Christensen and Secretary, Department of Social Services (Social services second review) - [2024] AATA 2704

Christensen and Secretary, Department of Social Services (Social services second review) [2024] AATA 2704 (2 August 2024)
Division:GENERAL DIVISION
File Number: 2023/6787
Re:Allan Christensen
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Member P Ranson
Date:2 August 2024
Place:Brisbane

The decision under review is affirmed.
.................................[SGD].................................
Member P Ranson
Catchwords
Social Security – Age Pension – rate of pension – assets – property valuation – homeowner – sole owner – new indexation of asset valuation – increase in asset valuation – reduction of rate of pension based on asset valuation – formal valuation accepted – real estate appraisal not accepted – decision under review affirmed
Legislation
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
Cases
Brownsey v Secretary, Department of Social Services [2015] AATA 660
Cummins v Secretary, Department of Families, Housing, Community Services, and Indigenous Affairs [2011] AATA 513
Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Secondary Materials
Social Security Guide
REASONS FOR DECISION
Member P Ranson
2 August 2024
BACKGROUND

Mr Christensen is an age pensioner. His assets include a house in the Gold Coast hinterland, not his residence, which needs substantial repairs (the hinterland property). Age pension entitlement is subject to a means test, which is based on the income and assets of the applicant. In early 2023, Centrelink arranged for a formal valuation of the property and the increase in its reported value caused his rate of age pension to decrease.
The valuation was conducted by a licenced valuer and the report says it considered the state of repair of the property and the likely cost of rectification. Mr Christensen disagrees with the report as he believes it substantially over values the property because in his opinion, the valuer was on-site for a very short time and seemed disinterested in his views about the repairs.
Prior to the hearing, Mr Christensen commissioned his own valuation. Whilst he would not confirm the result, it appeared from Mr Christensen’s evidence that his own valuation came in at a higher amount than the valuation commissioned by Centrelink.
There is no dispute the calculation of his assets using the Centrelink valuation, and the resultant rate of age pension, is correct. The issue in this case is whether the Centrelink valuation should be relied on in determining the value of Mr Christensen’s assets for age pension purposes.
For the following reasons, the decision under review is affirmed.
WHAT HAPPENED?
On 2 November 2022, Centrelink reduced Mr Christensen’s age pension based on a reassessment of his assets, principally the hinterland property, the value of which had been indexed from $450,000 to $563,760.[1] Mr Christensen objected to that increase and requested a formal review.
[1] T-Documents, T14, page 211.
On 17 January 2023, of its own volition, Centrelink commissioned a formal valuation of the hinterland property that resulted in a revised value of $555,000.[2] An authorised review officer of Centrelink applied that value in lieu of the indexed value from 2 November 2022 and calculated his age pension accordingly. As a result, Mr Christensen received a very small arrears of age pension.
[2] T-Documents, T8, page 66.
Mr Christensen was unhappy with that decision and appealed to the Social Security Division of this Tribunal for a review.[3] Centrelink provided a copy of the valuation report to the Tribunal on first review and the decision of the authorised review officer was affirmed on 23 August 2023.[4]
[3] T-Documents, T11, pages 81 to 82.
[4] T-Documents, T2, pages 5 to 8.
Still not happy with the outcome, Mr Christensen applied to the General Division of this Tribunal for a second review of the decision. In his application for the second review, Mr Christensen said his reasons for applying were:[5]
‘Reference to email dated 23/8/23. I feel the report from JLL Valuation Advisory is not a genuine reflection of the property or comparable with the houses in the JLL report. These homes are ready to move into + require no work + renovated. The septic system, landslide, non compliant retaining wall and easement. Building report to follow listing property defects in detail for fair outcome.’
[5] T-Documents, T4, page 4.
The essence of Mr Christensen’s disagreement with Centrelink is summed up in his letter to Centrelink dated 2 March 2023, in which he says:[6]
‘Your or your agent suggested a building inspection to be carried out and arranged JL valuers to attend the site. Ms Caroline [redacted] attended the site dated 13/01/2023. In designer clothes and was not able to nor interested in inspecting the property in detail, and understanding the amount of the problems on site. The assessment she completed was simply cosmetic and she had no understanding of the work needed to be done. She did a visual assessment and nothing further, I arranged a more accurate thorough inspection complying to our Australian standards.’
[6] T-Documents, T12, page 83.
In his evidence at the hearing, Mr Christensen expanded on his concerns. He said the JLL valuer was only on-site for 30 minutes and took very few pictures, whereas the person he arranged to conduct the building inspection was on-site for 5 hours. He said the easements that are now on the property occupy 800 m² and the land cannot be used. He also advised he had spoken with Legal Aid Queensland and curiously they had advised him to get a market appraisal of the property to establish its value. In summary, he says the JLL valuation was conducted by a valuer who could not have known about the defects due to their cursory glance at the property, whereas the appraisal was conducted by a local agent who knows the area.
As can be seen from the above, the issue in this matter is whether the valuation conducted by a registered valuer should be preferred over a market appraisal conducted by a local real estate agent.
THE LAW
In the Secretary’s Statement of Facts Issues and Contentions dated 24 April 2024 (SFIC), the Secretary explains at paragraphs [16] and [17] the relevant law in this matter, which includes the Social Security Act 1991 (Cth) (the Act) and the Social Security (Administration) Act 1999 (Cth) (the Administration Act) together with Centrelink’s policy contained in the Social Security Guide (the Guide).
As mentioned above, there is no dispute between the parties about the inclusion of the hinterland property as an asset of Mr Christensen for the purposes of the assets test. As the Secretary points out in their SFIC, there is abundant case law to support the view the net market value approach, based on comparable sales and the best use to which an asset could be put, is the most appropriate way to value an asset.[7] This approach has been used extensively by the Tribunal in similar cases,[8] and is consistent with the guide which says: [9]
‘Assets are generally assessed at their net market value (1.1.M.40). The net market value is the amount a person would expect to receive if they sold the asset on the open market, less any valid debts or encumbrances (1.1.E.108).’
[7] Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790.
[8] Cummins and Secretary, Department of Families, Housing, Community Services, and Indigenous Affairs [2011] AATA 513 and Brownsey and Secretary, Department of Social Services [2015] AATA 660 (at [5] and [6]).
[9] The Guide at section 4.6.6.10.
A note about policy
The Tribunal is charged with determining the correct or preferable decision based on an independent assessment of the facts before it and is entitled to treat policy as a relevant factor in that determination. The Full Federal Court has found that where a policy exists to guide the decision maker in exercising its powers, the Tribunal may apply that policy in reviewing a decision where it ‘makes it clear that it has considered the propriety of the particular policy and expressly indicates the considerations which have led it to that conclusion’.[10]
[10] Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409, from 420.
To the extent the Tribunal has considered policy in this case, it has not applied it inflexibly and has only considered it to the extent the policy is consistent with the requirements as set out in the legislation.
CONSIDERATION OF CLAIMS AND EVIDENCE
What does Mr Christensen say?
At the hearing, Mr Christensen was heard to say he had obtained his own formal valuation of the property, and when asked whether he intended to provide a copy of the valuation report as evidence, he said no. He initially appeared to indicate the valuation he obtained (as opposed to the real estate agent’s appraisal he put into evidence) suggested a value of $600,000. The Tribunal notes that is higher than the JLL valuation of $555,000, and that Mr Christensen was reluctant to provide any further information about that valuation.
In his submission dated 17 May 2024, Mr Christensen says he engaged an independent valuation not appointed by Centrelink: ‘for a comparing quote and received different result, confirming the valuating is flexible’.[11] It is unclear if the independent valuation he refers to is the market appraisal by the real estate agent or the formal valuation discussed above.
[11] Applicant’s Final Submissions and Other Material, page 1.
The JLL valuation
On 17 January 2023, a valuer of Jones Lang LaSalle Advisory Services Pty Ltd (JLL) prepared a valuation of the hinterland property and assessed its market value as $555,000 (the JLL valuation).[12] The valuer states the following regarding the property:[13]
‘The property is improved with a single level semi-modern rural residential dwelling of timber clad walls and metal roof construction providing 3 bedroom, 2 bathroom accommodation with 2 car garage, 2 carport and covered outdoor living area. The parcel comprises 7,660sqm being irregular in shape that is below road level with secondary improvements of, landscaping, driveway, rain water tank, household treatment plant with fair/dated presentation overall.’
[12] T-Documents, T8, pages 64 to 72.
[13] T-Documents, T8, page 65.
The valuer states the following instructions were received:[14]
‘We have been instructed by Services Australia to prepare and provide a valuation assessment assessing the market value of the real estate describe herein.
The purpose of the valuation is to ascertain the market value of the above mentioned property [the hinterland property] for Statutory Assessment purposes as at 17 January 2023.
This valuation report has been prepared in accordance with the Australian Property Institute Practice Standards and Social Security Act 1991 currently in force at the time of valuation.’
[14] T-Documents, T8, page 67.
The definition of market value is given as:[15]
Market value is defined as the best price at which the property being valued might be expected to be sold at the date of valuation assuming that it is:
‘The estimated amount for which an asset or liability should exchange on the valuation date between a willing buyer and a willing seller in an arm's length transaction, after proper marketing and where the parties had each acted knowledgeably, prudently and without compulsion.’ (Australian and New Zealand Valuation and Property Standards).
[15] T-Documents, T8, page 67.
Mr Christensen complains the JLL valuation does not consider the condition of the property. The report relevantly includes the following comments: [16]
‘At the time of inspection, the exterior of the improvements appeared to be in poor condition overall and the interior appeared to be in poor condition overall.
We have inspected the exterior of the property and where possible, the interior of the premises in our capacity as a property valuer. Consequently, no liability is assumed for the soundness of the structure. It must be clearly understood that this Report is a valuation Report only and not a structural survey.’
[16] T-Documents, T8, page 70.
In response to the issues raised by Mr Christensen:[17]
‘The subject property is of poor condition, there are a number of serious defects with the building, drainage and retaining walls, internal and external movement, damaged timber decking. We have taken the above issues into consideration in the Valuation provided.’
[17] T-Documents, T2, page 8.
In summary, the Tribunal concludes the JLL valuation found – on inspection – the property was in poor condition both internally and externally with numerous serious defects (not only in the building but also in the drainage and retaining walls), and that those issues were considered in determining the property’s value.
Section 8 of the JLL valuation deals with market evidence.[18] This section includes commentary on five properties in the area, all of which were found to be superior in value overall to the hinterland property. Each of the five properties had sold within the previous three months for a price more than the valuation of $555,000 and within the range of $600,000 to $920,000.
[18] T-Documents, T8, page 72.
In a separate report which was sent via email on 18 April 2024 (Annexure B to the Secretary's SFIC), a director of JLL discussed the impact of an easement on the hinterland property. The report opens by indicating there are two easements affecting the land, that is, easement in gross No 601700042 to the Council of the Shire of Albert dated 22 May 1989 on RP220706 (Easement V), and easement in gross No 719427972 to the Council of the city of Gold Coast dated 28 May 2019 on SP312360 (Easement E).
The report goes on to discuss a single easement, which appears to be Easement E. In any event, the area of the easement is said to cover approximately 800sqm. It says the contour of the property indicates the easement effectively covers a gully that falls steeply down from the main road and is possibly used for drainage.[19]
[19] Respondent’s SFIC, page 29.
The conclusion in relation to the easement is as follows:[20]
‘The gully area covered by the easement appears to be a steeply sloping, natural watercourse that would normally accommodate overland flow in periods of heavy rain.
The easement is located some distance from the dwelling and being in a gully has limited visibility.
The requirements of the easement may restrict the usage and utility of this 800sqm compared to the balance area of the allotment (subject to confirmation by the appropriate search as above).
In the absence of the easement, however, this gully area would appear to offer limited uses other than as its current use.
The easement does not impede access to the property.
Overall, the presence of the easement is considered to have minimal impact on the value of the property and an alteration in the valuation amount is not considered warranted.
At the date of valuation, the assessed valuation amount reflected a conservative figure to provide the owner of the property with “benefit of the doubt” for unforeseen issues.’
[20] Respondent’s SFIC, page 32.
The market appraisal by LJ Hooker
Mr Christensen provided an undated ‘Comparative Market Analysis’ by a real estate agent of a local LJ Hooker franchise (the LJ Hooker appraisal). It was sent to him by e-mail on 21 February 2024. It says:[21]
‘We have based this appraisal on current market conditions as well our extensive knowledge of the property market in the local area.
Despite having a block size of 7,660 m2, the majority of this property is unusable, and the Brisbane Council's mapping indicates that there is a risk of landslides along the property's perimeter. If we were to rent it out, the tiny house would require a lot of repairs. We could sell it exactly as it is, but the buyer would probably want to tear it down and start over, as is the case with properties of this age and in such level of disrepair all across the Gold Coast. Consequently, the land—and only the tiny plot of level land that the property is on—is what adds value. Placing the new build as far away from the edge of the drop would be necessary due to the danger of landslide.
The properties listed in this report, both for sale and sold, are not good comparables since they are on level lots or have a large amount of surrounding usable property only in need of clearing. But this is the only pertinent statistic that was available for the previous six months.
However, this is this is the only pertinent statistic that was available for the previous 6 months.’
[21] Applicant’s Bundle of Documents including Valuation Report, page 8.
The Tribunal notes the reference to the Brisbane City Council, which perhaps should be the Gold Coast City Council, and suggests the document may have been derived from another appraisal for a property in the Brisbane City Council area. The Tribunal’s role is not to speculate, and this decision does not turn on this apparent drafting error. The appraisal price range is given as follows:[22]
‘This market analysis has been prepared on 21/02/2024 and all information given has been based on a current market analysis for the property listed above. Based on this, we believe this property to be estimated in the following range: $450,000 to $480,000’
[22] Applicant’s Bundle of Documents Including Valuation Report, page 17.
The comment in the appraisal, which appears to downgrade the value of the property, concerns the small amount of level land and the risk of landslide. It says:[23]
‘Consequently, the land—and only the tiny plot of level land that the property is on—is what adds value. Placing the new build as far away from the edge of the drop would be necessary due to the danger of landslide.’
[23] Applicant’s Bundle of Documents including Valuation Report, page 8.
The market analysis discussed in the LJ Hooker appraisal includes a chart showing sales and growth in the area for the years 2006 to 2023, and for 2022 indicates 49 sales at a median price of $1,575,000, with the lowest price being $750,000.[24] It then lists three properties sold in the area in the previous six months, two of which were sold for more than $1M with no sale price in the third.[25] No commentary is offered comparing the hinterland property and the properties listed in the appraisal.
[24] Applicant’s Bundle of Documents including Valuation Report, page 14.
[25] Applicant’s Bundle of Documents including Valuation Report, pages 15 to 16.
The Secretary’s Closing Submissions dated 27 May 2024, seeks to question the weight to be applied to this appraisal and says in part at (c):[26]
…
‘The condition of the property was not considered within the report;’
[26] Respondent’s Closing Submissions, page 2, para [8].
However, that is not the case because the appraisal says in part:[27]
‘If we were to rent it out, the tiny house would require a lot of repairs. We could sell it exactly as it is, but the buyer would probably want to tear it down and start over, as is the case with properties of this age and in such level of disrepair all across the Gold Coast.’
[27] Applicant’s Bundle of Documents including Valuation Report, page 8.
Rapid Building Inspections report
Mr Christensen engaged the services of Rapid Building Inspections to conduct an inspection of the hinterland property to provide a ‘Pre-Purchase Standard Property & Timber Pest Report’ (the Building Inspection).[28] Their report is dated 15 February 2023, and after identifying the limitations of the inspection, indicates the scope of it as follows:
‘This Report only covers or deals with any evidence of: Structural Damage; Conditions Conducive to Structural Damage; any Major Defect in the condition of Secondary Elements and Finishing Elements; collective (but not individual).
Minor Defects; and any Serious Safety Hazard discernible at the time of inspection. The inspection is limited to the Readily Accessible Areas of the Building & Site (see Note below) and is based on a visual examination of surface work (excluding furniture and stored items), and the carrying out of Tests.’[29]
And
‘The purpose of this Inspection is to assist the Client to identify and understand any Timber Pest issues observed at the time of inspection.’[30]
[28] T-Documents, T12, pages 87 to 189.
[29] T-Documents, T12, page 88.
[30] T-Documents, T12, page 92.

The Building Inspection runs for 102 pages and identifies major and minor defects in the property too numerous to list in this decision. On many occasions, it qualifies its findings due to the level of accessibility for inspection including the presence of obstructions and considers the overall degree of risk of undetected defects including structural damage and conditions conducive to structural damage. It strongly recommends further inspection of those areas not readily accessible or obstructed once access is provided or the obstruction is removed, noting this would involve a separate visit to the site, permission from the owner of the property and additional costs.
In response to the Building Inspection, Mr Christensen obtained quotes for various works. These were included in his submission dated 7 January 2024 to Centrelink as follows:[31]
[31] Applicant’s Bundle of Further Documents, pages 13 to 31.

Supplier

Date

Quote ($) (Incl. GST)

Australian Retaining Walls (1)

08-11-2023

20,900

Australian Retaining Walls (2)

08-11-2023

60,000

Evergreen Wastewater[32]

15-11-2023

Unknown

LMMC Pty Ltd

06-11-2023

15,942

John Taylor Welding

07-11-2023

3,866

Earthsolve

30-11-2023

660

[32] Page 2 of the 3-page quote was not provided.
Aussie Home Loans

Also included in Mr Christensen’s submission to Centrelink dated 7 January 2024, is a copy of a transaction listing for Aussie Basic Home Loan account number ending 8316. It shows a balance owing on 2 January 2024 of $65,501.[33] Details of this loan were also included in his submission to the Tribunal dated 4 March 2024 (date stamped received by the Tribunal on 6 March 2023) including a copy of the loan contract.[34]
[33] Applicant’s Bundle of Further Documents, page 11.
[34] Applicant’s Bundle of Documents including Valuation Report, pages 1 to 4.
The loan offer is to Mr Christensen and his partner, Ms Christensen (now deceased), for two loans totalling $148,000 secured by a mortgage over the hinterland property and another property. There is a balance statement showing two account numbers ending 8316 for $63,177.57 and 8633 for $281.61 for a total owing on 3 March 2024 of 63,458.18.[35]
[35] Applicant’s Bundle of Documents including Valuation Report, page 5.
The existence of this loan was not raised in the SFIC or at the hearing. There is no mention of a loan in respect of the property in the decision under review (AAT1) notwithstanding that decision correctly notes at [12] the value to be used for asset test purposes is the net market value, that is, after any valid debts or encumbrances are deducted.[36]
[36] T-Documents, T2, page 7, para [12].
At the request of the Tribunal after the hearing, the parties provided submissions about this point. In the submission dated 19 July 2024, the Secretary confirmed the value of the hinterland property was reduced by the value of a charge or encumbrance over the property.[37]
[37] Respondent’s Further Submissions, page 2, para [8].
In his submission on this point dated 16 July 2024, Mr Christensen advised the loans on the hinterland property were originally with Aussie Home Loans and have since been changed to Macquarie Group. However, he provided an online statement which shows Aussie Basic Home Loans and the same account numbers referred to above. The date of the statement is 16 July 2024, albeit it is irrelevant to the decision under review other than to confirm the loans remain in place.[38]
[38] Applicant’s Further Submissions, page 2.
CONCLUSION
There is no doubt the hinterland property was in poor condition when it was inspected by Rapid Building Inspections in February 2023, which is close to the time of inspection by the JLL valuer who noted as much in the report including the inspection of the property internally and externally on the day of the site visit.
The market appraisal by the real estate agent for LJ Hooker is just that, an appraisal. It is not a valuation by a licenced property valuer such as JLL. Case law has clearly established the value determined by a licenced valuer is to be preferred over appraisals by others without such qualifications.
The JLL valuation of $555,000 is less than all the comparative sales it references in the area by at least $45,000. The issue of the easements over the property has been addressed by JLL and found not to affect the valuation provided.
Mr Christensen obtained his own formal valuation of the hinterland property, which he declined to submit as evidence to the Tribunal (a valuation which may show a value of $600,000).
Mr Christensen indicated at the hearing the cost of full rectification of the hinterland property might be $200,000, although the evidence of such cost, being the quotes provided, was around $80,000.
The market appraisal includes comparative sales with the range of values much higher than the value attributed to the hinterland property without explaining why they differ, whereas the JLL valuation refers to five comparative sales and offers brief explanations as to why they differ from the amount ascribed to the hinterland property, which is less than any of those comparative sales.
The market appraisal also refers to what it regards as the ‘tiny plot of level land’ on which to build a replacement residence as the only part of the property that adds value. Again, there is no explanation as to why that degrades the value of the property nor is it considered how the slope of the property may be attractive to some buyers.
The Aussie Basic Home Loans are valid debts or encumbrances in respect of the hinterland property and the market value of it has been reduced by the outstanding balance of the loans at the relevant time to arrive at the net market value.
DECISION
The decision under review is affirmed.

I certify that the preceding 51 (fifty-one) paragraphs are a true copy of the reasons for the decision herein of Member P Ranson

.......................[SGD].....................
Associate
Dated: 2 August 2024

Date of hearing:

Date final submissions received:

13 May 2024

19 July 2024

Applicant: Self-represented

Solicitors for the Respondent: Ms N Markov
Services Australia

Supplier	Date	Quote ($) (Incl. GST)
Australian Retaining Walls (1)	08-11-2023	20,900
Australian Retaining Walls (2)	08-11-2023	60,000
Evergreen Wastewater[32]	15-11-2023	Unknown
LMMC Pty Ltd	06-11-2023	15,942
John Taylor Welding	07-11-2023	3,866
Earthsolve	30-11-2023	660