Cummins and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2011] AATA 513
•25 July 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 513
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/5134
GENERAL ADMINISTRATIVE DIVISION ) Re Terence Cummins Applicant
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
Respondent
DECISION
Tribunal Mark Hyman Date 25 July 2011
Place Canberra
Decision The Tribunal:
(a) sets aside the decision under review and substitutes a decision that the value of the Connells Point property belonging to the applicant and his wife is $607,500; and
(b) remits the matter to the respondent for the calculation of Mr Cummins’s age pension on that basis.
.................[sgd]............................
Mark Hyman, Member
CATCHWORDS
SOCIAL SECURITY – age pension – assets test – value of property – principles of valuation – preference among competing valuations
Social Security Act 1991 (Cth) ss 1064, 1118
Local Government Act 1989 (Vic)
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Re Arnold and Minister for the Capital Territory (AAT 5110/1978, 21 September 1979)
Re Badolato and Secretary, Department of Social Security (AAT 8880, 2 August 1993)
Re Blaszczyk and Secretary, Department of Family and Community Services [2005] AATA 1224
Re Cleary and Secretary, Department of Family and Community Services [2004] AATA 1125
Re Demovich and Secretary, Department of Family and Community Services [2004] AATA 647
Re Duncan and Repatriation Commission (AAT 10823, 22 March 1996)
Re Eimberts and Repatriation Commission (1988) 16 ALD 19
Re Evans and Secretary, Department of Social Security (AAT 8710, 18 May 1993)
Re Fong and Secretary, Department of Family and Community Services [2002] AATA 172
Re Goldthorpe and Secretary, Department of Employment and Workplace Relations (2007) 99 ALD 637
Re Heath and Department of Employment, Education and Training (AAT 10423, 31 September 1995)
Re Henderson and Secretary, Department of Families, Housing Community Services and Indigenous Affairs [2008] AATA 468
Huntly and Secretary, Department of Workplace Relations [2007] AATA 1660; (2007) 96 ALD 780
ReJubb and Department of Family and Community Services [2001] AATA 239
Re Kennaugh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 346
Re Keremelevski and Secretary, Department of Social Security (AAT 11247, 17 September 1996)
Re Reynolds and Secretary, Department of Social Security (AAT 3879, 3 November 1987)
Re Rungert and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] 438
Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579
Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796
Re Torv and Secretary, Department of Social Security (AAT 8025, 18 June 1992)
Re Weller and Secretary, Department of Social Security (unreported Nos. Q95/394, Q95/395 22 March 1996)
Re White and Secretary, Department of Family and Community Services [2000] AATA 482
Re Woodhouse and Department of Social Security (AAT 3262, 5 March 1987)
Re Worthing and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 328
Spencer v Commonwealth (1907) 5 CLR 418
REASONS FOR DECISION
25 July 2011 Mark Hyman, Member
1. Mr Terence Cummins is a retired teacher who receives an age pension. The rate at which he is paid is determined under the assets test. Besides his own house in Bowral, NSW, Mr Cummins and his wife also own a property in Connells Point in Sydney. In the Centrelink annual assets and review form for 2010, Mr Cummins nominated the value of the property as $540,000, but valuation by the Australian Valuation Office (AVO) arrived at a figure of $625,000. Mr Cummins sought review of this figure, and gathered information to challenge it. An authorised review officer from Centrelink affirmed the value arrived at by the AVO, and on 9 November 2010 the Social Security Appeals Tribunal (SSAT) arrived at the same conclusion. Mr Cummins has sought review of the SSAT’s decision in this Tribunal.
The Issue
2. No question of the method of calculation of Mr Cummins’s pension has been raised in this matter. The only issue before me is the value of the property at Connells Point.
The Hearing
3. Mr Cummins, the applicant, appeared in person, supported by his wife. He tendered a large number of exhibits in support of his claim (Exhibits A1-A30), consisting of photographs, documents and material downloaded from the Internet. Ms Glenda Heggen, a Centrelink advocate, appeared for the respondent.
4. The matter was heard in Moss Vale over two days, on 28 April and 1 June 2011. Mr Cummins gave oral evidence. The AVO valuer who had inspected Mr Cummins’s property and submitted a written valuation, Mr James Brooke-Cowden, also gave evidence.
The Facts
5. Although many of the facts relating to the value of the property are themselves disputed, the essential events leading up to the hearing are uncontroversial. Mr Cummins and his wife Helen Cummins purchased the Connells Point property, a strata title property, for $540,000 in 2007. Mr Cummins declared his interest in the property to Centrelink on 4 October 2007 (T4), attaching material showing that the contract was entered into on 16 August 2007 with settlement on 27 September 2007; a certificate of title with the latter date records Mr and Mrs Cummins as holders of the estate in fee simple. I understand that Mr Cummins’s daughter, at times, lives in the property, and that Mr and Mrs Cummins stay there when they visit Sydney.
6. On 16 June 2010, Centrelink began a review of Mr Cummins’s real estate assets. As part of that review, Mr Cummins completed an ‘Income and Assets Update’ for Centrelink on 16 June 2010, nominating the value of the Connells Point property as $540,000 (T8). On 16 June 2010 Mr Cummins gave authority for a valuation of the property by the AVO (T9). An AVO valuer, Mr John Ploski, conducted a roadside inspection on 29 June 2010, and submitted a valuation of $625,000. Using this figure, Centrelink determined that Mr Cummins’s fortnightly social security payment would be reduced (T10).
7. On 6 July 2010 Mr Cummins asked for the decision to be reviewed (T13). A Centrelink Manager affirmed the decision, but noted that the query regarding the valuation of the property had been referred to the AVO (T14). Centrelink requested a further valuation by the AVO (T16), noting Mr Cummins’s objection to the initial valuation. On 27 July the AVO submitted a written report of this second valuation (T19). The valuation was undertaken by Mr James Brooke-Cowden, using the same valuation date (29 June 2010) as Mr Ploski, and arriving at the same value. Centrelink advised Mr Cummins on 3 August 2010 that the valuation of the property had been confirmed at $625,000 (T21).
8. On 5 August Mr and Mrs Cummins wrote to Centrelink (T22) contesting the AVO valuation figure, and attaching two assessments by real estate agents familiar with the Connells Point area: Mr York Davey of Gavan Property valued the Cummins’s property at $560,000 - $570,000, and Mr Mark Heyman of Brookes Partners valued it at $585,000 - $605,000. Mr Cummins contacted Centrelink further by telephone on 17 August and requested that the matter be referred to a Centrelink authorised review officer (ARO) (T24).
9. On 9 September 2010 the ARO concluded that the valuation of the property by the AVO was to be preferred, and affirmed the figure at $625,000 (T28). The ARO also noted that only a written valuation done by an accredited valuer following proper, explicit valuation processes could be accepted, and suggested that Mr Cummins might care to engage a valuer if he wished to contest the valuation further. Mr Cummins sought review of the ARO’s decision by the SSAT on 18 October 2010 (T30), and on 28 October 2010 made a submission to the SSAT in support of his case (T31). He attached to that submission an independent valuation report that he had commissioned from Mr Jeffrey Perkins, an accredited professional valuer, giving the value as $590,000. He also attached various other supporting documents, including photographs, NSW Land and Property Management Authority documents on the gross land value of the Connells Point Property at different times, information on strata levy payments for the property, a map of the area, a copy of the strata title unit plan and various documents downloaded from real estate websites relating to property sales in the area.
The Statutory Context
10. Mr Cummins receives an age pension. Section 1064 of the Social Security Act 1991 (Cth) (the Act) provides a series of Calculators which provide methods to determine a person’s rate of pension. Module A, in section 1064-A1, sets out the overall method. This consists of determining a maximum rate and then reducing it by either an income reduction or an assets reduction if the income or assets of a person are above a threshold. Step 11 of the Method statement set out in the section establishes that the reduction that is the greater of the calculated income and assets reductions is to be used. Section 1064-A2 establishes that members of a couple are to be treated as pooling their income and assets, and sharing them equally, for the purposes of determining the pension rate.
11. It is common ground that the reduction derived from Mr and Mrs Cummins’s assets is greater than the reduction derived from their income. Therefore the relevant Calculator that applies to them is that relating to assets. Module G in section 1064 sets out the assets test to be applied in calculating pensions. Section 1064-G2 provides that the value of the assets of a member of a couple is taken to be half of the total value of the assets of the couple. Various assets are excluded from the assets test, including, under section 1118, the principal home.
12. It is common ground that the Connells Point property is covered by the assets test.
The Valuations
13. The major sources of alternative valuation figures are the professional valuers’ reports, by Mr Brooke-Cowden of the AVO and by an independent valuer, Mr Jeffrey Perkins of Jeffrey Perkins and Associates. Both valuations follow the same methodology, the central element of which is the direct comparison of the subject property with others in the local area that have been sold in the period leading up to the valuation. Mr Brooke-Cowden used that methodology to arrive at a value of $625,000; Mr Perkins to arrive at a value of $590,000.
14. Besides differing in the value placed on the property, the two valuations also used different properties and sales for the purposes of direct comparison. The earlier roadside valuation by Mr Ploski also used a list that differed from those of Mr Brooke-Cowden and Mr Perkins. The address of the subject property is 5/18 Homedale Crescent, Connells Point, and three other properties in the same street were used for comparison purposes by all three valuers. However, all three valuers have each used a different fourth property for comparison purposes, and Mr Ploski also used a fifth property.
15. A further difference is the date of valuation. Mr Ploski’s valuation was done on 29 June 2010, and Mr Brooke-Cowden’s valuation also used that date as the date of valuation, although his inspection was done on 15 July 2010. Mr Perkins’s valuation (‘the Perkins report’) is dated 15 September 2010. The significance of the difference in date is explored below, but one effect of it was to allow the inclusion as a comparison property of 5/24 Homedale Crescent, which is listed as sold ‘circa May 2010’ in Mr Perkins’s report. However, according to the real estate data compiled by RP Data this property was sold on 1 July 2010 – i.e. two days after the valuation date used by Mr Ploski and Mr Brooke-Cowden. (‘RP Data’ is a website that assembles, compiles and presents data about real estate matters, including information on individual properties and statistical material about the market in general.)
16. The AVO took two further steps, presumably prompted by the dispute over the valuation. The AVO’s report includes a standard disclaimer to the effect that it not be used for SSAT and AAT proceedings unless the AVO has had a chance to comment and provide a ‘fully documented report’ (T19). It appears that that requirement was not met in respect of the SSAT’s consideration, but the AVO did revise the report after the SSAT proceedings, and submitted an expanded and corrected version for consideration of the matter in this Tribunal (Exhibit R1). That version (‘the Brooke-Cowden report’) differs from the earlier version in a number of presently relevant respects:
(a)It provides additional detail regarding identification of and title to the property, and annexes a title search and strata plan;
(b)It contains significantly expanded treatment of matters such as area, zoning, services, physical description and improvements;
(c)It responds in more detail to Mr Cummins’s contentions made contesting the first valuation by Mr Ploski; and
(d)It corrects the earlier version, adjusting the total strata area from the figure of 231 square metres used in the earlier version to 278 square metres. It is evident from the description of the different parts of the property in the later report that the earlier report omitted to include the downstairs part of the property (garage and storage) in the total area quoted.
17. The second step taken by the AVO was to insert a covering memorandum over Mr Brooke-Cowden’s revised report, signed by Mr Robert Russo, NSW Regional Manager of the AVO. This memorandum provides a review of the Perkins report and criticises it on several grounds, which I will return to later.
The Applicant’s Case
18. Mr Cummins argues that the valuation by Mr Perkins, a professional and accredited valuer, following the same method as that of the AVO, should be preferred. In support of that contention he advanced the following evidence and arguments:
(a)the valuations by the two real estate agents, which also provide lower values than that found by the AVO;
(b)errors in Mr Brooke-Cowden’s written report, namely
(i)the sale price of 1/22 Homedale Crescent is identified as $651,000 when it was in fact sold for $651,500 (this was admitted by Mr Brooke-Cowden and is confirmed by an RP Data printout (Exhibit A19));
(ii)The report lists Oyster Bay as among the amenities within one kilometre of the subject property, although Oyster Bay is on the other side of Georges River from Connells Point;
(iii)2/22 Homedale Crescent is described by Mr Russo as free-standing, when the strata plan (Exhibit A24), photographs taken by Mr Cummins (Exhibits A1, A2, A3, A4) and an RP Data aerial photograph (Exhibit A5) show it to be attached to 1/22 and to be attached by a garage to 3/22.
(c)The subject property is described as well positioned, private, and at the back of the block, when it is in fact closely adjacent to other properties (in different strata title groups), is exposed to noise and headlights, and has limited access from some sides; these points are illustrated by photographs taken by Mr Cummins (T31 and Exhibits A6, A7, A8, A9, A10, A11, A12, A13, A14) and the RP Data aerial photograph (Exhibit A5);
(d)Mr Brooke-Cowden’s report refers to renovations and floor coverings in the subject property, when in fact any renovations had been very limited and the floors in question appeared to Mr Cummins to be the original tiles (Exhibit A17);
(e)Mr Ploski included 1/17A Homedale Crescent (photographed by Mr Cummins, Exhibit A16) as a property for comparison purposes, but Mr Brooke-Cowden, while arriving at the same value, omitted it without explanation.
(f)Both Mr Brooke-Cowden and Mr Ploski included 7/63 Homedale Crescent as a property for comparison, despite its sale date of October 2009 (putting it outside a six-month window for comparison purposes);
(g)Mr Russo describes 5/24 Homedale Crescent (the property used for comparison by Mr Perkins, but not by either Mr Ploski or Mr Brooke-Cowden) as two-storey, when in fact it is split level.
19. Mr Cummins asserted that Mr Perkins had made a more balanced valuation, taking into account both the positive and negative aspects of the property. Mr Brooke-Cowden, on the other hand, had focused only on the positives, which explained why he had arrived at a higher value.
The Respondent’s Case
20. Ms Heggen relied on the AVO valuation, especially the written report by Mr Brooke-Cowden. She argued that real estate agents’ valuations could not be relied on to determine the value of a property. She also attacked much of Mr Cummins’s own evidence. In particular, Ms Heggen objected to the photographs tendered by Mr Cummins on the grounds that there was no independent verification that they represented what they purported to show, and that some of them had been electronically processed to create composites. Ms Heggen also suggested that the photographs could not be used as evidence as they had not been provided to the AVO.
21. Ms Heggen noted the various criticisms of the Perkins report by Mr Russo, and said that the AVO’s valuation should be preferred. She suggested that the AVO’s valuation, as an independent valuation by a professional organisation established for this very purpose, should be preferred as the basis for determining the value of the property.
22. I return to these arguments below, but in respect of Mr Cummins’s evidence given on his own behalf, it is my conclusion that he is a person of integrity who feels genuinely wronged by the way his grievance appears to have been brushed aside. I do not need to rely significantly on the photographs he submitted, as either the matter at issue was established by other evidence, or else it proved not to be crucial to the value of the property. It is likely, however, that if I had been obliged to rely on the photographs, I would have been willing to do so on the basis that they were attested to by Mr Cummins, who I regard as a reliable witness. And as they have been provided to the respondent for the purposes of the hearing, both the respondent and the AVO have had ample opportunity, including during the giving of evidence, to raise any point relevant to their use in deciding this matter.
Consideration
23. The Act does not specify how assets are to be valued for the assets test. Over the years, however, the Tribunal and the courts have established authority for the valuation of real estate through determining a market value based on comparable sales and the best use of the property.[1] That approach has been widely followed in the Tribunal and was accepted by the Federal Court in Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790. The market value of a property was addressed by the High Court in Spencer v Commonwealth (1907) 5 CLR 418. Griffith CJ (at 432) put it as follows:
In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie whether there was on that day a willing buyer, but by inquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’
[1] see eg Re Woodhouse and Department of Social Security (AAT 3262, 5 March 1987); Re Fong and Secretary, Department of Family and Community Services [2002] AATA 172).
24. That approach – that the market value is the price a willing, but not eager, purchaser and a willing, but not anxious, seller would arrive at on the day in an arms-length transaction, with both sides informed and the property appropriately marketed - has been followed since.
25. In practice, the case law, especially in this Tribunal, shows a heavy reliance on the valuations provided by the AVO as a means of arriving at the market value of a property.[2] In Re Goldthorpe and Secretary, Department of Employment and Workplace Relations (2007) 99 ALD 637, Deputy President Jarvis noted, at [37], that ‘Valuations by government officials should not be lightly departed from, having regard to their statutory obligations and the significance of the use that may be made of the valuations arrived at’.
[2] See e.g Re Eimberts and Repatriation Commission (1988) 16 ALD 19; Re Evans and Secretary, Department of Social Security (AAT 8710, 18 May 1993) (‘Evans’); Re Secretary, Department of Social Security and Langton (1993) 31 ALD 579; ReJubb and Department of Family and Community Services [2001] AATA 239; and Re Goldthorpe and Secretary, Department of Employment and Workplace Relations [2007] AATA 1875.
26. This approach has led to the Tribunal on occasion explicitly preferring AVO valuations to those arrived at from other sources such as real estate agents,[3] applicants themselves[4] and State Valuers-General.[5] It is apparent that a driving consideration in many of these cases is that the purpose for, or the basis on, which the alternative valuation was obtained was often different from that involved in determining the market value of a property for social security purposes. Thus in Re Henderson and Secretary, Department of Families, Housing Community Services and Indigenous Affairs [2008] AATA 468 (‘Henderson’), Deputy President Jarvis preferred the AVO’s valuation of a property to that of the Victorian Valuer-General, noting that the Local Government Act 1989 (Vic) provides for land to be valued for rating purposes, and that a range of valuation methods may be adopted; the value so obtained is not a market value determined for social security purposes. Similarly, in Re Kennaugh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 346 the Tribunal explicitly preferred AVO valuations of the various properties involved, noting that valuations for rates purposes did not determine a market price, and that the real estate agent who had offered a valuation was not a registered valuer and had not followed a transparent methodology.
[3] Re Duncan and Repatriation Commission (AAT 10823, 22 March 1996) (‘Duncan’); Re Keremelevski and Secretary, Department of Social Security (AAT 11247, 17 September 1996)
[4] Re Duncan and Repatriation Commission (AAT 10823, 22 March 1996)
[5] Re Cleary and Secretary, Department of Family and Community Services [2004] AATA 1125; Re Demovich and Secretary, Department of Family and Community Services [2004] AATA 647.
27. On the other hand, valuations by parties other than the AVO, and other than by professional valuers, have sometimes been preferred. In Re Blaszczyk and Secretary, Department of Family and Community Services [2005] AATA 1224 the Tribunal followed a real estate agent’s valuation over that of the AVO, because the latter was poorly done, while the agent’s valuation was more thorough. In Re Torv and Secretary, Department of Social Security (AAT 8025, 18 June 1992) the Tribunal concluded that the approach of the AVO to valuing the property under discussion was to be preferred, but nevertheless took account of evidence provided by a local real estate agent and valued the property at a point between those adopted by the AVO and the agent. Similarly, in Re Worthing and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 328, the Tribunal took note of a real estate agent’s valuation and adopted a value lying between that of the AVO and the agent.
28. In Re White and Secretary, Department of Family and Community Services [2000] AATA 482 (‘White’), the Tribunal noted that although AVO valuations carry a certain authority, that authority is in no sense binding on this Tribunal, which can form a conclusion of its own about a property’s value, drawing on professional valuations from other sources, from real estate agents and from informed lay opinion. Similarly, in Re Heath and Department of Employment, Education and Training (AAT 10423, 21 September 1995) the Tribunal drew upon both AVO valuations and the evidence of local stock and station agents.
29. Ms Heggen argued that where a real estate agent’s valuation has been relied on by the Tribunal, the valuation has been prepared in the knowledge that the purpose of the valuation is to decide a social security matter. It does not seem to me however, that the case law is clear on that point, as in many instances the knowledge of the circumstances by the real estate agent is unspecified. In any case, the approach set out by the Tribunal in cases such as White and Re Weller and Secretary, Department of Social Security (AAT, Q1995/394, 395, 22 March 1996) suggests a much more flexible approach by the Tribunal, taking account of all the circumstances and the relevant special knowledge and expertise that agents and valuers command.
30. In other cases there were competing valuations by the AVO and an independent valuer. In some instances AVO valuations have been preferred[6], but in other cases the Tribunal has relied on the independent valuations.[7] In Henderson Deputy President Forgie followed an AVO valuation for a purpose relating to one date, and an earlier valuation of the same property by an independent valuer for a purpose relevant to an earlier date. In Re Badolato and Secretary, Department of Social Security (AAT 8880, 2 August 1993) (‘Badolato’) the Tribunal adopted a value between those of the AVO and an independent valuer. In Huntly and Secretary, Department of Workplace Relations (2007) 96 ALD 780 the Tribunal reviewed the value of several properties, noting the greater rigour and transparency that professional valuers brought, normally, to the valuation process. In that case, however, the Tribunal sometimes followed the AVO, sometimes an independent valuer, and sometimes real estate agents.
[6] E.g. Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796
[7] E.g. Re Rungert and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 438
31. When Deputy President Jarvis, in the quotation given at paragraph 25, said that AVO valuations ‘should not be lightly departed from’, I take the emphasis to be on the adverb ‘lightly’. It does not imply that the AVO’s valuation is always to be followed, but rather that there should be reason to depart from it. In the cases where the Tribunal has followed some other path, there has been a question about the reliability or accuracy or thoroughness of the AVO’s valuation, or some other reason – such as a compelling valuation from elsewhere - to prefer an alternative.
Preliminary Contentions
32. In the context established by the case law, some of the contentions advanced by one side or the other in this matter can be put to one side. In making the application, and in subsequent processes, Mr Cummins made two particular points: that the valuation for rating purposes has not changed, and that the amount he is required to pay in strata levies has not increased. In the hearing he pressed neither point, but perhaps it is as well if I address them. Neither point is helpful to his case. The valuation done by the NSW Valuer-General is undertaken for a different statutory purpose, to a different standard, and it is not a market valuation, which is the kind of valuation required in the context of social security. The value so obtained cannot be used as a proxy for present purposes. Similarly, the amount paid into a strata title sinking fund is determined by the strata owners, and may be influenced by matters such as whether future capital improvements to common property are likely to be needed. It is therefore not an indication of the value for the property for social security purposes, or of change in the value of the property.
33. The real estate valuations obtained by Mr Cummins are in my view of limited utility. Real estate agents valuing a property for an undisclosed purpose, as appears to have occurred here, may be doing so, for example, with an eye on obtaining a listing. While they seem likely to give weight to the expected market value, the intrusion of other factors, such as the wish to attract a client, makes the value obtained less reliable. Nevertheless, real estate agents are likely to know the market, and their views should not be disregarded entirely. In the current circumstances, where there are two competing professional valuations, the views of real estate agents have some useful corroborative weight.
34. There has been some muddying of the waters with regard to the utility of median figures in determining a property value. The SSAT referred to median figures in its decision, and some of the respondent’s submissions also used that term. The respondent has subsequently disavowed use of median values for these purposes. Mr Cummins notes that if the value of his property since he bought it tracked the change in median values for Connells Point, it would now be worth $598,000. In evidence Mr Brooke-Cowden said that median values were not used in valuations, and neither he nor Mr Perkins relied on median values, although a median value for Connells Point is mentioned in the Perkins report.
35. I do not find median values useful in determining the value of Mr Cummins’s property. The median is a statistical measure, and while it is therefore useful in indicating what the market as a whole has done (assuming a sufficiently large sample size), it cannot provide information about a single property. The movement of median values for an entire suburb seems unlikely to be a reliable and precise guide to the change in value of an individual property within that suburb. Such an approach was rejected by this Tribunal in Re Arnold and Minister for the Capital Territory (AAT 5110/1978, 21 September 1979).
36. Some of the other points made by Mr Cummins about his property do not really assist his case. Whether or not the property has been renovated is chiefly relevant to the current condition of the property. Both the valuers saw the property in its present condition, assuming that it did not deteriorate materially between 15 July 2010 and 15 September 2010 (and there has been no suggestion that it did). Therefore the condition will have been taken into account by both on the same basis (although they may have given it different weight). The minor errors in the Brooke-Cowden report suggest neither that the value arrived at is inaccurate nor that Mr Brooke-Cowden has conducted his valuation in anything other than a professional manner.
37. It is true that Mr Russo made some errors in his commentary on the Perkins report. He described 2/22 Homedale Crescent as free-standing when it is semi-detached and 5/24 Homedale Crescent as two-storey when it appears to be split-level. Neither of these errors appears in Mr Brooke-Cowden’s report, however, and so neither can affect his valuation. As for the omission of 1/17A Homedale Crescent from his valuation when it was included in Mr Ploski’s, Mr Brooke-Cowden said in evidence that because 1/17A was a duplex (rather than a villa or townhouse) it was not comparable. I cannot see that its exclusion leads in any particular direction, or that it should inevitably have produced a difference in the value at which Mr Brooke-Cowden arrived.
The two valuations compared
38. The critical question is which valuation is to be preferred, and on what basis. Where two professional valuations differ by comparatively small amounts, it may be expected that the parties will reach an accommodation. In Re Reynolds and Secretary, Department of Social Security (AAT 3879, 3 November 1987) (‘Reynolds’), Deputy President Layton suggested that in such circumstances, compromise was the appropriate course of action, and expressed some impatience that the parties had not been able to iron out their differences over a discrepancy of $9,250 in a total property value of $130,000. In Evans Member Fayle at [8] noted the Tribunal’s comments in Reynolds, and suggested four questions to be asked in assessing whether a valuation meets the standard required for reliance to be placed on it:
·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?
39. While these questions may not exhaust all the possible tests that may be applied, and do not appear to have been universally adopted, they are a reasonable starting point for an examination of the two valuations.
40. With regard to professional qualifications, a curriculum vitae (CV) has been submitted for each of Mr Brooke-Cowden and Mr Perkins.
(a)Mr Brooke-Cowden holds Master of Applied Finance and Bachelor of Commerce degrees and a Diploma of Business (Real Estate Management); he is a Member of and Certified Practising Valuer with the Australian Property Institute and a NSW Registered Valuer. The Australian Property Institute imposes upon its members various professional rules, including a requirement that valuations not be done to deliver a predetermined result.
(b)Mr Perkins holds a Bachelor of Applied Science degree with Honours and Diplomas in Teaching and Law; he is a Registered Real Estate Valuer in NSW and a Member of the Valuers Chapter of the Real Estate Institute of NSW.
41. Both valuers have extensive experience in the valuation of property:
(a)Mr Brooke-Cowden’s CV shows that he undertakes valuations for a variety of different purposes, including market value assessments, for a wide variety of government-related clients, including Centrelink. In evidence Mr Brooke-Cowden said that Centrelink was the client for which he had done the preponderance of valuations, and that he is currently assigned to the Kogarah area of Sydney (which embraces Connells Point).
(b)Mr Perkins’s CV states that he has conducted his own valuation practice in all areas of Sydney since 1994, that he is registered to value all classifications of property, and that he has extensive experience in all aspects of valuation.
42. I have no basis to question the independence of the valuation undertaken by either valuer. The respondent argues that the valuation by Mr Perkins ‘is not a reliable valuation in that it was prepared by and paid for by the applicant to suit his purpose’. That is a remarkable and altogether specious argument. The AVO valuation, after all, was equally prepared for and paid for by Centrelink, for its purposes. Professional valuers exist to provide independent valuations on which reliance may be placed, and that applies equally to the AVO and to independent valuers in the private sector. That the decision at issue in this matter is reviewable of itself necessarily implies that an applicant can submit an alternative valuation by way of challenge; otherwise the right to seek review would be nugatory. There is nothing before me to suggest that Mr Perkins’s report is anything but a professional valuation done independently and according to the standards of the profession.
43. Similarly, I have no basis to believe that Mr Brooke-Cowden carried out a valuation that fell short of professional standards. Mr Brooke-Cowden impressed me as a truthful and reliable witness. He responded steadily and consistently to an extended cross-examination. Mr Cummins has suggested that it is possible that Mr Brooke-Cowden did his valuation in order to align the outcome with that of Mr Ploski, at $625,000. He said that Mr Brooke-Cowden rang him and advised that he had arrived at a valuation of $620,000, only to later increase the value to $625,000. In giving evidence, Mr Brooke-Cowden stated that he could not recall such a call, and that it would not have been his usual practice (as Centrelink rather than Mr Cummins was his client). Mr Brooke-Cowden said that he arrived at first at a value of $630,000, but decided to lower the value to $625,000 to align his value with that determined by Mr Ploski and to deliver the benefit of the difference to Mr Cummins. On that specific issue I prefer the evidence of Mr Brooke-Cowden, but that does not imply that I generally endorse the value he determined.
44. On the evidence I have concluded that there are no persuasive grounds for regarding either valuation as other than independent.
45. The Brooke-Cowden report quotes the definition of ‘market value’ in the 2007 International Valuation Standards, as the basis for a market valuation approach: ‘The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arms-length transaction after proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion’. This same definition is adopted by Mr Perkins. That definition accords with the approach endorsed in the authorities. Both valuers have approached the determination of market value on the same basis and both have used direct comparison as their valuation technique.
46. Each of the parties has attacked the other over the practices adopted in their preferred valuation. Mr Russo’s covering note made the following criticisms of Mr Perkins’s valuation:
(a)the Perkins report uses a valuation date of 15 September 2010, and does not address changes in the market between the valuation date of 29 June 2010 used in the Brooke-Cowden report and the later date;
(b)the date of sale for one of the Perkins comparison properties, namely 5/24 Homedale Crescent, is incorrect; it is given as ‘circa May 2010’ when in fact the sale occurred on 1 July 2010 and is therefore after the AVO’s valuation date;
(c)the Perkins report rates some of the properties as inferior or superior without explanation; in some cases smaller and older properties are rated as superior to the subject property; and the rating of the properties does not take into account whether they are free standing, semi-detached or of one or two storeys;
(d)in the Perkins report the comparison with other properties fails to identify the relevant Strata Plan in each case;
(e)the Perkins report does not identify a range of possible values, within which a valuation can then be identified;
(f)the Perkins report is ‘imprecise’ about the build date for the subject property, referring to it as built ‘circa 1980s’, whereas the Brooke-Cowden report offers a more precise period of 1987-88 as the likely period of construction; this difference is relevant because of the need to adjust the value when comparing the subject property to older properties built in the late 1970s; and
(g)the Perkins report quotes a strata area of 231 square metres for the subject property rather than the correct strata area of 278 square metres;
47. These comments by Mr Russo, repeated slightly more moderately by Mr Brooke-Cowden in giving evidence, appear somewhat self-serving. The criticisms seem intended to suggest that Mr Perkins did not follow good practice, and that his valuation is therefore not to be relied on, but for the most part it is difficult to conclude that any departures from good practice have had a material effect on the valuation.
48. Mr Russo points to the dates of valuation being quite different – 29 June 2010 as against 15 September 2010. If the property itself has not deteriorated or improved, the only difference engendered by the valuation date is the comparison properties that have been used. Mr Perkins dropped the oldest of the sales used by Mr Brooke-Cowden, and substituted a newer sale, that of 5/24 Homedale Crescent on 1 July 2010. It may be technically correct to draw only on sales that precede the date of valuation, and in that sense, Mr Perkins’s use of 5/24 Homedale Crescent renders his report not comparable with that of Mr Brooke-Cowden. But there is nothing to suggest that the two-day difference is material to the value Mr Perkins arrived at.
49. The comment that Mr Perkins’s rating of the properties assesses comparison properties without explanation is correct, but that appears to result from the report being an abbreviated valuation, which is what Mr Cummins commissioned in order to minimise the cost. The earlier version of the Brooke-Cowden report is similarly brief, and does not explain what it is in each property that leads to the conclusion that it is inferior or superior to Mr Cummins’s property. It is only in the version of the Brooke-Cowden report later revised and expanded for submission to this Tribunal that an explanation of the rating is to be found. Both the earlier Brooke-Cowden valuation and the Perkins report include a brief description of each comparison property: such as a ‘villa’ or ‘2 storey townhouse’, in the Brooke-Cowden report and in the Perkins report, a ‘semi-detached split level villa’ or ‘split level villa’. The amount of descriptive material is roughly the same, although the Perkins report contains a little more material about the number and kind of rooms in each property. It is clear that neither of these abbreviated reports is complete in whether the properties are free standing or not, unless that can be deduced unambiguously from terms such as ‘villa’; and if it can, then that is equally so for both documents.
50. Mr Russo makes much of the failure of the Perkins report to identify the strata plan for each of the comparison properties. No doubt it is good practice that a valuer should consult the strata plan when valuing a strata property. Perhaps for an abbreviated valuation Mr Perkins felt that time did not allow. Nevertheless, it is not clear that a failure to quote a strata plan number necessarily leads to a fatally flawed valuation. As the strata plans are authoritative sources of strata areas, however, and strata areas are major drivers of valuation outcomes, strata plans may be an important valuation tool. I return to this point below.
51. A range of possible values within which a valuation for the property may be set was identified by Mr Brooke-Cowden in both his original brief report and in the expanded version. No such range was set by Mr Perkins. It may be that it is good practice to nominate a range in that way, but I note that the range nominated by Mr Brooke-Cowden is simply the range between the sale price of the most expensive comparison property considered inferior and that of the least expensive comparison property considered superior to the subject property. The implication is that the range is implicit in the sale prices of the properties and the valuer’s judgment about which are inferior and superior: there does not seem to be any separate exercise of a valuer’s skill in deciding what the range is. In Mr Perkins’s valuation, the range, on the above basis, would appear to be $575,000 to $593,000. That range straddles his valuation outcome of $590,000 in the same way as Mr Brooke-Cowden’s range straddles his outcome of $625,000.
52. As Mr Russo points out, the Brooke-Cowden report uses greater precision in identifying the build date of the subject property (‘1987/88’ as against ‘circa 1980s’). Mr Russo says this may be important given the need to take ages of properties into account but it is not apparent to me that this difference is material to the value Mr Perkins arrived at, especially as the more precise date falls within the more general range he identified.
53. That leaves the mistake in the strata area of the property, which Mr Perkins lists as 231 square metres instead of 278 square metres. That would seem to be a significant error. The difficulty, however, is that Mr Brooke-Cowden in his first report made the same error. Both valuers therefore quoted an erroneous area, although Mr Brooke-Cowden later corrected it for his revised report. When asked whether it was possible that both valuers had made the same error, Mr Brooke-Cowden suggested that this was unlikely, as Mr Perkins had had the advantage of time to correct it. To my mind, the reverse seems more probable. Mr Perkins was paid to produce a single abbreviated report, and then presumably gave it no further thought, as he would not be remunerated for any additional work. Mr Brooke-Cowden, on the other hand, gave the matter further attention in order to prepare a revised report for this Tribunal. He therefore had the opportunity to detect and correct the error – which he did.
54. The parties have raised a number of arguments to do with the weight to be given to the positive and negative aspects of the subject property. Mr Cummins argues that Mr Perkins made a more accurate assessment of the property, as he noted that the property was ‘somewhat dated’ and that there was a lack of privacy with all bedrooms overlooked by neighbouring properties. To Mr Cummins, Mr Perkins’s recognition of these aspects makes his report more balanced. Mrs Heggen suggested that Mr Cummins is exaggerating the negatives; and she suggested that if the negatives were so pronounced it becomes difficult to understand why Mr Cummins bought the property or holds back from selling it now.
55. The Brooke-Cowden report says that the property ‘appears to have been renovated within the last 5 years’, and Mr Cummins has seized on this, suggesting that the conclusion is inaccurate and that the value has become inflated as a result. Mr Brooke-Cowden suggested that the property has been renovated to some extent, but before Mr Cummins bought it. His report notes that the property has ‘an attractive appearance’, and is ‘more desirable’ because it is standalone. Again, Mr Cummins appears to see these comments as evidence of a tendency by Mr Brooke-Cowden to overvalue the property.
56. None of these comments is hugely helpful to me in deciding which valuation to prefer. A valuation assesses a property’s value relative to others. Presumably Mr and Mrs Cummins, like other purchasers of property, bought a property that was as good and attractive as they could obtain at the price they were willing to pay. It is to be expected that there will be aspects about the property they particularly value and things they might wish were different. A valuation is a process that attributes value to things that the market as a whole recognises as positive and negative. The property might be ‘somewhat dated’, but that is only by comparison with others. Similarly, I infer that Mr Cummins’s stand-alone property is ‘more desirable’ than other townhouses in this or neighbouring complexes that are semi-detached or fully attached to other properties.
57. There is nothing before me, however, that establishes that any of these observations were in themselves highly material to the value arrived at, or that I should, on the basis of these observations, prefer one valuation over the other. Both the Perkins report and the earlier version of the Brooke-Cowden report are succinct documents, written generally in a flat non-committal style; the Brooke-Cowden report itself is comparatively elaborate in its description but it is similarly short of opinion, confining itself largely to factual matters. The observations that each makes are, I think, to be taken as summary notes of what was observed, but it would be jumping to conclusions to assume that these notes lead inexorably to the value arrived at. The descriptive terms used are to be understood as intended for the purposes of comparison. In his evidence, and also in his report, Mr Brooke-Cowden suggests that area, age and condition are the major drivers of the value of a property, and that seems a useful point of reference.
58. The following table presents all the comparison properties used by the three valuers, with prices, strata areas, sale dates, build dates and comparison ratings. The ratings are expressed on the basis of whether the comparison property is inferior or superior to Mr Cummins’s property.
1/17A
1/22
2/22
7/63
10/63
5/24
Strata area (sq m)
294
173
297
205
173
Sale date
2/2/2010
27/3/2010
17/4/2010
8/10/2009
1/5/2010
1/7/2010
Sale price
$600,000
$651,500
$575,000
$636,500
$593,000
$595,000
Build date
?
1979
1978
1994
1994
circa 1980s
Ploski
included
included
included
included
included
-
Rated (Brooke-Cowden)
-
superior
inferior
slightly superior
inferior
-
Rated (Perkins)
-
very superior
inferior
-
superior
comparable /superior
59. It is apparent that the critical differences between the Brooke-Cowden and Perkins comparison process are the choice of properties for inclusion in the comparison; and the comparative rating of 1/22 and 10/63 Homedale Crescent.
60. I have already commented on the inclusion of 5/24 Homedale Crescent by Mr Perkins. With regard to 7/63 Homedale Crescent, Mr Brooke-Cowden selected the property for inclusion in the comparison process despite its being a ‘dated sale’, having been sold in October 2009. Mr Brooke-Cowden says that the unit sold ‘in a weaker market’, but Mr Cummins assembled publicly available sales data for the period to suggest that the market at that time was stronger (Exhibit A27). When questioned, Mr Brooke-Cowden said that the material he drew on for his conclusion about the state of the market was proprietary and confidential material belonging to the AVO and relating to the relevant area of Sydney. Mr Cummins’s material was statistical data that included flats, villas and units and was therefore of limited use. As Mr Brooke-Cowden did not make his proprietary information available for Mr Cummins to challenge, however, procedural fairness would seem to require that I place little weight on the evidence he gives drawing on it. Mr Cummins also noted that 10/63 sold for a higher price than 7/63 when the properties were first built. He calculated the area of the courtyards from the strata plans and concluded that the living area of 10/63 is marginally greater than that of 7/63. He then argued that the greater living area and better position of 10/63 gave it a higher value, and that the higher value persisted to the present day. Thus the $636,500 price for 7/63 in October 2009, by this reasoning, was something of an anomaly reflecting the stronger market at that time. I find that reasoning tenuous; but nor am I persuaded that the inclusion of a dated sale from October 2009 is helpful in giving precision to a value determined some nine months later.
61. With regard to the different ratings afforded those properties that both valuers used, Mr Brooke-Cowden regarded 1/22 as superior, Mr Perkins as very superior. Mr Brooke-Cowden regarded 10/63 as inferior, Mr Perkins as superior. Clearly the difference of perspective regarding 10/63 is potentially significant. The property is newer than the subject property (1994 as against 1987), but smaller (205 square metres as against 278). Neither valuer was able to inspect the property, so nothing regarding its internal condition could be taken into account. Mr Perkins described it as a ‘semi-detached split level villa’; Mr Brooke-Cowden as a ‘semi-detached two storey townhouse’. Mr Perkins offers little to explain why he regarded the property as superior; the (expanded) Brooke-Cowden report explains that although newer, the property is smaller, both in living and total area, than the subject property.
62. While giving evidence Mr Brooke-Cowden suggested that one possible explanation of the difference between his and Mr Perkins’s outcomes was that Mr Perkins was in error about the strata area and therefore arrived at a value that was too low. The hypothesis is that Mr Perkins drew not on the strata plan, but on the strata areas he found in the earlier valuation by Mr Brooke-Cowden, thereby working from an erroneous strata area for Mr Cummins’s property; he relied on strata areas from the figures used by Mr Brooke-Cowden; and he omitted a strata area for 5/24 Homedale Crescent because he did not consult the relevant strata plan in order to obtain one. That hypothesis is plausible, and consistent with all the evidence, but it has little to corroborate it, and is not much more than mere speculation. Mr Brooke-Cowden noted in evidence that if the value of $590,000 arrived at by Mr Perkins was based on a strata area of 231 square metres, that implied a value of $710,000 of scaled up to an area of 278 square metres on a pro rata basis. When challenged, however, he admitted that a pro rata basis was not a suitable way to derive a value. I would note that not all areas within the total strata area are the same: presumably the living area is the greatest contributor to value, and the courtyard and downstairs storage and garage area have a lower value per square metre.
63. An equally plausible hypothesis to the above, in my view, is that two professional valuers conducted valuations using the same methodology and arrived at outcomes that varied in accordance with where they put their emphasis in the valuation process: perhaps Mr Perkins gave more weight to age, and to the privacy issues Mr Cummins has raised; while Mr Brooke-Cowden gave more weight to area and put emphasis on the good points about Mr Cummins’s property.
64. In evidence, Mr Brooke-Cowden suggested that the variation in valuation outcomes among professional valuers is about 1-3%. That implies that for a property valued at $625,000 another valuer might arrive at a figure up to $18,750 less, i.e. at $606,250 or more. That figure is well beyond the $590,000 of Mr Perkins, which implies a possible variation of at least 5.6%. I note however that in other cases far higher variability has been suggested. For example in Duncan, the Tribunal suggested a variation of 5-10% (implying a lower bound of $562,500 in this case if 10% is used). Logically, given the subjective elements involved, and the small number of data points provided by about four comparison properties, a higher variability seems more probable, especially as the factors surrounding the sale of comparison properties, and the internal condition of those properties, are unknown. I am inclined to conclude that a variability greater than that suggested by Mr Brooke-Cowden is to be preferred. I note, too, that all the evidence gathered by Mr Cummins, such as the values estimated by real estate agents, seems to corroborate a lower rather than a higher figure. I have chosen not to rely on these figures to determine the value, but they do all seem to point in a single direction. The respondent, on the other hand, has no additional evidence to support a higher value.
65. The Tribunal finds itself in the situation confronted by the Tribunal in Reynolds and Badolato. I do not know why the parties, confronted with competing valuations, were unwilling to compromise (each says that the other would not agree to alternative dispute resolution), and it may be that Centrelink wished to reinforce the authority of AVO valuations for their purposes. I have already noted that the availability of review of valuations implies that challenging an AVO valuation is an entirely legitimate step, nor can it be argued, on the cases, that the AVO is inevitably and always right. This is not a process in which a persistent and unmeritorious applicant has continued to pursue a lost cause. Mr Cummins is a pensioner, and secured an alternative valuation at his own expense. He has been disadvantaged in that he was unable to afford the costs of bringing Mr Perkins to give evidence, and that has also made it more difficult to decide where the correct or preferable decision lies.
66. I have not been able to find a basis for a decision that I should prefer one of the professional valuations over the other. The value of the property is set at the point mid way between the values arrived at in the two professional valuations.
Decision
67. The decision of the SSAT is set aside and substituted by a decision that the value of the Connells Point property is $607,500. The matter is remitted to the Secretary for determination of Mr Cummins’s age pension.
I certify that the 67 preceding paragraphs are a true copy of the reasons for the decision herein of Mark Hyman, Member
Signed: ................................[sgd]................................................
Caitlin Baillie, AssociateDate/s of Hearing 28 April, 1 June 2011
Date of Decision 25 July 2011
Representative for the Applicant Terrence Cummins
Solicitor for the Respondent Glenda Heggen
Centrelink Advocacy Branch
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