YLGY and Secretary, Department of Health (Social services)
[2019] AATA 3272
•22 August 2019
YLGY and Secretary, Department of Health (Social services) [2019] AATA 3272 (22 August 2019)
Division:GENERAL DIVISION
File Number(s): 2019/0193
Re:YLGY
APPLICANT
AndSecretary, Department of Health
RESPONDENT
DECISION
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:22 August 2019
Place:Sydney
The decision of 21 November 2018 made by the Respondent’s delegate is set aside, and the matter remitted to the Secretary to determine, in light of the Tribunal’s decision, the hardship supplement amount appropriate to the applicant’s circumstances.
...............................[SGD].........................................
Emeritus Professor P A Fairall, Senior Member
CATCHWORDS
AGED CARE ACT – where applicant eligible for financial hardship supplement – quantum of financial hardship supplement – where applicant has two thirds share in property – where property is unrealisable assets – where significant expenditure on upkeep of the property by the applicant – what expenses are to be taken into account in considering quantum of hardship supplement – where quantum improperly restricted to considering “essential expenses” – where no justification for excluding certain expenditure items in determining the amount of the supplement – decision set aside and remitted
LEGISLATION
Aged Care Act 1997 (Cth) ss 44-31, 52K-1
Social Security Act 1991 (Cth) s 11CASES
Librizzi and Secretary, Department of Health [2018] AATA 2278
Murphy and Department of Health and Aged Care [2000] AATA 351
Reed and Secretary to the Department for Health and Ageing [2004] AATA 1029
Rossow and Secretary, Department of Health (Social Services) [2018] AATA 1275
Winch and Secretary, Department of Social Services [2016] AATA 286SECONDARY MATERIALS
Subsidy Principles 2014
REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
22 August 2019
The applicant is 85 and frail. She suffers from depression, osteoarthritis, peripheral vascular disease, gastro-oesophageal reflux disease (GORD), and has had frequent falls. She wants and needs to move into residential care.
In 2016 the applicant’s marriage broke down and she and her husband separated. He left the house, wherein she continued to reside. The house is hereafter referred to as “the CC property”.
On 23 March 2017 the Federal Circuit Court made Orders under which the applicant was to retain the CC property. Under the terms of the settlement agreement the applicant was to pay a certain sum to her husband, representing his share in the CC property.
In order to facilitate this arrangement, the applicant sold a one third share of the CC property to her daughter and her daughter’s partner (hereafter “the other parties”).
On 22 May 2017, a bank advanced the funds that were paid to the husband in the property settlement. The bank took a mortgage over the CC property. The applicant and the other parties were registered as mortgagors.
Each of the parties agreed to contribute to payments under the mortgage. The applicant’s share of the mortgage payment is $180 per fortnight.
As a result, the applicant and the other parties now hold the CC property as tenants in common. The applicant has a two thirds share; the other parties one third. The other parties hold their one third as joint tenants.
Initially the applicant and the other parties resided at the CC property. But by July 2018 the relationship between the three parties had broken down. Police were called, and the other parties were required to leave the CC property.
The applicant wishes to sell the property but the co-owners refuse to agree to the sale: T10, at p 176; T15, at p 215.
On 27 July 2018, the applicant applied to the Department of Human Services (hereafter “Centrelink”) for a determination as to the amount she would be required to pay for residential aged care. She lodged a request for a combined assets and income assessment (T8 at p 117); and on 21 August 2018 she applied for financial hardship assistance: T10 at p 168.
In the normal course an aged care recipient may be expected to make three separate payments for residential care: an accommodation payment; a means tested accommodation contribution; and a daily care amount. The rate of contribution for each is subject to assets and income tests, and there is provision for payment reductions in special circumstances relating to financial hardship: see Aged Care Act 1997 (Cth) (hereafter “the Act”): ss 44-31, 52K-1.
On 24 September 2018, by reference to s 52K-1, Centrelink determined each of the accommodation payment and the accommodation contribution at nil: T13, at p 195. In applying the asset test, Centrelink determined that the CC property was an unrealisable asset because the other parties were unwilling to sell. Therefore, the CC property was not taken into account in applying the asset test.
Centrelink also determined that the applicant was eligible to receive a hardship supplement, by reference to s 44-31: T 13, at p 195.
In deciding whether to make a determination under s 44-31, and in determining the amount, Centrelink is required by s 44-31(2) to have regard to the matters (if any) specified in the Subsidy Principles 2014, (hereafter, “the Principles”). The Principles constitute a legislative instrument.
Sub-division B of the Principles contains the relevant sections dealing with the hardship supplement: ss 60–62. One of the matters referred to in s 60(4)(b) of the Principles is whether the amount of income available to the care recipient after expenditure on essential expenses is less than 15% of the basic age pension amount ($125.16): see Principles, s 60(4)(b); T22 at p 275.
Centrelink calculated the amount of the supplement by reference only to items of expenditure identified as essential. The essence of this case is whether in so doing Centrelink was following the correct methodology. Having determined by reference to the matters referred to in s 60(4), including the income test referred to in s 60(4)(b), that the care recipient is eligible to receive a hardship supplement, Centrelink appears to have proceeded on the footing that this last matter alone determined the quantum of such supplement, and that the other matters mentioned in s 60(4) had no relevance.
The determined amount of hardship supplement was initially set at $47.20 per day. Centrelink treated expenditures relating to the CC property, such as electricity and water, home and contents insurance, council rates, mortgage payments, and solicitor’s fees, as non-essential expenses. Costs related to the use of a motor car such as registration or insurance were also disallowed, as were expenses related to catheter bags required by the applicant.
On 3 November 2018, following appeals by the applicant, an internal Centrelink review reaffirmed that the applicant would not be charged an accommodation payment or accommodation contribution: T18, at p 251.
Her eligibility for a hardship supplement was confirmed on the footing that the applicant’s disposable income after payment of essential expenses was less than 15% of the basic age pension ($125.16): T22, at p 275.
The daily fee was reduced from $47.20 to $45.90 ($642.60 per fortnight). There was a small increase in the amount allowed for pharmaceuticals and private health insurance, and expenses related to a mobile phone were included as follows:
a. pharmaceuticals $40.74 ($38.43 = previous assessment)
b. private health insurance $58.20 ($53.72 = previous assessment)
c. mobile phone $15.00
Expenditure on the CC property, such as electricity and water bills, council rates, home and contents insurance and mortgage payments were treated as non-essential expenditure because the applicant had no partner or dependent child staying at the house: see Principles, s 61(1)(b).
Expenses relating to car registration and insurance, solicitor’s fees, and catheter packs, were also disallowed as non-essential.
On 21 November 2018 an authorised review officer (ARO) found that the decision of 3 November 2018 setting the daily care rate at $45.90 was correct: T2 at p 5.
The ARO confirmed that items relating to the CC property, such as part mortgage repayments and solicitor’s fees were properly disallowed. These expenditures were non-essential.
On 28 November 2018, the applicant again asked Centrelink to review the decision made on 3 November 2018. In her reasons for challenging the decision, she stated:
I am unable to leave the property and sell as my daughter had 1/3 and won’t sell. I tried to remove myself from ownership of the house but not able to. Due to the cost of the home, I am unable to afford the daily fee. I am unable to pay both at the same time. Please help! [T19, at p 256]
On 27 December 2018 the applicant applied to the Tribunal for review of the decision of 3 November 2018: T1, at p 1. The ARO decision was made on 21 November 2018, and this is taken for present purposes to be the applicable review decision date.
THE LEGISLATIVE CONTEXT
The objects of the Aged Care Act1997 (Cth) are set out in s 2-1 of the Act. They include:
·providing affordable and appropriate access, facilitating access regardless of economic circumstances, and protecting the health of the aged care recipient; s 2-1(e);
·to provide funding that takes account of the need to ensure access to care that is affordable by, and appropriate to the needs of, people who require it: s 2-1(1)(a)(iii);
·to protect the health and well-being of the recipients of aged care services: s 2-1(1)(c);
·to facilitate access to aged care services by those who need them, regardless of race, culture, language, gender, economic circumstance or geographic location: s 2-1(1)(e).
Section 2-1(2) provides that in construing the objects, due regard must be had to the limited resources available to support services and programs under this Act; and the need to consider equity and merit in accessing those resources.
The decisions of 24 September 2018 (T13, at p 195) and 3 November 2018 (T18, at p 251) were made under ss 44-31 and 52K-1 of the Act. The former provides for a hardship supplement reducing the daily care fee; the latter for a hardship determination affecting the accommodation payment and means tested accommodation contribution.
Section 44-31(1) states that, in accordance with the Principles the Secretary may determine that the care recipient is eligible for a hardship supplement if the Secretary is satisfied that paying a daily amount of resident fees of more than the amount specified in the determination would cause the care recipient financial hardship (emphasis added).
Section 44-31(2) provides that in deciding whether to make a determination, and in determining the specified amount (emphasis added), the Secretary must have regard to the matters (if any) specified in the Principles. The amount specified in the determination may be nil.
Section 60 of the Principles states that for s 44-31(2):
this section sets out the matters the Secretary must have regard to in deciding whether to determine that a care recipient is eligible for a hardship supplement. (emphasis added)
Section 60(2) sets out various circumstances where the Secretary must not determine that a care recipient is eligible for a hardship supplement.
Section 60(3) expressly excludes unrealisable assets in calculating the value of the care recipient’s assets in assessing eligibility for the hardship supplement.
Section 60(4) sets out various factors to which the Secretary may have regard in determining whether a care recipient is eligible for a hardship supplement. Factors relevant to the present application include:
(a)whether the amount of income available to the care recipient after expenditure on essential expense is less than 15% of the basic age pension amount: 4(b);
(b)the financial arrangements of the care recipient: 4(c);
(c)whether any income of the care recipient is income that he or she does not reasonably have access to: 4(g)
(d)any other matters the Secretary considers relevant: 4(j).
Section 61 sets out the meaning of the term “essential expenses” for a recipient of residential care.
Some observations may be made about s 60:
(a)while s 44-31(2) refers both to the issue of eligibility and the determination of the specified amount, s 60 of the Principles refers only to the first issue;
(b)some of the factors mentioned in s 60 are absolute disqualifications, some merely relevant considerations. So, for example, the asset test in s 60(2)(b) is a hurdle requirement; whereas the outcome of the income test contained in s 60(4)(b) is merely one of the matters the decision maker may have regard to in deciding whether the person is eligible to receive a hardship supplement;
(c)identifying an expense as “essential” within s 61 is for a particular purpose, namely applying the income test under s 60(4)(b);
(d)neither the Act nor the Principles require that the amount specified in the hardship supplement is determined solely by reference to the care recipient’s essential expenses, as defined in s 61. The care recipient’s disposable income after payment of essential expenses is merely one of the matters in s 60(4) that the Secretary may have regard to in determining eligibility.
THE TRIBUNAL HEARING
The applicant appeared by telephone at the Tribunal hearing, supported by a social worker.
The applicant said that the costs associated with maintaining the CC property were creating financial hardship for her.
When asked by the Tribunal, the applicant said she had raised the possibility of selling with the other parties, but they would not agree. She said she wanted to sell the CC property and would do so if she could, whether or not the other parties agreed.
An undated handwritten note signed by each of the other parties stated that they did not wish to sell the property. This note was included in the T documents: T10, at p 176; T15, at p 215.
The other parties were under no obligation to appear or give evidence and they did not do so.
The social worker told the Tribunal that the applicant had not spoken with her daughter following the breakdown of the relationship except through lawyers.
The social worker said that on 5 September 2018 she wrote to Centrelink on the applicant’s behalf setting out the background. She said that the applicant had been verbally and physically abused by her daughter and that the Police had been called on several occasions: T11, at p 192.
On 7 November 2018 the social worker wrote another letter to the Department. She wrote as follows:
[the appellant] is allegedly verbally and physically abused by her daughter and daughter’s partner, the police have allegedly been called a number of times to the residence by neighbours concerned for [the applicant’s] welfare. An AVO is currently not in place, as [the applicant] is reluctant to have her daughter charged: T 20, at p 257.
On 16 November 2018 another social worker also wrote in support of the applicant.
These communications were contained in the T documents and counsel for Centrelink did not seek to challenge the information contained therein.
At the hearing counsel for Centrelink accepted the determination under s 52K-1 that on the footing that the CC property was properly treated as unrealisable, the applicant’s accommodation contribution and accommodation payment should be nil. Counsel did however invite the Tribunal to reconsider whether the CC property was an unrealisable asset.
THE CC PROPERTY
Section 11(12) of the Social Security Act1991 (Cth) states that an asset is an unrealisable asset if:
(a)the person cannot sell or realise the asset; and
(b)the person cannot use the asset as a security for borrowing.
Counsel for the Respondent pointed out that the applicant has a remedy in law to seek the appointment of Trustees to arrange the sale of the property and distribution of the proceeds of sale less costs between the co-owners: Conveyancing Act 1919 (NSW), s 66G(1), which provides:
Where any property (other than chattels) is held in co-ownership the court may, on the application of any one or more of the co-owners, appoint trustees of the property and vest the same in such trustees, subject to incumbrances affecting the entirety, but free from incumbrances affecting any undivided shares, to be held by them on the statutory trust for sale or on the statutory trust for partition.
The applicant is aware that she could possibly seek a court order for the sale of the property. But she cannot afford the legal costs. She is still paying for her divorce in the form of $35,000 for solicitor’s fee, at the rate of $100 per fortnight: T19, at p 253. She cannot risk taking on more debt in the form of legal fees. She clearly lacks the means to agitate her rights in the Supreme Court in a contested action. The other parties have a clearly stated opposition to sale and may be expected to defend the action: see T10, at p 176; T15, at p 215.
This situation was also highlighted in the second social worker’s letter of 16 November 2018, referring to the lack of pro bono legal services available to provide assistance on property law: T20, at p 259.
It is arguable that the expression “cannot sell” in s 11 does not apply to cases where the exercise of the right of sale has not been fully tested. This proposition has a certain appeal. For example, in Winch and Secretary, Department of Social Services [2016] AATA 286 the husband and wife applicants were co-owners with the wife’s siblings of three farm properties worth over a million dollars. The Tribunal held that the properties were not unrealisable assets even though they were co-owned with other family members, on the basis that the sale of the three properties had not, at that time, been fully tested by listing at a realistic market value. However, in that case there was no evidence that the co-owners were implacably opposed to the sale of the farm properties.
In this case the applicant has a legal means of forcing a sale, but the legal cost of doing so creates a practical impediment. The sale of the property depends on the outcome of a successful court action. The Tribunal is not minded in the circumstances of this case to understand the expression “cannot sell” in such a way that a person is required to exhaust all legal remedies before it can be said that he or she cannot sell.
The Tribunal finds that the determination made by the Department that the applicant’s share in the CC property is an unrealisable asset is correct: see also Librizzi and Secretary, Department of Health [2018] AATA 2278; Rossow and Secretary, Department of Health (Social Services) [2018] AATA 1275.
THE CORRECT OR PREFERABLE DECISION
In relation to the present application, the Tribunal notes the following significant features:
(a)the applicant is in need of care such as may be provided in a residential care facility. She is at risk from falling. The need is pressing by reason of the breakdown of family relationships and the absence of ongoing daily care;
(b)the CC property has become an unsafe property and is a source of ongoing stress. In the absence of an AVO there is also a possibility that the applicant may be subjected to abuse as long as she is living alone in the CC property. According to the evidence of the social worker, she is not safe there;
(c)the applicant is unable to afford residential care at the rate assessed by Centrelink by reason of her other non-reducible expenses. She is helpless to act so as to reduce or avoid costs associated with the maintenance of the CC property, except by pursuing costly legal remedies for which she lacks the means;
(d)the applicant’s financial situation has been caused by factors beyond her control.
There is little doubt that the applicant is experiencing hardship in a broad sense. A particular hardship she experiences is that by reason of circumstances beyond her control she is unable to affordably access the residential care system where she might receive appropriate care.
The decision under review proceeds on the footing that the level of the daily care supplement should be calculated by reference to the care recipient’s essential expenses, as defined in s 61 of the Principles.
The applicant receives a pension payment of $926.20 per fortnight. Her expenses, including non-essential expenses (as defined by s 61) relating to running costs for the car and the CC property amount to $674 per fortnight. If she moves into residential care costing $45.90 per day ($642.60 per fortnight) she will have a fortnightly shortfall of at least $390.40. It is therefore financially impossible for her to maintain her existing contractual obligations in relation to the CC property, a property she can neither sell nor rent.
The imposition of a daily care fee of $45.90 creates an insuperable barrier to the applicant’s admission into aged care. She can move into residential care only by defaulting on her mortgage payments and other debts. To impose such a fee would create a situation of extreme financial hardship. In Reed and Secretary to the Department for Health and Ageing [2004] AATA 1029, at [30] Member Isenberg noted:
the Act recognises that some individuals may experience financial hardship in paying basic daily care fees, income-tested fees, or an accommodation payment. The intent of the individual hardship provisions in the Act is to ensure that access to aged care under the Act is based on need, rather than on ability to pay. The hardship provisions are designed to assist people who, because of factors outside their control, are experiencing genuine and severe financial hardship and are therefore finding it difficult to contribute to the cost of their care.
In Murphy and Department of Health and Aged Care [2000] AATA 351 at [13] Justice O’Connor (then President of the Tribunal) said:
The meaning of the word ‘hardship’, in my view, implies the creation of an extreme condition. The applicant submitted that there were degrees of hardship and drew my attention to a number of authorities to support that argument. None of those, of course, related to the use of the word in the context of this legislation. In my view, even if one accepted that there are degrees of hardship, in order to conclude that there is an individual case of financial hardship a decision maker must conclude that the effect on the claimant is so severe at the time of making the determination that it would amount to hardship.
The present circumstances of the applicant arise in part because of the financial duress of her marriage breakdown and the need to call upon her daughter to become a co-owner of the house. The Orders of the Family Court required the applicant to pay a significant sum of money to her husband, a crippling burden that she could discharge only with the assistance of her daughter and her de facto partner. No doubt the applicant was motivated by a strong desire to remain in the home, supported by her daughter who was her principal carer. The present circumstances were not foreseen at the time those Orders were made in March 2017 but the law of unintended consequences appears to have triumphed. Within little more than a year of those Orders taking effect the applicant is unable by reason of her financial circumstances to access the residential aged care system. That the daughter is unwilling to assist the mother in this impasse is not something the Tribunal should comment upon.
A critical question is whether a substantial allowance should be made to offset some if any of the expenses relating to the CC property. Those expenses have been disallowed on the basis that the CC property, though unrealisable, is not being used to accommodate the applicant’s partner or dependent child. They are not, therefore, asserts Centrelink, quite correctly, “essential expenses” within s 61 of the Principles. It is a cruel irony that if the husband returned the costs associated with the CC property could be brought into account.
As noted at [30] above, s 44-31(2) of the Act states that in deciding whether to make a determination that the care recipient is eligible for a hardship supplement, and in determining the specified amount, Centrelink must have regard to “the matters (if any) specified” in the Principles.
The purpose of s 60 of the Principles is to determine whether a person is eligible to receive a hardship supplement. Section 60(4) of the Principles contains a list of matters that Centrelink may have regard to in determining whether a person is eligible to receive a hardship supplement. Section 60(4) enumerates nine specific matters as well as a catch-all category “any other matters the Secretary considers relevant”: s 60(4)(j). One of the matters referred to is whether the amount of income available to the care recipient after expenditure on essential items is less than 15% of the basic age pension amount: s 60(4)(b).
The Tribunal considers that in calculating the amount of the hardship supplement a decision-maker is not required by reason of s 60(4)(b) or s 61 to exclude from consideration items classified as non-essential for the purpose of determining eligibility. It is the view of the Tribunal that the classification of an item of expenditure as non-essential as defined by s 61 does not mean that no allowance can be made for that item in the overall weighting to be given to the hardship suffered by the applicant.
Therefore, it was an error to calculate the hardship supplement on the basis that certain expenses, including some relating to the CC property, should be disallowed because they were not “essential” expenses as defined by s 61 for the purposes of s 60(4)(b).
Section 61 defines the meaning of essential expenses for a recipient of residential care. Section 61(1)(b) includes the mortgage on the principal home as an essential expense if the care recipient’s partner or a dependent child lives in the home. As noted above, the purpose of the classification of an expenditure item as “essential” under the Principles is to determine whether the amount of income available to the care recipient after expenditure on essential expenses is less than 15% of the basic age pension amount: see Principles s 60(4)(b). This is one of the factors that the Secretary may (not must) have regard to in determining eligibility, but it is not determinative of the amount of hardship supplementary relief.
The question now is whether the Tribunal should adjust the amount of the hardship supplement under subdivision 44F (s 44-3) so as to avoid or reduce the level of contribution required for daily care, presently assessed at $45.90 per day. The Tribunal has however decided to remit the matter to the Secretary for decision in light of the reasoning of the Tribunal. This will require reconsideration by the Secretary of the individual items of expenditure claimed by the applicant and previously classified as “non-essential” and disallowed in the calculation of the hardship supplement.
In reviewing the quantum of the hardship supplement the fact that certain expenses relating to the CC property arose from pre-existing contractual arrangements, and the circumstance under which those obligations arose, were relevant considerations in determining the amount of supplementary hardship relief for daily care. The applicant is contractually obliged to make mortgage payments and pay her solicitor’s fees as a result these ongoing contractual obligations.
The Tribunal has considered whether to determine the exact amount to be allowed for each of the relevant items of expenditure but has decided not do so. The Secretary is better placed to determine how much should be allowed for each item of expenditure, based on the approach determined by the Tribunal.
The Tribunal therefore directs that the following items of expenditure are to be included in the calculation of the hardship supplement:
(a)private heath cover;
(b)pharmaceuticals;
(c)mobile phone;
(d)sanitary products including catheter bags;
(e)transportation for medical consultations;
(f)periodic repayment of debt owed to lawyer;
(g)mortgage repayment amount.
There is one final matter. The peculiar circumstances of the applicant arise because she is presently not at liberty to sell her share in the CC property. It is assumed that any determinations made by the Secretary with respect to the levels of accommodation contribution or daily care arising as a consequence of the Tribunal’s decision will be reviewed upon the sale of the applicant’s share of the property, if and when that occurs.
The duty of the Tribunal is to arrive at the correct or preferable decision.
The decision of 21 November 2018 made by the Respondent’s delegate is set aside, and the matter remitted to the Secretary to determine, in light of the Tribunal’s decision, the hardship supplement amount appropriate to the applicant’s circumstances.
I certify that the preceding 75 (seventy -five) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall
.............................[SGD]...........................................
Associate
Dated: 22 August 2019
Date(s) of hearing: 15 July 2019 Applicant: By telephone Solicitors for the Respondent: Dr S Thompson, Department of Human Services
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