Schumacher; Secretary, Department of Family and Community Service S

[2003] AATA 554

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 554

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2002/1022 

GENERAL ADMINISTRATIVE DIVISION		)
Re		Secretary, Department of Family and Community Services

Applicant

And Gareth SCHUMACHER

Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date13 June 2003

PlaceSydney

Decision The Administrative Appeals Tribunal affirms the decision of the Social Security Appeals Tribunal dated 11 June 2002.

[sgd] Ms N Isenberg, Member

CATCHWORDS

Social security - liquid asset test waiting period (LATWP)  - compensation lump sum – whether preclusion period applies – investment in family company – withdrawal of invested monies – decision affirmed

LEGISLATION

Social Security  Act 1991 ss 14A(1), 598

CASE LAW

Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN N225

Re MT and Secretary, Department of Social Security (1986) 9 ALD 146 at 150

Re Kandasamy and Secretary, Department of Social Security (1987) 11 ALD 440 at 445

Re Jacobsen and the Secretary, Department of Social Security (1992) AATA 7846

Re Biddlecombe and Secretary, Department of Family and Community Services (1999) AATA 99/0528

REASONS FOR DECISION

13 June 2003 Ms N Isenberg, Member

DECISION UNDER REVIEW

1.      The decision under review before the Administrative Appeals Tribunals (“the Tribunal") was the decision of the Respondent, the Secretary, Department of Family and Community Services ("the Department") dated 16 April 2002 to impose a 13 week Liquid Assets Test Waiting Period (“LATWP”) (T7 pages 37 & 38) as affirmed by the Authorised Review Officer on 23 April 2002  (T21 pages53 to 56)  The Social Security Appeals Tribunal (“the SSAT") on 11 June 2002 (T2 pages 4 to 8), however decided to set aside the decision.

BACKGROUND

2.      The Respondent received a lump sum compensation payment following a workplace injury.  On 4 April 2001 he invested the sum of $80,000 with Stoneham Investments Pty Ltd (‘the company’).  (T24 page 61)

3.      The Respondent ceased employment on 31 March 2002 (T9 page 40) and on 9 April 2002 lodged a claim for newstart allowance with Centrelink.  He advised Centrelink of the $80,000 investment.  (T14 page 46)

4.      Applying the legislative formula, a 13 week LATWP was imposed.

ISSUE BEFORE THE TRIBUNAL

5. Whether the amount of $80,000 invested by the Respondent with Stoneham Investments Pty Limited was a “liquid asset” for the purposes of Section 598 of the Act.

APPEARANCES

6.      A hearing was held before the Tribunal on 27 March 2003 at which John Kenny, an advocate, represented the Applicant from the Centrelink Service Recovery Team.  The Respondent, who spoke to the Tribunal via conference telephone, was self-represented.

7.      A resumed hearing was held on 15 May 2003 when again the Applicant was represented by Mr Kenny and the Respondent again discussed the matter with the Tribunal by telephone, assisted by his father Mr Phillip Schumacher.

LEGISLATION

8. Section 598 of the Act provides that a person is subject to a LATWP where the person has “liquid assets” in excess of the “maximum reserve” on the date the person becomes unemployed or the date on which they claim newstart allowance. In the Respondent's case he became unemployed on 1 April 2002 the day after he ceased work on 31 March 2002. (T9 page 40)

9. Section 14A(1) provides that the maximum reserve, in the case of a single person with no dependants, is $2,500. According to a formula contained in s. 598 the length of the LATWP is determined as follows:

Liquid assets  -  Maximum reserve amount

Divisor

where:

liquid assets means the person’s liquid assets.

maximum reserve amount means the maximum reserve in relation to the person under subsection 14(1).

divisor means, in relation to a person:

(a)if the person is not a member of a couple and does not have a dependent child—$500; or

(b)otherwise—$1,000.

So, in the Respondent’s case, the formula is applied as follows:

$80,000 - $2,500

$500  Equals: 155 weeks

10. However, according to s. 598(2C) where the figure determined by the formula under s. 598(2A) exceeds 13 weeks, then the length of the LATWP is 13 weeks and the period is, 1 April 2002 to 30 June 2002.

11.     Section 14A relevantly defines “liquid assets” as:

"liquid assets", in relation to a person, means the person's cash and readily realisable assets, and includes:

(a)the person's shares and debentures in a public company within the meaning of the Corporations Law; and

(b)amounts deposited with, or lent to, a bank or other financial institution by the person (whether or not the amount can be withdrawn or repaid immediately); and

(c)amounts due, and able to be paid, to the person by, or on behalf of, a former employer of the person;

but does not include: (.......)

EVIDENCE: Documents

12.     The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence.

13.     In addition, the following documents were tendered:

Exhibit	Description	Date
A1	Applicant’s SOFC	9 May 2003
A2	Questionnaire completed by Mr Stoneham	4 November 2002
A3	Questionnaire completed by Mr Stoneham	11 December 2002
A4	Customer Declaration Form
A5	Fax Stoneham Investments P/L “Find Report”	15 May 2003

EVIDENCE: the Respondent

14.     The Respondent gave evidence and was cross-examined on behalf of the Applicant.  The Tribunal also put questions to the Respondent.

15.     The Respondent said that he injured his lower back in a workplace accident.  He said the condition has left him with sharp pains in the back, which are worse in winter.  He had moved to the Sunshine Coast to escape the cold.  Even now, some mornings he is unable to get out of bed. 

16.     He has been informed by his treating specialist that future surgery is likely, but it is unknown when that might be.  The cost of the surgery may be in the vicinity of $20,000 to 30,000.  He has no private health insurance.

17.     When he received a compensation settlement he invested the residual funds with Mr Stoneham’s company.  Mr Stoneham‘s wife has been a life-long friend of the Respondent’s mother and the families are friends.  He thought he would get a higher rate of interest with the company than with a bank.  He also felt that this would be more secure.  He said Mr Stoneham knew his circumstances and his medical situation.  The money had been paid by direct debit and he had a receipt from the company’s bank.  The company produces chemicals and he understood the money was used to finance the running of the company, but he was not an investor in the company as such.  He referred to T20 page 52:

This money is part of consolidated moneys, which are used to finance plant machinery, motor vehicles and the like for one of our affiliated companies.

18.     He was asked about the information provided by Mr Stoneham (Exhibit A2) to the effect that the transaction was not documented.  He said it was done ‘on a handshake’ because of the family relationship.  He thought Mr Stoneham might have something on his files about the details.  He also thought he had received something in writing from Mr Stoneham in addition to the bank receipt.

19.     He said that during the 13 week Liquid Assets test Waiting Period he lived ‘poorly’..  He lived with his father rent-free and most of his meals were provided.  Now he has to repay his father for supporting him during that period.

20.     He recalled that he had a casual truck driving position with TNT through Driver Recruitment, but he did not now know the exact dates this had been.  A couple of weeks may have been during the 13-week period, but he told Centrelink everything.

21.     When the Applicant unsuccessfully applied for a stay order and the Respondent received the ‘back pay’ for the 13 weeks, he paid his father some of the money he owes him.  With the balance, he paid bills; such as his Visa card, telephone and electricity expenses he agreed, that would have to have been met whether or not he was in receipt of newstart allowance.

22.     It was pointed out to him that if he had invested the funds at 7.5% in April 2002 he would have received $1500.  In June 2002 he would also have received that amount again.  He said that Centrelink had that information and had taken that into account when calculating his newstart allowance.

23.     His attention was invited to the various letters and questionnaires completed by Mr Stoneham (T-Docs T19, T20, T24 & Exhibits A2, A3).  He denied discussing with Mr Stoneham the LATWP prior to the letters and questionnaires.

24.     In T20 page 52 Mr Stoneham had said:

The money can be withdrawn provided two months notice is given except in cases of emergency.

25.     It was noted that there ‘emergency’ is not prefaced by ‘medical’..  He said that was the intention.

26.     In T24 page 61 Mr Stoneham had written that one-month’s notice was required.  There was no mention of emergency withdrawal.  The Respondent said the reference to one month was a misprint and that in all other documents Mr Stoneham had said ‘2 months’.

27.     The Respondent said he intended to leave the money with the company until there was an emergency such as when he needed the foreshadowed operation on his back.  It was put to him that T20 suggests that the money can be withdrawn at any time provided there is 2 month’s notice.

28.     When asked as to whether he was obliged to withdraw the entire $80,000 or if he could withdraw part only, he said he did not know.  Even if he had to withdraw the whole amount he said he would pay his medical and living expenses during his recuperation and then put the rest back with the company.

29.     The Respondent said he was now being punished for being prudent with his compensation monies, which he could easily have squandered.

EVIDENCE: Mr B Stoneham

30.     Mr Stoneham, the director of Stoneham Investments Pty Limited, was called to give evidence on behalf of the Applicant and did so by conference call.  He was also cross-examined on behalf of the Respondent and the Tribunal put questions to him.

31.     He said that in April 2001 the Respondent had loaned his company $80,000.  There were no formal documents as to the terms of the loan to the company.

32.     In the course of the hearing he faxed to the Tribunal a copy of a financial statement from the company (Exhibit A5) confirming that the date of the loan from the Respondent was 4 April 2001. It showed quarterly interest payments.  It also showed that on 15 January 2003 the loan monies had been repaid. 

33.     He was asked how that transaction had occurred.  He said that some time before Christmas last year he received a letter from the Respondent requiring repayment.

34.     He was asked about the disparity between his letters of 19 April 2002 (T20) and 18 July 2002 (T24) in respect of the required notice, but said he could only vaguely remember writing them.  He did not recall the questionnaires of 28 October 2002 and 29 November 2002.

35.     He was asked what he regarded as ‘an emergency’ and he replied that it was something like a serious illness.  He was asked what he would have thought if the Mr Schumacher had told him that Centrelink was not going to pay the $2600 [the amount withheld] and he said he would not classify that as an emergency.  It would only be an emergency, for example, if he was living on the breadline, but he knew the Respondent was being supported by his father.

36.     He was asked as to his view that if he had been requested to release a small amount of the money.  He said he would not take into account that interest payments were being made.

SUBMISSION: Applicant

37.     It was the Applicant’s submission that the $80,000 invested by the Respondent in Stoneham Investments Pty Limited is a “liquid asset” and in that it is a “readily realisable asset” of the Respondent.

38.     The Applicant agreed with the SSAT that Stoneham Investments Pty Limited is not a “financial institution”, hence the provision of s14A(b) does not apply.  (T2 page 8 paragraphs 19 and 20).  The advocate noted however, that when amounts are deposited with a bank it is irrelevant if the funds can be accessed immediately.  For consistency, if there is a loan with someone other than a bank, it should also not matter if the funds are readily accessible or not.

39. The Applicant disputed the finding of the SSAT that because the $80,000 investment does not fall within the definitions of cash and readily realisable assets (found in paragraphs (a), (b) and (c) of s. 14A(1)) then it is not a liquid asset. The provision is an “includes” definition and is therefore not exhaustive.

40.     It was submitted that whether an amount is a liquid asset will depend on the circumstances of the case, whether there is a formal contract, the relationship between the parties, including the formality (or otherwise) of the relationship.  The advocate for the Applicant referred the Tribunal to its decisions in Re Jacobsen and the Secretary, Department of Social Security (1992 - AATA 7846 and Biddlecombe and Secretary, Department of Family and Community Services. (1999) AATA 99/0528. In those cases the term ‘liquid assets’ was held to mean “no more than assets which are capable of ready conversion to cash”.. The section does not include provision for the existence of liabilities in relation to the asset sum. So for example: the desire of the Respondent to preserve the investment against future possible medical expenses is not a relevant consideration as to whether the investment funds are his liquid asset. (T25 page 63)

41.     On 19 April 2002 Mr Stoneham advised Centrelink that the money “can be withdrawn provided two month’s notice is given except in cases of emergency” (T20).  However in his letter of 18 July 2002 Mr Stoneham advised the notice period was one month.   In a questionnaire completed by Mr Stoneham dated 4 November 2002 he advised that the period of notice is two months.  (Exhibit A2) 

42.     Mr Stoneham also advised that if the Respondent were to seek withdrawal of his investment he would have to withdraw all of it, he could not make a partial withdrawal.   See questionnaire dated 9 December 2002.  (Exhibit A3)

43.     As the SSAT explained, there is no definition of a “readily realisable asset” in the Act.  The Guide to Social Security Law contains guidance for Centrelink decision makers in the interpretation of the law.   Part 1.1.L.50 of the Guide states:

Definition


Liquid assets are any readily available funds which can be accessed by the customer within 28 days of the date last worked.........
Examples: Liquid assets include:

·     cash on hand,

·     shares and debentures, term deposits,

·     other money available at short notice,

·     some payments made or due to be made (within 28 days) by a customer's last employer,

·     10 year insurance bonds,

·     amounts deposited or lent to banks or other financial institutions whether or not the amount can be withdrawn or repaid immediately,

·     amounts borrowed from the bank for a specific purpose such as overseas travel that may not have been used for the said purpose,

·     assets given to a son or daughter in some circumstances,

·     loans to other people,

·     unencumbered proceeds from sale of business,

·     monies in trust funds, bank accounts including mortgage offset accounts, BUT NOT balances of mortgage redraw accounts, and

·     compensation payments.

44.     It was submitted that there is no legal requirement to adhere to the policy on the 28 day access to the funds if the circumstances do not warrant it.  The Respondent’s investment is with a family friend and, it was submitted, that the relative paucity of documentation associated with the loan, taken together with the rather sketchy and malleable arrangement for its withdrawal reflects the informality of the relationship.

45.     The advocate for the Applicant submitted that it is reasonable to expect the Respondent to make the same arrangements to support himself during the LATWP as would someone who had the money invested in publicly listed shares or in an interest bearing deposit, for example.  The advocate for the Applicant submitted that it would frustrate the consistent application of these provisions to treat the $80,000 investment, or part thereof, as not being a “liquid asset” of the Respondent at the time he became unemployed.

SUBMISSION: the Respondent

46.     It was the Respondent’s position that he had been completely honest with Centrelink about his financial situation.  He said it was unfair if he were to be punished for having been prudent with his money, whereas he could have squandered it and become a burden on the system.  His father pointed out that it had only been for a short time that his son had needed benefits before he became self-sufficient again.

47.     He said it was clear that the money could not be withdrawn in less than 28 days.  A fair interpretation of the conflicting notations as to time for repayment was that one month’s notice was adequate, but two months would be better. 

48.     Centrelink had sought clarification from Mr Stoneham on several occasions.  In the first questionnaire Mr Stoneham had said the money could only be accessed with two month’s notice, but negotiation would occur if a shorter period were required.

FINDINGS

49.     In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.

50. The issue before the Tribunal was whether the amount of $80,000 invested by the Respondent with Stoneham Investments Pty Limited was a “liquid asset” for the purposes of Section 598 of the Act.

51.     There was no dispute that, if that amount were a liquid asset of the Respondent then the statutory formula would produce a LATWP of 13 weeks, as outlined above.

52.     Section 14A relevantly defines “liquid assets” as:

"liquid assets", in relation to a person, means the person's cash and readily realisable assets, and includes:

(a)….

(b)amounts deposited with, or lent to, a bank or other financial institution by the person (whether or not the amount can be withdrawn or repaid immediately); and

“Readily realisable asset” is not defined in the Act.  The Guide to Social Security Law contains guidance for Centrelink decision-makers in the interpretation of the law.  Part 1.1.L.50 of the Guide states:

Definition


Liquid assets are any readily available funds which can be accessed by the customer within 28 days of the date last worked.........
Examples: Liquid assets include:

·     cash on hand,

·     shares and debentures, term deposits,

·     other money available at short notice,

·     some payments made or due to be made (within 28 days) by a customer's last employer,

·     10 year insurance bonds,

·     amounts deposited or lent to banks or other financial institutions whether or not the amount can be withdrawn or repaid immediately,

·     amounts borrowed from the bank for a specific purpose such as overseas travel that may not have been used for the said purpose,

·     assets given to a son or daughter in some circumstances,

·     loans to other people,

·     unencumbered proceeds from sale of business,

·     monies in trust funds, bank accounts including mortgage offset accounts, BUT NOT balances of mortgage redraw accounts, and

·     compensation payments.

53.     Whether an amount is a liquid asset depends on the circumstances of each case; whether there is a formal contract, the relationship between the parties, including the formality (or otherwise) of the relationship. 

54.     It was clear that there were no formal documents as to the terms of the loan to the company, the director of which was a family friend.  The evidence as to the terms of the loan is somewhat contradictory, and may be summarised as follows:

·     Money could be withdrawn on 2 months’ notice except in cases of emergency (T20)

·     “Emergency’ means medical expenses or the like. (Exhibit A2, Mr Stoneham’s evidence)

·     In the event of disagreement as to ‘an emergency’ this would be resolved by negotiation (Exhibit A2)

·     Financial hardship would not be a reason to give less than 2 months’ notice (Exhibit A3, Mr Stoneham’s evidence )

·     Two months notice was required (Exhibits A2 and A3 )

·     The conditions of withdrawal of the money…was one month’s notice in writing (T24)

·     Only the total amount could be withdrawn (Exhibits A2 and A3)

·     Withdrawal of a lesser amount could only occur if the Respondent was living on the breadline, but Mr Stoneham  knew the Respondent was being supported by his father (Mr Stoneham’s evidence)

·     When, on 15 January 2003, the loan monies were repaid a month’s notice was given. (Evidence of the Respondent and Mr Stoneham)

55.     Of this evidence the most telling, in the Tribunal’s view, was what actually occurred when the funds were ultimately withdrawn in January 2003.  In the Tribunal’s view, It was fair to conclude that the withdrawal arrangements reflected that aspect of the agreement between the parties.  There was no evidence that, on this occasion there was any emergency, medical or otherwise.  The Tribunal finds that a fair interpretation of the conflicting evidence as to time of repayment was that one month’s notice was adequate, but two months would be better. 

56.     Furthermore, there was evidence that withdrawal of less than the whole amount could only occur if, for example, the Respondent was living on the breadline, which Mr Stoneham knew not to be the case.  The Tribunal took this to mean that the Respondent did not have ready access to even part of the monies.  

57.     Having come to that view the Tribunal considered the money was not available at short notice.

58.     There was no dispute that Stoneham Investments Pty Limited is not a “financial institution”, and hence the provision of S14A(b) does not apply.  However the advocate for the Applicant, as an alternative submission, sought to draw an analogy through that provision, that when amounts are deposited with a bank it is irrelevant if the funds can be accessed immediately.  For consistency, if the loan is with someone other than a bank, it should also not matter if the funds are readily accessible or not.  If that were the case, the terms of the agreement in relation to withdrawal would be irrelevant.  The Tribunal does not accept this view.  Centrelink’s Guidelines are specific with regard to deposits with banks, but other ‘examples of liquid assets’ contain no such limitation. Departmental guidelines have been described as “relevant only as forming part of the background of facts of which the Administrative Appeals Tribunal ought to be informed when making its decision”: Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN N225.  While acknowledged as being necessary to the administration of a large department guidelines do not supplant legislation (Re MT and Secretary, Department of Social Security (1986) 9 ALD 146 at 150; Re Kandasamy and Secretary, Department of Social Security (1987) 11 ALD 440 at 445). The general heading refers to accessibility within 28 days. Shortly put, it is in the Department’s hands to clarify its own guidelines.

59.     The Tribunal accepts that the cases to which it was referred (Re Jacobsen and Biddlecombe) are authority for defining the term ‘liquid assets’ as “no more than assets which are capable of ready conversion to cash”, but otherwise finds those cases unhelpful.  In Jacobsen the case turned on whether the applicant had informally committed the funds and whether they should therefore be taken into account.  In Biddlecombe the issue was the effect of the applicant holding funds on loan for a specific purpose.  The Tribunal does not accept that these authorities support the Applicant’s contention that the desire of the Respondent to preserve the investment against future possible medical expenses is irrelevant in determining whether the investment funds are a liquid asset.

60.     The advocate for the Applicant had submitted that it is reasonable to expect the Respondent to make the same arrangements to support himself during the LATWP.  The Tribunal agrees with this view and finds that the Respondent did so.  He did not invest all of his settlement funds and paid off some debts.  He was able to live with his parents for a time, although he has to repay them for the support provided.  He prudently invested his money, knowing that one day he would need further surgical intervention for his back condition.

61.     The Tribunal finds that the investment with Stoneham Investments Pty Limited was not a liquid asset of the Respondent.

62.     Having come to this view it was not necessary to consider the Applicant’s submission that to impose the LATWP would not create severe financial hardship to the Respondent.

DECISION

The Administrative Appeals Tribunal affirms the decision of the Social Security Appeals Tribunal dated 11 June 2002.

I certify that the preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member

Signed:         Georgie Zuzak         
  Associate

Date of Decision  13 June 2003
Counsel for the Applicant         Mr J kenny
Counsel for the Respondent     Self -Represented