Miezitis and Secretary, Department of Employment and Workplace Relations
[2006] AATA 760
•29 August 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 760
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/180
GENERAL ADMINISTRATIVE DIVISION ) Re RALPH MIEZITIS Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Dr EK Christie, Member Date29 August 2006
PlaceBrisbane
Decision The decision under review is affirmed. This means Mr Miezitis’ application for review is unsuccessful. The Tribunal makes some observations in relation to any potential future application for Disability Support Pension by Mr Miezitis. ....................[Sgd]..........................
Member
CATCHWORDS
Social Security - disability support pension - current market value - financial hardship rules - unrealistic asset.
Social Security Act 1991 - ss11, 98, 1064, 1121 and 1129(1)
Drake v Minister for Immigration and Ethnic Affairs (2002) 124 FCR 316 at 324-326
Australian Tea Tree Oil Research Institute v Industry Research and Development Board (2002) 124 FCR 316 at 324-326
Secretary, Department of Social Security and Langton (1993) 31 ALD 579 at 586-7
Spencer v Commonwealth (1917) 5 CLR 418
Stratford and Secretary Department of Employment and Workplace Relations [2006] AATA 410
WRITTEN REASONS FOR ORAL DECISION
7 September 2006 Dr EK Christie 1. This is an application by Ralph Miezitis to review a decision made on 16 November 2005 by the Social Security Appeals Tribunal [the “SSAT”], that decided Mr Miezitis was not entitled to a disability support pension (DSP) at the time he filed his claim on 13 April 2005.
2. At the hearing Mr Miezitis represented himself. The Department was represented by Ms S Dole, a Departmental advocate.
3. The evidence before the Tribunal comprised the documents filed pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the “T” Documents) [Exhibit R1] and the various exhibits lodged by the parties.
ISSUES BEFORE THE TRIBUNAL
4. There was only one issue for the Tribunal to decide: whether Mr Miezitis was entitled to a disability support pension when he filed his claim on 13 April 2005.
5. This issue depends on findings by the Tribunal in relation to the following matters arising under the Social Security Act 1991:
(a)The value of his assets at the time he filed his claim for Disability Support Pension, in relation to the “Asset Threshold Limit” of $313,750, in order to be entitled to DSP;
(b)Whether his assets came within the statutory meaning of an “unrealisable asset” in order for the “financial hardship provision” to come into operation; and
(c)A finding on whether Mr Miezitis’ land at Howrah was an “unrealisable asset” requires a consideration of two factors:
(i)whether it was reasonable to expect Mr Miezitis to sell or realize this asset; and
(ii)whether it was reasonable to expect Mr Miezitis to use the asset as a security for borrowing.
6. It is important to recognise that Mr Miezitis would have to satisfy both of these requirements [c(i) and c(ii)] in order for a finding that his “land asset” was a “unrealisable asset”.
GENERAL FACTS
7. Mr Miezitis owns a vacant block of land at 33-35 Howrah Road, Howrah, Tasmania. At the commencement of the hearing he acknowledged that there was no dispute that the market value of the land was at least $500,000.00. Moreover, Ms Dole referred the Tribunal to a further valuation of the property, on 7 March 2006 by the Australian Valuation Office, that resulted in the market value of $500,000 remaining unchanged.
8. Mr Miezitis filed a claim for a DSP on 13 April 2006.
9. On the basis of the evidence before it, the SSAT made the following findings of fact:
“(a) Mr Miezitis lodged a claim for disability support pension on 13 April 2005.
(b)Mr Miezitis owns the property situated at 33-35 Howrah Road, Howrah in Tasmania, valued at $500,000.
(c) Mr Miezitis withdrew the property from sale in May 2005.
(d)Mr Miezitis did not actively seek to sell the property as he was anticipating a positive outcome in his appeal to the Administrative Appeals Tribunal.
(e)Mr Miezitis was able to borrow against the property from his sister. A mortgage was registered on the Certificate of Title on 22 August 2005.” (T2 Folios 10,11).
10. Mr Miezitis gave the following responses to each of these findings at the start of the hearing:
·He agreed with the findings of fact (a), (b), (c) and (e).
·However, he disagreed with finding (d) that he was not actively seeking to sell the property. The property had been listed with an agent and he would have sold it if he had been offered the right price. He was unaware of the basis for the SSAT finding that he was anticipating a positive outcome on his appeal to the AAT.
Statutory Requirements And Case Law
The Tribunal’s Decision Making Powers
11. There is only one decision possible in this application for review: whether Mr Miezitis was entitled to a DSP when he filed his claim on 13 April 2005. Accordingly, the question for the determination of the Tribunal is whether the decision under review is the correct one: see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 at 68.
12. Administrative decision-makers are generally required to address the evidence before them and not confine themselves to evidence before a prior decision-maker whose decision is being reviewed unless the relevant legislation requires a decision to be based upon the circumstances at a particular point of time: see Australian Tea Tree Oil Research Institute v Industry Research and Development Board (2002) 124 FCR 316 at 324-326.
13. In this application for review, the Tribunal considers all the evidence and information before the Tribunal as at the date of the hearing.
The Statutory Scheme and the Assets Threshold Test under the Social Security Act
14. Disability support pension is subject to an assets test under Module G of section 1064 of the Social Security Act 1991 (“the SS Act”). Mr Miezitis is a single homeowner. At the time of his application in April 2005, the allowable limit (or threshold) set by the assets test, in order to be eligible for DSP, was $313,750.
15. Section 1129 of the SS Act prescribes “financial hardship rules” in certain circumstances, where a social security pension is not payable to a person because their assets exceed the allowable limit (in Mr Miezitis’ case, $313,750). The financial hardship rules then apply. If the following circumstances also exist, the person would be entitled to the social security pension. In Mr Miezitis’ case he would have to satisfy the following statutory requirements prescribed in s.1129(1) of the SS Act:
“….
(c) the person, or the person’s partner, has an unrealisable asset; and
(d) the person lodges with the Department, in a form approved by the Secretary, request that this section apply to the person; and
(e)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;….. (emphasis added)”
16. Central to satisfying s.1129(1)(c) of the SS Act is the meaning of “unrealisable asset”. With respect to the facts of Mr Miezitis’ case, the following requirements prescribed by ss.11(13) are relevant and must be satisfied:
“11.(13) For the purposes of the application of this Act to a social security pension (other than a pension PP (single), an asset of a person is also an unrealisable asset if:
(a) the person could not reasonably be expected to sell or realise the asset; and
(b) the person could not reasonably be expected to use the asset as a security for borrowing.”
17. Paragraphs (a) and (b) are joined by “and” which means that both paragraphs must be satisfied by Mr Miezitis in order for him to succeed in establishing that his land is an “unrealisable asset”.
CONSIDERATION OF THE ISSUES
Issue 1: Value of Assets at the Time of Filing Claim for Disability Support Pension on 13 April 2005
18. The SS Act does not specify the method by which land is to be valued, but it has been accepted by this Tribunal in Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579 that the generally accepted approach is the current market value of the property.
19. There is no dispute between the parties that the market value of the land was at least $500,000.
Issue 2: Whether it was unreasonable to expect Mr Miezitis to sell or to realise his asset (land at Howrah Road)
20. Mr Miezitis placed a “For Sale” sign on the Howrah property in the Mercury newspaper on 2 October 2004 and listed the property for sale with PRD Nationwide on 18 October 2004, as sole agent. The property remained listed with this real estate agent until 4 May 2005 when Mr Miezitis cancelled the contract.
21. In November 2004 Mr Miezitis received an offer of $566,500.00 for the Howrah property, the terms of which were a deposit of 2½% of the total ($14,125), with settlement six months later.
22. Mr Miezitis did not consider the terms of this offer to be reasonable for the following reasons:
·If the prospective purchaser withdrew from the contract, the 2½% deposit would not cover the costs he would have to pay to the real estate agent.
·The prospective purchaser had the option of “entitlement” to the property over the summer six months – the peak selling period for property in Tasmania. Mr Miezitis, on the other hand, had to forego any control over the property for a six month period and so run the risk of the prospective purchaser withdrawing from the contract – but with minimal financial impact on the purchaser. Moreover, the “six month settlement period” was connected with a period of rising real estate prices in Tasmania.
·Support for Mr Miezitis’ proposition that the terms of settlement were unreasonable can be given some credence from statements made by the principals of two real estate firms in Tasmania.
“’An offer in writing with a deposit of 2.5% of the purchase price of $400,000 and settlement 6 months from the date of the contract.’
The normal deposit on property is an amount of 10 percent, although on some occasions vendors may accept a lower amount, say 5%. A deposit of 2.5% is considered a low amount and one which a purchaser might well be prepared to forfeit in the event the contract could not be completed. This amount would be entirely absorbed in agents commission and the vendor would not receive any funds in all probability.
The only remedy for the vendor may be an action against the purchaser in the Supreme Court of Tasmania which is so costly that such cases are virtually unheard of.
A six months completion period is at the upper end of the scale and is a very long time to have a property effectively removed from the market.
The combination of the two factors, a low deposit and six months settlement, would render such an offer, in my opinion, to be unattractive and not one I would be recommending to a vendor.” (T29 Folio 110, M. Hobden, Director, Peterswald RE, Tasmania)
and
“This is to confirm that the normal contractual arrangements for a real estate sale is 5-10% deposit and 30-60 day settlement. Occasionally a 90 day settlement is arranged but the average is within the 60 day period.” (T30 Folio 111, J. Aufder-Heide, Prime R.E. Tasmania).
23. The following information provided by Mr Miezitis at the SSAT hearing is consistent with his oral evidence before the Tribunal:
“That he had not received any further offers on the property since November 2004; that he had left the property with PRD Nationwide for a substantial period of time, finally withdrawing it from sale in May 2005; that no further advertisements had been placed in relation to the property but that PRD had kept their sign up until August 2005 and, had an offer been made on the property up to that point in time he believed he would have been bound. (T2 Folio 8).
24. Furthermore, Mr Miezitis pointed out that he had been a resident of Queensland for some 18 years and so had relied completely on his real estate agent in Tasmania to effectively market his property – given that he had no direct link to the agent, or to monitor his activities, because of their different locations in Australia. However, he had believed that when the first offer was made the other parties would be interested, given the location of the property.
Issue 3: Whether it was reasonable to expect Mr Meizitis to use the asset as a security for borrowing
25. In August 2005, Mr Miezitis secured a loan of $178,000 from his sister by a registered mortgage over his land at Howrah. Of this amount, $78,000 was to repay a past debt for living expenses incurred, that he owed his sister. The amount of $100,000 was to cover future living and medical expenses. Mr Miezitis suffers from throat cancer.
26. Interest on this loan was being charged at 7% per annum and he had borrowed sufficient funds to be able to pay the interest charges (T2 Folio 8).
CONSIDERATION OF THE ISSUES
27. The first matter for the Tribunal to consider is the credibility of Mr Meizitis as a witness. The Tribunal finds him to be a witness of truth.
28. With respect to the first issue, the Tribunal concludes that it is quite clear that the market value of Mr Miezitis’ property (land at Howrah Tasmania) of $500,000 exceeds the threshold (of allowable limits) imposed by the asset test of $313,750 at the time the DSP claim was filed on 13 April 2005.
29. However, s 1121 of the SS Act provides that the value of an asset is reduced by any mortgage over the asset. There is a formal mortgage of $128,000 to secure the loan by Mr Miezitis. Accordingly, the “adjusted asset value”, in these circumstances, would be around $322,000 – still above the threshold (or allowable limit).
30. Consequently, under s 98(1) of the SS Act, Mr Miezitis was not entitled to DSP when he filed his claim in April 2005. The decision by the SSAT, in this regard, is correct.
31. The second issue for the Tribunal to consider is whether it was reasonable to expect Mr Meizitis to sell or to realise his asset of land at Howrah.
32. The Tribunal accepts Mr Miezitis’ explanation for this situation (paragraph 22) as being plausible. Together with the verification of the statements by independent Tasmanian real estate agents, the Tribunal concludes that it will have been unreasonable to expect Mr Miezitis to have sold his land, in the contract entered into, in November 2004. To do so would be inconsistent with the legal principles relating to a “willing vendor” as stated in Spencer v Commonwealth of Australia(1917) 5 CLR 418.
33. However, notwithstanding this specific instance, the Tribunal considers that the following statement is relevant in any consideration of this issue, in the wider sense, for Mr Miezitis’ factual circumstances – asset rich but access to liquid assets minimal. In Stratford and Secretary, Department of Employment and Workplace Relations [2006] AATA 410, the Tribunal made the following observations:
“…. The situation [is] that the applicant and his partner may be asset rich but have access to minimal liquid assets, and the idea of having to sell their property is undoubtedly unattractive to them. But there is clearly a capacity to convert some assets to enable the applicant and his partner to provide adequately for themselves. There are no circumstances which would alter this capacity to support themselves. The fact that the [high] value of their assets…. places them in an advantaged position comparatively with others who seek social security benefits.”
34. Consequently, the application of this reasoning, together with Mr Miezitis’ belief in relation to the likelihood for the sale of his land following the first offer (paragraph 24), lends the Tribunal to conclude that it would be reasonable to expect Mr Miezitis to sell or to realise his asset of land at Howrah in order to provide adequately for himself.
35. With respect to the third issue, whether it would be reasonable to expect Mr Miezitis to use the asset as a security for borrowing, the Tribunal endorses the following finding made by the SSAT:
“24. The Tribunal has found that in August 2005 Mr Miezitis secured a loan of between $178,000 and $180,000 from his sister by a registered mortgage over the subject property. As such it cannot be said that in April 2005, when he made his application for disability support pension, and in the 13 week period thereafter, he could not use the asset as security for borrowing – the fact is he could and he has. Accordingly the property could not be classified as an unrealisable asset and must be taken into account in calculating Mr Miezitis rate of disability support pension.” (T2 Folio 10).
36. Based on the findings for issues 2 and 3, the Tribunal has no option, other than to conclude that Mr Miezitis’ property – the land at Howrah, is not an “unrealisable asset”.
37. Whilst these findings may seem harsh, it would probably be more appropriate to describe the outcome as unfortunate, in Mr Miezitis’ factual circumstances. The legislation does not give the Tribunal the discretion to make any other conclusions other than those made.
38. However, the Tribunal makes the following observations should Mr Miezitis make a future application for DSP. As at April 2005, the “adjusted value”
of Mr Miezitis land at Howrah was around $322,000 (see paragraph 29) still above the threshold or allowable limit. However, it is important to recognise that “assets” under the SS Act extends to the land Mr Meizitis owns as well as saving bank deposits and the value of personal effects.39. At the hearing, Mr Meizitis referred to outstanding debts he still has – but not quantified in terms of the number of debts and the total amount owing. In addition, interest is repayable on the security.
40. Accordingly, the Tribunal makes the observation that Mr Meizitis considers preparing a “Statement of Financial Circumstances” form (obtainable from Centrelink) in order to:
(a)Derive a balance between his incoming funds (including possible future borrowing on his land as a security) and his outgoing costs;
(b)The total amount owing and repayment (including interest) of any outstanding debts; and
(c)Potential expenses for his medical condition(s).
41. These factors may be relevant in relation to any future change in the “adjusted value” of the land asset at Howrah and the existing threshold (or allowable) limits for assets for entitlement to DSP. It may be possible to project a future date when he may come within the allowable limit set by the assets test for all assets owned by Mr Miezitis.
42. For all of the above reasons, the decision under review is affirmed.
I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: .....................................................................................
B. Hitchcock, Admin AssistantDate/s of Hearing 29 August 2006
Date of Decision 29 August 2006
Written reasons for decision 7 September 2006
Applicant Mr Miezitis, himself
Respondent Ms S Dole, Departmental Advocate
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