Robin Phillips and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2012] AATA 85
•15 February 2012
[2012] AATA 85
Division General Administrative Division File Number(s)
2011/1263
Re
Robin Phillips
APPLICANT
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal Senior Member Bernard J McCabe
Date 15 February 2012 Place Brisbane The Tribunal sets aside the decision with respect to the amount of the debt, and remits the matter for recalculation in accordance with these reasons. The Tribunal otherwise affirms the decision not to waive the applicant's debt.
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Senior Member
CATCHWORDS
SOCIAL SECURITY - disability support pension - overpayment - total value of assets too high
LEGISLATION
Social Security Act 1991 ss 1124 to 1125, 1137AAD
REASONS FOR DECISION
Senior Member Bernard J McCabe
The Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs says the applicant, Mr Robin Phillips, received disability support pension (DSP) payments he was not entitled to receive between 18 March 1999 and 9 March 2004. The Secretary says the overpayment of DSP occurred because the total value of Mr Phillips’s assets during the period in question was too high. Mr Phillips has asked the Tribunal to reconsider the matter.
While Mr Phillips disputed the valuation attributed to a number of his assets, the outcome of this case turns on the value attributed to one asset in particular: a complex of flats that Mr Phillips owned in the suburb of West End, in Townsville. The property was purchased on 25 August 1993 and sold on or about 25 November 2003. Mr Phillips says the property was worth a lot less than the Secretary thinks.
In order to resolve this question, I heard from Mr Phillips, who was present in the hearing room. He was assisted by Mr Morgan, a friend who participated in the hearing by telephone from overseas.[i] I also heard evidence from two valuers. After considering the evidence and the submissions, I was satisfied the valuation put forward by the Australian Valuation Office should be preferred. I am also inclined to accept the values the Secretary has attributed to Mr Phillips’s other assets. That means the applicant is unsuccessful. I explain my reasons below.
THE APPLICANT’S PROPERTY IN TOWNSVILLE
I have already noted the applicant owned a number of assets during the period under review, including real property located at Harold St, West End in Townsville. There were six two-bedroom flats located on the Harold St block. It was acquired in August 1993 for $260,000 and sold for $485,000 on 3 October 2003. That equates to a purchase price per flat of $43,333 and a sale price per flat of $80,833. The property was encumbered by a mortgage upon purchase but that loan was paid out in November 2001. The respondent contended the applicant also occupied one of the flats for a period as a homeowner, which makes part of the asset exempt. That is an advantage to the applicant. Mr Phillips, to his credit, said he was not sure if he should be considered a homeowner in relation to part of the asset as he recalled he was renting a property at another location in Townsville during the period in question. Mr Phillips did not press the point at the hearing as he explained his memory of events was now clouded by the onset of dementia. But in written submissions at the end of the hearing, he insisted: “…I resided sporadically at the property in Townsville in order to oversee repair work and that it was never my primary residence.”
In the circumstances and in the absence of clear evidence to the contrary, I accept Mr Phillips’s claim that he did not reside at the West End property during the period under review. That finding will affect the calculation of his entitlements.
The respondent commissioned a valuation report from the Australian Valuation Office (the AVO) in relation to the property in November 2007. An updated report with explanatory remarks was prepared for these proceedings. That report, by Mr Michael Becker of the AVO’s Townsville office, is dated 10 November 2011. It was tendered as an exhibit.
Mr Becker was asked to estimate and chart the changes in value of the property at six monthly intervals between the date of purchase and sale. He set out the following table at p 9 of his report:
Valuation Date Asset Value 6 Monthly Price Variation 25/08/1993 $260,000 Market Steady Price IN 31/12/1993 $260,000 Unaltered 01/07/1994 $265,000 Up say 2% 31/12/1994 $265,000 Unaltered 01/07/1995 $270,000 Up say 2% 31/12/1995 $270,000 Unaltered 01/07/1996 $275,000 Up say 2% 31/12/1996 $275,000 Unaltered 01/07/1997 $280,000 Up say 2% 31/12/1997 $280,000 Unaltered 01/07/1998 $290,000 Up say 3.5% 31/12/1998 $290,000 Unaltered 01/07/1999 $300,000 Up say 3.5% 31/12/1999 $300,000 Unaltered 01/07/2000 $320,000 Up say 6.5% 31/12/2000 $340,000 Up say 6% 01/07/2001 $360,000 Up say 6% 31/12/2001 $380,000 Up say 5% 01/07/2002 $400,000 Up say 5% 31/12/2002 $420,000 Up say 5% 01/07/2003 $450,000 Up say 7% 03/10/2003 $485,000 Up Say 7.5% Price OUT
The increase in value was justified with reference to sales of other properties (including individual flats) that were thought to be comparable with the applicant’s property. Mr Becker concluded the rate of increase in value of the property was realistic, and noted that the rate of increase was greater in the period 2000-2003 because that is consistent with what was happening in the market. In his oral evidence at the hearing, he said his view was the only realistic assessment given the prices at which the property was bought and sold.
The respondent took those figures and incorporated information about the mortgage and took account of the periods when the applicant was thought to reside in one of the flats and came up with the following table. The figures will require amendment given my finding that the applicant did not in fact reside in one of the flats in the property during the period under review, but the table has some value even so:
Date AVO Valuation Mortgage Assessable Value 4.3.99 $290,000 $181,415 $108,585 12.3.99 $290,000 $181,415 $108,585 1.7.99 $300,000 $181,415 $118,585 16.8.99 $250,000 (1/6 exempt) $181,415 $91,321 1.7.00 $266,666 (1/6 exempt) $118,635 $148,031 22.8.00 $320,000 $144,224 $175,776 31.12.00 $340,000 $146,786 $193,214 25.1.01 $340,000 $166,786 $173,214 1.7.01 $360,000 $166,786 $193,214 30.11.01 $360,000 Loan Closed $360,000 31.12.01 $360,000 $0 $360000 21.3.02 $300,000 (1/6 exempt) $0 $300000 1.7.02 $316,666 (1/6 exempt) $0 $316,666 31.7.02 $316,666 (1/6 exempt) $0 $316,666 1.9.02 $316,666 (1/6 exempt) $0 $316,666 25.9.02 $380,000 $0 $380,000 1.12.02 $380,000 $0 $380,000 1.1.03 $380,000 $0 $380,000 1.7.03 $450,000 $0 $450,000 25.11.03 SOLD SOLD SOLD
These figures are a problem for Mr Phillips. If they are accepted (subject to them being amended to take account of the fact the applicant did not reside in one of the flats), they suggest his entitlements were calculated on incorrect figures, which would lead to overpayment.
Mr Phillips retained a valuer who reached a different view to Mr Becker. Mr Adrian Bagent of the Townsville office of Taylor Byrne, provided a report dated 30 September 2011 and gave evidence at the hearing. Mr Bagent said the property values suggested by the AVO were unrealistic given he understood several of the flats were uninhabitable, and the complex as a whole was in very poor condition. He also compared the prices of a number of multi-unit dwellings that were sold in the local area. He said the sales data he relied on suggested those properties were not reaching the sort of prices contended for by Mr Becker. Mr Bagent concluded “the sale price [of the applicant’s property] is considered to be well above market value”. In other words, he argued I should effectively disregard the price which the property did fetch in an open sale in my assessment of its value. In his oral evidence, he suggested some of the examples of sales cited by Mr Becker were affected by special considerations: one of the properties which fetched a higher price was bought by a neighbouring landholder who apparently wanted to consolidate his property, for example. On that analysis, the purchaser may have been prepared to pay above-market rates to secure the property. I note Mr Bagent did not suggest there were any special circumstances that affected the sale of the applicant’s property in 2003. He does not explain why the applicant was able to secure what Mr Bagent regarded as an excessive price.
I prefer the opinion of Mr Becker. His report was more comprehensive and offered a longitudinal study in value, where Mr Bagent’s report commented on a series of snapshots. While Mr Bagent was clearly a competent valuer, I am told Mr Becker has more experience in conducting this kind of historical valuation. I also note the evidence established that all of the flats were being rented on a more or less continuous basis. Mr Bagent proceeded on the basis that some of the flats were not rented at all. Lastly, Mr Becker’s opinion is consistent with the value that was actually realised by Mr Phillips when he sold the property. In the circumstances, I would adopt Mr Becker’s figures.
THE APPLICANT’S OTHER PROPERTY
The applicant disputed the values the Secretary assigned to the vehicles he possessed at the relevant time. In particular, he owned a Rolls Royce motor car that he purchased in 1989. He had told Centrelink the vehicle was worth $17,000 but subsequently said it was worth much less because it had been damaged when someone used the incorrect oil in its transmission. He traded the vehicle in for $9,000. The SSAT found that price was within the expected range for traded vehicles in the “red-book” guide to cars. The SSAT noted the red-book suggested the same car sold in a private sale would command a higher price – up to $18,100. I was not provided with any evidence to suggest the red-book was an inappropriate guide to value in the circumstances of this case. Given the vehicle was sold in 2002 at a price consistent with red-book estimates, I agree the private sale price is the appropriate standard. Using that approach, the SSAT estimated the market value of the vehicle between 4 March 1999 and 30 July 2002 was $14,961. I think the SSAT was right. I have no reason to doubt the $6,000 value assigned to the van Mr Phillips briefly owned from 31 July 2002 through 31 August 2002. Mr Phillips disputed the value assigned to a Ford Fairmont vehicle that he owned from 1 December 2002 for the balance of the period under review. The Secretary said it was worth $19,000, and the SSAT agreed. Mr Phillips said the value of the vehicle should be depreciated like any other asset for tax purposes. I disagree: this is not a dispute about the valuation of a vehicle for tax purposes. There is no evidence to doubt the value assigned to the Ford Fairmont, and I agree with the SSAT’s conclusions in that regard.
There was also some discussion about Mr Phillips’s financial assets in the period under review. The SSAT concluded (at [47]-[48]):
[47] Without bank statements it is impossible to determine with accuracy the balance of Mr Phillips’s bank accounts during the relevant period. Mr Phillips has informed the Tribunal that the various institutions with which he has held accounts do not keep records of bank statements in excess of six years old. He also told the tribunal that he has searched his own records and has been unable to locate the relevant bank statements.
[48] The Tribunal must determine a value for Mr Phillips financial assets (see section 9 of the Act) based on the material before it. The Tribunal finds that from 4 March 1999 to 20 March 2002 Mr Philips had financial assets of $8,330. From 21 March 2002 to 3 December 2002 his financial assets increased by $45,000 when Ms Herne lent him that amount. So that during that period his financial assets would total $53,330. On 4 December 2002 he held a total of $62.476 in his bank accounts. The Tribunal accepts that the $63,000 was spent by the end of 2003. When he sold the Townsville property and deposited $400,000 in the Esanda term deposit he had $68,000 remaining. From that amount he repaid approximately $25,000 credit card debt leaving $43,000 so that from 1 January 2004 to 9 March 2004 the balance of his accounts would have been approximately $43,000. The Tribunal finds accordingly.
Mr Phillips argued he was not loaned an amount of $45,000 by Ms Herne. The applicant said he held that amount in trust as a down-payment on a property they were buying together. In his written submissions, he argued the money was held on a constructive trust. That is possible, but I simply do not have enough evidence before me to conclude that was so. The better and more likely explanation on the limited material before me is the one adopted by the SSAT: the amount was a loan that had to be counted for present purposes. The characterisation of the $60,000 amount referred to by the SSAT was also disputed at the hearing. In his written submissions and in his oral evidence, he said he was unable to account for the money. He said he no longer knew why he had declared that he held the money. He surmised that the money might have been the residue of a loan or that it was the value of his hobby collection that had been incorrectly described as savings (although I note in his final submissions he suggested the value of the dinky toys in the collection had already been taken into account as household effects). Mr Phillips was ultimately unable to point to any persuasive evidence that would enable me to reach a different view to that of the SSAT. I acknowledge Mr Phillips was labouring because of his failing memory and an absence of documents, but I have to make the best decision I can on what is in front of me. I think the money should be counted as a financial asset on the basis that he declared it as such at the time.
I do not understand there to be any serious dispute over the value of Mr Phillips’s household effects.
The only other question that was raised relates to the value of a property in Thailand. The house had been bought for the applicant’s son. Ms Forsyth, for the respondent, pointed out the fact the property was acquired as a gift would engage the gifting provisions in the legislation so that the value of the property was still attributed to the applicant. She referred in particular to ss 1124 and 1125 of the Social Security Act 1991. Mr Phillips’s argument that the value of the property should not be attributed to him because it was a form of support for his son is not to the point. The SSAT was right to include $30,000 in the applicant’s assets from the date of the purchase of the property.
SPECIAL CIRCUMSTANCES
The Tribunal has the power to waive recovery of a debt owed by an applicant in a limited range of circumstances. The relevant provision in this case is 1237AAD of the Act. The discretion to waive a debt is enlivened where an applicant experiences special circumstances that suggest it is appropriate to waive recovery of some or all of the debt. The discretion is not exercisable where the debt arose as a result of the applicant knowingly making false statements to the respondent, or failing to comply with a relevant law. I do not think there are false statements in the relevant sense in this case. The real question is whether there are special circumstances, which means circumstances that are unusual, and which suggest this case is different to other cases so that it should be treated differently.
Mr Phillips is suffering from the early stages of dementia, as I have explained. It is unclear whether that condition has reached the point where it could be said to set aside the applicant’s case from others who received the DSP. I note he does own a rental property in Beenleigh. He has equity in that property and receives rental income. He says he had difficulty selling the property, but there is no reason to assume a sale is impossible. A sale of the property would enable him to meet his obligations to the respondent and take care of his dependent son. The fact he owns the property and has access to funds (even if not immediately) puts him a better position than many other people who might find themselves with a Centrelink debt.
The applicant also made submissions about his treatment at the hands of Centrelink. He says, in essence, he has been harassed over a long period of time in relation to his affairs. I accept the disputation with Centrelink has gone on for some time, and that a number of errors were made in the calculations of his debt and in some of the claims that were made against him. I also accept that the dispute has dragged on over a long period. Even so, I do not see how that amounts to special circumstances in this case.
I do not think there is any basis for treating Mr Phillips’ case as special. The discretion is unavailable. The debt should be recovered, albeit that the way in which it is recovered, and the pace of recovery, will need to be negotiated.
CONCLUSION
The decision of the SSAT was substantially correct, although I have noted it is now accepted that the applicant was not a resident of the West End property during the period under review. That may have a minor impact on the final figures. In those circumstances, I would set aside the decision under review with respect to the amount of the debt and remit it to the respondent for recalculation in accordance with these reasons. The decision in relation to waiver is affirmed.
I certify that the preceding 22 (twenty two) paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.
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Associate
Dated 15 February 2012
Date(s) of hearing 14 December 2011 Applicant Self-represented Advocate for the Applicant Mr Morgan Advocate for the Respondent Ms Forsyth [i] The applicant claims that he is experiencing the early stages of dementia. He asked for Mr Morgan to assist him. Having a representative appear by telephone from overseas creates serious logistical problems: What if the phone connection is cut, for example? The cost of a videolink was prohibitive in the circumstances. I agreed we would allow Mr Morgan to participate by telephone on the understanding that the hearing would proceed if there were technical difficulties that prevented Mr Morgan from being fully involved. I adjourned the case at one point because it became apparent Mr Phillips was not in a fit state to continue. But I was satisfied he was otherwise able to effectively represent himself.
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