Nguyen and Secretary, Department of Family and Community Services
[2005] AATA 1004
•12 October 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 1004
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2004/1006
GENERAL ADMINISTRATIVE DIVISION
Re: THUY HONG CUC NGUYEN
Applicant
And: SECRETARY,
DEPARTMENT OF FAMILY ANDCOMMUNITY SERVICES
Respondent
DECISION
Tribunal: Regina Perton, Member
Date: 12 October 2005
Place: Melbourne
Decision:The Tribunal affirms the decision under review.
(sgd) Regina Perton
Member
SOCIAL SECURITY – assets test ‑ cancellation of parenting payment (single) – property valuation disputed – unrealisable asset ‑ recoverable debt – waiver of debt – whether special circumstances exist ‑ decision under review affirmed
Social Security Act 1991 ss 11, 500Q, 1118, 1121, 1237AAD
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474
REASONS FOR DECISION
12 October 2005 Regina Perton, Member
1. Thuy Hong Cuc Nguyen is a widow with four children. Her husband died in 1994 when the children were aged between 2 and 9 years. After his death, she received Parenting Payment (single) (PPS), until it was cancelled on 25 June 2003. The cancellation took place because Centrelink, which administers programs for the Department of Family and Community Services, determined that her assets were above the allowable limit for her to receive PPS. On 9 July 2003, Centrelink decided that Ms Nguyen had been overpaid $45,518.01 on the basis that she had not been eligible for PPS from 18 March 1999 to 24 June 2003 and raised a debt for that amount.
2. Ms Nguyen’s property and loan dealings are complicated. A number of properties, third parties and loans are involved. The information Ms Nguyen has provided at various times to Government authorities and banks has been inconsistent. Her statements as to her employment, wages, marital status and rental income have varied, depending on which organisation she was providing them to and for what purpose. To determine whether Centrelink’s decision was appropriate, the Tribunal will need to examine some of those transactions in detail.
3. Ms Nguyen denied that her assets during the period of the debt exceeded allowable limits. She disputed Centrelink’s calculation of the debt and the cancellation of PPS. She also challenged some of the valuations of properties upon which Centrelink had made its calculations. The valuations were undertaken by the Australian Valuation Office (AVO).
4. Ms Nguyen sought review of Centrelink’s decisions. On 10 November 2003, an authorised review officer (ARO) affirmed the decision to cancel PPS, but deferred a decision on the level of debt pending further investigations. More information was obtained from Ms Nguyen, fresh valuations undertaken and the debt recalculated twice. On 11 June 2004, the ARO varied the debt period and found that Ms Nguyen owed a debt to the Commonwealth of $25,840.04 for overpayments between 1 March 2001 and 24 June 2003.
5. The Social Security Appeals Tribunal (SSAT), in reviewing Ms Nguyen’s application on 22 July 2004, affirmed the decision to cancel PPS and to raise the debt as calculated by the ARO. On 30 August 2004, Ms Nguyen sought review of the decision by the Tribunal.
6. The issues before the Tribunal are whether PPS should have been cancelled on 25 June 2003 and whether a debt should have been raised for the period from 1 March 2001 to 24 June 2003. This involves an examination of Ms Nguyen’s assets during that period.
THE PROPERTIES AND LOANS
7. When she was widowed, Ms Nguyen was living in Edmund Street, Maidstone in a property which was jointly owned with her late husband. She and her late husband also owned an investment property in Havelock Street, Maidstone. In July 1997, Ms Nguyen moved to a property she had purchased in Raglan Street, Maidstone having sold the Edmund Street property. She lived in Raglan Street until October 2003. Her official place of residence for the period during which she accumulated the debt was Raglan Street. Ms Nguyen subsequently sold the Raglan Street property for $406,000, with settlement being on 9 March 2004.
8. In March 1999, Ms Nguyen purchased a 20 hectare block in Keilor on which she subsequently commenced to build a house, not far from Melbourne Airport, for $320,000. The purchase was financed by a loan from the Bank of Melbourne for $120,000 secured against the Keilor property, and a loan of $150,000 secured against the Raglan Street property. In July 2002, Ms Nguyen and Hong Son Nguyen (Sunny) jointly obtained a loan of $300,000 from the Bank of Melbourne. The loans taken out by Ms Nguyen in 1999 to finance the purchase were repaid in full in August 2002. On 22 August 2002, the Keilor property was transferred into the names of Ms Nguyen and Sunny, as tenants in common in equal shares. In their application to the Bank of Melbourne for the $300,000 loan, Ms Nguyen and Sunny stated that the Keilor property was worth $700,000.
9. In May 2003, Ms Nguyen borrowed another $50,000 secured against the Raglan Street property. She borrowed a further $50,000 in July 2003.
10. In a submission on Ms Nguyen’s behalf, dated 10 October 2003, the Footscray Community Legal Centre indicated that as well as the loans totalling $270,000 taken out in March 1999, Ms Nguyen borrowed $20,000 from her brother. Sunny also contributed $20,000. Ms Nguyen claimed she had always intended to buy the Keilor property together with Sunny and had held his share in trust until the transfer in August 2002. There is no documentation to verify that claim.
11. On 1 July 2004, the AVO submitted a valuation report on the Keilor property following inspection. The AVO considered the market value at that time to be $950,000. The AVO estimated the value of the Keilor property and as at 1 March 2001 was $510,000. Ms Nguyen now lives on the Keilor property.
12. On 12 June 2003, Ms Nguyen estimated the market value of the unencumbered Havelock Street property to be $140,000. On 25 June 2003, the AVO valued the Havelock Street property at $240,000. On 20 September 2003, Ms Nguyen provided a letter from her then solicitors indicating that she had a 50 per cent interest in the Havelock Street property with her late husband, as tenants in common. The solicitors stated that the property was an unrealisable asset during the debt period due to difficulties in obtaining the Certificate of Title that were outside Ms Nguyen’s control. Hence, she had not been in a position to sell the property during the debt period.
ORAL EVIDENCE
13. Ms Nguyen has four children now aged 20, 17, 15 and 13 respectively. Her eldest, a son, is at university. Her 17 year old son suffers from autism. David Thirlwall, a pharmacist who met Ms Nguyen through assisting her autistic son, assisted Ms Nguyen in presenting evidence at the hearing.
14. The Tribunal was told that the property in Havelock Street could not be put up for sale until last year. There had been problems in obtaining the Certificate of Title due to its misplacement by the bank and/or a solicitor who no longer represented Ms Nguyen, or both. Ms Nguyen argued that Havelock Street was an unrealisable asset during the debt period.
15. Ms Nguyen said that she had bought the land in Keilor as she wanted a bigger property. She said that she and Sunny decided to buy the Keilor land together but at the time of settlement, he could not borrow money to finance his share as he was then still a bankrupt. She said that she therefore took out the two mortgages; otherwise, they would have forfeited the $32,000 deposit. She said that she and Sunny are not in a marital relationship. Sunny is a builder and they have been building a house on the Keilor property over a number of years.
16. Ms Nguyen described in detail her property purchases and loan history. This included transactions with or on behalf of members of her family, some of whom had migrated to Australia since the death of her husband. In relation to the loans taken out and the values she and Sunny had attributed to the Keilor property, Ms Nguyen said that they had inflated the value to get a large enough loan. She said that she and Sunny could not meet the regular repayments on the two loans totalling $270,000 and therefore consolidated them into one $300,000 loan.
17. Ms Nguyen was cross‑examined about the contents of her loan applications, in which she stated that she was married to Mr Nguyen and that she was working. This differed from the information she had given Centrelink, namely that she was single and not working. She responded that the information in the loan applications was false. She said that the person who does her tax returns also helps arrange loans. It was he who put in those details and she just signed the form. She said that the $700,000 attributed to the Keilor property in July 2002 was a figure suggested by Sunny.
18. Ms Nguyen was asked about the inconsistent information she had provided about rental income from the Havelock Street property. Tax documents showed that she had received income from rental which she had not declared to Centrelink. Ms Nguyen said she did not receive any rental but that the amount had been included at her tax agent’s suggestion. She said that she had allowed a friend and her children to live in the Havelock Street property rent-free until 1999, provided they paid the council and water rates. They did not do so and she therefore had outstanding council rates. She said that she had then considered selling the property but due to the difficulties in obtaining the Title, she had not been able to do so.
19. Ms Nguyen said that she now has further debts, having borrowed money from friends when Centrelink raised the debt. She said that she borrowed the money for her children’s education. She said that her eldest son moved out of home and was paying rent; so she decided to help him buy the house he was renting. She gave him $50,000, being an advance of his share of the family inheritance.
SUBMISSIONS
20. The Tribunal requested a further submission from Centrelink in light of the evidence regarding the Havelock Street property. On 27 June 2005, Wayne Zita, a Centrelink advocate, provided a further submission. Centrelink maintained the view that Ms Nguyen’s assessable assets exceeded the PPS asset limit from the date she purchased the Keilor property until cancellation in June 2003. Mr Zita submitted that loans that were not secured on the assessable investment properties could not be taken into account in calculating assets. He undertook fresh calculations of the value of Ms Nguyen’s assets at various points of time, submitting that even if the Havelock Street property was not able to be sold at that time, Ms Nguyen’s 50 per cent share needed to be taken into account.
21. Ms Nguyen provided a submission dated 8 July 2005. Among other things, she stated that the applications to the bank contained false information to enable her to borrow money. She also stated that her household and personal effects are not worth $1,500 nor is her car worth $5,000. She stated that all the property values are incorrect and queried the comparable values used by the AVO. She stated that she now has the Title to the Havelock Street property but wants to keep it for her children.
22. On 27 July 2005, Ms Nguyen provided a further submission in which she stated that she was not aware at any time that she was not entitled to the payments. The money she received as PPS was used for necessities for her four children. She stated that she had not been told of the requirement to advise Centrelink if the value of her property increased. She does not agree with the value put on her property in Keilor, but has no evidence to refute it. She stated that Centrelink has unfairly targeted her family.
CONSIDERATION OF THE ISSUES
23. The income and assets of a person are taken into account in assessing a person’s eligibility for PPS. The term asset is defined in s 11(1) of the Social Security Act 1991 (the Act) as property or money (including property or money outside Australia). Section 500Q of the Act states that PPS is not payable if the recipient’s assets exceed a certain level. That level is adjusted annually. On 1 March 2001, the upper limit for a single homeowner was $133,200. The upper limit from 1 July 2002 up to the date of cancellation, namely 24 June 2003, was $145,260.
24. Section 1118 of the Act allows certain assets to be disregarded for the purposes of the assets test. This includes the applicant’s principal place of residence. The Tribunal is satisfied that at the date of cancellation and throughout the debt period, Ms Nguyen’s principal place of residence was the Raglan Street property. Therefore, that property is exempt from the assets test.
25. Between 1 March 2001 and 24 June 2003, Ms Nguyen had an interest in two properties in which she did not live, namely the Havelock Street and Keilor properties. These properties constitute part of the assets test for eligibility for PPS.
26. There is no statutory provision in the Act setting out the method to be used for valuing property. In past cases, the Tribunal adopted the net market value approach based on comparable sales and the “best use” to which the assets could be put (for example, Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474). The Tribunal is satisfied that it is appropriate to adopt the net market value approach which, to the Tribunal’s knowledge, is the standard mode of valuation adopted by valuers in assessing the value of property for statutory purposes.
27. The AVO undertook an inspection and fresh valuation of the Keilor property on 23 June 2004. The estimated market value as at that date was $950,000. The AVO pointed out that values in that area had increased substantially between late 1998 and 2004. Based on comparable sales and the improvements on the Keilor property, the AVO made the following estimates of the property’s value:
·1 March 2001 $510,000
·1 September 2001 $572,000
·1 March 2002 $634,000
·1 September 2002 $695,000
·1 March 2003 $783,000
·1 September 2003 $870,000
·1 February 2004 $940,000
·23 June 2004 $950,000.
28. The AVO attributed a value of $240,000 to the Havelock Street property as at 25 June 2003. The Tribunal accepts that as the value as at that date. There is no AVO valuation for the Havelock Street property as at 1 March 2001. Centrelink sought information from the Maribyrnong City Council on the Capital Improved Value, used for rate calculation purposes, between 1998 and 2004. The Council value of the property for the financial year 2000-2001 was $125,000. Ms Nguyen had earlier declared a value of $86,000. The ARO and the SSAT were prepared to use the $86,000 value for the purposes of the assets test and debt calculation. The Tribunal is of the view that the property’s value would have been higher than $86,000 as at 1 March 2001, but is prepared to adopt $86,000 as that value in the absence of an AVO valuation.
29. Section 1121(1) of the Act allows the assessable value of an asset to be reduced by a charge or encumbrance over that asset. However, s 1121(3) stipulates that an encumbrance over an asset that is disregarded under s 1118 is not to be taken into account.
30. As at 1 March 2001, Ms Nguyen had two bank loans. The loan from the Bank of Melbourne was secured against the Keilor property and therefore, the value of that property for assets tests purposes will be reduced due to the loan. However, the loan from the ANZ bank was secured against the Raglan Street property which was Ms Nguyen’s principal place of residence. Given the Raglan Street property is exempt from the assets test, that ANZ loan is not taken into account. Ms Nguyen also gave evidence that she had borrowed money from relatives and friends at various times. There is no independent evidence of the loans or of when the moneys were borrowed or repaid. Furthermore, there is no evidence to show that the loans were secured against the investment properties. Therefore, the Tribunal will not take them into account in calculating the value of the assessable assets. Statements from the Bank of Melbourne indicate that the amount owing on the loan as at 1 March 2001 was just under $114,000. Hence, the assessable value of the Keilor property will be reduced by $114,000. The AVO valuation as at 1 March 2001 was $510,000. Taking the loan into account, the assessable value is reduced to $396,000. Notwithstanding the lack of contemporary documentary evidence of the agreement with Sunny of a 50/50 share as at 1 March 2001, the Tribunal is prepared to accept that this was the intention of both Ms Nguyen and Sunny, based on the later property transfer. The Tribunal therefore finds that the assessable value of the Keilor property for PPS purposes as at 1 March 2001 was $198,000.
31. Centrelink has indicated its preparedness to accept the Havelock Street property’s value as $86,000 as at 1 March 2001, although it appears clear that its value would have been higher. Ms Nguyen held 50 per cent of the unencumbered property. Notwithstanding that Ms Nguyen now appears to hold the Title in her own name, this was not the case during the debt period. Section 1118(1)(j) allows for the portion that was not yet received from her deceased husband’s estate to be an exempt asset. Therefore, the value of Ms Nguyen’s interest in the Havelock Street property is calculated as $43,000.
32. The value of Ms Nguyen’s assessable property assets as at 1 March 2001 totalled $241,000. Given that this figure exceeds the allowable limit of $133,250 which applied from 1 July 2000, the Tribunal finds that Ms Nguyen exceeded the assets test for PPS as at 1 March 2001.
33. The AVO did not provide a value for the Keilor property as at June 2003. The nearest valuation dates were 1 March 2003 with an attributed value of $783,000 and 1 September 2003 with a value of $870,000. By that time, Ms Nguyen had a 50 per cent interest in the property. A $300,000 loan with the Keilor property as security had been taken out. In a Real Estate Details form submitted to Centrelink on 7 August 2003, Ms Nguyen estimated the amount she owed on the loan as $150,000. There is no evidence of any other encumbrances on the Keilor property. Loans secured by the Raglan Street principal place of residence are not taken into account. While it is likely that the value as at 24 June 2003 may well have been over $800,000, the Tribunal will use the 1 March 2003 figure. The Tribunal finds that Ms Nguyen’s interest in the Keilor property as at 24 June 2003 was at least $246,500.
34. In relation to the Havelock Street property, the AVO has set a value of $240,000 as at 24 June 2003. Ms Nguyen had a 50 per cent interest in the unencumbered property. Therefore, the Tribunal finds that the value of that asset to Ms Nguyen was $120,000.
35. Taking into account both properties, Ms Nguyen’s property interests, for the purposes of the assets test for PPS as at 24 June 2003, was at least $366,500. This is well in excess of the permissible asset limit of $145,250.
36. Ms Nguyen has also queried the values ascribed to her car and personal property. However, these do not require further analysis as she exceeds the permissible asset limit without taking these items into account.
37. The Tribunal finds that Ms Nguyen exceeded the permissible asset limit for PPS throughout the period from 1 March 2001 to 24 June 2003. It finds that she was therefore not eligible for PPS. It also finds that Centrelink correctly raised a debt to the Commonwealth of $25,840.04 for payments received during that period (s 1223 of the Act).
38. Section 1237AAD allows for waiver of a debt where there are special circumstances. For the Tribunal to use its discretion to determine that Ms Nguyen's situation constitutes special circumstances, it must be satisfied that there is something to make the case stand out from the usual or the ordinary. In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866, Branson J held that the use of the term special circumstances in the legislation demonstrated an intention to proscribe waiver in ordinary cases. She was considering s 1237AAD which is the relevant section of the Act in this matter. Branson J stated that the hardship or unfairness should be sufficient to justify departure from the general rule in the particular case.
39. The Tribunal is not satisfied that the situation that Ms Nguyen finds herself is vastly different from other social security recipients who have received overpayments. The Tribunal is not satisfied that the circumstances in this case constitute special circumstances (other than financial hardship alone). Hence, the waiver provisions of s 1237AAD of the Act do not apply.
DECISION
40. The Tribunal affirms the decision under review.
I certify that the forty [40] preceding paragraphs are a true copy of the reasons for the decision of:
Regina Perton, Member
(sgd) Olympia Sarrinikolaou
Clerk
Date of hearing: 31 May 2005
Date of final submissions: 14 July 2005
Date of decision: 12 October 2005
Applicant: Self-represented
Advocate for respondent: Mr W. Zita, Centrelink
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