Tan and Anor and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 85 (5 February 2010)

Last Updated: 5 February 2010

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 85

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2009/3519 & 2009/3520

GENERAL ADMINISTRATIVE DIVISION		)
	Re		TECK HON TAN RUO LIAN LIU

Applicant

And

SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal

Ms N Bell, Senior Member

Date 5 February 2010

Place Sydney

Decision

The decisions under review are affirmed.

.....................[sgd]....................
Ms N Bell, Senior Member

CATCHWORDS – Social Security - Newstart Allowance - Parenting Payment – sole administrative error – special circumstances – value of encumbered property in determing rate of social security payments – value of and encumbrances on principal home disregarded in determining social security payments

Social Security Act 1991

REASONS FOR DECISION

Ms N Bell, Senior Member

1. Mr Teck Hon Tan and Ms Ruo Lian Lui, a married couple, were overpaid Newstart Allowance and Parenting Payment respectively because a mortgage held by them was assessed by Centrelink as being secured by their investment property (a takeaway food shop) rather than by their home. The result was that the value of their investment property was adjusted to be the value after deduction of the amount owed under the mortgage. This had an effect on the total value of their assets for the purposes of the calculation of their rate of payments. In reality, the mortgage was held over their home. The value of and encumbrances on a principal home are disregarded in determining the rate of social security payments. The full market value of the unencumbered investment property should have been used in calculations to determine their rate of payments. The result is that debts of $3,361.31 and $10,894.98 were raised against Mr Tan and Ms Liu respectively.
2. Mr Tan and Ms Liu do not dispute the calculation of the overpayments. However, Mr Tan and Ms Liu maintain that the debts should not be recovered. They contend that they were unaware of which property was security for the loan and were unfamiliar with the concept of “security” in any event. They contend administrative error by Centrelink insofar that it was Centrelink’s responsibility to ascertain whether the investment property was encumbered and its responsibility to request from
   Mr Tan and Ms Liu the documents that would equip Centrelink to ascertain this.
3. Centrelink contends that it could only rely on the information given to it by
   Mr Tan and Ms Liu. It says that if they were unaware of which property secured the mortgage then Centrelink could not be expected to know that either.
4. The Social Security Act 1991 provides for waiver of recovery of debts in limited circumstances. The provisions of the Act that are relevant to Mr Tan and
   Ms Liu are section 1237A which deals with waiver where the debt is due solely to the administrative error of the Commonwealth, and section 1237AAD which deals with waiver where the special circumstances of the case make it desirable to do so.
5. The issues for me to consider are whether the debts should be waived because:

i) the debts are due solely to the administrative error of Centrelink; or

ii) there are special circumstances that make it desirable to waive the debt.

ARE THE DEBTS DUE SOLELY TO ADMINISTRATIVE ERROR OF THE COMMONWEALTH?

6. Mr Tan was paid Newstart Allowance from January 2007 until June 2007 when he returned to work. Ms Liu was paid Parenting Payment from January 2007 until October 2008 when her payment was cancelled.
7. When Mr Tan and Ms Liu claimed Newstart Allowance and Parenting Payment, they were assessed on the basis of information that had been provided by Mr Tan. He had completed the ‘Real Estate Details’ form which he lodged on
   24 January 2007 that stated the investment property was worth $500,000 and was mortgaged for $380,000. Both Mr Tan and Ms Liu were paid their respective social security benefits at a rate that was calculated on the basis that they each had a $60,000 interest in the investment property.
8. Mr Tan’s evidence was that he had only partly completed the form when he lodged it with Centrelink in January 2007 and completed the rest of it while in an interview with a Centrelink officer. He said the officer looked over what he had done and accepted it.
9. It was also Mr Tan’s evidence that when completing question 11 of the form he stated that the investment property was mortgaged because he thought he had purchased the property with a commercial loan and used the shop as security. The clear purpose of the loan had been to finance the purchase of the shop. He said the officer did not ask him about security and they only discussed the fact that Mr Tan was using the rent from the property to pay off the loan.
10. Mr Tan’s evidence that rent and not security was discussed is supported by the next entry on the form. In answer to the question “How has this loan been secured?”, the written response is “Rent”. Mr Tan said he completed that part of the form in the Centrelink officer’s presence and the officer said “Just provide that. That will be right”. Mr Tan said he provided every document that the officer asked him to provide, including bank statements and the lease agreement, but he was never asked to provide the loan agreement and so he never did.
11. Mr Tan said he had a solicitor act for him and his wife on the purchase of the investment property. However, he said he did not think about which property was security for the loan.
12. Mr Tan said that if Centrelink had assessed the matter properly, he would have been aware that he was not eligible to receive a payment and he would have taken steps to have the loan secured against the investment proerty instead of against his home.
13. Ms Liu’s evidence was that she was never asked by a Centrelink officer which property was security for the loan. She also said that she did not know anyway and, until these proceedings and her appeal to the SSAT, she was unfamiliar with the concept of security for a loan. She said that all she knew was that she had obtained a loan so that she could buy the investment property.
14. Ms Liu also said that in October 2008 she was looking at her assessment history online and saw what seemed to her to be an anomaly in relation to her assets. She made contact with Centrelink to query it and a discussion followed about her assets and liabilities. It was then that she was asked to provide her loan agreement and all others going back to the time of the purchase of the investment property. Ms Liu said she was unable to find the original loan agreement and was told by the bank that it would cost $100 to search for the document and even then they could not guarantee they would find it.
15. Ms Liu said that at that time she was only receiving $20 to $40 per fortnight in Parenting Payment and she decided to give up the payments. She said that is why the Centrelink records show that in October 2008 she did not get back in touch with Centrelink. She expected, as she had been advised by Centrelink, that her payment would simply be cancelled because she did not provide the requested documents.
16. Ms Liu said she has now altered her financial affairs so that she has a loan of $250,000, secured by the investment property, and has applied the proceeds of that loan to reduce the mortgage on her principal home.
17. Ms Liu was referred to her claim form for Parenting Payment lodged on
    5 February 2007. She said there were many parts of it that she did not understand and so left those parts blank. She said the Centrelink officer to whom she gave her claim form told her that the form was “OK”. Ms Liu said she gave the officer everything she was asked to give including loan statements. However, Ms Liu said she was never asked to provide the loan agreement, even though she specifically asked the officer what was required in completing her claim.
18. Ms Liu was referred to the Westpac Bank loan agreement of September 2005 on which her signature appears. She was referred, in particular, to page 7 of the loan agreement which identifies Mr Tan’s and Ms Liu’s principal home at Ashfield as the security for the loan. Ms Liu said she never read the loan document and relied instead on the agent who was arranging the loan for her. I note that this loan was a refinancing of the original loan she had taken out in 2002 when she first purchased the investment property. Ms Liu said that, in relation to each of the loans she had taken out, she had only ever turned her mind to the amount of repayments and the interest rate. She said she had never been advised, either by a solicitor or by a loan agent, about which property was security for the loans.
19. Ms Liu echoed Mr Tan’s submissions about the role of Centrelink to determine whether they were eligible for a social security payment and about her own unawareness of the concept of security for a loan. She also submitted that she was disadvantaged by her lack of English language skills. Ms Liu, like Mr Tan, submitted that if Centrelink had assessed her claim properly and then rejected it, she could have altered her financial arrangements to make the investment property the security for the loan.
20. Finally, Ms Liu referred me to a Westpac Bank document noting, among other accounts, a home loan with a balance of some $383,000. She submitted that “anyone would know from that that we have a loan secured on our house”.
21. On the basis of this evidence, which I accept, I cannot conclude that the overpayments were due solely to administrative error. The misconception that the investment property was the security for the loan commenced with Mr Tan’s answers to that effect on the form he lodged with Centrelink in January 2007. It is arguable that, in the face of an incomplete form that showed by other entries a possible lack of understanding of his own financial situation (for example, his answer “Rent” to the question as to how the loan had been secured), a wise administrator would have requested a copy of the loan agreement along with the other documents requested. However, had Mr Tan not indicated on the form that the property was mortgaged for $380,000, the misconception would never have arisen. Centrelink must rely on the information given to it by claimants. It is unfortunate that the officer concerned did not request the loan agreement to ensure the matter was beyond doubt, but it is reasonable to expect that an owner of an investment property would be aware of his own financial and property arrangements.
22. I note Ms Liu’s submission concerning the Westpac document that sets out the accounts held by her and Mr Tan. I do not think the existence of the home loan as described on the Westpac document would, in the mind of a Centrelink officer or in reality, preclude the existence of another loan, like the one described by Mr Tan on the Centrelink form, that is secured against the investment property. I do not consider that the Westpac document constitutes notice to Centrelink that the loan was secured against the principal home.
23. I note that Centrelink requested a copy of the loan agreement after Ms Liu approached Centrelink to query the recording of her assets. It appears to have acted swiftly in this regard and acted promptly to cancel her Parenting Payment when she failed to provide the documents as requested. I am uncertain as to why the debt was raised in February 2009 when the loan agreement that proved that the investment property was unencumbered was provided later by Ms Liu in
    March 2009. However, it appears that Ms Lui’s failure to provide the requested loan agreement prompted Centrelink, rightly, to amend both their records to remove the loan as an encumbrance on the investment property with effect from the dates of first payments of Newstart Allowance and Parenting Payment.
24. While a careful Centrelink officer may have taken action to put the matter beyond doubt when the claim for the payments were first lodged, I do not consider that there was error on the part of Centrelink at any stage. It follows that the overpayment and the resulting debt is not due solely to the administrative error of the Commonwealth and its recovery may not be waived on this basis.

ARE THERE ARE SPECIAL CIRCUMSTANCES THAT MAKE IT DESIRABLE TO WAIVE THE DEBT?

25. Mr Tan’s and Ms Liu’s financial circumstances are difficult. They recently purchased the takeaway food business that had previously leased their investment property but had failed. They considered that the $15,000 required to purchase the business was less than the amount they would have to spend to fit out the premises to attract another tenant. They said that business is not good and they are struggling, with Mr Tan working full time in the business and Ms Liu serving behind the counter and receiving only family tax benefit payments.
26. They have a loan of $250,000 now secured against the investment property and a loan of $170,000 against their home. They have no other debts, but Ms Lui has had to use the redraw facility on the home loan in order to meet some loan payments.
27. They have two children, aged 13 and 5, both of whom are well. They have family overseas.
28. Mr Tan suffers from diabetes, high blood pressure, a hernia and back pain. He prefers to consult traditional Chinese doctors but cannot afford to do so.
29. While these circumstances are difficult, they are unfortunately not “special” in the sense of being unusual or out of the ordinary as required under the Act and as interpreted by the Federal Court. Many people struggle financially but most do not have the assets that Mr Tan and Ms Liu have to draw on. Many people suffer medical conditions and many people struggle with their businesses in periods of economic downturn.
30. The only other circumstances for me to consider are the unfortunate combined effect of Mr Tan’s and Ms Liu’s lack of understanding of their own financial and property arrangements and their reliance on Centrelink to alert them to those arrangements. I accept that they had no intention to mislead Centrelink and that they provided all the information that was requested of them. I accept that they did not appreciate that the loan that funded the purchase of their investment property was not secured by that property.
31. However, while I consider it would have been preferable for the relevant Centrelink officer to have been alert to the signs that Mr Tan and Ms Liu did not properly appreciate their own arrangements, the responsibility of investors to be aware of their own business affairs cannot be transferred to an officer whose duty is to assess claims on the basis of the information provided by the investor claimant. In this case, the information provided was incorrect and the responsibilty for that lies with Mr Tan and Ms Lui. I appreciate that a lack of English language skills may make such things more difficult, but Mr Tan and Ms Liu had previously had the benefit of the professional services of a solicitor and later a loan agent. They could have availed themselves of advice from similar professionals on this occasion as well. I do not consider that these circumstances are “special” within the meaning of the Act. Nor do I consider that they make it desirable to waive recovery of the debt.

DECISION

32. The decisions under review are affirmed.
    

I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bell

Signed:.........................[sgd]..................................................

Associate: Lloyd Doherty

Date of Hearing 7 December 2009

Date of Decision 5 February 2010

Date of written reasons 5 February 2010

Representative for the Applicants Unrepresented

Representative for the Respondent Ms Jennifer Maclean, Centrelink Legal Services