Ronald Kear and Secretary, Department of Social Security [1997] AATA 562 (11 December 1997)

ADMINISTRATIVE APPEALS TRIBUNAL

RONALD KEAR v SECRETARY, DEPARTMENT OF SOCIAL SECURITY
No. V97/102
AAT
No. 12488
Number of pages - 8
Social Security

COURT

ADMINISTRATIVE APPEALS TRIBUNAL

GENERAL ADMINISTRATIVE DIVISION

R C GILLHAM (Member)

CATCHWORDS

Social Security - applicant received unemployment and sickness benefits whilst he received a rental income, applicant denied ownership of the property, overpayment of social security benefits.

Social Security Act 1947 ss 18, 246

Social Security Act 1991 ss 8(1), s 1072A, s 1072B, s1072C, s 1224

Re Secretary, Department of Social Security and Jessop (1989) 17 ALD 62

Re Dewhirst and Secretary, Department of Social Security (AAT 11,717, 21 March 1997, unreported)

McAuliffe v Secretary, Department of Social Security [1991] FCA 268; (1991) 23 ALD 284 at 296

Haldane-Stevenson and Director-General of Social Security (1985) 7 ALD 467

HEARING

21 August & 30 October 1997 (hearing), 11 December 1997 (decision)

11:12:1997

Appearances

The Applicanat was self-represented.

Respondent's representative: Mr D. Perdon, Centrelink

ORDER

The Tribunal affirms the decision under review.

DECISION

R C GILLHAM

1. This application is for review of a decision of the Social Security Appeals Tribunal ("SSAT") dated 14 February 1997, which set aside a decision made by a delegate of the Secretary to the Department of Social Security ("DSS") on 14 June 1995, and affirmed by an Authorised Review Officer on 9 August 1995, to raise and seek recovery of a debt of $8,530.92, being an amount of social security payments made between 2 November 1990 and 23 September 1993. The SSAT sent the matter back to DSS for reconsideration in accordance with directions that the debt be recalculated on the basis that rates found by the SSAT to have been paid by the applicant be deducted from income otherwise taken into account in calculating the debt. The respondent recalculated the debt as directed by the SSAT and arrived at a figure of $4,529.78. The applicant appealed against the finding of the SSAT that there had been an overpayment of social security benefits. The debt in the recalculated amount of $4,529.78 is being recovered by the respondent by means of fortnightly deductions from the applicant's entitlement to Disability Support Pension.

2. At the hearing on 21 August 1997 the applicant represented himself and the respondent was represented by Mr David Perdon, a departmental officer of Centrelink. The respondent submitted documents (the "T documents") pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act").

3. At the conclusion of the hearing on 21 August 1997, the matter was adjourned because the applicant stated that he was unwell and required time to locate a document, provide it to the respondent and to allow the respondent time to reply to it. On 25 August 1997, the Tribunal listed the matter for resumption on 16 September 1997 at 2.15 pm. However, during the morning of that day, the Tribunal was advised by telephone by an unnamed person that the applicant was unwell and had obtained a doctor's certificate. The informant was requested to advise the applicant to write to the Tribunal and forward a copy of the doctor's certificate.

4. On 1 October 1997, the Tribunal wrote to the applicant advising that no doctor's certificate had been received, and that it would allow a further 14 days for him to provide the document which he had sought an adjournment on 21 August 1997 to locate. The Tribunal advised the applicant that it would then fix a date for the resumption of the hearing. No communication was received from the applicant and the parties were advised by the Tribunal on 20 October 1997 that the matter would be resumed at 10.00 am on 30 October 1997. There was no appearance by the applicant at the resumed hearing and, before adjourning, the Tribunal stated that it would make its decision on the matter on the evidence before it at the conclusion of the hearing on 21 August 1997. The applicant was advised of this by letter dated 30 October 1997.

5. The applicant was born in October 1942. He ceased work in March 1990. He claimed unemployment benefit on 22 October 1990 and it was granted with effect from 26 October 1990. He was thereafter continuously in receipt of Unemployment Benefit or Job Search Allowance or Newstart Allowance or Sickness Allowance until 23 September 1992. He claimed, and was transferred to, Disability Support Pension from 24 September 1992 and remains in receipt of that pension.

6. The applicant signed a contract to purchase real estate at 166 Goulburn Road, Echuca ("the Echuca property") in his name in June 1989. The purchase price was $235,000, the applicant paid a deposit of $23,500 and took out a mortgage of $160,000 in his name. Settlement took place in August 1989. The property consisted of five rental premises. The applicant engaged, and entered into a contract with, a real estate agent to manage the property on his behalf.

7. Monthly payments were made by the real estate agent by cheque direct to the applicant's bank account. These payments represented gross rents less the agent's commission and maintenance costs incurred by the agent. Details of such monthly payments from 31 January 1991 to 30 September 1994 inclusive were made available by the real estate agent, as well as gross rental returns for the months from November 1990 to 30 June 1991 inclusive (T31, pp 104-106).

8. A caveat was lodged over the property on 4 November 1991 by Rose Shields, naming the applicant as the Registered Proprietor and claiming that the applicant held the land in trust for himself and herself as joint tenants.

9. The applicant did not pay any rates on the premises after 28 September 1992 and did not make repayments on the mortgage after 14 December 1993. The mortgagee took control of the property in mid-1994 and sold it for $241,000 at the end of 1994. The applicant received his last payment of rent on 30 September 1994.

10. The respondent contended that the applicant did not notify it of his ownership of real estate or receipt of rent at any time. In the SSAT's Reasons for Decision it is stated:

"Mr Kear accepted that he had not informed the Department about income received from the Echuca property. He told the Tribunal, however, that he was not the proprietor of the Echuca property, although the property was in his name." (T2, pp 4 and 5)

and

"Mr Kear also told the Tribunal that he had signed the contract of sale for the Echuca property, that the first mortgage and the rates were in his name and that he engaged the Estate Agent. He told the Tribunal, further, that Mrs Shields gave evidence during the course of Mr Kear's prosecution in which she denied any arrangements between herself and Mr Kear." (T2, p5)

11. Mr Kear was interviewed by the Australian Federal Police ("AFP") on 7 September 1994 after the matter had been referred to them by the respondent on 2 March 1994 on the basis that he had failed to advise it of the income amounting to about $2,000 per month which he had derived from rental from the Echuca property. It was claimed that, as a consequence, there had been an overpayment of pension amounting to $28,635 over the period 26 October 1990 to 11 January 1994 (T24, p73 and T26, p78). Mr Kear was convicted in the Melbourne Magistrate's Court on 16 February 1996 for defrauding the Commonwealth contrary to Section 29D of the Crimes Act 1914. One consequence of this was that he was ordered to pay reparation of $7,721.62 to the respondent.

12. On 14 June 1995 the respondent wrote to Mr Kear to advise that he had been paid money which he was not entitled to receive, and to seek repayment of a debt of $8,530.92 which had been calculated. On 29 June 1995, Mr Kear appealed against this decision, but on 9 August 1995 the Authorised Review Officer affirmed the decision.

According to the respondent, this sum ($8,530.92) had been calculated by deducting from the gross rent all real estate agent fees such as commission and maintenance, interest on the mortgage (including interest charged after 14 December 1993), bank charges and insurance.

In response to the SSAT's direction, the debt was recalculated by the respondent taking into account all these deductions, except the interest charged after 14 December 1993, together with the payment of rates to 1991/92.

As a consequence, the respondent now contended that a debt of $4,529.78 was due and was being recovered by deductions from fortnightly payments of Disability Support Pension.

13. The applicant contended that he received no overpayment because he did not receive money from any another source. He contended that he had given a total of $100,000 to Rose Shields towards the purchase of a property at Gisborne ("the Gisborne property"). He said he was guarantor for the mortgage on that property. He said that, when the time came to sign the documents relating to the purchase of the Echuca property, Mrs Shields did not want to put her name to the document as the owner because she was fearful she would lose her pension if she did. Mr Kear contended that the caveat on the Echuca property proved that he did not own the property (transcript, p8, line 16). He contended that the money received from rents from the Echuca property which was paid into his bank account was not received by him, but passed on to pay the mortgage on the Echuca property and, as guarantor, on the Gisborne property.

He contended that because, in his view, he did not own the Echuca property, he was justified in answering "No" to the question on the unemployment benefit form "Do you own or have any interest in any real estate?" He contended, also, that because, in his view, the money from rents on the Echuca property which was paid into his bank account was used by him to pay the mortgages on the Echuca and Gisborne properties and not available for his personal use, he was justified in answering "No" to the question on the unemployment form, "Do you or will you get money from any other source?".

14. The relevant legislation is contained in the Social Security Act 1947 ("the 1947 Act") and the Social Security Act 1991 ("the 1991 Act").

15. One issue in this matter is whether the applicant is obliged to repay the sum of $8,530.92 to the DSS because he made a false statement to the DSS. Under s.246 of the 1947 Act and, from 1 July 1991, s.1224 of the 1991 Act, if an amount is paid by way of pension, benefit or allowance in consequence of a false statement, the amount so paid that would not have been paid but for the false statement is a debt due to the Commonwealth. A further issue relates to the correct calculation of any amount of overpayment.

16. Insofar as ownership of the Echuca property from which the rental income was derived is concerned, the evidence is that the applicant's name is the only name on the title. The mortgage is in his name and the mortgage company used his, and only his, income details to decide if the loan should be granted. The applicant made the arrangements with the real estate agent to manage the property and the net proceeds of the letting were paid into Mr Kear's personal bank account. The Echuca City Council confirmed Mr Kear's ownership of the property and the City of Echuca rates payable by him. Rates were paid in April 1990, October 1991 and June 1992 in respect of all the premises at the property, and a further sum in respect of one of them in September 1992.

17. Insofar as the caveat is concerned, the respondent contended that:

"The caveat is merely a means of registering a claim against any assets of a party in dispute. The caveat itself is not an interest in land. The land was bought in 1989, the caveat was not lodged until 1991 and indeed, the caveat must have been withdrawn to allow the sale of the property by the mortgagee." (Transcript, p31)

At para 12 of its Reasons for Decision, the SSAT states that Mrs Shields gave evidence during the course of Mr Kear's prosecution in which she denied any arrangements between herself and Mr Kear.

18. The hearing of this matter was adjourned on 21 August 1997 to allow Mr Kear to locate and submit a document relating to the Gisborne property, which he said was evidence of a trust (transcript, p32). He estimated that it would take him 10 days to do this. In spite of the communications referred to in paras 3 and 4 (supra), nothing had been received from Mr Kear by the time the resumed hearing on 30 October 1997 was adjourned.

19. The respondent contended:

"As regards the matter of a trust, section 52 and 53 of the Property Law Act Victoria provide that:

... there can be no interest in land created or disposed of except evidenced in writing.

So, it is clear there is no express trust in the present case. No trust arises from the payment by the applicant of the mortgage on the Gisborne property because as guarantor he had a legal obligation to make those payments.

There is then the question of whether there is a constructive trust or an implied trust. A constructive trust is where a person is claiming a beneficial interest against the legal owner of the property, but that is not the present case. Indeed, the legal owner of the property is attempting to claim a beneficial ownership of someone else to gain advantage in the context of the Social Security debt. An implied trust is where there is a presumed intention by language or conduct of the parties. An implied trust does not arise unless Mrs Shields acts as a purchaser of a property and the respondent refers to Jacobs Law of Trusts Fifth Edition at page 269. Where Shields purchases land from X and directs X to make the transfer to Kear, which X does, there is a presumption of a resulting trust in favour of Shields.

However, these principles will not apply if Shields lends or gives money to Kear and Kear uses the money to buy property from X. Kear is not an implied trustee of the land for Shields because Shields has not acted as a purchaser. Unless Shields can show an express trust of the land by Kear in favour of Shields, the relationship between Shields and Kear will be limited to donor and donee or lender and borrower.

The respondent's submission is that there is no implied trust in the current matter. There is no evidence in writing. Any trust has been denied by Mrs Shields in court." (Transcript, pp 30, 31).

20. The Tribunal accepts the respondent's contentions set out in paragraph 17 and in paragraph 19. Having considered all of the evidence in relation to the Echuca property, the Tribunal finds that Mr Kear was the sole proprietor and that, therefore, he falsely stated to the respondent on Unemployment Benefit claim forms on 30 March 1990, 22 October 1990 and in subsequent statements, that he did not own (or have any interest in) any real estate apart from the home he lived in.

21. The second matter relates to the question of income. The definition of income is contained in s.8(1) of the 1991 Act and provides that:

"Income is an amount earned, derived or received by a person for their own use or benefit."

In answer to a question put to the real estate agent managing the property owned by Mr Kear, the real estate agent advised by means of a General Report dated 6/1/94 (T22, p71) that rent amounting to $84,709.42 had been collected and forwarded to a Commonwealth Bank account no. 3548 1005 8173. According to a statement made by the Fraud Investigations Officer of the Commonwealth Bank (T33, p110) this account number and its predecessor 758-7123-2624 (the change relating to the merger of the bank with the State Bank of Victoria) were in the name of Mr Kear, and regularly received deposits from Charles L. King and Co. (the real estate agent) and these deposits originated in Echuca. In a statement made by a Compliance Officer of the ANZ Bank, cheques drawn upon the trust account of Charles L. King dated 31/1/91 to 30/9/93 were all deposited into a State Bank, Sunbury, account no. 758-7123-2624 in the name of R.B. Kear, and cheques dated 31/10/93 to 30/8/94 were paid into the Commonwealth Bank, account no. 3548 1005 8173 in the name of R.B. Kear.

22. A "Members Statement of Account" of the Suburban Housing Group sets out the repayments of interest and management fees made by Mr Kear from September 1989 to the last payment made on 13 December 1993 (T25, p74 and T30, pp. 95-99). The last payment of rent by the real estate agent to Mr Kear's bank account occurred on 30 September 1994. It would appear, then, that some $4,985 of rental income was received into Mr Kear's bank account after all payments of the mortgage and rates had ceased. There is no evidence as to the disposition of those funds.

23. In Re Secretary, Department of Social Security and Jessop (1989) 17 ALD 62 at 65, Senior Member (now Deputy President) McMahon dealt with the meaning of the word "receive":

"(13) The applicant's argument was that the words 'is not receiving' in s73 have a plain meaning and that there was no need to go beyond that. I find myself in agreement with this approach. In the Shorter Oxford English Dictionary, the relevant meanings of 'receive' are 'to take in one's hand, or into one's possession ... to take delivery of a thing from another, either for oneself or for a third party ... to accept something offered or presented'. The ordinary and natural meaning of the word 'receive' has reference to the physical act of taking something into one's possession. 'Receiving' and 'is not receiving' have corresponding meanings. There is nothing difficult or obscure in understanding the meaning of these words, either in the abstract or in the context in which they are found."

24. Thus, on the basis of the evidence, the Tribunal finds that the proceeds from the Echuca property, being rent paid by the tenants, collected by the real estate agent engaged by Mr Kear and paid into his bank account, constituted income amounts received by him pursuant to s.8(1) of the Act.

25. In the light of these findings as to his ownership of real estate and the receipt of income the failure of Mr Kear to report the true situation has to be considered.

26. The meaning of the phrase "for their own use and benefit" was considered by Deputy President Forgie in Re Dewhirst and Secretary, Department of Social Security (AAT 11,717, 21 March 1997, unreported). The respondent said:

"The Tribunal is referred to the decision in Dewhirst, which was a case where Ms Dewhirst was receiving a scholarship and put to the Tribunal that the amount of income received by her was the amount of the scholarship less the moneys paid on her educational expenses, and the Tribunal did not accept that argument. It found that given the definition of income in the Act, it talks about gross ordinary income, and that is in section 1072A, that all income must be taken into account. So there could be no deduction from her scholarship for the amounts that she paid on her education." (Transcript, p28)

27. No restrictions were placed on the funds derived from rents collected and deposited in Mr Kear's bank account by the real estate agent. They were available to be disposed of entirely at his discretion. The fact that he used them to pay the mortgage and rates on the Echuca property to the extent that he did and to discharge his legal obligations as guarantor in relation to the Gisborne property, does not mean, in the Tribunal's view, that he did not receive the income "for his own use or benefit".

28. For these reasons, and having considered all the evidence, the Tribunal finds that the proceeds from the Echuca property, being rental income, constituted income amounts earned, derived or received by Mr Kear for his own personal use or benefit, pursuant to s.8(1) of the Act.

29. Under s.246 of the 1947 Act and, from 1 July 1995, s.1224 of the 1991 Act, if an amount is paid by way of pension, benefit or allowance in consequence of a false statement the amount so paid that would not have been paid but for the false statement is a debt due to the Commonwealth.

30. In McAuliffe v Secretary, Department of Social Security [1991] FCA 268; (1991) 23 ALD 284 at 296, Von Doussa J said:

"For the purpose of s.246(12) in my opinion a statement or representation which is untrue in fact, is false. Liability to the Commonwealth for overpayment of benefit is not dependent on proof that the statement or representation was deliberately or intentionally untrue."

31. The Tribunal finds that Mr Kear made false statements in relation to his ownership of real estate and his rental income from those properties during the relevant period. It notes that he was convicted in the Melbourne Magistrate's Court on 16 February 1996 of defrauding the Commonwealth, and was ordered to pay to the Commonwealth of Australia (DSS) reparation amounting to $7,721.62. In a submission to the Court on 21 December 1994, an officer of the respondent stated that the amount of overpayment between 26 October 1990 and 23 September 1992 was $8,530.92. The Tribunal notes that this period is different from the period of overpayment referred to in the respondent's original determination (26 October 1990 to 22 September 1994) and the period referred to in the Authorised Review Officer's letter (2 November 1990 to 23 September 1993) although the amount of debt is the same in each case. This amount was reduced by the SSAT on appeal, and the respondent was directed to recalculate the debt. As a consequence, the debt was reduced to $4,529.78.

32. It remains, therefore, to consider the amount of the debt. It is noted that all of the assessments of the debt by the respondent (and, by implication, the SSAT) have resulted in net amounts.

In respect of the 1947 Act, the Federal Court decided in Haldane-Stevenson and Director-General of Social Security (1985) 7 ALD 467 that where "income" is defined in s.18 of the 1947 Act the reference is:

"... to the net, rather than gross, income of a pensioner from each of the pensioner's sources of income. Accordingly, in determining a pensioner's annual rate of income it was appropriate to set off against each item of income the cost associated with that income."

33. The respondent submitted:

"Now, that was decided under the 1947 Act and the 1991 Act uses different language and specifically in section 1072A and 1072B and 1072C, the new Act the '91 Act says:

That a person's ordinary income is to be worked out by taking their gross income from all sources without any reduction.

And it does then go on to say:

That is there are costs associated with a business -

certain specified costs then they can be deducted. So if a person is conducting a business then the '91 Act allows the deduction of the expenses. It would appear on the literal meaning of the words that if a person is not conducting a business then there can be no deduction from gross income. The respondent is happy not to accept that apparent literary meaning because the transition from the 1947 Act to the 1991 Act was stated at the time in the second reading speech and the explanatory memoranda to be policy neutral.

So even though there is a question on that plain reading of the '91 provisions, when those Acts were changed the department and the Government accepted that there was in fact no actual policy change between the 47 and the 91 Act. So obviously there is a question about whether the applicant was conducting a business or not but in the context of those two Acts changing and the fact that they should be policy neutral the respondent is happy to accept the decision in Haldane v Stephenson as representing the situation as it should be applied. And indeed the respondents recalculated the debt as directed by the SSAT on that basis." (Transcript, p 37 & p38)

34. In view of the applicant's contention that he did not own the property and did not receive the income from it, and having reported on at least one occasion that he was not involved in a business (T9, p32) it could not be found that the applicant was carrying on a business within the meaning of s.1072B and 1072C of the Act. The Tribunal accepts the respondent's submission that it is the intention that there should be no policy change between the application of the 1947 Act and the 1991 Act and the outcome as it now affects the applicant following the recalculation of the debt by the respondent as directed by the SSAT.

35. The Tribunal affirms the decision under review.