The Secretary to the Department of Social Security v Cummane, M
[1990] FCA 58
•14 MARCH 1990
Re: THE SECRETARY TO THE DEPARTMENT OF SOCIAL SECURITY
And: MAUREEN CUMMANE
No. V G452 of 1988
FED No. 58
Administrative Law
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Gray J.(1)
CATCHWORDS
Administrative Law - Social Security - Pension entitlement - Assets test - disposition of place of residence with retention of right to accommodation for life - whether value of retained right taken into account in calculating value of property disposed of.
Social Security Act 1947 ss. 4 and 6. (formerly 6AA and 6AC).
HEARING
MELBOURNE
#DATE 14:3:1990
Counsel for the applicant: Mr. R.M. Downing
Solicitor for the applicant: Australian Government Solicitor
Counsel for the respondent: Mr. K. Andrews
Solicitor for the respondent: Maddock, Lonie and Chisholm
ORDER
The appeal is dismissed and the decision of the Administrative Appeals Tribunal is affirmed.
The applicant pay the respondent's costs of the appeal.
Note: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.
JUDGE1
This is an appeal from the Administrative Appeals Tribunal on a question of law arising under the Social Security Act 1947. The question relates to what is known as the "assets test", with respect to an age pension.
The respondent to the appeal was born on 15th July 1923. She was in receipt of an age pension. She was living in a house at No. 11 (referred to incorrectly in the Tribunal as No. 1) Powlett Street, Heidelberg, which had been her family residence. The respondent became the sole proprietor of the property by survivorship upon the death of her husband in 1975. In June 1984, she moved out of the house and into a rented unit, allowing her son and his family to live in the house. In 1986, it was decided that an extension to the house should be built, paid for by the son. The respondent would then transfer the title of the house to her son, and would receive a right to live in the extension for the rest of her life. This plan was carried out. A transfer of the land from the respondent to her son was executed on 12th November 1986 and registered on 30th March 1987. The valuation of the property at $140,000 for stamp duty purposes was treated by all parties as the value for the purposes of the assets test. The respondent has lived and lives in the extension to the house, and her son and his family occupy the rest of the house.
In consequence of the transaction, the respondent was treated as having disposed of the house, the value of which was notionally added to her assets for the purposes of the assets test. As a consequence, the age pension which she was formerly receiving was discontinued. The respondent appealed to a delegate of the Secretary to the Department of Social Security who dismissed the appeal. She then sought review of that decision in the Administrative Appeals Tribunal. The Tribunal set aside the decision and remitted the matter to the applicant for reconsideration, with a direction to deduct from the value of the respondent's assets for pension calculation purposes the value of a right to accommodation for life in the extension to the house, that value to be determined by actuarial calculation.
At the time when the decision was made to terminate the respondent's age pension, the relevant provisions of the Act were as follows:
"6AA(1) In calculating the value of the property of a person for the purposes of this Act (other than section 6AC) -
(a) there shall be disregarded -
(i) if the person is an unmarried person - the value of any right or interest of the person in relation to the principal home of the person (not being a right or interest of the kind referred to in sub-paragraph (iv)); ...
(iv) if the residence that is the principal home of the person is a private residence and the person has acquired for valuable consideration, or has retained, a right to accommodation for life in, or a life interest in, that residence - the value of that right or interest; ...
6AC ....
(2) Subject to sub-section (3), where, on or after 1 June 1984 -
(a) an unmarried person has, during a pension year of the person, disposed of property of the person; and
(b) the amount of that disposition of property, or the sum of that amount and of the amounts (if any) of other dispositions of property previously made by the person during that pension year, exceeds $2,000, then, for the purposes of this Act, there shall be included in the value of the property of the person -
(c) the amount by which the sum of the amount of that first-mentioned disposition of property and of the amounts (if any) of other dispositions of property previously made by the person during that pension year exceeds $2,000; or
(d) the amount of that first-mentioned disposition of property, whichever is the lesser amount." ...
(10) For the purposes of this section, a person shall be taken to have disposed of property of the person if the person engages in a course of conduct (not being a course of conduct under which the person ceases employment or ceases to engage in a business or profession or reduces the extent to which the person is employed or the extent to which the person engages in a business or profession) that diminishes, directly or indirectly, the value of the property of the person where -
(a) the person receives no consideration or inadequate consideration, in money or money's worth;
...
(12) For the purposes of sub-sections
(10) and (11), the value of a right or interest of the kind referred to in sub-paragraph 6AA(1)(a)(iv) of a person shall be deemed not to be consideration received by the person."
As a result of the Social Security Amendment Act 1987, the provisions corresponding with the former sections 6AA and 6AC are now numbered as sections 4 and 6 respectively.
In the provisions of ss. 6AA quoted in the reasons for decision of the Tribunal, the words "(other than section 6AC)" do not appear. Those words were inserted into s.6AA by s.5(2)(a) of the Social Security and Veterans' Affairs (Miscellaneous Amendments) Act 1986, which came into operation on 27th October 1986. The amendment therefore applied to the consideration which was given to the respondent's pension. The amendment to s.6AA does not appear to have come to the attention of the Tribunal. The same amending Act also made changes to s.6AC(2), which do not appear in the Tribunal's reasons for decision.
The Tribunal's conclusion that the respondent was entitled to have taken into account against her only her disposition of the house less the value of her retained right of accommodation for life no doubt resulted from the apparent oddity of the opposite result. It does seem strange, and unfair, that a right of accommodation for life, retained upon a disposition of a residence, should not be treated as having been retained by a pensioner, when the very same right is not to be taken into account as an asset for the purposes of s.6AA. In effect, the respondent was treated by the delegate of the applicant as having disposed of more than she in fact did dispose of. Counsel for the applicant drew attention to the more generous level of assets which a pensioner not owning a principal home is entitled to own without risking his or her pension, but the effect of making no allowance for the retention of a right of accommodation for life upon disposition of a home is to cause that right to be taken into account as an asset, whereas under s.6AA(1)(iv) it is not to be taken into account. It is understandable that, in those circumstances, the Tribunal should have taken the view that the correct way to disregard the value of the right of accommodation for life was to deduct it from the value of the home disposed of. There would be much to commend that view, without the amending words, of which the Tribunal was apparently unaware.
The amending words appear to me to put the matter beyond doubt. They make it clear that the legislative intention was that a right to accommodation for life is to be disregarded (i.e. not taken into account) for the purposes of s.6AA (i.e. in calculating the value of a person's assets) but is not to be disregarded (i.e. is to be taken into account) for the purposes of s.6AC (i.e. in calculating the value of a person's dispositions of property). A person is not to be treated as having disposed of the entire value of a home if he or she has retained a right to live in that home. Such a right is not to be disregarded for that purpose. This view accords with the logic of the scheme of the assets test. To treat the value of a retained right of accommodation as an asset would be to fly in the face of the provision in s.6AA that such a right is to be disregarded for the purposes of calculating the value of a person's property.
Counsel for the applicant placed heavy reliance on the provisions of s.6AC(12). It is clear that that sub-section deems a person not to have received consideration for certain dispositions of property or income by reason of the retention of a right of accommodation for life. That deeming, however, is only "for the purposes of sub-sections (10) and (11)", which provide, in effect, that a person is taken to have disposed of property or income if the value or rate of that property or income is diminished, and no consideration, or inadequate consideration is received. The respondent did not diminish the value of her house; she transferred the title in it to her son. She did so, however, subject to her retention of a right. It is necessary to take into account that retained right, in order to determine the value of the property which she has disposed of. Even if sub-section (12) were relevant, it would not be applicable in determining the value of the property disposed of. It would be necessary only to disregard the value of the retained right as consideration, not to disregard it in determining the value of the asset disposed of.
When the matter was argued, counsel for the applicant argued that the decision of the Tribunal was wrong. Counsel for the respondent did not concede the incorrectness of the Tribunal's decision, but took the view that he could not put a cogent argument that it was correct. His view was based on the presence of the amending words. In taking that position, counsel for the respondent misconstrued the Act, and the amending words in particular. I am bound to look at the matter for myself. Having done so, for the reasons I have given, I am satisfied that the Tribunal's approach is confirmed by the amending words.
It was not contended that the Tribunal adopted a wrong approach to the method by which the respondent's right to accommodation for life is to be valued. Accordingly, the proper order to make is to dismiss the appeal and to affirm the decision of the Tribunal.
On the assumption that the appeal would succeed, counsel for the applicant stated that the applicant would not press for costs. On the same assumption, counsel for the respondent said nothing on the question of costs. The respondent having succceeded, there is no reason why she should not be entitled to her costs of the appeal. The fact that an institutional litigant has offered to forgo costs against an ordinary citizen, when the former believes it is correcting an error, should not impose any reciprocal obligation on the ordinary citizen. Accordingly, the appellant should be ordered to pay the respondent's costs of the appeal.
3
0
0