Keshan and Repatriation Commission (Veterans' entitlements)

[2021] AATA 398

Keshan and Repatriation Commission (Veterans' entitlements) [2021] AATA 398 (5 March 2021)

Division:VETERANS' APPEALS DIVISION

File Number(s):      2019/2908

Re:Dorothy Keshan

APPLICANT

AndRepatriation Commission

RESPONDENT

DECISION

Tribunal:Emeritus Professor P A Fairall, Senior Member

Date:5 March 2021

Place:Sydney

The Tribunal sets aside the reviewable decision and remits the matter to the Respondent for determination of the Applicant’s income support supplement in light of the revised valuation.

.................................[sgd]..........................................

Emeritus Professor P A Fairall, Senior Member

CATCHWORDS

VETERANS’ ENTITLEMENTS – income support supplement – whether the valuation of the Applicant’s property in Kangaroo Valley is correct – where the property is flood prone and subject to development controls – where three valuation reports available – competing valuations – comparison of similar properties – whether any adjustment needs to be made – adjustment of five per cent made – decision set aside and remitted

LEGISLATION

Veterans’ Entitlements Act 1986(Cth)

CASES

Evans and Secretary, Department of Social Security [1993] AATA 497

Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790

Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369

Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418

Tsiokantas and Secretary, Department of Social Services (Social services second review) [2018] AATA 398

REASONS FOR DECISION

Emeritus Professor P A Fairall, Senior Member

5 March 2021

INTRODUCTION

1. The Applicant owns a half share in a property in Cullen Crescent, Kangaroo Valley (the Cullen property), a rural village 150 kilometres south of Sydney, just inland from Nowra. The village is popular with tourists and day-trippers from Sydney. The property is a holiday home that has been in the Applicant’s family since the 1960s. It is not rented out but kept for the family’s enjoyment. It consists of a single parcel of 4,717m² of land situated on an isthmus of land bordered by the Kangaroo River and by Myrtle and Barrengarry Creeks. Improvements consist of a two bedroom brick veneer house. The house is in a poor state of repair. The land is in a flood planning area, and subject to building controls. It has little or no commercial development value.

2. The Applicant is in receipt of a war widow’s pension, and she receives an energy supplement and an income support supplement under the Veterans’ Entitlements Act 1986 (Cth) (the Act).

3. By letter dated 14 January 2019, the Department of Veterans’ Affairs (the Department) informed the Applicant that her income support supplement had been reassessed, taking into account a revaluation of the Cullen property (the original determination).[1]

   [1] T11/52.

4. The revised valuation of $625,000.00 was to take effect from 15 January 2019. The Applicant’s half share was valued at $312,523.00. This amount included home contents valued at $23.00. The Applicant’s fortnightly payment of $1,026.70 was calculated as follows:

   War widow’s pension   917.30

   Income Support Supplement   95.20

   Energy supplement – War Widow’s Pension            14.20

5. On 22 January 2019, the Applicant wrote to the Department requesting a revaluation of the Cullen property, and stating that her share of the Cullen property had been valued in 2017 at $250,023.00.[2] The Department acknowledged her request, and offered a free professional valuation.[3] The Applicant completed a Property Valuation Appeal Form, dated 20 February 2019, permitting the Department’s valuer to visit the Cullen property to carry out the valuation.[4]

   [2] Received by the Department on 7 February 2019: T12/55.

   [3] Letter dated 11 February 2019: T14/59.

   [4] T13/58.

6. The Department proceeded to arrange a valuation by LMW, a firm offering professional valuation services. On 12 March 2019, the Cullen property was inspected by Mr Mandile, a Certified Practising Valuer (CPV). He confirmed the valuation (as of 1 July 2018) of $625,000 adopted by the Department, assigning a value of $550,000 for the unimproved land, and $75,000 for improvements.[5]

   [5] T15/60.

7. On 29 April 2019, a delegate of the Department affirmed the original determination.[6] In the Reasons for Decision, the delegate noted that a CPV had inspected the Cullen property and provided a valuation of $625,000 and a detailed report. The delegate was “satisfied” that the chosen CPV was qualified and that the valuation was conducted on the basis of sales of comparable properties in the area. The delegate was “reasonably satisfied” that $625,000 was a “fair market valuation” for the Cullen property.

   [6] T16/71.

8. On 24 May 2019, the Applicant applied to the Administrative Appeals Tribunal (the Tribunal) for review of the decision of 29 April 2019.[7]

   [7] T2/3.

9. The decision by the delegate of the Department taken on 29 April 2019 to affirm the original determination is the reviewable decision.

10. For the sake of chronology, I note that Mr Mandile was subsequently provided with an opportunity to reconsider his valuation in light of various matters raised by the Applicant, and did so in a letter of 19 November 2019. He did not see fit to revise his valuation. He noted that there had been an overall increase in property prices in Kangaroo Valley over the relevant period, and defended his choice of comparable properties.[8]

    [8] Letter dated 19 November 2019.

    APPLICATION FOR REVIEW TO THE ADMINISTRATIVE APPEALS TRIBUNAL

11. The hearing was conducted by telephone on 11 February 2021.

12. Documentary materials before the Tribunal consisted of:

    Applicant's Material

    ·Applicant's letter to the Tribunal dated 4 May 2019

    ·Documents from Shoalhaven City Council (various)

    ·Statement of Dorothy Keshan dated 24 August 2020

    ·Property Valuation Report by Opteon, dated 21 September 2020

    Respondent's Material

    ·Documents provided by the Respondent under section 37 of the Administrative Appeals Tribunal Act 1975 (Cth) (the T Documents)

    ·Respondent’s Statement of Facts, Issues and Contentions

    ·Briefing letter to LMW dated 8 November 2019

    ·Letter from LMW dated 19 November 2019

    ·Letter to the Applicant about valuation dated 20 December 2019

13. I also note various other items of correspondence included within the materials before the Tribunal, and specifically:

    ·Letter dated 27 August 2019 from the Applicant to the Respondent in response to the Tribunal’s Direction of 21 August 2019, with various enclosures. The enclosures contained information about planning restrictions, building controls and flooding potential. She also provided a 2016 Land Valuation Report (the HTW Report) prepared by the firm of Herron Todd White, certified valuers, in response to an objection to a land value assessment.[9]

    ·Letter dated 27 September 2019 from the Respondent to the Applicant responding to the Applicant’s letter of 27 August 2019.

    Oral evidence

    [9] Letter dated 27 August 2019.

14. Evidence was heard from:  

    ·the Applicant

    ·Mr Zweep, CPV (Opteon) called by the Applicant

    ·Mr Mandile, CPV (LMW) called by the Respondent

15. Mr Zweep and Mr Mandile were each the author of a detailed valuation report on the Cullen property.

    RELEVANT LAW

16. The Act is silent as to the method to be used in the valuation of assets, and the value thereof is taken to be the net market value of those assets at a particular point in time.[10]

    [10] See also Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790 at [17] in relation to the Social Security Act 1991 (Cth).

17. The net market value is the value that a willing (but not desperate) buyer would need to pay, assuming the owner is desirous of selling, but does not need to do so. The hypothetical buyer is assumed to be aware of any imperfections affecting the value of the property.

18. The hypothetical buyer is taken to be:

    perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.[11]

    [11] Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418, per Isaacs J at 441.

19. The views of a properly qualified independent valuer carry considerable weight and may even be conclusive: Evans and Secretary, Department of Social Security [1993] AATA 497, at [8].

20. Where the Tribunal has conflicting valuations from certified valuers, the Tribunal is entitled to make whatever adjustments are required by the evidence, but it should avoid the error of defaulting into the role of a third valuer: Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369. In that case, Debelle J noted at [81]:

    I am especially conscious of the fact that, although the duty of the court is to determine whether it is proper to set aside the assessment and then determine what the annual value is, the judge must never allow himself to be cast in the role of a third valuer… But the court is not bound to accept either valuation and may make such adjustments as are required by the evidence… The court's duty of determining this appeal is appropriately discharged by deciding which of the two valuations is to be preferred and making whatever adjustments are required by the evidence. [emphasis added]

21. In considering an expert valuation report, the 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?

22. The Tribunal must form its own conclusions based on the evidence presented, and is not bound by an expert valuation.

23. The above principles are summarised by Deputy President Sosso in Tsiokantas and Secretary, Department of Social Services (Social services second review) [2018] AATA 398, at para [35]-[46].

    THE HEARING

24. The Applicant, a person of advanced years, was unrepresented in the proceedings before the Tribunal.

    The Applicant’s evidence

25. The Applicant told the Tribunal that she did not accept the LMW valuation or the comparable property sales data upon which it was based.[12]

    [12] Statement dated 24 August 2020.

26. She emphasised that the Cullen property had been designated as a “high hazard flood prone” as a result of a severe flooding event in 1973, and that the western edge of her land was affected by a substantial flood drainage easement. She referred to a letter from Shoalhaven City Council dated 21 August 2019, stating that her property is “predominantly, a high hazard floodway”, and subject to development controls.

27. She said that she had arranged a professional valuation at her own expense, and tendered a Valuation Report by Opteon (the Opteon Report), prepared by Mr Zweep, CPV.

28. She called Mr Zweep to give evidence.

    Mr Zweep’s evidence

29. Mr Zweep told the Tribunal that he was a certified practising valuer, a Fellow of the Australian Property Institute, with a Masters degree in Property.[13]

    [13] Transcript, 11 February 2021, p 33.

30. In his written report, Mr Zweep described the land as follows:

    The land is effectively an isthmus with Myrtle Creek and the Kangaroo River on three sides. The catchment of these streams are prone to heavy rainfall episodes and the Kangaroo River can rise to a high level with little warning. This is exacerbated because Barrengarry Creek, about 200m upstream, will flood at the same time creating a surge into the Kangaroo River aimed at the northern boundary of the land. Over the years this bank has eroded considerably effectively reducing the land area of the property.

    Heavy rain falls mean that the land floods easily and it can be observed that water has reached above the floor level of the house.[14]

    [14] Valuation report, Opteon, 21 September 2020, p 5.

31. His valuation included an analysis of comparable sales, and included the following properties:

Property address	Area (m2)	Sale price	Contract date	Flood potential	Valuer’s comment
1	14 Cullen Crescent	746	$695,000	08/05/2020	Not within flood zone	Superior property
2	29 Cullen Crescent	1,559	$757,000	19/06/2020	Flood affected land but unlikely to affect improvements	The most comparable property, but superior
3	18 Mount Scanzi Rd	2,885	$820,000	08/11/2019	Not flood affected	Superior property

1. He valued the unimproved land at $350,000 as at 11 September 2020. He valued the improvements at $105,000, with a net market value of the entire property of $455,000.[15] The Report states:

   We believe that the comparable sales demonstrate the detrimental effect on value of flooding. The flood zone property 29 Cullen Crescent has a much lower comparable land than has flood free 14 Cullen Crescent and because it is in a flood street it has a lower value than the conventional Mt Scanzi Road property.[16]

   [15] Valuation report, Opteon, 21 September 2020, p 15.

   [16] Valuation report, Opteon, 21 September 2020, p 14.

2. In evidence, he said that the potential for severe flooding made the Cullen property uniquely vulnerable. He had seen signs of extensive flood damage during his inspection of the Cullen property, including water damage to the home caused by the big flood in 1973.

3. He said that his valuation took into account the potential for flooding.

4. He appeared to the Tribunal to be knowledgeable about the history of flooding in the Kangaroo Valley, and identified certain unique hydrological features associated with the specific location of the Cullen property which made it especially susceptible to flooding.

5. Some time was spent comparing the subject property to 14 and 29 Cullen Crescent. Unfortunately, in giving oral evidence, Mr Zweep confusingly transposed number 14 and number 29. Fortunately, he identified and corrected his error during the course of giving evidence.[17]

   [17] He said: “I’ve been talking about number 14 Cullen Crescent when I should have been talking about number 29 Cullen Crescent. Fourteen is of course on the opposite side of the road. That’s the more elevated one. Number 29 Cullen Crescent is the one that is flood affected as far as I can see at the moment”: Transcript, 11 February 2021, p 41.

6. With this in mind, I refer to his evidence:

   I then inspected the property, the subject property, and on the walls, exterior walls of the subject property there are definite flood marks, probably about 1 metre or slightly more than 1 metre above floor level. That one and a half metres is probably - or rather the elevation of 14 (sic) Cullen Crescent is probably a little bit more, probably more like 2 metres above the level of the subject property, which indicates to me that where the house is built on 14 (sic) Cullen it is free of flooding, but even though there would have been evidence of flooding on the land itself at some of 14 (sic) Cullen. So the difference essentially is that the subject property is not flood free, it has been flooded in fairly recent past to an extent that 14 (sic) Cullen wasn’t flooded, and I think this is a fact that has been overlooked in the previous valuations. I don’t think there’s been any significant thought given to what the inundation of the subject property would have been, and if you look at the - there’s also the difference, the river flow is quite different at the subject property. There’s a full front on flood from Kangaroo River, and I’ve referred to that in my report. There is also flooding from, what is it, a creek just slightly upstream, and there’s another creek which bends around the subject property. All of these things add to the flood proneness of the subject property, and it’s not affected in that sense at 14 (sic) Cullen Crescent.

   Mr Zweep, what if I were to tell you that the [subject] property was last inundated with water at the residence in 1973 and has not since that time been inundated with water?‑‑‑That may be so, but as I pointed out to you, as I mentioned to you the house itself shows clear flood marks on the outer wall.

   So you’re referring to flood marks on a wall that go back to 1973, Mr Zweep?‑‑‑Yes. If that’s - if that’s the last flood of the house that would be so.

   And in your opinion that impacts the value of that property so significantly that it is to be considered a lesser valuable, or, you know, inferior property to 14 (sic) Cullen Crescent?‑‑‑Yes. If you look at the test of what market value is then you consider what a prospective buyer might be thinking when he looks at a particular property. If a buyer at the subject property is looking at acquisition at buying the first thing they would - or the thing that would obviously hit them in the eye that the house has been inundated to a level of one to 1.25 or something like that metres. Now, that is a constraint, or will be a constraint on what people would consider to be marketability.

   Something that occurred almost 50 years ago?‑‑‑Yes, but that doesn’t - that doesn’t necessarily mean - when you look at the site itself there’s evidence of flooding on the land, you know, which is much more recent than obviously 1970s. You can see there’s detritus of - you know, of stuff that’s been flooded down the creek, or down the river. If you look at the photograph, if you look at the front page of my report you can see how that affects the property. If you combine all these things, that there’s detritus on the land, the flood marks on the house and the appearance of the creek - of the river coming straight at the property, the presence of the creek around it and the presence of the Cambewarra Creek I think it is slightly upstream, you would have hesitations. Those thoughts would not enter your mind if you looked at number 14 (sic) Cullen Crescent.[18]

   [18] Transcript, 11 February 2021, pp 37-38.

7. Shortly after this exchange, Mr Zweep corrected his error regarding properties number 14 and 29.

8. With regard to the usable land on the Cullen property, I note the following exchange:

   You would agree, wouldn’t you, though that there is at least 740 square metres of usable land on the property?‑‑‑That would probably be, you know, reasonable, yes, yes.

   There would be more - in fact there would be more, that would be a very conservative estimate, would you agree?‑‑‑No, not - no, it would not be conservative.

   So in your assessment there would be approximately 750 square metres of usable land at 21 Cullen Crescent?‑‑‑I couldn’t say with any accuracy, but it certainly wouldn’t be more than a thousand. But you need to remember that it is a lower lying parcel of land and consequently more flood affected, and even if the house was not affected, hasn’t been affected since 1975 the land I’m sure has been flooded since then.[19]

   [19] Transcript, 11 February 2021, p 40.

9. Mr Zweep defended his valuation, even though it was distinctly lower than other valuations:

   You would agree, wouldn’t you, Mr Zweep, that your valuation as at 2020 is the lowest valuation that we have available to us in over six years, wouldn’t you?‑‑‑Yes, I would agree with that, and I would - I still stick by that knowing all the other - the other valuations.

   And it’s well under any other identified sale price that you have provided and that we have available to us from other valuers. Do you agree?‑‑‑Yes.

   In that six year period?‑‑‑Yes.

   And yet you maintain your earlier evidence that this property, that the value of this property has essentially been unchanged in that period?‑‑‑Unchanged in my view. In other words unchanged from what I am saying the value is.[20]

   [20] Transcript, 11 February 2021, p 40.

   Mr Mandile’s evidence

1. In response, the Respondent called Mr Mandile, the author of the valuation report relied upon by the Respondent (the LMW Report). [21]

   [21] T15/60-70.

2. Mr Mandile inspected the land on 12 March 2019.

3. He valued the unimproved land at $550,000 and the improvement value at $75,000, as of 1 July 2018.

4. In the LMW Report, Mr Mandile analysed the net market value of the Cullen property in terms of the following sales:

Property address	Area (m2)	Sale price	Contract date	Flood potential	Valuer’s comment
1	13 Cullen Crescent	797	$860,000	04/11/2017	No comment	Superior
2	14 Cullen Crescent	746	$533,000 $695,000	13/07/2017 08/05/2020[22]	“	Inferior
3	21 Jenanter Drive	4400	$975,000	23/03/2018	“	Superior
4	18 Moss Vale Road	3566	$790,000	10/11/2017	“	Superior
5	102 Moss Vale	1515	$655,000	14/05/2018	“	Superior

[22] RSFIC, 4.7(c)(i).

1. Mr Mandile acknowledged that the Cullen property was flood affected, but emphasised the property’s desirable attributes, especially its riverfront location and uninterrupted elevated views of the Kangaroo River. He stressed the value of riverfront properties in the Kangaroo Valley. He noted that property values had remained strong even for those properties in the flood planning area.

2. As to the impact of the potential for flooding on the general increase of property values in the area, he said:

   So, in your opinion, you would not consider the flood prone nature of this property to mean that its value would not at all have increased over that time?‑‑‑No. No, I still believe that the property, even with its flood expectation, would still increase over that time.[23]

   [23] Transcript, 11 February 2021, p 5.

3. Mr Mandile was cross-examined by the Applicant and later re-examined by the Respondent and the Tribunal.

   MS KESHAN: [W]ere you aware of the fact that that house had been full of river water up to seven and half inches into the house; were you aware of that?‑‑‑No, I wasn’t.[24]

   MS KESHAN: How can you, therefore, compare the two, or the three or the five, I think there were five, with my property because they have no - they had no condition put on them and all through they say with compatible and it’s not?

   [MR MANDILE] I look at the current improvements of the subject and compare them to the current improvements of the comparable sale. I also look at the land area and the location of the property and compare it to the subject property and that’s - that’s how I draw my comparison. I don’t have access or information of - of what future development can be available to - to certain properties, I can only - I only have limited information available and that’s the information that I use.[25]

   MS BORTONE: Mr Mandile, would the fact that there was a flood which resulted in floodwaters reaching the home, as Ms Keshan asked you about earlier, in 1973 impact your assessment of the value of this property as at 2018?‑‑‑I would take it into account but it wouldn’t affect - it wouldn’t have changed my valuation figure.[26]

   SENIOR MEMBER: Mr Mandile, were you aware of any land erosion issues and, if so, did you take it into account in your reports?‑‑‑I knew some of the - a fair proportion of the land was - was low lying but the - it does have a large land area in comparison - in comparison to the other comparable sales, so it’s 4700 square metres. We’ve only really allowed the land value for 2000 square metres, saying that the - the other part of the land, the other 2700 square metres, would only have a nominal value because of its flood allocation, because of its - its steepness and - it would have some value but only a nominal value and the comparable sales that I’m looking at in Cullen Crescent are only 797 square metres and 746 square metres, so in the area still inferior to the - to the subject.[27]

   [24] Transcript, 11 February 2021, p 9.

   [25] Transcript, 11 February 2021, p 10.

   [26] Transcript, 11 February 2021, p 10.

   [27] Transcript, 11 February 2021, p 12.

4. The reference to the other properties in Cullen Crescent is to numbers 13 and 14.

   The HTW Report

5. I note that there is a third valuation report before the Tribunal, which was tendered by the Applicant, and admitted into evidence. The genesis of this Report appears to be the result of a Departmental Bulk Property Valuation Exercise.[28] As a result of that exercise, on 3 December 2016, the Cullen property was re-valued at $585,000. The Applicant was informed that this value would be used with effect from 1 January 2017 to update her income support supplement.[29] She asked for a review of this valuation and the matter was referred to a CPV.[30]

   [28] T8/34.

   [29] T8/32.

   [30] Letter from Applicant dated 20 December 2016.

6. It appears that the valuation was carried out by Mr Brian Vaughan, CPV, of Herron Todd and White (HTW). Mr Vaughan inspected the property on 9 December 2016, and his report is dated the same day.[31] He valued the unimproved value of the land, as at 24 July 2015, at $482,000.[32] The land value was based on the freehold value of the land excluding any structural improvements.

   [31] Shoalhaven City Council 12/09/2019, Report on Objection to the Land Value under the Valuation of Land Act 1916 (Herron Todd White).

   [32] Shoalhaven City Council 12/09/2019, Report on Objection to the Land Value under the Valuation of Land Act 1916 (Herron Todd White), at p 4.

7. On 13 April 2017, a delegate of the Respondent set aside the previous determination of $585,000, and reassessed the Cullen property at $500,000 with effect from 1 January 2017.[33]

   [33] T9/37.

8. Mr Vaughan described the property as follows:

   Approximately 40% of the site area is usable to a larger or lesser degree with the residue effectively a steep and heavily vegetated embankment which falls to its respective Kangaroo River reserve and Boundary Creek frontages. Direct river access is very difficult due to the steepness of the banks. The banks have clearly been eroded and impacted by variable levels of flood water over the years which is evident from the cutting into the embankment, unevenness of the river banks and exposed tree roots.

   An estimated 2,000 square metres of the site is generally of gently sloping and partly level topography … The front useable portion off Cullen Crescent (is lightly timbered with an area of 1,100 m²). There is a drainage easement 3 metre wide that diagonally crosses the front portion of the site…

   The rear elevated easterly portion affords a northerly aspect with prominent Kangaroo Valley River views and is the location of the home site on a clearing of approximately 900 square metres. The geological foundation is primarily of sandstone, silt stones and/or conglomerate rock. Such rocks are exposed on the side of the northern embankment.

   All services of electricity, telephone and water are connected to the site. The property has an onsite sewer septic system...[34]

   [34] Shoalhaven City Council 12/09/2019 Report on Objection to the Land Value under the Valuation of Land Act 1916, at pp 1-2.

9. Mr Vaughan noted that the Cullen property is within a flood planning area and subject to development controls. It is also within a bushfire planning area.

10. Direct comparison methodology was used. Four properties were selected, with contract dates either before or after but close to the valuation date.

Property address	Area (m2)	Sale price	Contract date	Analysed and adjusted land value (as at) 1/07/2014	Flood potential	Valuer’s comment
1	15 Cullen Crescent	1,075	$765,000	25/06/2015	$440,000	Flood prone and subject to planning controls	Overall inferior
2	19 Cullen Crescent	1,132	$515,000	21/03/2016	$385,000	Within flood planning area	Overall Inferior
3	23 Cullen Crescent	1,770	$330,000	28/01/2014	$250,000	Within flood planning area	Overall inferior
4	63 Moss Value Road	1,948	$500,000	02/04/2015	$355,000	No mention	Overall inferior

CONSIDERATION

1. The issue for the Tribunal is whether the reviewable decision dated 29 April 2019 to affirm the original determination of the delegate of the Department is the correct or preferable decision in light of the evidence now before the Tribunal.

2. At the conclusion of the hearing, the Respondent invited the Tribunal to accept the LMW valuation by Mr Mandile of $625,000, and to affirm the reviewable decision. The Respondent asked the Tribunal to reject the Opteon valuation of $455,000 by Mr Zweep.

3. Mr Zweep and Mr Mandile presented as credible and experienced valuers. Each based his judgment on comparative sales data; Mr Mandile surveyed five properties, Mr Zweep only three. Each was independent and prepared to defend his judgment on rational grounds. They had both conducted a site inspection. But their valuations are far apart, even taking the two-year gap between valuations into account. Mr Mandile valued the unimproved land at $550,000 as at July 2018; Mr Zweep valued it at $350,000 as at September 2020. A decline of such magnitude is implausible; one or both figures must be wrong.

4. It is hard to reconcile these competing valuations, even on the assumption that July 2018 was a high water mark for valuations in the Kangaroo Valley, and September 2020 a low water mark.

5. Without assuming the role of a third valuer, the Tribunal is required to assess these Reports and the oral evidence for the purpose or affirming or setting aside the reviewable decision.

   Comparable properties

6. The Tribunal has sales data for seven properties in Cullen Crescent: numbers 13, 14, 15, 19, 21, 23 and 29.[35]

   [35] See Appendix A.

7. Only one of the comparison properties selected by Mr Zweep was included in Mr Mandile’s report: 14 Cullen Crescent. While Mr Zweep regarded this as a superior property, Mr Mandile regarded it as inferior.

8. The comparative date for the Cullen Crescent properties is not particularly helpful. Other than 13 and 14 Cullen Crescent, none of the comparable properties in Cullen Crescent were sold within 12 months of July 2018, the relevant date of valuation.

9. Number 13 sold for $860,000 in November 2017. LMW considered this to be a superior property, and it does appear to be flood free.

10. Number 14 sold for $533,000 on 13 July 2017, and sold more recently on 8 May 2020 for $695,000.

11. Number 14 is marked by LMW as inferior. However, Mr Zweep noted it as a superior property comprising a larger dwelling of superior quality, with superior ancillary improvements and car accommodation, and not flood affected.

12. Over three years, number 14 appreciated by $162,000 between July 2017 and May 2020. This is a growth of approximately nine per cent per annum. This implies a value of $580,000 in July 2018 (assuming a constant rate of growth). This is slightly below Mr Mandile’s $625,000 valuation for the subject property. It is however much higher than Mr Zweep’s valuation.

13. Mr Zweep regarded number 29 as the most comparable property. Number 29 sold for $757,000 in June 2020. It is hard to see that it would have fetched less than $700,000 in July 2018.

14. I do not regard the properties in Mount Scanzi Road and Jenanter Drive as good comparators. They are well away from the river and neither is flood affected.

15. Of the three properties in Moss Vale Road (18, 63 and 102), only number 63 is close to the river. This 1,948m² property sold for $500,000 in April 2015, but this information is of little value, being more than three years prior to the relevant date. I note that number 63 was regarded by Mr Vaughan from HTW as being “overall inferior” to the Cullen property.

16. Assuming that number 63 increased at a similar rate (nine per cent) to number 14, that property would have been worth almost $650,000 in July 2018. Number 14 provides an important clue to the value of the Cullen property, because Mr Vaughan thought it was less valuable than the Cullen property. Mr Vaughan had no interest in the present proceedings.

17. Having examined the property comparisons contained within the three reports, and taking into account the different valuation dates, I am not satisfied that Mr Mandile’s valuation is unreasonable. It is broadly consistent with sales figures relating to 14 Cullen Crescent, and 63 Moss Vale Road.

18. I accept that Mr Zweep may be correct in asserting that the Cullen property is uniquely affected. Nevertheless, it is a much larger property and in my view, with respect, his valuation of $455,000 is too low, and does not reflect the net market value of the property in July 2018.

19. The following Table compares the three valuations for the unimproved land value of the Cullen property.

Year	Valuation of unimproved land	Valuation Date	Inspection Date	CPV	Valuation Firm
2015	$482,000	24/07/2015	09/12/2016	Mr Vaughan, CPV	HTW
2018	$550,000	01/07/2018	12/03/2019	Mr Mandile, CPV	LMW
2020	$350,000	11/09/2020	11/09/2020	Mr Zweep, CPV	Opteon

1. It can be seen that Mr Zweep’s valuation is much lower than the other two valuations.

2. I note that more than two years elapsed from the relevant valuation date (July 2018) until the valuation date applied by Mr Zweep (11 September 2020). Mr Zweep did not express an opinion, either in the Opteon Report or to the Tribunal, as to the value of the Cullen property in July 2018, which is the relevant date for present purposes.

3. Moreover, it is public knowledge that during 2020, the COVID-19 pandemic had a broadly negative effect, and September 2020 may well have been a low water mark.

4. In assessing the net market value as at 1 July 2018, I think that the valuation by Mr Mandile comes closer to the mark. However, there are two aspects of his evidence that trouble me.

5. First, it appears that Mr Mandile was given the departmental valuation prior to making the LMW Report.[36] Without doubt, the LMW Report would have been stronger had the process been “blind”, rather that confirmatory in nature.

   [36] T15, 66.

6. Secondly, in evidence Mr Mandile said that he was unaware that in 1973, the house had been “full of river water up to seven and half inches into the house”.[37] Surprisingly, he said that this information would not have changed his valuation.[38]

   [37] Transcript, 11 February 2021, p 9.

   [38] Transcript, 11 February 2021, p 10.

7. Given the depth of material on flooding submitted to the Tribunal, and the obvious importance of flood potential as a factor relevant to land value, I must consider whether Mr Mandile’s assessment should, under the circumstances, be regarded as conclusive, or whether some adjustment is required.

   Should there be any adjustment?

8. I note that in Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369, Debelle J noted, at [81]:

   I am especially conscious of the fact that, although the duty of the court is to determine whether it is proper to set aside the assessment and then determine what the annual value is, the judge must never allow himself to be cast in the role of a third valuer… But the court is not bound to accept either valuation and may make such adjustments as are required by the evidence… The court's duty of determining this appeal is appropriately discharged by deciding which of the two valuations is to be preferred and making whatever adjustments are required by the evidence.[authorities omitted and emphasis added]

9. I heed Debelle J’s advice not to assume the role of a third (or fourth valuer).

10. It is not disputed that a major flooding event occurred in 1973, and that it was sufficient to inundate the house. There is no evidence of any flooding of the house since 1973.

11. Although Mr Mandile acknowledged that the property was flood prone, he emphasised the desirable features of the property together with a general increase in Kangaroo Valley property values in the period from 2015 to 2018.

12. By contrast, Mr Zweep emphasised the flood hazard.

13. I am persuaded that there are hydrological and topographical features of the Cullen property that make it especially vulnerable to erosion and flooding. Despite the idyllic nature of the Cullen property, its sanctuary and size and river views, the significant flood hazard is likely to deter potential purchasers, and this has a discernible negative impact on the net market value.

14. While I accept the broad thrust of the LMW Report, I have decided to discount Mr Mandile’s valuation by five per cent.

15. I consider that this will fairly take account of the impact of the flooding hazard.

16. The figure of five per cent is consistent with the evidence relating to the unimproved land value. According to Mr Vaughan’s HTW Report, prepared for rating purposes, the net market value was $482,000, as at 24 July 2015.[39] The LMW Report, on which the reviewable decision is based, assigned a value of $550,000, as at 1 July 2018.[40] This corresponds to an increase of just over four per cent per annum, a not unrealistic rate of growth over the period. I consider that the Opteon valuation of $350,000 for the unimproved land value in September 2020 is low, and probably, much too low.

    [39] Herron Todd White, Report on Objection to the Land Value under the Valuation of Land Act 1916, at p 4.

    [40] T15/60.

17. Assuming that the Cullen property benefitted from an overall lifting of the market at a similar rate, this would suggest a value of around $650,000 (for the improved property) in July 2020. I do not accept Mr Zweep’s contention that the Cullen property would not have benefited from any growth associated with a general uplift. There is no evidence of any highly damaging flooding or erosion event in the period that would support that contention.

18. I note that number 14 Cullen Crescent sold for $695,000 on 8 May 2020; and 29 Cullen Crescent sold for $757,000 on 19 June 2020. A sale price in mid-2020 of $650,000 for the Cullen property would fall within the range of comparable properties.

19. I note the observation by Griffith CJ in Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418, at 432 that any finding as to the net market value of a property “must be to some extent conjectural”.

20. To some extent, a finding as to net market valuation at a point of time is necessarily conjectural. Of course, to describe something as conjectural is not to say that it is arbitrary or merely plucked out of thin air. A conjecture supported by evidence and inference is a defensible hypothesis.

21. I am satisfied on the basis of the evidence before the Tribunal, and especially the LMW Report by Mr Mandile, that a net market value of approximately $600,000 would have been achievable in July 2018.

22. I find that the net market value of the Cullen property, as at 1 July 2018, was $593,750.

    DECISION

23. I therefore set aside the reviewable decision and remit the matter to the Respondent for determination of the Applicant’s income support supplement in light of the revised valuation.

I certify that the preceding 96 (ninety-six) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member

...............................[sgd].........................................

Associate

Dated: 5 March 2021

Date of hearing:	11 February 2021
Applicant:	Self-represented
Solicitors for the Respondent:	Ms A Bortone, Sparke Helmore Lawyers

APPENDIX A

Valuer	Property address	Area (m2)		Sale price	Contract date	Flood potential	Valuer’s assessment relative to subject property
LMW	13 Cullen Crescent	797		$860,000	04/11/2017	Superior
Opteon	14 Cullen Crescent	746		695,000	08/05/2020	Not within flood zone	Superior
LMW	14 Cullen Crescent	746		$533,000	13/07/2017	Inferior
HTW	15 Cullen Crescent	1,075	$765,000		25/06/2015	Flood prone and subject to planning controls	Overall inferior
HTW	19 Cullen Crescent	1,132	$515,000		21/03/2016	Within flood planning area	Overall Inferior
HTW, LMW, Opteon	The Cullen property	4,717	$482,000 (land only) $625,000 $455,000		24/07/2015 (land only) 01/07/2018 11/09/2020	Flood prone and subject to planning controls	Subject property
HTW	23 Cullen Crescent	1,770	$330,000		28/01/2014	Within flood planning area	Overall inferior
Opteon	29 Cullen Crescent	1,559	$757,000		19/06/2020	Flood affected land	The most comparable property, but superior