Cummins; Secretary, Department of Family and Community Services [2002] AATA 39 (11 January 2002)

Last Updated: 5 February 2002

DECISION AND ORAL REASONS FOR DECISION [2002] AATA 39

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S2001/32

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And SALLY CUMMINS

Respondent

DECISION

Tribunal Senior Member WJF Purcell Mr DJ Trowse (Member)

Date 11 January 2002

Place Adelaide

Decision For the reasons given orally at the hearing of this matter, the Tribunal affirms the decision under review.

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

WJF PURCELL

(Senior Member)

CATCHWORDS

SOCIAL SECURITY - pensions, benefits and allowances - Parenting Payment Partnered - financial hardship

Social Security Act 1991 sections 1123, 1131

DECISION AND ORAL REASONS FOR DECISION

11 January 2002 Senior Member WJF Purcell Mr DJ Trowse (Member)

1. This is an application for review of a decision of the Social Security Appeals Tribunal (the SSAT) of 8 December 2000, which set aside the decision of a delegate of the applicant (the Department) to reject a claim for Parenting Payment Partnered, under the financial hardship provisions, and substitute a new decision that the respondent's partner did not dispose of an asset for no consideration, and for the purpose of obtaining a social security benefit. The SSAT remitted the matter back to the Department, to determine the respondent's entitlement to Parenting Payment Partnered, in accordance with section 1130 of the Social Security Act 1991 (the Act).

2. The evidence before the Tribunal comprised the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the T Documents), together with the exhibits tendered by the applicant. Ms Odgers represented the Department. Mr Hemsley appeared for the respondent.

3. The respondent's husband, Mr John Cummins (the Husband), is a farmer on property known as "Woolacoola". Part of the property comprised in Woolacoola had originally been owned by Mr Cummins' father, Mr Ian Cummins (the father-in-law). In 1975 the husband had inherited some land, and had purchased also some other land. This property is also included in Woolacoola.

4. From the early 1980s, the husband carried on a partnership with his parents, known as the IC, MJ and JEJ Cummins Partnership.

5. On 28 August 1997 the Woolacoola Trust (the Trust) was established. The husband and his parents were the trustees, and all the land which now comprises Woolacoola was transferred into the Trust. The husband sold his land to the father-in-law for $376,300 and the father-in-law transferred, subsequently, that land and other land to the Trust, for the total value of $1,261,900.

6. On 30 August 1998 a deed was entered into between the husband and the father-in-law, which acknowledged that the father-in-law was indebted to the husband in the sum of $376,300 for monies lent in connection with the purchase of Certificates of Title 2505/23 and 3631/147. The deed released and discharged the father-in-law from payment of the said amount. The expressed consideration was "natural love and affection". There was no monetary consideration.

7. On 30 August 1998 a deed was entered into between the husband, the father-in-law, and the mother-in-law in their capacity as trustees of the Woolacoola Trust. The deed acknowledged that the trustees were indebted to the father-in-law in the amount of $1,261,900, in connection with the purchase of the land comprised in Certificates of Title 2505/23, 3631/146, 3631/147, 4270/810, 4270/811 and 3137/5. The deed released and discharged the trustees from payment of the said amount. The expressed consideration was "natural love and affection". There was no monetary consideration.

8. On 29 June 2000 the respondent's Parenting Payment Partnered was cancelled, as the combined assets of her and her husband were too high. She applied subsequently, for payment under the hardship provisions. This application was rejected on 7 July 2000. This decision was affirmed by an Authorised Review Officer on 24 August 2000.

9. On 8 December 2000 the SSAT set aside the decision and decided that the husband did not dispose of an asset for no consideration, nor for the purpose of obtaining a social security benefit, and that his asset could therefore be disregarded for the purposes of the respondent's payment.

10. The issues before the Tribunal are whether the value of the debt owed by the father-in-law and the husband should be included in the value of the husband' assets in assessing whether the respondent is entitled to be paid Parenting Payment Partnered; whether the husband disposed of an asset within the meaning of section 1123(1) of the Act; and whether the respondent is entitled to take advantage of the financial hardship rules, contained in section 1131 of the Act.

11. Section 1123(1) of the Act provides:

"(1) For the purposes of this Act, a person disposes of assets of the person if:

(a) the person engages in a course of conduct that directly or indirectly:

(i) destroys all or some of the person's assets; or

(ii) disposes of all or some of the person's assets; or

(iii) diminishes the value of all or some of the person's assets; and

(b) one of the following subparagraphs is satisfied:

(i) the person receives no consideration in money or money's worth for the destruction, disposal or diminution;

(ii) the person receives inadequate consideration in money or money's worth for the destruction, disposal or diminution;

(iii) the Secretary is satisfied that the person's purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage."

12. Section 1131 of the Act provides:

"(1) If:

(a) a social security benefit is not payable to a person because of the application of an assets test; and

(b) the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(c) the person's partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(d) either:

(i) sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A and 1126 (disposal of assets) do not apply to the person; or

(ii) the Secretary decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and

(e) the person, or the person's partner, has an unrealisable asset; and

(f) the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(g) the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person."

13. In the course of the Hearing Ms Odgers, on instructions from the Department, conceded that the respondent's circumstances satisfied all subsections of section 1131(1) with the exception of subsection (d)(ii). The remaining question for the Tribunal is therefore whether in all the circumstances of the matter, it is appropriate to disregard the applications of section 1125(A) of the Act.

14. The Department submits that the husband disposed of his asset, namely the debt to the father-in-law, for an inadequate consideration. For this reason the discretion available in section 1131(d)(ii) of the Act should not be exercised in the respondent's favour. It relies in particular on a decision in Rogers v The Department of Social Security V86/02 AAT 3859, 23 October 1987.

15. The respondent maintains, that on the evidence before the Tribunal, she is suffering severe financial hardship, which is not in dispute, and which is not a result of the disposal of the property and it is appropriate that the discretion available in section 1131(d)(ii) of the Act be exercised in her favour.

16. We have examined the evidence carefully and in detail and taken into account the party's submissions. We are satisfied on the evidence that there has been a disposal of an asset by the husband, namely the debt of $636,300, for less than adequate consideration. Section 1125A of the Act applies therefore to this transaction and we must turn now to consideration of subsection 1131(d)(ii) of the Act.

17. In the matter of Twelftree and the Repatriation Commission (1986) 10 ALD 34, the Tribunal set out the following guidelines:

"1. Has the disposal of property deprived the grantor of income and thereby left him in circumstances of financial hardship?

2. Was the sole purpose or dominant purpose of that disposal to produce that result?

3. Did the grantor know or should have known that his actions would prejudice that result?

4. If the grantor had not disposed of that property in that manner and for that consideration, what would have been the effect on his pension rate?

5. Were there areas to make it reasonable for the grantor to do what they did?

18. In our view, the husband disposed of the property. The husband's disposal of the property did not deprive him of income, and thereby leave him in circumstances of financial hardship. The purpose of the disposal was not related to the deprivation of income. The third guideline is not applicable to these circumstances. We consider that, had the husband not disposed of the property, it was not feasible for him to demand repayment from the father-in-law. It would have been, in effect, an unrealisable asset, and thus to be disregarded for the purposes of determining a rate of pension. We consider also, that in all the circumstances of the matter, it was reasonable for the husband to have entered into these transactions.

19. We are satisfied therefore in the whole of the evidence that it is appropriate to disregard the application of section 1125A of the Act to the respondent.

20. For these reasons the Tribunal affirms the decision under review.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member WJF Purcell, Mr DJ Trowse (Member)

Signed: .....................................................................................

Personal Assistant

Date/s of Hearing 11 January 2002

Date of Decision 11 January 2002

Counsel for the Applicant Ms Leeanne Odgers

Solicitor for the Applicant Centrelink

Counsel for the Respondent Mr G D Hemsley

Solicitor for the Respondent Mr G D Hemsley