Wasley and Secretary, Department of Family and Community Services

[2004] AATA 765

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 765

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No S2004/47

GENERAL ADMINISTRATIVE DIVISION		)
Re		Lan Wasley

Applicant

And Secretary, Department of Family and Community Services

Respondent

DECISION

Tribunal Mr D.J. Trowse (Member)

Date20 July 2004

PlaceAdelaide

Decision The decision under review is affirmed.

Signed
  (D.J. Trowse)

Member

CATCHWORDS

SOCIAL SECURITY – Newstart Allowance – asset test hardship provisions – asset value threshold – valuation of land – land allegedly held in trust for others – disposal for inadequate consideration – decision affirmed

Social Security Act 1991; ss 593, 611, 1123, 1126A, 1131

Guide to Social Security Law Part 4.6.7.20

Spencer v The Commonwealth (1907) 5 CLR 418

Kirkovski v Secretary, Department of Family and Community Services (2004) FCA 790

Re Follone and Secretary to the Department of Social Security (1987) N86/571 AAT No 3313

Re Fong and Secretary, Department of Family and Community Services (2002) AATA 172

Re Cooper v Repatriation Commission V95/1422 AAT no 11584

REASONS FOR DECISION

20 July 2004 Mr D.J. Trowse (Member)     

1.      Mrs Lan Wasley, the applicant, has made an application to this Tribunal to review the decision of the Social Security Appeals Tribunal (SSAT) dated 12 January 2004 which affirmed decisions made by a Centrelink officer on 15 October 2003 and 28 October 2003. In those earlier decisions the applicant’s claim for Newstart Allowance was rejected as was her claim under the asset test hardship provisions.

2. Fundamental to the primary rejection is the respondent’s calculation as to the overall value of the applicant’s assets as at 15 October 2003. Included in that calculation, which reveals a total in excess of the threshold of $149,500 declared in section 611 of the Social Security Act 1991 (the Act), is a property at 140 North East Road, Vale Park (the property) with a stated value of $170,000. The valuation of the property is at the core of the dispute. Also, the Tribunal is required to consider the belated submission that, at the relevant time, the applicant held the property in trust for herself and others.

3.      Assistance under the financial hardship provisions, contained in section 1131 of the Act, had been refused on the basis that the applicant did not meet all of the criteria specified in that section.

4. The Tribunal received into evidence the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, together with twenty exhibits tendered by the applicant and two by the respondent. Additionally, the Tribunal heard evidence from the applicant and Mr David Conigrave, a certified practising valuer employed by the Australian Valuation Office. At the hearing, the applicant was represented by Ms M. Riley of Welfare Rights Centre (SA) Inc and the respondent was represented by Mr. C. Goldsworthy, an advocate on its behalf.

5.      Based on the oral and written evidence before it, the Tribunal makes the following findings of fact:

a)The applicant, who is aged 57 years and who migrated to Australia from Vietnam in 1980, resides with her daughters Kaye, aged 19, and Kym, aged 17, at her Broadview home which she acquired as part of a marriage settlement reached with her former husband.

b)While both daughters are in receipt of Youth Allowance, the applicant is unemployed and has no separate source of income. The allowances received by the daughters are pooled and used to pay the living expenses of all three members of the family.

c)Besides the Broadview property, the applicant was at the time of applying for the Newstart Allowance the registered owner of the property at Vale Park. The purchase of the property, which occurred in 1996 for a consideration of $124,000, was funded by the applicant’s mother who, because of matrimonial problems between the applicant and her former husband, was keen to ensure that her daughter and two grand daughters had a place to live. Soon after this acquisition, the mother died.

d)At the time of purchase, a conventional style house built in the early 1950s was located on the property. The house was demolished in about April 2000 and council approval was granted for the construction of a large two-storey detached dwelling. Development of the site did not proceed.

e)Because of financial need and after being advised that the property could realise in excess of $300,000, the applicant offered the property for sale by public auction. The auction, which took place sometime during the 2002 year failed to produce a result. Indeed, other than the auctioneer, no other person attended.

f)As at the date of application for Newstart Allowance, that is 3 October 2003, the applicant’s assets, using values adopted by the respondent, comprised:

Funds in bank account  18
Personal Effects  1000
Motor Vehicle  1000
Vale Park Property   170000
Total      $172018

The value placed on the property originated from a valuation undertaken by a different staff member of the Australian Valuation Office in March 2003 and which related to a previous claim made by the applicant.

g)Also in existence as at 3 October 2003 are the following debts due by the applicant:

Legal fees in connection with divorce
proceedings and secured by a
warrant of sale registered on the
property’s certificate of title -  $4423.81

State Land Tax assessed on the property -    $1369.38.

The respondent accepts that these outstandings are deductible in calculating the value of the applicant’s assets.

h)On 21 October 2003, the applicant lodged a memorandum of transfer of the property with the Commissioner of State Taxation. The transfer was from the applicant to her elder daughter Kaye for a stated consideration of “agreement between both parties”. A search of the title shows that the transfer was “for no consideration, but new ownership.” In the assessment of stamp duty on this transaction, a value of $188,000 was determined. This figure equates with the then statutory assessment made by the State Government for rating purposes.

i)On 21 October 2003, the applicant lodged a claim for payment of Newstart Allowance under the hardship provisions.

j)On 3 November 2003, that is thirteen days after the execution of the memorandum of transfer, the applicant and daughter Kaye signed a contract of sale and purchase in respect of the property. In terms of that documentation, the daughter agreed to purchase the property for a consideration of $120,000 payable by instalments of $100 per fortnight for the first ten years and, thereafter, at the rate of $200 per fortnight.

6.      The criteria for Newstart Allowance is set out in section 593 of the Act. However, in terms of subsection 611(1) the payability of the allowance is subject to a test which compares the value of a person’s assets with assets value limits enumerated in a table contained in subsection 611(2) of the Act. If the assets value limit is exceeded, the Newstart Allowance is not payable. As the applicant is not a member of a couple and a homeowner, her assets value limit is $149,500.

7.      Access to benefits because of financial hardship is governed by the provisions contained in section 1131 of the Act which state:

“Access to financial hardship rules—benefits

1131(1) If:

(a) a social security benefit is not payable to a person because of the application of an assets test; and

(b) the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(c) the person's partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and

(d) either:

(i) sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or

(ii) the Secretary decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and

(e) the person, or the person's partner, has an unrealisable asset; and

(f) the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(g) the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person.

Note: for unrealisable asset see subsections 11(12) and (13).”

8.      It is accepted that the applicant satisfies paragraphs (a), (b) and (c). However the respondent, in reliance upon the application of section 1126AA which relates to disposals of assets on or after 1 July 2002 by a person who is not a member of a couple at the time of the disposal, contended that the applicant had failed the requirement set out in paragraph (d)(i). For the purposes of the Act, a person disposes of an asset where, inter alia, a person receives inadequate consideration for the disposal and the Secretary is satisfied that the person’s purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage – see section 1123.

9.      According to the respondent, the discretion given to the Secretary under subsection 1131(1)(d)(ii) is exercisable only in the circumstances outlined in Part 4.6.7.20 of the Guide to the Social Security Law and which are repeated hereunder:

·the person is in severe financial hardship;

·the hardship is not a direct result of disposing of an asset; and

·the person would have qualified for hardship even if they had not disposed of an asset.

10.     The respondent is also of the view that the applicant is not entitled to benefit under the hardship rules in so far as she was not at the time of her application in possession of an unrealisable asset. As such, the applicant fails to meet the requirements of subsection 1131(1)(e).

11.     The Tribunal moves to a consideration of the submission that, in view of the mother’s intention to benefit other members of the family, the applicant was not the sole beneficial owner of the property. The testimony of the applicant was that, at the time of acquisition, her mother made comments along the lines of “remember, this is for you and your brothers and sisters” and “look after your brothers and sisters in the future”. The applicant also stated that she believed her mother advised her siblings of this alleged arrangement. Since she had managed the family business in Vietnam and in accordance with family culture, the applicant regarded the ownership of the property to be equally shared between her five siblings, her two daughters and herself.

12.     No documentary evidence as to the existence of joint ownership was supplied to the Tribunal. Nor were any of the alleged beneficiaries called to give evidence as to their understanding of the applicant’s assertions. What is known is that, despite the avowed interests of other parties, the applicant did not seek their authority to either demolish the house located on the property, offer the property for sale at auction or to transfer legal ownership to her daughter. The Tribunal finds the applicant’s explanation that, as the eldest member of the family, she did not need the permission of others as less than compelling.

13.     Also of concern, is the fact that the decisions of the authorised review officer and SSAT make no mention of the allegation of shared ownership currently before this Tribunal. Again the applicant’s statement that those decision makers chose to ignore her submission as to a shared proprietorship is far from convincing.

14.     The following comments taken from Re Follone and Secretary to the Department of Social Security (1987) N86/571 AAT No 3313 are apposite to the matter under consideration.

“15.  Administration of the assets test legislation is an extraordinarily

complex and difficult task.  It is important for all who might be subject to

its application, that the assets test be administered fairly.  It can only be

administered fairly by the respondent where clear evidence is submitted, by

those who would seek to avoid or reduce its application, that property or

money which has all the appearance of being in their hands has in fact

legitimately passed to someone else.

16.  It is possible, in the context of family life, to elevate all kinds of

understandings and expectations between family members into agreements which

might be claimed legitimately to have divested pension recipients of whole or

part of their assets.  If, through the Tribunal's interpretation of the assets

test legislation, it were made possible to allow such expectations and

understandings to be so elevated, the respondent would be in an impossible

position in its attempts to dispute the legitimacy of dispositions of assets,

as part of its duty to ensure fair and equal application of the assets test

formula to all who might fall within it.

…

19.  … But at the very least, there must have been agreements which were more than expectations and understandings typically part and parcel of family

relationships.  And there must be some external evidence of their existence,

beyond the bald assertions of the parties that claim to be privy to them.”

15.     Although the applicant experienced language difficulties in the giving of her evidence, the Tribunal is of the view that she has developed from past encounters with Centrelink a reasonable understanding of the relevant Social Security legislation. Furthermore, the Tribunal was left with the impression that the applicant was prepared to tailor her evidence in order to achieve the desired result. For this reason the applicant’s evidence is to be approached with considerable caution.

16.     In the absence of supporting external evidence, the Tribunal is not prepared to accept that a structure whereby the applicant held the property for herself and others as a trustee was in place. In any event, a contrary finding would be followed by a further finding that the arrangement so described was no more than an expectation and understanding typically found in a family relationship. This is not a situation where parties had the intention of creating a legal relationship.

17.     In moving to a consideration of the value of the property as at 3 October 2003, the Tribunal begins with the observation that under the Act there is no statutory provision specifying any method for the valuation of assets. The value of land at a given date is to be determined by inquiring “what would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?” – see the decision of Griffith CJ of the High Court of Australia in Spencer v The Commonwealth (1907) 5 CLR 418 at p.432. An approach based on comparable sales and the best use to which the asset could be put is generally applied in this determination – see Re Fong and Secretary, Department of Family and Community Services [2002] AATA 172 and accepted by Bennett J of the Federal Court in Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790.

18.     Material before the Tribunal relative to the value of the property includes:

·statements that valuations had been undertaken on two prior occasions by the Australian Valuation Office – one on 17 April 2002 for $168,000 and the other on 24 March 2003 for $170,000;

·the following statutory assessments made by the State Government for rating purposes –

For the 2002 year                $168,000

For the 2003 Year               $170,000

·two notes penned by the agent involved in the auction, and who evidently suggested an achievable price in excess of $300,000, indicating – in the first, a best after auction offer of $140,000 and – in the second, a revised best offer figure of $125,000 together with an opinion that that figure be updated by 20-22.5% to reflect current value; and

·a comprehensive valuation made by Mr David Conigrave on 2 June 2004 which reveals a value of $215,000.

19.     Mr Conigrave, a member of the Australian Property Institute and a certified practising valuer, has been engaged as an employee of the Australian Valuation Office in the valuation of residential, commercial and industrial properties since 1988. In the formation of his opinion, Mr Conigrave, besides a physical inspection of the property, consulted with the local council about its rezoning and maximum development potential and Transport SA on the issue of property access. As a result of those inquiries, it was ascertained that the council would look favourably on an application to erect on the property two semi-detached dwellings and that there are no control access issues associated with the property.

20.     Notwithstanding Mr Conigrave’s comment that there is little by way of direct comparison, he has taken into consideration several recent property sales in the area. In those circumstances, it appears that Mr Conigrave has given weight to the comparable advantages and detriments in his final analysis. When confronted with the failure to sell at auction, Mr Conigrave opined that the vendor pricing in excess of $300,000 resulted in little market interest being generated.

21.     The valuation made by Mr Conigrave is founded on comparative sales and best use and, bearing in mind his expertise in this field, the Tribunal sees no reason to reject the views and opinions expressed.

22.     On the basis of all three valuations made by the Australian Valuation Office and their general accord with the values determined by the State Government, the Tribunal finds that, at the relevant time, the value of the property was no less than the figure of $170,000 used by the respondent in its determination. After due allowance for the deductions previously mentioned, the value of the applicant’s assets exceed the assets value limit of $149,500 and, on that basis, a Newstart Allowance is not payable to her.

23.     Finally to the issue of financial hardship and, more particularly, to the requirements specified in paragraphs (a) to (g) of subsection 1131(1) of the Act. Clearly, access to benefits under these provisions is dependent on the satisfaction of all the nominated requirements. Failure to comply with any one of the requirements will result in disqualification. Support for this interpretation is to be found in the decision of Re Cooper v Repatriation Commission  No V95/1422 AAT No 11584.

24.     Once the applicant transferred the property to her daughter on 21 October 2003, she ceased to have an unrealisable asset. Thus there is a failure to comply with paragraph (e) of subsection 1131(1) and, for that reason alone, the applicant is denied access to the financial hardship provisions.

25.     For the sake of completeness, the Tribunal further finds that the applicant received inadequate consideration for the disposal of the property, and that the dominant purpose of engaging in that transaction was to receive a social security advantage. On that basis, section 1126AA applies. Furthermore, in the circumstances surrounding that disposal, the Tribunal concludes that the Secretary should not disregard that application. Therefore the requirements of subsection 1131(1)(i) and (ii) have not been met. In arriving at the latter conclusion, the Tribunal has considered Part 4.6.7.20 of the Guide to the Social Security Law which, in its opinion, correctly reflects the accepted philosophy that a person’s entitlement to share in the public purse should take into account their capacity to finance themselves.

26.     The applicant’s evidence that the disposal of the property to her daughter because of financial need is rejected. It will be recalled that the Youth Allowance being received by the daughter was already being used to meeting living expenses and thus the claim that the loan repayments of $100 per fortnight ex the Youth Allowance created additional funding is meaningless. Conversely, the Tribunal is left in no doubt that the property transfer was executed at a figure less than commercial in the hope that such action would fix the value of the applicant’s asset below the stated threshold. If, instead of disposing the property on less than commercial terms, the applicant had sold the property to an outsider when the opportunity presented itself the claimed hardship would not have arisen.

27.     For the reasons enunciated the decision of the SSAT dated 12 January 2004 is affirmed.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Mr D.J. Trowse (Member)

Signed:         .....................................................................................
  Associate

Date/s of Hearing  10 June 2004
Date of Decision  20 July 2004
Counsel for the Applicant         Ms M. Riley
Solicitor for the Applicant          Welfare Rights Centre (SA) Inc
Counsel for the Respondent     Mr C. Goldsworthy
Solicitor for the Respondent     Service Recovery Team Centrelink