Wilson and Secretary, Department of Social Services (Social services second review)
[2018] AATA 749
•28 March 2018
Wilson and Secretary, Department of Social Services (Social services second review) [2018] AATA 749 (28 March 2018)
Division:General Division
File Number(s): 2017/5238
Re:Jayne Wilson
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Chris Puplick AM, Senior Member
Date: 28 March 2018
Place: Sydney
The decision under review is affirmed.
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Chris Puplick AM, Senior Member
CATCHWORDS
SOCIAL SECURITY – age pension – assets test – property valuation - decision to reduce social security benefits - decision based on assessment of property value -– whether valuation obtained by Centrelink to be preferred to applicant retained private valuer – purpose of valuation - decision affirmed
LEGISLATION
Social Security Act 1991 (Cth) s 1064
Social Security (Administration) Act 1999 (Cth)
CASES
Idemovich and Secretary, Department of Family and Community Services [2004] AATA 647
Kirkovski and Secretary, Department of Family and Community Services [2004] FCA 790
Spencer v Commonwealth [1907] 5 CLR 41
Re Evans and Secretary, Department of Social Security [1993] AATA 497
Re Reynolds and Secretary, Department of Social Security [1986] 11 ALN N193
Re Rungert and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2001] AATA 438
Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796
Re White and Secretary, Department of Family and Community Services [2000] AATA 482
Torv and Secretary, Department of Social Security [1992] AATA 185Wragg and Secretary, Department of Family and Community Services [2004] AATA 1399
REASONS FOR DECISION
Chris Puplick AM, Senior Member
ISSUE
The matter before the Tribunal for determination is what is the value of the Applicant’s holiday home property at Barragga Bay, NSW.[1]
[1] The exact address of the property in issue has been suppressed for reasons of privacy and Tribunal policy.
There is a dispute between the Applicant (Mrs Jayne Wilson) and the Respondent (Secretary, Department of Social Services) as to the value of this property, the outcome of which is determinative of the Applicant’s pension entitlement(s).
The rate of Age Pension is dependent upon calculations of the value of income and assets in accordance with the legislation.[2] However actual determination of rates of pension or possible adjustments or payments of arrears is not relevant in these proceedings.
[2] The relevant legislation is the Social Security Act 1991 and the Social Security (Administration) Act 1999.
The Applicant is a 50% owner of a property at Barragga Bay, NSW (the property) together with her husband. This property is their holiday home purchased in early 1998 for $145,000.[3]
[3] Tribunal documents at 78
The question before the Tribunal is: what is the value of the Applicant’s property at Barragga Bay, NSW?
The answer is that the property is valued at $500,000.
BACKGROUND
The Applicant was granted the Age Pension on 24 May 2015.
On 3 June 2015 the Applicant’s husband initially provided the Department with an assessment of the value of the property being $550,000.[4]
[4] Tribunal documents at 120
Subsequently, on 24 January 2017 the Applicant and her husband wrote again to the Department asserting that the value was $475,000, and in the course of the correspondence, they admitted the initial figure was “plucked out of the air”.[5]
[5] Tribunal documents at 49
The Applicant’s basis for assertion of a value of $475,000 was supported by the submission to the Department of three separate valuations of the property provided by local real estate firms or valuers.
The first valuation was of a range from $485,000 to $525,000. The second was from $470,000 to $480,000 and the third from $420,000 to $475,000. On this basis the Applicant took the average price in each separate valuation and then the average price of the three aggregated figures to arrive at her calculation of $475,000.[6]
[6] Tribunal documents at 50-56
The Department undertook its own valuation and on 30 March 2017 settled on a value of $600,000. This resulted in a reduction of the rate of pension for the Applicant and her partner (the other beneficial owner) as from 31 March 2017.
On 10 April, after a request for a review from the Applicant[7] an independent valuer (MVS National) was engaged by the Department. Their valuation (26 April 2017) was $550,000 and so as from 1 May 2017 the Applicant and her partner had their pensions updated.
[7] Tribunal documents at 106
This valuation was upheld by a further assessment by an Authorised Review Officer on 3 May 2017.[8] The ARO, in their decision stated that: “Property valuations provided by the independent valuer should be accepted as being the most accurate indication of the true value of the property.”[9]
[8] Tribunal documents at 64
[9] Tribunal documents at 66
On 16 May, the Applicant applied to the Social Services and Child Support Division of this Tribunal for an initial review of the Department’s decision.
The Applicant continued to dispute the Department’s assessment, claiming, by further letter of 27 June 2017, that the valuation had been made on a series of misapprehensions or invalid calculations, in particular disputing the valuer’s statement that the size of the property was 2428 square metres (sq. m) when it should have been 1424 sq. m[10] and maintaining a value of $475,000. This was based primarily on a detailed report provided to the Applicant by the Opteon Property Group (Opteon).[11] This Report contained valuations of a number of allegedly equivalent properties recently sold in the general environs of Barragga Bay.
[10] Tribunal documents at 71-73
[11] Tribunal documents at 79-88
On the basis of this information, namely that wrong figures may have been used in the original MVS report, the Department undertook a further revision of the valuation, again employing MVS National and on 7 July settled on a revised value of $500,000.[12]
[12] Tribunal documents at 89-91
This valuation, for pension payment purposes was backdated to 31 March 2017 and pension payment adjustments were made.
The second MVS valuation took into account the Applicant’s objections regarding land size etc. and worked on the basis of the property being 1688 sq. m – a figure accepted by the Applicant. This valuation also included figures of comparative local sales.
At the hearing of the Tribunal at first instance the original Departmental valuation of $550,000 was set aside and the amended valuation (of 7 July) of $500,000 was determined to be correct.
By application of 1 September 2017 the Applicant challenged that determination and brings the matter forward for review.
EVIDENCE BEFORE THE TRIBUNAL
Valuations
It is almost axiomatic that no two genuinely independent valuations of a property will ever be exactly the same. Similarly many will not state a precise figure but will provide a range of figures.
In this case the Tribunal is faced with:
·A valuation submitted by the Applicant, prepared by Opteon Solutions (24 June 2017) which sets the value of the property at $450,000,[13] and
·A valuation submitted by the Respondent, prepared by MVS National (26 April 2017) which sets the value of the property at $ 500,000.[14]
[13] Applicant’s documents A2, Tribunal documents at 79-88
[14] Tribunal documents at 93-103
The MVS valuation is in fact a revised valuation. MVS undertook an initial valuation in April 2017 when they submitted a figure of $550,000 (being $300,000 land value and $250,000 improvement value)[15] but provided this revised figures after taking into account factual objections by the Applicant.
[15] Tribunal documents at 134
The Applicant does not dispute the $250,000 figure for improvement value.[16]
[16] Tribunal documents at 3
The Applicant did however dispute the land value of $300,000 and did so primarily on the basis that the valuer had measured the land in question as comprising 2428 sq. m whereas she claimed it to be only 1688 sq. m. By their calculations this figure should have been $209,000.[17]
[17] Tribunal documents at 3
Property size
There was some confusion about the size of this property. In a submission to this Tribunal dated 27 June 2017 the Applicant claims the size was 1424 sq. m and that a claim that it was 2428 sq. m[18] was an error.[19]
[18] The initial MVS report of 26 April 2017
[19] Tribunal document at 73
In the Applicant’s submission of 29 August 2017 she states that the size is 1688 sq. m and this is the size used by Opteon in their report.
The revised MVS valuation (26 April 2017) accepts this figure of 1688 sq. m and this is the property size which I shall adopt.
THE VALUATIONS
Given that the valuation is in dispute, it falls to this Tribunal to make a determination.
The Tribunal, particularly in this instance, claims no expertise in the matter of land or real estate valuation.
It is however guided by certain principles or directions which have been laid down by the Courts. I take these to be (inter alia):
(a)The Tribunal, taking into account all the evidence before it can and must draw its own independent conclusion[20]
(b)There is no specific guidance as to whether any preference should be given to Australian Valuation Organisation[21] determinations as against those from independent valuers[22]
(c)Weight should be given to valuations which proceed on the basis of truly comparative sales information[23]
(d)Weight should be given to assessing current market values and best use of the property. [24]
[20] Re White and Secretary, Department of Family and Community Services [2000] AATA 482
[21] Eg Re Timbs and Secretary, Department of Family and Community Services [2004] AATA 796. Also Wragg and Secretary, Department of Family and Community Services [2004] AATA 1399
[22] Eg Re Rungert and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2001] AATA 438
[23] Re Torv and Secretary, Department of Social Security [1992] AATA 185
[24] Idemovich and Secretary, Department of Family and Community Services [2004] AATA 647; Kirkovski and Secretary, Department of Family and Community Services [2004] FCA 790; Spencer v Commonwealth [1907] 5 CLR 418.
There is further judicial guidance[25] as to what constitutes appropriate quality valuations upon which Tribunals such as this may place reliance. As I apprehend them, they suggest that the following criteria should be in evidence:
(a)Is the valuer appropriately qualified?
(b) Is the valuer experienced in this sort of valuation under consideration?
(c)Was the valuer’s state of mind independent of the purpose for which the value was sought?
(d) Was the valuation carried out in accordance with the accepted practices of the profession?
[25] Re Evans and Secretary, Department of Social Security [1993] AATA 497, Re Reynolds and Secretary, Department of Social Security [1986] 11 ALN N193
I am satisfied that both of the valuers: Opteon and MVS National satisfy these criteria.
THE CONTENTIONS REGARDAING VALUATION
The Applicant (appearing by telephone) presented a very coherent and reasoned case in support of her assessment of a value of $450.000. She outlined ten points of objection to the MVS report. In summary these were:
(a)MVS had used a wrong figure of 2428 sq. m in their calculations
(b)The correct figure should be 1688 sq. m
(c)Centrelink had “not admitted their error” in this matter
(d)Opteon had been engaged by Mrs Wilson as a reliable firm of valuers
(e)The Opteon report of $200,000 land value and $250,000 improvement is correct
(f)Notice should be taken of the Opteon report of a recent and comparable land sale in March 2017 of the property at 3488 Tathra Bermagui Road, Barragga Bay for $195,000[26]
(g)Centrelink had valued the improvement component at $250,000 on one occasion and $240,000 on another
(h)Mrs Wilson accepts that $240,000-250,000 is the correct value for improvement
(i)The land value component of $250,000 in the MVS report is incorrect
(j)The correct figure is $250,000 improvement and $200,000 land value = $450,000.
[26] Applicant’s document 2 – Opteon Report (27 June 2017) at 14
It is not correct to say that the MVS report relies on the erroneous 2428 sq. m calculation. As noted above this was an error in the first MVS report but was corrected in their revised report.[27] It is also not the case that Centrelink failed to acknowledge this error. They did so and acted accordingly.
[27] Tribunal documents at 95
Mrs Wilson also made the point that she and her husband had holidayed in the region for 21 years and that she was personally familiar with land values and had kept “a keen eye” on them at all times. She also notes that immediately adjacent sales are rare and that some properties are “on the market for up to three years.”
I accept her narrative in terms of agreeing that the initial assessment of value which she had submitted to the Department was guess work and that she had only been occasioned to seek more rigorous evaluation of the property after the introduction, by the Department of “tightened” asset tests at the end of 2016. The Respondent agreed that such a tightening had occurred and that it was reasonable thereafter for Mrs Wilson to seek a professional valuation of the property.
Finally Mrs Wilson took the Tribunal through her commentary on the two sets of comparative sales data provided in the Opteon and MVS reports. She was particularly critical of the inclusion, in the MVS reports of two sales of properties which were 3.8 ha and 9.95 ha in size although she did not disagree with the inclusion of properties which had sold for $433,000, $440,000, $468,000, $620,000 and $640,000 respectively.
The Respondent holds that the Applicant has failed to appreciate that the revised (7 July 2107) MVS report was undertaken on the basis that all of the Applicant’s claims of inaccuracies in the first MVS report (26 April 2017) had been corrected. Moreover the revised MVS report also accepted the Applicant’s claims about the impact of asbestos, the replacement of the sceptic tank and hot water system and the generally “below average overall presentation.”[28] The Respondent discounts other “minor discrepancies” (a difference of one square metre in the calculation of the garage space for example) as being of no consequence.[29]
[28] This description first appears in the Opteon Report (24 June 2017) at page 5
[29] Respondent Statement of Issues, facts and Contentions at para 32
It also rejects the Applicant’s use of median value calculations.[30]
[30] Ibid at para 33
The Respondent sought to interrogate the Applicant in relation to why she had sought valuations, the choice of Opteon as the preferred valuer and the instructions which had been given to Opteon in preparing their valuation.
I accept Mrs Wilson’s testimony that the reason for the valuation was the change in assets test policy; that Opteon was an obvious choice as it is apparently, the only major firm with a presence in Bega (the reference municipality for Barragga Bay) and that it was a well credentialed firm. She also made in clear in her own opening statement to the Tribunal that this valuation was sought by way of a “second opinion”.
The Respondent challenged aspects of the Opteon report, in particular the inclusion of property valuations from Mystery Bay which is quite distant from Barragga Bay (and Narooma is its closest town). Mrs Wilson responded in support of the use of Mystery Bay details that both were “isolated” communities with similar physical, geographic and social features. The Tribunal has no independent knowledge of this one way or another.
The Respondent relied upon several differences between the MVS and Opteon reports to urge the Tribunal to a more favourable view of the former:
(a)The MVS report had an explicit “definition of market value” inclusion in its Report and such a value should be the basis of any determination[31]
(b)The MVS report focussed on sales within a twelve month period whereas the Opteon report stretches back further
(c)Land value alone should not be the determinant factor – the valuation should “be looked at as a whole”
(d)The inclusion of the Mystery Bay sales should not be taken as a valid comparator
(e)The MVS report is more thorough in its comparative analysis of sales related to the property in question.
[31] Tribunal documents at 102
THE TRIBUNAL’S CONCLUSIONS
In threading the needle between values of $450,000 and $500,000 the Tribunal is not drawn immediately to any meaningful differentiation between the two valuations provided by Opteon (as relied upon by the Applicant) and MVS (as relied upon by the Department).
General Comparative Matters
It should be noted that the actual land value discrepancy is between Opteon’s $200,000 and MVS’s $260,000. The balance being improvement valuations.
Thus, neither of the first two principles enunciated above (at 32) comes significantly into play one way or the other.
Nor does the third as comparative sales information between the two valuations display significant disparities. The Opteon report lists five sales (between November 2015 and June 2017) in Barragga ranging between 160,000 and $640,000 and four in Mystery Bay ranging between $381,000 and $535,000. The MVS report shows sales (between July 2016 and March 2017) for three properties in Barragga Bay ranging from $440,000 to $923,000; two in Bermagui ranging from $433,000 to $620,000; one in Wallaga Lake at $468,000 and one in Coolagolite at $560,000.
These MVS sales figures are also generally in line with the values and assessments which were provided in the email from Bermagui Real Estate (dated 24 January 2017 and range $485,000 to $525,000) submitted by the Applicant in earlier correspondence.[32]
[32] Tribunal documents at 50
It is also not that simple to compare sizes of properties detailed as having been sold (given in both reports in either sq. m or hectares) and thereby come to easy comparisons on a comparable square metre basis.
Immediately Adjacent Valuations
The Tribunal has looked specifically at sales on the Tathra Bermagui Road and Amaroo Avenue:
(a)3388 Tathra Bermagui Road (15.09.16) 4.047 ha – bush block and dwelling = $440,000
(b)3550 Tathra Bermagui Road (01.11.15) 2956 sq. m – superior timber dwelling = $464,500
(c)3548 Tathra Bermagui Road (08.06.17) 2656 sq. m – well maintained superior dwelling = $640,000
(d)3488 Tathra Bermagui Road (08.03.17) 2972 sq. m – vacant parcel of land = $195,000
(e) 15 Amaroo Avenue (02.07.15) 3004 sq. m – vacant parcel of land = $160,000.
All the above sales appear in the Opteon report and items (a) and (c) appear in the MVS report as well.
The Applicant relies heavily on the comparison with item (d) in terms of it being a bigger block and in terms of being valued for its land component only. The principal difference between this lot and Mrs. Wilson’s property appears to be that the former has “no significant view”[33] whereas the latter does.
[33] Applicant document 2 at page 14
Significant Point of Difference
However the Tribunal encounters a major difficulty in terms of the basis upon which the two contending reports are based.
The MVS document states under the heading “Report Purpose” – “Statutory Assessment Purposes.”[34]
[34] Tribunal documents at 94
The Opteon report under the heading “Valuation Purpose” states – “Financial Reporting purposes – Please note, this report does not meet Practice Standards for valuations for mortgage/finance purposes and is specifically not suitable for this purpose.”[35]
[35] Tribunal documents at 81
The Applicant made clear in her evidence that Opteon had been engaged specifically in response to the MVS report because of the impact which that report had on the Applicant’s pension (i.e. financial) situation. When questioned by the Respondent, the Applicant admitted that she had briefed Opteon to this effect although she was not sure whether or not she had actually provided the MVS report to Opteon. Regardless of that, it is clear to me that when Opteon was engaged, Mrs. Wilson’s purpose was to assist her in resolving matters related to her pension/financial entitlements and that Opteon were aware of the purposes of their engagement.
Under these circumstance it is hard for the Tribunal to understand why Opteon would have included what amounts to a disclaimer for this very purpose.
Without this qualification the Tribunal would have been inclined to prefer the Opteon report which otherwise presents comparative sales figures for more adjacent properties including those sold as vacant parcels of land only.
However since the Opteon report seems to walk away from its own valuation in terms of it being used for “financial purposes” and the MVS report is constructed on the specific basis that it has such purposes in mind, the Tribunal, only on balance, feels that it must adopt the MVS valuation.
The Tribunal finds that the value of the property in question is $500,000. The decision of the Secretary is affirmed.
I certify that the preceding 62 (sixty-two) paragraphs are a true copy of the reasons for the decision herein of
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Associate
Dated: 28 March 2018
Date of hearing: 21 March 2018 Applicant: In person Advocate for the Respondent: Sharon Sangha Solicitors for the Respondent: Department of Human Services
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