Nelson and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2010] AATA 841
•29 October 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 841
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/1234
GENERAL ADMINISTRATIVEE DIVISION ) Re James Nelson Applicant
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
Respondent
DECISION
Tribunal Senior Member A K Britton Date29 October 2010
PlaceSydney
Decision 1. The reviewable decision made on 12 August 2009 is set aside.
2. The matter is remitted to the Respondent for recalculation of the debt owed by the Applicant in accordance with these reasons.
.....................[SGD]...............
Senior Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – assets test – overpayment – debt recovery – extent of applicant’s beneficial interest in a parcel of land – where mother transferred legal title to property to son subject to monetary loan – charges and encumbrances – administrative error – special circumstances.
EQUITY – resulting trusts – presumption of advancement.
Social Security Act 1991 (Cth) – ss 117, 1064, 1121, 1237A. 1237AAD
Social Security (Administration) Act 1999 (Cth) – s 68
Napier v Public Trustee (WA) (1980) 32 ALR 153
Calverley v Green (1984) 155 CLR 242
Nelson v Nelson (1995) 184 CLR 538
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Kintominas v Department of Social Security (1991) 30 FCR 475.
Secretary Department of Social Security v Hodgson (1992) 37 FCR 32
Kidner v Department of Social Security (1993) 31 ALD 63
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441.
Currie v Hamilton (1984) 1 NSWLR 687
Re Beadle and Director-General of Social Security [1984] AATA 176
29 October 2010 REASONS FOR DECISION
Senior Member A K Britton 1. Mr James Nelson seeks review of a decision made by the respondent Secretary, and affirmed by the Social Security Appeals Tribunal, to raise and recover a debt from him in the sum of $37,220. The debt arose as a result of an alleged overpayment of disability support pension (DSP) to Mr Nelson throughout the period 25 July 2000 to 5 November 2007.
2. The rate of DSP payable to a person is calculated by reference to, among other things, the value of their total assets. The alleged overpayment resulted from counting only half the value of a block of land in Tweed Heads, NSW, as part of Mr Nelson’s assets. While agreed that Mr Nelson held an interest in the Tweed Heads property, the parties disagree about the nature and extent of that interest before August 2006.
3. The key issue to be determined is whether the Tweed Heads property is an asset of Mr Nelson. To address this question, it is necessary to decide:
(i) The value, if any, of the Tweed Heads property attributable to Mr Nelson for the purposes of calculating his rate of DSP; and
(ii) Whether Mr Nelson’s mother held a charge or encumbrance over part or all of the Tweed Heads property for all or part of that period.
4. If it is found that a debt has arisen for which Mr Nelson is liable in relation to the payment of DSP for the period, it will be necessary to decide whether the debt should be waived or written off because of:
(i) Administrative error on the part of Centrelink (s 1237A of the Social Security Act 1991 (Cth) (“the Act”)); and/or
(ii) Special circumstances (s 1237AAD of the Act).
Background to the Tweed Heads property
5. In September 1991, Mr Nelson and his parents purchased a block of land at Tweed Heads for the sum of $120,000. Mr Nelson’s parents contributed 50 per cent of the purchase price and financed the balance by way of a loan taken out in their names. The Certificate of Title listed Mr Nelson and his mother, Mrs Joybel Nelson, as joint tenants.
6. At the time of purchase, Mr Nelson was living with his parents in the family home in Sydney, where he continues to reside. Both parents are now deceased. According to Mr Nelson, it had been he and his parents’ intention at the time of the purchase that the immediate family would eventually build a house on the property and relocate to Tweed Heads. He said that after his father’s death in 1996, he and his mother held on to the “dream”, and it was not until about three weeks before his mother’s death that they conceded it would never be realised. Realising this ambition was thwarted by a succession of illnesses suffered by family members.
7. Mr Nelson testified that when the property was purchased, he and his parents agreed that he would contribute half of the mortgage repayments. That agreement was not committed to writing. According to Mr Nelson, it transpired that he made only occasional contributions to the property because he was frequently short of money on account of poor health and limited income. He claimed that his parents paid for all outgoings on the property.
8. In May 1997, Mrs Nelson transferred her interest in the property to Mr Nelson. The transfer documents record the consideration for the transfer as $1. On Mr Nelson’s account, he had agreed with his mother that he would repay her about half the purchase price of the property. Various figures are mentioned in the contemporaneous documents as the amount said to have been owed by Mr Nelson to his mother. The parties agree that this figure is $70,000.
9. In August 2006, Mr Nelson purchased the Davidson family home from his mother. He testified that as part of that deal, his mother forgave the loan on the Tweed Heads property.
Mr Nelson’s interest in the property from 1997 to August 2006
10. The primary issue in dispute is the nature and extent of Mr Nelson’s interest in the property throughout the period spanning the 1997 transfer by his mother and forgiveness of the loan in August 2006. The resolution of this issue will determine the rate of DSP payable to Mr Nelson throughout this period and hence the extent — if any — of overpayment of DSP.
11. Section 117(a) of the Act provides that the rate of disability support pension payable to a person in Mr Nelson’s circumstances (i.e. a person who is not blind and to whom s 117(b) is not applicable) is to be determined in accordance with s 1064 of the Act. The rate of DSP is subject to an “assets test”. Contained in Module G of s 1064, the assets test operates to proportionally reduce a person’s DSP payments rate when the “value of a person’s assets” exceeds the relevant amount specified in s 1064‑G3 — “the asset value limit”. The first step in working out the effect of a person’s assts on their maximum pension rate is to “work out the value of the person’s assets”: s 1064-G1.
12. In applying the assets test, only the beneficial interest that a person has in property of which he or she is the legal owner is to be taken into account: Kidner v Department of Social Security (1993) 31 ALD 63; Kintominas v Department of Social Security (1991) 23 ALD 572.
13. After the 1997 transfer, Mr Nelson was the sole registered owner of the property. It is agreed that he held 100 per cent of the legal interest in the property. Mr Nelson contends, however, that he did not hold an equitable interest in the property until 2006, when his mother forgave the $70,000 loan. In the alternative, it is submitted that consistent with Mr Nelson’s belief and the advice he provided Centrelink throughout the period, he held a 50 per cent equitable interest in the property during this period. The Secretary disagrees and contends that from 1997, Mrs Nelson held no legal or equitable interest in the property. The Secretary concedes that the property was subject to a loan of $70,000 provided to Mr Nelson by his mother.
14. The starting point in determining the nature of Mr Nelson’s interest in the property is that the beneficial ownership of real property is presumed to be commensurate with the legal title: Currie v Hamilton (1984) 1 NSWLR 687 at 690. Depending on the facts, that presumption may be displaced by a presumption of a resulting trust or the countervailing presumption of advancement. Where as in this case, a party purchases property and directs the vendor to place the whole or part of the property into the name of another person, or, without consideration, transfers their interest in a property into the name of another, a presumption arises that the property is held on trust for the purchaser or transferor: Napier v Public Trustee (WA) (1980) 32 ALR 153 at 158; Calverley v Green (1984) 155 CLR 242. The presumption of a resulting trust does not apply where the relationship between the parties gives rise to a presumption of advancement. A relationship of parent and adult child gives rise to a presumption of advancement: Nelson v Nelson (1995) 184 CLR 538 at 586;. The presumption of advancement may be rebutted by evidence of the actual intention of the parent who provided the purchase funds or made the transfer at the time of purchase or transfer: Nelson at 547.
15. As acknowledged for Mr Nelson, there is little reliable evidence about the agreements, if any, reached between himself and his parents when the property was first purchased, or when Mrs Nelson subsequently transferred her interest to him. Both parents as noted are now deceased. In a statement prepared by Mrs Nelson in June 2008, she stated that she had no recollection of the transfer of the legal title to her son in 1997. She confirmed however that “in recent years” she had told her son he did not have to repay the money he owed in respect of the Tweed Heads property.
16. On Mr Nelson’s account, it was agreed when the property was originally purchased that he would meet half the mortgage repayments. A combination of ill health and limited income meant that his contributions were small and irregular. He is now unable to quantify the amount he repaid. Mrs Nelson stated that after her son became sick and gave up work in 1997 he could not afford to make any further repayments. It was argued for Mr Nelson that the presumption of advancement does not arise in these circumstances as it was the intention of the parties that the property would eventually become the future family home. I accept that that was the intention of Mr Nelson’s parents at the time of purchase. While this indicates that they intended to retain an interest in the property, that object would appear to have been achieved by Mrs Nelson being registered as a joint tenant. There is no evidence, and nor is it suggested, that at the time of purchase the Nelsons (snr) had agreed between themselves or told their son that his share of the property was held in trust for them. Nor in my view could that inference be drawn.. As far as it can be determined, it was intended that he would hold a 50 percent interest in the property and repay one quarter of the purchase price. In my view, while the presumption of a resulting trust arises in relation to Mr Nelson (jnr’s) interest, there is insufficient evidence to rebut the presumption of advancement. Accordingly, I am satisfied that Mr Nelson’s equitable interest was commensurate with his legal interest in the property from the date of purchase until the 1997 transfer.
17. In respect of the subsequent transfer by Mrs Nelson of her 50 per cent interest, it is argued for Mr Nelson that this did not amount to a transfer of his mother’s equitable interest in the property. In support he points to first, his claim that the transfer was subject to a loan in the sum of $70,000, and second, that it was the intention of all parties that Mrs Nelson, her son and other members of the immediate family would eventually reside in Tweed Heads.
18. There is scant evidence about Mrs Nelson’s intention at the time of transfer. The only documentary evidence apart from the transfer documents is a file note made by a Centrelink officer in January 1997 following a meeting with Mr Nelson and his mother. According to Mr Nelson, the purpose of that meeting was to obtain advice from Centrelink about the pension implications if Mrs Nelson were to transfer her share to him. Centrelink’s record of the interview included the following passage:
… They jointly own a property at Tweed Heads which is worth about $120,000. …. Mr Nelson wants to move to the property and buy out his mother’s share. This would be in the form of a mortgage over the property to repay his mother. I advised that the dept would delete the asset value of the land but would maintain the amount of the agreed value of the half share (about $70k at current prices) as a loan from the client to her son and also income would be deemed of the outstanding loan (which would decrease as it was repaid. I calculated on total financial assets that income from pension would be $5700 pa, this would reduce pension by 460 pf.
19. Mr Nelson’s recollection of events around this time is somewhat limited. On his account, he was told by Centrelink that, providing that there was a loan or promissory note recording that he and his mother had entered into a loan agreement, his mother’s pension entitlement would be unaffected by the transfer. He claims that after receiving that advice, he instructed a solicitor to transfer the property, but cannot recall the contents of the discussions with the solicitor as he was ill at the time.
20. The best evidence is that at the time the transfer it had been Mrs Nelson’s intention to transfer her interest to her son and that he was liable to repay her the sum of $70,000. There is no direct evidence that Mrs Nelson intended to retain a 50 per cent interest in the property until such time as the loan was forgiven. Nor, in my view, could that inference be drawn on the scant evidence before me. That Mr Nelson and his mother held onto the dream that one day they might be able to move to the Tweed Heads property is not inconsistent with the finding that the mother’s interest was limited to the $70,000 loan. Except for a short period, Mr Nelson had lived with his parents all his life. There is nothing to suggest that within the immediate family, the right of residence was conditional upon holding a legal or equitable interest in the relevant property.
21. I am satisfied that a resulting trust did not arise as a result of Mrs Nelson’s transfer of her 50 per cent interest in the property. I find that from the date of transfer — that is, 9 May 1997 — and as agreed by Centrelink, Mrs Nelson held a “charge or encumbrance” over the property within the meaning of s 1121 of the Act.
Should the debt or part of the debt be waived on account of administrative error?
22. Section 1237A(1) of the Act provides that the decision-maker must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received the payment or payments that gave rise to that proportion of the debt in good faith: s 1237A of the Act. “Proportion” is defined to 100 per cent of the debt: s 1237A(3).
23. Mr Nelson submits that part of the debt Centrelink now claims is owed arose as a result of its failure to act and adjust his pension after he had notified it that:
1. The value of the property had increased; and
2. He had become the sole owner of the property.
24. Two elements must be satisfied before the power to waive the debt under s 1237A(1) of the Act can be exercised:
1. The debt or the proportion of the debt must be attributable solely to an administrative error made by the Commonwealth.
2. The debt must have received in good faith the payment or payments that gave rise to that proportion of the debt.
(i) Notification that the value of the property had increased
25. In late 2005, Mr Nelson received a land tax assessment from the NSW Office of State Revenue based on a valuation of the property at $443,000. Mr Nelson was concerned his pension might be affected by the revised valuation and contacted Centrelink in November 2005 to advise of it. At that time, Centrelink estimated the value of the property to be about $200,000. Mr Nelson annexed the State Revenue Assessment to a real estate details form provided to Centrelink on 4 November 2005.
26. Centrelink took no action to adjust Mr Nelson’s pension rate in line with the increased valuation, until October 2007.
27. Centrelink properly concedes that that part of the debt that arose as a result of not acting on the advice about the revised value of the property satisfies both elements of s 1237A(1) of the Act. I concur with that view. Accordingly, that part of the debt that arose as a result of Centrelink failing to act after being notified by Mr Nelson that the property had increased in value must be waived.
(ii) Notification that the loan had been forgiven
28. Mr Nelson claims that he notified Centrelink in or about August 2006 that his mother had forgiven the loan over the Tweed Heads property and that he was the “sole owner”. He submits that part of the debt that arose as a result of Centrelink’s failure to act after receiving that alleged advice should be waived. The Secretary disputes Mr Nelson’s claim, and points out that the first reference to the loan having being forgiven is a Centrelink record made on 31 August 2007.
29. It is necessary to examine in some detail the evidence concerning the loan and Mr Nelson’s dealings with Centrelink. As will be recalled, the subject loan — agreed to be the sum of $70,000 — was made by Mrs Nelson to her son in 1997.
30. In a real estate details form provided to Centrelink on 8 November 2005, Mr Nelson confirmed information he had consistently provided since applying for sickness allowance in 1998, that the Tweed Heads property was jointly owned with his mother. In the covering letter enclosing the form, he also advised that he and his mother intended to dispose of it because of the “size of taxation”.
31. Centrelink records reveal that in July 2006 Mr Nelson contacted Centrelink and foreshadowed that he intended to purchase the Davidson property from his mother. A few weeks later he contacted Centrelink with an update about the purchase. On 11 August 2006, he notified Centrelink that the purchase had been finalised. None of the electronic records created by the Centrelink officers who spoke to Mr Nelson on these three occasions make any reference to a change in ownership of the Tweed Heads property or forgiveness of the loan.
32. The first Centrelink record to refer to Mr Nelson being the sole owner of the Tweed Heads property is an electronic file note dated 31 August 2007:
Customer now owns 100% of 47 plover place tweed heads. Documents received for this referral case: can we look at this as customer now owns 100% of this as of mother’s death, customer has asked for an updated appraisal before, customer now very worried as rates notice now claims property valued at 420000.
33. Solicitor for Mr Nelson, Mr Hodges urged the Tribunal not to assume that Centrelink records are necessarily correct. He points to various reports prepared by the Auditor General and more recently, the Commonwealth Ombudsman, which identified significant shortcomings in Centrelink’s record-keeping. In addition, he points to a number of demonstrable errors in relation to Centrelink’s record that relate to Mr Nelson (see paragraph [82] of Mr Nelson’s Statement of Facts and Contentions).
34. The Secretary contends that in the absence of any firm evidence that Mr Nelson notified Centrelink before 31 August 2007 that the loan had been forgiven, it is not open to the Tribunal to find that notice was provided before that date. While conceded that there were some errors in the records made by Centrelink officers, the Secretary argues that it does not follow that the records relevant to this issue are necessarily inaccurate.
35. Findings and conclusions: The only evidence to support Mr Nelson’s claim that he notified Centrelink that the loan was forgiven at the same time as he purchased the Davidson family home is his evidence given in these proceedings. He stated that while he was unclear when the loan was forgiven, he was certain that he notified Centrelink about it at the same time he advised of the change in ownership in the Davidson property. (Exhibit A1 par [25]).
36. On balance, I am satisfied for the following reasons Mr Nelson gave notice of the loan and the change in ownership in the Davidson property at the same time. His claim that the loan was forgiven as part of an overall deal reached with his mother in relation to the Davidson property is inherently plausible. Centrelink’s records reveal that Mr Nelson has a history of punctiliously notifying changes in his circumstances, including minor changes, such as receipt of a $45 payment for jury service and changes that are adverse to him. Mr Nelson impressed me as a reliable witness. There is nothing to indicate — and nor is it suggested — that he gave untruthful evidence or sought to embellish his version of events. His claim that he notified Centrelink about the change in ownership of the Davidson property and the forgiveness of the loan at around the same time is un-contradicted, apart from the absence of any record to support that claim. While I do not accept as suggested on behalf of Mr Nelson that the Tribunal should proceed on the assumption that Centrelink records are necessarily inaccurate, I accept that in this case it is more likely than not that the relevant officer failed to record Mr Nelson’s advice that the loan had been forgiven.
37. From what is before me, it is not possible to say with any certainty on which of the three occasions Mr Nelson spoke to Centrelink about the pending sale of the Davidson family home (31 July 2006, 9 August 2006, and 11 August 2006), that he told disclosed forgiveness of the loan. Little turns on which date applies. I have elected to apply the most recent date — that is, 11 August 2006.
38. I am satisfied that payments received by Mr Nelson after notifying Centrelink about the forgiveness of the loan were received in good faith. Both elements of s 1237A(1) of the Act being satisfied, that part of the debt that arose as a result of Centrelink not acting on Mr Nelson’s advice about the forgiveness of the loan must be waived.
Should the debt be waived under s 1237AAD?
39. Given my finding that part of the debt must be waived under s 1237A of the Act, it is necessary to decide whether all or part of the balance of the debt should be waived under s 1237AAD. Section 1237AAD provides:
Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
40. It is not in issue that s 1237AAD (a) is satisfied: that is, the debt did not arise as a result of Mr Nelson knowingly making a false statement or representation, or failing or omitting to comply with a relevant statutory provision. The Secretary concedes that Mr Nelson genuinely believed that his mother held a half share of the property until 2006. Accordingly, it must be decided whether special circumstances exist and, if so, whether the power to waive the right to recover all or part of the remaining debt should be exercised.
41. The term “special circumstances” has been the subject of exhaustive consideration by the AAT and the Federal Court. The Federal Court has declined to adopt a prescriptive formula about the meaning of the term (see for example, Beadle v Director-General of Social Security [1984] AATA 176; French J in Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531 at 535). Nonetheless, the Court has emphasised that the term denotes a requirement that there be “something which distinguishes [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545. This, however, is not to be interpreted as a requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”: per Hill J in Secretary Department of Social Security v Hodgson (1992) 37 FCR 32 at 42. There is no requirement that the circumstances be unique to the individual — circumstances might be special though they apply to more than one person or to a class of persons, provided they are not of universal application: per Katzmann J in Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441.
42. The Guide to Social Security Law (the Guide) provides direction to decision makers on the application of the “special circumstances” discretion (see s 6.7.3.40). The Tribunal is not bound to apply the policy expressed in the Guide, but may do so and, indeed, will usually do so unless there are cogent reasons in a particular case for not doing so (see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60).
43. It is argued on behalf of Mr Nelson that his ill health and that of family members over an extended period together with the recent death of his mother constitute special circumstances.
44. As properly conceded by Mr Nelson, his financial position could not be described as something that distinguished his position from that of other social security recipients. There is no evidence — and nor is it suggested — that the repayment of the debt places Mr Nelson in a straitened financial position. I acknowledge that Mr Nelson and various members of his immediate family have suffered ill health over a significant period. I have considerable sympathy for the position Mr Nelson now finds himself in — having to repay a debt he innocently incurred. However, I am not satisfied that “special circumstances” exist, and am therefore unable to exercise the power to waive the balance of the debt.
calculation of the debt
45. In the course of these proceedings the Secretary, properly in my opinion, made a number of concessions, and as a consequence recalculated the subject debt, reducing it to $22,502. 54.
46. At my request, the Secretary prepared a detailed outline of the assumptions on which those revised calculations were made (see supplementary submissions lodged on 6 October 2010). I am grateful for that assistance.
47. Mr Nelson does not dispute the assumptions on which the revised calculations were based, with the exception of the following assumptions:
1. That after the 1997 transfer he held a one hundred per cent equitable interest in the Tweed Heads property.
2. That he first disclosed that the loan from his mother was forgiven on 31 August 2007
3. That the value of the property following 8 November 2005 was $400,000.
48. I have made findings in respect of Assumption 1 and 2 in these reasons for decision. In respect of Assumption 3, I agree with Mr Nelson that the value of the property should be assessed on the basis of the valuation provided by the Valuer-General – i.e. $443,000 and not on the basis of his estimate provided to Centrelink in November 2005 – i.e. “up to $400,000”.
49. Otherwise, I accept the assumptions on which the revised calculations were based.
Orders
1. The reviewable decision made on 12 August 2009 is set aside.
2. The matter is remitted to the Respondent for recalculation of the debt owed by the Applicant in accordance with these reasons for decision.
I certify that the 49 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton
Signed: ................................[SGD]..........................................
Associate to Senior Member BrittonDates of Hearing: 15 September 2010; 14 October 2010
Date of Decision: 29 October 2010
Solicitor for the Applicant: Stephen Hodges, Solicitor
Solicitor for the Respondent: Centrelink Advocacy Branch
0
10
0