Murray and Repatriation Commission

[2007] AATA 1618

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1618

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No V 200600751

VETERANS'       APPEALS       DIVISION		)
Re		MARGARET ELLENOR MURRAY

Applicant

And REPATRIATION COMMISSION

Respondent

DECISION

Tribunal Mr B.H. Pascoe, Senior Member  

Date1 August 2007

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(Sgd)  B.H. Pascoe

Senior Member

VETERANS’ AFFAIRS – income support supplement – value of assets – market value of metropolitan taxi licence

Veterans’ Entitlement Act 1986

Re Reid and Secretary, Department of Family and Community Services (2002) 70 ALD 142

Spencer v Commonwealth (1907) 5 CLR 418

REASONS FOR DECISION

1 August 2007 Mr B.H. Pascoe, Senior Member

1.      This is an application to review a decision of the Repatriation Commission (the respondent) to cancel the Income Support Supplement paid to the applicant, Mrs M.E. Murray, with effect from 3 July 1997.  The decision resulted from a re‑assessment of Mrs Murray’s assets.  The particular issue for Mrs Murray was the inclusion in her assets of the alleged market value of a metropolitan taxi licence.

2.      At the hearing, Mrs Murray was represented by her son-in-law, Mr T. Donohue.  The respondent was represented by Mr R. Douglas, an advocate with the Department of Veterans’ Affairs.

3.      Mrs Murray is 78 years of age and in ill health.  There was no dispute that she owns a metropolitan taxi licence formerly owned by her late veteran husband who died in 1980.  The dispute related solely to the ascertainment of market value of the licence.  It is understood that Mrs Murray has no present intention of selling the licence which is used by a relative for little or no consideration.

4.      The respondent obtained figures from the Victorian Taxi Directorate setting out the average price paid for metropolitan taxi licences in each month from January 1993 to March 2005.  From this information the respondent used the average price figure for the month of July in each of the years 1997 to 2004 and assessed the value of the taxi licence of Mrs Murray at that figure for the purposes of applying the assets test.  Subsequently, the respondent requested the Australian Valuation Office (AVO) to prepare a valuation which was provided by letter of 19 May 2006.  The amounts assessed by the respondent and the AVO were as follows:

Respondent Assessment	AVO Value
July 1997	$246,250	$230,000
July 1998	$261,300	$260,000
July 1999	$288,600	$290,000
July 2000	$253,800	$255,000
July 2001	$285,750	$280,000
July 2002	$307,642	$310,000
July 2003	$331,000	$325,000
July 2004	$342,500	$340,000

Both sets of figures were based on the same data with the difference being between the average sale price in the month of July and the average sale price over a year and rounded to the nearest $10,000.  Either set of figures results in the value of the assets of Mrs Murray exceeding the maximum amount for payment of income support supplement.

5.      It was submitted by Mr Donohue that the figures supplied by the Victorian Taxi Directorate were unreliable and should not have been used for the purpose of the valuation of the taxi licence.  He noted that the alleged average price paid for licences in any given period excluded those licences transferred for nil consideration and those transferred at a price lower than within the range of the majority.  Both the respondent and the AVO accepted that the figures supplied excluded transfers for nil or a figure below that which the Taxi Directorate regarded as a normal arm’s length consideration.  The AVO commented on this in the report in the following terms:

The low and nil value transfers are not included in the calculations as they are not regarded as being adequate consideration for an asset.  One of the principles of valuation is that the sales used in order to provide evidence of value need to be between willing and informed parties and without any compulsion.  Low sales are disregarded as they may reflect sales between related parties or circumstances of forced sales.

A difficulty recognised by both parties was that the Victorian Taxi Directorate records simply show the names of the purchaser and vendor and the consideration paid for a transfer.  No other details are available to indicate whether or not the sale was at arm’s length.

6.      While Mr Donohue was not able to provide evidence of an acceptable alternative to the values adopted by the respondent as a result of what he regarded as unsatisfactory data, he submitted that it was inappropriate to raise a debt of $20,065 for alleged overpayment of income support supplement on the basis of rubbery figures.

7.      The respondent did obtain from the Victorian Taxi Directorate the amounts of consideration paid for all transfers of metropolitan taxi licences in the 2004 calendar year.  An analysis of these figures shows the following:

Total licenses transferred

191

Transfers for nil consideration

52

Transfers for “low” consideration

20

Transfers included in average calculation

119

191

The transfer included in the average calculation ranged from $310,000 to $379,000 while 115 of the 119 were in a range of $320,000 to $360,000.  Transfers for consideration but excluded from average calculation ranged from $150,000 to $300,000.  The average price of all licences transferred in the year for consideration was $328,283.  The average price within the range used by the Victorian Taxi Directorate in its figures was $338,712, a difference of $10,429 or 3.1 per cent. Mr Donohue accepted that it would be appropriate to exclude transfers for nil consideration from any calculation of market value as being unlikely to have been transfers at arm’s length.  However, he submitted that, with no evidence of the reasons for transfers at $300,000 or less, they should not be excluded from the calculation.

8.      As stated in Re Reid and Secretary, Department of Family and Community Services (2002) 70 ALD 142, at 149:

… the tribunal has consistently followed the principles outlined by the High Court in Spencer v Commonwealth (1907) 5 CLR 418; 14 ALR 253.  Those principles have been adopted by the International Assets Valuation Standards Committee in describing what is meant by “market value”:

‘Market value is the estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.

At times this principle is described in the terms of what a willing but not anxious purchaser will pay and a willing but not anxious vendor will accept both with full knowledge of current market conditions.

9.      While only the full figures of all sales in the 2004 year are available, they demonstrate to my satisfaction that the methodology adopted by the Victorian Taxi Directorate, the respondent and the AVO was appropriate to determine the estimated market value of a metropolitan taxi licence at the relevant dates.  In estimating an arm’s length valuation it is appropriate to exclude sales for no consideration and also to exclude sales for amounts which are significantly less than the vast majority of sales.  While it might be a matter of argument as to the appropriate figure at which certain sales should be excluded, the analysis of the 2004 figures demonstrates the exclusion level adopted by the Victorian Taxi Directorate has made a very minor difference to a resulting average price calculation.  Given the predominance of sales within a relatively narrow range of that average, I am satisfied that the resultant valuations adopted by the respondent represent an appropriate estimate of the market value of the licence owned by Mrs Murray.  It is the most likely figure which a willing buyer would be prepared to pay.

10.     In relation to the suggestion of unfairness to Mrs Murray by the adoption of the estimated market value resulting in her loss of income support supplement it is noted that she has not sought to derive income from that asset.  While she may consider that there are acceptable reasons for not seeking a market return on the licence it is recognised that she has had and continues to have an ability to replace the income support supplement from such potential income. 

11.     It follows from the foregoing that the decision under review should be affirmed.

I certify that the eleven (11) preceding paragraphs are a true copy of the reasons for the decision herein of
Mr B.H. Pascoe, Senior Member

Signed:         Dianne Eva
  Clerk

Date of Hearing:  17 July 2007 
Date of Decision:  1 August 2007
Advocate for the applicant:       Tim Donohue

Advocate for the respondent:    Robert Douglass, Department of Veterans' Affairs