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

[2008] AATA 547

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 547

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/0628

GENERAL ADMINISTRATIVE DIVISION		)
Re		JOHN DART

Applicant

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

Respondent

DECISION

Tribunal Deputy President P E Hack SC

Date27 June 2008  

PlaceBrisbane

Decision The application is dismissed pursuant to s 42B(1)(a) of the Administrative Appeals Tribunal Act 1975.

....................[Sgd]..........................

Deputy President

CATCHWORDS

SOCIAL SECURITY – age pension – applicant deemed to have assets in excess of the maximum allowed for pension to be payable

PRACTICE AND PROCEDURE – frivolous application – re-litigation of issues already decided by the Tribunal – legally frivolous – application is dismissed under s 42B(1)(a)

Administrative Appeals Tribunal Act 1975 (Cth) – s 42B(1)(a)

Social Security Act 1991 (Cth) – ss 1207N, 1207P 1207Q 1207V, 1207X, 1208M

Comcare v Grimes (1994) 50 FCR 60

Dart and Secretary, Department of Family and Community Services [2005] AATA 154

REASONS FOR DECISION

27 June 2008 Deputy President P E Hack SC    

1.The applicant, Mr John Dart, is qualified to be paid an age pension. He lodged a claim for such a pension in July 2007. The claim was refused by the respondent, the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs, on the basis that Mr Dart did not satisfy the payability criteria for age pension. In particular, it was, and is, said by the Secretary that the effect of certain transactions involving Mr Dart and entities associated with him is that Mr Dart is deemed to have assets in excess of the maximum that would make age pension payable.  

2.The factual basis that informed the Secretary’s view arises from Mr Dart’s involvement with two discretionary trusts – the Trumps Trust and the Dart Security Trust. What follows is not in dispute:

(1) At all times material Trumps Pty Ltd was the trustee of the Trumps Trust.

(2) Prior to May 2003 Mr Dart was a director of Trumps Pty Ltd and held 7 of its 10 issued shares.

(3) At all times material Fastcombe Pty Ltd was the trustee of the Dart Security Trust.

(4) Prior to May 2003 Mr Dart was a director of Fastcombe Pty Ltd and held 7 of its 10 issued shares.

(5) On or about 8 May 2003 Mr Dart transferred his shares in Trumps Pty Ltd and Fastcombe Pty Ltd to his son for the face value of the shares, i.e.  $14.00 in total. The transfers were stamped on 28 May 2003.

(6) As at 30 June 2001 (the most recent figures available),

(a) the assets of Trumps Pty Ltd, in its capacity as trustee, had a value of $483,733;

(b) the assets of Fastcombe Pty Ltd, in its capacity as trustee, had a value of $1,730,581.

(7) Mr Dart has not been at any material time a beneficiary of either the Trumps Trust or the Dart Security Trust.

3.It is material to note the terms of clause 16 of the trust deed dated 13 March 1984 by which the Trumps Trust was established. It provided,

“The trustee hereof shall have the power by instrument in writing at any time and from time to time to remove any trustee and appoint a new and additional trustee or trustees whether in addition to or in substitution for any other trustee or trustees.”

Moreover, and by virtue of clause 18 of the trust deed, the trustee could, subject to the usual exceptions, vary the terms of the trust deed.

4.Given one of the submissions advanced by Mr McQuinlan it is necessary to notice that Mr Dart made an earlier claim for age pension in June 2003, that is, after the share transfers referred to in paragraph [2(5)] above. That claim was rejected and the decision was affirmed on internal review and, ultimately, by this Tribunal constituted by Mr S C Fisher, Member[1]. An application for an extension of time within which to appeal that decision was dismissed by Marshall J on 3 May 2005.

[1]        See Dart and Secretary, Department of Family and Community Services [2005] AATA 154.

5.Mr Dart accepts that there are no new or different facts beyond those that were before the Tribunal constituted by Mr Fisher. On this basis Mr McQuinlan submitted that Mr Dart’s application ought be dismissed on the footing that it was frivolous in the legal sense. The contention advanced was that:

“the legal doctrine of res judicata or the principle established by the AAT that it, as master of its own procedure, will not allow a finally determined matter to be re-litigated bars the applicant from re-litigating the present application.”

Reliance was placed on the decision of Wilcox J in Comcare v Grimes[2]. That case does not support the Secretary’s reliance upon res judicata but Mr McQuinlan accepted that there was a discretion to be exercised and that it was relevant, in exercising that discretion, to consider the apparent merits of the decision under review. I propose to do so because it is not immediately apparent to me that the necessary distinction has been drawn between the value of shares in a company holding assets in its own right and the value of a company holding assets in the capacity as trustee.

[2] (1994) 50 FCR 60.

6.The earlier decision of the Tribunal was determined against Mr Dart because the view was taken[3] that the transfer by Mr Dart of his shareholding in Trumps Pty Ltd and Fastcombe Pty Ltd attracted the operation of s 1208M of the Social Security Act 1991 (Cth) (the Act). The Secretary contends that that conclusion was correct and that the same conclusion ought again be reached on the present application.

[3] [2005] AATA 154 at [36].

7.It is necessary to examine the complex statutory provisions. The starting point is s 1208M of the Act. It provides:

“If:

(a)an individual ceases to be an attributable stakeholder of a company or trust on or after 1 January 2002; and

(b)immediately before the cessation, the company or trust owned a particular asset (whether alone or jointly or in common with another entity or entities);

Division 2 of Part 3.12 and sections 93U, 93UA and 198F to 198MA (inclusive) have effect as if:

(c)the individual had disposed of an asset of the individual; and

(d)the amount of the disposition referred to in paragraph (c) were equal to the individual’s asset attribution percentage of the value of the asset referred to in paragraph (b), worked out immediately before the cessation.”

If s 1208M has operation it is sufficient for present purposes to notice only that provisions within Division 2 of Part 3.12 of the Act have the effect that assets disposed of are regarded as being assets of the attributable stakeholder.

8.In determining whether s 1208M operates in this way in the present case the first question is whether Mr Dart was an “attributable stakeholder of a company or trust”. If he was, then he ceased to be so on or after 1 January 2002. The expression “attributable stakeholder” is explained by s 1207X of the Act. It is enough to note that that section has the effect that if a company is a “controlled private company” in relation to an individual or if a trust is a “controlled private trust” in relation to an individual, the individual is an “attributable stakeholder” of the company or the trust and the “asset attribution percentage” in relation to the company or the trust is 100% unless the Secretary determines a lower percentage.

9.By virtue of s 1207Q of the Act a company is a controlled private company in relation to an individual if the company is a “designated private company” and, so for as is presently material, the individual controls 50% or more of the voting interests in the company. Having regard to s 1207N of the Act it seems plain that Trumps Pty Ltd and Fastcombe Pty Ltd each answer the description of designated private company in that section. Moreover, until the transfer of his shares in May 2003, Mr Dart controlled more than 50% of the voting interests in each of the companies.

10.Section 1207V of the Act has the effect that a trust is a controlled private trust in relation to an individual if the trust is a designated private trust and the individual passes the “control test”. Section 1207P defines the term “designated private trust” in such a way that each of the Trumps Trust and the Dart Security Trust satisfy the definition. The control test is described in s 207V(2) of the Act in these terms:

“For the purposes of this section, the individual passes the control test in relation to a trust if:

(a)the individual, or an associate of the individual (other than an associate covered by paragraph 1207C(1)(j)), is the trustee, or any of the trustees, of the trust; or

(b)a group in relation to the individual was able to remove or appoint the trustee, or any of the trustees, of the trust; or

(c)a group in relation to the individual was able to vary the trust deed or to veto the decisions of the trustee; or

(d)the aggregate of:

(i)     the beneficial interests in the corpus or income of the trust held by the individual (whether directly or indirectly); and

(ii)     the beneficial interests in the corpus or income of the trust held by associates of the individual (whether directly or indirectly);

is 50% or more; or

(e)a group in relation to the individual had the power (by means of the exercise by the group of any power of appointment or revocation or otherwise) to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust; or

(f)a group in relation to the individual was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or

(g)a group in relation to the individual was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (e) or (f); or

(h)a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the individual.”

11.The term “group” in relation to an individual is, by s 1207V(4), a reference to:

“(a)the individual acting alone; or

(b)an associate of the individual acting alone; or

(c)the individual and one or more associates of the individual acting together; or

(d)2 or more associates of the individual acting together.”

It is not necessary, in the present case, to make reference to the definition of “associate” in s 1207C(1) of the Act.

12.The Secretary contended that these sections operated as follows.

13.So far as the companies, Trumps Pty Ltd and Fastcombe Pty Ltd, were concerned, it was said that each satisfied the definition of a “designated private company” in s 1207N of the Act. Until the transfer of shares in May 2003 Mr Dart controlled 70% of the voting interests in each company. Thus each company was a “controlled private company” in relation to Mr Dart having regard to s 1207Q of the Act. Thus, by operation of s 1207X(1) of the Act, Mr Dart was an attributable stakeholder of each company prior to the transfer of shares.

14.As to the Trumps Trust and the Dart Security Trust, reliance was placed upon earlier factual findings of the Tribunal in relation to assets of the trusts said to have been available to benefit Mr Dart. In my view, it is unnecessary to go that far. Both trusts are designated private trusts. In relation to the Trumps Trust, Mr Dart passes the control test prior to the transfer of shares because he, as majority shareholder and constituting a “group” as defined, was able to remove the trustee or vary the trust deed thus satisfying the definitions in paragraphs (b) and (c) of s 1207V(2) of the Act. Thus the Trumps Trust was a controlled private trust in relation to Mr Dart and, by virtue of s 1207X(2) of the Act, Mr Dart was an attributable stakeholder of the Trumps Trust.

15.I do not have a copy of the trust deed which established the Dart Security Trust. Were this the first occasion that the matter had been considered by the Tribunal I would have required its production. However where, as here, the issue is the more narrow question of whether Mr Dart ought be permitted to re-litigate issues already decided in this Tribunal, I do not regard that step as necessary. I see no reason to doubt that that trust deed had provisions similar to that of the Trumps Trust deed, permitting the trustee to appoint a new trustee and to vary the deed. I propose to proceed on the basis that Mr Dart was an attributable stakeholder of the Dart Security Trust.

16.If, as I conclude is the case, Mr Dart was an attributable stakeholder of Trumps Pty Ltd and Fastcombe Pty Ltd and of the Trumps Trust and the Dart Security Trust, then s 1208M of the Act operates in his case to bring Part 3.12 of the Act into play. The companies as bare trustees had no assets beyond their capital; that is, the assets were not owned by the companies beneficially but in the company’s capacity as trustee. But because Mr Dart was an attributable stakeholder of the trusts, the assets of the trusts immediately before he ceased to be an attributable stakeholder (by virtue of the transfer of shares), were treated as being assets disposed of by him.

17.I am thus satisfied that the earlier decision of the Tribunal was not affected by error and, having regard to the acceptance by Mr Dart that there are no new or different facts, I propose to accede to the Secretary’s submission that the application ought be dismissed as being legally frivolous. I should add that Mr Dart is understandably perplexed at the way in which the statutory scheme operates to attribute to him the value of assets not owned by him, and I fully understand why the situation would appear unfair to him. But that is the effect of the legislation that both the Secretary and the Tribunal are required to have regard to. That legislation treats the disposal of assets as being a disposal by him of his assets, notwithstanding that they were not, in law, his assets.

18.I would dismiss the application pursuant to s 42B(1)(a) of the Administrative Appeals Tribunal Act 1975 (Cth).

I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed:         ................................[Sgd]................................................
  Jacqueline Woods, Associate

Date of Hearing  26 May 2008
Date of last submissions          20 June 2008
Date of Decision  27 June 2008
Solicitor for the Applicant          Self-represented
Solicitor for the Respondent     Departmental Advocate