Cockburn and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 772

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 772

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/5282

GENERAL ADMINISTRATIVE  DIVISION		)
Re		GARRY JOHN COCKBURN

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Regina Perton

Date29 August 2008

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(sgd) Regina Perton

Member

SOCIAL SECURITY ‑ age pension – assets – valuation – journal entries in company account – whether loan or gift – value of other holdings of controlled private company – decision affirmed

Social Security Act 1991 Part 3.18

REASONS FOR DECISION

29 August 2008 Regina Perton       

1.      Garry Cockburn lodged a claim for age pension on 16 March 2007.  At that time he had a partner and his partner also lodged a claim for age pension on the same date.  Centrelink, which administers age pension for the Department of Families, Housing, Community Services and Indigenous Affairs (the Department) rejected their claims on 12 April 2007 because their assets exceeded the maximum amount allowable for members of a couple to receive age pension.  The Social Security Appeals Tribunal affirmed that decision.

2.      Mr Cockburn and his partner have now separated.  Both of them lodged applications for review of the SSAT decision with the Tribunal but Mr Cockburn’s former partner has withdrawn her application.  Mr Cockburn maintains that the value of his assets was overestimated.  Mr Cockburn lodged a fresh claim for age pension after the separation, which resulted in the grant of age pension from early January 2008.  However, Mr Cockburn maintains that he was entitled to age pension as from 16 March 2007.

3.      Mr Cockburn is a director and one of the shareholders of a company.  He submits that outstanding loans, shown in the records of the company, were gifts to his children and the children of his former partner and it was never intended that they be repaid.  He asserts therefore that the loans should not be considered assets of the company.  He also submits that the asset value of vineyard interests which the company holds should be zero, given that they are not saleable in the current financial climate. 

4.      The issue for the Tribunal is to ascertain the value of the assets held by Mr Cockburn and Mrs Vicky Evans at the date of his claim for pension and to determine whether the value of those assets prevented Mr Cockburn from being granted age pension at that time when he and Mrs Evans were still partners. 

Background

5.      Mr Cockburn and Mrs Evans were in a relationship for some 20 years.  Their relationship ended in November 2007, about eight months after the application for age pension in this matter was made.  Mr Cockburn and Mrs Evans had been equal shareholders in a company called Winborra Holdings Pty Ltd (Winborra) since 1989.  Mr Cockburn was the sole director.  Winborra was primarily a vehicle for investments and share transactions.

6.      Mr Cockburn told the Tribunal that he was once worth several million dollars but had now lost almost everything, including his partner.  He is frustrated that he is now reliant on an age pension.  He believes that Centrelink is attributing assets to him that he does not hold.

Winborra Holdings Pty Ltd

7.      When a person seeking age pension is the director and shareholder of a private company, the company’s assets are taken into account in determining the assets held by the person (Part 3.18 of the Social Security Act 1991 (the Act)).  Mr Cockburn and Mrs Evans were the sole shareholders of Winborra from its inception in 1989.  Mr Cockburn is the sole director.  The Tribunal is satisfied that Winborra is a private controlled company of which Mr Cockburn has control.

8.      Mr Cockburn lodged his claim for age pension on 16 March 2007.  In a balance sheet dated February 2007 and provided to Centrelink at that time, the then current assets of Winborra included Advances to Family totalling $245,000 as follows:

S Evans        $140,000.00

P Evans         $60,000.00

C Westall        $35,000.00

S Cockburn        $5,000.00

K Cockburn       $5,000.00

9.      In a letter dated 21 May 2007 accompanying a number of documents requested by a complex assessments officer at Centrelink, Mr Cockburn stated:

Your inference that the Gifts to Family Members are Unsecured Loans is not correct.  It is a matter of semantics because I knew exactly what they were and the accounts did not clearly show that.  For that I apologise…

10.     Mr Cockburn provided a copy of the Financial Accounts of Winborra for the year ended 30 June 2000 prepared by the company’s accountants.  They showed $245,000 in sundry unsecured loans as at that date as current assets.  The $245,000 remained in Winborra’s records until after the claim for age pension was lodged.

11.     Mr Cockburn told the Tribunal that the advances to family members of the shareholders should not be considered as assets, notwithstanding that they had appeared in Winborra’s records since 1998.  He said that he entered them in the journal about 10 months after they were gifted.  He provided the Tribunal with statutory declarations which had been signed by three of the recipients of the advances, none of whom appeared as witnesses at the hearing:

·Paul Stuart Evans, architect, in a statutory declaration dated 8 November 2007, stated that in July 1997, his mother and Mr Cockburn gave him $60,000 as a gift, to assist in the purchase of their property.  He ended the text stating:

There was no agreement made or signed with their company “Winborra Holdings Pty Ltd” and the company has no rights at law to claim this money back.

·Carolyn Ann Westall, midwife, stated in a statutory declaration dated 10 November 2007, that in November 1988, her mother and Mr Cockburn gave her $35,000 to assist in the purchase of their property.  The last sentence of the statutory declaration was the same as that cited in her brother’s affidavit above.

·Susanne Evans, shopkeeper, in a statutory declaration dated 9 November 2007, stated that her mother and Mr Cockburn transferred a house and other incidentals amounting to $140,000 in total to her as a gift in November 1997.  The final sentence in her statutory declaration was identical to those of her siblings.

12.     Mr Cockburn provided a statement from the Victorian State Revenue office confirming that stamp duty had been paid on a transfer of land to Susanne Evans in 1997. 

13.     A file note dated 15 June 2007 on the Departmental file, after Centrelink had made its decision to refuse age pension, indicates that Mr Cockburn telephoned and advised that information in the balance sheet was incorrect and requested that the figures not be used at that time.  

14.     Mr Cockburn told the Tribunal that he had entered the gifts as unsecured loans so that the children knew what each had been given, as a way of dividing up their parent’s estates should he and his partner pass away.  The Tribunal accepts that moneys were given to the children.

15.     A balance sheet dated November 2007 no longer showed the amounts given to Mrs Evans’ children or the $10,000 given to Mr Cockburn’s children as unsecured loans due to Winborra.

16.     There is no dispute that Winborra is a private company with Mr Cockburn and Mrs Evans holding 50 per cent of the assets each at the relevant date.  The Tribunal is satisfied that Winborra’s financial records should be read as they appear in the documents prepared for official purposes in the period preceding the claim for age pension.  Mr Cockburn, as the sole director of Winborra, chose to treat the moneys advanced to the children by the company as unsecured loans in the company’s financial records for some nine years after they were made.  They had not been forgiven by the company at the time of lodgement of the claim for age pension.  Hence, the Tribunal is satisfied that the $245,000 should be treated as an asset of Winborra at the time of the claim for age pension.

17.     The other dispute in relation to Winborra is the value of vineyard investments held by the company.  As at the date of claim for age pension, Winborra had the following vineyard investments:

·16 leased areas of the Frankland River Vineyard Project No.2

·19,200 ordinary shares in Frankland River Vineyards Holdings Ltd

·12 grower interests in GuildGrape Project No. 1 (Kayinga)

·12 units in the GuildGrape Property Trust.

18.     Mr Cockburn submitted that a high value cannot be put on the vineyards as there is no market for them.  Mr Todd argued that the Tribunal did not have jurisdiction to declare certain assets as excluded assets as there had been no claim and hence no declaration by the Secretary on such a matter in relation to the decision to the claim for age pension lodged in March 2007 (s 1208E of the Act).  The Tribunal concurs with Mr Todd’s contention and hence must undertake a valuation of Winborra’s assets rather than declare that certain assets are unrealisable for the purposes of this review. 

19.     In relation to the GuildGrape Project No. 1 and GuildGrape Property Trust, the General Manager of Guild Financial Services Ltd, which managed the investment, wrote to Winborra on 30 September 2006.  He stated:

...

…The Project was recently revalued by an independent valuer which resulted in the overall value of the Vineyard declining slightly from last year.  The independent valuation figures are reflected in this year’s audited accounts.

The net asset value per Project interest and Property Trust unit are summarised below.  Included in these figures are accruals for income received from grape sales and interest earned over the last financial year.

Interest/Unit	30 June 2006	30 June 2005
Vineyard Project Property Trust	$24,337 $4,399	$24,973 $4,607
Total	$28,736	$29,580

20.     On 14 January 2008, Mr Cockburn advised the Tribunal by email that the Administration Coordinator at Guild Financial Services had advised him that there were at that time 41 growers recorded in their register seeking to sell 93 lots at the Kayinga vineyard.  The last sale occurred in August 2006.  Mr Cockburn stated that the sale price the Administration Coordinator believed had been approximately $19,000 per unit. Mr Cockburn argued that would put the value of his units at $228,000, if they were saleable.  Mr Cockburn attached a copy of the email from the Administration Coordinator in which she stated: 

The 42 Growers did include you and sale price in 2006 was around $19,000 (but please don’t quote me on that).

21.     No further information about the exact sale price of the units, said to have been sold in August 2006, was provided to the Tribunal.  The Tribunal is not satisfied  that $19,000 represents an appropriate figure to use for the valuation; given the lack of corroboration of the price and the comment in brackets above in the Administration Coordinator’s email.  The Tribunal is of the view that the appropriate valuation, in light of the vagueness of the sale details, is that provided in the letter signed by the General Manager of Guild Financial Services on 30 September 2006 which purports to be from an independent valuer.  The Tribunal ascribes a value of $292,044 to the 12 units in GuildGrape Project No. 1 and a value of $52,788 to the GuildGrape Property Trust.

22.     The Tribunal agrees with the SSAT that a value of $nil is appropriate for the Frankland River Project No. 2.  The Tribunal, like the SSAT, accepts Mr Cockburn’s argument that in a situation where growers can relinquish their interests by paying the landowner $1,760 per leased area, the asset value should be $nil, as effectively he will have to pay the landlord a significant amount to exit the investment.  However, that does not assist him in this case.

23.     In summary, the Tribunal is satisfied that the unsecured loans in Winborra’s financial statements were assets of the company at the relevant date.  The Tribunal is also satisfied that the value of the GuildGrape investments should be that provided at the valuation preceding the date of claim for age pension.  Given that the Tribunal has concurred with the SSAT’s valuation of the assets and found that Mr Cockburn and Mrs Evans held far in excess of the maximum amount of assets a couple could hold if they were to be paid age pension, there is no need to examine in detail all the other assets held by them at that time.  The Tribunal is satisfied that Mr Cockburn did not qualify for age pension in his claim lodged in March 2007 because he exceeded the asset limit.

DECISION

24.     The Tribunal affirms the decision under review.

I certify that the twenty-four [24] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

Signed:          Dianne Eva

Clerk

Date of hearing:  26 June 2008

Date of decision:  29 August 2008
Advocate for applicant:                self-represented

Advocate for respondent:            Mr M Todd, Centrelink Legal Services