White and Department of Family and Community Services
[2000] AATA 482
•16 June 2000
DECISION AND REASONS FOR DECISION [2000] AATA 482
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N1999/1652
GENERAL ADMINISTRATIVE DIVISION )
Re COLIN THOMAS WHITE
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Senior Member M D Allen
Date16 June 2000
PlaceSydney
Decision The decision under review is set aside and this matter remitted to the Respondent with the direction THAT: the value of the Applicant's land situated at 2107 Coramba Road, Megan in the State of New South Wales is the sum of $114,500.00.
(Sgd) M D ALLEN
..............................................
Senior Member
CATCHWORDS
SOCIAL SECURITY - Assets Test. Valuation of rural land. Bush block suitable only for residential use. Use of comparable sales.
Social Security Act 1991 - s1064-G3
Re Eskelinen and Secretary, Department of Social Security (AAT 8742, 28 May 1993) disapproved
Re Weller and Anor and Secretary, Department of Social Security (Q1995/394, 395) followed
Cafe v Morrison (1879) 2 SCRNS 297
Re Objection to Valuations – Shire of Bellingen (unreported Land and Valuation Court NSW 21 August 1969)
REASONS FOR DECISION
16 June 2000 Senior Member M D Allen
By application made 29 October 1999, the Applicant sought review of a decision by a Social Security Appeals Tribunal on 11 October 1999 that affirmed a prior determination which reduced the amount of Disability Support Pension payable to the Applicant on the basis that he held assets in excess of the sum of $125,750.00.
The sole asset in the hands of the Applicant that took the value of his assets above the limit allowed by the Social Security Act 1991 (as amended) was a block of land at Megan in the Bellingen Shire which land was valued by a qualified valuer from the Australian Valuation Office at $180,000.00. The amount of assets which could be held by the Applicant before his pension was reduced was, as stated above, $125,750.00.
Although immaterial for the decision in this matter, the Applicant stated in evidence that the reason he owned both the block of land at Megan and a dwelling at Ulong (also in the same general area) is that he desired to move to the Megan property, and upon which he had commenced to build a house, but that he had been unable to sell his Ulong property. That property is now subject to a contract for sale so that a reassessment of the Applicant's asset value will have to be undertaken by the Respondent in the event of that sale proceeding to settlement.
In essence the dispute resolved itself into one between the valuation reports obtained by the Respondent and the valuation report obtained by the Applicant. Unfortunately neither valuer was present to be cross-examined, the Applicant's valuer was not present as the Applicant could not afford to bring him to the Tribunal hearing and the Respondent's valuer was absent through unavailability. I was, however, materially assisted by the evidence given by the Applicant.
In addition to the Applicant's oral evidence, there was taken into evidence, and marked as follows, the following:
Documents T1–T27 : The documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
Exhibit A1: Submissions from Welfare Rights Centre dated 30 May 2000
Exhibit A2: Map showing Applicant's land and house site
Exhibit A3: Photograph showing the Applicant's land at Megan
Exhibit A4: Photographs showing relevant sale land at Beverleys Road, Megan
Exhibit A5: Contour map of the sale Stewart to Bollard
Exhibit A6: Letter from Bellingen Shire Council to Applicant dated 26 April 2000
Exhibit R1: Respondent's Statement of Facts and Contentions.
Both valuers carried out their valuation on a basis of the highest and best use of the subject land. I believe this to be a proper basis for valuation in that although the property (referred to in evidence as the Megan property) is a "bush" block in a rural area, it is not rural land as such. The block is heavily timbered in regrowth timber and has no capacity to carry stock. All commercial timber had already been logged before the purchase of the block by the Applicant, but logging would not be permitted in any event now. As the maps and photographs of the block show, it is steeply contoured and its only use is as a rural residential block. The Applicant's evidence is, and this is also reflected in the valuation reports, that no subdivision would be permitted by the local Council. The block, therefore, is more akin to urban land and both valuers adopted a valuation based on comparable sales.
The Applicant's land is situated 55 kilometres from Coffs Harbour and 27 kilometres from Dorrigo on the Dorrigo Plateau west of Coffs Harbour. The description of the land in the Applicant's valuer's report reads:
"Irregular shaped undulating to very steep terrain bounded on the eastern alignment by Coopernook Creek. The land is heavily timbered and access to most part is restricted by gullies and steeply contoured hills. The land offers a remotely located rural residential homesite. It has limited agricultural value."
The address of the property is 2107 Coramba Road, Megan 2453. Coramba Road is a dirt road which enters and winds through the property. The local Council carries out maintenance on the road approximately once a month.
Crossing the block are three electricity transmission easements plus power lines. Although electricity lines cross the block, the block itself is not connected to any electrical system and the Applicant was quoted $100,000.00 as a connection fee. In addition to the electricity easements, a portion of the block has been excised and is owned by the New South Wales Railways although no railway track was ever laid.
Abutting the property on one side is the Dorrigo National Park and on the northern boundary is a recently gazetted National Park, being the former Cattle Creek State Forest. The site has weed problems and weed and feral pests escape from the National Parks.
Both valuers had regard to what they regarded as comparable sales. In his first report the Government valuer relied on two sales, namely at Coramba Road, Megan, a sale from Stewart to Bollard, and a sale at Beverleys Road, Megan, being a sale Plumbe to Wachter.
The Applicant's valuer, who practices at Coffs Harbour, relied on five sales, one of which was the subject property, namely its sale to the Applicant in 1995. Both valuers state in their reports that there are limited comparable sales.
As to the sale Plumbe to Wachter at Beverleys Road, Megan, the Applicant stated that the land was superior, being cleared, and that grazing could be carried out thereon. There was also a dwelling on the land. Exhibit A4 is a series of photographs of that property.
Those photographs reveal that the property is superior and the Government valuer recognises this in his second report (dated 20 January 2000 – see Exhibit R1). Although this second report takes issue with the Applicant's evidence, I do not accept that any upgrade after sale made an appreciable difference. The photographs show that clearing is old and well established. Further, electricity appears available and I do not regard the additional distance to Coffs Harbour to be significant. This sale was also taken into account by the Applicant's valuer but, although described by him as superior, he did not state why although the reasons may no doubt be ascertained by having regard to his description of the land, namely:
"Good quality undulating cleared and partly timber grazing land, fenced, dams, old cottage and yards – …"
In my opinion this sale, given its cleared undulating land and electricity plus improvements, is superior and indeed can be argued as not comparable as anyone who purchased this land would most likely run some cattle, if only on a hobby basis.
Sales 2 and 3 relied upon by the Applicant's valuer were regarded by him as being of land superior to the Applicant's. No comment is made by the valuer regarding sale 4 but no doubt it would be regarded as superior as the land is described as undulating as compared to the steep contours of the Applicant's land. Again there is no evidence that these properties are subject to easements or excisions.
In his report of 20 January 2000 the Government valuer states:
"The AVO agrees with Mr White that the Coramba Road, Megan sale is far more directly comparable than the sale at Beverleys Road, Megan".
Although the Government valuer does not regard that property as identical to the Applicant's, few properties are identical and the bases of valuation was on comparable sales.
At Document T17, the Government valuer's first report, the comment on the sale Stewart to Bollard is:
"Smaller inferior lot with inferior less elevated homesite adjoining subject property."
The subject block is on the Applicant's eastern boundary and Exhibit A5 is a map with the block's boundaries outlined.
Although the homesite may be less elevated than the Applicant's, I do not regard that fact as significant. Both blocks have bush views only into a valley. Neither block has views to the coast where elevation might make a difference.
In evidence the Applicant stated that of the Stewart/Bollard block, it has four entrances and the whole property can be accessed compared to his where the land is steep. Even the Applicant has not had access to that part of his property on the other side of Snake Creek to the homesite. The Stewart/Bollard property is crossed by four wheel drive tracks whereas the Applicant's block has only one track which enters off Coramba Road and simply goes to the homesite.
Whereas the Applicant's block may be larger in size than the Stewart/Bollard block, the Applicant's block has several factors which decrease its value. Firstly, it is traversed by three electricity easements and, although scrub has been cleared from below the transmission lines, this clearing would detract from the aesthetics of the block as a rural retreat. Further, the type of person who seeks a rural retreat often has reservations about the effects of emissions from high voltage powerlines upon health and well-being.
Acreage is to my mind not of importance. Although the Applicant's block may be larger, neither block is used for any form of agriculture. The land surrounding the homesite is no more than a buffer zone from the outside world. In this regard overall size is not as important as, for example, it would be if the land had a potential for use.
Both valuers had regard to the partially completed dwelling the Applicant has erected on the property. In valuation practice it does count as an improvement – cf Rost & Collins "Land Valuation and Compensation in Australia" at p29, namely:
"Improvements relating to land are products of capital and labour applied to land which enable it to be put to higher and more beneficial uses than would be possible had it remained in its natural or unimproved states."
Of course the fact that there are improvements on land does not mean that cost is equal to value. As was said in Cafe v Morrison (1879) 2 SCRNS 297:
"The cost of improvements is only an elementary value. No value can be placed on an improvement which does not give an increased value to the land."
Cf Else-Mitchell J in – Objections to Valuations – Shire of Bellingen (unreported Land and Valuation Court NSW 21 August 1969):
"Sufficient has been said in the other decisions of this court to which I have referred to emphasise the distinction between cost and value and to show that every sum of money spent upon the improvement of land by clearing, timber treatment, and otherwise does not necessarily result in an identical increase in the value of the land on which it is spent."
The presence of the partially completed dwelling on the land may or may not enhance its value. It may well be that a prospective purchaser, this being a rural retreat type block, would have in mind a construction of their own design and regard the Applicant's partially completed efforts as a disincentive to purchase. However, it is there and should be given a value. There is also, according to Exhibit A6, a shed which is satisfactory except for fly bracing. The local council has accepted the value of the improvements as $79,000.00 for both labour and materials and I am content to accept this figure. The council (Exhibit A6) states that the building work was, as at 30 March 2000, 50% complete so that the current value would stand at $39,500.00.
Of all the sales relied upon by the valuers, the only true comparable sale is the sale of the property adjoining the Applicant's, namely Stewart to Bollard. That sale was for $72,000.00 for 94.29 hectares or $763.00 per hectare.
A per hectare approach to valuing rural homesites was rejected by the Queensland Land Appeal Court in Oldfield v Valuer General (1980) 7 QLCR 116 at 118-119. That court held, following Crouch v Minister of Works 13 SASR 553 and Re W H and K M Knieling v The Crown (1978) 5 QLCR 162 that in valuing rural homesites, sales evidence on a site value basis is to be preferred and that the per hectare approach is not applicable.
With respect to the Queensland Land Appeal Court this matter illustrates some of the reasons why they rejected a valuation based on a calculation of cost per hectare. Although the Applicant's land has a larger area than the comparable sale it is crossed by no less than three electricity easements and powerlines and has a portion excised for railway purposes. Part of the land is so precipitant as to discourage exploration of it by the Applicant, so that it would detract from value as being of little use except as a buffer zone and have a negative value as council rates would be levied on the total area of the block irrespective of its ability to be used.
The Respondent's valuer allocated a value of $107,440.00 to the Applicant's land (exclusive of improvements), using a figure of 126.4 hectares at $850 per hectare. The basis of this assessment was that the sale Stewart to Bollard gave a per hectare rate of $764 per hectare and therefore $850 per hectare was adopted as the Applicant's land was a superior block.
The Applicant's valuer practises at Coffs Harbour and to my mind would have a superior knowledge of the area to the Government valuer who, I note from his reports, is located in Lismore. The Applicant's valuer had adopted the site valuation method preferred by both the South Australian Supreme Court and the Queensland Land Court. I therefore find that the value attributed by the Applicant's valuer is the correct value of the Applicant's land, namely the figure of $75,000.00. To this must be added the improvements which I have assessed, in line with the Bellingen Shire Council's letter, as $39,500.00. The total value is therefore $114,500.00.
Before leaving this, matter I wish to lay to rest the total misconception of the law as stated by the Social Security Appeals Tribunal in quoting Re Eskelinen and Secretary, Department of Social Security (unreported AAT 8742, 28 May 1993). This not the first time Re Eskelinen supra has been cited for the incorrect assertion based on a misquoting and misunderstanding of Re Torv and Secretary, Department of Social Security (unreported AAT 8025, 18 June 1992) to the effect that:
"The Tribunal is bound to accept a valuation by a qualified valuer to that of an informed lay opinion."
In Re Torv supra one of the members of the Tribunal was the late Mr Woodley, an experienced valuer. The assertion that lay opinion cannot prevail over a valuer's opinion was also cited to the Tribunal in Re Weller and Secretary, Department of Social (unreported AAT Q1995/394,395, 22 March 1996). The Tribunal in that case consisted of Deputy President Breen and Mr J Horrigan who is also a qualified valuer. The decision in Re Eskelinen supra was a decision by a Senior Member who was not legally qualified and had no knowledge of the law of land valuation. The correct interpretation of the Re Torv decision was given by Deputy President Breen in Re Weller supra.
The learned Deputy President together with Mr Horrigan, the valuer, said:
"I am not familiar with the Torv decision and know only that little piece which I have just read. With respect to the author of the reasons in Torv and to the Member who constituted the Tribunal apparently adopting it in Eskelinen, that is not the law as I understand it. The present case provides an excellent illustration of why. In the event, as the parties will shortly see, we have not accepted Mr Bradford's opinions [the valuer's] to the exclusion of those of Mr Lohse nor have we accepted Mr Lohse's opinions to the exclusion of Mr Bradford's. We found, as my colleague will observe, the evidence of both to be reliable, honest and within the perception of each witness, accurate. We have been assisted by that whole body of evidence. We have, based upon that whole body of evidence, come up with a figure of our own as to the proper value for relevant purposes of the Little Woodmillar Road property.
However, the law as I understand it would have permitted us to accept Mr Bradford's evidence to the exclusion wholly of that of Mr Lohse, or vice versa. The fact that Mr Bradford holds formal qualifications and is licensed as a Valuer does not, per se, bind itself upon a fact-finding Tribunal to the exclusion of the views of people with the experience and background that Mr Lohse has. Mr Lohse is quite rightly to be regarded as an expert witness in his own right, albeit that his expertise has been gained by dint of experience and worldly knowledge as opposed to the gaining of formal qualifications awarded by an institution of academic learning."
Later, in an addendum to that decision, the learned Deputy President said:
"3. The statement that 'The Tribunal is bound to accept a valuation by a qualified valuer to that of an informed lay opinion' purports to be founded upon the reasoning in Torv.
4.In fact it is not.
5.Paragraph 5 of the Reasons in Torv contains what I suspect was interpreted as laying foundation for the statement made in Eskelinen. Paragraph 5 of the Reasons in Torv reads:
'It is unfortunate that the Applicant as an aged pensioner was unable to afford legal representation and apparently did not seek or was ineligible for legal aid. This together with the Applicant's impecuniosity then left him in a position of a layman attempting to demonstrate to the Tribunal that the valuation by a qualified valuer from the Australian Valuation Office was in some way flawed. In the absence of evidence from a qualified valuer to support his argument the Applicant would clearly find it difficult to succeed.'
6.That statement, that expression of view, accords with commonsense but it does not support the interpretation placed on it apparently in Eskelinen.
7.Indeed, a whole reading of the decision in Torv shows that the Tribunal's overall view of the law accords with the one I expressed in the present matter.
8.At the hearing in Torv, evidence was given by a qualified valuer employed by the Australian Valuation Office and in addition Mr Torv tendered as an exhibit a report by a Mr RJ Duncan of whom the Tribunal says that he, Mr Duncan, 'has been a practising Real Estate Agent since 1988 and has operated a local franchise in the Kurrajong area since 1988'. The Tribunal in paragraph 13 goes on to say 'Mr Duncan also holds degrees of Bachelor of Arts and Bachelor of Economics but has no formal qualifications as a valuer. Notwithstanding his lack of formal valuation qualifications, his experience in marketing real estate in the locality does give him local knowledge which is fundamental to assessment of market values'.
9.Finally, it emerges that in Torv the Tribunal did exactly what my colleague Mr Horrigan and I did in the present matter. It reached its own conclusion based in part upon the qualified valuer's evidence and also in part upon that of the real estate agent, Mr Duncan."
It is hoped that no longer will the Department of Family and Community Services and the Social Security Appeals Tribunal continue to make submissions or found decisions upon the erroneous view of the law as stated in Re Eskelinen supra.
In this matter the decision under review is set aside and this matter is remitted to the Respondent with the direction that the valuation of the Applicant's land situated at 2107 Coramba Road, Megan is the sum of $114,500.00.
I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of:
Senior Member M D Allen
Signed: Ivanka Mamic .....................................................................................
AssociateDate of Hearing 6 June 2000
Date of Decision 16 June 2000
Solicitor for the Applicant Applicant was self-represented
Advocate for the Respondent Ms A Alex,
Department of Family and Community Services
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