Nosek and Secretary, Department of Social Services (Social services second review)
[2016] AATA 199
•1 April 2016
Nosek and Secretary, Department of Social Services (Social services second review) [2016] AATA 199 (1 April 2016)
Division
GENERAL DIVISION
File Number
2015/0652
Re
Roman Nosek
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member R W Dunne
Date 1 April 2016 Place Adelaide The Tribunal affirms the decision under review.
.......... [Sgd] ...................................................
Senior Member R W Dunne
CATCHWORDS
SOCIAL SECURITY – Austudy – qualification for Austudy payment – assets test – value of property – principles of valuation – different valuations – decision under review affirmed.
LEGISLATION
Social Security Act 1991 (Cth) ss 11, 568, 569, 573, 573A, 573B
CASES
Cummins v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 513
Re Woodhouse and Department of Social Security [1987] AATA 73
Re Torv and Secretary, Department of Social Security [1992] AATA 185
Kirkovski v Secretary, Department of Family and Community Services [2004] FCA 790
Re Evans and Secretary, Department of Social Services [1993] AATA 497
Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796
Spencer v Commonwealth of Australia (1907) 5 CLR 418
Re Secretary, Department of Social Security and Langton and Anor (1993) 31 ALD 579Re Goldthorpe and Secretary, Department of Employment and Workplace Relations [2007] AATA 1875
REASONS FOR DECISION
Senior Member R W Dunne
1 April 2016
INTRODUCTION
Mr Roman Nosek, who is the applicant in this case, did not qualify for Austudy because his assets exceeded the assets value limit under the Social Security Act 1991 (“Act”) for the member of a couple. When the applicant applied for Austudy, the respondent rejected his claim. When an authorised review officer (“ARO”) affirmed the decision, as did the Social Security Appeals Tribunal (“SSAT”), the applicant requested a further review of the SSAT decision by this Tribunal.
At the hearing before me, the applicant was self-represented and Mr A Hay (Senior Government Lawyer, Department of Human Services) represented the respondent. I received into evidence the T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975.[1]
[1] Exhibit R1.
ISSUE FOR THE TRIBUNAL
The issue for the Tribunal is whether the correct value of the applicant’s property has been determined for the purpose of the assets test.
LEGISLATION
The legislation that presently applies is contained in the Act and relevantly reads as follows:
“11 Assets test definitions
(1) In this Act, unless the contrary intention appears:
asset means property or money (including property or money outside Australia).
…
homeowner has the meaning given by subsection (4).
…
(2) A reference to this Act to the value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person’s interest in the asset.
…
Homeowner
(4) For the purposes of this Act:
(a) a person who is not a member of a couple is a homeowner if:
(i) the person has a right or interest in the person’s principal home; and
(ii) the person’s right or interest in the home gives the person reasonable security of tenure in the home; and
(b)a person who is a member of a couple is a homeowner if:
(i) the person, or the person’s partner, has a right or interest in one residence that is:
(A)the person’s principal home; or
(B)the partner’s principal home; or
(C)the principal home of both of them; and
...”
“568 Qualification for austudy payment – general rule
Subject to this Subdivision, a person is qualified for an austudy payment in respect of a period if, throughout the period:
(a)the person satisfies the activity test (see Subdivision B); and
(b)the person is of austudy age (see Division C); and
(c)the person is an Australian resident.”
“569 Activity test
General
(1) Subject to subsection (2), a person satisfies the activity test in respect of a period if the person satisfies the Secretary that, throughout the period, the person undertaking qualifying study (see section 569A).
…”
“573 Austudy payment not payable if assets value limit exceeded
An Austudy payment is not payable to a person if:
(a)the person is not excluded from the application of the Austudy payment assets test; and
(b)the value of the person’s assets is more than the person’s assets value limit.
…”
“573B Assets value limit
A person’s assets value limit is:
(a) $125,750 if the person:
(i) is not a member of a couple (see section 4); and
(ii) is a homeowner; or
(b)$215,750 if the person:
(i) is not a member of a couple; and
(ii) is not a homeowner; or
(c)$178,500 if the person:
(i) is a member of a couple; and
(ii) is a homeowner; or
(d) $268,500 if the person:
(i) is a member of a couple; and
(ii) is not a homeowner.
Note 1: For homeowner see subsection 11(4).
Note 2: The amounts in this section are indexed annually on 1 July (see sections 1191 to 1194).”
BACKGROUND FACTS AND EVIDENCE
The material facts in this case are largely not in dispute. The applicant applied for Austudy on 4 April 2014. He owned a vacant block of land with his partner, Ms Vickers, situated at Lot 4 Whitelaw Road, Myponga Beach (“Property”) which he said was worth $197,000. His application was rejected by the respondent because it was decided that the applicant’s assets exceeded the assets value limit, which at the time (pursuant to s 1191 of the Act) was $279,000. When the applicant sought a review of that decision, an ARO affirmed the original decision and, based on a valuation given by the Australian Valuation Office (“AVO”), found that the value of the Property was $300,000.
The AVO valuation report initially showed the value of the Property at 15 July 2009 as $375,000 and as at 17 May 2011 at $300,000. The AVO then recommended that the assessment as at 15 July 2009 be reduced from $375,000 to $320,000 and the assessment as at 17 May 2011 be retained at $300,000. The applicant submitted that the Property was worth $235,000 and provided an appraisal from Ms Gail Copley, Licensed Land Agent, at First National Real Estate, together with an estimated price range of $220,000 to $235,000 and a recommended advertising price of $230,000 from Mr Kyle Hand, Sales Consultant, at Southern Fleurieu Realty.
In the SSAT, the Member (Ms Millar) noted that the AVO valuer (Mr Parish) listed his qualifications as including those of a Certified Practising Valuer and prepared the AVO report on the basis of a sight visit to the Property. The valuer concurred with the applicant that the Property was not a viable agricultural holding, but stated there was a suitable building envelope and considered the highest or best use of the Property was for rural living/lifestyle. The valuation report stated that there was no mains water, but the majority of properties in the area were adequately serviced by rainfall. There was no electricity on the Property and the AVO contacted ETSA who advised connection costs would be $100,000 and would not be a viable option. The report also stated that the site was the subject of an unrestricted right of way and it provided a comparison with other properties in the area.
Ms Millar indicated the applicant had said that, in its report, the AVO made mistakes that bordered on negligence. The applicant acknowledged that there were decisions of this Tribunal that the AVO was the appropriate body to value assets, but he considered the valuation in this case was wrong. The applicant further said that he believed the AVO had made a mistake and were trying to cover it up. Ms Millar also said that, while there may be circumstances in which the valuation of the AVO would not be relied on, in the applicant’s case she could see no reason to prefer the estimates of the real estate agents to the view of the valuer, given the more detailed analysis by the AVO which included considering and addressing the issues the applicant raised.
In giving his evidence, the applicant said that in its report the AVO had looked at comparable properties when they were not comparable at all. He said that proper allowance had not been made for the different properties in making comparisons. The AVO had compared a “beachfront property” and compared it to an inland property. The applicant said that all the aspects of the comparable properties should be considered, including topography. He said that his valuations were given by two real estate agents who were not qualified licensed valuers, but were people who actually sold properties. He suggested that, where the AVO valuation was lacking, it should not be followed. He also said that he could not afford to get a licensed land valuer himself to compete against the AVO. Even if an independent licensed land value was obtained, he said he did not have to accept any valuation if he did not agree with it.
The applicant analysed the AVO evidence and submitted that there was no justification for a valuation of the Property that had dropped from $375,000 to $320,000 and then to $300,000, where no reasons were given for the reduction. The applicant contended that the AVO valuation was wrong, no matter how much detail had been provided in its valuation report. He also contended that the SSAT decision was flawed because of a wrong analysis by the AVO. There was no consideration by the AVO of fences, water, topography and access, and hence the SSAT decision was wrong. The applicant submitted that the capital value of the property was what it could be sold for. Council rates suggested that the property was worth $198,000, not $220,000.
THE APPLICANT’S ARGUMENTS
It is the applicant’s main argument that, in its report, the AVO has analysed several properties. However, they are not the same types of properties. And they are not the same as the property situated at Lot 4 Whitelaw Road, Myponga Beach. Proper allowance has not been made for the comparisons and the positions of the properties. In considering comparative sales, the AVO has not made concessions for the comparative features in the properties. However, comparative sales are not infallible.
The AVO has used the “highest and best use method” to value the Property. The best case scenario is that the Property is only worth what someone else is willing to pay for it. There is no justification why the value of the Property has dropped from $375,000 to $320,000 to $300,000, and no reasons have been given. Topography features of the Property are relevant in arriving at a valuation.
The SSAT is not impressed with the AVO valuation. The SSAT decision is flawed because of a wrong analysis by the AVO.
The applicant contended that the capital value of the property is what it could be sold for. The council said the capital value was $198,000, not $220,000. He referred to Cummins v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs,[2] and the approach taken by the Tribunal Member to adopt a value of the property there at a point mid-way between the values arrived at in the two professional valuations.
[2] [2011] AATA 513
THE RESPONDENT’S ARGUMENT
The respondent contended that, as there was no statutory provision for valuing property, the most appropriate approach to valuation is a consideration of the market value of the property which is based on comparable sales and the highest and best use to which the property could be used. As there are not professional valuations on both sides, the midpoint valuation approach that was used in Cummins (supra) is not available in the applicant’s case.
The value of property has been addressed in the High Court, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, but by inquiring, ‘What would a man desiring to buy the land have to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’
In practice, the case law, especially in the AAT shows a heavy reliance on the valuations provided by the AVO as a means of arriving at the market value of a property.
CONSIDERATION
What is the correct value of the applicant’s property for the purpose of the assessment of the assets test?
In this matter, the applicant applied for Austudy and his application was refused because it was decided that his assets exceeded the assets limit in s 573B of the Act. An ARO affirmed this decision and found that the value of a property, owned jointly by the applicant and his partner at Myponga Beach (hereinafter referred to as the “Property”), was $300,000. This was based on a valuation given by the AVO. The ARO found that the allowable assets limit for a couple who owned their own home was $279,000. As the applicant’s assets exceeded this amount, pursuant to s 573B and s 573C of the Act, he was not entitled to receive an Austudy payment.
The applicant applied to the SSAT for review of the decision of the ARO. Based on appraisals from real estate agents, the applicant argued that the Property was worth $235,000 and as this was less than the assets value limit he was eligible for Austudy. It appears that the applicant’s assets as at 4 April 2014 were:
·Bank account balances $288.00
·Vehicles, boat and tractor $19,400.00
·Property at Myponga Beach $300,000.00
·Total assets $319,688.00
The applicant’s permanent residential address was at South Brighton. His interest in that property was not taken into account in determining his eligibility for Austudy payment.
As Mr Hay submitted, the legislation that is relevant in this case is contained in the Act. Section 11(2) of the Act provides that a reference to value of a particular asset of a person is, if the asset is owned by the person jointly or in common with another person or persons, a reference to the value of the person’s interest in the asset. The term “value” is not defined in the Act but, for the purpose of social security law, the value of a property is generally taken to be its net market value based on comparable sales and the “best use” to which the asset could be put (see re Woodhouse and Department of Social Security;[3]; re Torv and Secretary, Department of Social Security[4]). This approach was endorsed by Bennett J in the Federal Court in Kirkovski v Secretary, Department of Family and Community Services[5] where he said:
“17. Under the Social Security Act 1991 (Cth) there is no statutory provision specifying any method for valuation of assets. 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 …”
[3] [1987] AATA 73.
[4] [1992] AATA 185
[5] [2004] FCA 790.
In re Evans and Secretary, Department of Social Services[6], the Tribunal considered the question of valuation of property for the purpose of assessing Jobsearch Allowance. There, Member Fayle said:
[6] [1993] AATA 497.
“Approach to valuation
7. It is clear from the decision of the High Court in Spencer v Commonwealth of Australia (1907) 5 CLR 418 and that in R v Brown (1867) 2 LRQB 630 that in assessing the value of property for the purposes of the assets test under the Act, it is necessary both to ascertain the highest and best use of the property and to assess the price that a desirous buyer would pay to a willing but not anxious seller to purchase the property.”
And further:
“… Where there is no sale or indeed a recent sale then the market value is an estimate of what the willing but not anxious buyer would pay the willing but not anxious seller to conclude a sale; Re: Reynolds and Secretary, Department of Social Security (1986) 11 ALN N193. It is upon that principle that a qualified and experienced valuer’s report would be accepted into evidence and that evidence weighed having regard to the process of arriving at the valuation. Obviously a figure plucked from the air, albeit by a qualified valuer, is on no use, whereas a valuation done independently by an experienced and competent qualified valuer would carry considerable weight and unless rebutted must be taken as conclusive. It is for the Tribunal to be satisfied that a valuation was supported by the qualities referred to in Re Reynolds. In that event relevant questions are:
oIs the valuer appropriately qualified?
oIs the valuer experienced in the sort of valuation under consideration?
oWas the valuer’s state of mind independent of the purpose for which the value was sought?
oWas the valuation carried out in accordance with accepted practices of the profession?
In Re Timbs and Secretary, Department of Family and Community Services[7], the issue involved the value of a property owned by the applicants who were in receipt of age pension and partner allowance. There was evidence from three separate valuers. Mr Allsopp was a valuer and property adviser in Lismore. Mr Greenhalgh was from the Australian Valuation Office. Mr Browning was not called to give evidence. In reaching his decision, the Tribunal Member said[8]:
“I am satisfied that the report and the evidence of Mr Greenhalgh provide a more balanced appraisal than that of Mr Allsopp particularly in his analysis of the balance between the negative aspects of the property and those which would make it attractive to a potential purchasers. Whilst he has varied his initial assessments of valuation, both in 1996 and in 2003, this is a reflection of the nature of the inspections he undertook. In each of those years, the second inspection which took place was far more detailed than the first assessment based on a road-side inspection.”
As the Tribunal Member said, the assessments of valuation of the Property in 1996 and 2003 was a reflection of the nature of the inspections the AVO valuer undertook. Upon a further analysis of the AVO report in the present case, it seems to me that this is a reasonable explanation why Mr Parish varied his valuations of the Property in 2009 and in 2011.
[7] [2004] AATA 796.
[8] [2004] AATA 796 at [26].
As Mr Hay said, there is no statutory provision in the Act which establishes the method to be adopted when valuing property. The International Valuation Standards Council 2001 defines “market value” as:
“The estimated amount for which a property should exchange on the date of valuation between a willing buyer and a willing seller in an arm’s-length transaction after the proper marketing wherein the parties had each acted knowledgeably, prudently, and without compulsion.”
It is noted that this definition generally accords with the approach to be taken in assessing the value of land as outlined in Spencer v Commonwealth of Australia.[9] The definition was also endorsed by the Tribunal in re Secretary, Department of Social Security and Langton and Anor .[10]
[9](1907) 5 CLR 418.
[10] (1993) 31 ALD 579 at [33]
Mr Hay submitted that the Property was appropriately valued as determined by the AVO in the valuations dated 15 July 2009 and 17 May 2011, which were referred to in the report of Mr Parish dated 14 July 2011. I note that Mr Parish is a Certified Practising Valuer and holds a Batchelor of Business (Property Valuation). He is also a member of the Australian Property Institute. In reading his report, it is apparent that he carried out a detailed investigation and analysis of the property sales in the area. He has also given due consideration to relevant factors relating to the Property itself, such as block size, shape, utility, frontage and location and topography. His report also refers to the availability of utilities and services, encumbrances and access to the land. Relevantly, Mr Parish’s findings were that the highest and best use of the land was “rural living/lifestyle”. The applicant contended that the capital valuation of the property by the South Australian Government State Valuation Office was a better indicator of the market value of the property. However, in Cummins (supra) the Tribunal Member there said of such an approach:[11]
“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.”
Mr Hay contended that the valuation for council rate purposes suggested by the applicant should be disregarded. I agree with this contention.
[11] [2011] AATA 513 at [32].
The applicant also contended that a valuation based on the opinion of a real estate agent should be accepted. However, Mr Hay has submitted that a valuation based upon the opinion of a real estate agent should not be relied upon because it is inconsistent with the following principles:
·a real estate agent is not appropriately qualified as a valuer;
·a real estate agent is experienced in the sale of properties, but not the valuation of properties;
·a real estate agent’s state of mind is not independent of the purpose for which the value is sought. An agent has a contingent interest in earning commission from any sale of the property if they are later contracted by an owner who prefers their valuation; and
·the valuation will not be carried out in accordance with accepted practices of the profession.
Based upon all the evidence in this case, particularly in relation to the appraisals of the real estate agents involved, I have no hesitation in accepting this submission.
I am reminded that the applicant declined an offer by the respondent to obtain a further AVO valuation report. However, the applicant has not provided a private or independent valuation by a certified practising valuer in support of his application. And I understand he has declined to accept an offer of an independent valuation from the AVO.
In Re Goldthorpe and Secretary, Department of Employment and Workplace Relations,[12] Deputy President Jarvis said:
“37. As I said above, the valuations made by Centrelink were based on the Australian Valuation Office valuations.…. Valuations by government official should not lightly be departed from, having regard to their statutory obligations and the significance of the use that may be made of the valuations arrived at.”
The applicant argued that, when the learned Deputy President said that valuations by the AVO “should not be lightly departed from”, he was inferring that an AVO valuation should not necessarily be preferred to any other. In my view, the applicant’s interpretation of what the Deputy President was saying is incorrect. This is clear from what the Tribunal Member said in Cummins (supra) at [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.”
[12] [2007] AATA 1875.
In Cummins (supra), the Tribunal’s decision turned on which of two valuation reports should be preferred. One report was commissioned by the AVO for the respondent and the other report was by a private but licensed valuer commissioned by the applicant. The Tribunal found that both reports were independent and embarked upon a detailed comparison of the substance of the two competing valuation reports. The Tribunal ultimately decided at [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 tin the two professional valuations.”
Mr Hay submitted that, as the applicant has not produced a report from an independent licensed valuer to compare against the AVO valuation report, the expert opinion of a Certified Practising Valuer and the valuation report of the AVO is to be preferred over the applicant’s submissions of real estate market appraisals.
The applicant submitted that there was no justification for an AVO valuation of the Property that had dropped from $375,000 to $320,000 and then to $300,000, where no reasons were given for the reduction. Furthermore, he contended that the AVO valuation was wrong, no matter how much detail had been provided in its valuation report. As to the applicant’s submission, I have given consideration to the comments made by Mr Parish under “Market Considerations & Reconciliation” on page 4 of his report. In relation to Myponga Beach, he says:
“Properties have typically been tightly held in the location with a relatively low number of directly comparable sales. Discussions with local agents in Normanville indicate the highest and best use would be a rural living lifestyle allotment and a premium would be paid to reflect the unobstructed sea and countryside views. They suggest a value of $300,000 would be considered conservative for the property inclusive of the access and services limitations.”
Mr Parrish then refers to Lot 10 Whitelaw Road, Myponga Beach which he says is currently listed for sale with an asking price of $675,000. He then observes:
“The property is in close proximity to the subject property, has a similar level of views and access and has no services available. The selling agent reported that there has been a good level of interest in the property and that he is apparently in negotiation for the sale. This property is considered to be comparable to the subject property.”
In my view, the above market considerations provided by Mr Parish give support to the valuation of $300,000 the AVO has provided in respect of the Property. In relation to his contention that the SSAT decision was flawed, it appears the applicant in referring to paragraph 20 of Ms Millar’s decision believes that the SSAT does not have confidence in the AVO valuation because of a wrong analysis in its report. In my view, the applicant’s contention is misguided. In reading paragraph 20 of Ms Millar’s decision, it is clear that she was actually satisfied with the more detailed analysis given by the AVO in its report. Moreover, the applicant said that he considered the AVO valuation was wrong. He said he believed the AVO had made a mistake and were trying to cover it up, and he suggested to Ms Millar that what the AVO did bordered on negligence. In my view, these comments are unnecessary and are of no assistance to me in reaching a decision in reviewing the matter.
During the course of the hearing on 17 December 2015 and when closing submissions were delivered on 19 January 2016, the applicant became agitated at times. In reply to the respondent’s statement of facts and contentions, he had filed an 85 page response detailing the issues, facts and circumstances he saw as relating to the matter in dispute. Included in the response were numerous citations and references to cases dealing with the value of property and assets for the purposes of the assets test. Many of the citations and case references were repetitive and the applicant often had difficulty in explaining the contentions he wished to make.
CONCLUSION
In the applicant’s case, the AVO valuation was conducted by a Certified Practising Valuer who visited the Property. Having considered many of the citations and cases referred to by the applicant, I agree with the decision reached by Ms Millar in the SSAT. I am unable to see why the estimates of the real estate agents, who would be experienced in selling properties, would be preferable to the more detailed analysis given by the AVO valuer.
DECISION
For the reasons outlined above, the decision under review is affirmed.
I certify that the preceding 33 (thirty-three) paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne ........ [Sgd] ......................................
Administrative Assistant
Dated 1 April 2016
Dates of hearing 17 December 2015 and 19 January 2016 Applicant In person Advocate for the Respondent Mr A Hay Solicitors for the Respondent Department of Human Services Program Litigation and Review Branch
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