Murphy and Secretary, Department of Families, Community Services and Indigenous Affairs
[2007] AATA 1947
•14 November 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1947
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W 200600411
GENERAL ADMINISTRATIVE DIVISION ) Re JOAN MURPHY Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr A Sweidan, Senior Member Date14 November 2007
PlacePerth
Decision The Tribunal affirms the decision under review.
.................[Sgd A Sweidan]....................
Senior Member
CATCHWORDS
SOCIAL SECURITY - Age Pension – assets test for homeowners – real estate subject to caveat – caveat registered after SSAT decision under review – whether the Administrative Appeals Tribunal can have regard to caveat – caveat does not reduce value of asset – merely a protective device – real estate not an unrealisable asset – hardship provisions do not apply
Inheritance (Family and Dependants Provision) Act 1972 (WA), s 7
Social Security Act 1991 (Cth), ss 11(12), 43, 55, 1064, 1064-G1, 1129 and 1130
Transfer of Land Act 1893 (WA), ss 137, 137(1), 138, and 138B
Avery and Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1523
Bevilaqua and Secretary, Department of Employment and Workplace Relations [2007] AATA 1602
Commissioner of Taxation v La Rosa [2002] FCA 1036
Finley and Secretary, Department of Family and Community Services [2005] AATA 18
J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1972) ALR 323
Murphy and Secretary, Department of Employment and Workplace Relations [2007] AATA 8
Radevski and Secretary, Department of Employment and Workplace Relations [2007] AATA 1061
Re Fuller and Repatriation Commission (1987) 14 ALD 220
Re Henry and Secretary, Department of Social Security [1986] No. V85/425 AAT No. 2739
Re Kirkman and Department of Social Security (1990) 20 ALD 400
Re Secretary, Department of Social Security and Ross Bodey Copping and Irma Copping No. G15 of 1987
Secretary, Department of Employment and Workplace Relations and House [2003] AATA 1273
Secretary, Department of Social Security and Winterbotham [1990] AATA 6499
Williamson and Repatriation Commission [1986] AATA 2731
REASONS FOR DECISION
14 November 2007 Mr A Sweidan, Senior Member Decision Under Review
1. The applicant Mrs Murphy seeks a review of a decision made by the Social Security Appeals Tribunal ("SSAT") on 28 November 2006, which affirmed the decision made by a Centrelink delegate on 4 August 2006, not to pay Age Pension ("AP") to Mrs Murphy under the financial hardship rules.
Issues
2. The issues for this Tribunal are:
a)Is Lot 734 Hamilton Rd, Denmark ("the Lot") owned by Mrs Murphy an unrealisable asset?
b)If so, should the financial hardship rules be applied to allow Mrs Murphy to be paid a higher rate of AP?
Background to the SSAT Decision of 28 November 2006
3. The SSAT had previously determined in a decision of 27 May 2005 that the Lot was an unrealisable asset.
4. The SSAT came to that decision on the basis set out in paragraph 5 below.
5. In relation to the valuation of the Lot, the SSAT accepted that while Mr Murphy was not happy with the approach of AVO when they undertook the valuation, and that there were some errors of fact in the valuation document, there was no contrary valuation supplied and Mr Murphy did not disagree with the valuation made in April 2005. The applicant contended that nothing had changed since the previous SSAT decision of 27 May 2005. The previous SSAT decision determined that the Lot was an unrealisable asset because it was not reasonable to expect Mrs Murphy to sell or borrow against it. This determination was made on the basis of several factors including the fact that her son farmed the Lot “in conjunction with his own farm” and that he was “not in a position to pay rent for the property due to encumbrances on his own farm”. The SSAT found in its decision of 28 November 2006 that while the other factors taken into account in its previous decision remain unchanged these two factors no longer existed and the SSAT therefore affirmed the delegate’s decision that the Lot is no longer an unrealisable asset.
Findings of Fact by SSAT
6. The SSAT made the following findings of fact which are not in dispute:
(a)Mrs Murphy is a homeowner who received age pension.
(b)Mrs Murphy owns the Lot which was valued at $225,000 by AVO in April 2005.
(c)Prior to 17 May 2006 the value of the Lot was disregarded under the financial hardship rules in calculating Mrs Murphy’s rate of age pension on the basis that it was an unrealisable asset.
(d)Prior to the sale of his farm Mrs Murphy’s son farmed the Lot in conjunction with his own farm as a joint enterprise and was not in a position to pay rent due to encumbrances on his own farm.
(e)Mrs Murphy’s son sold his farm on 18 July 2005.
SSAT’s Conclusion
7. The SSAT concluded that in light of the above after the sale of Mrs Murphy’s son’s farm it was reasonable to expect Mrs Murphy to sell or borrow against the Lot.
Background to the Decision of This Tribunal
8. The Lot had been previously valued at $90,000. The increase in the valuation in April 2005 led to Mrs Murphy’s pension payments being reduced.
9. On 14 December 2004 Mrs Murphy lodged an application to be paid under the financial hardship rules on the basis that the Lot is an unrealisable asset.
10. Centrelink rejected Mrs Murphy’s application on 17 January 2005 and a series of reviews were undertaken by Centrelink, culminating in a hearing by the SSAT on 27 May 2005.
11. At that hearing the SSAT set aside the Centrelink decision, based on the evidence provided by Mr Terrence Murphy, her son, ‘that his farm would not remain viable if he had to pay a lease amount for the Lot as he has mortgages over his other holdings. The Tribunal accepts this to be the case. The notional annual income from the unrealisable asset is therefore nil’.
12. When Mr Murphy sold his farm on 18 July 2005 he used the proceeds to repay the loans secured over his principal home and investment property. The investment property was sold a few months later.
13. Following an annual review of Mrs Murphy’s situation on 10 April 2006, Centrelink decided that the Lot could no longer be exempted from being included as part of her assets and raised a debt.
14. These decisions were reviewed by an Authorised Review Officer ("ARO") who affirmed the decision not to exempt the Lot from being included as part of Mrs Murphy’s assets.
15. The SSAT heard a further review application by Mrs Murphy on 28 November 2006 and affirmed the decision that the Lot was not an unrealisable asset because following the sale of her son’s farm, she could be reasonably expected to sell or borrow against it. This decision was based on the farm being farmed to its capacity, but not deriving an amount of income adequate to offset expenses, and that the Lot was no longer being run in conjunction with her son’s farm to supplement his income.
The Law and Further Relevant Facts as Determined by This Tribunal
16. The relevant legislation is the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999.
17. The respondent accepts that Mrs Murphy meets the age pension qualification criteria of section 43 of the Act.
18. Section 55 of the Act provides that the rate of age pension is to be calculated in accordance with the provisions set out in section 1064 of the Act. These provisions allow for a person’ maximum rate of pension to be reduced in accordance with the assets test (section 1064-G1 of the Act).
19. Section 1129 of the Act provides that a person’s pension rate can be considered under the financial hardship provisions if their rate of payment has been reduced under the assets test, they have made an application for consideration under the provision and they would suffer severe financial hardship if the provision did not apply to them.
20. Section 1130 of the Act provides that if section 1129 applies to a person, the value of any unrealisable asset of the person or of the person's partner is to be disregarded in working out the person's social security pension rate.
21. Section 11(12) of the Act says that the 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.
In addition if a person is a pensioner, 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.
22. In considering whether it is ‘reasonable’ to expect Mrs Murphy to sell or borrow against the Lot, the Tribunal has had regard to the Federal Court decision in Re: Secretary, Department Of Social Security And: Ross Bodey Copping And Irma Copping No. G15 Of 1987 and in particular the following comments;
I think that the word "reasonably", in the context which sub-section 6AD(3) supplies, directs the Secretary's attention to, inter alia, all the circumstances, including the personal relations of those concerned in the property, which in his judgment might reasonably be taken into account by "the person" or "the person's spouse", as the case may be, in deciding how the property was to be exploited to produce income. And he is required, in my opinion, to have regard to the annual rate of income that could reasonably be expected to be derived from, or produced with the use of, that property in all the circumstances, including those circumstances to which I have just referred. The construction suggested does not direct enquiry merely as to the annual rate of income likely in fact to be derived from, or produced with the use of, the property by "the person" or "the person's spouse", as the case may be, but rather enquiry as to what annual rate of income the Secretary, or the Administrative Appeals Tribunal on a review, considers would be likely to be derived from, or produced with the use of, the property by that person if that person made decisions concerning the exploitation of the property which in all the circumstances, including personal circumstances, the Secretary, or the Tribunal on review, considered reasonable.
23. The applicant contends that the Lot cannot be sold or borrowed against, because of conditions claimed to have been placed on it by the original settlers that it should never be sold or mortgaged and should be handed down to the eldest son in each generation.
24. In support of this the applicant provided Statutory Declarations made by Mrs Murphy’s two daughters. The daughters state that it was their grandfather’s (Joseph Thornton) wish, “on a piece of paper written in approximately 1962”, that the Lot was to be left to their mother, was never to be mortgaged or sold and was to be handed down to the eldest son in each generation. They both state that this has always been a verbal understanding in the family.
25. Neither Mr Thornton’s will nor “the piece of paper” have been provided by the applicant. The Record of Certificate of Title and copies of the land transfer, showing firstly the transfer to Mr Norman Thornton (Mrs Murphy’s brother and Mr Joseph Thornton’s son) and then the transfer to Mrs Murphy were provided.
26. The Tribunal has further had regard to the case of Williamson and Repatriation Commission (1986) Administrative Appeals Tribunal - AATA 2731, in which the Tribunal said at paragraph 6:
In our opinion, in the application of the income and assets tests, it is necessary to have regard to the special circumstances which confront families whose livelihood is dependent upon farming or grazing. Whatever may be the formal arrangements between parents and their children, it is common that and expected that farming properties will be passed from parent to son and from son to grandson. Frequently, this must be achieved without there being any financial benefit to the parent arising from the disposition of the farm to the younger generation. Of necessity, the younger generation will often not have the financial resources required to purchase the property from the parent. The property must pass by will or by gift or through a trust structure or on a sale involving an exchange of cheques. We think that these means of passing on farm properties from one generation to another should not be discouraged. We would regard it generally as unreasonable that viable farm properties that are required for the support of one generation should be broken up by sale simply because of the older generation's need for support. It is of no overall benefit to Australia to discourage the concern which families have in maintaining and working farm properties and in passing those properties from generation to generation.
7. In the present instance, we think it would be unreasonable to require Mr Albert Williamson to sell the farm properties and thus to destroy the livelihood which his son Paul has. It would be particularly unreasonable to do so at the present time because of the step which Mr Paul Williamson has taken to improve the profitability of the farm by purchasing the additional 287 acres. As a result of a subsequent unexpected fall in the profitability of the farm and an unexpected rise in interest rates, the sale of the properties would, at the present time, result in a substantial financial loss both to Mr Albert Williamson and to Paul. But we do not turn our decision in this matter upon their special circumstances. In principle, we think that the special position of farming and grazing families ought to be taken into account and that it is generally unreasonable to expect parents to sell a farm when that farm is suitable for and required and used for the support of a child or children.
27. The applicant’s son is apparently currently farming the Lot to its capacity, but acknowledges that it is not his main source of income. His main source of income is his Disability Support Pension payments.
28. In the Tribunal’s view the Murphys' situation, prior to the sale of Mr Murphy’s farm, was similar to that of the Williamson case. However following the sale of Mr Murphy’s farm the position has changed and it is clear that the Lot is not used for the substantial support of Mr Murphy and consequently the Tribunal is of the view that Mrs Murphy could be reasonably expected to sell or borrow against the Lot.
29. It is relevant to compare the Murphy family circumstances to those referred to in the Guide to Social Security Law. Chapter 4.6.7.50 sets out the situations in which Centrelink can accept that a person cannot be reasonably expected to sell an asset. It states that it would be unreasonable to expect a person to sell an asset if:
the asset is a property AND the customer has lived there for at least 20 years AND the property cannot be subdivided to allow the customer to retain the portion their home is on, OR
the asset is a farm AND the customer has been a farmer for at least 20 years (not necessarily on this farm) AND the customer is working the farm AND they could not sell some of the land without affecting the viability of the farm and/or significantly affecting their income from the farm (see exception), OR
the asset is a farm AND a family member (section 23(14)) is working the farm to capacity AND has been working the farm for at least ten years (a slightly shorter period can be accepted if the family member has worked the property continuously since leaving school) AND the farm is the main source of the family member's livelihood (see explanation and example), OR
the asset is a farm or some other business AND there is a temporary but substantial reduction in income from the business due to factors outside the customer's control, OR
the asset is a house occupied by a near relative AND the near relative has lived in the house for at least 10 years OR the near relative has previously provided care for the customer in the house (which was formerly the customer's home) OR the near relative is a handicapped son or daughter and the customer is providing the house to promote the child's independent living OR the near relative has dependent children and the family income of the near relative does not exceed the FTB income ceiling.
30. The applicant also claims that the Lot is impossible to sell as it is in a future water catchment area and may be flooded by the Water Corporation.
31. However the evidence is that the valuer from the AVO spoke to Mr Murphy about this on 11 February 2005. Mr Murphy confirmed that it was likely that compensation would be paid if the Lot formed part of a new dam.
32. In addition the evidence shows that the ARO contacted Denmark Council on 31 March 2005 and was informed that any action in regard to a possible dam could be 20 years away.
33. The Tribunal notes that the applicant has not provided any evidence that the Lot has been offered for sale or lease. On the contrary, no attempt has been made to sell or lease the Lot.
34. The Murphy family claims a 40 year association with the Lot and it is Mrs Murphy’s desire that the property passes to her son on her death. However the Tribunal finds that the Lot is not an unrealisable asset as per section 11 of the Act and therefore the provisions set out in section 1130 of the Act do not apply in Mrs Murphy’s case.
35. At the hearing on 6 June 2007 the applicant was represented by her son, Mr Terrence Murphy who also gave evidence. Mr Murphy contended, among other things, that his mother is in financial hardship as the Lot is his by inheritance and cannot be sold or leased that he now has a caveat over the property.
36. A copy of a caveat (Exhibit A2) and attached Statutory Declaration in support of the caveat (Exhibit A1), dated 29 May 2007, were presented to the Tribunal and by Mr Murhpy.
37. In cross examination Mr Murphy confirmed that the facts set out in T18: pp. 93-94 of the SSAT decision dated 27 May 2005 were correct, in particular:
·'The value of $225,000 was about the right value as prices of hobby farms.... ....a lease amount of $3,000 per annum could be a reasonable figure...
·He could never afford to borrow that sort of money to buy the property from his mother and it was not viable to pay $3,000 per year to lease it.
·He purchased a larger farm in 1980 on which he runs beef cattle and grows hay but he needs to use Lot 734 for cattle grazing as well to help pay the mortgage on his own farm. He runs both properties as a joint enterprise
·He described Lot 734 as a hobby farm because it is too small on its own to be a viable property.
·It was not reasonable to expect the property to be sold or to expect him to pay rent for the property to his mother as this would place him in a difficult financial position – his farming business only remains viable because of his access to the unencumbered property.'
38. The Tribunal notes that within six weeks of the dispatch of the earlier SSAT decision of 22 May 2005 Mr Murphy sold his farm and received $570,000 for it. After paying off his liabilities including the encumbrances on his investment property, he was left with a net balance of $70,125.44.
39. Mr Murphy than sold his investment property at Dunsky Rd for $245,000 in November 2005.
40. It appears that following the sale of his farm Mr Murphy had approximately $315,125.44 ($70,125.44 + $245,000) available funds which was well in excess of the $225,000 value of the Lot. In essence Mr Murphy was financially able to make an offer to purchase the Lot. His response to this is that “the Lot is not for sale”.
41. The Tribunal also notes the AAT decision of Diane Murphy and S,DEWR [2007] AATA 8 ("the 2007 Murphy case"). In that case Mr Murphy declared that on 21 July 2005 he and his wife deposited $38,000 into their Home Building Society account (at 23), and confirmed 'that $3,000 was deposited into the superannuation fund in April 2007' (at 20).
42. It is clear that Mr Murphy was therefore in a financial position to purchase or lease the Lot from his mother, but chose to deposit the money in his superannuation fund or bank account.
43. As noted above Mr Murphy confirmed in his evidence to the SSAT that the Lot was '...a hobby farm because it is too small on its own to be a viable property' [T18: pg. 93: par. 7].
44. In the 2007 Murphy case Senior Member Ettinger also noted that Mr Murphy's farm had been sold, that Dunskey Place was a rental property, and found 'that Mr and Mrs Murphy [wife] cannot be held to have been engaged in primary production in relation to Dunskey Place, and neither once the farm had been sold' (at 22).
45. The Tribunal is of the view that apart from the fact that Mr Murphy is occupying the Lot for the operation of a hobby farm, there is no reason why the property could not be leased or sold to him or another.
46. It is also clear that there is also no imminent threat that the land will be resumed by the Water Corporation and that if it was, Mrs Murphy would be compensated [T17: pg. 81].
47. The AAT and Federal Court have considered the issue of financial hardship relating to rural property in other cases eg (Re Fuller and Repatriation Commission (1987) 14 ALD 220, Re Henry and SDSS (1986) No. V85/425 AAT No. 2739, Williamson and Repatriation Commission (1986) AATA 2731 and Federal Court case Re: Secretary, Department of Social Security And: Ross Bodey Copping And Irma Copping No. G15 Of 1987. In the Tribunal’s view these cases suggest that one or both of the following propositions should be satisfied:
i)It is unreasonable to require a person to sell the farm if it destroys their livelihood (see Williamson and Repatriation Commission (1986) AATA 2731 and Federal Court case Re: Secretary, Department of Social Security And: Ross Bodey Copping And Irma Copping No. G15 Of 1987).
ii)The younger generation will often not have the financial resources required to purchase, lease or rent the property from the parents (Ref. Re Fuller and Repatriation Commission (1987) 14 ALD 220 and Re Henry and SDSS (1986) No. V85/425 AAT No. 2739).
48. The Tribunal finds that neither of these instances apply in Mrs Murphy's situation. The hobby farm on the Lot is not the Murphy's main source of income or their livelihood. Mrs Murphy's main source of income is her Age Pension and her son, Mr Murphy, is receiving Disability Support Pension payments.
49. Mrs Murphy has chosen to allow her son to use the Lot as a hobby farm which does not produce any assessable income. In the Tribunal’s view the evidence shows that Mr Murphy could afford to lease the property or buy the property from his mother or it could be sold or leased to a third party and thereby relieve her of any financial hardship. In the Tribunal’s view it is not unreasonable to consider that where a person can realise an asset they should do so.
50. Another method of realising property is to use it as security for borrowing. It is not uncommon for people to borrow or live off the equity of their assets, by way of so-called “reverse mortgages”.
Caveat
51. As noted above, Mr Murphy is claiming a hereditary interest on the Lot, and has lodged a caveat on the title since the SSAT hearing.
AAT’s Further Directions
52. On 17 September 2007 the Tribunal directed the parties to file post-hearing submissions on the following issues:
(a)Can the Tribunal take into account matters which arose after the SSAT decision of 28 November 2006?
(b)If so, does Mr Murphy's Statutory Declaration (Exhibit A1) show a caveatable interest in Lot 734 owned by Mrs Murphy? and
(c)If so, is Lot 734 an unrealisable asset for the purpose of s11 of the Social Security Act 1991 ('the Act")?
Tribunal’s Further Findings in Relation to Caveat
53. The matter before the Tribunal is a de novo (a new) merit review of an administrative decision to pay Mrs Murphy a reduced rate of AP because she failed to satisfy the financial hardship rules.
54. A matter heard de novo is heard over again from the beginning. Pursuant to s 33(1)(c) of the Administrative Appeals Tribunal Act 1975 the Tribunal is not bound by the rules of evidence and 'stands in the shoes' of the original decision maker. The Tribunal is therefore not confined to the evidence or materials that were presented in the original SSAT hearing (Radevski and S,DEWR [2007] AATA 1061).
55. However, in determining what weight the evidence has, the Tribunal must determine the probative value of the information presented (Commissioner of Taxation v La Rosa [2002] FCA 1036).
56. In SDEWR and House [2003] AATA 1273 the Tribunal noted that:
'....The powers of the Tribunal are prescribed by statute and it may only review those decisions in relation to which it has been given jurisdiction. The hearing is a hearing de novo and in reviewing a decision the Tribunal exercises all the powers of the original decision-maker (section 43(1) of the Administrative Appeals Tribunal Act 1975 ("the AAT Act")). The Tribunal is able to access within reason whatever information is necessary to fully inform itself and so carry out its role. In particular the Tribunal is not bound by the rules of evidence (section 33 of the AAT Act). The Tribunal considers that its pre-eminent responsibility in the matter before it is to ascertain whether or not the respondent was, or was not, entitled to receive AP...' (at 31).
57. While the Tribunal has admitted the exhibits relating to the caveat into evidence, the Tribunal is of the view that they do not provide any additional value or weight to the applicant’s case, as the authorities referred to below show that a caveat is merely a protective device indicating the caveator's alleged interest over a property. Mr Murphy did not have to prove his claim at the time of lodgement of the caveat and it has no more evidentiary value than testimony presented by Mr Murphy.
58. The purpose of Mr Murphy's statutory declaration was to provide support for the lodgement of a caveat (ref s137(1) of the Transfer of Land Act 1893 (WA) "the Land Act")).
59. The 'Butterworths Australian Legal Dictionary' (1997) of Reed International Books states that a caveatable interest in real property must be:
'An interest in Torrens title land that is capable of supporting a caveat. The interest must be in the land itself, not a mere contractual arrangement with or other claim against the owner of the land or an executory interest in land that would not support a decree of specific performance or other equitable interest. Examples of caveatable interests are: equitable leases or mortgages; the interest of a purchaser under a binding contract to purchase land; a claim to an interest in the proceeds of sale where land is held under a trust for sale; the benefit of an easement or a restrictive covenant that runs with the land; and a profit à prendre. Claims that do not support a caveat include the interest of a creditor under a judgment debt, the right of a liquidator to apply to a court for an order vesting land in him or her, and a claim by a transferee under an imperfect gift' (pg. 174).
60. Sections 137 and 138 of the Transfer of Land Act 1893 (“TLA”) set out the requirements to lodge a caveat and the consequences. It is noted that a caveator does not have to prove his claim at the time of lodgement of his caveat; it is enough, at that time, that it be alleged.
61. Subsection 138B of the TLA provides that the registered proprietor may apply for the caveator to take action (i.e. lodge an injunction in the Supreme Court), or the caveat would lapse 21 days after the day the notice is served.
62. The issue of caveats lodged over properties in relation to social security law has been considered by the Courts and the Tribunal, refer to - Re: Kirkman and DSS (1990) 20 ALD 400, Finley and SDFACS [2005] AATA 18, Bevilaqua and S,DEWR [2007] AATA 1602 and Avery and SDFACSIA [2007] AATA 1523.
63. In Re: Kirkman and SDSS (1990) 20 ALD 400 the Tribunal held that a caveat lodged to protect an interest pending a family law settlement was not a charge or encumbrance within the meaning of the equivalent s 4(1)(b) of the 1947 Act.
64. The Tribunal noted that:
'16. The term "caveat" is not defined in the Western Australian Transfer of Land Act but part V deals with the lodgement of a caveat and its effects....
17. The provisions of the Transfer of Land Act 1915 (as amended) were considered in Butler v. Fairclough (1967) 23 CLR 78. They are very similar to those in the Western Australian legislation. Griffith C.J. said:
"The effect of these provisions is not to enlarge or add to the existing proprietary rights of the caveator upon which the caveat is founded, but to protect those rights, if he has any. In the case of a caveat lodged by a beneficiary or equitable interest in the land without giving him an opportunity of invoking the assistance of the Court to give effect to that interest."
19. A caveat is simply a protective device allowing the caveator an opportunity to take other action to establish his interest. It does not of itself create a "right to payment" (see paragraph 12 above) in the sense of a charge or a claim or demand in the sense of an encumbrance (see paragraphs 13-15 above) but merely holds the status quo as it were while the caveator takes, expeditiously, other steps to protect his interests.
20. Understandably, Mr Kirkman feels that his hands are tied and that he cannot dispose of his house and his unit while the caveats exist and the property settlement in the matrimonial proceedings between himself and his wife remains unresolved. Whether or not he would be able to have these caveats lifted is a matter that is outside the scope of these proceedings.
65. In Avery and SDFACSIA [2007] AATA 1523 the applicant, Mr Avery, had his claim for Age Pension rejected due to his and his partner’s combined assets exceeding the pension cut off limit. Assets include two property lots valued at $875,000 which were held as partial security over a debt of $720,000. Mr Avery declared bankruptcy in 2005 and his bankruptcy trustee placed caveats on the two properties to protect the interests of creditors. The Tribunal followed Deputy President Forgie's reasoning in Kirkman and SDSS that, unlike an ‘encumbrance’ that covers “all prior estates, interests, rights, claims and demands which can or may be set up into or upon or in respect of land", a caveat is simply a protective device.
66. The main function of a caveat is protective. It is 'simply a claim by someone that he shall receive notice before any dealing with land is carried through' (see High Court decision of J & H Just (Holdings) Pty Ltd v Bank of New South Wales [1972] ALR 323).
67. In Finley and SDFACS [2005] AATA 18, the Applicant was in receipt of a reduced rate of Age Pension due to a property, valued at $300,000, which she and her husband inherited from her mother and which placed Ms Finley over the allowable asset limit. Ms Finley argued that the property was an unrealisable asset because of a caveat placed by her sister and other factors related to selling it in the current market.
68. The Tribunal noted that:
'17. As the caveat on the Charles Street property is not an encumbrance which prevents the sale of the property and does not of itself create a right to any payment to the caveator, it is not a charge or encumbrance the value of which can be deducted from the value of the property. This means that the whole of the value of the property must be attributed to Mrs Finley. As it is entirely within Mrs Finley’s power to deal with the property and to either request the Registrar General to remove the caveat or to come to a formal arrangement with her sister, I do not find that Mrs Finley is the owner of an unrealisable asset as contemplated under section 1129(1)(c)....' [emphasis added].
69. As noted in the above cases, the Tribunal has previously considered that it may consider whether a claimed caveatable interest is real and can be acted on, or whether there is no caveatable interest. The issue is whether an applicant has the ability to realise an asset, and until such time as it is tested the 'status quo' should continue.
70. The Tribunal finds that a caveat is not an encumbrance and a statutory declaration does not of itself establish an equitable interest in the property
71. The Tribunal also finds that the financial hardship claimed to be suffered by Mrs Murphy in relation to selling or leasing the Lot is similar to that in the Finley case, in which the Tribunal found that:
'The financial hardship she is suffering at the moment is the result of her lack of action about the Charles Street property. It is entirely attributable to her failure to attempt to dispose of the property or to reach some other resolution of the problem it poses in respect to her assets test for the pension. As this problem rests in her own hands, it is not appropriate for the Tribunal to take note of any financial hardship which has resulted to Mrs Finley' (at 17).
72. As noted in the Kirkman case, whether or not Mrs Murphy could have the caveat lifted or whether Mr Murphy has a legitimate interest, is a matter that is outside the scope of these proceedings. As to whether the Statutory Declaration shows a caveatable interest by Mr Murphy in the Lot, the Tribunal is of the view that it does not.
73. Mr Murphy states that he has a beneficial interest in the property through working the land and making capital improvements. The area Mr Murphy is laying claim to is the whole of the Lot.
74. It is, however, not uncommon for children to assist parents in farming their land. Mr Murphy has claimed that since his father died he farmed the land in conjunction and in support of his own farming business, at no financial gain to his mother.
75. As stated by Mr Murphy in the SSAT he gained an advantage from using the land as he ran both farms as a joint enterprise and needed 'Lot 734 for grazing as well to help pay his mortgage on his own farm' and 'his farming business only remained viable to the access of the unencumbered property' [T18: pp. 93-94].
76. Capital improvements and erection of fences of livestock farms could well be regarded as part of Mr Murphy's business venture and as it was of a commercial nature could be considered in themselves payment or services in kind, or in lieu of the payment of rental for the Lot.
77. Mr Murphy has also claimed an interest in the Lot by way of succession on the death of his mother.
78. The SSAT noted in the decision of 28 November 2006 that: 'The dispersal of the property was done in accordance with English custom; it was expected that properties would be passed onto the son' [T18: pg. 92] and the Lot 'is willed to him' [T2: pg. 7].
79. Mr Murphy presented statutory declarations by his sisters Mrs Burton and Mrs Douglas. The Tribunal finds that as Mrs Murphy, Mrs Burton and Mrs Douglas were not present at the hearing to give evidence and be cross examined to support this allegation, little weight should be given to their declarations.
80. When asked whether the Lot was actually bequeathed to Mr Murphy at the directions hearing on 17 September 2007 Mr Murphy stated that it was a “held belief” that the property would be passed on to the "eldest son", i.e. himself.
81. However the Tribunal notes that the alleged right of succession and retention of the land by the eldest son did not occur when Mrs Murphy came into possession of the property from her brother [T16: 74-75]. The Tribunal finds that Mr Murphy has not proved any legal or equitable rights, whether real or perceived, over the Lot and therefore has no caveatable interest that can be realised.
82. Even if the Tribunal were to accept that Mr Murphy has an interest or right to his mother's property, this would only arise on the death of his mother. Although caveats can be lodged at any time prior to probate being granted to any person having a relevant interest in the deceased estate, it still does not prevent claims against the estate by persons entitled to claim (s7 of Inheritance (Family and Dependants Provision) Act 1972) (WA).
83. The Tribunal finds that the lodgement of the caveat and statutory declaration does not of itself give Mr Murphy any rights of proprietorship over the Lot, nor does it prove any caveatable interest or make the Lot an unrealisable asset.
84. The Tribunal finds that the Lot is able to be realised by Mrs Murphy.
85. In the Tribunal’s view it is clear that Mrs Murphy can realise the farm through a lease, borrowing against the equity or the sale of the farm. The fact that she allows her son to occupy the property for his hobby farm and chooses not to claim rent from him or lease it to another, does not mean she cannot realise the asset, but rather that she chooses not to realise it .
86. The Tribunal rejects Mr Murphy's claim of a “patrimonial right of succession”. It is clear that Mrs Murphy is the legal owner of the Lot, and has the legal right to realise this asset or dispose of it by will.
87. The Tribunal notes that in SDSS and Winterbotham (1990) AATA 6499 it was held that “the Tribunal must take that [assets] into account in deciding whether the respondent is in a position of exceptional financial hardship. While the respondent has assets of such value he can never be so regarded. Should there be any difference between one who invests his money in stocks and shares and one who invests in real estate? Neither should expect the taxpayer to support him while he holds on to assets he could well realise and use to support himself.” Those comments reflect the Tribunal’s views in this case.
DECISION
88. The Social Security Appeals Tribunal (SSAT) decision, dated 28 November 2006 is affirmed.
I certify that the eighty eight [88] preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Sweidan.
Signed: .........................[R Riberi].............................
AssociateDate of Hearing 6 June 2007
Date of Final Submissions 11 October 2007
Date of Decision 14 November 2007
Representative for the Applicant Mr T W Murphy
Counsel for the Respondent Mr A Holt
Solicitor for the Respondent Legal Services Branch, Centrelink
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