Singh and Secretary, Department of Social Services (Social services second review)

Singh and Secretary, Department of Social Services (Social services second review) [2017] AATA 2163 (10 November 2017)
Division:GENERAL DIVISION
File Number: 2017/0115
Re:Surila Singh
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Deputy President J Sosso
Date:10 November 2017
Place:Brisbane

The decision under review is set aside and the matter is remitted to the Respondent to recalculate the Applicant’s eligibility for the sickness allowance on the basis of the asset values determined by the Tribunal.
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Deputy President J Sosso
CATCHWORDS
SOCIAL SECURITY – Sickness allowance – asset calculation – decision set aside and remitted
LEGISLATION
Social Security Act 1991 ss 611, 666, 680, 1118, 1121.
CASES
Re Secretary, Department of Employment and Workplace Relations and Huntly (2007) 96 ALD 780
Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355
SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Deputy President J Sosso
10 November 2017
INTRODUCTION

Mrs Surila Singh (the Applicant) seeks a review of a decision of the Social Services and Child Support Division of this Tribunal (AAT1) of 12 December 2016 which affirmed a decision by the Department of Human Services (Centrelink) to reject the Applicant’s claim for sickness allowance on the basis of excess assets.
On 3 March 2016 the Applicant lodged a claim for sickness allowance.
Section 666 of the Social Security Act 1991 (the Act) prescribes the basic qualifications for the sickness allowance. Subsection (1) sets out the following qualifications for receiving sickness allowance:
(a)the person is incapacitated for work or study throughout the period because of sickness or an accident; and
(b)the incapacity is caused wholly or virtually wholly by a medical condition arising from the sickness or accident; and
(c)the incapacity is, or is likely to be, of a temporary nature; and
(ca) one of the following applies:
(i)immediately before the incapacity occurred the person was in employment (whether the person was self-employed, or was employed by another person, on a full-time, part-time, casual or temporary basis) and the Secretary is satisfied that, when the incapacity ends, the employment will be again available to the person (whether or not the same kind of work will be available);
(ii)immediately before the incapacity occurred the person was in full-time education and was receiving payments under the ABSTUDY scheme and the Secretary is satisfied that the person is committed to resuming full-time study under that scheme when the incapacity ends;
(iii)immediately before the incapacity occurred the person was undertaking qualifying study and receiving austudy payment, and the Secretary is satisfied that the person is committed to resuming qualifying study when the incapacity ends; and
(e)before the period begins the person has turned 22; and
(f)before the period ends the person has not turned, or is not likely to turn, the pension age; and
(g)throughout the period, the person:
(i)is an Australian resident; or
(ii)Is exempt from the residence requirement within the meaning of subsection 7(7).
It is not contended that the Applicant fails to meet the basic qualifications for receiving the sickness allowance as prescribed by s 666.
Subsection 680(1) of the Act provides that a sickness allowance is not payable to a person if the value of the person’s assets is more than the person’s assets value limit. Subsection 680(3) provides how the assets value limit is calculated by reference to a Table.
In the Secretary’s Statement of Issues, Facts and Contentions (SSIFC) at para 19 and in Member White’s decision at AAT1 (Exhibit 1 T2 p.9 para 8) reference is made to s 611 as the applicable section which prescribes the asset test for sickness allowance. Section 611 does prescribe an assets test, but it is for the newstart allowance and not the sickness allowance. However, the principles applicable to the assets test for the newstart allowance are broadly similar to those prescribed for the sickness allowance.
Subsection 1118 prescribes certain assets which are to be disregarded in calculating the value of a person’s assets. Pursuant to subsection 1118(1)(b) when calculating the value of a person’s assets, and that person is a member of a couple, the following is disregarded:
“the value of any right or interest of the person in one residence that is the principal home of the person, of the person’s partner or of both of them that is a right or interest that gives the person or the person’s partner reasonable security of tenure in the home.”
In addition, s 1121(1) provides that where there is a charge or encumbrance over a person’s asset, the value of the asset is to be reduced by the value of the charge or encumbrance.
However, s 1121 prescribes certain exceptions to this general rule. Of importance in this matter, s 1121(3) and (4) provide that where a charge or encumbrance is secured against both an assessable asset and an exempt asset (i.e. the principal home), the amount of the outstanding charge or encumbrance is shared between the assets in proportion to the asset values. The formula for calculating this principle is set out in s 1121(4).
The formula is the value of the charge or encumbrance multiplied by the value of the other assets divided by the value of all assets.
On 5 April 2016 Centrelink rejected the Applicant’s claim because of excess assets. At that time the asset ceiling for partnered homeowners was $286,500.
The Applicant is married to Mr Ravendra Singh – Exhibit 1 T5 p. 31. The Applicant and Mr Singh own, in addition to their principal place of residence at Forest Lake, two rental properties. The first is in North Booval and the other is a unit in the Brisbane CBD.
In documentation lodged with Centrelink in March 2016 the Applicant estimated the then market value of the three properties at $550,000, $450,000 and $400,000 respectively – Exhibit 1 T8 p.58, T6 p.46 and T7 p.52.
The North Booval property was purchased in November 2010 for $447,000 (Exhibit 1 T6 p.45) and the Brisbane CBD unit in March 2008 for $396,000 (Exhibit 1 T7 p.51).
The Applicant and Mr Singh took out loans with Westpac to purchase the rental properties. The properties are secured against themselves, and the Applicant and Mr Singh also used their principal home as collateral security – Exhibit 1 T 9 pp.75 – 130.
When Centrelink rejected the Applicant’s claim it applied the formula contained in s 1121(4) to the three properties.
First, the market value of the Applicant’s principal place of residence was estimated by the Applicant at $550,000 on 9 March 2016. The outstanding amount of the loans taken out with Westpac at that time, including the Westpac Home Loan ($132,036.02 – Exhibit 1 T9 p. 136) and the Westpac Rocket Investment Loan ($300,705 – Exhibit 1 T9 p. 134) amounted to $432,741. The residual value of the Applicant’s principal home at Forest Lake was, therefore, $117, 259 – SSFIC para 23.
During the hearing the Tribunal was provided with a desktop valuation of the Forest Lake property - Exhibit 6. The valuation was undertaken on 24 September 2017 by MVS Valuers Australia Pty Ltd for the Respondent. The indicative valuation of the property as at 3 March 2016 was $550,000. In reaching this conclusion a comparison was made with the sales history of four properties in the vicinity in the period August 2015 to January 2016. This valuation is consistent with the Applicant’s estimate. The Applicant, through her husband, disputed this valuation. This difference will be dealt with in detail below.
Second, the Brisbane CBD unit had an outstanding loan balance of $95,600 as at 29 January 2016 – Exhibit 1 T9 p.130. While the Applicant valued the unit at $396,000, the Respondent provided the Tribunal with an independent valuation as at July 2016 of $350,000 – Exhibit 1 T13 p.170. Using the formula: $95,600 x $350,000 divided by $467,259 (i.e. the market value of the CBD unit plus the residual value of the principal home), results in a figure of $71,609.10 which is subtracted from the market value of the CBD unit to determine a residual value of $278,390.90.
Third the market value of the North Booval property was estimated by the Applicant to be $450,000. The Respondent obtained an independent valuation of the property. The valuer estimated a market value in June 2016 of $289,000 – Exhibit 1 T 12 p.159. The Respondent has proceeded on this assumption, which is $160,000 less than the estimate of the Applicant.
The outstanding balance of the loan secured against the North Booval property and the Applicant’s principal home was $448,807. When that figure is multiplied by the market value of the property ($289,000) and divided by the sum of the value of the North Booval property and the residual value of the Applicant’s home ($406,259) it equates to $319,267. When the market value of property ($289,000) is deducted from it, there is a negative value of $30,267. Importantly, the Respondent contends that in these circumstances the residual value of the property is nil – SSIFC para 24.
Consequently, the Respondent contends that the total value of the Applicant’s rental properties was $278,390.90 as at 3 March 2016 – SSFIC para 25. While this is less than the assets value limit of $286,500, the Respondent correctly highlights that the value of the Applicant’s other assets, including her combined personal effects, household contents, vehicles and cash, must be equal or less than $8109.10 as at 3 March 2016 in order to remain under the assets limit.
Subsection 1118(3) of the Act provides:
“(3) For the purposes of this section, if:
(a) the value of any assets of a person or, if the person is a member of a couple, of the person and the person’s partner, that consists of the contents of a principal home and of other personal effects that are used primarily within the principal home does not exceed $10,000; and
(b) the assets are used primarily for private or domestic purposes;
the value of the assets is to be taken to be $10,000 unless the person satisfies the Secretary that the value of the assets is less than $10,000.”
The Respondent drew the Tribunal’s attention to Instruction 4.6.5.10 of The Guide to Social Security Law which states that if a person advises that the net market value of their personal effects and household contents is less than $10,000 Centrelink should accept that assessment unless there are very strong indications to suggest that the value is significantly understated – SSIFC para 27.
In March 2016, the Applicant estimated that the market value of her and her partner’s household contents was $20,000 – SSIFC paras 13, 28. The Applicant estimated the market value of a 2011 Toyota Yaris as $8000 and financial investments as $701, with a combined total market value of $28,701 – SSIFC para 28.
However, the Applicant’s updated market value of the above assets at 16 September 2016 was far less. The estimated value of household contents was reduced to $2500 and the value of the Toyota Yaris was reduced to $2000. The Applicant included in the updated valuation a SsangYong Kyron valued at $2000 but the value of financial investments was reduced to $178.26. The updated estimated overall market value was $6678.26, which was more than $20,000 less than the estimated market value of the combined items in March 2016 – SSIFC paras 13, 28.
The Respondent correctly contends that if the Tribunal accepts the original valuation of household contents, cars and savings of March 2016, then the Applicant’s combined assets would amount to $307,092.90, which exceeds the asset value limit by $20,592.90 – SSIFC para 29.
The Respondent also contends, and the Tribunal accepts, that if the notional $10,000 value is assigned to the Applicant’s household contents, motor vehicles and savings, it would amount to $288,391,90, or $1891.90 over the assets value limit – SSIFC para 30.
Finally, if the Tribunal accepts the Applicant’s amended valuations as at 16 September 2016, the combined value of the Applicant’s assets would be $285,070.16, which would be $1429.84 under the assets value limit.
Member White at AAT1 proceeded on the basis of the estimated market value of the three properties as provided by the Applicant when she first claimed the sickness allowance. Accordingly, he concluded that the combined residual value of the Brisbane CBD and North Booval properties was $405,896. As this figure was far in excess of the assets value limit, Member White did not deal with the dispute over the value of the Applicant’s household contents and motor vehicles – Exhibit 1 T2 p. 11 paras 15 – 18.
This matter was heard in Brisbane on 27 September 2017. The Applicant appeared in person and gave evidence. She was assisted by her husband who made representations on her behalf. The Respondent was represented by Ms Claire Campbell who was of particular assistance to the Tribunal. Her lucid explanations of this difficult area of social security law was appreciated.
ISSUE
The sole issue to be determined is whether the total value of the Applicant and her partner’s assets exceeded the assets value limit as at 3 March 2016 for the sickness allowance.
CONSIDERATION
Market value of Forest Lake property
The Applicant challenged the Respondent’s independent valuation of her principal home, even though that valuation correlated with her estimate in March 2016.
The Applicant provided the Tribunal a valuation by Mr Vish Uttam, the Principal of Xperience Realty dated 22 May 2017 – Exhibit 7. It would appear that Mr Uttam is not a valuer but a real estate agent. In any event he stated that he had not physically inspected the property and his valuation was based on comparable sales in the area. Mr Uttam made these comments about general real estate market conditions:
“Unfortunately, the current market is on an existing downward trend. Some areas are more affected than others. Factors such as the oversupply of units outstripping demand, poor economic fundamentals and forecast, low rents and rising vacancy rates, the tightening and restrictions of the banking lending practices and the downturn in the mining industry have made buyers a bit more cautious about entering the markets.”
Mr Uttam estimated the “current market worth” of the Forest Lake property as between $460,000 and $490,000.
Four issues arise from this valuation.
The first is that it is a desktop valuation just as the Exhibit 6 valuation was.
Second, although Mr Uttam states that he relies upon comparable sales in “the area”, the report does not list the comparable properties, their location, the date of the sales and whether they are truly “comparable” to the Forest Lake property. In comparison, the MVS Valuers valuation listed the address of the comparable properties, the sale date, the sale price and details of the age of the respective properties, the number of bedrooms and bathrooms, garage and pool details as well as the overall site area.
Third, the MVS Valuers valuation was based on property sales in the period prior to March 2016, with no sale being earlier than approximately 6 months prior to the Applicant claiming the sickness allowance. In comparison, Mr Uttam’s valuation is based on market values as at May 2017, or approximately 15 months after the claim date.
Finally, as Mr Uttam highlights, the real estate market in more recent times has been soft, with property prices either flatlining or decreasing. In this context his valuation of the Applicant’s principal place of residence was made in the context of a depressed and declining market. Presumably, based on his analysis, the Applicant’s Forest Lake property would have been valued higher in March 2016 than May 2017.
Overall, the Tribunal prefers and accepts the valuation by MVS Valuers and proceeds on the basis that the Forest Lake property’s market value in March 2016 was $550,000.
Negative asset value: set-off or zero asset value
The North Booval property has a negative value of $30,267. The Respondent, therefore, determined that it had a residual value of zero dollars.
At the hearing, Mr Singh submitted that this was not the correct approach, rather the negative value should be set-off against the Applicant’s total assets. If the Tribunal accepts the set-off contention, the Applicant’s total assets would be less than the assets value limit.
The Tribunal gave the Respondent liberty to make further written submissions on this matter. Subsequently the Respondent submitted a document entitled “Secretary’s supplementary written submissions” dated 4 October 2017. The document was prepared by Ms Campbell on behalf of the Respondent.
The Respondent relies on a finding of Senior Member McCabe (as he then was) in Re Secretary, Department of Employment and Workplace Relations and Huntly (2007) 96 ALD 780 at 784/[20]:
“Ms Huntly acquired a property in Flinders Way on 9 September 2004 for $350,000. (She entered the contract to acquire the property on 20 August 2004). She borrowed $195,000 from the Adelaide Bank for that purpose. The property therefore had a value of $155,000 for the purpose of the legislation. That amount exceeds the assets limit of $153,000. The fact Ms Huntly appeared to have negative equity in the Jubilee Court property at this point is irrelevant as it is impossible to assign a negative value to a property and debts can only be deducted from the value of the property in respect of which the debt was raised. It follows Ms Huntly is unable to satisfy the assets test at this point.”
Senior Member McCabe did not cite authority for his finding that a negative value cannot be set-off against an applicant’s total assets, and the Respondent was unable to locate any other authorities directly on point.
Ms Campbell also drew to the Tribunal’s attention a number of Tribunal determinations reaching the same conclusion, but each case concerned different statutory provisions.
The Tribunal is required to interpret the wording of s 1121 so that it is consistent with the language and purpose of the Act – McHugh, Gummow, Kirby and Hayne JJ Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381.
Subsection 1121(4) prescribes a very specific formula which must be applied and which produces an amount which is to be deducted under subsection (1). When this formula is applied in this matter it produces a negative residual value for the North Booval property. The question is whether the Respondent correctly substituted a new amount, namely a residual value of zero dollars.
It would appear that the rationale for ignoring the existence of a negative residual value is that there is no explicit statutory mandate to apply a set-off, nor any specific recognition of the concept of negative asset values.
There is an overarching requirement to interpret s 1121 so that its application harmonises with the overall purpose of the Act and its intended operation. If s 1121 allows a set-off, then in the normal course such a scenario would be expected to be spelt out or inferred from the wording of the provision and its ordinary mode of operation.
Subsection 1121(1) focuses on the value of an asset. Two consequences flow from this.
The first is that the formula outlined in subsection (4) is applied to each asset individually. There is no mandate from the wording of the section to set off a negative asset value of one asset to another asset, or against the total asset value.
The second is that the word “value” itself implies a positive figure. If an asset has no value, then logically its residual value is zero. If s 1121 was drafted with the intention of departing from this rule of common sense then there would need to have been some recognition that recourse could be made to negative asset values. A careful reading of s 1121 discloses no such recognition.

The Tribunal therefore finds that the North Booval property should be treated as having no value.
Market value of household contents, motor vehicles and savings
The Respondent, correctly, draws the Tribunal’s attention to the extreme variation between March and September 2016 estimates of the market value of the Applicant and her partner’s household contents, motor vehicles and financial investments. The estimated market value was reduced from $28,701 to $6678.26.
The Applicant owns (with her husband) two motor vehicles: a 2010 SsangYong Kyron and a 2011 Toyota Yaris. The Respondent provided the Tribunal with RACQ price guides for motor vehicles of this type; the former having a market value of $9630 - $11,035 and the latter a market value of $10,000 - $11,340 – Exhibit 5.
The Applicant submitted an assessment of the motor vehicles by Mr Kiyam Samadhi, a qualified motor mechanic dated 26 June 2017- Exhibit 8. Mr Samadhi quite properly stated that he is not a motor vehicle valuer and was only giving his opinion and recommendations on the motor vehicles.
With respect to the Toyota Yaris, Mr Samadhi said:
“This is a 2011 model vehicle and has done 80K. Toyota carries a very good resale value for a long time. I have examined the above vehicle. The vehicle is mechanically sound but does not have first impression for a good price. I recommend you do the following:
·     There are dents and scratches which need to be fixed and the bumper need to be fixed.
·     There are hail damages (Roof, sides and bonnet) needs fixing.
·     The car needs full detailing which also should include cleaning of tyre rims and polishing. All tyres need to be painted.
·     The windscreen has a small crack. I recommend the windscreen to be replaced…
Without taking any action, you may receive only $2,500 - $3,500 when trading-in. The resale value of your car will significantly improve when all the above is completed.”
With respect to the SsangYong Kyron, Mr Samadhi said:
“I have examined the vehicle. The Vehicle has done 130K and is 2010 model. SsangYong has very good resale value for the first 5 years and/or when it has done less than 100K. During the examination I have found that your vehicle has a major issue which is that two of the gears slip. You need to fix or replace the automatic transmission gear box ASAP….
Without completing any of the above, you may receive only $2,000 - $3,000 for a trade-in. By completing all of the above the value of the vehicle will improve significantly.”
Mr Singh said that the SsangYong Kyron had major transmission problems and was worthless. He tendered a Quote from Blue Ribbon Motors, Yamanto dated 29 August 2017- Exhibit 9. The estimated cost for replacing the transmission and labour costs is $11,192.40. Mr Singh stated that he and the Applicant could not afford to replace the transmission, the car was difficult to drive and that the cost of making the car good far exceeded its resale value.
The Applicant also tendered a bundle of documents (Exhibit 4) which included photographs of the Toyota Yaris which illustrated extensive hail damage to the roof and bonnet of the car.
Having regard to the poor state of both vehicles the Tribunal finds, on the balance, that the estimated market value provided by Mr Samadhi is reliable and accurate. Whilst his estimate is considerably less than the RACQ figures, it was made after viewing and closely examining both vehicles. For that reason, combined with the other information provided to the Tribunal, it should be preferred. Accordingly, the Tribunal proceeds on the basis that the market value of the Toyota Yaris is $2500 and the SsangYong Kyron is $2000. It may be that the $2000 figure for the SsangYong Kyron is too high as the vehicle most probably can only be sold to a wrecking yard. However, the Tribunal proceeds on the basis of the market value estimate of Mr Samadhi as he was aware of the transmission problems when he gave his estimate.
A more difficult issue is ascribing a value to the household contents of the principal home of the Applicant and Mr Singh. The Applicant’s initial market value estimate was $20,000 but six months later she reduced it to $2500. Understandably, the Respondent contends that the latter estimate is a gross undervalue and should not be accepted. Normally there would be considerable weight in such a contention as it highly unusual that such a gross difference over such a short period of time could be sensibly explained.
Mr Singh, on behalf of the Applicant, submitted that they were naïve when they ascribed a market value of $20,000 for their household contents. He submitted that they didn’t know the value of their personal and household items and gave a very optimistic figure. That explanation, by itself, is not satisfactory and if that were the only evidence the Tribunal would proceed on the presumption in s 1118(3) of the Act and assess the household assets at $10,000.
The Applicant tendered (Exhibit 4) a bundle of documents which included a comprehensive list of household and personal items together with photographs of the said items. This was supplemented by oral evidence.
The Applicant gave evidence and testified that she filled out her claim at home and included in the estimate of household items fixtures such as carpets and light fittings. She testified that she and Mr Singh had lived in the Forest Lake home since 2004. Many of the household items were already old when they first moved in. For example, their fridge was purchased from R T Edwards in 1996 and was valued at $50. The Applicant testified that their home was burgled some years ago and all of her jewellery was stolen.
The photographs of the household and personal items are consistent with the evidence that was given. They are generally old and their market value would be negligible.
It is very difficult for the Tribunal to independently and accurately place a value on the household and personal items of the Applicant and Mr Singh. In the absence of taking a view or having the benefit of a valuer making a professional estimate, the Tribunal must make a decision on the basis of the evidence tendered and the credibility of the testimony of the Applicant and her husband.
Although at first blush it seems unlikely that the revised estimate of $2500 is accurate, a close perusal of the material in Exhibit 4 taken together with a consideration of the submissions and evidence of Mr Singh and the Applicant, lead the Tribunal to consider, on the balance, that the preferable market value estimate is that provided by the Applicant in September 2016, namely $2500.
Combined market value of household contents, motor vehicles and financial investments
The combined value non-real estate assets is as follows:
Household contents  $2500
Toyota Yaris  $2500
SsangYong Kyron  $2000
Financial investments  $701
TOTAL  $7701
CONCLUSION
The total value of the Applicant’s assets, namely real estate of $278,390.90 and non-real estate of $7701, amounts to $286,091.90 which is under the assets value limit of $286,500. It will be noted that the Tribunal has proceeded on the basis of the initial estimate of financial investments of $701, and not the later estimate of $178.26. If the Tribunal had proceeded on the basis of the later estimate then the total value of the Applicant’s assets would have been $285,568.26, which again is under the assets value limit.
DECISION
The decision under review is set aside and the matter is remitted to the Respondent to recalculate the Applicant’s eligibility for the sickness allowance on the basis of the asset values determined by the Tribunal.

I certify that the preceding 73 (seventy -three) paragraphs are a true copy of the reasons for the decision herein of Deputy President J Sosso

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Associate
Dated: 10 November 2017

Date of hearing:

Final submissions received:

27 September 2017

5 October 2017

Advocate for the Applicant: Mr Ravendra Singh

Solicitors for the Joined Party: Ms Claire Campbell
Department of Human Services

[2017] AATA 2163

10 November 2017

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