Alex Andriotis and and Secretary, Department of Social Services

[2014] AATA 390

[2014] AATA 390 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2012/3847
Re	Alex Andriotis
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT
File Number	2012/3850
Re	Argyro Andriotis
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Deputy President K Bean
Date	20 June 2014
Place	Adelaide

1.          In application 2012/3847:

(a)        the decision under review is varied so as to provide that Mr Andriotis’ entitlement to Age Pension is to be determined on the basis that the value of his Greek properties was €72,450 as at 23 January 2013 and €64,400 as at 23 January 2014; and

(b)        the matter is remitted to the respondent for recalculation of Mr Andriotis’ entitlement to Age Pension accordingly.

2.          In application 2012/3850:

(a)        the decision under review is varied so as to provide that Mrs Andriotis’ entitlement to Age Pension is to be determined on the basis that the value of Mr Andriotis’ Greek properties was €72,450 as at 23 January 2013 and €64,400 as at 23 January 2014; and

(b)        the matter is remitted to the respondent for recalculation of Mrs Andriotis’ entitlement to Age Pension accordingly.

.................[Sgd]...............................

Deputy President K Bean

CATCHWORDS

SOCIAL SECURITY – Age pension – Assets test – Market value of properties in Greece – Valuation by qualified and independent valuer – Reduction in value of properties due to Greek economy – Decisions under review varied.

LEGISLATION

Social Security Act 1991, s 1064

CASES

Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790

Re Evans and Secretary, Department of Social Security [1993] AATA 497
Re Torv and Secretary, Department of Social Security [1992] AATA 185

Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579

REASONS FOR DECISION

Deputy President K Bean

20 June 2014

1. The applicants, Mr and Mrs Andriotis, are currently in receipt of Age Pension.  Mr Andriotis has been receiving Age Pension since 10 August 2006 and Mrs Andriotis has been receiving Age Pension since 18 May 1995, and each of their pensions is assessed by reference to the value of their assets, including land and a dwelling owned by Mr Andriotis and situated on the island of Corfu in Greece.

2. When Mr Andriotis claimed Age Pension in 2006, he advised Centrelink of these properties and provided an estimated value of $7,500.00.  However, valuations were subsequently undertaken, including by the Australian Valuation Office, which arrived at a higher value. 

3. A number of decisions were subsequently made reducing Mr and Mrs Andriotis’ rates of Age Pension due to an increase in the assessed value of their assets.  A number of those decisions were challenged by Mr and Mrs Andriotis, and on 23 June 2010, the Social Security Appeals Tribunal (the SSAT) made a decision to set aside the then current decision and remit the matter back to Centrelink with a direction to revalue the properties.[1]

   [1] Exhibit 1, T34/127.

4. That revaluation was subsequently undertaken and resulted in a valuation lower than that arrived at by the Australian Valuation Office, but higher than what Mr and Mrs Andriotis believe the properties are worth.

5. Mr and Mrs Andriotis accordingly sought review of the relevant decisions by the SSAT.  However, on 31 July 2012, the SSAT affirmed the decisions under review, being decisions to assess the combined values of Mr Andriotis’ properties in Greece as €80,500 for Age Pension rate purposes from 23 January 2012.

6. On 4 September 2012, Mr and Mrs Andriotis lodged applications in this Tribunal seeking review of those decisions and giving rise to these proceedings.  Mrs Andriotis did not attend or participate in the hearing in this matter, apparently because of ill health.  However, Mr Andriotis indicated that she was happy for him to represent her interests.

   ISSUES

7. As Mr and Mrs Andriotis do not dispute the assessments which have been made as to their entitlement to Age Pension on any other basis, it follows that in broad terms the question for me to determine is the correct value of Mr Andriotis’ properties in Greece, for the purposes of assessing Mr and Mrs Andriotis’ entitlement to Age Pension from 23 January 2012.

8. I propose to first set out the applicable legal framework before addressing that issue by reference to the evidence before me.

   THE LEGAL FRAMEWORK

9. Section 1064 of the Social Security Act 1991 (the Act) provides for Age Pension rates to be calculated according to a rate calculator at the end of the section.  Pursuant to that provision, a person’s rate of Age Pension is required to be calculated by reference to both an income and assets test.  The term “asset” is broadly defined by s 11 of the Act and there is no dispute that this includes real estate, other than a person’s principal home.  There is also no dispute between the parties that Mr Andriotis’ properties in Greece must be taken into account in the calculation of the total assets held by Mr and Mrs Andriotis for the purpose of the assets test to be applied in determining Mr and Mrs Andriotis’ correct rate of Age Pension.

10. When it comes to the valuation of assets, the Act does not set out any particular method by which property is to be valued.  However, past cases have considered this question and previous decisions of this Tribunal have concluded that consideration should be given to the net market value of the property based on comparable sales and the “best use” to which the asset could be put.[2]

    [2] See Re Torv and Secretary, Department of Social Security [1992] AATA 185; Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579.

11. This approach was endorsed by the Federal Court in the decision of Kirkovski v Secretary, Department of Family and Community Services[3], where her Honour Justice Bennett observed:

    Under the Social Security Act 1991 (Cth) there is no statutory provision specifying any method for the valuation of assets. The test which seems to have been applied by the AAT in a majority of cases is a net market value approach based on comparable sales and the ‘best use’ to which the asset could be put  (see Fong and Secretary Department of Family and Community Services [2002] AAT 172; Re Emberts and Repatriation Commission (1988) 16 ALD 19).

    [3] [2004] FCA 790 at [17].

12. In relation to the valuation process, an earlier Tribunal also observed in the matter of Re Evans and Secretary, Department of Social Security[4]:

    Approach to valuation

    7.        It is clear from the decision of the High Court in Spencer v Commonwealth of Australia (1907) 5 CLR 418 and that in R v Brown (1867) 2 LRQB 630 that in assessing the value of property for the purposes of the assets test under the Act, it is necessary both to ascertain the highest and best use of the property and to assess the price that a desirous buyer would pay to a willing but not anxious seller to purchase the property.

    8.        In Re Woodhouse and Secretary, Department of Social Security 12 ALD 474, this Tribunal accepted a principle of valuation that neither bids at public auction nor accepted offers to purchase can be regarded as evidence of valuation and only concluded contracts are admissible as evidence (McDonald v Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 231 applied). This Tribunal does not understand that approach to limit evidence of valuation to concluded contracts: i.e. that only concluded contracts would suffice as appropriate evidence of the sale value. Where there is no sale or indeed a recent sale then the market value is an estimate of what the willing but not anxious buyer would pay the willing but not anxious seller to conclude a sale; Re: Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193. It is upon that principle that a qualified and experienced valuer's report would be accepted into evidence and that evidence weighed having regard to the process of arriving at the valuation. Obviously a figure plucked from the air, albeit by a qualified valuer, is of no use, whereas a valuation done independently by an experienced and competent qualified valuer would carry considerable weight and unless rebutted must be taken as conclusive. It is for the Tribunal to be satisfied that a valuation was supported by the qualities referred to in Re Reynolds. In that event relevant questions are:

    -         Is the valuer appropriately qualified?

    -         Is the valuer experienced in the sort of valuation under consideration?

    -Was the valuer's state of mind independent of the purpose for which the value was sought?

    -Was the valuation carried out in accordance with accepted practices of the profession?[5]

    [4] [1993] AATA 497 at [7]-[8].

    [5] Evans and Secretary, Department of Social Security [1993] AATA 497.

13. It is in this context therefore and against the background of these principles that I must proceed to consider the value of Mr Andriotis’ Greek properties.

    THE EVIDENCE

    The “King Hellas” Valuation

14. The evidence before me directed to this question includes an updated report on a roadside valuation undertaken by a certified valuer, Mr Tim Hughes, and an electrical engineer, Mr Nicholas Rodis, for a firm described as “King Hellas” at the request of the Australian Valuation Office.  That valuation was apparently undertaken in January 2012 and the report was received by the Australian Valuation Office on 22 March 2012.[6]

    [6] Exhibit 1, T21/83.

15. This report provides a valuation of certain properties close to the village Agios Mathaios, approximately 25 kilometres south of Corfu Town on the island of Corfu as at the date of 23 January 2012.  The properties are described in the report as follows:

    1. An old two-storey home with total area of approximately 68.66m², located within the village of Agios Mathaios.

    2. An agricultural smallholding located in the neighbourhood of “Mintziviri, total area 2,605.02m², used for fruit and vegetable production including 30 olive trees.

    3. Land plot located in the neighbourhood of “Mintziviri” near the village of Agios Mathaios, total area 224.48m, with one olive tree.

    4. A semi-cultivated land plot located in the area known as “Gardiki”, total area 717.78m², with 11 olive trees.

    5. A cultivated, semi-fenced olive grove located in “Voutomilas”, near Lake Korissia on the southwestern coastline of Corfu, rectangular in shape with a total area of 1,426.23m², supporting 43 young olive trees.

    6. An uncultivated, unfence hillside land area located in “Kontrakas”, total area 1,165.69m², with 29 olive trees.[7]

    [7] Exhibit 1, T21/86.

16. Mr Andriotis confirmed at the hearing that this is an accurate description of the properties owned by him in Greece.

17. The report also contains a more detailed description of the relevant properties, together with photographs, and addresses issues including planning status, tenure and market evidence before proceeding to give the following market value for the house and land plots respectively:

    1.    HOUSE IN AGIOS MATHAIOS

    Four years ago there was significant demand for old village properties on Corfu but since then there has been a marked fall due to the economic crisis.  We estimate that if finished the subject house will be worth around 65,000 €.  After deducting a cost of 20,000 € for completing the works and making an allowance for developer’s profit we estimate that the current market value is 45,000 €.

    LAND PLOTS

    2.A cleared, cultivated, accessible plot – this property is marketable and we estimate a value of 20,000 €.

    3.Small and not directly accessible, difficult to sell except to neighboring owners who would be termed special purchasers.  We estimate a value of 1,000 €.

    4.Again not directly accessible and only of interest to neighboring landowners, we estimate a value of 3,500 €.

    5.A more attractive olive grove although in a conservation area near Lake Korissia, again not directly accessible from the nearest public road.  We estimate a value of 8,500 €.

    6.An unfenced, uncultivated part of a hillside forest, difficult to access and very difficult to sell except to neighboring owners.  We estimate a value of 2,500 €.[8]

    [8] Exhibit 1, T21/92.

18. The report proceeds to summarise the authors’ opinion as to the current market values of the relevant properties[9] as follows:

    [9] Exhibit 1, T21/93.

Location	Total Area (m²)	€/m²	Market Value (€)
1. Two storey house in Agios Matheos	68.66	€ 650.00	€ 45,000
2. “Mintziviri”, Agios Matheos	2,605.02	€ 7.50	€ 20,000
3. “Mintziviri”, Agios Matheos	244.48	€ 4.00	€ 1,000
4.  “Garidki”, Agios Matheos	717.78	€ 5.00	€ 3,500
5.  “Voutomilas”, Agios Matheos	1,426.23	€ 6.00	€ 8,500
6.  “Kontrakas”, “Agios Matheos”	1,165.69	€ 2.00	€ 2,500
TOTAL			€ 80,500

The authors then proceed to confirm that their overall estimate of the value of all of the properties is €80,500 in total.

1. The report also contains a retrospective valuation, based on inspection of the properties in January 2012, of the respective valuations of the properties in October 2009 and December 2010, as well as in January 2012[10], summarised in a table at page 10 of the report as follows:

   [10] Exhibit 1, T21/93.

Property	Area m²	Market Value 06 Oct 2009	Market Value 01 Dec 2010	Market Value 23 Jan 2012
House	68	€ 49,000	€ 47,000	€ 45,000
Land 2	2,605	€ 22,000	€ 21,000	€ 20,000
Land 2	245	€ 1,100	€ 1,000	€ 1,000
Land 3	718	€ 4,000	€ 3,500	€ 3,500
Land 4	1,426	€ 9,500	€ 9,000	€ 8,500
Land 5	1,166	€ 2,900	€ 2,500	€ 2,500
TOTAL	6,228	€ 88,500	€ 84,000	€80,500

The report also contains a discussion of general market trends including the impact of the Greek debt crisis.[11]

[11] Exhibit 1, T21/94.

1. One of the authors of the King Hellas report, Mr Tim Hughes, also gave evidence at the hearing.

2. Mr Hughes told the Tribunal that he had lived and worked in Greece since 1991.  He became a chartered surveyor in 1992 and has since worked in valuation offices in Athens valuing commercial and residential premises in Greece for private individuals, companies, and three major Greek banks.  Mr Hughes said that the methodology used to value Mr Andriotis’ properties was the “comparable method”, which involves considering properties of a similar size, location and condition that have been sold or are for sale. He said that a “holistic view” of the evidence is taken and adjusted to the property being valued.

3. Mr Hughes confirmed that he had visited Mr Andriotis’ properties twice.  He said that the issue of accessibility for most of the land plots was taken into account in the valuation, such that a 30% discount was applied to their market value.  He explained that the land plots could potentially be amalgamated with neighbouring land in the future to create a larger plot upon which a house could be built, thus raising the value of the individual plots.  He said that whilst the most likely buyers would be the adjoining owners, it was likely that there would also be others who would be willing to pay a relatively small amount of money for each of the plots, notwithstanding the access issues.

4. In relation to Mr Andriotis’ house, Mr Hughes explained that it could potentially be a property of interest to European buyers who visit Corfu and may wish to purchase it as a second home.  

5. Mr Hughes acknowledged that the Greek economy has “shrunk” over the last six years and that property values have fallen by approximately 20% since January 2012, that is, by 10% each year.  He accepted that the market values given in the King Hellas report would now be 20% lower as a result.

6. Mr Hughes was also asked about a document supplied by Mr Andriotis emanating from the Greek Taxation Office and which appeared to give a value to Mr Andriotis’ house in Agios Mathaios.  He told the Tribunal that this document represented an objective valuation of the house for tax purposes, which is usually well below market value.  He said that his understanding of how that value is determined was that a “zone rate” per square metre was applied to all properties in a particular neighbourhood.  The properties are not inspected, although adjustments may be made for road frontage and proximity to the sea.

   Evidence provided by Mr Andriotis

7. As indicated above, Mr Andriotis provided a document from the Greek Taxation Office which values the house at €9,137.43, in support of his contention that the value of the properties is much lower than that arrived at by Mr Hughes.[12]  After the hearing, Mr Andriotis also provided a certificate from the Ministry of Finance, Tax Office of Kerkyra, dated 14 February 2014, which was subsequently translated by the respondent.

   [12] Exhibits 2 and 4.

8. This certificate gives the value of the five land plots “on the basis of law 1249/82 which determines the objective system of calculating the value of real estate in Greece.”[13]  Adopting the same numbering as that reflected in the King Hellas report, the values given in the certificate for the relevant land plots are as follows:

   [13] English translation of document lodged by Mr Andriotis on 26 March 2014, provided by the respondent on 2 June 2014.

2 -	€ 5,837.44;
3 -	€  544.32;
4 -	€  1,417.92;
5 -	€  3,239.04; and
6 -	€  2,430.40.

1. Mr Andriotis has also provided a “certificate” from the Mayor of Melition, Mr Ioannis Livadiotis, apparently dated 2 November 2009.  The translation of the certificate states that Mr Andriotis is the owner of:

   A)     A house of around 50 m2, pre-existing in 1955, real value 9,000 euro

   B)     Farms with 114 olive trees valued 4,560 euros approximately.[14]

   [14] Exhibit 1, 733/125 and T45/207.

2. Mr Andriotis also gave evidence that the house was in extremely poor condition, and that the ceiling of the upstairs section was at approximately chest height, making it necessary to stoop to enter that part of the house.  He also added that it was currently unsafe for children.

   MR ANDRIOTIS’ CONTENTIONS

3. At the hearing, Mr Andriotis indicated that he disputed the accuracy of the valuations reflected in the King Hellas report, primarily for the following reasons:

   ·The market in Greece is “dead”;

   ·The total value attributed to the properties has changed over time, from an initial €60,000, to €82,000, and then €140,000, and finally €80,500;

   ·The valuations given by King Hellas over time are contradictory and the respondent should have obtained a valuation from another valuer;

   ·Mr Hughes did not convincingly answer his questions in cross-examination about how a value of €45,000 could be attributed to the house in light of its present state;

   ·The Greek Taxation Office does send people to inspect properties for the purpose of obtaining a value for tax purposes, and it is incorrect to say that that value does not reflect the market value; and

   ·The valuations given by the local Mayor also supported a much lower value for both the house and land plots.

4. Following provision of the certificate from the Ministry of Finance after the hearing, Mr Andriotis also contended that this supported lower values for the land plots, and that the values in the certificate should be accepted in preference to those in the King Hellas report.

   CONSIDERATION

5. I propose to address each of these contentions in turn.

   The state of the Greek economy

6. As alluded to above, Mr Hughes confirmed in the course of his oral evidence that property prices in Greece have fallen in recent years as a result of the state of the Greek economy, by roughly 10% per year.  I accept that it is appropriate to take this into account in determining the value of Mr Andriotis’ properties from January 2012.

   Changes in the valuations and the need for a different valuer

1. I note that the differences in the total values attributed to the properties by King Hellas were explained by Mr Hughes by reference to the fact that the first three valuations were “desktop valuations” which were made without inspecting the properties.  The most recent valuation of €80,500 was made following an inspection of Mr Andriotis’ properties by Mr Hughes.  Mr Parker, who appeared as advocate for the respondent, submitted, and I accept, that the recent valuation most accurately reflects the market value of the properties as at 23 January 2012.

2. The respondent also pointed out that it was open to Mr Andriotis to obtain his own valuation of the properties for the purposes of these proceedings.  I do not consider that the respondent was obliged to obtain a valuation from a different valuer in the circumstances of this matter.

   Adequacy of Mr Hughes’ evidence

3. Mr Andriotis put to Mr Hughes that it appeared from his report that a house similar in size to that of Mr Andriotis’ and which was also in need of repair had been offered for sale on the market at €30,000, yet King Hellas had valued Mr Andriotis’ house at €45,000.  Mr Hughes noted that Mr Andriotis’ house was a few square metres larger, and said he may have also taken some other details into account at the time of preparing the report.  He conceded that he was not at that time able to completely explain the difference in value, particularly as he did not know how much repair was required for the €30,000 house.

4. Mr Andriotis also put to Mr Hughes that the ceiling of the top level of his house in Corfu is at chest height, such that it was necessary to stoop to enter this part of the house.  However, Mr Hughes said that he could recall being able to walk into the upstairs section, and could not recall any such height restriction, otherwise he would have remarked upon it in his report.

   The Greek Taxation Office Valuation

5. Mr Andriotis contended that the value ascribed to the house by the Greek Taxation Office was more reliable than that arrived at by Mr Hughes, and asserted that this valuation was based on inspection of the property.  However, I prefer the evidence of Mr Hughes as to the approach taken by the Greek Taxation Office to the valuation of properties for tax purposes.  I am therefore satisfied that an arbitrary value is attributed per square metre, which is not reflective of the market value, and that the document relied upon by Mr Andriotis therefore carries less weight than the King Hellas report.

   Valuation by the Mayor

6. Whilst the value given by Mr Livadiotis for the house is similar to that given by the Greek Taxation Office, it is not apparent how Mr Livadiotis has arrived at either of the values reflected in his certificate.  In those circumstance, I consider that that certificate carries little weight when compared with the King Hellas Report and Mr Hughes’ evidence, which reflects a proper and independent valuation by a qualified valuer.

   The Ministry of Finance Certificate

7. The certificate provided by the Ministry of Finance indicates that the value of the land plots in total is approximately €13,469.12, or about one third of the value arrived at by King Hellas.  However, as with the certificate provided by the Greek Taxation Office, I am not satisfied that the values given in the certificate are the market values.  Indeed, the reference in the certificate to “the objective system of calculating the value of real estate in Greece” suggests that these values have been arrived at by a relatively arbitrary process, akin to the approach taken by the Greek Taxation Office as described by Mr Hughes.  As I am satisfied that the values arrived at in the King Hellas report do reflect the market value of the house and land plots, I prefer that report over the contents of this certificate.

   Summary

8. Accordingly, I am satisfied that the King Hellas report is the most reliable evidence before me as to the market value of the properties at the relevant times, and I prefer the valuations contained in the King Hellas report, and the oral evidence of Mr Hughes, to the evidence provided by Mr Andriotis.  In reaching that conclusion, I have taken into account the fact that I am satisfied that the valuations reflected in the King Hellas report were arrived at after physical inspection of the properties by a qualified and independent valuer having regard to comparable sales and likely buyers of the properties, and therefore reflect a realistic assessment of the net market value of the properties, as at 23 January 2012.  I am also satisfied that the report gives a reliable indication of the respective values of the properties at the earlier dates indicated in the report, namely October 2009 and December 2010, when the total value of the properties were given as €88,500 and €84,000 respectively.  On the basis of Mr Hughes’ oral evidence, I am further satisfied that the value of the properties has fallen by 10% each year since January 2012.

9. Therefore, on the basis of the evidence currently before me, I am satisfied that the SSAT was correct to conclude that Mr and Mrs Andriotis’ Age Pension should be assessed on the basis that Mr Andriotis’ properties in Greece had a total value of €80,500 as at 23 January 2012.  However, having regard to the additional evidence before me as to the value of Mr Andriotis’ properties in the period after 23 January 2012, I propose to vary the decisions under review so as to provide that Mr and Mrs Andriotis’ Age Pensions should be assessed on the basis that Mr Andriotis’ Greek properties were worth €72,450 as at 23 January 2013, and €64,400 as at 23 January 2014.  I note that Mr Parker accepted that this variation should be made in light of Mr Hughes’ evidence.

   DECISION

10. In application 2012/3847:

    (a)the decision under review is varied so as to provide that Mr Andriotis’ entitlement to Age Pension is to be determined on the basis that the value of his Greek properties was €72,450 as at 23 January 2013 and €64,400 as at 23 January 2014; and

    (b)the matter is remitted to the respondent for recalculation of Mr Andriotis’ entitlement to Age Pension accordingly.

11. In application 2012/3850:

    (a)the decision under review is varied so as to provide that Mrs Andriotis’ entitlement to Age Pension is to be determined on the basis that the value of Mr Andriotis’ Greek properties was €72,450 as at 23 January 2013 and €64,400 as at 23 January 2014; and

    (b)the matter is remitted to the respondent for recalculation of Mrs Andriotis’ entitlement to Age Pension accordingly.

I certify that the preceding 44 (forty -four) paragraphs are a true copy of the reasons for the decision herein of Deputy President K Bean

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Associate

Dated 20 June 2014

Dates of hearing	23 January 2014 and 6 and 7 March 2014
Applicants	Mr Andriotis in person Mr Andriotis on behalf of Mrs Andriotis
Advocate for the Respondent	Mr A Parker
Solicitors for the Respondent	Program Litigation & Review Branch Department of Human Services