Smith and Secretary, Department of Social Services (Social services second review)
[2015] AATA 929
•2 December 2015
Smith and Secretary, Department of Social Services (Social services second review) [2015] AATA 929 (2 December 2015)
Division
GENERAL DIVISION
File Number(s)
2014/1782
Re
Noel Smith
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Professor R Deutsch, Deputy President
N Gaudion, Member
Date 2 December 2015 Place Sydney The decision under review is affirmed.
............................[sgd]............................................
Professor R Deutsch, Deputy President
CATCHWORDS
SOCIAL SECURITY – asset test – newstart allowance – disability support pension – whether applicant failed the asset test limit when receiving payments – whether applicant failed to declare assets – whether debts incurred by applicant – valuation of assets – whether debt could be written off – whether debt could be waived – whether any special circumstances – no reason debts should not be recovered in full – decision under review affirmed
LEGISLATION
Social Security Act 1991 ss 1236, 1237A, 1237AAD
CASES
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth and Secretary Department of Social Security (1995) FCA 1708
Kirkovski v Secretary, Department of Families and Community Services [2004] FCA 790
REASONS FOR DECISION
Professor R Deutsch, Deputy President
N Gaudion, Member
2 December 2015
FACTS AND BACKGROUND
The background to this matter is that at all relevant dates the applicant resided in a property he owned in Rozelle, New South Wales.
In 1989, the applicant’s parents subdivided a property attached to the house in which they resided in Wellington Point, Queensland. The subdivided property resulted in four vacant blocks of similar size with one block being transferred to each of the applicant and his three siblings. Two of the siblings sold the blocks that were transferred to them and the applicant and his brother retained the blocks transferred to them. The property transferred to the applicant was 24 Rye Street Wellington Point, hereafter referred to as the Rye Street Property.
The applicant applied for Job Search Allowance (later changed to Newstart Allowance) which commenced being paid from 21 October 1993. The respondent is of the opinion that the applicant did not properly disclose the ownership of the Rye Street property when he applied for the Job Search Allowance.
On or around 7 March 2001 the applicant’s father transferred 24 Chermside Street Wellington Point (“the Chermside Street property”) to the applicant and his brother as joint tenants. The Chermside Street property is where the applicant’s parents had lived. The Rye Street property was located at or near the rear of the Chermside Street property.
The applicant did not notify Centrelink of his change in circumstances in 2001 when he had acquired an interest in the Chermside Street property.
The applicant applied for the Disability Support Pension (“DSP”) and was granted DSP with effect from 5 September 2003.
On 6 April 2010 Centrelink commenced a review of the applicant’s entitlement to his pension. On 13 May 2010 the applicant signed a “mod R real estate details” form and an “Income and Assets Update” form. This form disclosed the ownership of the property in which the applicant resided in Rozelle NSW as well as the applicant’s ownership of the Rye Street property and his one half interest in the Chermside Street property. On 18 May 2010 the Australian Valuation Office (AVO) issued valuation reports for each of the Rye Street and Chermside Street properties.
The applicant received DSP until 15 June 2010 when his pension was cancelled because his assets exceeded the asset limit based on the value of the Chermside and Rye Street property valuations prepared by the AVO.
The AVO valuations for the applicant’s interest in the Chermside Street property was accepted and adopted by both parties.
ISSUES
The issues for the Tribunal to consider are:
(a)Was the applicant overpaid Newstart allowance from the period 21 October 1993 to 4 September 2003 and Disability Support Pension for the period 5 September 2003 to 2 June 2010 because he exceeded the relevant asset limits?;
(b)If the applicant was overpaid:
(i)whether the debt should be written off?; and
(ii)whether the debt should be waived?
With respect to the value of the applicant’s assets, prior to the hearing the applicant had asserted that both the Rye Street Property and the Chermside Street Property had been held on trust and therefore should be excluded from the asset test limits. At the commencement of the hearing the applicant conceded that there was insufficient evidence to satisfy the statutory requirement for the properties to be held on trust.
Therefore, in order to determine if the applicant exceeded the asset test the issue for the Tribunal to determine is the value that should be attributed to the Rye Street property at the relevant dates.
WHAT VALUE SHOULD BE ATTRIBUTED TO THE RYE STREET PROPERTY AT THE RELEVANT DATES AND DOES THAT VALUE RESULT IN THE APPLICANT EXCEEDING THE RELEVANT ASSET TEST LIMIT?
With respect to the valuation issues, the applicant ultimately sought to rely on the Valuer General’s valuations and the Secretary ultimately sought to rely on the valuations of Ms Rachel Johnson of Hely & Associates. Set out below is a summary of the relevant dates for us to determine the value of the Rye Street property, the agreed value of the Chermside Street property and the relevant asset test limit. The Valuer General values were obtained by the applicant from the rates notices for the Rye Street Property. The relevant asset test limits were advised by the Secretary and were not disputed by the applicant.
1 2 3 4 5 Date Valuer General valuation of Rye Street Hely Valuation of Rye Street AVO valuation of Chermside Street Relevant Asset Limit 21 October 1993 $78,000 $95,000 N/A $112,750 1 January 1998 $90,000 $105,000 N/A $125,750 7 March 2001 $103,000 $130,000 $90,000 $133,250 1 July 2003 $127,000 $155,000 $150,000 $149,500 1 July 2005 $225,000 $330,000 $210,000 $317,750 1 July 2007 $225,000 $500,000 $270,000 $343,750 1 July 2009 $225,000 $500,000 $270,000 $562,000
It was agreed by the parties these were the relevant dates for the value of the Rye Street property to be determined. It was accepted by the applicant in submissions made by his representative that in all relevant years that the value of the applicant’s assets exceeded the asset test limit after March 2001 when he acquired the interest in the Chermside Street Property. Whilst this would eliminate the need for the value of the Rye Street property to be determined at any date other than 21 October 1993 and 1 January 1998, we have nonetheless made a determination of the value of the Rye Street property at each of the above dates.
During the hearing there was some discussion as to whether or not the value of the applicant’s household contents and personal effects were to be included for the purpose of the asset test. However, for the reasons set out below, it was not necessary for any determination to be made as to whether or not the value of the applicant’s household contents should be counted towards the asset limit. Annexed to the affidavit of the applicant tendered as Exhibit A2, is a valuation report prepared by Mr Anthony Higgs of Herron Todd White (referred to during the hearing as the “Herron Todd White” valuation) and a report prepared by Mr Reginald Randall of Solutions in Property.
The Herron Todd White valuation dated 3 October 2013 sets out a value for the Rye Street property as at 21 October 1993 of $95,000. Mr Higgs did not give evidence in relation to his report.
Mr Randall’s report was dated 12 January 2014 and was referred to in the applicant’s affidavit at paragraph 44. Relevantly, it states:
The report from Solutions in Property was a critique of the valuations prepared by the Australian Valuation Office and the valuation prepared by Heron Todd White. It was not a valuation as such.
Mr Randall did give evidence during the hearing. Mr Randall is a registered valuer in the state of New South Wales and has many years of experience in the real estate industry generally. Mr Randall’s evidence was inconsistent as to whether or not he was providing an opinion as to the value of the Rye Street property or a critique of the other valuations including that of Ms Johnson.
Mr Randall advised that he had provided the instructions to Heron Todd White to have the Rye Street property valued. Mr Randall was asked if he agreed with the value of the Rye Street property at at $95,000 as at 21 October 1993 set out in the Herron Todd White report to which he stated that he did.
Mr Randall confirmed that the Herron Todd White valuation and the valuation of Ms Johnson both adopted a comparable sales approach in order to reach their respective opinions of the value of the Rye Street property and that this approach was an appropriate approach to adopt.
During his evidence, Mr Randall was referred to page 4 of his report where he stated “[i]n conclusion we have found no evidence to support a valuation higher than the Valuer General’s Queensland on 24 Rye Street Wellington Point Queensland 4160 which are as follows” and then listed the relevant dates and values including a value of $78,000 at 21 October 1993. Given that he had stated that he agreed with the value of $95,000 as at 21 October 1993 set out in the Herron Todd White report, Mr Randall advised that he wished to amend the value set out in his report as at 21 October 1993 from $78,000 to $95,000. However, Mr Randall initially maintained that all other values set out in his report at the other dates did not require any amendment.
Mr Randall advised that he was initially asked to do a valuation of the Rye Street property but declined to do so. It is understood that this was because as a NSW registered valuer he is not licensed to value properties outside of New South Wales and the Rye Street property is located in Queensland. Mr Randall also acknowledged that he had not inspected the Rye Street property. Mr Randall ultimately withdrew all of his opinions as to the value of the Rye Street property.
Whilst Mr Randall did not provide any opinion as to the value of the Rye Street property, he does have many years experience within the real estate industry and is a registered property valuer in NSW. Therefore, it is accepted that he is qualified to provide an opinion that the comparable sales approach adopted in the Heron Todd White valuation and Ms Johnson’s valuation is an appropriate approach to adopt.
The applicant’s position during submissions was that the value to be adopted for the Rye Street property must be reasonable and that the Valuer General values were set at levels which the applicant believes should be considered to be reasonable.
It is the respondent’s position that the appropriate basis for valuation is market value and referred to the decision by Bennett J of the Federal Court in Kirkovski v Secretary, Departmens of Families and Community Services [2004] FCA 790 at [17]:
Under the Social Securities Act 1991 (Cth) there is no statutory provision specifying any method for the valuation of assets. The test which seems to have been applied by the AAT in a majority of cases is a net market value approach based on comparable sales and the ‘best use’ to which the asset could be put (see Fong and Secretary Department of Family and Community Services [2002] AAT 172; Re Emberts and Repatriation Commission (1988) 16 ALD 19).
We agree that market value is the appropriate basis of valuation to adopt in a matter such as this. The Heron Todd White report and the report prepared by Ms Johnson both set out that they have adopted market value as the basis of valuation and comparable sales as the approach adopted to determine the market value.
The only evidence available to support the Valuer General’s valuation was the values set out in various rates notices which can be found at pages 75, 76 and 237 to 253 of the T documents. There was no substantive evidence provided to indicate if the Valuer General’s valuations were the market value basis of valuation, being the basis that we have determined is appropriate. Further, there was no substantive evidence to indicate the approach that had been adopted by the Valuer General, such as comparable sales or another valuation method.
Therefore, the only evidence before the Tribunal as to the “market value” of the Rye Street property are the Herron Todd White valuation and the valuation report of Ms Johnson of Hely & Associates.
Ms Johnson was granted leave to appear and gave evidence at the Hearing by telephone. Ms Johnson is a registered valuer in the state of Queensland. Ms Johnson was asked questions in respect to the timing on when certain services such as water, electricity, sewage became available and whether she had taken into account that the property was “land locked” by virtue of there being no road constructed to access the property when determining her opinion of value.
In respect to the timing of services, Ms Johnson advised that she relied on council documents. It was contended by the applicant that where the relevant council document described a date as an ‘installation date’, it may in fact have been referring to another date, such as when the works were approved and they were installed at a later time. However, there was no evidence provided on behalf of the applicant that the dates on the council documents relied on by Ms Johnson were different to the way in which she had interpreted those documents.
Ms Johnson was also asked questions in respect to her understanding as to the timing of when the sealed road was constructed. Given the valuation is at respective dates, Ms Johnson again stated that she had relied on council documents.
It became clear during the course of the hearing that the assertion being made on behalf of the applicant was that while the area for a road for Rye Street was marked on council documents, it was not constructed as a sealed road until 2000. Therefore at all relevant times prior to this, the applicant’s Rye Street property was land locked as the Rye Street road land area consisted of bush and trees. The implication of this assertion appears to be that the property was land locked and consequently a lower valuation might be applicable. However, the applicant also gave evidence that the property given by his parents to his brother and located adjacent to his on Rye Street was also “land locked” and he was able to construct a home on his property in 1997 with access via a dirt road. It is therefore not accepted that the absence of a sealed road meant that the applicant’s Rye Street property was land locked prior to the construction of the sealed road in 2000.
Ms Johnson’s report stated:
Our valuation is on a direct comparison approach taking into account the development potential of the site at the appropriate date, however, does not treat the site as a development site taking into account the profit/lost and costing of potential development.
She also states:
however, the report from the Australian Valuation Office have provided a valuation based on a hypothetical development model of the subject land in 1993 and 1998 for the subdivision of the land into 2 lots and the subsequent years as a 6 unit development site.
It is understood that the AVO valuation was based on a hypothetical development model whereas Ms Johnson adopted a comparable sales approach comparing the price at which other vacant blocks of land were sold.
Various submissions were also made on behalf of the applicant with respect to the zoning of the Rye Street property which changed over the years and the extent to which it could be developed. The reasons for these submissions appears to be a hypothetical development model approach adopted in the AVO valuations of the Rye Street property and that in the applicant’s view the Rye Street property would not be suitable for a six unit development site. It is not clear if the submissions also attempted to infer that Ms Johnson adopted the development model approach but in our view she did not. Mr Randall confirmed she adopted a comparable sales approach. The submissions and assertions regarding zoning do not appear to be relevant given that the only valuation based on a hypothetical valuation model is that of the AVO and neither party is seeking to rely on the AVO valuations for the Rye Street property.
Ms Johnson was not provided any information during her evidence that caused her to change her opinions of value at the relevant dates. As noted above, we are of the view that market value is the appropriate basis for determining the value of the property, and this is the approach which Ms Johnson adopted. She used a comparable sales approach which was also used in the Herron Todd White valuation and accepted by Ms Randall as an appropriate valuation method. We are of the view that Ms Johnson is an appropriately qualified and registered valuer who conducted her valuation in an appropriate manner. We therefore accept the valuations prepared by Ms Johnson at all relevant dates as set in column 3 of the table at paragraph 13.
Adopting the value of the Rye Street property and the value of other assets declared at the commencement of his pension means that the applicant exceeded the asset limit at all relevant dates, regardless of whether or not household contents are included for the purpose of the asset test limit.
In conclusion, in our view, the applicant did not properly disclose to Centrelink his ownership of two properties in Wellington Point, Queensland – one in Rye Street and one in Chermside Street. As a result of the applicant’s failure to properly disclose his ownership of those properties, Centrelink was led to believe that the value of the applicant’s assets were much less than they really were. Consequently, Centrelink overpaid the applicant $85,221.27 during the period 21 October 1993 to 4 September 2003 in respect to Newstart Allowance and $94,335 during the period 4 September 2003 to 2 June 2010 in respect to DSP. The amounts of the overpayments were provided by the respondent and the amounts were not disputed by the applicant. These overpayments are therefore a debt of the applicant in accordance with section 1223 of the Social Security Act 1991 (“the Act”).
SHOULD THE OUTSTANDING DEBT BE WRITTEN OFF?
The relevant section of the the Act to consider the write off of the debt is section 1236. This section states at section 1236(1A):
The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c) the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d) it is not cost effective for the Commonwealth to take action to recover the debt.
Clearly, if the Tribunal is satisfied in respect of any one of the paragraphs referred to above, the debt may be written off. It also follows that if none of the above paragraphs can be satisfied, then the debt cannot be written off.
Dealing with these paragraphs sequentially the Tribunal comments as follows:
a)There was no suggestion made in submissions or at the hearing the debt was anything other than recoverable at law;
b)The applicant’s assets include the property in which he resides at Rozelle NSW, the Rye Street property and an interest in the Chermside Street property and some other assets. The applicant has assets which significantly exceed that amount of the debt. Whilst the applicant may need to sell one of his assets, the value of his assets greatly exceed the amount of the debt and therefore he has capacity to repay the debt.
c)The applicant’s whereabouts are known.
d)In submissions the respondent advised it would be cost effective for the Commonwealth to take action to recover the debt and the Tribunal has no reason or basis to doubt that conclusion.
Therefore, there is no scope for the debt to be written off.
SHOULD THE OUTSTANDING DEBT BE WAIVED?
With respect to waiving the debt, the relevant sections of the Act to be considered are 1237A (administrative error) or 1237AAD (special circumstances). We have considered each of these separately.
Section 1237A(1) states:
Subject to subsection (1A), the Secretary 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 in good faith the payment or payments that gave rise to that proportion of the debt.
Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors, such as error by the debtor.
It is asserted by the applicant that at the time of applying for the pension, he placed an asterisk mark next to the question “Do you have any other assets?” and he was advised by a Centrelink representative that the family home was not considered an asset and in the applicant’s view what he owned was land which was the backyard of the family home. The applicant held this view because the Rye Street property used to be on the same title as the Chermside Street property which he considered as the family home as he did not have a family of his own.
The applicant further asserts that he provided Centrelink a copy of the rates notice for the Rye Street property during an interview for his pension application. The applicant acknowledges that he thought the treatment of the Rye Street property was an important issue that required further clarification and while he did not receive an answer as to the appropriate classification, he assumed it was excluded from the assets test when the pension commenced being paid and he did not seek any further clarification.
The applicant’s evidence appeared to be presented in such a way to assert that he disclosed the Rye Street Property at the time of an application interview and this was supported by the inclusion of a rate notice for the Rye Street Property in the T documents following identity documents he asserted he also provided at an application interview. However, the identity documents form part of T9 in the T documents described as “Centrelink file review” dated 13 July 1994 (the initial interviews were in 1993) and the rates notice formed part of T10 which included the rate notices with issue dates of 18 September 1993 and 8 August 1994 (pages 75 and 76 of T documents respectively), with the latter rate notice being issued the year after the initial interviews. The inclusion of the rate notice at page 75 of the T documents is not sufficient evidence that the applicant disclosed the Rye Street property at the time of his interviews in 1993 and provided the rates notice at that time.
It is understood that the applicant is asserting the debt is attributable to two administrative errors. Firstly, that Centrelink did not properly investigate the reason for the asterisk mark next to the question “Do you have any other assets?”. Secondly that the applicant provided a copy of the rate notice for the Rye Street Property at the time of making the application. It is unlikely that either of these two matters could in and of themselves amount to an administrative error. Merely attaching an asterisk to a question and presenting a rate notice cannot be said to shift the onus onto Centrelink to make further enquiries. These matters, in our view, cannot be said to constitute an administrative error by Centrelink.
However, regardless of whether or not these matters constitute administrative errors, in our view, in any event, the debt is not solely attributable to these matters for the reasons set out below.
The applicant completed two pension application forms which were signed by him on 30 September 1993 and 1 October 1993. Both of these forms included the question “Do you own or have an interest in any real estate/farm? (apart from the home you live in)”. This question was responded to on both forms with the “No” box being ticked when the applicant should have ticked the “Yes” box given he lived in his property at Rozelle and also owned the Rye Street property.
Further, despite various communications advising the applicant that he should advise Centrelink within 14 days if his circumstances were to change, the applicant did not notify Centrelink that he had acquired an interest in the Chermside Street property.
Therefore, in our view the debt did not arise “solely” due to administrative error and the debt cannot be waived under section 1237A.
Section 1237AAD of the Act deals with waiver of the debt in special circumstances. The section provides:
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.
All three paragraphs referred to above need to be satisfied in order to allow a debt to be waived under section 1237AAD.
The main focus of the parties was on the question of special circumstances with the applicant submitting that there are special circumstances because of:
(a)The long period of the debt and the delay in conducting the review. The applicant stated that if Centrelink had acted earlier to conduct the review that was conducted in 2010 the applicant could have taken different actions at that time;
(b)The injustice due to the failure of Centrelink to maintain sufficient records of the interviews in 1993 to be able to support the applicant’s assertions regarding the disclosure of the Rye Street property;
(c)The applicant’s health issues;
(d)The contention that if the applicant’s initial application forms were set out in the same format as the Mod R form completed in 2010, he would have appropriately disclosed the Rye Street property in 1993.
When determining whether special circumstances exist, the relevant hurdle is for a circumstance to be something that is “unusual, uncommon or exceptional” and have “a particular quality of unusualness that permits them to be described as special”: Re Beadle and Director-General of Social Security (1984) 6 ALD 1; see also Groth and Secretary Department of Social Security (1995) FCA 1708.
The long period of the debt is not considered to satisfy special circumstances, particularly when the applicant did not advise Centrelink of his change in circumstances when he acquired an interest in the Chermside Street property nine years prior to the Centrelink review which resulted in the full disclosure of the properties in which the applicant held an interest.
In respect to the maintenance of Centrelink records, it is our view that Centrelink maintained all records which it was legally required to and for such time as is legally required. There is no requirement of Centrelink to maintain all records indefinitely.
How the applicant’s health issues constituted special circumstances was not made clear in submissions. The evidence suggests that the applicant did suffer from cancer whilst he was in receipt of DSP. However, there were no submissions with respect to any current health issues that would constitute special circumstances. Furthermore, there were no specific health issues identified at any given times that would support the existence of special circumstances in a particular period.
The Mod R form completed by the applicant in 2010 is a different format with different questions to the two initial applications completed by the applicant in 1993. It is reasonable to assume that forms could change between 1993 and 2010 and we do not accept this change somehow amounted to a special circumstance.
The application forms signed by the applicant in 1993 asked the question “Do you own or have an interest in any real estate/farm? (apart from the home you live in)”. On any reasonable basis that would appear to be a sufficiently clear question to which the applicant could and should have ticked “yes” given that he owned the house in Rozelle that he lived in and in addition owned the Rye Street property.
As the applicant has not satisfied the special circumstances of section 1237AAD, the debt cannot be waived.
For the reasons set out above, the debt of the applicant can neither be written off nor waived.
CONCLUSION
For the reasons outlined above the Tribunal concludes as follows:
·The Rye Street property should be attributed the values set out in the table below:
Date Valuation of Rye Street 21 October 1993 $95,000 1 January 1998 $105,000 7 March 2001 $130,000 1 July 2003 $155,000 1 July 2005 $330,000 1 July 2007 $500,000 1 July 2009 $500,000
As a result the applicant exceeded the asset test at all relevant dates. Therefore, the applicant was overpaid Newstart and DSP and the overpayment is a debt of the applicant.
·The debt cannot be written off;
·The debt cannot be waived.
DECISION
Accordingly, the decision under review is affirmed.
I certify that the preceding 65 (sixty-five) paragraphs are a true copy of the reasons for the decision herein of Professor R Deutsch, Deputy President, N Gaudion, Member ...............................[sgd].........................................
Associate
Dated 2 December 2015
Date(s) of hearing 21 August and 23 October 2015 Advocate for the Applicant D McNeice, MoneyWise Accounting Solicitors for the Applicant S Hodges Solicitors for the Respondent Sparke Helmore
Key Legal Topics
Areas of Law
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Social Security Law
Legal Concepts
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Asset Valuation
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Social Security Obligations
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Decision Affirmation
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