Clancey and Secretary, Department of Education, Employment and Workplace Relations
[2010] AATA 990
•10 December 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 990
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/1857
GENERAL ADMINISTRATIVE DIVISION ) Re ALLAN CLANCEY Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Senior Member Dr K S Levy RFD Date10 December 2010
PlaceBrisbane
Decision
The Tribunal affirms the decision under review.
...............[Sgd]...............................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Benefits and entitlements – newstart allowance – application of newstart allowance “assets test limit” – allowance not payable where assets exceeds limit – entitlement to deductions upon unsecured loans - applicant’s assets exceed assets value limit – decision under review affirmed
Social Security Act 1991 (Cth) s 611, 1121
Achkar and Department of Family and Community Services [2001] AATA 684
Berry and Secretary, Department of Social Security [1995] AATA 238
Collins and Repatriation Commission (1980) 32 ALR 581
Gowans and Repatriation Commission (1988) 14 ALD 377
Howells v Nagrad Nominees Pty Ltd (1982) 43 ALR 283
Munday v Secretary, Department of Employment, Education and Workplace Relations [2010] AATA 124
Repatriation Commission v Harrision (1997) 46 ALD 193
Secretary, Department of Family and Community Services and Meyer (2004) 78 ALD 348
REASONS FOR DECISION
10 December 2010 Senior Member Dr K S Levy RFD INTRODUCTION
1. Mr Clancey seeks review of a decision to cancel his newstart allowance. That decision was made on the basis that his assets had been assessed as being in excess of the statutory limit for entitlement to newstart allowance. The main asset which caused the excess was a property he had purchased with a view to making improvements to enhance its value and then ultimately, to resell it at a profit. The property had a house which was not habitable at the time of purchase. To achieve his objective, the applicant had to obtain loans, most of these being obtained as unsecured loans from friends. The respondent contends that these are not deductible against the investment property.
2. The original decision to cancel newstart allowance was reviewed and affirmed by an authorised review officer on 13 January 2009. The applicant appealed that decision to the Social Security Appeals Tribunal (“SSAT”). The SSAT affirmed the original decision also. The latter decision was made on 18 March 2010. Mr Clancey now appeals to this Tribunal for review.
ISSUES FOR DETERMINATION
3.The issues for determination are:
(1) What is the total value of assessable assets as at 9 December 2009;
(2)Did Mr Clancey’s assessable assets exceed the statutory asset test limit at that date? and
(3)Was the decision to cancel newstart allowance correctly made?
EVIDENCE
4. The Tribunal had the benefit of the applicant’s letter of 8 September 2010 with attachments. There was also tendered a valuation of the applicant’s investment property by Department of Natural Resources dated 17 March 2008. In addition, an Enduring Power of Attorney was provided to show that Mr Clancey administered his mother’s affairs, together with two other siblings. Mr Clancey was however provided with carer allowance over the majority of the period of the cancellation of newstart allowance as he was his mother’s carer.
Oral evidence of Mr Clancey
5. Mr Clancey purchased the property the subject of this appeal which is situated at Sussex Road, Acacia Ridge. While he purchased this house for the purpose of “improving” and reselling it at a profit, the house was not habitable at the time of purchase. It did not have a roof; it only had a thin fibro shell; and plumbing and other work needed to be fixed before it could be effectively inhabited.
6. Mr Clancey described it as a “pile of junk” when he bought it. He said the loans were required to help him make it into a house.
7. He obtained a contract for the sale of this property on 1 July 2010 for $269,000. Following a house inspection, the prospective purchaser was advised that they would have to spend at least $9,000 on the house. Mr Clancey was required to renegotiate his sale price to keep the contract on foot. It appears that the purchase price was renegotiated to $264,500.
8. A valuation by the Australian Valuation Office (“AVO”) was made on 29 October 2009 where the value of the property was seen to be $280,000. Mr Clancey agreed with the valuation at the SSAT hearing and he said that in fact it was probably worth more like $285,000. At the hearing of this Tribunal, he said it was very much overvalued at that price. The Tribunal heard evidence that the valuation was a “roadside valuation” which was influenced by properties around that locality which had been sold shortly before the date of the valuation[1]. Mr Clancey now says it was overvalued and tendered the Department of Natural Resources valuation of $148,000 as support for that proposition.
[1] Folio 16, T documents.
9. The property had a registered encumbrance for $49,000 (approx). There were also private loans (unsecured) to three friends, each between $34,000 to $40,000 approximately. He has other personal chattels and assets worth approximately $37,378. There is adequate evidence of the amounts paid out on these loans at the time of settlement of the property.
Submissions
10. The applicant submits that other expenses should have been allowed to be deducted, such as solicitor’s costs and real estate agent’s commission. The applicant further submitted that the renegotiated sale price resulting in a reduction of $4,500 following the building inspection report should also be deductible.
11. Mr Hamilton for the respondent submits that the question is whether the unsecured loans can be deducted. Mr Hamilton raised three possible scenarios:
(1)Net value of all assets – using the AVO and SSAT valuations;
(2)Net value of the house as being the amount reflected in the contract price; and
(3)The net value taking account of both the secured and unsecured loan amounts.
12. Mr Clancey made a final submission that the third scenario should be accepted but that the cost of his plumbing expenses ($14,127) should also be deducted.
CONSIDERATION
13. I have considered all of the evidence and the submission of the parties and taken account of the relevant law.
14. Section 611(1) of the Social Security Act 1991 (“the Act”) provides that the newstart allowance is not payable if the value of a person’s assets is more than the person’s asset value limit. At the relevant date, that asset value limit was $178,000. Section 1121 of the Act provides that if there is a charge or encumbrance over a particular asset of the person, the value of that asset is to be reduced by the value of the charge or encumbrance for the purpose of calculating the person’s assets.
15. The respondent submits that s 1121 is amplified by the Guide to Social Security Law (“The Guide”). The Guide says two instructions are relevant:
(a)1.1E.105 – A charge or encumbrance is to be legal in nature; and
(b)4.6.6.30 – This policy of the Department deals with unsecured loans and provides as follows:
If a customer has a unsecured loan AND provides evidence that the loan was specifically obtained to purchase the asset, the outstanding amount of the loan IS deducted from the value of the asset.
16. The respondent says that the Guide to Social Security Law, in particular, Instruction 4.6.6.30 “provides a more liberal treatment of assets and liabilities than does either s 1121 or the case law”. However, The Guide says this can only have application where an unsecured loan is to purchase an asset and no other circumstance (i.e. improvement of an asset is not provided for in the Instruction).
What value should be put on the Sussex Road property?
17. It is clear that the Tribunal is not bound by the valuation provided by official sources. Indeed, the respondent says that liabilities may be deducted but only so far as they are secured against the particular assets[2]. But the Tribunal is not bound to accept the valuations submitted by either party. The applicant says the Council valuation should be accepted. However, such valuations are made for rating purposes and includes the unimproved value only. What is required is a closer approximation to market value, which is generally accepted as being very different to that of valuations for rating purposes.
[2] Secretary, Department of Family and Community Services and Meyer (2004) 78 ALD 348 at 362
18. The AVO valuation has been determined at $280,000. This was made on 29 October 2009. The market value at the time of sale of 1 July 2010 was $264,500. Property valuation is not a precise discipline and at the time of sale, the market value would be more readily accepted as $264,500 rather than $280,000. However, the valuation is to be made as at 9 December 2009 and the AVO valuation is the valuation which is closer in time to that critical date. Therefore, I find that the valuation in December 2009 was $280,000.
What amounts are deductible to determine total assessable assets?
19. In reviewing decisions of this nature, it is well established that when an administrative law decision is made by a public official, the exercise of the relevant discretion is subject to the “non-fettering” rule (the decision maker must not be shackled by a superior); and the “non-abdication” rule (the decision maker must act or decide based on the individual merits of the case and not be constrained by a policy). The latter aspect is an elastic one and depends to some degree on the nature of the policy. Statutory rights of review exist to correct any breach of the non‑fettering rule or the non-abdication rule.
20. The courts have noted the interface between the policy aspects and the exercise of a statutory discretion is not an easy one[3]. In that case, it was said that the discretion must be exercised genuinely and realistically, and that there should be a willingness to depart from a strict adherence to policy where necessary[4].
[3] Howells v Nagrad Nominees Pty Ltd (1982) 43 ALR 283
[4] Ibid at 307
21. I agree that the amount of the secured loan ($49,798.21) should be deductible. As I understand it, the secured loan comes within the bounds of s 1121 of the Act.
22. In relation to the unsecured loans, s 1121 has on first reading a reasonably specific scope. Instruction 1.1.E.105 limits the use of a charge or encumbrance to those which are “of a legal nature”. Unsecured loans, particularly in relation to land, are generally equitable and not legal in nature. The evidence of the loans here appears not to be legal in nature but equitable.
23. As was stated in Munday v Secretary, Department of Employment, Education and Workplace Relations[5] the difficult issue for applicants in challenges to s 611 and s 1121 is that despite what they might see as fairness or equity in their circumstances, the ultimate determination is based on statutory interpretation.
[5] [2010] AATA 124
24. In Gowans and Repatriation Commission[6], the Tribunal held that a pensioner who obtained loans from his family company could not get the benefit of offset of those loans against his net assets. The approach by courts and tribunals to the application of these provisions reveals that setoff of loans and charges is against a specific asset and using a “net asset” basis is not permissible[7]. It has been noted that these legislative provisions are sometimes perceived as working an unfairness (Berry and Secretary, Department of Social Security)[8], but that decision cited the Federal Court decision of Collins and Repatriation Commission[9] where it was said that “… the Tribunal has no charter to act in making its decision in accordance with “equity and good conscience”, but is obliged to comply with the provisions of the legislation”.
[6] (1988) 14 ALD 377
[7] Repatriation Commission v Harrison (1997) 46 ALD 193; Achkar and Department of Family and Community Services [2001] AATA 684
[8] [1995] AATA 238
[9] (1980) 32 ALR 581
25. Having considered Instruction 4.6.6.30, its wording is quite specific and while it appears consistent with s 1121 in that it includes “unsecured loans”, it also limits its deductibility to the purchase of an asset. In the circumstances of this case, Mr Clancey’s unsecured loans do not fit within the principle of the law applicable in s 1121 and the Guide to Social Security Law as his loans were not to purchase the relevant property. I therefore answer the issues posed for determination as follows:
(1)Total assessable value is $267,579.79. This is based on the AVO valuation of $280,000 less the secured loan of $49,798.21 and including the personal assets of $37,378.
(2)The value of the applicant’s assessable assets therefore exceed the newstart allowance assets test limit; and
(3)Newstart allowance was correctly cancelled as at 9 December 2009.
I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr K S Levy RFD
Signed: .....................[Sgd]........................................................
Alex Seagar, Research AssociateDate/s of Hearing 7 October 2010
Date of Decision 10 December 2010
Applicant was self-represented
Solicitor for the Respondent Mr Bob Hamilton, departmental advocate
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