STANLEY MARLEY AND DOROTHY MARLEY and SECRETARY, DEPARTMENT OF HOUSING, FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS Mr A Sweidan, Senior Member Mr A Sweidan, Senior Member

[2010] AATA 331

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 331

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/0329 and 2009/0331

GENERAL ADMINISTRATIVE DIVISION		)
Re		STANLEY MARLEY AND DOROTHY MARLEY

Applicants

And SECRETARY, DEPARTMENT OF HOUSING, FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

REASONS FOR DECISION

Tribunal   Mr A Sweidan, Senior Member

Date of Decision                19 March 2010

Date of Written Reasons  3 May 2010

Place  Perth

1.At the conclusion of the hearing of these applications on 19 March 2010, the terms of the decision intended to be made and the reasons for that decision were stated orally by the Tribunal.

2.On 22 April 2010 the applicants requested the Tribunal furnish to it a statement in writing of the Tribunal’s reasons for its decision.

3.The oral reasons for decision have been transcribed by Auscript Australasia Pty Ltd the Commonwealth reporting service.

4.An edited copy of the transcript of those reasons is attached and is provided as a statement in writing of the Tribunal’s reasons for its decision.     

....(sgd) Mr A Swedian.......

Senior Member

WRITTEN REASONS FOR DECISION

3 May 2010 Mr A Sweidan, Senior Member

Decision Under Review

1.      The applicants seek a review by this Tribunal of decisions of Centrelink on 28 April 2008, which were affirmed by the Social Security Appeals Tribunal (SSAT) on 25 November 2008, to raise and recover debts of $22,258.80 in relation to Mr Marley, and $13,318.84 in relation to Mrs Marley.

Facts

2.1      The relevant facts which are largely not in dispute are as follows:

2.2Mr Marley lodged a claim for a social security payment on 27 March 2001. Question 7 of Part F of the claim form is ticked ‘No’ in response to ‘Do you have any…money you have loaned?’.

2.3Mrs Marley lodged a ‘Form F’ about her assets and income details on 27 March 2001. Question 7 of part C of the form is ticked ‘No’ in response to ‘Do you have any…money you have loaned?’. Mrs Marley disclosed the value of her assets including a written off loan of $85,984 to an unidentified borrower [T5:p86].   

2.4On 9 November 2001 Centrelink advised Mr Marley that he was receiving disability support pension (DSP). The notice included details of Mr Marley’s rate of payment and the requirement to notify if the combined value of his financial investments are more than $26,522.

2.5      Mrs Marley lodged a claim for Age Pension on 5 May 2003.

2.6Mrs and Mr Marley completed and lodged an income and assets form on 23 May 2003, the question at A8 asks ‘Do you (and/or your partner) have money on loan?’ and is answered ‘No’.

2.7On 12 December 2006 Centrelink received details of the JL and CA Marley Family Trust which disclosed that Stanley Peter Marley was owed $119,720 (or $120,000 on the detailed balance sheet) by the Trust.

2.8On 7 March 2008 Centrelink advised Mr Marley that he had been overpaid disability support pension and age pension totalling $22,252.80 in the period 27 March 2001 and 19 June 2007.

2.9On 7 March 2008 Centrelink advised Mrs Marley that he had been overpaid age pension totalling $13,318.84 in the period 12 May 2003 and 19 June 2007.

2.10On 28 April 2008 an Authorised Review Officer (ARO) affirmed the decision to raise and recover the debts against Mr and Mrs Marley.

Applicants’ Contentions

3.1At the hearing in the SSAT and again in this Tribunal the applicants acknowledged that they had provided an amount of approximately $130,000 to their son and his former wife to assist in the purchase of a service station business.

3.2At the hearing in the SSAT applicants described this amount as a loan which they thought of as a gift but also said that an amount of $10,000 was repaid and that they hoped that some repayments would be made.

3.3Applicants acknowledged that the JL & CA Marley Family Trust was an entity associated with their son and his former wife.

3.4At the hearing in this Tribunal applicants contended that the amount in question was a gift, not a loan. In support of this they said that there was no loan documentation, no interest or agreed repayment terms and no recovery action was ever taken by applicants.       

Issues      

4.1      Is there a loan amount outstanding from Mr and Mrs Marley to the JL & Ca Marley Family Trust (the Trust)?  

4.2      If so, is the amount a financial asset of Mr and Mrs Marley?

4.3Were Mr and Mrs Marley overpaid social security payments and, if so, are the overpayments recoverable debts? and

4.4      Should recovery of all or part of the debts be written off or waived?

Legislation

5.1      The relevant legislation is contained in the Social Security Act1991 (the Act).

5.2S 1064 of the Act sets out the method of calculation of a person's rate of disability support pension. In particular, Module G of that provision sets out an "assets test" to be applied in that calculation. The rate of a person's disability support pension may be reduced if the person's assets exceed the threshold, adjusted from time to time.

5.3S 11(1) of the Act defines "asset" as "property or money (including property or money outside Australia)".

5.4      S 9(1) of the Act defines "financial assets" as:

"(a) a financial investment; or

(b) a deprived asset."  

5.5      "Financial investment" in s 9(1) of the Act is defined as:

"(a) available money; or

(b) deposit money; or

(c) a managed investment; or

(d) a listed security; or

(e) a loan that has not been repaid in full; or

(f) an unlisted public security; or

(g) gold, silver or platinum bullion; or

(h) an asset-tested income stream (short term)."

5.6S 1122 of the Act provides as follows in relation to the value, as an asset, of an amount of loan:

"1122 Loans

If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan."

5.7S 1223 of the Act provides that if a social security payment is made to a person and the person was not entitled to receive the payment, the amount is a debt due to the Commonwealth. 

5.8S 1236 of the Act provides for a debt to be written off (i.e. recovered at a later date).

5.9S 1237 of the Act provides for the non-recovery of debts in certain circumstances.

Tribunal’s Findings

Issue 1

6.1      Do Mr and Mrs Marley have a loan outstanding? If so, is it a financial asset?  

6.2On 26 April 1994 Mr and Mrs Marley were informed that loans would be considered personal assets for social security purposes [T19:p407].

6.3On 12 December 2006 Centrelink were advised that the JL & CA Marley Family Trust owed Mr Stanley Peter Marley $120,000 [T11:p187 & p202].

6.4On 3 April 2008 Mr Marley advised Centrelink that the loan to the trust was made in 1994 to assist his son and daughter-in-law to purchase a business. $10,000 had been repaid 11-12 years ago and no further repayments made. Mr Marley said he had been advised by his lawyer that the debt was not recoverable under the “Limitation Act of WA”.

6.5      The Limitations Act 2005 (WA) (Limitations Act) relevantly provides:

2.        Commencement

This Act comes into operation on the day on which it receives the Royal Assent.

4.        Application of limitation periods under this Act

(1)       The limitation periods provided for under this Act apply only to causes of action that accrue on or after commencement day.

(2)       This section is subject to sections 7 and 8.

12.      When actions commence

(1)       In this Part a reference to the commencement of an action is a reference to the issue in the appropriate court of a writ or other originating application in relation to the action.

(2)       Nothing in subsection (1) affects the operation of section 88.

Division 2 — General limitation period

13.      General limitation period — 6 years

(1)       An action on any cause of action cannot be commenced if 6 years have elapsed since the cause of action accrued.

(2)       Subsection (1) does not apply to an action if Division 3 provides for a different limitation period for that action.

59.      Debts repayable on demand

A cause of action for the repayment of a debt repayable on demand accrues when there is a failure to comply with a demand for repayment.

6.6The Tribunal is of the view that sections 7 and 8 of the Limitations Act do not apply in Mr and Mrs Marley’s circumstances.  

6.7There is no evidence of any action being taken by Mr and Mrs Marley for repayment of the debt and the limitations contained in the Limitations Act accordingly do not apply.

6.8On 23 April 2008 Mr Marley advised the ARO that he had loaned his son money to commence his own business and that it was to be repaid. There was no formal loan agreement. Following a downturn affecting his son’s business Mr Marley required no repayment to be made until such time as his son got back on his feet. Mr Marley did not forgive the loan as there remained an expectation the loan would be repaid. Mr Marley did not declare the outstanding loan at the time of making his DSP application (2001) as it appeared recovery of the loan was unlikely at that time. Mr Marley advised he had taken no formal action to recover the amount [T22:p440].

6.9On 25 November 2008 Mr Marley told the SSAT that they had discussed the 1994 advice with their son, but did not complete any paperwork about gifting the loan. Mr Marley always considered the loan a gift, not expecting repayment of the full amount, but hoping for repayment from time to time. In 2004 Mr Marley’s son sold the business and Mr Marley expected he might receive some of the proceeds of the sale. Mr Marley did not receive any of the proceeds of the sale [T2:pp8-9, par 17]. The Tribunal notes that the lack of documentation as well as the fact that no interest was charged and that there were no agreed terms of repayment are not unusual in family situations.  

6.10Now, as opposed to the applicant’s contentions, the Tribunal has had regard to the following:  firstly, the Tribunal notes that in documents before the Tribunal and I refer specifically to the bundle of documents numbered A 1 and at page 5 of that bundle, is a balance sheet of JL and CA Marley, being the son and former daughter-in-law of the applicants, and that balance sheet was prepared by a firm of certified practicing accountants, which shows that as at 30 June 1994 they owed to, it appears, Mr Marley, $146,286.93.  That was clearly the amount which is the subject of these proceedings.  Further in the same bundle of documents at page 46 there is another balance sheet, a subsequent balance sheet, for the period ended 30 June 1996, also prepared by a firm of accountants.  There appears under the heading Non-current Liabilities JL and CA Marley Loan SP Marley $140,287.

6.11The Tribunal notes further that at page 136 of the bundle of documents A1 there is annexed correspondence between the solicitors acting for the applicant’s son’s former wife and their son’s solicitor, and that, on page 136, of that bundle, there is included in the correspondence a letter, which commences at page 134.  It’s a letter which is dated 12 January 2009, in which the following statements are made:

Our client acknowledges that your client’s parents originally loaned the parties approximately $147,000 to buy the service station in 1994/1995.  However, during the relationship, your client advised our client not to worry about the debt whenever she inquired about it.  Further, your client’s parents often attended the service station and collected cash, fuel and other items for free.  No formal records were kept.  In light of these circumstances, our client formed the view over time that there was no longer a debt to your client’s parents, it either being forgiven or repaid in a combination of formal cheques and informal collections from the service station.

6.12The Tribunal notes that that appears to be consistent with Ms Marley’s submission, in which she said that the understanding was that the amount advanced was to be repaid in kind.  Now, whilst there is a lack of further records in relation to this loan, after 1996, in terms of materials before the Tribunal, the Tribunal notes that, at page 187 of the T documents before the Tribunal, there appears a Centrelink form, apparently completed by Mrs Carole Marley, which commenced at page 178 but which, at page 187, refers to an amount of money owing by the Trust and the Trust, in this case, appears to be the trust of which Glen Spean Holdings was said to be the trustee at that time, and of which company, Glen Spean Holdings Proprietary Limited, the applicant’s son and former daughter-in-law were the directors. That shows that the Trust owes an amount of $119,720 to Mr Stanley Peter Marley. That form was lodged with Centrelink on 12 December 2006. The Tribunal also notes the record made by the Centrelink ARO as follows:

23 April 2008, spoke with Mr Marley.  He explained that in April/May 1994, he purchased a local garage for $140,000 to allow his son to commence his own business.  He said the amount was a loan that was to be repaid.  I asked Mr Marley if the details had been included in a loan agreement signed by all parties and he said no.  He told me that his son managed to pay back about $20,000 in the first two to three years, but then the business suffered a downturn and he was unable to make any further repayments.  Mr Marley told me that he made an arrangement with his son that no further repayments would be required until he was back on his feet.  I asked him if he had considered forgiving the loan at that time and he said no.  There was still an expectation that the loan would be repaid.

I asked Mr Marley if he had commenced any legal action to enforce recovery and he said no.  Mr Marley told me that, at the time of making his claim for DSP, he had discussions with a financial advisor, who discussed forgiveness of the loan and gifting rules.  Mr Marley told me that he was aware that a gift would affect his rate of payment for five years.  I asked if any action was taken at that time with regard to forgiveness of the loan and he said no.  I asked Mr Marley about his claim for DSP and why he had not provided details of the outstanding loan at the time of making his claim.  He said that, at that time, his son was struggling with the business and he knew recovery of the loan was unlikely.  Mr Marley advised that he’s looking to amend his will so that his son is seen to have already received his inheritance through the forgiveness of the loan, but no action has been taken at this time.

6.13Now, that evidence is consistent with the evidence which Mr Marley gave before the SSAT and which is summarised at pages 8 and 9 of the T documents.  There is no need for me to set out the detail of that but it’s quite clear from all of the documents to which I’ve referred, the evidence which appears in the T documents included, on the balance of probabilities that the amount in question was a loan and not a gift, as the applicants have sought to assert before this Tribunal.

6.14In Re Lyons and Secretary, Department of Family and Community Services and Anor [2007] AATA 1095 the Tribunal considered the meaning of the term ‘gift’ in relation to cash injections made from the applicant to their company. The Tribunal said:

41. At general law, the term ‘gift’ is used in two distinct senses. First, the term ‘gift’ is used to describe a method of alienating real or personal property. ‘Gift’ is an "old English noun of Norse derivation which designates a descriptive category of transfer of property": Leary v FCT (1980) 32 ALR 221 at 241 per Deane J; see also Brennan J at 238. Secondly, the term ‘gift’ is used to categorise a voluntary transfer of property from one person to another where there is no valuable consideration passing from the transferee to the transferor (or as the transferor directs). "A gift is, by its very name, an assignment without consideration": Olsson v Dyson (1968) 120 CLR 365 at 386 per Windeyer J. In Leary v FCT (1980) 32 ALR 221 at 237, Brennan J observed that the ordinary notion of ‘gift’ in its technical meaning have common features: a transfer of a beneficial interest in property by way of benefaction, and an absence of a pecuniary or a proprietary benefit passing to the transferor" from the transferee by way of return. This definition locates the concept of a gift as both a method of transferring property from one person to another and it also provides the necessary and sufficient rationale for that transfer. The first sense in which gift is employed is a narrow sense, and simply seeks to demarcate the transaction of a gift from other transactions which take place, such as sale of property or other forms of alienation or dealings in property. It is also possible for a chose in action (or movable incorporeal property) to be the subject of a gift: Norman v FCT (1962) 109 CLR 9 at 28 per Windeyer J.

6.15The Tribunal went on to consider its ability to accept the change of character of the injections from ‘loan’ to ‘gift’:

45. In the opinion of the Tribunal, the gift characterisation is an ex post facto (or retrospective) attempt to outflank the accounting treatment of the loans made beforehand. Having regard to the totality of the evidence before the Tribunal (and particularly the accounting records of the company in question), the Tribunal is not satisfied on the balance of probabilities that the Applicants intended to make a gift of cash injections to their company. Even the statement of the Applicants that they did not expect to recover their money which they injected does not necessarily mean that they were making a gift of that money. This statement goes more to the expectation of recovery than to the basal nature of the transaction.

6.16The Tribunal finds that Mr Marley intended the money he gave his son to be in the form of a loan and it is correctly characterised as a loan in accordance with s 1122 of the Act.   

6.17The Tribunal finds that under s 9(1) of the Act the amount of the loan is a financial investment and a financial asset.

6.18The Tribunal finds that the value of that asset cannot be disregarded under the provisions of s 1118 of the Act, and that the value of the financial asset is $120,000.

Issue 2

7Were social security payments overpaid and, if so, are the overpayments recoverable debts?

7.1It is clear that the social security payments made to Mr and Mrs Marley did not take into account any reductions provided for by sections 1064-E or 1064-G of the Act in relation to the loan to the JL and CA Marley Family Trust.

7.2S 1223(1) of the Act provides that if a social security payment is made to a person and the person is not entitled to receive the amount, the excess amount is a debt due to the Commonwealth.

7.3The Tribunal finds that Mr Marley received $22,258.80 excess payment in the period 27 March 2001 to 19 June 2007 and this amount is a debt due to the Commonwealth [T15:pp280-364].

7.4The Tribunal finds that Mrs Marley received $13,318.84 excess payment in the period 12 May 2003 to 19 June 2007 and this amount is a debt due to the Commonwealth [T16:pp365-396]. 

Issue 3

8.        Should recovery of all or part of the debts be written off or waived? 

8.1Part 5.4 of the Act contains provisions for write off or recovery of debts due to the Commonwealth if certain criteria are met.

8.2      Relevantly section 1236 of the Act provides:

1236.  Secretary may write off debt

1236.(1)  Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

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.

1236.(1B)  For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:

(a) the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in s 1231, 1232 or 1233 has elapsed; or

(aa) the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or

(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or

(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or

(d) the debtor has died leaving no estate or insufficient funds in the debtor's estate to repay the debt.

1236.(1C)  For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:

(a) deductions from the debtor's social security payment; or

(b) deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or

(c) setting off under section 84A of that Act;

the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.

1236.(2)  A decision made under subsection (1) takes effect:

(a) if no day is specified in the decision–on the day on which the decision is made; or

(b) if a day is specified in the decision–on the day so specified (whether that day is before, after or on the day on which the decision is made).

1236.(3)  Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.

8.3The Tribunal finds that the provisions of s 1236 of the Act do not apply in Mr and Mrs Marley’s circumstances.

8.4S 1237 of the Act provides for waiver (non-recovery) of all or part of a debt.

8.5Relevantly s 1237A provides for recovery to be waived if, amongst other things, the debt is caused solely because of Centrelink’s error.

8.6It is clear that Centrelink were not informed by Mr or Mrs Marley that there was an outstanding loan when they claimed their social security payments.

8.7The Tribunal finds that the debts are not attributable solely to Centrelink’s error and cannot be waived under s 1237A of the Act.

8.8The Tribunal notes Mrs Marley is, or has been, undergoing medical treatment.

8.9      Section 1237AAD of the Act provides:

1237AAD.       Waiver in special circumstances

1237AAD.     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 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.

Note 1:     Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.

Note 2:     This section has effect subject to section 1237AAE in relation to an assurance of support debt.

8.10The Tribunal accepts that Mr and Mrs Marley did not ‘knowingly’ fail to declare the loan when they applied for social security payments.

8.11In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] Besanko J said (at 33):

I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.  

8.12The Tribunal finds that being diagnosed with and undergoing treatment for a serious illness is not in itself a special circumstance that would make it appropriate to waive recovery of the debts.

8.13The Tribunal finds that s 1237AAD of the Act does not apply in Mr and Mrs Marley’s circumstances.  

Decision

9.        The decisions of the SSAT are affirmed.

I certify that the 9 preceding paragraphs are a true copy of the written reasons for the decision herein of Mr A Sweidan, Senior Member 

Signed: .(sgd) T Freeman.......
  Associate

Date of Hearing  19 March 2010
Date of Decision  19 March 2010
Date of Written Reasons                  3 May 2010
Representative for the Applicants    Self Represented     
Representative for the Respondent Mr P Maishman
Solicitor for the Respondent            Centrelink Legal Services Branch