Yazdani and Anor and Secretary, Department of Employment and Workplace Relations
[2007] AATA 1752
•11 September 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1752
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2006/0728
GENERAL ADMINISTRATIVE DIVISION ) Re BAHRAM YAZDANI
FARANGIS JANAMIANApplicants
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Ms N Isenberg, Senior Member Date11 September 2007
PlaceSydney
Decision The decision under review, being the decision made on 26 July 2007 which pursuant to subsection 180(2) of the Social Security (Administration) Act 1999 is deemed to be the decision of the Social Security Appeals Tribunal in substitute of the decision dated 24 May 2006, is affirmed. That is, the decision to include the Guildford property in the Applicants’ assets for the purposes of calculating their entitlement to Centrelink benefits and accept the valuation of the Guildford property as being $335,000 as at 15 June 2005, is affirmed.
...................[sgd]...........................
Ms N Isenberg
Senior Member
CATCHWORDS
SOCIAL SECURITY – reduction of rate of disability support pension and wife pension – assets test – ownership of property – trust – value of property – decision under review is affirmed
Social Security Act 1991 – sections 117, 159, 1064, 1118
Social Security (Administration) Act 1999 – section 180
Dinsdale bht Protective Commissioner v Arthur [2006] NSWSC 809
Re Szmerling and Secretary to the Department of Family and Community Services [2003] AATA 661
Khoury & Anor v Khouri [2006] NSWCA 184
Re Evans and Secretary, Department of Social Security (AAT 8710, 18 May 1993)
Re Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193
REASONS FOR DECISION
11 September 2007 Ms N Isenberg, Senior Member DECISION UNDER REVIEW
1. Mr Yazdani and Ms Janamian (collectively referred to as “the Applicants”) are in receipt of the disability support pension (“DSP”) and wife pension, respectively. On 19 August 2005, Centrelink decided to reduce the fortnightly rate of their pensions due to an increase in the value of their assets, in particular, a residential property in Guildford (“the Guildford property”) which they jointly own. The decisions to reduce the rate of their pensions were affirmed by a Centrelink authorised review officer (“ARO”) on 18 February 2006 (T23) and 16 March 2006 (T25), respectively. On 24 May 2006, the Social Security Appeals Tribunal (“SSAT”) affirmed the decisions of the ARO. The Applicants lodged an application for the review of that decision on 21 June 2006.
2. On 26 July 2007, the original decision maker accepted an updated the valuation of the Guildford property, consequently increasing the pension payments received by the Applicants. Section 180 of the Social Security (Administration) Act 1999 provides that if an officer sets aside a decision and substitutes a new decision after an application has been made to the Administrative Appeals Tribunal (“the Tribunal”) for the review of the original decision, but before the determination of the application, the application is to be treated as if the SSAT had set aside the original decision and substituted the new decision, and as if the application were an application for review of the new decision.
BACKGROUND
3. The Applicants were born in Iran and came to Australia as refugees in 1984.
4. Since 4 July 1991, Mr Yazdani and Ms Janamian have received the DSP and wife pension, respectively.
5. The Applicants lived in the Guildford property for 10 years, until 1996, when they moved to their home in Castle Hill, which they also jointly own. Since 1996 the Guildford property has been rented.
6. Although the Applicants are the registered owners of the Guildford property they contend, however, that the Guildford property is, in fact, owned by Mr Yazdani’s brothers and sisters, who live outside Australia.
7. The Applicants notified Centrelink of their ‘ownership’ of the Guildford property, and Centrelink has taken into account the rental income and value of the Guildford property to determine the level of the Applicants’ pensions for many years.
8. The Guildford property was valued by the Australian Valuation Office (AVO) at $180,000 as at 1 July 2000 (T3), and continued to be valued at the same rate until November 2002 when the AVO valued it at $225,000. This value was maintained by Centrelink until 15 May 2005.
9. On 16 May 2005, the Applicants provided Centrelink with an updated estimate of the value of the Guildford property of $245,000. The Applicants were advised by letter dated 8 June 2005 that their pensions were to be paid at a reduced rate following the recording of the value of the Guildford property at $245,000 (T7). Their pensions commenced being paid under the assets test instead of the income test.
10. Centrelink referred the matter to the AVO for their opinion of the value of the Guildford property on 15 June 2005.
11. On the same date, the Applicants obtained a valuation of the property from Robert R. Andrew Merrylands Real Estate which indicated the Guildford property was valued at between $225,000 and $235,000.
12. On 29 June 2005, the AVO valued the property at $400,000 after a roadside inspection (T8). The Applicants’ pensions were reassessed after this valuation and were further reduced (T29).
13. Mr Yazdani contacted Centrelink by telephone on 30 August 2005 to express his disagreement with the AVO valuation, and suggested the Guildford property should be valued between $250,000 and $260,000 as the state of the building was “not good” (T9). On 13 September 2005, Mr Yazdani requested a review of the decision to reduce their pensions (T10). On this occasion, he indicated that the valuation of the Guildford property should be approximately $250,000. Mr Yazdani also called Centrelink on 19 September 2005 to express his disagreement with the valuation (T11). A further request, by letter dated 11 October 2005, for a review of Centrelink’s decision was lodged by the Applicants (T12).
14. The Applicants’ initial request for a review prompted Centrelink to request the AVO to conduct a review of the valuation of 29 June 2005 and an onsite internal inspection of the property.
15. On 26 October 2005, the AVO provided a revised valuation of the property. In his report the valuer, Mr Luc Kakoz, opined that the value of the property was $355,000 as at 15 June 2005, notwithstanding that the property required some building work (T13). Centrelink updated its records to reflect the new value with effect from 15 June 2005.
16. The Applicants obtained some quotes for extensive building work to the property during November 2005 (T16, T17).
17. On 17 November 2005 the Applicants requested a review of the original decision in light of the repair quotes (T18). The decision to accept the valuation of $355,000 was subsequently affirmed by the original decision maker, the ARO and the SSAT.
LEGISLATION
18. The relevant legislation was annexed to the T-documents.
19. Sections 117 and 159 of the Social Security Act 1991 (“the Act”) provide that the rate of DSP and wife pension, respectively, are worked out in accordance with section 1064 of the Act. Income and assets tests are applied in accordance with Module E and Module G of the Pension Rate Calculator A and the test that results in the lower (or nil) rate of pension is the one that applies. In this case, the assets test applies. Persons whose assets are over the threshold may still receive the DSP or wife pension, but their rate of pension is progressively reduced as the value of the assets increases, until the rate is reduced to nil.
20. The assets test is dependent, in part, on whether a person is single or partnered, and whether the person is a homeowner or a non-homeowner.
21. The Applicants jointly own the home in which they live, although it was claimed that that property was also partially owned by Mr Yazdani’s overseas relatives. The value of their principal home is exempted under subsection 1118(1) of the Act. In the period 1 July 2005 to 30 June 2006 a partnered homeowner could receive a full pension if the combined value of their assets did not exceed $223,000 and could continue to receive a part pension if their assets did not exceed $490,500.
ISSUES BEFORE THE TRIBUNAL
22. The issues are:
· Does the Guildford property belong to the Applicants?
· If so, what is the value of the Guildford property to be taken into account for the purpose of assessing entitlement to pension?
EVIDENCE, CONSIDERATION OF ISSUES AND FINDINGS
23. I had before me documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which I took into evidence.
24. Other documents were tendered including documents evidencing telegraphic transfers of funds, bank statements, taxation returns, a land valuation by AVO as at 2 February 2007, letters from the AVO dated 18 October 2006 and 16 February 2007, estimates of value of the Guildford property by real estate agents dated 15 June 2005 and 10 June 2006, five quotations for the repair and renovation of the Guildford property dated June and July 2006, the Applicants’ recent wills and builders’ responses to Centrelink notices.
25. Mr Yazdani gave evidence, assisted by an interpreter. Mrs Janamian assisted her husband in his recollections but wished to give no additional evidence herself.
26. Mr Luc Kakoz, a registered valuer employed by the AVO, also gave oral evidence.
27. In coming to the correct and preferable decision, I took into account all the evidence, submissions, case law and relevant legislation.
28. I turn now to examine the identified issues.
Does the Guildford property belong to the Applicants?
29. It was contended before the SSAT that the Guildford property should not be considered to be an asset of Mr Yazdani and his wife because it belongs to Mr Yazdani’s brother, ‘N’, who has resided in Germany for about 50 years.
30. At the hearing before this Tribunal, however, Mr Yazdani contended that the property was in fact owned by all his siblings, who had forwarded money to him through his brother, N. He said he had two other brothers and two sisters, all of whom were in Iran. The property had been purchased for them, as well as N, even though none of them, or their children, have any intention of coming to Australia to live. Mr Yazdani produced to the Tribunal some notices of telegraphic transfers of funds from N dating from around the time in which the Guildford property was purchased.
31. As to the relative shares of each sibling, Mr Yazdani did not know, but said that “they know”. The evidence was that all payments came from his brother, who is now in a “mental asylum” in Germany. There was no evidence from the other family members as to their respective shares.
32. Mr Yazdani said that his then solicitor had advised that the Guildford property be purchased by the Applicants as joint tenants. Mr Yazdani said that he did not tell the solicitor about his relatives’ interest. In any event, the solicitor has now been struck off.
33. There is no trust deed or any other agreement in writing between the Applicants and their relatives in relation to the property.
34. I asked what arrangements had been made if the Applicants, or indeed other members of the family, should die. Mr Yazdani said that his children “know it belongs to the aunts and uncles”, and that he and his wife had made a statement in their wills to that effect. I asked the Applicants to produce those wills but they had apparently been stolen about three years ago. Following my request to look at the wills, the Applicants executed new wills. Those new wills are in corresponding terms (mutual wills) and leave the whole of the Testator/rix’s estate to the survivor. It is only upon the death of the surviving spouse that the property is to be held in trust for Mr Yazdani’s siblings in proportions to be nominated by N. It should be remembered too, that Mr Yazdani and his wife hold the property as joint tenants, which means that on the death of one the whole of the property remains with the surviving joint tenant/spouse.
35. Mr Yazdani said that they had lived in the Guildford property for about 10 years. He said that they put some cash aside by way of rent – about $10,000 – for his brothers and sisters. On my calculations this would be about $20 per week. However, he and his wife spent that cash in building the new home at Castle Hill. Mr Yazdani initially said that property too is owned “about 50-60%” by his relatives. On the third day of the hearing, however, Mr Yazdani said his relatives’ interest was $50,000-$60,000. Mr Yazdani said that his relatives would know what their respective shares were, as would N.
36. The wills make no provision for the relatives in respect of the Castle Hill property. On the final day of hearing, Mr Yazdani said his children would know how to pay the relatives because there was “a list” at home. This was the first mention of the list, notwithstanding that reimbursement and accounting to the relatives had been discussed at length on both occasions the matter was previously before the Tribunal, and at the numerous telephone directions hearings between times.
37. When the Applicants moved into their Castle Hill home in 1996 they rented out the Guildford property. Mr Yazdani said the rent monies were paid into a savings/transaction account opened in N’s name about 15 years ago. Mr Yazdani said he sent the bank application forms to Germany for his brother to sign. Subsequently, term deposit accounts have been opened on N’s behalf and there is now a considerable sum held in accounts bearing N’s name.
38. Extensive bank records were provided. These, however, do not show a pattern of payments into N’s transaction account which might correspond to rent until 2001, some five or six years after the property was first rented. Mr Yazdani told the SSAT that the tenants pay $255 per week in rent. The Applicants’ tax returns for the years ending 30 June 2005 and 30 June 2006 would suggest the amount is closer to $280 per week.
39. Mr Yazdani said that some of the monies deposited into N’s transaction account were from his relatives. A visitor might arrive from Iran, telephone him and they would agree to meet. He would be handed large sums of cash, up to, according to the bank records, $29,000. Although there were many deposits which Mr Yazdani thought might have been these types of funds, he could name only two of the “visitors” who had given him the money from his relatives.
40. There had also been a couple of times when people residing in Australia came to Mr Yazdani and gave him money for their relatives in Iran which Mr Yazdani deposited into N’s transaction account, and then Mr Yazdani told his relatives in Iran to give an equivalent amount of money to the people in Iran. Mr Yazdani was not sure which of the deposits in N’s transaction account were of this kind.
41. One of his sisters, A, also opened a savings/transaction account when she came to visit Australia in 1998 and a series of term deposits in her name were opened subsequently. Mr Yazdani had made rent deposits into A’s transaction account. This had been done, he said, in error by him or by his children. He said that he knew how to correct the entries (so as to transfer the money into the account in N’s name) but had not yet done so, even though some dated back to 2002.
42. The Applicants said they paid for the maintenance of the Guilford property out of the rent monies. No money has been sent to any of the relatives, as it would be dangerous in Iran for them to have money. Mr Yazdani’s evidence was that he believed even Centrelink and the banks to have Iranian spies who would identify his siblings as having money. Notwithstanding this, N opened an account in his own name giving his address as one in Iran, where he has not lived for 50 years.
43. I accept the Applicants' evidence that the Applicants' relatives may have perceived some difficulty in owning property and financial assets in Iran, and that the Applicants sought to accommodate their concerns. The arrangement, however, on the available evidence, falls short of a trust. As underlined in Dinsdale bht Protective Commissioner v Arthur [2006] NSWSC 809:
[10] The prima facie position that the beneficial ownership of real property is commensurate with the legal title [Currie v Hamilton (1984) 1 NSWLR 687 at 690 (McLelland J)], is displaced by the presumption of a resulting trust arising from payment of the purchase price, unless that presumption is in turn rebutted by a presumption of advancement, or by evidence [Martin v Martin (1959) 110 CLR 297; Calverley v Green (1984) 155 CLR 242]. …
44. The SSAT, at paragraph 27 of its decision, cited Re Szmerling and Secretary to the Department of Family and Community Services [2003] AATA 661 which referred to several definitions of the term trust:
8. … An often quoted definition of a trust is that provided in Underhills Law Relating to Trusts (London: Butterworths, 12 Ed, 1970, p.3):
…
A trust is an equitable obligation, binding a person (“trustee”) to deal with property over which he has control (“trust property”) either for the benefit of persons (“beneficiaries”) of whom he may be one, and any one of whom may enforce the obligation, of for the advancement of certain purposes.
In Jacobs’ Law of Trusts in Australia , 6th Ed, pp.4-6, the authors set out the four essential elements present in every form of trust. In summary, they are:
·a trustee who holds a legal or equitable interest in the trust property
·property capable of being held on trust
·a cestui que trust or beneficiary
·a personal obligation on the trustee to deal with the trust property for the benefit of the beneficiary
…
45. Where the circumstances of this matter especially fall short, in accordance with the definition, is as to the final point, namely, “a personal obligation on the trustee to deal with the trust property for the benefit of the beneficiary”. The evidence was that the Applicants lived in the property virtually rent free for 10 years, and used such money as they had put aside for rent for their present home. Even now, the Applicants do not account to their relatives as to income and expenditure in relation to the property. None of the relatives is in Australia, and none, on the evidence, has any intention of coming to Australia. It would seem unlikely, on the evidence, that should the Applicants attempt to sell the property, that any steps would be taken by the alleged beneficial owners to stop them.
46. The law in relation to trusts where the subject matter of the alleged trust is real property was recently canvassed in detail in Khoury & Anor v Khouri [2006] NSWCA 184 (“Khoury’s case”). One common feature of the cases discussed there was that there were details of the views, albeit competing, about agreement between the parties which was able to be determined. In this matter, I only have the Applicants’ assertions that there was any agreement at all. Even the Applicants do not appear to know the relative proportions of beneficial ownership that each member of Mr Yazdani’s extended family would be likely to assert. Only one of Mr Yazdani’s brothers, N, a resident in a “mental asylum”, has that information.
47. Khoury’s case is a salutary lesson of how matters can go awry in respect of real property when there are only informal arrangements between family members. From that very detailed decision, I wish to bring to attention, particularly for the benefit of the Applicants the following:
33. … It must be obvious to anyone with any business experience and to any adult who gave any thought to his or her own interests that an arrangement involving significant sums of money about something so important as ownership of a family home should be written down. There has been a law requiring dealings with land to be in writing if they are to be effective in England for well over three centuries, and in Australia for as long as there has been a legal system here, and what that law requires is no more than reasonable people would do if they considered their own interests.
48. I find that the property should be included in the Applicants’ assets for the purposes of calculating their entitlement to Centrelink benefits.
What was the value of the Guildford property?
49. On 29 June 2005, the AVO valued the Guildford property at $400,000 as at 15 June 2005 after a roadside inspection. As the Applicants disputed the valuation of the property, a further report was requested from the AVO.
50. In a report dated 26 October 2005 Mr Luc Kakoz provided a revised valuation of the property of $355,000 as at 15 June 2005. This revised report was prepared after conducting an internal inspection of the property. The value of the property was reduced from $400,000 to $355,000 because of the required repairs. It is the decision of Centrelink to accept this valuation that was the subject of the Applicants’ application for review.
51. In June and July 2006, around the time the Applicants filed their application for review at this Tribunal, they obtained a further valuation from Robert R. Andrew Merrylands Real Estate who valued the Guildford property at between $310,000 and $340,000 but noted the need for renovations. They also obtained quotations for various repairs and renovation to the Guildford property. These were referred to Mr Kakoz who, in a letter dated 18 October 2006, maintained that as at 15 June 2005 the valuation of the property at $355,000 was within market parameters.
52. Mr Kakoz gave evidence on the first day of hearing of the method by which he came to his view. He referred to the sale price of comparable properties in the area. He came to a figure to estimate the land value of the property and then, assisted by technical valuation manuals came to a view that, if the property had been in good repair for its age, it would have been valued at $380,000. However, given its disrepair, he applied a formula to indicate accelerated depreciation of the property to arrive at a value of $355,000.
53. Mr Kakoz had discussions with Mr Yazdani at the property. Mr Yazdani pointed out aspects of disrepair, and these are referred to in the report. Mr Kakoz invited Mr Yazdani to submit quotes for the repair of the property. When these were made available, some 12 months later, some features were not considered relevant because they related to apparent improvements, rather than restorations. Mr Kakoz accepted the cost of repairs to the kitchen, the (higher of the) ceiling quotes and the flooring repair cost and some repairs to the bathroom. These rounded to about $25,000 which was commensurate with the allowance made for accelerated depreciation.
54. Mr Yazdani pointed out that the report dated 26 October 2005 referred to a problem with the ridge of the roof, specifically that “the roof pitch looked somewhat compromised”. Mr Kakoz said that he would need more information about the structural integrity of the roof before he could consider the builders’ quotes (which had not been made available to him before the hearing) in relation to aspects of the roof. He conceded that depending on what was actually wrong with the roof his valuation might have to be adjusted.
55. Mr Yazdani also said that “half of [the property] is just useless” because of a sewerage line across the property. Mr Kakoz was unaware of that and conceded that that also may affect his valuation.
56. The matter was adjourned for information to be obtained in relation to the roof and the sewerage.
57. In a letter dated 16 February 2007, Mr Kakoz having perused the sewerage diagram, was of the view that allowance should be made for the “Board’s sewer” bisecting the property. He reduced his valuation of the Guildford property to $335,000 as at 15 June 2005. Mr Kakoz had also revalued the Guildford property at Centrelink’s request shortly before the first day of hearing. He originally valued the Guildford property at $295,000 reflecting current market levels as at 2 February 2007. He reduced this valuation to $275,000 in consequence of viewing the sewerage diagram. These revised values were accepted by the original decision maker at Centrelink on 26 July 2007 and I understand the Applicants’ pensions were adjusted accordingly and they were paid an amount representing arrears.
58. In respect to the roof, Centrelink sought information from the builders who had supplied the quotations, however, neither, in answer to Centrelink’s questionnaires, indicated that they had found any structural problems with the roof. Centrelink contended that based on his evidence, Mr Kakoz would not have been prepared to revise his valuation of the Guildford property further on the basis of the builders’ reports and in the absence of a structural engineer’s report.
59. Centrelink contended that the report revising the value of the Guildford property to $335,000 at 15 June 2005 was a comprehensive report in which Mr Kakoz confirmed that this was the market value, taking into account the location, description of land (including the sewerage issues) and building, improvements, market considerations and all the repairs required for the property.
60. There is no statutory provision which specifies the manner in which a person’s assets must be valued. Centrelink contended that for the purpose of the assets test the real estate should be assessed according to its market value. I was referred to Re Evans and Secretary, Department of Social Security (AAT 8710, 18 May 1993) where the Tribunal considered the question of valuation of property for the purpose of assessing jobsearch allowance:
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.
61. And further:
8. … 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?
62. In applying the test in Re Reynolds I note that Mr Kakoz is a qualified valuer, experienced in the valuation of residential property, engaged by the AVO, an independent valuation service. He had discussions with Mr Yazdani which he took into account and was prepared to revise his views when more information came to hand, namely on internal inspections, after seeing the sewerage diagram and in considering if there was structural damage. Against this is the evidence of two scant letters from a real estate agent. In these circumstances I prefer Mr Kakoz’s evidence and accept that the value of the property at the relevant date was $335,000.
DECISION
63. The decision under review, being the decision made on 26 July 2007 which pursuant to subsection 180(2) of the Social Security (Administration) Act 1999 is deemed to be the decision of the Social Security Appeals Tribunal in substitute of the decision dated 24 May 2006, is affirmed. That is, the decision to include the Guildford property in the Applicants’ assets for the purposes of calculating their entitlement to Centrelink benefits and accept the valuation of the Guildford property as being $335,000 as at 15 June 2005, is affirmed.
I certify that the 63 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member
Signed: .................[sgd]...............................................................
AssociateDates of Hearing 8 February, 22 and 23 May, 5 July 2007
Date of Decision 11 September 2007
Solicitor for the Applicants Self-represented
Solicitor for the Respondent Mr J Kenny, Centrelink Legal Services
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