Decision Pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal sets aside the decision under review and in substitution therefor decides that one half of each applicant's debt be waived.

SOCIAL SECURITY - pensions, benefits and allowances - Age Pension - Disability Support Pension - assets test - value of shareholdings - valuation methodology considered - estoppel considered - debt recovery - failure to notify provisions and ineligibility provisions discussed - waiver - special circumstances

Social Security Act 1991 ss.11, 1064, 1118, 1223, 1224, 1237AAD

Re King and Department of Social Security (1994) 80 SSR 1163

Bank of New South Wales v The Commonwealth [1948] HCA 7; (1948) 76 CLR 1

Re Cowling and Secretary, Department of Social Security (1986) 12 ALD 169

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

Re Clarke and Repatriation Commission (1987) 13 ALD 396

Formosa v Secretary, Department of Social Security [1988] FCA 291; (1988) 15 ALD 657

Commonwealth of Australia v Hamilton (1991) 2 Qd.R.257

Midland Metals Overseas v Comptroller-General of Customs (1991) 30 FCR 87

Minister for Immigration and Ethnic Affairs v Daniele [1981] FCA 212; (1981) 39 ALR 649

Re Heuzenroeder and Secretary, Department of Education, Training and Youth Affairs [1999] AATA 914

2 August 2000 Senior Member J.A. Kiosoglous MBE Mr D.J. Trowse (Member)

1. This is an application by Vincent and Marie Ryan (the applicants) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 16 November 1998 (T2) which affirmed a decision of an authorised review officer (ARO) of the respondent dated 6 March 1998 (T65), varying a decision of the delegate of the respondent dated 31 July 1997 (T52) to raise and recover debts of Age Pension in respect of Mrs Ryan and Invalid Pension (now called Disability Support Pension) in respect of Mr Ryan.

2. The Tribunal received into evidence the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T1-T69), together with 17 exhibits, 7 lodged by the applicants (Exhibits A1-A7) and 10 lodged by the respondent (Exhibits R1-R10). In addition, the Tribunal heard evidence from Mr V. Ryan, who also called Mr J. Dawes, Valuation Consultant. The respondent called Mr S. Hinkelthein, Valuer, as a witness. The applicant was represented by Mr G. Hemsley, of counsel, and the respondent was represented by Ms A. Pugsley, a departmental advocate.

3. The issues raised before the Tribunal are the correct methodology and value of the applicants' shares in Ryan's Landing Pty Ltd; whether there are debts for the period 22 October 1992 to 17 November 1994; if so, whether the respondent is estopped from pursuing recovery; and if not, whether part or all of the debts should be waived.

4. This application has a long and convoluted past. The Tribunal has given close attention to the entirety of the history, but only sets out what it considers the most significant aspects herein.

5. The applicants purchased land along the River Murray in 1983. In 1989 the land was valued at $250,000, contained an eleven acre orchard, and was encumbered by a $120,000 mortgage in the names of the applicants.

6. It seems that Ryan's Landing Pty Ltd (the company) came under the control of the applicants in about 1989 and that its intended object was to realise upon those areas of land in close proximity to the river and which were to be acquired from the applicants. In exchange for that acquisition, shares of varying classes and related to particular allotments of land were to be issued at a premium to the applicants, who then could sell to parties interested in nominated allotments shares of a class connected to those allotments. Needless to say, the company's articles of association provide shareholders with both occupancy and on-selling rights. As part of the plan, Lot One was to be maintained in the applicant's control, and contains their principle home.

7. In October 1992 the said land, which was valued at $841,000, was transferred to the company and in return the applicants were issued with 173,998 shares with each share having a nominal value of $1. The difference between the alleged land value and the nominal value of the issued shares was treated as a share premium.

8. The applicants began selling shares in the company in January 1993 and it is the value of the remaining shares held by the applicants that is at issue.

9. The Department raised debts for the period 22 October 1992 to 17 November 1994 on 22 February 1995 (T20) in the amounts of $14,573.20 each, due to a perceived failure to advise of the share sales and value thereof. At that stage the departmental officer considered the applicants' share value in the company to be $558,700 (T21).

10. An Australian Valuation Office (AVO) valuation of the land owned by the company dated 24 August 1995 gave the current value of the "Ryan's Landing" property as $150,000 (T34). A Complex Assessment Officer determined on 29 September 1995 (T37) to restore pension from November 1994 on the basis of the valuation, stating (inter alia):

As discussed with you on the phone 29/9/95, your pension will be restored by the Berri Regional Office, and the pension file papers have been returned to that office for that purpose.

This means that as from November 1994, you will have been in receipt of an income tested pension which precludes you from the hardship provisions which is only applicable to a client receiving an assets tested pension.

As explained to you, this new assessment is based on a valuation of the company shares prepared by the Australian Valuation Office in August 1995 at around $150000, but because the AVO still require another on site inspection, this valuation is considered to be tentative. If a subsequent AVO valuation of your current company share holdings varies from this figure, there will be no excess payment attributable to this issue.

The AVO will eventually produce a valuation for the company shares for previous periods back to October 1992, which will allow this department to review the excess payments already raised against you, and against which you have already appealed.

11. On 19 June 1997 (T51) a separate Complex Assessment Officer disregarded the AVO valuation and valued the shares on the basis of past share sales history attaching a nominal value of $5 per share and assessing the value of the applicants' shareholding to be at least $550,240. On this basis, the debts were recalculated on 31 July 1997 to reflect the period 22 October 1992 to 12 June 1997.

12. Upon review dated 6 March 1998 (T65) an ARO varied the debt to again reflect the period 22 October 1992 to 17 November 1994, taking into account the undertaking of the first Complex Assessment Officer (T37) that no debt would arise post November 1994.

13. On 16 November 1998 the SSAT affirmed the decision under review.

14. Mr V. Ryan told the Tribunal that buying shares bought occupancy rights to a particular lot of land and the right to onsell or bequeath. He agreed that buyers paid a high price for their shares because those that had been sold were the "pick of the crop". He stated that buyers were selected from a captive market, including people with shacks on the land or friends thereof, as he was not allowed to advertise, and that some 80% of shack owners took up options.

15. He stated that he could not understand how the figure of $841,000 had been arrived at and stated that he recently came to understand that it was a method of minimising tax. He stated that the figure was prepared by his accountant and that he was advised to sign as "part of company procedure" by his accountant. He further stated that he does not accept that it represents an accurate value of the land, however agreed in cross-examination that he thought the value of the assets of the company as declared in the 1993 and 1994 financial years to be correct (when taken to where he had signed to this effect). He stated that although he had told the SSAT that $841,000 was correct, he now considered that it is not, because it was done at that time for taxation purposes.

16. He told the Tribunal that there was a limited market for shares due to the recession in the early 1990s and so he disagreed with the valuation appearing at T15. He stated that he was told by the Department prior to the 1992 share transfer that "it should be alright" and that his entitlements should not be affected.

17. Mr J. Dawes, Valuation Consultant, first valued the land in question in 1992 producing a figure of some $841,000. In a subsequent valuation carried out for the purpose of these proceedings dated 18 April 2000 (Exhibit A6) he stated (inter alia):

To value the allotments individually, in my opinion, is not correct, due to the fact that under the Government policy of the day, individual allotments could not be created.

At the time the demand for shack sites was very low, due to:-

It was during the recession that "we had to have", the purchase of recreational property was very low on the list of priorities.

It is my opinion that an appropriate way of valuing the property is to capitalise the rental income.

The rental for the occupied sites was in the order of $300 per site per annum, however in my opinion a more appropriate rental would have been $1000 per site per annum, 38 sites @ $1000 per annum = $38,000.

In view of the nature of the property, the lack of demand and the economic conditions prevailing at that time, it is my opinion that a capitalisation rate of between 14 and 16% would have been appropriate and I have settled on 15%, viz

$38,000 per annum capitalised at 15% = $253,335 dollars

18. In oral evidence in support of his report, Mr Dawes stated that he has seen the land in question four to five times. He acknowledged that he had been involved in the initial valuation in 1992, at which time he valued the land as individual freehold allotments.

19. He further stated that because a purchaser in 1993 was unable to get freehold subdivision approval, he looked at what a potential purchaser may expect to get from the property and factored in the recession to arrive at the 15% capitalisation rate. He told the Tribunal that there are inherent difficulties in valuing the land as a company title as potential restrictions and action against the company entity affect the value significantly.

20. He told the Tribunal that he did not consider comparative sales to be an appropriate valuation method as no such comparative sales were available. He stated that he did not consider net asset backing as he had not been so instructed, and that net asset backing did not preclude imputed rental consideration.

21. Mr S. Hinkelthein, Valuer with the Australian Valuation Office, valued the land in question in 1995 resulting in the report at T34. In a subsequent valuation dated 18 January 2000 (Exhibit R8) he stated (inter alia):

As instructed the subject property has been valued on the assumption that there are forty individual freehold allotments...

In determining the valuation of the subject properties, the Direct Comparison Method was used. This has involved research and analysis to determine sales of properties in the locality, which are considered to be of some comparability to the subject properties. Consideration was given to variations from the subject properties, including land size, water frontage, zoning and condition of improvements.

22. Attached to the valuation is a schedule valuing each allotment and giving total values of the applicants' shareholdings at 22/10/92 of $677,250, 22/10/93 of $378,250 and 17/11/94 of $350,000.

23. In oral evidence in support of his report, Mr Hinkelthein told the Tribunal that his instructions were to value the property as if each allotment were freehold title with no bulk discount. He stated that it was difficult to make comparisons as there were few sales in that period and that leasehold sales were the best comparison he could make. He further stated that Mr Dawes' valuation method made no allowance for the differential in river frontage and lagoon frontage and no allowance for improvements. In cross-examination he said that a blanket value should not be adopted for shares as it is not appropriate to attribute the same value to all shares. He also stated that he was surprised at the sale prices the applicants were actually able to achieve given the state of the market at that time.

24. He told the Tribunal that, as at the date of valuation, the vacant lots have no value aside from being able to put caravans and the like there, due to the zoning restrictions. In the early 1990s the prospects and speculative potential for vacant allotments was very bleak. In response to questions from the Tribunal he stated that he was not a share valuer. He stated that he was performing a freehold valuation so that values he had attached to certain allotments sold during the period appeared higher than their actual sale price.

25. Mr Hemsley submitted, on behalf of the applicants, that the original valuations performed in 1995 and/or that of Mr Dawes were to be preferred as the methods by which to value the Ryans' shareholdings in the company, because those share values accorded with the actual net value of the land. He submitted that Mr Dawes had adopted the best approach he could in the unique circumstances.

26. He submitted that the respondent cannot contend that the applicant has failed to advise of a change in value when some seven years later the Department has still not produced a share valuation itself. He submitted that the only failure to notify has been in respect of share sales, not change in value.

27. Mr Hemsley also submitted that the Department cannot "walk away" from the 1995 valuation of $150,000 and that the Department was estopped from seeking recovery of the debt because of the undertakings made by the initial Complex Review Officer (T37), in that there was no reason those undertakings should not be extended back to 1992. He further submitted that the Department's deplorable conduct, the effluxion of time, failure to properly instruct Mr Hinkelthein in 1995 and 2000 and the fact that a valuation of the shares had still not been affected because of the unique nature of the land holdings in this case amounted to special circumstances.

28. Ms Pugsley submitted, on behalf of the respondent, that recent sales history is the preferred method of valuation in this case.

29. She submitted that a debt is correctly raised pursuant to section 1224 of the Social Security Act 1991 (the 1991 Act) as a result of the applicants' failure to advise of the increase in value of their assets above the $148,000 threshold.

30. She submitted that the first Complex Assessment Officer's 1995 undertaking does not impact upon the prospect of debt recovery in the 1992-1994 period. She submitted that there is a lack of "clean hands" on the applicants' behalf due to the debt resulting from their omissions with respect to the provisions of the 1991 Act.

31. She submitted that waiver is not appropriate in this case.

32. A debt will arise in this case in one of two ways. First, if it can be said that the applicants failed to notify of an increase in asset value above the $148,000 as required by the notices, a debt arises pursuant to section 1224 of the Act. Alternatively, if the assets of the Ryans place them above the relevant limits at the time, then a debt may arise pursuant to section 1223 of the Act. The difficulty with that last possibility is the complicated set of legislative amendments to section 1223 of the Act between 1991 and 1993, and the interrelation with the Social Security Act 1947 (the 1947 Act) (see Re King and Department of Social Security (1994) 80 SSR 1163).

33. Knowledge is not required by sections 1224 or 1223 of the Act. In respect of 1224, were the Tribunal to find that the value of the Ryans' assets in the relevant period is above that prescribed in the notices, then a failure to comply with the Act will have resulted. The immediate question that arises, is whether, as Mr Hemsley pointed out, there can be a failure to notify of a value which has never in fact been ascertained? A further point for consideration is whether the Ryans took sufficient steps such that it could be said to accord with "notification" as that term has been interpreted in previous Tribunal decisions.

34. The initial question remains to attach a value to the Ryans' shareholdings in the company during the relevant times. In this regard, the Tribunal has received very little assistance from either the applicants or the respondent, and has a paucity of information from which to work.

35. Neither side attempted to obtain a share valuation, despite this matter being adjourned from the first occasion to enable such to occur. Ms Pugsley proceeded to have Mr Hinkelthein value the property as if the individual allotments were freehold title (which they clearly are not) and has put forth confusing submissions which seemingly resile from the approach taken by her own valuer and preferring a global approach akin to that taken by the second Complex Assessment Officer (see paragraphs 11-15 of the respondent's written submission). Indeed, in her final address, no mention was made of Mr Hinkelthein's evidence, and the Tribunal is still in the position of having no clear understanding of what the respondent considers the value to be.

36. Mr Hemsley, on behalf of the applicants, at least made no bones about the fact that neither of the valuations obtained for the purpose of these proceedings adequately address the issue of share value, or aid the Tribunal greatly to perform that task. Nevertheless, it is not good advocacy to simply say, in effect, "well, it's all too difficult, so we'll leave it to the Tribunal!".

37. The Tribunal also faces the difficulty of reconciling the valuations present in the company documents and tax returns with the more recent valuations which are significantly lower. Mr Ryan gave evidence that he now believes that the earlier valuations were so high because of taxation issues, and his evidence was that, in effect, the valuation in 1992 reflected clever accounting, which had no regard for actual value. Mr Dawes contradicted this however, because his evidence was that he was involved in that initial valuation, such that it cannot be asserted that the figure was plucked from the air for tax purposes. As is itemised in the company articles, it was based upon some real figures, and as such, represented an actual value. Mr Ryan signed declarations that the value of $841,000 was correct, and if he now asserts that he never thought that the value was close to that, he is at risk, for the lack of a good faith belief when signing such declarations would amount to fraud, particularly in relation to the tax returns. Given the property was originally bought for $100,000, Mr Ryan cannot simply say he did what his accountant told him to do when signing a declaration of a value of $841,000, because surely a jump in value of some $700,000+ in the space of a few short years would have made him pause before signing.

38. The Tribunal found Mr Dawes' most recent method of valuation of the land to be unimpressive. In all the circumstances, it is not a reasonable basis of valuation to consider that prospective buyers would buy the allotments for the purpose of renting them out on an annual basis. In the Tribunal's opinion such land as is in issue here, especially as at the early 1990s, would have been bought ostensibly for the recreational pleasure of the owners and not for leasing. The Tribunal was not convinced as to the rental figure of $1,000 per annum being applied carte blanche on all allotments, when clearly the frontage, improvements and amenities attaching to each allotment would have a dramatic impact upon its rental capacity. The 15% capitalisation rate also appears to be without solid foundation. The Tribunal also has difficulties reconciling Mr Dawes' involvement in the production of the 1992 value with the more recent (and much lower valuation). This may simply be as a result of the instructions he has acted upon in terms of methodology, but when this is combined with the Tribunal's other concerns, the Tribunal must disregard Mr Dawes' valuation as being of no benefit to these proceedings.

39. The Tribunal is not convinced that a "global" approach is appropriate in this case, and nor is attaching an average to any share price. The shares in the company are all of different classes, and attach to different allotments, all of varied size and value, and affected by building rights and frontage. Also, the Tribunal is of the opinion that the value of a shareholding must be considered to be less than a freehold holding, as the rights and obligations attaching to each are quite separate and distinct, the freehold title giving more benefits and less financial inconvenience to a prospective land owner than holding such land as shares. The value of share ownership stems from the rights flowing from the articles of association and statutory authority, and is necessarily encumbered by the limitations of such ownership and the obligations and limitations associated with share ownership (per Latham CJ in Bank of New South Wales v The Commonwealth [1948] HCA 7; (1948) 76 CLR 1 at p209).

40. Mr Hinkelthein's comparative sales approach has its attractions as a method of valuation, but as he quite readily admits, it is limited by the paucity of other sales and the unique nature of this land holding. Also, he was instructed to perform a freehold valuation.

41. The Tribunal is of the opinion that it is appropriate to consider each allotment separately, because of the differences between allotments (and therefore the class of shares attached to such). It agrees with Mr Hemsley's statement of facts, issues and contentions (Exhibit A1) at paragraph 32(d) that:

"... in so far as the value of each class of shares is tied to a specific allotment, the value of that allotment is an appropriate measure of the value of that class of shares."

42. Having decided against the use of the earning capacity method, the Tribunal is left with the asset backing method. In the Tribunal's view the most significant aid to valuation of this kind is the actual share sales that occurred in the relevant period. It is simple logic that if one wants to determine what the value of a particular class of shares was in the early 1990s, the 1993 or 1994 sale price will be a good indicator.

43. The various authorities on share valuation support this approach of actual market value. In Re Cowling and Secretary, Department of Social Security (1986) 12 ALD 169, the Tribunal stated (inter alia) at p170:

"... for the purpose of ascertaining the value of property to be disregarded in s 6AA of the Act (in particular the principal home) it was necessary to ascertain the net market value of the property having regard to the principles enunciated in the decision in Spencer v Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418.

44. In Spencer v Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418, Barton J stated (inter alia) at p436-437:

... And I should say, in view of the many authorities cited and upon the sense of the matter, that a claimant is entitled to have for his land what it is worth to a man of ordinary prudence and foresight, not holding his land for merely speculative purposes, nor, on the other hand, anxious to sell for any compelling or private reason, but willing to sell as a business man would be to another such person, both of them alike uninfluenced by any consideration of sentiment or need.

45. Issacs J stated in the same case (inter alia) at p441:

... Having mentally placed itself in the position of the bargaining parties as on the critical date, 1st January 1905, the question for the tribunal is, what is the point at which the parties would meet; what is the sum the one would be willing to give and the other to take? That is practically the same as asking what is the highest sum such a purchaser would give, because we must assume the owner would be willing to take the best he can get. ...

46. In Re Clarke and Repatriation Commission (1987) 13 ALD 396 the Tribunal stated (inter alia) at p398:

In the Tribunal's view, in the application of the assets test, the "value" of a non-exempt asset can only be the net cash amounts actually received or receivable by the veteran in respect of the assets concerned.

47. It is clearly appropriate on this basis to take into account the amounts actually paid for shares upon transfer during the relevant period in the present case. These amounts reflect what men and women "of ordinary prudence and foresight" (Spencer at p436) were prepared to pay for the land.

48. The amount that was actually paid for the shares at the time is a good indicator of contemporaneous market value. It is also of assistance in determining the value of the remaining shares held by the applicants. The usual practice of valuation is to adjudge value based on the sale price of the same type (class) of shares, but as previously noted the Tribunal is confronted with shares of differing classes. The Tribunal considers however, that there is comparability between the various classes of shares issued by the company. Each class brings with it rights and obligations. Within the context of the various frontages and building rights, certain unsold share classes are capable of being compared to certain sold share classes. Whilst each block has its own unique aspects, there are allotments similar enough in size, locality and amenity to warrant such a comparative approach. The Tribunal is mindful in its comparison, however, of Mr Ryan's comment that the share classes that were sold represented land that was the "pick of the crop".

49. Taking into account all the above considerations, the Tribunal, in an effort to determine the values attaching to the various allotments and using the only information available, has prepared the following table which indicates its consideration of what the Ryans' interests in the company were during the relevant period. For convenience the Tribunal has used the three dates utilised by Mr Hinkelthein as bench marks, but has also provided a total value as at April 1994, at which time the value of the Ryans' shareholding would have been at its lowest by the foregoing logic.

Lot no. Lot area (m2) Value 22/10/92 Value 22/10/93 Value 17/11/94 Comments

1 37,800 50,000 50,000 50,000 Incl. Home occupied by applicants

2 1,248 50,000 50,000 50,000 River frontage, Compare (lots)3+4+6

3 496 18,000 18,000 - River frontage, sold 12/93 $18,000

6 388 18,000 18,000 18,000 River frontage, sold 4/95 $18,000

7 444 20,000 20,000 20,000 River frontage, shed, compare lots 3,5,6

8 413 9,000 9,000 9,000 River frontage, no building rights

10 375 9,000 9,000 9,000 River frontage, no building rights

11 478 18,000 - - River frontage, sold 1/93 $18,000

14 491 incl in 12 Incl in 12 Incl in 12 Compare 3,5,7

15 550 18,000 - 18,000 Sold 1/93 $18,000, repurchased 5/94 $18,000

16 550 10,000 10,000 10,000 River frontage, no building rights

17 520 18,000 18,000 - River frontage, sold 12/93 $18,000

18 520 10,000 10,000 10,000 River frontage, no building rights

19 520 22,000 22,000 22,000 River frontage, shed, area m2 see 3, 7

20 520 10,000 10,000 10,000 River frontage, no building rights

31 450 15,000 15,000 15,000 Compare 29 and 30, footings negligible value

Total value of property held as shares by Ryans 584,392 352,392 310,500 April1994 292,500

50. The Tribunal then considers the mortgages and statutory homeowner reduction in coming to the final valuations. There was some discrepancy between the oral evidence of Mr Ryan and the mortgage documents later received by the Tribunal. However, the Tribunal is prepared to err on the side of caution in attaching a value of $100,000 to the mortgage as at October 1992. The mortgage was discharged soon after the initial sales of shares, with the discharge signed on 8 March 1993 and registered soon thereafter. The Tribunal notes Ms Pugsley's submission that the mortgage is attached to the company and not the applicants personally, and for that reason no reduction should be made to the value of the shares held by the applicants. Notwithstanding the nature of the security taken by the bank the Tribunal finds that the Ryans were the sole beneficiaries of the monies borrowed and on that basis concludes that the amount borrowed is correctly deducted from the value of the shareholdings. This is a scenario in which form should not be put before substance. The Tribunal has used the maximum amount of the mortgage given because in the final analysis it makes no real difference to the end result.

51. The Tribunal has also included the reduction flowing from the provisions of sub-paragraph 1118(1)(b) of the 1991 Act. The Tribunal notes that at earlier stages of review, the applicant and his accountant had disputed whether or not the applicants could be said to be homeowners. However, Mr Hemsley did not take issue with this point. Accordingly, and without any submissions being put to the contrary, the Tribunal is satisfied that the share rights in this case give "reasonable security of tenure in the home" so satisfying the above stated subparagraph, and further satisfying the definition of "homeowner" for the purposes of the 1991 Act. The home property is 37,800 m2 which equates to 3.78 hectares (1 ha = 10,000 m2). Sub-section 11(5) of the Act limits the amount that can be offset under sub-paragraph 1118(1)(b) to the home and two hectares. On a strict percentage basis, two hectares in this case (based on the Tribunal's value for lot 1) is approximately $26,455. Given location, use and the significant value of the applicants' dwelling in valuing that lot, the Tribunal considers that a more appropriate value of the "principle home" as per the sub-section 11(5) definition is $40,000.

52. The Tribunal has considered the merit of any further "discounting" due to lack of freehold title, but considers that because of the adoption of the comparative sales approach, there is no necessity for a discount over and above the values ascribed already by the Tribunal.

Total value of property held as shares by Ryans 584,392 352,392 292,500 310,500

53. Returning to the question of whether or not there are debts in the amounts of $14,573.20 per applicant, it is clear that at all relevant times according to the values ascribed to the shareholdings by the Tribunal the applicants remained above the prescribed limits set out in the section 1064 table G3 of the 1991 Act (as it stood in 1992, 1993 and 1994). The applicants received notices requiring them to inform the respondent if their assets rose above certain levels, although the Tribunal did not receive such notices itself until it requested them from the Department. Mr Hemsley's point is well made that the applicants did not in fact know during the period of the debt what the exact share values were, yet it seems to the Tribunal that the applicants should have had some inkling given the value of the share sales that they would be dangerously close to the asset limits. It was only in 1995 that the AVO value was produced, and that value is within the prescribed limits. The applicants also queried the Department early in 1992 and according to Mr Ryan's evidence, relied upon assurances given at that stage.

54. The question arises as to whether it is possible to notify in respect of something which is unknown? Certainly the applicants failed to advise of share sales. However, this of itself, given the relationship of share sales to the mortgage, was not necessarily indicative of assets being above the prescribed levels. There is also the question as to whether there is (or should be) any limit on the retrospective application of section 1224 of the 1991 Act.

55. Raising a debt pursuant to section 1224 of the 1991 Act in this case is fraught with difficulties. The Tribunal considers that it is far more appropriate to consider the application of section 1223 of the 1991 Act. During 1992 to 1994, section 1223 underwent a tumultuous period of legislative amendments, issues arising as to the application of the 1947 Act and the effect of transitional acts. The Tribunal has carefully scrutinised the legislation as it stood at the various junctures throughout 1992 and 1994, and is satisfied that for the purposes of the debts in question in this case, sub-section 1223(1) of the 1991 Act remains applicable throughout the period. That sub-section provides that if an amount has been paid and the recipient was not qualified so the amount was not payable, then the amount so paid is a debt to the Commonwealth. That appears to the Tribunal to be the case here. In the Tribunal's opinion, the applicants were not qualified to receive benefits because they were unable, to satisfy the requirements of the assets test. Their eligibility was therefore nil during the period of the debt, and accordingly, the Tribunal so finds that the amount paid to them in that period is a debt due the Commonwealth.

56. Estoppel has been interpreted in respect of administrative proceedings to be a question open to consideration where discretion has arisen in the course of a decision or other administrative action. There is a clear distinction made in the authorities on this issue between discretionary and non-discretionary administrative actions and the applicability of estoppel (Formosa v Secretary, Department of Social Security [1988] FCA 291; (1988) 15 ALD 657 at p665-6 per Davies and Gummow JJ).

57. The Tribunal was provided with a number of authorities of little assistance with regard to the question of estoppel raised herein. Those authorities largely concerned estoppel with respect to Tribunal proceedings themselves. In this case, the question of estoppel arises as a result of a decision taken by the initial Complex Assessment Officer involved in the matter in 1995. The Tribunal has set out at paragraph 10 herein the substance of that decision. There is clearly a discretion exercised in that decision, and the nature of the representation overcomes many of the hurdles of representation identified in Commonwealth of Australia v Hamilton (1991) 2 Qd.R.257.

58. In Hamilton, the defendant had declared himself to be unemployed in order to obtain benefits at a time during which he was actually in full employment. An estoppel argument was raised in the common law debt recovery proceedings on the basis of an alleged representation given by the prosecutor during the criminal proceedings (guilty plea) that no money was sought, with a question arising as to whether it was a qualified statement of no money being sought "at this stage". In that case issues were raised as to the extent of the representative's agency and the extent to which representations can be relied upon when they conflict with the statutory procedures and requirements of the 1947 Act. The Tribunal notes in passing that, on its reading of the legislation and case law, the form and content of the 1991 Act removes many of the difficulties associated with the 1947 Act in respect of the debt recovery sections. It is also worth bearing in mind that this is not a common law jurisdiction.

59. On its reading of Hamilton, the Tribunal considers that the prospect is raised that estoppel is arguable where there has been a representation of some sort purporting to be representative of the Department, and in the context of a discretionary exercise of administrative authority. Williams J at p271-2 of Hamilton provides a useful commentary on the relationship between legal authority to recover debts and estoppel arguments:

In Commonwealth of Australia v Burns [1971] VicRp 100; [1971] VR 825 Newton J. was concerned with an action in which the Commonwealth was seeking to recover amounts paid to Burns purportedly by way of repatriation pension, but in circumstances where she had no entitlement thereto. When the payments had first been made Burns had queried her entitlement with an official, and had been assured that the payments were being lawfully and properly made. She relied on that as one of her defences to the claim. At 830 the learned trial judge said that the answer to her argument on that ground was "to be found in the well established rule that a party cannot be assumed by the doctrine of estoppel to have lawfully done that which the law says he shall not do". ...

... It must not be forgotten that estoppel (and at least in some circumstances, waiver) is concerned with preventing a party from obtaining an unconscionable advantage over another, and in consequence in this area of the law the court is frequently called upon to adjudicate as between competing rights; the various judgements in Commonwealth v Verwayen (1990) 170 CLR 394 sufficiently illustrate that point. Thus one finds, for example, Deane J observing in that case at 441: "There could be circumstances in which the potential damage to an allegedly estopped party was disproportionately greater than any detriment which would be sustained by the other party to an extent that good conscience could not reasonably be seen as precluding a departure from the assumed state of affairs if adequate compensation were made or offered by the allegedly estopped party for any detriment sustained by the other party." And in the same case McHugh J said at 497: "In my opinion, the true basis of the decisions in these cases is that, where the existence of a statutory right depends upon the fulfilment of a condition precedent, a person entitled to insist on the fulfilment of that condition may dispense with its compliance unless it is enacted for the benefit of the Public, and that person will be held to have waived compliance with the condition if he or she knowingly takes or acquiesces in the taking of a subsequent step in the course of procedure laid down by the statute after the time for the other person to fulfil the condition has passed."

Whilst none of those judicial observations is conclusive, each nevertheless seems to me to be suggesting that the public instrumentality, particularly where it is pursuing a statutory right to recover moneys wrongfully taken from the public purse could not, in consequence of conduct (particularly by some minor official), be estopped from pursuing the recovery. ...

60. McPherson ACJ in that case was concerned with the relationship between the waiver provisions of the 1947 Act and estoppel. To say that a discretion has been exercised to not recover a debt is akin to effecting the waiver provisions of the 1947 Act (at p267 therein). Logically, the discretion involved must in effect be exercising the waiver provisions of the 1947 Act, that being, a discretionary decision that no debt will be raised.

61. It is particularly significant to note that this Tribunal is not a common law jurisdiction, and as such, the Tribunal considers that its powers as regards estoppel consideration is limited to some degree. The powers of the Tribunal are prescribed by statute, and it is limited to exercising its statutory authority. The Tribunal hearing is a hearing de novo, and the Tribunal, sitting "in the shoes of the decision maker" is in the position of being able to access whatever information is necessary to the exercise of its function (within reason and accordance with procedural fairness), as Hill J expresses in Midland Metals Overseas v Comptroller-General of Customs (1991) 30 FCR 87 at p96-97 (inter alia):

"First, it is clear that the proceedings of the Tribunal, and in particular its findings of fact, do not constitute an issue estoppel on any issue, even if the parties to the Tribunal proceedings are regarded as the same parties as are presently before the court. The Administrative Appeals Tribunal is an administrative body. When its jurisdiction is enlivened it is empowered to review an administrative decision made under some other enactment: s 25(4) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act). In matters before it, its proceedings are to be conducted with a minimum of formality and with due expedition. It is not bound by the rules of evidence: s 33 of the AAT Act. In reviewing decisions referred to it, the Tribunal is empowered to exercise itself all the powers and discretions conferred upon the decision-maker: s 43(1) of the AAT Act. If the Tribunal so decides after hearing the review, it may affirm the decision under review, vary it or set aside the decision and either itself make a decision or remit the matter back to the original decision-maker for reconsideration: s 43(1).

Where, as occurred in the present case, the decision is remitted to the decision-maker for reconsideration, it is evident that the ultimate decision will be one not made by the Tribunal, but by the decision-maker himself. But even where the Tribunal substitutes its own decision for that of the original decision-maker, the Tribunal in so doing is merely acting in an administrative capacity. Its decision is deemed for all purposes to be the decision of the decision-maker: s 43(6) of the AAT Act. ..."

62. The issue of estoppel against this background brings into dispute the jurisdiction of the Tribunal. Mr Hemsley argues that because of assurances given by the Complex Assessment Officer in 1995, and the reliance at that stage on the $150,000 valuation, no further valuation may be used by the Department in subsequent decisions. They are estopped from using other valuations. Were the Tribunal to accept this argument, it would mean in effect that the delegate's decision of 31 July 1997 (T52), as varied, would be invalid, as the delegate in 1997 would be estopped from so deciding. In the absence of a valid decision by the delegate, it is questionable whether this Tribunal would have the jurisdiction to so review the debt, as the delegate would have acted ultra vires. In certain respects, the ARO obviously considered that the delegate acted in this way in respect of the period from November 1994 onwards. It is certainly not a conclusion that the Tribunal anticipates the applicant would be happy with were it to conclude it lacks jurisdiction due to there being no reviewable decision! The Tribunal notes that the Full Federal Court has addressed this dilemma to a certain extent in Minister for Immigration and Ethnic Affairs v Daniele [1981] FCA 212; (1981) 39 ALR 649 wherein Davies J states at p657 (inter alia):

... Moreover, the review was conducted by a body, the Administrative Appeals Tribunal, which has an independent duty to investigate for itself the facts of the matter. The Tribunal is not restricted by any estoppel which binds a primary decision-maker or upon which the primary decision-maker may rely.

63. Thus, even if the delegate was estopped as a result of the Complex Assessment Officer's 1995 undertakings, the Tribunal is not prepared to necessarily accept that it is so bound, given the scope and powers attached to its review processes.

64. It is a legitimate expectation that once a discretion has been exercised by the Department to abide by a valuation, the Department will not renege on such a decision. The factual extent and nature of the purported 1995 discretionary decision does not however, in the Tribunal's opinion, give rise to an estoppel in respect of the period under review.

65. Whilst the initial Complex Assessment Officer was exercising a discretionary power to both have regard for the 1995 AVO valuation and to "waive" (stop the recovery of) any monies that may be overpaid in respect of that reliance, the decision of 29 September 1995 has clearly stated limitations. It is limited to the period from November 1994 onwards. The Complex Assessment Officer states that the exercise of the discretion to have regard for the valuation does not affect whatever determinations may affect entitlements from 1992 until November 1994. Mr Hemsley suggested that it is a natural extension of the discretion to extend it back until 1992, but the Tribunal does not accept this as a necessarily logical conclusion. Whilst the Tribunal is not entirely satisfied that the Complex Assessment Officer's approach was in accordance with natural justice, it was her discretion to exercise, and as such, she was entitled to so limit the discretion to account only for the period from November 1994 onwards. This means that in respect of the period in question, it cannot be said that the Department (representative or agent thereof), has exercised discretion in such a way as to affect the legal capacity to institute the debt recovery sections of the 1991 Act in respect of the period prior to November 1994, or indeed to have regard to other valuations in respect of this period. As in Hamilton, the representation by the Complex Assessment Officer is not such so as to estop, as a matter of fact or law, the ability to consider the period up until November 1994 using different valuations to that of the AVO in 1995.

66. In Re Heuzenroeder and Secretary, Department of Education, Training and Youth Affairs [1999] AATA 914, Deputy President Burns rejected an estoppel argument where an applicant had AUSTUDY refused on grounds he successfully challenged, and later had AUSTUDY again refused for the same period on different grounds. The Deputy President considered that the paramount consideration was whether or not there was a legal entitlement to the monies at paragraph 16 (inter alia):

"... the applicant's submission is that, having decided in March 1997 that the applicant was disentitled to Austudy on one ground which was successfully challenged by the applicant, the Department "was thereafter estopped from relying on other grounds in the regulations to refuse the appellant" - namely, on the grounds of the actual means test - "especially as it is a purpose of the parent Act that AUSTUDY decisions be made promptly (section 5C(a)(iii)" (Mr Greenwood's submissions). The Tribunal is not persuaded by this submission. Clearly, before Austudy can be lawfully paid to the applicant, he must qualify under the relevant legislative criteria, and unless and until the Department is so satisfied, Austudy must by law be refused. In short, it cannot be said that whenever a decision-maker refuses to grant a benefit upon grounds which are later found to be invalid, that the Department is thereafter estopped from relying upon other lawful grounds of refusal as this would, in effect, amount to the granting to a person of a benefit to which they are not lawfully entitled. The corollary to this is that there is no legislative requirement on the Department to proffer each and every ground of refusal at the same time. Any applicant for benefit must at all times qualify for Austudy and, for this reason, an estoppel cannot lie against the Department in the sense submitted above."

67. Whilst this case is clearly distinct on its facts, this Tribunal concurs with the Deputy President in so far as there is no requirement that a Department decide everything at once, although it is clearly preferable to avoid delays as in the present case. The fact that the initial Complex Assessment Officer did not deal with the 1992-94 period in 1995 does not of itself create an estoppel, especially since, as noted above, her decision is relatively unambiguous in separating the periods she was concerned with. In respect of the 1992-94 period, this Tribunal is required to consider whether or not there is a lawful entitlement to benefit, and it is not satisfied, and so finds, that there is any argument which persuades it that it is estopped from so inquiring, or which limits the scope of the valuations it may consider in respect of the period under review.

68. Regarding waiver, there is no sole departmental error giving rise to the debt, in that no matter how the Department's conduct might be viewed, the "sole" test cannot be satisfied given the factual matrix of this case, and the Tribunal so finds.

69. In respect of special circumstances, the Tribunal has given careful scrutiny to all aspects of the long and complex history of this matter. The Tribunal has some serious misgivings about the Department's handling of this matter. It appears that the applicants had some discussions with the Department in November 1991 and that as of December 1992, the "note for file" (T7) indicates that an AVO valuation should be obtained. On the information put before the Tribunal, no valuation appears to have actually been requested prior to the initial Complex Assessment Officer's request in 1995.

70. Whilst the initial Complex Assessment Officer's decision to only backdate that valuation to November 1994 was hers to make, the logic of it is not necessarily sound in the Tribunal's opinion. Whilst estoppel does not arise from this alone, it appears erroneous for the initial Complex Assessment Officer to only have regard to the $150,000 figure, when in fact Mr Hinkelthein had provided figures for October 1992, 1993 and 1994. These were obviously tentative, and predicated on a number of assumptions and partial information, but then so was the $150,000 figure. The file note dated 5 September 1995 (T36) explains the reasoning behind the decisions made, but it is not necessarily sound, as further evidenced by the file note dated 29 September 1995 (T38/158) where, once again, attempts are made at averaging the share prices, resulting in figures ranging from $7.37 for August 1994 to $1.30 as at August 1995. What justification could there be for adopting an administrative course of action which results in acceptance of a differential of some $6.07 in share prices over the course of one year? What further clouds the reasoning process is the fact that the AVO valuation disclosed a figure of $100,000 as at October 1994, which is significantly lower than the deemed August 1994 figure of over $1,000,000, obtained using the logic in the latter file note (T38/158)!!!

71. What happened next was that the Complex Assessment Officer seemingly decided that it was all to difficult and to wait for appeals to happen. It apparently appeared inevitable to departmental officers that their actions should be responsive to appeals rather than pro-active (T39):

Mr Ryans assessment is almost impossible to sort out logically with past shareholdings based on the AVO valuation, and any new shares purchased based on that purchase price.

It is suggested that you restore from November 94 as a first step, and then wait for any appeal against that decision before recalculating the excess payment. This will also give the accountant plenty of time to reconstruct the family trust tax returns etc.

72. The initial Complex Assessment Officer then produced a file note which attempted to set out the share valuations for 1992, 1993 and 1994 and appears to have accepted the AVO valuations, and applied a discount of $40,000 for the Ryans' home (T42):

The company shares held jointly can be assessed as follows and the $40000 value for the home and curtilage has already been deducted:

October 1992 $210000, Oct 93 $85000, Oct 94 $60000, Oct 95 $112646 (as assessed).

73. It does not appear from the documentary evidence that this valuation, as determined by the initial Complex Assessment Officer, formed the basis of any debt recovery decision. It is indeed confusing, as it contradicts her earlier reasoning (with which the Tribunal also took issue). A reference is made in a "Summary of Case" document (T43) which accords with the Tribunal's assessment:

File returned from CAO - recommendation inconsistent with previous CAO reports."

74. That same valuation (T42) contained the disturbing rider that:

The AVO valuations obtained August 1995 have not given a separate share valuation for each separate class of shares held which would strictly speaking be the correct method of valuation, but as a matter of expediency have provided the valuation of all the clients land held at particular times since 1991.

If the client chooses to appeal against the valuations included in these new excess payment calculations, it will be up to him to provide a separate valuation for each of the 26 etc share types held at various times since 1991, and the AVO will be [sic] then be able to give an opinion. This will be an extremely expensive option for Mr Ryan but he may still wish to take it.

75. What is clear from this note, is that the Department had (again) decided that it was all too difficult. As such, they failed to obtain a valuation of the shares, simply relying on the land valuation. It is a mistake compounded by Ms Pugsley in the current proceedings, where, even after the Tribunal adjourned from the first occasion to enable share valuations to be obtained, Mr Hinkelthein appeared on the second occasion to give a valuation as if the land were held in freehold allotments. This is no indictment of Mr Hinkelthein, who must be, as always, responsive to the instructions he receives. Despite being aware as at 2 July 1996 that their valuations were defective, the Department has still failed to remedy the situation.

76. The involvement of Mr Stephen Wright, the second Complex Assessment Officer, only served to make matters worse. Mr Wright abandoned any consideration of valuations, and for no logical reason, returned to the "averaging" of share prices, a method which, as this Tribunal has noted, is defective in failing to take into account the differences in allotments, in terms of frontage and building rights etc. The faulty reasoning at this stage resulted in the production of a notice dated 25 September 1997 (T56) (and the raising of a debt) which was clearly outside of legal authority given the undertakings of the initial Complex Assessment Officer. It was only after this decision was appealed that the fault was rectified by an ARO.

77. At the end of the day, there has been a "comedy of errors" in the Department's handling of the matter, including, significantly, the failure to properly instruct the AVO at any stage to perform a proper valuation. This was something available to them as far back as December 1992 (T7), at which time the company had been incorporated. It is not sufficient for the departmental officers to recognise the deficiencies in their own valuations, but to do nothing to remedy the deficiencies, instead putting the burden back upon the applicants should they choose to appeal. This is not administration in accordance with the goals and aims of the legislation.

78. The situation has resulted in there being no actual proper valuation performed until the involvement of the Tribunal. The Department then proceeded to raise a debt pursuant to section 1224 of the 1991 Act, in circumstances where it can offer no actual valuation to prove the failure to notify of assets above the limit, merely relying on conjecture and approximation to conclude that the value, must be above the asset threshold. The Tribunal's finding that it was in fact higher is beside the point.

79. Mr Hemsley is correct in stating that there has now been a considerable effluxion of time, much of which has resulted from departmental mismanagement. The Tribunal is also cognisant of the extreme difficulties the applicants have faced in trying, at least for social security purposes, to do the right thing at all material times. The Tribunal is also mindful of the unique nature of this type of landholding and the difficulties the structuring and policy changes have caused. The combination of all these circumstances suggest strongly to the Tribunal that this case warrants the description "unusual", "exceptional" or even "unique". The nature of the Department's conduct over several years in particular, persuades the Tribunal that it would be unreasonable or otherwise unfair to expect the applicants to bear the full burden of the debt. Recipients have a right (as conferred by procedural fairness considerations) to expect consistency in the application of administrative discretion, and the applicants in this case have been denied such consistency over the course of several years, the delay associated with such has also resulted in an increased burden on the applicants.

80. Vitiating against such consideration is of course the paramount consideration that the applicants have received public monies to which they are not entitled. The pool of assets in this case is not insignificant. The Tribunal is also somewhat sceptical of the means by which the initial valuations above $800,000 came into being. However, given its finding at paragraph 79 as regards the applicants' actions, it considers that the "knowingly" aspect of section 1237AAD is not in issue. Certainly Ms Pugsley made no submissions to that effect.

81. Accordingly, taking into account all of the before-mentioned circumstances, the Tribunal considers that the circumstances of this case warrant the exercise of the discretion pursuant to section 1237AAD to the extent of waiving one half of each applicant's debt. This discretionary waiver takes into account all the circumstances of the case, but the Tribunal would note in particular the effluxion of time, lack of departmental consistency and failure to properly instruct the AVO over the course of many years up to and including the present proceedings.

82. For the above reasons, and pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal sets aside the decision under review and in substitution therefor decides that one half of each applicant's debt be waived.

I certify that the 82 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member J.A. Kiosoglous MBE and Mr D. J. Trowse (Member)

Signed: .....................................................................................

Date/s of Hearing 25 October 1999, 18 November 1999