Hossain and Secretary, Department of Education, Employment and Workplace Relations

[2008] AATA 984

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 984

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/2860
  )          No 2007/2863

GENERAL ADMINISTRATIVE DIVISION		)
Re		AMZAD HOSSAIN AJJAKIATUL HOSSAIN

Applicants

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Ms L R Tovey, Member

Date              4 November 2008

PlacePerth

Decision The Tribunal affirms the decision under review.

…(sgd) Ms L R Tovey........

Member

CATCHWORDS

SOCIAL SECURITY – newstart allowance – whether the value of the Applicants' assets exceeded their assets value limit

Social Security Act 1991 (Cth), s. 11, 11A, 611, 612, 1131-2, 1121.

.

Re Dickeson and Secretary, Department of Social Security (1989) 18 ALD 58

Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790

Re Ma and Secretary, Department of Employment and Workplace Relations (2006) 93 ALD 746

Re Samek and Department of Social Security (1988) 16 ALD 295

Secretary, Department of Employment, Education, Training and Youth Affairs v Ovari (2000) 98 FCR 140

Re Secretary, Department of Family and Community Services and Kulshrestha (2003) 73 ALD 438

Spencer v The Commonwealth (1907) 5 CLR 418

REASONS FOR DECISION

4 November 2008 Ms LR Tovey, Member

BACKGROUND

1.      The Applicants, Dr Amzad Hossain and Mrs Ajjakiatul Hossain are husband and wife.  They each claimed newstart allowance on 19 March 2007.  In making that claim, Dr Hossain indicated that they lived at a property at 46 Kooralbyn Valley Crescent in Jandakot ("the Jandakot property") of which they owned 50%.  They also indicated that they owned a property at Brookland Street in Kenwick ("the Kenwick property").  They estimated the value of the Kenwick property at $175,000.

2.      On 30 March 2007 the Applicants were given notice that their claim for newstart allowance had been granted effective from 19 March 2007.  However, on 4 April 2007 Centrelink obtained a valuation which valued the Kenwick property at $385,000.  As a result, a delegate of the Respondent decided to cancel the Applicants' newstart allowance on the basis that the value of their assets exceeded the assets value limit beyond which newstart allowance is not payable.

3.      The decision of the Respondent's delegate was confirmed by an Authorised Review Officer of the Respondent on 20 April 2007.  The ARO had regard to a more comprehensive valuation report of the Australian Valuation Office dated 19 April 2007, which valued the Kenwick property at $375,000.

4.      I note that the Respondent's delegates also decided to recover an overpayment of $327.90 in newstart allowance from each of the Applicants.

5.      On 29 May 2007 the Social Security Appeals Tribunal reviewed the above decisions.  It affirmed the decision that newstart allowance was not payable to the Applicants, but set aside the decision to recover the overpayments on the basis that the debt should be waived.

6.      The Applicants now seek a review of that decision.

ASSETS VALUE LIMIT

7. Section 611(1) of the Social Security Act 1991 (Cth) ("the Act") provides that newstart allowance is not payable to a person if the value of the person’s assets is more than the person’s "assets value limit". As at 19 March 2007 the assets value limit for the Applicants, provided for by s. 611(2) of the Act, was:

(a)$114,500 if either of the Applicants was a "homeowner"; or

(b)$173,000 if neither of the Applicants was a "homeowner".

8. I note the assets value limits provided for by s. 611(2) of the Act are adjusted annually in line with CPI increases in the manner provided for by ss. 1191-4 of the Act. While they have been further altered since the application date of 19 March 2007, those further alterations are not material for the purposes of this decision.

9. The term "homeowner" is defined by s. 11(4)(b) of the Act. Pursuant to that provision the Applicants will be homeowners if either or both of them have a right or interest in one residence that is the principal home of either or both of them and that right or interest gives either of them "reasonable security of tenure in the home". Section 11A(10) of the Act provides that:

"If a person has a right or interest in the person’s principal home, the person is to be taken to have a right or interest that gives the person reasonable security of tenure in the home unless the Secretary is satisfied that the right or interest does not give the person reasonable security of tenure in the home."

10.     In order to identify the assets value limit applicable to the Applicants it is then necessary to consider whether they were homeowners as at 19 March 2007.  A first step in that process is to identify their "principal home" at that time.

11.     In Re Samek and Department of Social Security (1988) 16 ALD 295 at 296-7 Senior Member Hayes expressed the following views in relation to the term "principal home":

"The Act contains no definition of “the principal home”. In most cases, there will be no doubt about it. Typically, the principal home will be the family home, in the sense of being the home in which the couple whose assets are to be assessed have lived for most of their married lives while they have raised their children and in which, at the time of assessment, they continue to live. There will be no question but that they will remain living there for the foreseeable future.

A married couple might also, over the course of their lives, acquire other properties. They might ultimately develop a beach or country house, which is used by their family at odd times during the year for recreational purposes. They might also acquire what are clearly investment properties. In this context, the family home will remain the principal home, even though the couple, as they approach retiring age, might progressively shift the focus of their activities to the holiday house, possibly leaving the family home unoccupied for various periods over the year, or occupied by teenage or young adult children who might wish to remain in the city for study or work purposes. Again, notwithstanding this shift, there will be no difficulty in saying that the family home remains the principal home.

The concept of “the principal home” assumes, however, that there is more than one property which is used as a home. If one moves from home to home, then the home in which one spends most time would, logically, be the principal home. But in the context in which it appears, to talk of one home being a principal home, and another being a secondary home, the respective “homes” must be “property” which can be valued for the purposes of the Act. Thus, as between the city house and the holiday house owned by a retired couple in my earlier example, the city house would remain their principal home for as long as they spent the bulk of their time there. But once they spent the bulk of their time in their holiday house, it would become their principal home.

A person who owns a residential property in the city and who is in the habit of living there, but who spends the bulk of his or her time travelling around the country, living in hotels, and pursuing business or recreational interests from those hotels, can still be regarded as retaining the city property as his or her principal home. While the person spends more time each year in hotels than at home, he or she has no proprietary interest in the hotel room and so cannot be regarded as setting up a home which can be regarded as such as to make the city home a secondary one."

12.     In Re Dickeson and Secretary, Department of Social Security (1989) 18 ALD 58 at 61-2 Senior Member Handley said:

"The words “home”, “house”, “residence” and “domicile” have all been extensively considered by the courts, but derive their meaning only by reference to a particular subject whether it be taxation, family law, tenancy, customs, probate, or social welfare.

In assessing the criteria of what constitutes a “home” a substantial degree of occupation is persuasive … whereas conversely occupation by occasional visiting is not …, and living away from the family home in other premises causes the family home to no longer be the principal home ... A “home” is likely to be a place where persons ordinarily eat, morning and night, and where they sleep, and in the case of adults have the characteristics of permanency... It is a concept of nature and “it is the place where the centre of gravity of one's domestic life is to be found”… Where one chooses to live is relevant … and a reference to a “home” requires an affinity to its location and usage by the occupier: ... A home need not be a structure of four walls and a roof, but may be constituted by a caravan … or a campervan … or a yacht." (citations omitted)

13.     These passages from Dickeson and Samek were cited with approval by Deputy President Hack SC in Re Ma and Secretary, Department of Employment and Workplace Relations (2006) 93 ALD 746 at 751-2, [31]. He saw Samek as authority for the proposition that:

"as between two or more properties in which a person had a propriety interest, the person’s “principal home” would be the property in which the person spent the bulk of his or her time."

14.     In Secretary, Department of Employment, Education, Training and Youth Affairs v Ovari (2000) 98 FCR 140 at 143, [12] the Full Federal Court expressed the view that the adjective "principal" in the phrase "principal home" in the AUSTUDY Regulations was directed to excluding holiday homes and the like from the assets test provided for in those regulations.

15.     In Re Secretary, Department of Family and Community Services and Kulshrestha (2003) 73 ALD 438 at 443, [24] Deputy President Forgie and Member Ericksen said, after referring to Ovari:

"The Full Court did not explain the meaning of a “principal home”. Some assistance as to the meaning of the expression a “principal home” is available from the dictionary definitions. The word “home” has a number of meanings but, in the context in which it appears in the Act, it means (The Macquarie Dictionary, 3rd ed, 1997):

… 1. a house or other shelter that is the fixed residence of a person, a family, or a household …

The meanings ascribed to the word “principal” include “first or highest in rank, importance, value, etc; chief; foremost”. Taken together, a person's principal home is the place of residence that is his or her chief or first and foremost residence."

16.     In a MOD P completed by Mrs Hossain on 26 March 2007 she gave her address as an address in Spyglass Circle Canning Vale ("the Canning Vale property").  However, I infer from the Centrelink correspondence at the time that Dr Hossain gave his address as the Jandakot property in his application.

17.     When I asked Dr Hossain where he was living at the time of the hearing of this application he responded by saying that he was "officially" living at the Jandakot property but "actually" living at the Canning Vale property.  He went on to explain that the Jandakot property was the house of one of his daughters and her husband, and that his name and that of his wife was on the title of that property.  The Canning Vale property was the house of his other daughter and her husband and, while that property has also been registered in the name of Dr Hossain and his wife for a time, steps had been taken to remove their names from the title.

18.     Dr Hossain told me that he and his wife had lived at the Canning Vale property for the last seven or eight years.  At one point he said in cross-examination he said that they had never lived at the Jandakot property, but then qualified that statement by saying that he had been told by a lady at Centrelink that unless he moved to the Jandakot property "we cannot give you any money".  Dr Hossain said that he and his wife moved to the Jandakot property for a few weeks and moved back to the Canning Vale property when the newstart allowance was discontinued.  He said that they moved back to the Canning Vale property because he found the location of the Jandakot property inconvenient.  However, he said that "if the payment continued then definitely I would have lived there".

19.     I find from the above evidence that Dr Hossain and his wife have lived at the Canning Vale property for the past seven or eight years apart from a few weeks around the time of their application for newstart allowance on 19 March 2007.  For those few weeks they moved to the Jandakot property in order to attempt to become entitled to newstart allowance.

20.     In those circumstances, having regard to the authorities referred to above, I find that the principal home of the Applicants on 19 March 2007 was the Canning Vale property.  It was the home where the Applicants spent most of their time, and was their chief and foremost place of residence.

21. I am fortified in that conclusion by s. 11A(9)(a) of the Act, which provides that a residence of a person is to be taken to continue to be the person’s principal home during any period (not exceeding 12 months) during which the person is temporarily absent from the residence. That provision was introduced by the Families, Community Services and Indigenous Affairs and Veterans’ Affairs Legislation Amendment (2006 Budget Measures) Act 2006 (Cth), and was in force on 19 March 2007. The Applicants' absence from the Canning Vale property was clearly for less than 12 months, so that the Canning Vale property should, in the circumstances of this case, be taken to the continue to be the Applicants' principal home during the period of that absence by reason of this provision.

22.     A title search for the Canning Vale property undertaken on 20 February 2008 shows that at that time the Applicants' daughter Popie Hossain-Khaman and Liton Rhaman were the only registered proprietors of that property, and had been so registered since 19 March 2007.  I infer than the Applicants ceased to be registered proprietors of the Canning Vale property on 19 March 2007, the date of their application for newstart allowance.  The evidence of Dr Hossain, which I accept, is that his daughter paid the costs of removing the Applicants' names from the title, and that on 19 March 2007 the Applicants were not personally indebted to the Commonwealth Bank, which holds a mortgage over the property.  From the above evidence I find that, as at 19 March 2007, the Applicants did not have any right or interest in the Canning Vale property.

23.     It follows that as at 19 March 2007 the Applicants were not homeowners, as they did not have a right or interest in the Canning Vale property which was their principal home, and that the assets value limit was $173,000 for each Applicant.

DID THE VALUE OF THE APPLICANTS' ASSETS EXCEED THE ASSETS VALUE LIMIT?

24.     It is then necessary to consider whether the value of the Applicants' assets exceed their assets value limit of $173,000.

25. The term "asset" is defined in s. 11(1) of the Act to relevantly mean property or money. Section 11(2) and (3) of the Act provides that:

"(2)     A reference in this Act to the value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person’s interest in the asset.

(3)A reference in this Act to the value of a charge or encumbrance on an asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of that charge or encumbrance in so far as it relates to the person’s interest in the asset."

26.     The term "value" in this context refers, in my view, to the concept of value explained in Spencer v The Commonwealth (1907) 5 CLR 418 at 432, namely the price a purchaser desiring to buy the relevant land would have to pay for the land to a vendor willing to sell it for a fair price but not desirous to sell, assuming the persons to be conversant with the subject at the relevant time. In Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790 Bennett J held that it was open to the Tribunal to determine "value" in a case such as the present by adopting the net market value approach based on comparable sales and the ‘best use’ to which the asset could be put.

27.     The valuation report of the Australian Valuation Office dated 19 April 2007 adopts that approach to the valuation of the Kenwick property and concludes that the estimated market value of that property as at 2 April 2007 was between $375,000 and $400,000.  The valuer valued the property at $375,000.  The valuation was not challenged by the Applicants and I accept that the value of the Kenwick property is as indicated in that report.  The difference between the valuation date of 2 April 2007 and the relevant date of 19 March 2007 is not significant, and I infer that the value of the Kenwick property was the same on both dates.

28. The Applicants are registered as proprietors of the Kenwick property as joint tenants. Section 612(2) of the Act provides that the value of each of the Applicants' assets is taken to be 50% of the sum of the value of their combined assets. Therefore, if it were assumed that the Kenwick property were the Applicants' only asset, the value of each of their assets would be half the value of that property, namely $187,500.

29. In reaching that conclusion I have had regard to the mortgage over the Kenwick property to the Commonwealth Bank, which the certificate of title shows to have been registered on 29 January 2003. In that regard s. 1121 of the Act relevantly provides:

"(1)           If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of this Act (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.

Note: this section does not apply to an asset to which section 1121A (primary production assets) applies.

(2)  Subsection (1) does not apply to a charge or encumbrance over an asset of a person to the extent that:

(a) the charge or encumbrance is a collateral security; or

(b)  the charge or encumbrance was given for the benefit of a person other than the person or the person’s partner."

30.     The evidence of Dr Hossain on 12 February 2008 was to the effect that he thought that this mortgage was taken to secure a debt incurred by his daughter Popie Hossain-Rhaman for the purposes of renovating the Canning Vale property.  In his evidence on 29 April 2008 Dr Hossain appeared to indicate that the mortgage secured a loan used to purchase the Canning vale property.  In that regard, Dr Hossain's evidence was inconsistent and unclear.  What was clear from his evidence, however, was that the mortgage of the Kenwick property secured a debt of his daughter which was incurred for the purposes of the Canning Vale property, and that his daughter had been making the repayments on that loan.  That evidence is corroborated by the report of the Commonwealth Bank to the Respondent that the Applicants have not applied for finance from that bank.

31. From the above evidence I find that the mortgage of the Kenwick property was given for the benefit of a person other than the Applicants. The effect of s. 1121(2)(b) of the Act, set out above, is that the value of the Kenwick property is not to be reduced by the value of the mortgage.

32. I note that Dr Hossain gave evidence that, between the hearing of this matter in February and April 2008, the Kenwick property was used to secure a further loan advanced to the Applicants' daughter. As that further debt was incurred well after the relevant date of 19 March 2007, it is not a matter I can take into account. Even if liabilities incurred after that date were relevant, the effect of Dr Hossain's evidence is that the loan was for the benefit of a person other than the Applicants, so that s. 1121(2)(b) of the Act would again prevent the value of the security given for that loan from being taken into account in valuing the Kenwick property.

33.     It follows that, having regard only to the Kenwick property, the value of each of the Applicants' assets was $187,500 on 19 March 2007, which was greater than their assets value limit of $173,000.  It follows that the Respondent was correct to reject the Applicants' application for newstart allowance.

34.     That conclusion relieves me of the need to determine the value (if any) of the Applicants' interest in the Jandakot property, of which the Applicants were two of four registered proprietors as at 19 March 2007.

AN ALTERNATIVE ROUTE TO THE SAME CONCLUSION

35. I note that, even if I was wrong in regarding the Canning Vale property as the Applicants' principal home it would not affect the result in this case. If it were the case that the Applicants' principal home was the Jandakot property at 19 March 2007 then the value of the Jandakot property may have to be disregarded (assuming for the sake of this hypothesis that the Applicants' right or interest in that property gave them reasonable security of tenure in the home): see s. 1118 of the Act. However, in that event the assets value limit for the Applicants, as homeowners, would be only $114,500. The value of each of their assets, based only on their interest in the Kenwick property, would remain $187,500.

Financial Hardship Rules

36. Sections 1131 and 1132 of the Act provide for circumstances in which the value of an "unrealisable asset" is to be disregarded. However, having regard to the valuation report of 19 April 2007, I do not consider the Kenwick property to be an unrealisable asset. Section 11(12) of the Act provides that:

"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"

37. The valuation report indicates that there is a market for the Kenwick property. Dr Hossain's evidence was that, although he had unsuccessfully attempted to sell the property at some time between 2002 and 2004, he had not recently attempted to sell the property. The effect of his evidence was that he was holding on to the property hoping to make a profit if land values in the Canning Vale area increased in the future. I find from this evidence that the Kenwick property is not an asset which the Applicants cannot sell or realise. In any event, as the recent borrowing secured by a mortgage of the Kenwick property illustrates, that property is an asset which can be used as a security for borrowing. In those circumstances, ss. 1131 and 1132 of the Act are not available to the Applicants.

DECISION

38.     For the above reasons, the Tribunal affirms the decision under review.

I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Ms LR Tovey, Member

Signed:         ..(sgd) T Freeman............
  Associate

Dates of Hearing:  12 February 2008 and 29 April 2008.

Date of Decision  4 November 2008

Date of Last Written Submission             12 June 2008

Representatives for the Applicants          Dr A Hossain

Representative for the Respondent         Mr W Wright

Solicitors for the Applicants  Centrelink Legal Services