Rabski and Secretary, Department of Employment and Workplace Relations

[2006] AATA 679

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 679

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2006/23

GENERAL ADMINISTRATIVE DIVISION		)
Re		ELZBIETA HELENA RABSKI

Applicant

And SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Mr A Sweidan, Senior Member

Date3 August 2006

PlacePerth

Decision The Tribunal affirms the decision under review.

.......(Sgd A Sweidan)...........

Senior Member

CATCHWORDS

Social Security Act 1991 - Social Security (Administration) Act, 1999 - section 771HF - section 771HF (3) - section 11 (2) - Value of the "interest of the person" in an asset.

Cases

Hayes and Repatriation Commission [2006] AATA 201

Secretary, Department of Social Security and Langton (1993) AATA 9059

Re Grybas and Secretary, Department of Social Security (1991) AATA 7646

REASONS FOR DECISION

3 August 2006 Mr A Sweidan, Senior Member    

Background

1.      The applicant has appealed to the Tribunal against a decision of the Social Security Appeals Tribunal (“SSAT”) dated 16 January 2006.  The applicant did not attend the hearing before this Tribunal but was represented by Mr John Cochrane.  The respondent was represented by Mr Frank Nipperus, an advocate of the Centrelink Legal Services Branch.

2.      The SSAT decision upheld a decision made by a Centrelink officer on 7 October 2005 to cancel the applicant’s Partner Allowance which she had been receiving pursuant to the relevant provisions of the Social Security Act 1991. The SSAT also affirmed the decision of the Centrelink officer to reject a claim by the applicant for Partner Allowance under the hardship provisions contained in the Act.

3.      When this matter came before the Tribunal Mr Cochrane on behalf of the applicant informed the Tribunal that the claim under the hardship provisions would not be proceeded with, and accordingly, the Tribunal is only required to review the SSAT decision regarding the cancellation of the applicant’s Partner Allowance.

4. The Tribunal had before it “T” documents lodged by the respondent pursuant to the provisions of section 37 of the Administrative Appeals Tribunal Act. Neither the applicant nor the respondent placed any additional evidence before the Tribunal and accordingly the Tribunal’s review proceeded solely on the basis of the evidence contained in those documents, the decision of the SSAT as set out therein, and the submissions of the parties’ representatives.

Issues

5.      The sole issue before the Tribunal was whether the applicant is entitled to continue to receive Partner Allowance having regard to the application of the assets test provisions contained in section 771 HF(1) of the Act.  Under that provision the asset value limit for a person or a partner of a homeowner is $111,500 and the issue is therefore whether the applicant’s assets have a value in excess of this amount.

6.      Subsection 771 HF(3) of the Act  provides that the value of the assets that ought to be taken into account under the assets test is:

“the value of the person’s assets is taken to be fifty percent of the sum of the value of the assets of the person and the value of the assets of the person’s partner”.

Evidence

7.      The evidence before the SSAT was that the combined value of the assets of the applicant and her husband was $237,196 – being $230,000 for the house which they jointly own, $3,000 for the contents, $4,000 for a car and $196 in the bank.

8.      The substantial asset is the house in Quinn Avenue, Bentley owned by the applicant and her husband as joint tenants.

9.      Evidence of a licensed valuer regarding the value was placed before the SSAT in the form of a letter dated 5 January 2006 addressed to Mr John Cochrane from Mr Steven L Kish.  That letter is included in the T-documents at T50 on Page 168.

10.     Because of its importance to the decision of this matter I set out below in full the relevant parts of the letter from Mr Kish as follows:

“Dear John

RE:  Queens Park Property

Further to our telephone conversation, we have considered the definition within Section 11(2) of the Social Security Act, and advise as follows:

1.    It would be extremely difficult to sell a Joint tenancy half interest to another unrelated party without an comprehensive agreement in place given the following:

1.1No control of the asset i.e to on sell, or say to mortgage to purchase other assets etc.

1.2Survivorship upon one of the parties death. i.e. goes to the other party rather than the your own estate.

1.3No bank would ever lend on this basis, unless both parties are jointly and severable liable (and therefore an agreement would need to be put in place, which would probably be an unlikely Scenario given your client would not want to take on the other parties debt in case of default).

With respect to the second point, you are taking the punt you will survive the other party. (A bit like saying you will toss a coin for it, and winner takes all).

2.    We have been involved with valuing “Tenants in Common” interests which at least has the benefit of reverting to your estate upon your death, however, even in this case, without a comprehensive agreement in place to cover the ownership, sale, mortgaging etc. we generally discount the value in the order of 20-40% given the restrictions on ownership.

Therefore given the above, we would consider the half share interest as a joint tenancy should be discounted at the least in the order of 50%.  Given the appraisal provided to you, this would reflect a value of approximately $57,000 to $65,000 for the 50% interest of 2 joint tenancy owners.  Even then we believe it would be extremely difficult to source a buyer to purchase the Half Share.”

11.     Mr Kish in his letter refers to section 11(2) of the Act.  Section 11(2) states:

“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.”

12.     As will be noted from Mr Kish’s letter he is of the view that because the applicant owns the interest in the Quinn Avenue property as a joint tenant with her husband the value of her interest should discounted at least in the order of 50% and that on this basis the value of her interest in the property is approximately $57,500 up to $65,000 and Mr Cochrane contended that this is what the Tribunal should find.

13.       At the hearing before the SSAT it was also contended that the value of the applicant’s interest in the house should be net of certain liabilities incurred by the applicant for borrowings from her family and also net of selling costs.  However at the hearing before this Tribunal this argument was no longer relied upon by the applicant.

14.     The evidence before the SSAT showed that the applicant has been appointed as the Plenary Administrator of her husband’s estate.  As such she has full legal power to deal with her husband’s interest as a joint tenant in the Quinn Avenue property and accordingly has the legal power to effect a sale of the whole of the property or to borrow money on the security of the property on behalf of her husband and herself.

15.     Mr Cochrane on behalf of the applicant submitted at the hearing before the Tribunal that the SSAT had applied section 771 HF (3) incorrectly and that when regard is had to the provisions of section 11(2) of the Act the correct way for the applicant’s interest to be valued in order to establish the value of her assets is as follows:

(1)       Value the assets of the applicant.

(2)       Value the assets of the applicant’s partner.

(3)       Add those values together to get their sum; and

(4) .     Take 50% of their sum.

16.     The SSAT for purposes of determining the value of the applicant’s assets had regard to a value of $230,000 for the Quinn Avenue property, being the value of the whole of the property on the basis that, having regard to the fact that the applicant is Plenary Administrator of her husband’s estate she has the power to bring about a sale of the whole of the property or otherwise deal therewith. The value of the applicant’s other assets is not in issue.

17.     It will be noted from the letter of Mr Kish that the reasons that he gives for discounting the value of the applicant’s joint tenancy half interest in the property are:

1.1No control of the asset as a whole i.e. no ability to sell or to mortgage the asset as a whole.

1.2      The fact of survivorship upon the death of one of the tenants; and

1.3      That no bank would lend on the basis of a joint tenancy half interest.

18.     In the Tribunal’s view while it may well be the case that if the matter is looked at in a vacuum then a discount as put forward by Mr Kish should apply, the Tribunal cannot look at the matter in a vacuum.  The Tribunal must have regard to the circumstance that, Mrs Rabski, the applicant has the full power to deal with the whole property.

19.     Mr Cochrane contended that although Mrs Rabski has the power to deal with the property as a whole by reason of being the Plenary Administrator of her husband’s estate, nevertheless she is obliged to act in her husband’s best interests when dealing with his interest in the property, and as it may not necessarily be in her husband’s best interests to sell the property, therefore, the Tribunal should have no regard to the applicant’s powers as Plenary Administrator.

20.     In the Tribunal’s view this argument cannot be sustained.  The Tribunal must have regard to the admitted facts, namely, that the applicant does have the power to deal with the property.  Obviously in doing so she must not act against the best interests of her husband.  However if she were to decide in the exercise of her power as Plenary Administrator, acting in good faith, to effect a sale of the property and did so on the basis of obtaining the current market value for the property, then in the Tribunal’s view, she could not be said to have acted against her husband’s best interests and this is the only constraint upon the exercise of her power as Plenary Administrator.

21.     The Tribunal notes that on the basis of Mr Cochrane’s submission the value of the applicant’s assets and the value of the applicant’s partner’s assets would each be $65,000 (in relation to their interest in the house).  This obviously brings about a totally anomalous result when the property is admittedly worth $230,000, and in the Tribunal’s view the legislature could not have intended section 11(2) of the Act to be interpreted or applied in this way as it brings about an anomalous result, where the facts are as in this matter.

22.     In the Tribunal’s view the approach adopted by the SSAT was the correct approach, i.e. to have regard to the value of the property in Quinn Avenue as a whole without applying any discount for the fact that the applicant has a half interest as a joint tenant in the property as suggested by Mr Kish.  In the Tribunal’s view the approach suggested by Mr Kish leads to an artificial and an anomalous result in this instance because it does not take account of the applicant’s power to deal with the whole of the property either by selling or mortgaging the same.

23.     In the result the Tribunal affirms the decision under review. 

I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan, Senior Member

Signed:         ............(Sgd S da Motta)...........................
  Associate

Date/s of Hearing  23 June 2006
Date of Decision  3 August 2006
Counsel for the Applicant         Mr John Cochrane          
Counsel for the Respondent     Mr Frank Nipperus
Solicitor for the Respondent     Centrelink Legal Services Branch