Highnam and Repatriation Commission
[2006] AATA 500
•8 June 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 500
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/1365
VETERANS' APPEALS DIVISION ) Re DAVID HIGHNAM Applicant
And
REPATRIATION COMMISSION
Respondent
DECISION
Tribunal Senior Member, Mrs Josephine Kelly Date8 June 2006
PlaceSydney
Decision The decision under review is set aside and remitted for reconsideration in accordance with my findings
[sgd] Senior Member, Mrs Josephine Kelly
CATCHWORDS
VETERANS’ APPEALS - asset valuation for calculating amount of pension payable – whether area of principal home exceeding 2 hectares is an asset (excess curtilage) – closed period – asset valued appropriately – financial hardship rule – excess curtilage may be an unrealisable asset – Applicant does not rely on financial hardship rules – decision set aside and matter remitted for reconsideration
LEGISLATION
Veterans’ Entitlement Act 1986 s 5L, 52, 52Y and 52Z
REASONS FOR DECISION
8 June 2006 Senior Member, Mrs Josephine Kelly 1.I refer to my preliminary findings in this matter dated 15 May 2006. They were stated orally on 5 May 2006 and provided in writing on 15 May 2006. A copy is attached.
2.In those preliminary findings, I found that the Repatriation Commission (“the Commission”) had valued Mr Highnam’s ’principal home’ in accordance with the Veterans’ Entitlements Act 1986 (“the Act”), that is the area of the ‘principal home’ in excess of 2 hectares (“the excess cartilage”) was an asset. That asset was valued at $65,000.
3.I also found that the Financial Hardship Rules of the Act may be relied upon in relation to that asset. Mr Highnam has not contacted my Associate within the time I directed to advise that he wishes to rely on those Rules..
4.Accordingly, I proceed to make a decision, as I foreshadowed. I find that the Commission has properly taken into account the value of the excess curtilage when calculating Mr Highnam’s assets. The excess cartilage was an asset which was valued at $65,000.
5.Although the Financial Hardship Rules may apply, Mr Highnam has not relied upon them to ameliorate the operation of the assets test in this case.
6.As I have found that the excess cartilage was valued at $65,000 rather than the $75,000 found in the reviewable decision, that decision is set aside and the matter remitted for reconsideration in accordance with my findings.
I certify that the 6 preceding paragraphs are a true copy of the true copy of the reasons for the decision herein of Senior Member, Mrs Josephine Kelly
Signed: Miss Sacha Keady
AssociateDate/s of Hearing 4 May 2006
Date of Decision 8 June 2006
Advocate for the Applicant Self Represented
Advocate for the Respondent Department of Veterans' Affairs
Administrative
Appeals
Tribunal
PRELIMINARY FINDINGS
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2005/1365
VETERANS' APPEALS DIVISION ) Re DAVID HIGHNAM Applicant
And
REPATRIATION COMMISSION
Respondent
PRELIMINARY FINDINGS
Tribunal Senior Member, Mrs Josephine Kelly Date of Preliminary Findings 15 May 2006
PlaceSydney
[sgd] Senior Member, Mrs Josephine Kelly
PRELIMINARY FINDINGS
15 May 2006 Senior Member, Mrs Josephine Kelly 1.Following are my preliminary findings in the matter of David Highnam and Repatriation Commission.
Introduction
2.Mr Highnam and his wife live in a dwelling house located on a 17 acre property on the Lakes Way, Bungwahl. They own this property as joint tenants. Mr Highnam applied for a service pension which was granted but the rate was reduced because of the application of the assets test prescribed by the Veterans Entitlements Act 1986 ("the Act"). The value of a person's interest in the principal home is disregarded for the purposes of the assets test pursuant to section 52(1)(b) of the Act, however, relevantly the definition of a principal home in section 5L(5) is:
(5) A reference in this Act to the principal home of a person includes a reference to:
(a) if the principal home is a dwelling‑house—the private land adjacent to the dwelling‑house to the extent that the private land, together with the area of the ground floor of the dwelling‑house, does not exceed 2 hectares; or …
3.The value of the area of the property in excess of two hectares was taken into account in assessing Mr Highnam's assets. That area will be referred to as the excess curtilage. The total area of the property is 7.158 hectares. The issue in these proceedings is whether the value of the excess curtilage should be taken into account as an asset for the purpose of the assets test.
Background
4.On 2 July 2005, Mr Highnam applied for his service pension which would commence on 15 July 2005 when he turned 60 years of age. On 9 August 2005 he was granted a service pension by the Repatriation Commission ("the Commission") but it was reduced because of the application of the assets test which included an asset of $75,000 which related to the value of the excess curtilage. Mr Highnam has appealed to this Tribunal against that decision, the reviewable decision. On 20 September 2005, the Commission reassessed the value of his assets other than the excess curtilage which had the consequence that a slightly higher rate of pension was payable.
5.In December 2005 there was a change in Mr Highnam's circumstances and his assets exceeded the limit under the Act. Therefore this decision relates to a closed period from 15 July to December 2005.
6.Section 5L(1) of the Act defines asset as meaning:
Property or money (including property or money outside Australia).
Mr Highnam's Arguments
7.On 12 August 2005, Mr Highnam wrote a letter to the Commission objecting to the excess curtilage being considered an asset of $75,000. He listed his objections as follows:
· Although the property is 17 acres, it only contains his residence.
· The property is rated as residential by the Great Lakes Council (a rate notice was attached).
· The property is not legally subdivisible due to the council's limit on minimum 100 acre blocks.
· He does not use the property for any reason. No animals, no crops, no improvements.
· He obtains no income from the property at all.
· The value of the property is residential only. The unused section has no added value to him at all.
· He cannot dispose of the extra land, the 75,000 or any other value.
· Because of the environmental sensitivity of the land, approval of any use would be near impossible.
· He wanted to know how this valuation was arrived at when all received was a phone call from an assessor.
· No real estate agent is able to value this extra land as it is not saleable separately.
8.The rates notice submitted by Mr Highnam described the property rating category as "residential, rural sector". In a letter dated 8 October 2005 to the Administrative Appeals Tribunal, Mr Highnam once again stated that it is illogical that he receives a reduced pension when the part of his property brings him no income and he cannot sell it. He states that he was in Vietnam for four years and purchased the property so that he could have peace and quiet.
The Valuation Evidence
9.At T7 there is a request by the Commission for a valuation of the property which was provided on 1 August 2005. The whole property was valued at $875,000 and the house and curtilage was valued at $800,000. That resulted in a value of the excess curtilage of $75,000 referred to above. The Australian Valuation Office prepared a valuation report dated 8 February 2006. It found the value of the property as of 14 July 2005 was $900,000 and the value of the house and curtilage was 835,000. Therefore, the excess curtilage was valued at $65,000. This is $10,000 less than at the time of the original determination. At the hearing, Mr Highnam re-stated his objection to the value of the excess curtilage being taken into account as an asset.
10.He initially stated he accepted the valuation evidence that had been tendered by the Commission but as related later in this decision, in the course of discussion he adopted a somewhat different position. In addition to the points he had previously made in writing summarised above, he said that section 5L(5) was an anomaly. He gave an example of a person who owned a property comprising two lots in Vaucluse which were two hectares in area or less, on which was constructed a dwelling house and which was the area being used primarily for private purposes. That property would be exempt from the assets test although it could be subdivided and may be valued at $10 million or more.
11.In support of that example, he tendered an extract from a magazine, Veterans Affairs, of December 2005, which provided an example of how the provision might exempt an area of less than two hectares even if in two separate legal titles, provided it was used primarily for private purposes. Those situations were in contrast to his situation, he said, where he could not sell the excess curtilage and which was, in his view, worth nothing in any event. He said that where he lives, the area of a parcel of land makes little difference to the value and that five acre, 10 acre and 25 acre lots are the same value. I understood him to be referring to unimproved value.
12.In his opinion it was the improvements such as the house, garden, access roads and the like which constituted the value of the blocks.
Consideration
13.On the valuation evidence before me, I find that the Commission has valued the property in accordance with the Act, that is, the value of the principal home as defined in the Act as at 14 July 2005 was $835,000 and the value of the land in excess of the two hectare limit was $65,000 when one relies on the valuation report prepared on 8 February 2006. However, that does not answer Mr Highnam's objection to the application of the valuation to the calculation of his assets.
14.During the hearing, the question was asked, what provisions exist which might ameliorate the application of section 52(1)(b) and section 5L(5)? As there seems to have been no consideration of the question in this matter before the hearing, it was not addressed in detail before me by the Commission or by Mr Highnam who was representing himself. The only provisions which my research has revealed are the Financial Hardship Rules.
15.Relevantly, section 52Y of the Act sets out when access may be had to the Financial Hardship Rules. There are several pre-conditions to be satisfied before those rules may be accessed. The following are not findings but my preliminary view on the material before me.
Preliminary View
16.Mr Highnam seems to satisfy the first pre-condition, that is, his service pension rate is determined by the application of an assets test (section 52Y(1)(a)(ii)). He also seems to satisfy the second pre-condition, that is, none of the sections referred to in section 52Y(1)(b)(i) apply to him. Those sections refer to disposal of income and disposal of assets. The next pre-condition is that the person or person's partner has an unrealisable asset (section 52Y(1)(c)). This seems to me to be the critical question in this case. Can a value of land in excess of the two hectare limit in section 5L(5) constitute an unrealisable asset?
17.An unrealisable asset is defined in section 5L(11) and (12).
(11) An asset of a person 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.
(12) For the purposes of the application of this Act to a service pension or an income support supplement, an asset of a person is also an unrealisable asset if:
(a) the person could not reasonably be expected to sell or realise the asset; and
(b) the person could not reasonably be expected to use the asset as a security for borrowing.
18.For present purposes, I assume that the excess curtilage cannot be sold or used as security in isolation from the balance of the property. The definition of asset has been set out earlier in this decision. In my opinion it is consistent with the beneficial nature of the legislation, that the provisions of section 5L(5) may be ameliorated by the operation of the Financial Hardship Rules, that is, the area in excess of the two hectare limit in section 5L(5) may constitute an unrealisable asset which, if all the pre-conditions are satisfied may be disregarded in working out the person's service pension rate pursuant to section 52Z(1).
19.This is consistent with the scheme of the Act in that if the value of land in excess of two hectares is taken into account as an asset for the purpose of the assets test, it follows that it may also be an unrealisable asset for the purpose of the access to the Financial Hardship Rules.
Finding
20.As a possible application of these rules have not been fully argued and there has been no written request by Mr Highnam pursuant to section 52Y(1)(d) to the Department of Veterans Affairs as required, the appropriate course in this case is to grant Mr Highnam a period of 14 days within which to advise my Associate whether he wishes to seek to rely on the Financial Hardship Rules.
21.If he does, then a directions hearing will be held and a timetable set out for the matter to proceed. If he does not advise my Associate he wishes to proceed, I will make a decision in the matter on the material before me.
22.In order to succeed, apart from the written request to the Department and the other pre-conditions being satisfied, he will have to satisfy me that he would have suffered severe financial hardship during the closed period the subject of these proceedings if the hardship rules were not applied (section 52Y(1)(e)). That matter was not addressed at the hearing and is critical.
23.These findings will be sent to the parties and Mr Highnam has 14 days from the date they are sent to contact my Associate and advise whether he wishes to rely on the Financial Hardship Rules.
I certify that the 23 preceding paragraphs are a true copy of the preliminary findings for the decision herein of Senior Member, Mrs Josephine Kelly
Signed: Miss Sacha Keady
AssociateDate/s of Hearing 4 May 2006
Date of Preliminary Findings 11 May 2006
Counsel for the Applicant Self Represented
Advocate for the Respondent Department of Veterans’ Affairs
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