FEDERAL COURT OF AUSTRALIA Nock v Secretary, Department of Family and Community Services [2005] FCA 217 SOCIAL SECURITY – appeal from decision of Administrative Appeals Tribunal – application for Partnered Parenting Payments (PPP) and Austudy rejected – applicants' assets exceeded limit prescribed by value assets test – method of calculating assets – charge or encumbrance over property – whether amount of charge or encumbrance to be calculated at time of application – whether value of applicants' assets to be reduced by full amount potentially owing under charge or encumbrance. Social Security Act 1991 (Cth) ss 500Q, 573, 573B, 1118, 1121 Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 cited WALTER NOCK and PUI YING NOCK v SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES WAD 227 of 2003 LANDER J 11 MARCH 2005 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD227 OF 2003 ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY ASSOCIATE PROFESSOR G A BARTON BETWEEN: WALTER NOCK AND PUI YING NOCK APPLICANTS AND: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES RESPONDENT JUDGE: LANDER J DATE OF ORDER: 11 MARCH 2005 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The applicants pay the respondent's costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY WAD227 OF 2003 ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY ASSOCIATE PROFESSOR G A BARTON BETWEEN: WALTER NOCK AND PUI YING NOCK APPLICANTS AND: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES RESPONDENT JUDGE: LANDER J DATE: 11 MARCH 2005 PLACE: PERTH REASONS FOR JUDGMENT 1 This is an appeal pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) from a decision of a Member of the Administrative Appeals Tribunal (AAT). A party may appeal to this Court on a question of law from any decision of the AAT: s 44. 2 This Court has jurisdiction to hear and determine appeals under s 44(1) of the AAT Act and that jurisdiction may be exercised by a single judge if paragraphs (b) and (c) of s 44(3) of that Act do not apply. Those paragraphs do not apply in this case. 3 The applicants are husband and wife who had claimed benefits under the Social Security Act 1991 (Cth) (SS Act). The first named applicant claimed for Parenting Payment Partnered (PPP) from 31 October 2002. The second named applicant claimed Austudy from the same date. 4 The respondent rejected both claims; in the case of the first named applicant on 7 August 2002; and, in the case of the second named applicant, on 3 January 2003. 5 An authorised review officer of the respondent affirmed those decisions on 29 January 2003 and 30 January 2003. 6 The applicants sought a review of that decision before the Social Security Appeals Tribunal (SSAT) and, on 26 March 2003, the SSAT affirmed the decisions under review. 7 The applicants applied to the AAT for a further review of the following decisions: 'Decision 1 The decision of the Social Security Appeals Tribunal ("the SSAT") of 26 March 2003 (T2a) to affirm upon review a decision of an authorised review officer ("ARO") of 29 January 2003 (T31) to cancel Mr. Nock's parenting payment partnered ("PPP") from 31 January 2002 because the value of his assets exceeded his assets value limit for the purpose of section 500Q(1) of the Social Security Act 1991 ("the SSA"). Decision 2 The decision of the SSAT of 26 March 2003 (T2a) to affirm upon review a decision of an ARO of 26 August 2002 (T15) to cancel Mrs. Nock's austudy payment from 31 January 2002 because the value of her assets was above the asset value limit for the purpose of section s573 of the SSA. Decision 3 The decision of the SSAT of 26 March 2003 (T26) to affirm upon review a decision of an ARO of 29 January 2003 (T32) to reject Mr. Nock's claim for PPP from 31 October 2002 because the value of his assets exceeded his assets value limit for the purpose of section 500Q(1) of the SSA. Decision 4 The decision of the SSAT of 26 March 2003 (T26) to affirm upon review a decision of an ARO of 30 January 2003 (T33) to reject Mrs. Nock's claim to be paid austudy from 31 October 2002 because the value of her assets was above the asset value limit for the purpose of section 573 of the SSA.' 8 On 20 October 2003, Associate Professor G A Barton, a Member of the AAT, affirmed the decisions under review. 9 It is only decisions 3 and 4 which are the subject of this appeal. 10 As I have said, an appeal only lies to this Court on a matter of law. 11 The questions of law said to be raised on the appeal are stated in the Amended Notice of Appeal: '1) Decision 3 & 4 whether the value of the assets exceed the allowable limits and caused cancellation of parenting and Austudy payment. 2) Whether the law states loan as principle[sic] amount of borrowing.' 12 The applicants did not give any further particulars of those questions of law, nor did they file any submissions in support of this appeal. 13 There is nothing on the face of it to indicate what the questions of law are. 14 The respondent suggested that there were two issues which the applicants might be seeking to agitate: '4.1 that for the purposes of s1121(1) of the Social Security Act 1991 ("SSA"), the value of the Equity Access Loan was $179,253, i.e. the amount owing to Westpac at the material time, as opposed to the sum of $340,000, i.e. the credit limit of the facility in question at the material time; 4.2 that the applicants assets exceeded the relevant assets value limit for PPP and Austudy by applying s1121(1) SSA such that the value of the applicants' "charges or encumbrances" was only used to reduce the value of the particular asset to which the charge or encumbrance applied.' 15 I will assume that the respondent has correctly identified the applicants' complaints. 16 As I have said, Mr and Mrs Nock are married to each other. 17 Neither applicant was entitled to the respective entitlements claimed if the value of their assets exceeded 'the asset value limit'. In the case of the first named applicant, s 500Q(1) and (3) of the SS Act governed his application in that regard. In the case of the second named applicant, s 573 and s 573B(1)(c) of the SS Act governed her application. 18 In both cases, therefore, if the value of the applicants' assets exceeded that amount then the applicants would not be entitled to the particular benefits which they had sought. The AAT determined that the assets value limit of each of the applicants' assets was $206,500. No complaint is made in relation to that finding. 19 The applicants jointly owned the following properties: 141 Rochdale Road, Mount Claremont, Western Australia 6010 143 Rochdale Road, Mount Claremont, Western Australia 6010 21 Beecham Road, Mount Claremont, Western Australia 6010 62 Graylands Road, Mount Claremont, Western Australia 6010. 20 The parties agreed the valuations of those properties at 143 Rochdale Road at $380,000; 21 Beecham Road at $417,000; and 62 Graylands Road at $285,000. 21 The applicants used the property at 141 Rochdale Road as their principal place of residence. In determining the relevant assets value limit, no regard was to be had to the value of the property at 141 Rochdale Road because it was the applicants' principal home: s 1118(1)(b) of the SS Act. 22 In determining the value of any asset owned by an applicant, regard must be had to the amount of any charge or encumbrance over the particular asset. 23 The property at 143 Rochdale Road, Mount Claremont was purchased by the applicants from the second applicant's mother. The applicants' evidence was that the second applicant's brothers agreed to assist the applicants in purchasing the property by lending them the full amount of the purchase price of $380,000 and, in consideration of that advance, the applicants acknowledged a debt to the second applicant's brothers of $450,000. 24 That acknowledgement was contained in a deed dated 11 March 2002 which created to the lender 'a right to create a charge over the property known as 143 Rochdale Road, Mt. Claremont in the said State'. 25 The property at 62 Graylands Road, Mount Claremont was purchased in or about March 2002 for a consideration of $280,000. The applicants borrowed $450,000 from RAMS Mortgage Corporation Ltd (RAMS), which secured its loan over the properties at 143 Rochdale Street and 62 Graylands Road. 26 RAMS disbursed $280,000 to the vendors of Graylands Road and the sum of $164,786.23 was paid to the applicants. 27 At that time the applicants had a credit facility with Westpac with a limit of $340,000. They deposited the sum of $164,786.23 in their Westpac account which had the effect of reducing the amount owing under the facility to about $160,000. 28 At the time the applicants applied for benefits under the SS Act, the amount then due and owing to Westpac under that credit facility was $179,253.61. 29 At the hearing before me, the second applicant appeared for herself and the first applicant. 30 She handed to the Court a copy of one page of a letter from RAMS addressed to her husband and dated 14 March 2002. 31 That letter indicated how the $450,000 which had been borrowed, as mentioned above, had been disbursed. 32 In particular, it showed that $164,786.23 was paid to PY & W Nock. 33 The second applicant tried to argue on the appeal that the sum of $164,000 was a further advance from her brothers to both applicants. 34 That claim was wrong. The brothers did not advance a further $164,000 or any sum like that to the applicants. 35 After some discussion, the second applicant agreed that what she was putting was not correct. 36 The AAT identified the two issues before it: 'The first is whether the value of 21 Beecham Road is to be reduced by the amount of the loans from Maria Morl and Sin Wai Wong, and the value of 143 Rochdale Road is to be reduced by the amount of the loan from Mrs Nock's brothers, pursuant to section 1121(1) of the SSA. The second is whether the value of 21 Beecham Road is to be reduced by the amount of $179,253.00 drawn down on the Westpac Equity Access Loan on 29 October 2002 or the credit limit amount of $340,000.00 pursuant to section 1121(1) of the SSA. For convenience the Tribunal will deal with these issues under the heading "Family loans" and "Equity Access Loan" respectively.' 37 No issue is now taken on this appeal in relation to the findings in respect of the first issue. 38 The only matter with which I am concerned on this appeal is the determination by the AAT in respect of the second issue. 39 In respect of that second issue, the Member concluded: 'Whilst there may be an agreement between the applicants and the Westpac Corporation that 21 Beecham Road be charged with any future debts up to an amount of $340,000 the asset is charged at a particular time only to the extent of an existing borrowing or debt – see for example the decision of Brennan J in Sibbles v Highfern Pty Ltd (1987) 164 CLR 214 at 229 cited in Re Fawthrop and Repatriation Commission (1993) 19 AAR 220. Consequently the Tribunal finds that the value of the charge on 21 Beecham Road on the 29 October 2002 was $179,253.' 40 The effect of that finding was that each of the applicants' current assets value limit exceeded $206,500. That meant that neither of them were entitled to the respective benefits which they had claimed. 41 Section 1121(1) of the SS Act provides: 'If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person's assets for the purposes of this Act, is to be reduced by the value of that charge or encumbrance.' 42 Section 1121(1) of the SS Act requires the Secretary to identify a particular asset; value that asset; and then reduce the value so arrived at by the value of any charge or encumbrance. Section 1121 may be contrasted to the manner in which the Secretary must address effective liabilities on the value of assets used in primary production: s 1121A. 43 The exercise under s 1121(1) requires a matching of assets and corresponding charges or encumbrances. 44 Therefore, in this case, the Secretary and the Tribunals had to consider what charge or encumbrance attached to 21 Beecham Road and what charges or encumbrances attached to 143 Rochdale Road and 62 Graylands Road. 45 The applicants were the owners of the property at 21 Beecham Road. 46 The undisputed evidence was that at the time each of them made their respective applications for their entitlements, an amount of $179,253 was owed to Westpac on a facility which had a credit limit of $340,000. 47 It was the appellant's case before the Tribunals that the value of the assets should be reduced by the value of the credit limit, namely, $340,000 not the amount of $179,253 which was then owing to Westpac. 48 The Tribunals below and, relevantly, the AAT rejected that argument. 49 In my opinion, the value of the charge or encumbrance, for the purpose of s 1121(1), is the amount then due and owing at the time that the application is made. 50 The amount of the credit facility is unimportant if the credit facility has not been drawn down to its limit. 51 In Sibbles v Highfern Pty Ltd (1987) 164 CLR 214, Brennan J said at 229: ' A charge cannot exist unless the debt or liability to be secured is in existence: there may be an agreement that property be charged with the payment of a future debt, but there is no charge until the debt exists. The giving of a bill of mortgage over land is sometimes said to be the mortgaging of the land even though the debt or liability to be secured has not come into existence, but the giving of an instrument which can have effect "only as a security for the sum of money … intended to be thereby secured" (s. 60, Real Property Act) is not effective to create a charge until there is a sum of money charged on the land. The bill of mortgage was given by the appellants to secure the payment of any "amount or balance … owing or unpaid". When the bill of mortgage was given nothing was "owing or unpaid". There was no burden on the land at that time. There was no charge on the land until the vendor's account went into overdraft.' 52 On the date of this application, the applicants would have been entitled to discharge the amount of the charge or encumbrance by paying the sum of $179,253. 53 If the applicants' argument were accepted, it would allow applicants to arrange credit facilities for significant amounts and draw them down to a negligible amount, but claim that the value of the charge or encumbrance is the greater amount. 54 In my opinion, that argument cannot be accepted. 55 I agree with the decision of the AAT. 56 The appeal is dismissed. 57 The applicants must pay the respondent's costs. I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate: Dated: 11 March 2005 Counsel for the Applicants: Mrs P Nock appeared in person on behalf of the Applicants Counsel for the Respondent: Mr P Pope Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 3 March 2005 Date of Judgment: 11 March 2005