Berry and Repatriation Commission [2000] AATA 40 (28 January 2000)

Last Updated: 4 February 2000

DECISION AND REASONS FOR DECISION [2000] AATA 40

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V1999/695

VETERANS' APPEALS DIVISION )

Re HENRY BERRY

Applicant

And REPATRIATION COMMISSION

Respondent

DECISION

Tribunal Mr J.T.C. Brassil, AM, Member

Date 28 January 2000

Place Melbourne

Decision The decision under review should be set aside and directs the respondent to calculate the rate of Service pension in accordance with the finding of the Tribunal.

(Sgd.) J.T.C. Brassil

Member

CATCHWORDS

VETERANS' AFFAIRS - Service pension -- income test -- purpose of personal loan -- whether an advance payment or a loan -- calculation of asset

Veterans' Entitlements Act 1986

REASONS FOR DECISION

28 January 2000 Mr J.T.C. Brassil, AM, Member

1. This is an appeal by Henry Berry from a decision of the Repatriation Commission on 1 March 1999, affirmed by a delegate of the Commission on 26 May 1999, determining the rate of Service pension being paid to him.

2. The appeal was heard on 14 December 1999, the applicant was self-represented and departmental advocate Robert Douglass appeared for the respondent.

3. The documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (the "T Documents") were taken into evidence.

Facts

4. The applicant was married to Phyllis Berry and the couple lived in the matrimonial home at 9 Molyneaux Street, Warracknabeal. The couple divorced with the decree absolute being dated 1 July 1997.

5. On or about 4 April 1998 the home was sold for $28,000 on terms, a deposit of $2000 and weekly payments of $90 interest free until a date late in 2003.

6. In the property settlement resulting from the break-up of the marriage each spouse was to share equally the proceeds of the sale of the matrimonial home. In the event the applicant agreed to the request of his spouse, in 1996 during the period of separation prior to divorce, that he would make a prior payment to her of $12,000 which together with the interest on the loan he took in order to make this payment would approximately equal the equity she could expect on sale of the home and thus satisfy the provisions of the property settlement.

7. In April 1996 the applicant applied for and was subsequently granted a personal loan by the Commonwealth Bank of $16,000.

8. At the time of the hearing the applicant's spouse had died although the applicant was not sure of the date of death.

Submissions

9. The respondent submitted that Section 41(1) of the Veterans' Entitlements' Act 1986 ("the Act") requires that the rate of age service pension be calculated according to the Rate Calculator in Part 2 of Schedule 6 of the Act. Module A of the Rate Calculator contains an outline of the overall rate calculation process. Since the income reduced rate of pension is lower than the assets reduced rate of pension the

former was selected as the appropriate rate of pension, as required by Step 9 of the Method Statement in Module A.

10. Mr Douglass further submitted that a person's rate of pension is to be reduced by applying the formula contained in SCH6-E11 of Module E to the excess of a person's "ordinary income" over the "ordinary income free area". The latter being defined in SCH6-E4 of Module E as "the amount of ordinary/adjusted income the person can have without any deduction being made from the person's maximum payment rate"

11. The term "ordinary income", he submitted, is defined in Section 5H(1) of the Act as "income that is not maintenance income". The term "income" is defined in Section 5H(1) as "an income earned, derived or received by the person for the person's own use or benefit...". The term "income amount" is also defined in Section 5H(1) as "... (a) valuable consideration; or (b) personal earnings; or (c) moneys; or (d) profits (whether of a capital nature or not)".

12. Mr Douglass drew the attention of the Tribunal to Section 46 of the Act which provides that:

"A reference in this Act to a person's ordinary income for a period is a reference to the person's gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 2".

He submitted that the only reductions permitted under Division 2 relate to reductions of business income attributable to allowable deductions under particular provisions of the Income Tax Assessment Act. He submitted that these provisions have no application in this case.

13. He submitted that there was no provision under the Act to reduce ordinary income by interest on the personal loan taken out by the applicant.

14. He further submitted the deductions under the asset values in Sections 52C and 52CA did not apply. He stated that the personal loan was not secured against any asset held by the applicant.

15. Mr Berry submitted that the respondent should not have considered the whole amount of the sale of the matrimonial home as being for his sole benefit. The home was jointly owned during the marriage and the property settlement, effected prior to the actual divorce, provided for each of them to share equally from the proceeds of the sale.

16. He said there was some acrimony during this period and his wife wanted her share as soon as possible. In order to avoid further argument he agreed to pre-pay her prior to the sale. The $12,000 in cash plus the cost of borrowing was accepted as equivalent to her entitlement and, in addition, she received her money early.

17. Mr Berry borrowed $16,000 which enabled him to effect necessary repairs to his motor vehicle and pay $12,000 to his wife.

18. Eventually the house sold but he had to give terms in order to make the sale, $2,000 deposit and $90 per week for five and one-half years without interest. After paying his solicitor about $500 for the conveyancing the proceeds of the house sale was $27,500. Under the property settlement and the agreement he had with his former spouse her share was $12,000, already paid to her, leaving him with $15,500 (less three-quarters of the cost of the personal loan) the balance of which he would receive weekly until late in 2003.

19. He submitted that the departmental estimate of $23,000 (the total of the $90 weekly payments still due) was wrongly inflated by his wife's entitlement that he had pre-paid and that his particular circumstances should have been taken into account.

20. In a further written submission on 14 January 2000 Mr Douglass, on behalf of the respondent, stated that the respondent's view is that any equitable interest that Mrs Berry had in the matrimonial home was extinguished around April 1996 when "Mrs Berry renounced any further interest in the property". Accordingly he submitted that Mr Berry does not hold any assets subject to any equitable interest by Mrs Berry.

21. He submitted that on 1 March 1999 the applicant was entitled to the entire balance of the loan extended to the purchaser, without any deductions. He further submitted that this was mandated by the provisions of Section 52D which specifies that:

"If a person lends an amount after 22 May 1986, the value of the

assets of the person for the purposes of this Act includes so much

of this amount as remains unpaid but does not include any amount

payable by way of interest under the loan"

Hence Mr Douglass submitted "the loan (sic) is appropriately valued at $23,000, as per page 18 of the T-documents".

Consideration of the Issues

22. The dominant issue in this matter is whether the applicant had the whole beneficial interest in the proceeds of the sale of the matrimonial home at the time of the decision of the respondent, viz 1 March 1999.

23. There was no difference between the parties in respect to the application of the relevant legislation except as would follow from the determination of the beneficial interest in the proceeds from the sale.

24. As Mrs Berry is now deceased it is not possible for the Tribunal to hear whether she had in April 1996 "renounced any further interest in the property" as submitted by the respondent. The only available evidence the Tribunal has is from the applicant that his spouse wished to be paid out without waiting for the sale.

25. No evidence was presented by either party as to who were the proprietors of the property at the time of sale. As there is no evidence that the estate in fee simple was transferred to the applicant the Tribunal finds that the property, up to the time of sale remained in joint proprietorship. The proceeds from the sale would then have to be divided equally between Mr and Mrs Berry, if this was $27,500 then each would be entitled to $13,750.

26. The Tribunal accepts the submission of the applicant, in that there is no evidence to the contrary, that he paid his spouse an amount of $12,000 as advance payment of her share of the proceeds to avoid the continuation of the acrimony then existing. The Tribunal is not prepared to characterise this payment as a loan as is the submission of the respondent.

27. Considering all the circumstances, not uncommon in family law matters, the Tribunal finds that the asset was divided in accordance with the property settlement and does not consider the particular action of making a prior payment to avoid further personal dealing affects the right to payment of half of the proceeds to Mrs Berry as long as she continued as joint proprietor. It must follow that Mr Berry did not become possessed of her asset.

28. The finding of the Tribunal is that the outstanding asset of the applicant at 1 March 1999 should be calculated as $13,750 less $45 per week from the sale until that date, a period of some 46 weeks. The asset thus calculated would be $11,680.

Decision

29. The Tribunal will set aside the decision under review and direct the respondent to calculate the rate of Service pension in accordance with the finding of the Tribunal.

I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J.T.C. Brassil, AM, Member

Signed: Judith Holt, Associate

Date of Hearing 14 December 1998

Date of Decision 28 January 2000

Applicant Self-represented

Respondent Mr R. Douglass, Advocacy Section,

Department of Veterans' Affairs