Lountzis and Secretary, Department of Families, Community Services and Indigenous Affairs

[2007] AATA 1503

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1503

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No V 200601135

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		DENNIS LOUNTZIS

Applicant

And

SECRETARY,

DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr Egon Fice, Member

Date3 July 2007

PlaceMelbourne

Decision The Tribunal affirms the decision under review.  

(sgd) Egon Fice

Member

SOCIAL SECURITY – rate of age pension – assets – homeowner – right or interest in principal home – reasonable security of tenure – bare trustee – tenancy at will

Administrative Appeals Tribunal Act 1975

Property Law Act 1958

Residential Tenancies Act 1997

Social Security Act 1991

Re Control Investment Pty Ltd and Ors and Australian Broadcasting Tribunal (1980-1981) 3 ALD 88

Re Delos Reyes and Secretary, Department of Social Security (1993) 32 ALD 287

Re Johnston and Repatriation Commission (31 May 1994 AAT No 9508, unreported)

Secretary, Department of Employment and Workplace Relations v Vanderpluym [2007] FCA 876

Stow v Mineral Holdings (Australia) Pty Ltd (1977) 14 ALR 397

REASONS FOR DECISION

3 July 2007 Mr Egon Fice, Member

1.      Mr Dennis Lountzis has received the age pension since 1 August 2002.

2.      On 15 November 2004, Mr Lountzis was notified by Centrelink that his age pension had been reduced because the combined value of his assets and those of his partner had increased.  Centrelink acts as the service delivery agency for the Secretary, Department of Families, Community Services and Indigenous Affairs (the Secretary).  Mr Lountzis did not agree with that decision and on 25 January 2005, he lodged an application with Centrelink seeking a review.  Mr Lountzis claimed that the decision was wrong because he believed that he should not be regarded as a homeowner.

3.      A Centrelink Customer Service Officer (CSO) confirmed the original decision and Mr Lountzis then sought a review of the decision by an Authorised Review Officer (ARO).  On 2 September 2005, after being provided with a Trust Deed which it was said confirmed that the property where Mr Lountzis and his wife resided was wholly owned by his son, the ARO set aside the decision and sought to have the matter re‑investigated.

4.      The CSO who examined Mr Lountzis’ claim notified Mr Lountzis on 13 February 2006 that he remained of the opinion that Mr Lountzis was a homeowner.  The CSO then referred the matter back to ARO.  On 13 February 2006 the ARO re-instated the decision to assess Mr Lountzis as a homeowner for the purposes of calculating his rate of age pension.  Mr Lountzis then sought review of the decision by the Social Security Appeals Tribunal (SSAT); which, on 31 October 2006, affirmed the ARO’s decision.

5.      The only issue before me is whether Mr Lountzis should be regarded as a homeowner for the purposes of the Social Security Act 1991 (the Social Security Act).

RELEVANT FACTS

6.      The facts in this matter are not in dispute and the parties agreed that the findings of fact made by the SSAT were correct. 

7.      Until 19 January 2001 Mr Lountzis and his wife owned and resided in a property situated at 56 Rosehill Road, Niddrie in the state of Victoria (the Niddrie property).

8.      On 19 June 2000 Mr Lountzis and his son, Alex, became tenants in common of a property situated at Lot 16 Cahill Street, Bulla in the state of Victoria (the Bulla property).  According to Alex, who paid the deposit on the property, he needed a loan of $236,000 for the balance of the purchase price.  Alex said that the bank was not willing to lend the money solely to him because his income was not sufficient to meet repayments on the loan.  For that reason, he said that the bank required his father to hold a share in the property before it was prepared to lend the balance of the purchase price.  The mortgage provided to the bank was executed by Alex and Mr Lountzis. 

9.      Mr Lountzis and Alex agreed that Alex made all of the mortgage repayments on the Bulla property and that he also paid for all maintenance and insurance.

10.     Mr Lountzis and his wife moved from the Niddrie property to reside in the Bulla property after settlement.  Alex lived with his parents at the Bulla property until 2003.  Mr and Mrs Lountzis retained the Niddrie property and derived rental income from it between 2001 and 2003.

11.     Although the evidence before the SSAT was that Mr Lountzis signed a Trust Deed at about the time the property was purchased, under cross-examination, Mr Lountzis agreed that he signed the Trust Deed about two to three years after the purchase of the property.  The Trust Deed is undated.  It provides that Mr Lountzis holds his half share in the Bulla property on behalf of his son Alex, and he agrees to do all things necessary to transfer his half interest in the property to Alex at such time and in such manner as Alex directs. 

12.     Alex married in 2003 and by agreement with Mr Lountzis and his wife, Alex and his wife commenced living at the Niddrie property.  The reason for doing so was that it was conveniently situated to Alex’s place of work.  In the meantime, Mr Lountzis preferred living at the Bulla property as it had land attached and this has enabled him to work around the property and to remain active.  Neither Mr Lountzis nor his son charged the other rental for occupying the other’s property.  Their living arrangements were not committed to writing and were wholly contained in an oral agreement.

13.     The living arrangements between Mr Lountzis and his son have been in place since 2003 and they have no plans to alter those at present.  Alex said in cross-examination that even if he came back to the Bulla property, he may nevertheless allow his parents to remain. 

THE LEGISLATIVE SCHEME

14. The rate of the age pension payable to an eligible claimant must be calculated in accordance with the rate calculator set out at the end of s 1064 of the Social Security Act. In applying the pension rate calculator which is at Module A, Centrelink must apply the assets test using Module G to work out the reduction which must be made for assets held by the applicant. When applying Module G, Centrelink is required to work out whether the value of the applicant’s assets exceeds that person’s Assets Value Limit. The Assets Value Limit for a person is set out in Table G-1 which prescribes various limits depending on a person’s family situation. The Assets Value Limit also takes into account whether the applicant or his or her partner is a homeowner. The Assets Value Limit varies considerably depending upon whether the applicant or his partner is a homeowner. For example, where the applicant is partnered and the partner is not receiving a pension or benefit, if either the applicant or his or her partner is a homeowner, the assets value limit is $78,750. However, if neither the applicant nor his or her partner is a homeowner, the assets value limit is $118,500.

15.     Where a person’s assets value exceeds the Assets Value Limit set out in Table G-1, that person’s pension is reduced according to a formula provided in Table G-2. 

16.     Therefore, Mr Lountzis’ rate of age pension will vary significantly dependent on whether he is a homeowner. 

17. A homeowner is defined in s 11(4) of the Social Security Act. Because Mr Lountzis is a member of a couple, the relevant definition is found in s 11(4)(b) of the Social Security Act which provides:

Homeowner

11(4)    For the purposes of this Act:

(a)…

(b)a person who is a member of a couple is a homeowner if:

(i)     the person, or the person’s partner, has a right or interest in one residence that is:

(A)   the person’s principal home; or

(B)   the partner’s principal home; or

(C)   the principal home of both of them; and

(ii)     the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home; and …

18. Section 11A(10) provides:

11A(10)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.

19. The effect of s 11A(10) of the Social Security Act is that were a person’s right or interest in the principal home is established, that right or interest, whatever it may be, gives the person reasonable security of tenure unless the Secretary is satisfied otherwise. That does not, in my view, place an onus of disproving reasonable security of tenure on the applicant. There is no onus of proof in the Tribunal. Although there is no provision in the Administrative Appeals Tribunal Act 1975 dealing with onus of proof, there are a number of decisions in the Tribunal and the Federal Court of Australia which conclude that to be the case (see for example Re Control Investment Pty Ltd and Ors and Australian Broadcasting Tribunal (1980-1981) 3 ALD 88). However, an applicant quite clearly bears an evidentiary onus which requires a person to put before the Secretary, or the Tribunal in this case, sufficient evidence for it to be satisfied that the right or interest which that person may have in their principal home does not give that person reasonable security of tenure.

RIGHT OR INTEREST IN PRINCIPAL HOME

20.     There is no dispute between the parties that the Bulla property in which Mr and Mrs Lountzis reside is their principal home.  That is where they have resided since 2001.  They continue to own the Niddrie property and it is clearly one of their assets, but is not their principal home. 

21. The first issue which arises is whether Mr Lountzis, by reason of the fact that he is one of two tenants in common registered on the title of the Bulla property, is a homeowner for the purposes of the Social Security Act. Quite clearly, the right to one of a total of two equal undivided shares in the Bulla property does give Mr Lountzis a legal interest in the principal home. However, that is only the first limb of the requirements set out in s 11(4)(b) of the Social Security Act. That interest in the principal home must also provide Mr Lountzis or his partner reasonable security of tenure. The answer would no doubt be in the affirmative, were it not for the fact that Mr Lountzis claims that he holds his half share in the Bulla property on trust for his son Alex. Although the Trust Deed in evidence is not dated, Mr Lountzis agreed that he had signed that document some two or three years after the purchase of the Bulla property. Furthermore, he said that he never intended to be the beneficial owner of the Bulla property but that he merely held his interest in trust for Alex. Given that the evidence is that Alex paid the deposit on the property and that he pays all of the maintenance and other associated costs, it is difficult not to agree with Mr Lountzis.

22. Nevertheless, the Secretary argued that by reason of the deeming provision set out in s 11A(10) of the Social Security Act, the burden of proving that Mr Lountzis’ interest did not give him reasonable security of tenure had not been displaced. However, as I have pointed out above, there is no burden of proof before the Tribunal. Mr Lountzis does have an evidentiary burden and the material before me, particularly the Trust Deed, discloses that Mr Lountzis holds his half share in the Bulla property as a bare trustee. The Trust Deed does not confer on Mr Lountzis any rights in the Bulla property other than the right to hold his half share in the property on behalf of Alex. Under the Trust Deed, Mr Lountzis has a duty to transfer his half share interest in the property to Alex whenever Alex decides that should happen. Therefore, it is not possible to say that Mr Lountzis’ half interest in the property gives him and or his partner reasonable security of tenure in the home.

23.     However, that is not the end of the matter.  Although the expression right or interest is not defined in the Social Security Act, a right or interest in the principal home has been held to be synonymous with a right or interest in real property (see Re Delos Reyes and Secretary, Department of Social Security (1993) 32 ALD 287 at 290). In that case, Deputy President Forrest also relied on the decision in Stow v Mineral Holdings (Australia) Pty Ltd (1977) 14 ALR 397 where Aickin J said, at 411: An interest in property is a right of a proprietary nature not a mere personal right.  The Tribunal in Re Johnston and Repatriation Commission (31 May 1994 AAT No 9508, unreported) agreed with the conclusions reached by Deputy President Forrest in Re Delos Reyes and said that the right or interest in the principal home must equate with the right or interest in real property.  The Tribunal went on to state, at paragraph 24:

We note that there are many “arrangements” relating to real property which may give rise to interests or rights in relation to that real property.  Some of those interests or rights may be legal and some equitable.  Some relate to the freehold estate and some to the leasehold.  Interests in real property include the freehold and leasehold estates as well as mortgages, rent charges and easements.  Some “arrangements” in relation to land do not confer a right or interest in the land but are matters of contract as, for example, a licence.

24.     There can be no doubt that an interest in real property may be legal or equitable.  Mr Ginnane of counsel, who appeared on behalf of the Secretary, submitted that Mr Lountzis’ occupation of the Bulla property resulted from the fact that he was a tenant at will.  A tenancy at will has been described by the authors of Australian Real Property Law (Bradbrook, MacCallum and Moore) Lawbook Company Limited 1991, as occurring where a tenant occupies the land as a tenant on the basis that either party may terminate the tenancy at any time.  There is no agreement as to duration, and usually, no agreement as to payment of rent.  The authors give an example of this arrangement as where a person, with the permission of the landlord, takes possession of a property rent free for an indefinite period.

25.     In a decision handed down after the hearing of this matter (Secretary, Department of Employment and Workplace Relations v Vanderpluym [2007] FCA 876), Greenwood J said that the first step is to identify whether the applicant (in relation to section 11(4)(b) of the Act) enjoys a right or interest in a residence that is a principal home. As was the case in Vanderpluym, Mr Lountzis and his wife appear to be tenants at will under an oral undocumented arrangement with their son Alex.

26.     Although no interest in land can be created or disposed of except in writing signed by the person creating or conveying that interest (s 53 Property Law Act 1958) (the Property Law Act)), all interests in land created by parole and not put in writing and signed by the person creating that interest have the force and effect of an interest at will (s 54 Property Law Act).

27.     Residential tenancies are regulated by the Residential Tenancies Act 1997 (the Residential Tenancies Act).  A dwelling for the purposes of the Residential Tenancies Act means any structure that is designed to be used for human habitation and that is capable of being so used.  The term rented premises means the premises let under the tenancy agreement.  A tenancy agreement means an agreement, whether or not in writing, and whether expressed or implied, under which a person lets premises as a residence. 

28. The Property Law Act and the Residential Tenancies Act create obligations on the landlord which are enforceable by remedial action. It follows that Mr Lountzis probably has enforceable rights as a tenant at will.

29. Greenwood J considered the notion of home ownership in the context of the Social Security Act in Vanderpluym. He said, at paragraph 58:

… The social policy of the Social Security Act is to adopt a broad notion of ‘homeowner’ by s 11(4)(b) so as to ensure that those applicants (or their partners) who have a right or interest in a residence which gives reasonable security of tenure in the home are to be treated as homeowners for the purposes of calculating assets value limits and thus pension entitlements. ……

30. Greenwood J also explained that s 11(4)(b) of the Social Security Act contemplates an interest which is either a legal or equitable interest. He said that reference to the term right also contemplates a class or species of right which may not necessarily involve a legal or equitable interest in the residence.  He continued;

…having regard to the objectives of the Social Security Act and the disjunctive reference, the term ‘right’ is not to be read in a way which is simply a synonym for ‘interest’ which comprehends a legal or equitable interest in the residence. …

In other words, something short of an interest in the principal residence, for example, a contract which gives rise to bare rights in respect of a residence which is the principal home of a person who is an applicant for a Social Security payment, will suffice.  Of course even such a limited right must give rise to reasonable security of tenure in the principal home.  As Greenwood J concluded in Vanderpluym;

…It is the conjunction of the character of the right or interest and the circumstances in which it arises that conveys an objective sense of whether the right or interest confers reasonable security of tenure in the home. …

CONCLUSION

31.     The arrangement entered into by Mr Lountzis and his son Alex is one where Alex has agreed that Mr Lountzis and his wife shall be the sole occupants of the Bulla premises.  In exchange for granting that right of exclusive occupation, Mr Lountzis has agreed that Alex and his wife may occupy the Niddrie property to the exclusion of others.  The duration of this agreement is unstated, although it has continued in existence since 2003.  Furthermore, it is likely to continue for some time into the future.  Alex’s evidence was that even if he and his wife decided to return to the Bulla property, it was likely that his parents would continue to reside there given the nature of the family ties. 

32. I am therefore of the opinion that Mr Lountzis’ occupation of the Bulla property under the arrangements with Alex does create an equitable interest in the residence. It has all the hallmarks of a tenancy at will. Even if I am wrong about that, and the agreement is merely contractual, I have no doubt that the right so created is one which does give Mr Lountzis and his wife reasonable security of tenure in the home. Therefore, Mr Lountzis is a homeowner for the purposes of the Social Security Act. The decision of the SSAT made on 31 October 2006 must be affirmed.

I certify that the thirty-two [32] preceding paragraphs are a true copy of the reasons for the decision herein of:

Mr Egon Fice, Member

Signed:  Ursula Noyé

Clerk

Date/s of Hearing  6 June 2007
Date of Decision  3 July 2007
Counsel for the Applicant            Mr N Doukas
Solicitor for the Applicant             Karavias & Associates
Counsel for the Respondent        Mr P Ginnane
Solicitor for the Respondent        Australian Government Solicitor