Loveday and Anor; Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Anor and
[2009] AATA 697
•11 September 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 697
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/4776
GENERAL ADMINISTRATIVE DIVISION ) 2007/5239
ReSECRETARY,
DEPARTMENT OF
FAMILIES, HOUSING,
COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Applicant
And MAREE LOVEDAY
Respondent
------
MAREE LOVEDAY
Applicant
AndSECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
CORRIGENDUM
On 29 September 2009, the Tribunal directed the Registrar, pursuant to s 43AA of the Administrative Appeals Tribunal Act 1975, to alter the text of the reasons for decision as follows:
Replace the table in paragraph 22 with:
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $127,200 | $159,000 | $159,000 | $159,000 | $174,900 | $185,000 | $195,400 | $200,000 |
| Lytton and Marsden Road | $37,800 | $42,000 | $42,000 | $42,000 | $46,000 | $50,400 | $53,200 | $56,000 |
| The Avenue | $5,600 | $7,000 | $7,000 | $7,500 | $8,000 | $9,000 | $9,500 | $10,000 |
| Chaucer and Milton Road | $39,000 | $39,000 | $48,000 | $72,500 | $107,000 | $120,000 | $102,000 | $90,000 |
| TOTAL VALUATION FOR EACH YEAR | $209,600 | $247,000 | $256,000 | $281,000 | $335,900 | $364,400 | $364,400 | $356,000 |
Replace the table in paragraph 23 with:
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $123,000 | $148,000 | $227,000 | $252,000 | $277,000 | $276,000 | $248,000 | $247,000 |
| Lytton and Marsden Road | $58,000 | $66,000 | $92,000 | $122,000 | $136,000 | $143,000 | $133,000 | $131,000 |
| The Avenue | $4,500 | $5,500 | $9,000 | $13,000 | $15,000 | $16,000 | $15,000 | $15,000 |
| Chaucer and Milton Road | $43,000 | $45,000 | $54,000 | $84,000 | $114,000 | $120,000 | $114,000 | $108,000 |
| TOTAL VALUATION FOR EACH YEAR | $228,500 | $264,500 | $382,000 | $471,000 | $542,000 | $555,000 | $510,000 | $501,000 |
Replace the whole of paragraph 56 with:
56. Overall, I prefer the valuation by Mr Ellis, other than in respect of the Chaucer and Milton Road property from December 2004 where I prefer the valuation of Mr Kotecha. Accordingly, the correct or preferable property valuation is as follows:
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $127,200 | $159,000 | $159,000 | $159,000 | $174,900 | $185,000 | $195,400 | $200,000 |
| Marsden and Lytton Road | $37,800 | $42,000 | $42,000 | $42,000 | $46,000 | $50,400 | $53,200 | $56,000 |
| The Avenue | $5,600 | $7,000 | $7,000 | $7,500 | $8,000 | $9,000 | $9,500 | $10,000 |
| Chaucer and Milton Road | $39,000 | $39,000 | $107,000 | $72,500 | $107,000 | $120,000 | $114,000 | $108,000 |
| COMBINED VALUE OF SUBJECT PROPERTIES | $209,600 | $247,000 | $256,000 | $281,500 | $335,900 | $364,400 | $372,100 | $374,000 |
Replace the table in paragraph 58 with:
| 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
| TOTAL ASSETS | $215,690 | $253,090 | $262,090 | $287,090 | $341,990 | $370,490 | $378,190 | $380,090 |
DECISION
TribunalMs N Isenberg, Senior Member
Date11 September 2009
PlaceSydney
Decision The decision of the Social Security Appeals Tribunal dated 23 August 2007 is set aside. In substitution for the decision set aside the matter is remitted to the Secretary for reconsideration in accordance with these reasons and the following directions:
(a)As at 3 October 2006 Mrs Loveday was entitled to carer payment;
(b)Mrs Loveday’s entitlement to carer payment from 22 February 1999 to 20 September 2006 (the relevant period) is to be reassessed and recalculated on the basis of the assets detailed in paragraph [59] of these reasons;
(c)To the extent that there was an overpayment during the relevant period, that amount constitutes a recoverable debt; and
(d)Any debt arising from payments in the period before 22 February 1999 is waived on the basis of administrative error.
....................[sgd]..........................
Ms N Isenberg
Senior Member
CATCHWORDS
SOCIAL SECURITY – Carer payment – Cancellation – Debt raised – Value of assets – Whether exceeded limit and to be taken into account in assessing rate of payment – Whether basis for non-recovery of debt – Decision set aside and remitted
Administrative Appeals Tribunal Act 1975, s 35
Social Security Act 1991, ss 11, 199, 210, 1064, 1118, and 1126
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Re Evans and Secretary, Department of Social Security [1993] AATA 497
Spencer v Commonwealth of Australia (1907) 5 CLR 418
Torv and Secretary, Department of Social Security [1992] AATA 185
Re Keremelevski and Secretary, Department of Social Security [1996] AATA 320
Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796
Re Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193
Re Stubbs and Secretary Department of Families and Community Services [2003] AATA 729
Re Lumsden and Secretary Department of Social Security [1986] AATA 228
Re Levender and Secretary to the Department of Family and Community Services [2002] AATA 1120
Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
REASONS FOR DECISION
| 11 September 2009 | Ms Naida Isenberg, Senior Member |
| decision under review |
Mrs Maree Loveday and the Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (the Secretary) have both applied for review of a decision made by the Social Security Appeals Tribunal (SSAT) on 23 August 2007.
The SSAT set aside the decisions made by a Centrelink authorised review officer (ARO) to cancel Mrs Loveday’s carer payment from 20 September 2006, and to recover a debt of carer payment totalling $54,854.92 covering the period 22 February 1999 to 19 September 2006. The SSAT substituted a new decision that:
(a)Mrs Loveday was entitled to part carer payment on 20 September 2006 and therefore it was incorrect for Centrelink to cancel her carer payment on 3 October 2006. Centrelink must reinstate her carer payment from 20 September 2006 and pay her arrears from this date to the present time, calculating her rate on the basis of her and her husband’s assets value detailed in paragraph 30 (of the SSAT’s decision).
(b)She was eligible for the full rate of carer payment from 22 February 1999 to 31 December 2001 and therefore she has no debt for this period.
(c)She was eligible for part rate of carer payment from 1 January 2002 to 19 September 2006 and as she was paid the full rate of carer payment for this period she has a debt for this period. Centrelink is to calculate this debt taking into account her and her husband’s assets value as detailed in paragraph 30.
(d)This debt should be adjusted with her arrears of part carer payment from 20 September 2006 to the present time and moneys already recovered from her in respect of the debt, and if she still has any outstanding debt, it must recovered, and if she is owed any money, it must be paid to her immediately.
background
Mr and Mrs Loveday live at Riverstone, New South Wales. They own four other properties at Riverstone, each comprising of a number of lots.
From 14 December 1995, Mrs Loveday was granted carer pension (now carer payment) in respect of care provided by her for Mr Loveday.
On 22 February 1999, Centrelink sent Mrs Loveday a notice requiring that she tell Centrelink within 14 days if the value of her and her husband’s assets went over $178,500. Over the next five to six years Mrs Loveday was sent similar notices, each referring to an increasing base level of assets.
In July 2006, Centrelink initiated a review of Mrs Loveday’s carer allowance after information was received concerning properties owned and rented out by Mr and Mrs Loveday. As part of the review, roadside inspections were conducted by the Australian Valuation Office (AVO) and valuations were provided, as a result of which Mrs Loveday’s pension was cancelled on 3 October 2006.
In December 2006, the AVO provided further valuations of the properties, as a result of which Centrelink decided to raise a debt of $93,994.41 covering the period 18 April 1996 to 19 September 2006. On review the cancellation decision was affirmed but the debt was reduced to $54,854.92 for the period from 22 February 1999 to 19 September 2006. The debt for the earlier period (prior to 22 February 1999) was waived on the basis that the debt was caused by Centrelink’s sole administrative error before that date and Mrs Loveday received the payments in good faith, she apparently not having previously been advised about the review of her assets.
For the purposes of the SSAT hearing Mrs Loveday engaged Mr M D Ellis of Independent Property Valuations Pty Ltd (IPV) who completed valuations of the properties. As a result, the SSAT adjusted the value of Mrs Loveday’s assets and undertook calculations which resulted in the decision under review.
issue before this tribunal
The issues before me are as follows:
(a)What is the correct value of Mr and Mrs Loveday’s assets for the purposes of the application of the assets test; and
(b)Was Mrs Loveday overpaid carer payment between 22 February 1999 and 19 September 2006; and if so:
(i)Is the amount overpaid a debt due to the Commonwealth; and
(ii)Is there any reason not to recover all or part of the debt?
Before the hearing the Respondent conceded that the decision of 3 October 2006 to cancel carer payment from 20 September 2006 was incorrect.
legislation
Section 210 of the Social Security Act 1991 (the Act) stipulates that the rate of carer payment is to be worked out using the ’Pension Rate Calculator A’ contained in section 1064 of the Act. Module G of section 1064 sets out how to determine the effect of a person's assets on the person's maximum payment rate (the asset test).
Section 11 of the Act defines asset to mean ‘property or money’. The value of a person’s principal home is to be disregarded in the calculation of a person’s assessable assets: s 1118 of the Act. According to s 199 of the Act, carer payment is not payable if the person's carer payment rate is nil, that is, if their assets exceed the maximum allowable.
consideration of the evidence
The documents before the tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act1975 (the T documents), which were taken into evidence. There were also a large number of additional documents taken into evidence and marked as exhibits. A list of these documents is provided in Annexure A to this decision.
applicant’s evidence
Mrs Loveday gave oral evidence in person and she and Mr Loveday also provided voluminous written material, which I have taken into account.
By way of background, Mrs Loveday said that Mr Loveday had grown up in the Riverstone area and had lived there nearly all his life. Because he knew that he would one day be completely blind he worked at three jobs to buy his first property at Riverstone to provide a home for his new wife and baby.
Soon thereafter, redevelopment around the trotting track caused a change in water flow and caused the property to flood. Mr and Mrs Loveday have campaigned about this for many years, apparently without success.
Nonetheless, further investment properties were purchased at Riverstone:
(a)23 - 75 Lytton Road, which includes an illegal dwelling (“Lytton Road”);
(b)92 - 93 The Avenue (“the Avenue”);
(c)59 – 66 Marsden Road and 125 – 132 Lytton Road, which includes an illegal dwelling (“Marsden and Lytton Rd”); and
(d)90-92 Chaucer Road and 165-167 Milton Road (“Chaucer and Milton Road”).
Each property comprises a number of lots and, with the exception of Chaucer and Milton Road, all the properties are in a high flood area.
the valuations
The Blacktown City Council Town Planner, Mr Glen Apps, gave evidence. He said that there was no present indication of when the area might be developed, especially because the area was prone to flooding. He said that all structures erected on properties in the relevant area before 1988 were “illegal dwellings”.
I had the benefit of hearing evidence from Mr Ellis, of IPV, and Mr Kotecha, of the AVO, who gave their evidence concurrently. Both Mr Ellis and Mr Kotecha had conducted further valuations of the properties for the purpose of the hearing before me, and critiqued each other’s valuations.
Mr Ellis had, upon consideration of Mr Kotecha’s valuation, revised his valuations for each of the properties from 1999 onwards. In each case his valuations increased from those which the SSAT had relied on. Mr Ellis’ final valuations are indicated in the table below:
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $127,200 | $159,000 | $159,000 | $159,000 | $174,900 | $185,000 | $195,400 | $200,000 |
| Lytton and Marsden Road | $37,800 | $42,000 | $42,000 | $42,000 | $46,000 | $50,400 | $53,200 | $50,400 |
| The Avenue | $5,600 | $7,000 | $7,000 | $7,500 | $8,000 | $9,000 | $9,500 | $10,000 |
| Chaucer and Milton Road | $39,000 | $39,000 | $48,000 | $72,500 | $107,000 | $123,000 | $102,000 | $40,000 |
| TOTAL VALUATION FOR EACH YEAR | $209,600 | $247,000 | $256,000 | $281,000 | $335,900 | $367,400 | $360,100 | $300,400 |
In response, Mr Kotecha also revised his valuations, and came to a final view set out in the table below:
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $123,000 | $148,000 | $227,000 | $252,000 | $277,000 | $276,000 | $248,000 | $247,000 |
| Lytton and Marsden Road | $58,000 | $66,000 | $92,000 | $122,000 | $136,000 | $143,000 | $133,000 | $131,000 |
| The Avenue | $4,500 | $5,500 | $9,000 | $13,000 | $15,000 | $16,000 | $15,000 | $15,000 |
| Chaucer and Milton Road | $43,000 | $45,000 | $54,000 | $84,000 | $114,000 | $129,000 | $114,000 | $108,000 |
| TOTAL VALUATION FOR EACH YEAR | $228,500 | $264,500 | $382,000 | $471,000 | $542,000 | $447,000 | $510,000 | $501,000 |
Mrs Loveday did not accept either valuation, notwithstanding that Mr Ellis had been engaged on her behalf. She was of the view that both valuers had failed to take into account a number of matters peculiar to the properties and the Riverstone area in general. She expressed concern in particular that inadequate consideration had been given to:
(a)the devaluing effect of being in a high flood area;
(b)the fact that the market had been destabilised and manipulated by some unscrupulous property owners in the area; and
(c)the fact that the lots could not be subdivided.
Mrs Loveday tendered a valuation from Blacktown City Council, made on 26 May 2009, which was used as the basis for rate calculations in respect of the properties until 2007, and which was said to be based on the Valuer-General’s valuation as shown in the table below (the Avenue was amalgamated with Chaucer and Milton for billing purposes):
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $22,400 | $22,400 | $42,200 | $42,200 | $42,200 | $53,000 | $53,000 | $53,000 |
| Lytton & Marsden Road | $22,000 | $22,000 | $41,500 | $41,500 | $41,500 | $53,000 | $53,000 | $53,000 |
| The Avenue | - | - | - | - | - | - | - | - |
| Chaucer & Milton Road | $13,840 | $13,840 | $21,100 | $26,070 | $26,070 | $33,000 | $33,000 | $33,000 |
| TOTAL VALUATION FOR EACH YEAR | $58,240 | $58,240 | $104,800 | $104,800 | $109,770 | $139,000 | $139,300 | $139,000 |
Mrs Loveday submitted that the Blacktown City Council valuation was to be preferred to both Mr Ellis’s and Mr Kotecha’s valuations. She added that she and her husband proposed appealing in the Land and Environment Court of New South Wales, presumably against that valuation, in any event.
the approach to valuation
The Social Security Act 1991 does not specify any particular method for the valuation of assets. In Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790 at [17] Bennett J noted:
…
The test which seems to have been applied by the AAT in a majority of cases is a net market value approach based on comparable sales and the `best use' to which the asset could be put.
…
In Re Evans and Secretary, Department of Social Security [1993] AATA 497, the Tribunal considered the question of valuation of property for the purpose of assessing Jobsearch allowance. Referring to Spencer v Commonwealth of Australia (1907) 5 CLR 418, the Tribunal said that at [7] and [8] ’it is necessary to ascertain the highest and best use of the property’ and further to assess the price that a willing but not anxious buyer would pay the willing but not anxious seller to conclude a sale.
In Re Torv and Secretary, Department of Social Security [1992] AATA 185 the Tribunal stressed the necessity for valuations to proceed on the basis of truly comparative sales, that is, having regard to factors such as location, size, degree of improvement and potential use. In Re Keremelevski and Secretary, Department of Social Security [1996] AATA 320 and Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796, the Tribunal considered the AVO valuation was a "more balanced appraisal" particularly in its analysis of both negative and positive aspects of the property.
The Tribunal in Re Evans also referred to Re Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193, where is was said that a valuation done independently by an experienced and competent qualified valuer would carry considerable weight. It is a question of fact in each particular case, however, consistent with Re Evans, in assessing the weight to give expert valuation evidence, the Tribunal may consider the following matters:
(a)Is the valuer appropriately qualified?;
(b)Is the valuer experienced in the sort of valuation under consideration?;
(c)Was the valuer’s state of mind independent of the purpose for which the value was sought?; and
(d)Was the valuation carried out in accordance with accepted practices of the profession?
The accuracy, depth, logic and consistency of any valuation reports may also be a relevant consideration.
the blacktown city council valuation
I will deal first with the Blacktown City Council ‘valuation’. That handwritten document purports to be an extract of the values used by the council in assessing land values for the purpose of issuing rate notices. It clearly does not meet any of the tests set out above.
was each valuer appropriately qualified?
Mr Kotecha is a senior valuer of the AVO and holds a Master of Valuation (Real Estate) and a Master of Valuation (Plant and Machinery) from a surveyor’s college in London. Mr Kotecha is an associate member of the Australian Property Institute. He holds a Bachelor of Science (Maths) obatined at an Indian university.
Mr Ellis, who is the principal of Independent Property Valuations, is also an associate member of the Australian Valuers Institute and the Australian Property Institute. He is a former board member of the Australian Valuer’s Institute. He has a Bachelor of Business (Land Economy) from the University of Western Sydney.
I find both valuers were appropriately qualified.
was each valuer experienced in the sort of valuation under consideration?
I was informed, and I accept, that the AVO is a national organisation and has valuers operating in every area of Sydney. While the AVO may undertake specialised valuations in all fields of valuation including real estate, plant and equipment, business valuation, rural, government and specialised properties and may undertake many valuations in Riverstone each year, it is the experience of its valuer, and not the organisation as a whole which is of relevance.
I accept that Mr Kotecha is skilled in valuing property for the purposes of the application of the social security assets test, and that he also has experience in conducting private valuations.
I also accept that Mr Ellis has participated in over 25,000 commissioned reports, and has practised, mainly in western Sydney, for over 15 years, post–qualification. Mr Ellis has lived in the area for 21 of the last 27 years. The SSAT preferred Mr Ellis’ (earlier) valuation because of his experience in the area.
was each valuer’s state of mind independent of the purpose for which the value was sought?
I accept that both valuers were relevantly independent.
was each valuation carried out in accordance with accepted practices of the profession?
In arriving at the valuations, both valuers gave consideration to relevant factors of the subject properties including:
(a)level of flood exposure;
(b)zoning/building restrictions;
(c)block size, shape, utility, frontage and location; and
(d)improvements, including capacity for rental income and existing use rights.
Mr Ellis referred to his company’s own database with respect to the area and also referred to the House Price Index (HPI), published by Residex P/L to supplement sales data. He has had personal experience of the August 1990 floods and has spoken with landowners who experienced that and the previous major flood in 1978. He had consulted local real estate agents and also Blacktown City Council, as did Mr Kotecha.
Mr Kotecha, however, considered the use of the HPI index to be inappropriate because it is not a primary source but provides a market analysis.
In respect of Marsden and Lytton the sales evidence relied on by Mr Kotecha was only one or two sales each year with the exception of 2000 and 2004 when there were no sales. Mr Ellis also commented that the sales data used by Mr Kotecha in respect of The Avenue was also limited.
Because, as both valuers agreed, there was market volatility, a number of non-arms length transactions, and limited sales, I prefer Mr Ellis’ opinion that the reference to other material, namely the HPI assists in analysing the local market. Further, in his report of 11 May 2009, Mr Ellis said that he was circumspect as to reliability of the data from that source and I am satisfied that he was conscious of the degree of its usefulness.
Mr Ellis used the following in carrying out his valuation for the years 1999 to 2006. He said the most appropriate method of valuation is considered by direct comparison of sales within the locality based on land size, flood affectation and the classification of improvements as either approved under existing land rights or otherwise. He adopted a rate per block for vacant lands for comparison purposes and applied this to the properties. Residential improvements were not considered to have any significant value on flood affected lands. His evaluation analysis erred on the higher side of market value for the non flood affected lands as they were more in demand by fully informed purchasers than flood affected lands.
Mr Ellis addressed the issue of existing use rights. He noted that many properties in the area have dwellings which do not have planning approval. He considered that many purchasers of properties were unaware that the dwellings on the properties were considered “illegal”. He understood that many purchases proceeded on such informal bases, and at such low prices, that no proper enquiries were made as to the legality (or otherwise) of the dwellings, and that purchasers may find that existing use rights may be lost if the dwelling is not used for a continuous period of 12 months.
While each of the valuers pointed out errors or perceived errors in the analyses of the other, Mr Ellis pointed out a fundamental error in Mr Kotecha’s report in respect of Milton and Chaucer, namely that he had proceeded on the basis that there was a dwelling on the site. In respect of the Avenue the number of lots was incorrect.
Mr Kotecha noted that the subject properties are located in the area identified by the NSW Government as the North West Growth Centre (NWGC) announced in December 2004. This area is expected to be developed with some 60,000 new dwellings over the next 25 to 30 years. The NWGC comprises sixteen precincts across three local council areas of approximately 10,000 hectares.
Mr Ellis considered that the properties would be unaffected by the opening up of the NWGC because West Riverstone (where the Loveday’s properties are located) is unlikely to have development potential due to the availability of non-flood affected properties in the wider area. Further, that development is unlikely because of the flooding and associated difficulties in providing services. The lots in Chaucer and Milton are presently unserviced and do not have any immediate likelihood of being rezoned to permit development. Mr Kotecha conceded that the properties in a high flood precinct ‘could take a very long time to sell’ compared to other parts of Riverstone. He conceded that it was possible that a purchaser could, at the time of purchase, be unaware that the property was subject to flooding. Mr Ellis said that over the years, whenever there was an announcement by the government, there would be speculation.
Mr Kotecha purported to adopt values from 2001 to 2006 at the lower end of the range due to the Secretary’s request to exclude allegedly non-arms length sales. Mr Ellis also noted that there were a number of transactions of this type and excluded them all. His experience in the area was that one person bought large tracts of land at auction either personally, through a nominee or using and alias and then on-sold to speculators at inflated prices. Such a landowner makes about 100 sales per annum.
Mr Ellis took issue with the exclusion of a comparable transaction in relation to lot 169 Lytton Road which Mr Kotecha had excluded on the basis that the vendor and purchaser appeared to share ethnicity. There was no evidence that this transaction was anything other than at arms length, and it was inappropriate to exclude it on an unsubstantiated assumption.
Mr Kotecha was of the view that where there is an improvement to a property – whether legal or illegal, a purchaser would tend to pay more. Mr Ellis, on the other hand, said this would vary from purchaser to purchaser, given the risk that council could order demolition of illegal erections.
Both valuers noted that prices in the area show a high level of volatility. Mr Ellis noted that the area had had interest from ‘out of town’ buyers over the years and that property prices may have been increased because those buyers had little understanding of the area, and therefore limited reliance should be placed on those sales. I do not accept that explanation, given the “willing but not anxious buyer/seller test”.
With respect to the Chaucer and Milton Road property Mr Ellis’ valuation did not specifically differentiate between this property and the other 3 properties, all of which were in the high flood risk area whereas this property is in the ‘low risk flood’ precinct. It does not adjoin a creek and has two street frontages. Mr Kotecha considered restrictions in the low risk flood precinct to be limited and that, subject to zoning changes, this block has the best chance of development in the future. I accept that following the announcement of the NWGC in December 2004 the value of this property is more likely to have been higher than has been valued by Mr Ellis, and in respect of this property, after 2004, I prefer the valuation of Mr Kotecha.
Mr Ellis observed that the potential for rental income with improvements was limited because of the flood exposure. Tenants are unable to obtain insurance against flood damage. He was particularly critical of Mr Kotecha’s valuation of Lytton Road, which, given that the rental on the dilapidated dwelling is $50 per week, because the valuation clearly assumed some investment potential. Mr Ellis gave a nil value to the two cottages, whereas Mr Kotecha attributed, he said, a ‘token value’ of $15,000-$20,000. Later in his evidence he said he had allowed only $6,000. The AVO valuation in 2006 however placed no value on the dwellings. Mr Kotecha agreed in his evidence that a purchaser was not going to buy the property on the basis of what return he might achieve and would buy it on the basis of the land value. “What he does with that land is his problem”. Furthermore, the IPV valuation does not consider the existing use rights attached to the dwellings or the capacity to renovate the properties and increase the rental income.
The correct or preferable valuation
Overall, I prefer the valuation by Mr Ellis, other than in respect of the Chaucer and Milton Road property from December 2005 where I prefer the valuation of Mr Kotecha. Accordingly, the correct or preferable property valuation is as follows:
| Property | 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 |
| Lytton Road | $127,200 | $159,000 | $159,000 | $159,000 | $174,900 | $185,000 | $195,400 | $200,000 |
| The Avenue | $37,800 | $42,000 | $42,000 | $42,000 | $46,000 | $50,400 | $53,200 | $50,400 |
| Marsden and Lytton Road | $5,600 | $7,000 | $7,000 | $7,500 | $8,000 | $9,000 | $9,500 | $10,000 |
| Chaucer and Milton Road | $34,000 | $39,000 | $107,000 | $123,000 | $114,000 | $129,000 | $114,000 | $108,000 |
| Combined value of subject properties | $209,600 | $247,000 | $256,000 | $281,500 | $342,900 | $335,400 | $372,100 | $368,400 |
I also observe that “other assets” amounting to $6090 each year were used by Centrelink and the SSAT in calculating her assets.
Taking all this into account, I find the Loveday’s total assets for each year to be:
| 1999 | 2000 | 2001 | 2002 | 2003 | 2004 | 2005 | 2006 | |
| TOTAL ASSETS | $215,690 | $253,090 | $262,090 | $287,090 | $341,990 | $379,490 | $378,190 | $374,490 |
The end result is that the calculation of Mr and Mrs Loveday’s assets for each year increases on the figures used by the SSAT in coming to its decision.
Was there a debt?
On the available evidence, Mrs Loveday has an ongoing entitlement to part payment of carer pension.
However, even on the SSAT’s calculations, there was a debt, and that debt, given my findings above, will need to be re-calculated. The Secretary contends that there is a legally recoverable debt from 22 February 1999 to 19 September 2006 totalling $53,878.66. This figure will need to be recalculated to take into account my findings above at paragraph 59.
is there any reason why the debt should not be recovered?
The Act makes provision in limited circumstances for debts not to be recovered.
Write-off
Pursuant to s 1236(1A) and (1C)of the Act a debt may be written-off, only if:
…
(i)the debt is irrecoverable at law; or
(ii)the debtor has no capacity to repay the debt; or
(iii)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(iv)it is not cost effective for the Commonwealth to take action to recover the debt.
…
1236.(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a)deductions from the debtor's social security payment; or
…
(b)…; the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
“Severe financial hardship” is not defined in the Act. While not implying destitution, the term goes beyond straitened financial circumstances and ‘imports a need for the particular case of a person to include suffering of a severe or extreme nature’: Re Stubbs and Secretary Department of Families and Community Services [2003] AATA 729 at [20]. A person’s entire financial position would need to be materially less than the current rate of pension: Re Lumsden and Secretary Department of Social Security [1986] AATA 228.
Mrs Loveday has the capacity to repay the carer payment debt through withholdings from her fortnightly Centrelink entitlements. Furthermore, it would be possible for Mrs Loveday to realise the properties. Consequently, it is inappropriate to write off the debt under section 1236 of the Act.
Waiver for administrative error
A debt may be waived under s 1237A(1):
…
Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
…
For a debt to be waived under section 1237A of the Act, two conditions must be met, namely that the debt arose solely because of administrative error and, secondly the payments were received by the debtor in good faith.
The Respondent did not dispute that the overpayment before 22 February 1999 is attributable solely to administrative error and that part of the debt should be waived.
On 22 February 1999, Centrelink sent Mrs Loveday a notice requiring that she notify Centrelink within 14 days if her combined assets exceeded $178,500. Over the next five to six years Mrs Loveday was sent similar notices.
Mrs Loveday told the SSAT that she thought that she was exempt from the assets test due to her husband’s blindness, she thought that the assets limit did not apply to her and so she did not react to these letters. In her evidence she said that she thought the value of her assets were less than the amounts stated in the letters from Centrelink because the Valuer–General valuations they had were considerably less. In cross-examination Mrs Loveday said she did not know when she first became aware that her assets might affect her carer pension.
I find that Mrs Loveday contributed to the debt by not responding to the notice of 22 February 1999 and to subsequent notices on 9 February 2000, 26 February 2001, 24 December 2001 and 12 June 2005. Consequently the debt cannot be waived under section 1237A of the Act.
I therefore find that the debt did not arise solely from Centrelink’s error.
Having come to this view it is not necessary for me to consider if the payments after 22 February 1999 were received in good faith.
Waiver in relation to property valuation
Subsection 1237A(2) of the Act provides for the underestimation of property value:
(2) If:
(a) a debt arose because the debtor or the debtor's partner underestimated the value of particular property of the debtor or partner; and
(b) the estimate was made in good faith; and
(c) the value of the property was not able to be easily determined when the estimate was made;
the Secretary must waive the right to recover the proportion of the debt attributable to the underestimate.
Mrs Loveday’s evidence, referred to above, was somewhat unclear. She also told the SSAT that she was not aware that the value of her assets might reduce her carer’s pension. If that is so, then there has been no underestimation of the value of her properties; rather she chose to not reply to the letters based on an incorrect assumption that the value of her assets was not relevant to the calculation of the rate of her carer’s pension.
If that were not the case, and, on receiving the letters Mrs Loveday made an estimate that the combined value of those properties was less than $178,500 and therefore she was not required to respond to those letters, then 1237A(2) would apply. Mr and Mrs Loveday, however, have over the years displayed considerable interest in their local property values: talking to council, challenging Valuer General’s valuations, and attending local auctions. I reject Mrs Loveday’s submission that it was enough simply to rely on a Valuer-General’s valuation; those valuations are notoriously conservative. I cannot therefore accept that Mrs Loveday underestimated the value of the properties in good faith: per Re Levender and Secretary to the Department of Family and Community Services [2002] AATA 1120. The waiver under s 1237A(2) therefore does not apply.
Are there special circumstances why the remainder of the debt should be waived?
Section 1237AAD of the Act is a further provision that allows for waiver of debts in “special circumstances”:
…
(a)the debt did not result wholly or partly from the debtor or another person knowingly:
(i)making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
…
Before considering Mrs Loveday’s circumstances I must be satisfied that she is not precluded from consideration by 1237AAD(a) of the Act.
As stated by Deputy President Forgie in Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435 at 445:
There is nothing in s 1237AAD which suggests that the word “knowingly” should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statements or the act or omission.
I accept that there was no evidence that she intentionally or deliberately failed to comply with her obligations.
Amongst the other requirements of the provision, there must be special circumstances other than financial hardship alone that make it desirable to waive the debt. The Act provides no guidance as to the meaning of the term “special circumstances” in that provision. In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security (1984) 6 ALD 1) where (at [3]) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances "must have a particular quality of unusualness that permits them to be described as special". See also Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 per Besanko J at [33].
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle’s case, observed (at 545) that special circumstances:
would require something to distinguish ... [the]… case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
Evidence was given about several aspects of Mr and Mrs Loveday’s circumstances which were said to be “special”.
Mrs Loveday gave evidence of her husband’s very traumatic upbringing, which I accept, and do not intend to detail.
Mr Loveday has a congenital blindness and can now only differentiate between light and darkness. He ‘crashes’ into a lot of things around the house and with his increasing blindness she had to give up her job to care for him. He finds it demeaning to be dependent on her. He is overweight and has high blood pressure. He suffers depression badly and is often non-compliant with his treatment regime. He injured his back while working at the meatworks some time ago and now will often lie on the bed all day and do nothing. He has a very negative outlook on life and has once attempted suicide.
Mrs Loveday has suffered from breast cancer, including a mastectomy, and has endured 6 months of chemotherapy. As a result she has developed arthritis and has hormone issues. She had an unsuccessful reconstruction. She also is on medication for depression. She said the medication is expensive without a healthcare card.
I specifically asked Mrs Loveday why one or more of the four properties could not be sold, especially as they are conservatively valued (by the Valuer General) at about $150,000. She said that her husband takes the view that he would not sell flood affected properties and thereby ‘take advantage’ of people. It was pointed out that only two of the four properties are flood affected, and one is on ’scheduled lands’ (which precludes the legal erection of dwellings). She thought that the remaining property should be retained to leave to her children and grandchildren.
They live on her carer pension and Mr Loveday’s blind pension, and, on Mrs Loveday’s evidence, live reasonably frugally. In addition they receive a total of $160 per week in rental for two of the properties, one of which is a three bedroom house rented to her son for $100 per week. He has been living there since 1997. The other property has been rented for $60 per week for about four years.
Mr and Mrs Loveday have two grown up children and grandchildren with whom they are close.
The properties are unencumbered and Mr and Mrs Loveday have no debts.
There is no doubt that Mr and Mrs Loveday have some serious health issues. On the other hand they cannot be said to be in financial hardship. They have no debts and own several unencumbered properties of some value.
Taxpayers are entitled to expect that in the ordinary course money paid to Centrelink beneficiaries to which they are not entitled will be recovered: Secretary, Department of Social Security v Hales (1998) 82 FCR 154. For that reason I have come to the conclusion that Mr and Mrs Loveday’s circumstances, taken together, are not sufficiently unusual or unfair that would justify a waiver of some of the debt under s 1237AAD of the Act.
decision
As indicated at paragraph [57] of these reasons, I prefer the revised valuations of Mr Ellis on all properties other than in respect of the Chaucer and Milton Road property from December 2004. From December 2004 for the property at Chaucer and Milton Road I prefer the valuation of Mr Kotecha.
For the reasons set out above, the decision of the SSAT dated 23 August 2007 is set aside. In substitution for the decision set aside the matter is remitted to the Secretary for reconsideration in accordance with these reasons and the following directions:
(a)As at 3 October 2006 Mrs Loveday was entitled to carer payment;
(b)Mrs Loveday’s entitlement to carer payment from 22 February 1999 to 20 September 2006 (the relevant period) is to be reassessed and recalculated on the basis of the assets detailed in paragraph [59] of these reasons;
(c)To the extent that there was an overpayment during the relevant period, that amount constitutes a recoverable debt; and
(d)Any debt arising from payments in the period before 22 February 1999 is waived on the basis of administrative error.
I certify that the 96 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member.
Signed: .........[sgd]..............
Steven Mulipola, Associate
Date/s of Hearing: 25 and 26 May 2009, 25 June 2006
Date of Decision: 11 September 2009
Applicant representative: Self-representedRespondent representative: Mr J Larcombe, Centrelink Legal Services and Procurement
ANNEXURE A
A1 Valuation of Mr Ellis dated 11 May 2009 and letter dated 14 May
2009
A2 Resume of Mr Ellis
A3 Bundle of documents supplied by Mr Loveday
A4 Bundle of documents including contract of sales, caveats, ASIC
searches, solicitors letter from La fontaine, Bank Accounts and
copy of letter to solicitors Mervyn Cathers
A5 Undated letter re139-140 MarsdenA6Material from the Land and Environment Court of NSW in
response to Appeal
A7 Bundle of documents dated 8 May 2009
A8 Letter from Blacktown City Council dated 11 June 2008
A9 Flood Level Information
A10 Notice of Untraceable Owners
A11 Letter from Blacktown City Council dated 11 May 2007
A12 Extract from Herald Newspaper
A13(a) IPV Pty Ltd critique of AVO Valuation Report dated 17 June 2009
A13(b) IPV Pty Ltd critique of AVO Valuation Report dated 19 June 2009
A14(a) Letter from the Department of Lands re 64 Lytton Road,
Riverstone
A14(b) Letter from the Department of Lands re The Avenue, Riverstone
A14(c) Letter from the Department of Lands re Milton Road, Riverstone
A15 Fax from Blacktown City Council
A16 Photographs of Lytton Road Property
R1 Valuation of Mr Kotecha dated 14 October 2008
R2 Notes of Mr Kotecha on SSAT valuation and critique
R3 Resume of Mr Kotecha
R4 Residex File
R5 AVO document detailing sales
R6 Valuation figures
R7 Comparison schedule of valuations
R8 Blacktown City Council Probability Flood Extents Map
R9 Depreciation schedule
R10(a) AVO critique of IPV Pty Ltd Report prepared on 11 May 2009
R10(b) AVO response to critique provided by IPV Pty Ltd on 19 June
2001
R10(c) AVO response to critique provided by IPV Pty Ltd on 17 June 20 2002
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