Blaszczyk and Secretary, Department of Family and Community Services

[2005] AATA 1224

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 1224

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No     W2004/465

GENERAL ADMINISTRATIVE DIVISION		)
Re		JAN BLASZCZYK

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal   Linda Savage-Davis, Member and Lisa Tovey, Member

Date  12 December 2005

Place Perth

Decision  The Tribunal sets aside the decision of 16 April 2004 to reduce the applicant’s rate of age pension and remits the matter to the respondent to determine the appropriate reduction in accordance with these reasons.

..........(sgd L Savage Davis)..................

Member 

CATCHWORDS

SOCIAL SECURITY – age pension – assets test – property valuation disputed – turns on own facts

Social Security Act 1991 (Cth), ss11, 55, 1064

Wragg v Secretary, Department of Family and Community Services [2004] AATA 1399

Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474

Spencer v Commonwealth of Australia (1907) 5 CLR 418

Maurici v State Revenue (2002) 212 CLR 111

REASONS FOR DECISION

12 December 2005 Linda Savage Davis, Member and Lisa Tovey, Member   

1.      This is an application by Mr Jan Blaszczyk (“the applicant”) for a review of a decision of the Social Security Appeals Tribunal (“SSAT”) made 11 November 2004.  The written reasons of the SSAT were provided on 18 November 2004.  The SSAT affirmed a decision of the delegate of the Secretary of the Department of Family and Community Services (“the respondent”) on 16 April 2004 to reduce the rate of age pension provided to the applicant due to the increase in value of the applicant’s assets.

2.      The parties agreed that the sole issue for determination by the Tribunal is the value that should be attributed to the applicant’s property situated at Lot 18 on strata plan 8753 as contained within Certificate of Title 1579/588, known as unit 31/308 Stirling Street, Perth (“the property”).  The respondent contends that the estimated market value of the property as at the date of valuation of 16 April 2004 is $145,000.  The applicant contends that the estimated market value of the property is $135,000.  The Tribunal understands that if the value of the property is $135,000 the applicant’s age pension will be approximately $30 per fortnight higher than if the value of the property is $145,000.  The total value of the applicant’s assets for the purposes of the calculating the age pension rate as at 16 April 2004 was $195,467.

3.      At the hearing before the Tribunal on 12 October 2005 the applicant represented himself.  Mr P. Maishman, an officer in the Legal Services Branch of Centrelink, appeared for the respondent.  The Tribunal was assisted by Ms Anna Habryn, an interpreter of the Polish language.

4.      The Tribunal had before it the T-documents lodged pursuant to s37 of the Administrative Appeals Act 1975 (Cth) (T1 - T64; 1 - 126). 

5.      In addition, the Tribunal received into evidence the following documents:

Exhibit A1 – letter from the applicant to the Tribunal dated 18 January 2005; letter from the applicant to the Tribunal dated 14 December 2004.

Exhibit A2 – letter from the applicant to the Tribunal undated, but received by the Tribunal 18 February 2005, which annexed a market appraisal for the property prepared by Mirka Tarca, a Licensed Real Estate Agent of Time Conti dated 17 February 2005.

Exhibit A3 – letter from the applicant to the Tribunal dated 11 August 2005.

Exhibit A4 - letter from the applicant to Mr J. Benson, Manager, Centrelink dated 31 July 2004.

Exhibit R1 – the respondent’s Statement of Facts and Contentions filed 21 June 2005.

BACKGROUND AND EVIDENCE

6.      On 18 September 2001 the applicant became the registered owner of the property.  The purchase price paid was $108,000.  The property is a two bedroom one bathroom unit of approximately 59 square metres.  It is located on the top floor of a three storey 26 unit complex.  No car bay is allocated to the unit, although the complex has 16 car bays in the common area.  Whilst there was some dispute as to the age of the complex it appears to be common ground that the complex is at least 40 years old.  It was the applicant’s evidence that he thought he had paid too much for the unit and that it needed various repairs/improvements.

7.      On 16 April 2004 Mr Weaver from the Australian Valuation Office estimated the market value of the property to be $145,000 as at that date (“valuation date”).  This valuation was based on a roadside inspection of the property and comparable sales evidence.  On 22 April 2004 the applicant sought a review of the valuation of the property.

8.      On 23 April 2004 the applicant obtained an appraisal of the property from Ms Diana Edwards of Jamie Loh Real Estate (T21).  Ms Edwards indicated that a realistic sale price for the property was between $108,000 and $114,000. 

9.      A written report in relation to the value of the property was then obtained by the respondent from Mr Weaver of the Australian Valuation Office.  Mr Weaver in his report (T45) (“AVO Report”), which is unsigned, but dated 24 May 2004, indicates that he inspected the property on 29 April 2004 and that values for units in the locality as the applicant’s property has escalated considerably over the past 2 to 3 years.  The estimated fair market value of the applicant’s property as at the valuation date was confirmed by Mr Weaver to be $145,000.  This valuation was based; it was stated, on “a full inspection of the property and analysis of current sales evidence”.  In relation to this inspection, it was the applicant’s evidence that Mr Weaver inspected the property for approximately 10 - 15 minutes.  The applicant also said that when Mr Weaver attended at the property he gave Mr Weaver a list of items where the property required improvement and/or repair.  The applicant further said that Mr Weaver told him that he was not willing to change his valuation.

10.     In the AVO Report it was stated:

“This is an abridged report only and should the property, the subject of this report, be referred to the SSAT or the AAT for review, then it is recommended AVO supply a full and detailed report for consideration by the relevant Tribunal.”

11.     Leave was granted to the respondent to confirm that the AVO Report was a “full and detailed report”.  In this regard, following the hearing of the matter, the Tribunal received a letter from Mr Maishman, dated 12 October 2005, which relevantly provides “I have spoken to the AVO valuer, Mr Graham Weaver, who has confirmed that the existing report is considered sufficient for valuation purposes and is considered to convey the necessary information.”

12.     The applicant gave evidence that he made inquiries, after this was suggested to him by Mr Maishman, in relation to obtaining his own valuation of the property, but told us that he was unable to do so given the fees involved.  He also gave evidence that he contacted the Real Estate Institute of Western Australia and was given the contact details of two members of the Institute who could assist in providing an estimate as to the value of the property.  In this respect, the applicant told us that he contacted Ms Mirka Tarca, who is a Licensed Real Estate Agent, of Time Conti.  The applicant advised us that he chose Ms Tarca to inspect the property as she had approximately 15 years experience in the industry.  It was the applicant’s evidence that Ms Tarca spent approximately one hour inspecting the property, the parking facilities available and the general condition of the complex his property was located in.  The applicant also told us that he provided a copy of the AVO Report to Ms Tarca.  Following this, a Market Appraisal Report, dated 17 February 2005, was provided to the applicant by Ms Tarca (“Market Appraisal Report”).

13.     The stated objective of the Market Appraisal Report in relation to the property was:

“To give an indication of fair market value of the above property, taking into consideration current market trends, recent sales, location of the property, supply and demand and properties currently for sale of similar style.”

14.     It was Ms Tarca’s view that in light of the recent sales in the area and a consideration of the properties currently on the market, the applicant’s property “should realise a final sale price in the region of $130,000 - $140,000.”

15.     A disclaimer to the Market Appraisal Report provided that:

“This appraisal has been prepared for the sole benefit of the party to whom it is addressed and for the purpose of marketing the property at a realistic price.  Whilst care has been taken in the preparation of this report Roccella Estates Pty Ltd trading as Time Conti or the Directors of Roccella Estates Pty Ltd do not guarantee its accuracy and will not accept any responsibility whatsoever to any third parties.  Third parties relying on this appraisal are advised to make their own independent enquiries before basing any decision on this appraisal.”

CONSIDERATION OF THE ISSUES

16. Sections 55 and 1064 of the Social Security Act 1991 (Cth) (“the Act”) set out the way in which the rate of a person’s age pension is to be calculated. In particular, Module G of s1064 provides the assets value limit in calculating the rate of pension applicable. Relevantly, in this case, as at 16 April 2004, the Tribunal was told by the respondent’s representative that a single person in the applicant’s position, namely a person with their own home, was allowed assets up to the value of $149,500.00 at the time of claiming the age pension. To the extent that the person’s assets exceed the allowable limit his or her pension is reduced accordingly. It is not in dispute that the property is an asset within the meaning of s11 (1) of the Act and, as such, is to be taken into account in determining the rate of pension applicable.

17. It is clear that there is no statutory provision in the Act which establishes the method to be adopted when valuing property (See Wragg v Secretary, Department of Family and Community Services [2004] AATA 1399 at para 16). It is equally clear that in this case the most appropriate approach to valuation is a consideration of the market value of the property which is based on comparable sales and the highest and best use to which the assets could be used (See Wragg v Secretary, Department of Family and Community Services [2004] AATA 1399 at para 16; and Re Woodhouse and Secretary, Department of Social Security (1987) 12 ALD 474).

18.     “Market Value” is defined in the AVO Report as follows:

“MARKET VALUE: The International Valuation Standards 2001, defines “Market Value” as:

“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgably, prudently, and without compulsion.”

19.     It is noted that this definition generally accords with the approach to be taken in assessing the value of land as outlined in Spencer v Commonwealth of Australia (1907) 5 CLR 418.

20.     It was the applicant’s submission that the Tribunal should prefer the estimate of market value that he obtained.  The Tribunal agrees with this submission.  In this regard, we note that both the AVO Report and the Market Appraisal Report give consideration to past sales evidence in the same area as the property in arriving at their estimates as to the market value for the property.  Both reports involved the writer inspecting the property.  However, Ms Tarca in the Market Appraisal Report considers a larger number of sales close to the valuation date, and all but one of the sales is sales of two bedroom units such as the property.  The AVO Report identifies only three sales of one bedroom units.  One of those sales occurred some eight months prior to the valuation date and was considered by Mr Weaver to be above the fair market value.  In contrast, the sales evidence referred to by Ms Tarca in the Market Appraisal Report identifies a larger volume of more compatible sales than those identified in the AVO Report.

21.     Further, of the two sales identified in the AVO Report as reflecting a fair market value, both sales referred to disclose a value substantially below the market value of $145,000 which Mr Weaver estimates for the property.  The two sales identified by Mr Weaver, both occurring in April 2004, were for $115,000 in respect of a 44 square metre one bedroom unit located on the ground floor in the same complex as the property which had a small courtyard, and $120,000 for a 45 square metre one bedroom unit on the ground floor of a complex at 292 Stirling Street, Perth.  Whilst Mr Weaver contends that these sales are of units inferior to the property, the extent to which the prices should be adjusted upwards in order to arrive at an estimated market value for the property is a matter which must be open to debate and which is not clearly explained in his report.

22.     The larger number of sales referred to by Ms Tarca, and the fact that they are more readily comparable to the property, is, in the Tribunal’s view, a significant factor.  In this respect, when adopting the comparable sales method of valuation it is important that the sales evidence be relevant and sufficient in volume (See Maurici v State Revenue (2002) 212 CLR 111 at 121).

23.     There was some suggestion by the respondent’s representative that the Market Appraisal Report ought to be seen in light of the disclaimer, indicated above.  Whilst we would accept this, there was nothing to suggest that the Market Appraisal Report was provided other than in good faith and there was no suggestion that the report was the product of any improper motive.  In our view, nothing turns on the terms of the disclaimer in this case.  It is, perhaps, merely a reflection of the more litigious society in which we now live.

24.     Further, although it may often be the case that a report obtained from a valuer would carry more weight than a report obtained from a real estate agent, to insist in every case for a recipient of government welfare benefits to obtain a sworn valuation would not, in our view, be reasonable.  To so insist would effectively deny such a recipient the ability to challenge a valuation where they lack the financial means to obtain such a report.  It may be accepted that, all things being equal, a valuation by a licensed valuer is to be accorded greater weight than an appraisal by a real estate agent.  However, in this case all things are not equal.  The greater number and relevance of the comparable sales relied upon by Ms Tarca leads us to prefer her approach to that taken by Mr Weaver, notwithstanding his qualifications as a valuer.

DECISION

25.     As to the actual estimated market value of the property, the Tribunal is prepared to accept the applicant’s concession that the value of $135,000 ought to be the estimated fair market value of the property.  The Tribunal would substitute this value for the purposes of assessing the applicant’s total assets in relation to calculating the age pension applicable.  As a consequence, the Tribunal finds that the value of the applicant’s assets for the purposes of calculating the age pension to be $185,467.

26.     The Tribunal sets aside the decision of 16 April 2004 to reduce the applicant’s rate of age pension and remits the matter to the respondent to determine the appropriate reduction in accordance with these reasons.

I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of

Signed:         ...........(sgd E M Jordan)....................
   Associate

Date of Hearing  12 October 2005
Date of Decision  12 December 2005
Counsel for the Applicant         Unrepresented
Solicitor for the Applicant          
Counsel for the Respondent     Mr Paul Maishman 
Solicitor for the Respondent      Service Recovery Team Centrelink