Miezitis and Secretary, Department of Family and Community Services
[2005] AATA 1063
•24 October 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 1063
ADMINISTRATIVE APPEALS TRIBUNAL )
) No T2005/71 and T2005/72
GENERAL ADMINISTRATIVE DIVISION ) Re RALPH MIEZITIS Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Miss Mary Imlach (Senior Member) Date24 October 2005
PlaceHobart
Decision The decisions under review are affirmed. ..............................................
Senior 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)
Secretary, Department of Social Security and Langton (1993) 31 ALD 579 at 586-7
Radovanovic and Secretary, Department of Social Security (2000) 61 ALD 530
Reynolds and Secretary, Department of Social Security (1986) 4 AAR 478
REASONS FOR DECISION
24 October 2005 Miss Mary Imlach (Senior Member) 1. Mr Ralph Miezitis was the recipient of a disability support pension which was cancelled in February 2004. The reason for the cancellation of Mr Miezitis pension was the revaluation of his property, a vacant block of land at 33-35 Howrah Road, Howrah, Tasmania at $500,000.00. Mr Miezitis then made a claim on 15 March 2004 for a disability support pension under the hardship rules. Centrelink initially rejected his claim, then granted him a pension for the period 2 October 2004 to 30 December 2004 and finally cancelled Mr Miezitis’ pension on 30 December 2004.
Issues
(a) Whether a disability support pension is payable to Mr Miezitis given the value at 19 February 2004 of his assets in particular his property at 33-35 Howrah Road, Howrah, Tasmania?
(b) Whether the property at 33 Howrah Road, Howrah, Tasmania is an unrealisable asset?
Background
2. On 19 February 2004 Centrelink reduced the rate of disability support pension (DSP) paid to Mr Miezitis after reassessing the value of his assets, in particular his land at 33-35 Howrah Road, Howrah, Tasmania (“the property”).
3. On 18 February 2004 a valuation of the property by the Australian Valuation Office (AVO) resulted in an assessment of the value of the property at $320,000.00.
4. AVO carried out a full inspection of the property on 27 February 2004 and concluded that the property was in fact worth $500,000.00.
5. The valuations resulted in the value of Mr Miezitis’ assets exceeding the assets test limit and payment of DSP to him was cancelled on 2 March 2004.
6. An Authorised Review Officer (ARO) affirmed the decision to cancel Mr Miezitis’ pension on 12 March 2004.
7. Mr Miezitis made a claim on 15 March 2004 for DSP under the hardship rules. Centrelink initially rejected his claim on 12 August 2004 then determined on 23 November 2004 to grant Mr Miezitis a pension under the hardship rules from 2 October 2004 and not earlier, and finally on 30 December 2004 Centrelink cancelled Mr Miezitis’ DSP.
8. The Social Security Appeals Tribunal on 13 September 2004 affirmed the decision of Centrelink to cancel Mr Miezitis’ DSP and on 22 April 2005 affirmed Centrelink’s decisions in relation to Mr Miezitis’ claim for DSP under the hardship rules.
9. Mr Miezitis made two applications for review to this Tribunal which were heard concurrently, the first, dated 26 September 2004 in relation to the decision by Centrelink on 19 February 2004 to cancel his DSP and the second, dated 5 May 2005 in relation to the decisions made by Centrelink on 12 August 2004, 23 November 2004 and 30 December 2004 relating to his claim for DSP under the hardship rules.
Submissions of the Applicant
10. Mr Miezitis’ main contention was that the increases in the various AVO valuations ($100,000.00 to $200,000.00 to $320,000.00 to $500,000.00) were outrageous when compared to CPI increases, general rises in Hobart real estate and data from BIS Shrapnel. He maintained that it was reasonable to value his land according to the local Council’s valuation. If CPI were applied to the Council’s 2001 valuation of $145,000.00, his land would not be worth more than $200,000.00.
11. Mr Miezitis contended further that the AVO valuation of $500,000.00 was based on incorrect data. He stated that the neighbouring property at 31 Howrah Road did not sell at $650,000.00 as claimed by AVO that the property 48 Pindos Drive, Tranmere did not sell as he saw it was passed in at auction at $200,000.00 in June 2003. He claimed that the other comparative properties used by the AVO were bigger than his and able to be developed.
12. Mr Miezitis agreed that there is no mortgage secured against the land but he had borrowed $50,000.00 from his sister over the years to live on when Centrelink stopped his payments.
13. The beach frontage of his block was sandy and there was a beautiful view across the River Derwent but Mr Miezitis contended Tasmanians do not appreciate the value of waterfront land and take views for granted.
14. Mr Miezitis said that the Eastern Shore area where his land was situated was less attractive and valuable than Tranmere in which other comparative properties used by AVO were situated and that his land would be hard to build on because it was rocky.
15. In relation to his claim for a DSP under the hardship provisions Mr Miezitis claimed that he had been disadvantaged by Centrelink’s delay in not deciding his March 2004 claim until August 2004. He claimed that had he been made aware he would have put his property on the market immediately.
16. Mr Miezitis remained unaware until October 2004 that placing his property with a real estate agent was a necessary precondition for being considered under the hardship rules and he remains unable to see that there is anything in the social security law that prescribes this requirement.
17. An offer was received by the agent PRD Nationwide with whom Mr Mietzitis had placed the property for $566,500.00 in November 2004. The terms of the offer were a deposit of $15,000.00 with the balance on settlement in May 2005.
18. Mr Miezitis was not convinced of the genuineness of the offer given the intended settlement period and a deposit significantly less than the standard 10%. He considered the offer not to be reasonable in any event as he would not have had access to the deposit during the settlement period.
Submission of the Respondent
19. The respondent contended that it is well settled law that it is the market value of an asset that is to be assessed when calculating the value of a persons assets. In support of this contention the respondent referred the Tribunal to the decision in Secretary, Department of Social Security and Langton (1993) 31 ALD 579 at 586-7.
20. In making its decision the respondent contended that the Tribunal needed to assess the available evidence including valuations provided by professional valuers and accord weight to that evidence as it sees fit.
21. The respondent noted that Mr Miezitis had at no time obtained a valuation of his land from an independent valuer to support his claim that the AVO valuation was incorrect.
22. The valuer who had carried out the valuation on behalf of AVO was a qualified experienced valuer with extensive local knowledge.
23. The respondent noted that the competing valuations put forward by Mr Miezitis were, in part, based on evidence of sales made prior to the boom years in Tasmania and on a method of valuation tied to the consumer price index.
24. The respondent contended in relation to Mr Miezitis’ claim for DSP under the hardship provisions that prior to listing the property with an agent in October 2004 it could not be said that Mr Miezitis was unable to sell his property. It could not be regarded, therefore, as an unrealisable asset prior to October 2004 and Mr Miezitis could not be paid a DSP according to the financial hardship rules.
25. The four offers received by Mr Miezitis in October/November 2004 for his land showed that there is obviously a market for his property and that clearly the property is not an unrealisable asset.
Discussion of the Evidence
26. The prime matter which is in dispute in this matter is the valuation of Mr Miezitis’ land at 33-35 Howrah Road, Howrah. Mr Miezitis disagrees with the figure of $500,000.00 and proposes $200,000.00 as a reasonable figure. Mr Miezitis relied on an indexation of the land value shown on the local council 2001 rates valuation, general increases in real estate if applied to Centrelink’s previous valuations of the land and what he believed to be flaws in the AVO’s approach.
27. The Tribunal rejects Mr Miezitis’ method of valuation based on CPI indexation applied to an old valuation of his property as being less relevant than what the property is actually worth on the current real estate market.
28. The Tribunal noted that the dramatic rise in Hobart real estate prices has been reported widely in the Australian media and this fact was supported by evidence produced by AVO in particular prices paid for real estate in Howrah.
29. The Tribunal noted that Mr Miezitis in his cross-examination of Mr Armytis (transcript p 37) made mention of the property “across the road” from his land “... that is non-water front and they are talking over $550,000.00 for that”. The property to which Mr Miezitis made mention was 50 Howrah Road (also known as 52 Howrah Road) which sold at public auction on 10 September 2005 for $550,000.00. The property is diagonally opposite Mr Miezitis’ land and has a frontage onto Howrah Road. It is not waterfront property.
30. The Tribunal itself conducted a search of the property 52 Howrah Road which revealed the land has an area of .1103 ha, double the area of Mr Miezitis’ land, which is 541 m². The search revealed an interesting factor in that the land value shown on the current rates demand for 52 Howrah Road showing the valuation year 2001 was $140,000.00. The land value shown on Mr Miezitis’ current demand for rates, which showed the same valuation year 2001, was $145,000.00 even though the area of land in Mr Miezitis’ title was half that in the title to 52 Howrah Road. The Tribunal can only deduce from this fact that even at 2001 values, the value of waterfrontage land in Howrah Road was deemed to be double the value of land on the opposite side of the road which was not waterfrontage. This information points against the figure proffered by Mr Miezitis and suggests that the market price for land in Howrah, let alone a waterfrontage block, is more than $200,000.00.
31. The Tribunal noted that at no stage did Mr Miezitis attempt to obtain a valuation of the property from a qualified valuer.
32. The Tribunal accepts the valuation by the AVO of Mr Miezitis’ land at $500,000.00. This decision is based on the AVO’s expertise in property valuations, the comparative real estate prices in the area and the widely acknowledged increase in the Hobart real estate market.
33. The Tribunal noted Mr Miezitis’ evidence that although he owes $50,000.00 to his sister there is no mortgage or encumbrance registered over the title to his land which means the full value of the land must be assessed when determining the value of Mr Miezitis’ assets.
34. The valuations of Mr Miezitis’ other assets are not in dispute. The valuation of personal effects at $2000.00 and $703.00 for his bank account are accepted by Mr Miezitis.
35. Mr Miezitis lodged an application on 15 March 2004 for access to the financial hardship rules after his DSP was cancelled in February 2004 due to the revaluation of his land at 33-35 Howrah Road by the AVO at $500,000.00. It took Centrelink until August 2004 to reject this application. Mr Miezitis has claimed that this unexplained delay has disadvantaged him in that he remained unaware that Centrelink would not consider his application under the hardship rules unless it could be shown that the property at 33-35 Howrah Road could not be sold.
36. The Tribunal accepts that Mr Miezitis placed a “For Sale” sign on his land in April 2004 and that he placed an advertisement in the Mercury newspaper for the private sale of the property on 2 October 2004. Further that Mr Miezitis signed an authority on 18 October 2004 appointing PRD Nationwide as the exclusive selling agents for a period of 90 days. This evidence supports Mr Miezitis’ contention that from the period commencing 2 October 2004 he made reasonable efforts to sell the property.
37. The Tribunal is satisfied on the evidence supplied by Mr Dowling from PRD Nationwide that firm offers were made in the period October to November 2004 for Mr Miezitis’ land. The first two officers of $320,000.00 and $400,000.00 were significantly below the AVO’s valuation and for that reason are not accepted. The third offer of $560,000.00 was withdrawn and the last offer of $566,500.00 was made on the basis of a deposit of $15,000.00 with settlement in May 2005. Mr Miezitis made a counter offer of $600,000.00 with settlement to be made in eight weeks. It is not clear whether this counter offer was negotiable, but the result was the offer of $566,500.00 was withdrawn. There was no evidence to suggest that the buyer was not genuine.
Findings of Fact
38. The Tribunal makes the following findings:
(i) Mr Miezitis is a single homeowner in receipt of disability support pension at all relevant times.
(ii) Mr Miezitis is the owner of land at 33-35 Howrah Road, Howrah, Tasmania.
(iii) There is no mortgage or encumbrance on the Howrah land.
(iv) The values of Mr Miezitis’ assets at 19 February 2004 were as follows:
Personal effects $ 2,000.00
Bank account 703.00
Land at Howrah $500,000.00
$502,703.00
(v) Mr Miezitis lodged applications for access to the financial hardship rules on 15 March 2004 and 4 October 2004.
(vi) 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.
(vii) In November 2004 Mr Miezitis received a genuine offer of $566,500.00 for the Howrah property, the terms of which were a deposit of $15,000.00 with settlement in May 2005.
Application of the Law and Reasons
39. The legislation relevant to these appeals is found in ss11, 98, 1064 and 1121 of the Social Security Act 1991 (“the Act”).
40. A person’s rate of DSP under the rate calculation in s1064 may be reduced by the value of their assets. Subsection 11(1) defines “asset” as property or money. It is not in dispute that Mr Miezitis’ land at Howrah is property and therefore an asset under s11.
41. The 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 generally the accepted approach is the current market value of the property. The Tribunal has accepted as outlined that the current market value of Miezitis’ land is $500,000.00.
42. Section 1121 of the Act provides that the value of an asset is reduced by any mortgage or encumbrance over the asset. There is no formal mortgage or encumbrance to secure the loan Mr Miezitis has from his sister. It was held by this Tribunal in Radovanovic and Secretary, Department of Social Security (2000) 61 ALD 530 unsecured loans do not fall within the scope of s1121. The full value of Mr Miezitis’ land therefore must be assessed when valuing Mr Miezitis’ assets.
43. The allowable assets limit for a single homeowner such as Miezitis at 19 February 2004 was $302,500.00. The Tribunal has found that the total value of Miezitis’ assets is $502,703.00. The value of Mr Miezitis’ assets at 19 February 2004 was higher than the allowable assets limit therefore, the rate of pension payable to him under the Act was nil. Under s98(1), DSP is not payable if a person’s rate would be nil. The decision to cancel Mr Miezitis’ DSP therefore was correct.
44. The rate of DSP payable to Miezitis at the time of his applications under the financial hardship rules on 15 March 2004 and 4 October 2004 was nil if the total value of his assets exceeded $306,250.00 and $312,000.00 respectively. The value of Mr Miezitis’ assets on each of these dates exceeded these figures as it included the property at Howrah the value of which is accepted to be $500,000.00.
45. S1129(1) of the Act allows for access to the financial hardship rules if the person or the person’s partner has an unrealisable asset and s11(12) and (13) of the Act defines unrealisable asset to mean an asset that a person cannot sell or realise.
46. The respondent referred the Tribunal to the decision of the Administrative Appeals Tribunal in Re Reynolds and SDSS (1986) 4 AAR 478:
“The words ‘cannot sell’ must be given their ordinary meaning. ‘Can’ means ‘to be able’ or ‘to have the power or capacity’. ‘Cannot sell’ must include the legal capacity to sell but in my opinion there is no justification for excluding the alternative meaning ‘is unable to sell’ for whatever reason”.
47. It could not be said that Mr Miezitis was unable to sell his property until he had made an attempt to sell it and had advertised it for sale. Prior to his application on 4 October 2004 for access under the financial hardship rules Mr Miezitis had merely erected a “For Sale” sign on the land and had inserted a private newspaper advertisement in the Mercury on 2 October 2004. The Tribunal is of the opinion that neither actions was a sufficient attempt to sell the property.
48. The fact that four offers were received for the land in the period October/November 2004, two of which the Tribunal believes to be acceptable offers leads the Tribunal to believe that there is no evidence on which to conclude that the property was unrealisable during the period March/October 2004.
49. The Tribunal has accepted that the offer of $566.500.00 received in November 2004 was a genuine offer although Mr Miezitis considered the terms of the sale were unreasonable.
50. The offer was $66,500.00 in excess of the valuation by the AVO and indicates that the property could be sold at a price reasonable to Mr Miezitis. Although Mr Miezitis could not have access to the deposit, which is the usual practice in Tasmania, he could have borrowed on the property pending settlement of the sale.
51. The Tribunal is satisfied that Mr Miezitis’ DSP was correctly cancelled on 30 December 2004 for the reason that his Howrah property could no longer be disregarded for the purposes of the pensions assets test.
Decision
52. The decisions under review are affirmed.
I certify that the 52 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed: K L Miller (Administrative Assistant)
Date/s of Hearing 29 August 2005
Date of Decision 24 October 2005
Counsel for the Applicant Appeared on his own behalf
Counsel for the Respondent Mr Brian Sparkes
Solicitor for the Respondent Centrelink
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