Towers and Secretary, Department of Employment and Workplace Relations

[2006] AATA 381

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 381

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  V2005/1128

GENERAL ADMINISTRATIVE  DIVISION		)
Re		STEVEN TOWERS

Applicant

And SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Mr John Handley, Senior Member

Date2 May 2006

PlaceMelbourne

Decision

The decision of the Social Security Appeals Tribunal under review in these proceedings is varied only to the extent that –

(i)        the sum of $31,539 should be treated as not having been made; and

(ii)       the period of preclusion should be recalculated.

The whole of the remainder of the decision of the Social Security Appeals Tribunal is affirmed.

..............................................

Senior Member

SOCIAL SECURITY – preclusion period calculated after receipt of compensation monies – all monies subsequently expended – purchases of real estate and other costs – special circumstances considered – partial concession by respondent – decision varied

Social Security Act 1991 (Cth) s 17 (2) and s 1169 and s 1184K

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67

REASONS FOR DECISION

2 May 2006 Mr John Handley, Senior Member

1.      This is a review of a decision of Centrelink to preclude payment of disability support pension (“DSP”) to Mr Towers for the period 5 May 2001 to 27 February 2009.  The hearing was convened in Warrnambool.  Mr Towers appeared with his wife and was unrepresented.  Ms Bramley appeared on behalf of the respondent.

2.      The circumstances given rise to the decision made by the respondent are not in dispute and may be briefly summarised as follows.

3.      Mr Towers suffered severe permanent injuries in a workplace accident in 1997.  He was thereafter totally incapacitated and received weekly compensation.  On 10 May 2001, he signed a release to settle his compensation and common law rights against his former employer in the sum of $460,000 plus costs.  Mr Towers was then legally represented.  He could not recall whether prior to signing the release he had been advised by his solicitor that there would be a period of preclusion from Commonwealth benefits, but he did acknowledge that he and his solicitors each received a letter from Centrelink dated 25 May 2001 notifying him of the period of preclusion as above (T7 and T27).  It follows that two weeks after the date of settlement, Mr Towers was aware that he would be precluded from receiving social security benefits.

4.      At the date of receipt of settlement funds, Mr Towers had been living in a house at Crib Point.  He and his wife had been renting it for many years.  They eventually decided to purchase it.  The settlement funds had been deposited with a financial adviser who arranged for certain investments.  Monies were withdrawn from those investments to purchase the Crib Point property in the sum of approximately $90,000.  Extensive renovations were completed over the property in the sum of approximately $45,000.  Monies were also expended to pay outstanding debts, purchase a motor vehicle, and a boat, repair a motor vehicle owned by his daughter and pay for a holiday in Tasmania.  Sometime after the Crib Point renovations were completed, it became apparent that Mr Towers’ daughters intended to have careers with animals specifically horses.  The oldest daughter, Kaylea, was undertaking a course in animal and horse management at a TAFE College and the youngest daughter, Ashleigh, had expressed an interest in a career as a vet.  Mr Towers knew a person “Maurie”, who was apparently regarded as an accomplished horseman.  After some discussion it was intended that the property at Crib Point would be sold and a property would be purchased elsewhere.  It was intended that Maurie would work on the property and train Kaylea in horse management and the property purchased would be conducted as a business.  A suitable property was located at Lyons in Western Victoria and it was eventually purchased.  The Crib Point property was sold in the sum of approximately $180,000 thereby securing a profit in excess of $40,000.  The property at Lyons was purchased in the sum of $130,000.  It comprises 30 acres of freehold land.  An option was exercised to acquire a 99 year lease over an adjoining property.

5.      Mr and Mrs Towers decided to register the property at Lyons and the 99 year lease in the name of Kaylea alone.  That was done with the intention of his daughters eventually conducting a business over the land comprising breaking in and education of horses.  The intended “market” for that activity would be persons engaged in eventing and equestrian pursuits.  Mr Towers was of the belief that his life expectancy was limited, having regard to the serious nature of his injuries.  It was also his intention to ensure that his daughters would be financially secure.  In exchange, he said that all he expected was to be able to live in a house that was on the property.  He spent considerable sums of money improving the property by construction of yards, fencing, stables and an arena.  He also purchased some horses for his daughters together with a float and other sundry equestrian equipment.

6.      Shortly after moving to Lyons, the relationship between Mr Towers and Kaylea deteriorated considerably.  Mr Towers said that he owned a champion quarter horse and was asked by Kaylea to transfer it to her.  He said that she tried to “blackmail” him into transferring the horse upon the basis that she would then agree to transfer her interest in the real estate to him.  Mr Towers said that Kaylea was then “mixed up with the wrong crowd” and he was concerned that her current male partner would have manipulated or influenced her into selling the horse to acquire illegal drugs.  The relationship continued to deteriorate and Kaylea took out an intervention order against Mr and Mrs Towers.  She alleged that she was being stalked by her parents.  The allegations were apparently found to be absurd when members of the local police realised that Mr Towers spent much of his time in a wheelchair.  The matter eventually proceeded to the Portland Magistrates’ Court with both Kaylea and Mr Towers each being separately being represented by lawyers.  Negotiations took place between the parties and their representatives and it was eventually agreed that the intervention application would be withdrawn and Kaylea would agree to transfer her interest in the real estate to her parents.  In exchange for that undertaking, Mr and Mrs Towers agreed that they would pay the legal costs incurred by Kaylea and the Victorian government charges on the transfer and stamp duty of the real estate.  Mr and Mrs Towers also incurred their own legal costs.  A loan was taken out to meet all of those charges which were estimated to be in the vicinity of $8000.00 (that evidence was also given to the SSAT, T2, page 9).

7.      Subsequent to those unfortunate events, Kaylea agreed to have counselling at Mt Gambier (at the cost of Mr and Mrs Towers) and has returned to live at home.  She is a student at the Glen Ormiston Agricultural College studying horse management.  She will graduate at the end of this year.  She is presently 22 years of age.  Ashleigh is presently 17 years of age and finished schooling last year.  She is not currently working.

8.      Mrs Towers is paid $420.10 per fortnight as carer payment with respect to Mr Towers.  She also receives $189.40 per fortnight as carer allowance with respect to Mr Towers and Peter Goodwin who also lives on the Lyons property and who, in exchange for not paying rent, performs maintenance around the house and the property.  Kaylea and Ashleigh each pay rent of $25.00 per week.  Mrs Towers said that she does not receive any other income.

9.      Mr Towers agreed that the properties at Crib Point and Lyons were purchased with the knowledge that the funds that had been received in settlement of the compensation claim would preclude him and his wife from receiving a pension until 27 February 2009.  He said the property at Crib Point was purchased because they had been renting it and rent was “dead money”.  He said the property at Lyons was purchased with the ultimate intention of it being owned by Kaylea and over which his daughters could operate a profitable business.  In exchange he said that he and his wife would live in the house on the property rent free.

10.     The settlement funds have now all dissipated.  The T‑documents are largely comprised of correspondence, memorandums, financial plans and charts completed by Mr Towers’ previous financial adviser all of which indicate a rapid erosion of monies invested.  Unfortunately, the expenditure of the whole of the sum of $460,000 is not explained by these documents.

11.     Mr Towers’ former financial advisers established a number of financial plans being the vehicles for investment of the monies.  Page 120 of the T‑documents gives an example of monies invested on behalf of Mr Towers in a “master key unit trust”, a “master key cash management trust” and a “master key allocated pension”.  Monies were also invested on behalf of Mrs Towers, having their origin in the settlement funds.  Most of the investments were subject to market forces and whilst it would appear that monies were lost, most of the money which has been expended was with respect to the purchase of real estate, improvements over the real estate (both at Crib Point and Lyons), on other sundry expenses and day to day living costs.

12.     Mr and Mrs Towers continue to express unhappiness at their former financial adviser and believe that he was at fault with respect to monies lost and over which they are unable to account.  They have also been advised by a financial adviser in Warrnambool that they “should see a solicitor”.

13.     However, at T30 (page 253 – 255) is a letter written by a senior officer within the financial advising company which previously represented Mr and Mrs Towers explaining the basis for all expenditure and withdrawal of funds.  Some of the concerns expressed by Mr Towers are dealt with by that letter.  The explanations given by that person are at odds with the beliefs held by Mr and Mrs Towers.

14.     The letter concludes that if there is continuing unhappiness with the performance of that company, a complaint could be lodged with the Financial Industry Complaints Service Ltd (“FICS”).  Mr and Mrs Towers said that they did contact FICS and were advised that there was nothing irregular or improper about the conduct of the former financial advisers.

conclusion and reasons for decision

15.     The Social Security Act 1991 (“the Act”) provides that the amount of money paid to Mr Towers in settlement of his compensation claim is a “compensation payment” (s 17 (2)).  Section 1169 provides that if a person claims a compensation affected payment (in this case DSP) and that person has received a compensation payment, the person is not entitled to receive the compensation affected payment throughout the duration of a lump sum preclusion period.  That period is calculated by the formula found at s 1170 which takes account of 50 per cent of the sum received.  When the sum of $230,000 is divided by the “income cut-out amount” (in this case $562.75) the resultant 480 weeks is the duration of the preclusion period.  The calculations with respect to the preclusion period were not in dispute.

16.     Section 1184K provides that if there are special circumstances the Secretary (in this case the Tribunal) may treat the whole or part of the compensation payment as either not having been made or not liable to be made.

17.     In the present case an officer of Centrelink has calculated that there were certain loses on investments which in the circumstances should be regarded as being special and which he has calculated in the sum of $23,539.  The officer attached a summary of his calculations to the Statement of Facts and Contentions lodged prior to the hearing.  Ms Bramley indicated at the commencement at the hearing that the respondent continued to make that concession.  Accordingly, in so far as that concession is concerned, I am prepared to treat the sum of $23,539 as not having been made and the period of preclusion should accordingly be adjusted.

18.     In the Federal Court decision of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 Her Honour Kiefel J, discussed the concept of special circumstances and decided (paragraph 12) –

. . . For present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others to take it out of the usual or ordinary case.  That was I consider the only enquiry to be undertaken in this case.  It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.

19.     In Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67, Kiefel J again considered the concept of “special circumstances” and extended her comments from Groth  to consider whether strict application of the legislation would result in “inappropriateness”, thereby qualifying as a special circumstance.

20.     In the present case, Mr Towers knew within a matter of weeks of settlement of his compensation claim that he would be precluded from receiving a compensation affected payment until February 2009.  He arranged for the whole of his settlement funds to be paid to his financial adviser who arranged certain investments on his behalf.  Despite the knowledge of ineligibility for a compensation affected payment, Mr Towers arranged to have outstanding debts paid, he entered into other transactions for the purchase of a motor car, boat and a holiday and also purchased a home at Crib Point over which he had previously being paying rent.  He then arranged for the property to be extensively renovated, which incurred further cost.

21.     Later, Mr Towers and his wife agreed to purchase another property at Lyons in Western Victoria with the intention of giving security to his daughters and offering them the opportunity to conduct an income producing business over it.  To that end he arranged for the property at Lyons to be registered in the name of Kaylea.

22.     From time to time, considerable amounts of money were withdrawn from the investments held on his behalf to meet what was described as day to day living costs.  Other monies were also withdrawn to meet the costs of considerable improvement and construction on the Lyons property.

23.     I am not satisfied that any of the funds expended with respect to the above constitutes circumstances which may described as special.  In my view there is nothing unfair, unintended, unjust or inappropriate in the purchase of real estate, the extinguishing of debts, renovation of properties or use of funds to meet day to day costs.  Those reasons constitute the usual or anticipated basis for expenditure of monies and as such they are not circumstances which are special.  The expenditure may have been imprudent or immodest.  Perhaps a more conservative or restrained approach should have been adopted with respect to the expenditure.

24.     The decision to purchase the property in the names of his daughters might be regarded as unusual but of itself does not constitute a circumstance which is special.  Clearly, Mr Towers was mindful of what he then believed to be his limited life expectancy and intended to ensure that his young daughters would have a financially secure future.  Indeed he used his monies to improve the property to ensure that the intended activities with respect to the breaking in and education of horses could be achieved.  For that he is to be commended and whilst few parents might have the financial opportunity to undertake those purchases and secure those investments for their children, his intention amounted to obvious love and affection for his daughters.  Those circumstances were not unfair, unjust or unintended.  They were deliberate choices, made by him.

25.     I can find nothing from the papers within the T‑documents, or from the evidence heard in these proceedings, that, subject to the amount conceded by the departmental representative (refer earlier), that there was any default or negligence on the part of Mr Towers’ previous financial adviser.  If there had been, such losses might constitute special circumstances but the company which engaged the financial adviser who acted on behalf of Mr Towers has given a comprehensive explanation of the expenditure and dissipation of monies invested.  It also invited Mr Towers to lodge a complaint with the FICS.  That entity was notified and ultimately found there to be no irregularity or impropriety.

26.     Having listened to Mr and Mrs Towers at the hearing, I think that it is obvious that they were either naïve about the manner in which the monies would be invested and, or, they did not understand the advice that they had been given.  If that belief is true it would not be hard to understand the difficulty in comprehending the nature of the investments undertaken on their behalf or to interpret the financial information that was documented and forwarded to them.  The concept of “unit trust”, “cash management trust” and “allocated pension” were, in my view, beyond the comprehension of Mr Towers and were concepts and investments which were probably inadequately explained to him.  Failure to comprehend often leads to confusion and mistrust.

27.     I also think that the intended business operation at Lyons was, although well intentioned, naïve.  Mr Towers intended that their friend Maurie would assist Kaylea in establishing the business because of his 30 year experience with horses.  Apparently he and Kaylea had a breakdown in their relationship and he left the property and moved to Gippsland.  There was never a business agreement created nor was there ever a business plan.  There was a belief by Mr Towers that because Maurie was involved he would ensure the successful establishing and operation of a business which would create profit.  It was never explained that even if that had occurred, how it would have been that Mr and Mrs Towers would have coped financially until the expiration of the preclusion period.  In the absence of any business agreement or financial plan over the property, which eventually become registered in their name, there was no consideration of whether they would have ever received a share of the profits, if any, thereby giving them regularity of income.

28.     In conclusion, I do think however that the costs incurred by Mr Towers with respect to the legal proceedings involving Kaylea were costs which may be regarded as arising out of circumstances which were special. 

29.     Mr Towers agreed to move from Crib Point to Lyons.  He intended to create an opportunity for his daughters to establish and operate an income producing business and to that extent arranged for the property to be registered in the name of Kaylea, the eldest daughter.  He also did that because of a belief that he had a reduced life expectancy.  Shortly after moving to Lyons, he and Kaylea had a breakdown in their relationship, she left home, intended to “blackmail him” into having a quarter horse transferred to her and was involved in a relationship with a person who used drugs.  Kaylea then took out an intervention application against her parents alleging that she was being stalked by them.  That allegation was withdrawn, she entered into counselling at Mt Gambier, the relationship has been restored, she has returned home and now is a student at the Glen Ormiston Agricultural College.  There was also an agreement that she would transfer the property to Mr and Mrs Towers and in exchange they would meet all of her legal costs and the Victorian government charges with respect to the transfer of the property and stamp duty.

30.     The events subsequent to moving to Lyons could not reasonably have been anticipated.  The relationship must have deteriorated considerably for Kaylea to have taken out an intervention order against her own parents.  Mr and Mrs Towers of course sought to defend and preserve their reputation by engaging legal representatives to demonstrate that the application was absurd.  Which it was.  Not only was the application withdrawn but according to Mr Towers, the presiding Magistrate also made an observation about the absence of any merit in the application.  That Mr Towers agreed to pay Kaylea’s legal costs and the costs associated with the transfer of the property is a measure of his intention to restore his relationship and a manifestation of his feelings towards Kaylea, just as he arranged to have counselling undertaken for her in Mt Gambier.  To ignore the sum of approximately $8000.00 which was expended by him arising out of those proceedings and subsequently would, I think, be unfair and unjust and must be regarded as something out of the ordinary.  In the circumstances I am satisfied that that sum should be regarded (s 118 (4K)) as not having been made.

31.     Precision with respect of that amount cannot be achieved.  It was the sum referred to by the SSAT in its decision (pages 9 and 13) and approximately equated with amounts stated by Mrs Towers at the hearing to have been paid.  Verification if necessary can apparently be obtained from Mr Blakely, Mr Towers’ solicitor, in Portland.

32.     In all of the circumstances I am satisfied that $31,539, being the total of the sum of $8000.00 as discussed above together with the sum of $23,539 as conceded by Centrelink should be treated as not having been made.  The decision otherwise under review should be affirmed.

I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of:
Mr John Handley, Senior Member  

Signed:         .....................................................................................
  Associate

Date of Hearing  26 April 2006
Date of Decision  2 May 2006
Solicitor for the Applicant          Self Represented
Departmental Advocate            Ms A Bramley