Dart v Dept of Family
[2004] FMCA 485
•06/08/2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DART v DEPT OF FAMILY & COMMUNITY SERVICES | [2004] FMCA 485 |
| ADMINISTRATIVE LAW – Appeal of decision from Administrative Appeals Tribunal – whether applicant entitled to receive full age pension under Social Security Act – whether AAT erred in finding that assets of the Appellant exceeded those permitted to be entitled to receive a full age pension – valuation of assets/income – meaning of a “home owner” under the Act – whether effective gift of shares. |
| Applicant: | JOHN PEDEN DART |
| Respondent: | SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES |
| File No: | BZ114 OF 2003 |
| Delivered on: | 06.08.2004 |
| Delivered at: | Brisbane |
| Hearing date: | 02.09.2003 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Solicitors for the Applicant: | SELF REPRESENTED LITIGANT |
| Solicitors for the Respondent: | AUTRALIAN GOVERNMENT SOLICITOR |
ORDERS
That the Appeal be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ 114 of 2003
| JOHN PEDEN DART |
Applicant
And
| SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION:
The Appellant JOHN DART lodged an Appeal against a decision of The Administrative Appeals Tribunal (“the Tribunal”) given by member McCabe on 13 December 2002. The Respondent, the Secretary, Department of Family and Community Services (“the Secretary”) opposes the Appeal.
DECISION:
The decision under appeal affirmed a decision of the Social Securities Appeal Tribunal (SSAT) to refuse the Appellant’s application for an aged pension on the basis that the Appellant did not satisfy the assets test provided for in the Social Security Act 1991 (“the Act”).
PRINCIPLES ON APPEAL:
This is an appeal on a question of law, brought pursuant to section 44 of the Administrative Appeals Tribunal Act 1975. It is worth re-stating that there is no error of law simply in making an error of fact (see Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356).
ISSUES:
The Notice of Appeal filed 9 January 2003 identified, quite broadly, the question of law raised on the Appeal, which were further articulated in a document received and marked Exhibit 1, by Spender J on 28 February 2003, when he transferred the proceedings to this Court for determination.
I am satisfied that the issues raised can be summarised as follows:
a)The AAT erred in finding that he was a home owner for the purposes of the Social Security Act;
b)The AAT erred in not offsetting moneys owed by the appellant to the Dart Security Trust against amounts owed to the appellant by Trumps Pty Ltd;
c)The AAT erred in finding that the appellant had not taken all effective steps to effect the gift of shares to his children by May 1996;
d)The AAT erred in failing to determine the proper basis upon which the shares in Sobrante Pty Ltd should be valued;
e)The AAT erred in its net assessment of the assets; and
f)The AAT erred in not assessing the income.
BACKGROUND:
The background of the Appellant’s financial affairs described by the member as “complex” set out at paragraphs 5-12 of the decision is generally accepted by the Appellant. It is not necessary in these reasons to recite that history.
Importantly, the Appellant applied for an aged pension on 18 July 2001, and was refused on the basis of an assessment of his assets at the time of application, being $299,502 as follows:
Bank of Queensland savings
$
1,3313.00
Trumps Pty Ltd shares
$
7.00
Fastcome Pty Ltd shares
$
7.00
Loan to Trumps Pty Ltd
$
44,171.00
Shares in Sobrante Pty Ltd
$
105,562.00
Gifts of Shares in Sobrante Pty Ltd
$
148,624.00
$
299,502.00
The Appellant was determined to be a home owner for the purposes of the Act. As a result, at the relevant time and pursuant to s.1064 of the Act, a person without a partner (such as the Appellant) is permitted to own up to $141,000 in assets and receive a full pension. If he was not a home owner, he would be entitled to receive the full age pension provided his assets did not exceed $242,000. Part pension entitlements arise for asset levels above these figures, essentially cutting out at $277,000 (home owner) and $378,00 (non home owner).
The Appellant resides in a home at Corinda registered in the name of FASTCOMBE PTY LTD as Trustee for the DART SECURITY TRUST (“DST”). The Appellant is not a beneficiary under the trust, but is one of three directors and the majority shareholder in FASTCOME. On that basis the Tribunal found he controlled the Trust and the Appellant conceded as much in his Application.
The DST holds a number of property assets purchased over previous years. The Appellant had been involved in the business of selling edible nuts and dried fruit, with the trading operations being conducted by the TRUMPS TRUST. The Appellant is not a beneficiary of the Trumps Trust, but he is one of three directors and the major shareholder in Trumps Pty Ltd, the Trustee of that Trust.
Sobrante Pty Ltd is a company which receives distributions of profit from DST. In his submissions, the Appellant suggests this was to capture taxable profits assessed at a lower rate than applies to Trusts. Share transfers in relation to SOBRANTE were the subject of analysis by the Member in his decision and that analysis is a ground of appeal. I deal with those matters later in these reasons.
WAS THE APPLLANT A “HOME OWNER”?
Section 118 of the Social Security Act says that the family home may be disregarded for the purposes of the assets test. Section 118(I)(a) provides:
“1118(I) in calculating the value of a person’s assets for the purpose of this Act……disregard the following:
a)if a person is not a member of a couple – the value of any right or interest of the person in the person’s principle home that:
i)is a right or interest that gives the person reasonable security of tenure in the home; …..”
“Home Owner” is defined in section 11(4) of the Act in almost identical terms. Section 11(4) provides:
“For the purposes of this Act:
a)a person who is not a member of a couple is a home owner if:
i)the person has a right or interest in the principal home; and
ii)the person’s right or interest in the home gives the person reasonable security of tenure in the home; …..”
Subsection 11(8) of the Act creates a presumption which may be rebutted, that a person with a right or interest in the principal home has a reasonable security of tenure. That section provides:
“If a person has a right or interest in the persons principal home, the person is taken to have a right or interest that gives the person reasonable security of tenure in the home unless the secretary is satisfied that the Right does not give the person reasonable security in the home.”
The Member found, on the evidence that:
a)The Appellant “had a lease in this case, as opposed to a mere licence” (paragraph 25);
b)“The Applicant controls the landlord. While he is under an obligation to Act in the best interests of the landlord company and that company is itself under an obligation to act in the interests of the beneficiaries, it is unlikely the applicant’s occupancy would ever be under threat” (paragraph 27).
And as a result the Member was satisfied that he had a right or interest in the home owned by FASTCOME which gave him reasonable security or tenure.
The Appellant says in his submissions that:
a)He is not a beneficiary of DST and pays a commercial rent (of $646/ month);
b)He has no written lease;
and accordingly this all constitutes “a genuine commercial letting at arm’s length – a “good deal” for both sides.”
The Appellant in his submissions referred to paragraph 23 of the reasons of the SSAT, where the member says, inter alia that:
“Under s1118(I) of the Act, if a person has a right or interest in accommodation that provides reasonable security of tenure, other than a genuine letting at arm’s length, then the occupant is a home owner for Centrelink assets test purposes” (emphasis added).
The words emphasised above have encouraged the Appellant to rely on a decision of the Federal Court of Australia relating to an interpretation of paragraph 160ZH(9)(c) of Income Tax Assessment Act 1936 and the meaning of the words “dealing with each other at arm’s length,” (see GRANBY PTY LTD v COT (1995) 129 ALR 503). The Appellant contends that if he can establish (and he say he has) that he has a genuine commercial letting of the home, then he is simply not a home owner for the purposes of the Act.
Section 1118(I) of the Act does not include the words described in the SSAT decision. That is not the test posed by the legislation.
The proper test is the one identified and analysed by the Member in the AAT decision. It is clear that the legislative definition must be applied to the facts and circumstances of every particular case.
Clearly if the applicant for a pension was the registered proprietor of the home, there would be no dispute the person “was a home owner for the purposes of the Act.” Similarly if an applicant has a lease or tenancy reduced to writing with a landlord who has no connection whatsoever with the tenant, it would be easy to discern that the applicant was not a home owner. This person who has the benefit of a tenancy or lease does not, have the type of “reasonable security of tenure” akin to home ownership.
Between those obvious parameters lies a range of fact situations some of which are possibly designed to escape the obvious purpose of the assets test so far as it relates to determining whether the applicant in question is a home owner or not.
The definition of a “home owner” for the purposes of the Act does not require in my view, a strict identification of the type of legal or equitable interest or right. It is a definition to be used to classify applicants into two distinct groups – home owners or non home owners. Understandably, to enable a home owner and a non home owner to receive the same rate of full pension, the non home owner is entitled to have greater assets. No enquiry as to the value of a person’s home is undertaken.
Accordingly the definition is directed to ascertaining if a person has the benefit of a Right or interest in a home which provides reasonable security of tenure – not actual ownership. For example, whilst the Appellant says he is paying an agreed monthly rental, there is no apparent legal obligation enforceable upon him to do so – save for the Trustees obligation to properly manage the assets of the Trust. Critically the Member found “it unlikely the applicant’s occupancy would ever be under threat.” Such a finding was open to the learned Member.
Whilst I may not characterise the right or interest as an unregistered lease, (as the Member did in this case), in the circumstances of this case where the applicant found the home; has resided in it exclusively since acquisition; and controls the Trustee of DST which owns the property, I am satisfied that was open to the AAT to find the Appellant has a right or interest in the property giving him reasonable security of tenure. This ground of appeal must fail.
OFFSETTING MONEYS OWED BY APPELLANT TO DST AGAINST MONEYS OWED TO HIM BY TRUMPS PTY LTD
It was accepted that at the relevant date of application, TRUMPS PTY LTD owed the Appellant $44,171.19 and he owed DST $48,438.83 in respect of advances made to him. There is no suggestion the debts arose out of the same transactions (see UNICOMB v SECRETARY OF DEPARTMENT OF SOCIAL SECURITY (1998) 50 ALD 405). I am satisfied that the learned Member did identify and apply the appropriate test imposed by s.1121 of the Act. The Appellant does not make any compelling submissions to the contrary other than to say that, after the relevant date, the “matter was cleared with an exchange of cheques on 26 March 2002.” The effect of that submission may be that an application subsequent to March 2002 may be assessed differently.
No ground of appeal is established.
DATE OF GIFTING OF SHARES:
Again, in some ways, this issue involves a question of timing. It was common ground that at the time of the hearing before me, the Appellant had perfected gifts of shares in SOBRANTE PTY LTD to his children. The issue before the Tribunal was whether the gift has been completed in:
a)June 1997 as contended by the Respondent (and accepted by the Tribunal): or in
b)May 1996 as contended by the Appellant.
The significance arises from the way the gift is to be treated for calculation of his assets. Section 1124A of the Act provides that assets disposed of in the five years preceding the application must be included in the value of the person’s assets.
The Appellant argued that the gift of shares to his children took effect at the time he announced his intention to make a gift in May 1996. He says the formal paperwork was delayed until June 1997 because of errors by his accountants.
It is clear that the share transfers and Deeds of Gift were not executed until June 1997.
The Appellant says, in his submissions that his letter of 5 May 1996 (see page 469 of T Documents), he gave notice to his children just before his departure overseas, of the
a)Transfer to him of 20 only “Z” type voting only shares;
b)Removal of voting rights for other shares;
c)Allotments of an additional 53 shares, which together with other shares (totalling 63), enabled the seven children to have nine shares each in SOBRANTE PTY LTD.
The letter concludes with the words “It’s pleasing this has occurred on the eve of my departure, as it completes my intentions.”
The intentions related, it seems, to the ownership of Trumps and the future of the DST.
The Appellant submits that:
“the signed letter to each child is an irrevocable Deed of Gift and the exchange took place on the fifth of May 1996”
and further that:
“the Donor cannot rescind and the Donee can register when ever he/she wishes without effecting the Date of the Gift.”
After referring to the High Court decision in CORIN v PATTON (1990) 169 CLR 540, and s.200 of the Property Law Act 1974(Qld), the Member said at paragraph 4 that:
“Whether one applies the reasoning in CORIN (SSAT’S approach) on s.200 of the Property Law Act, the result is the same in this case. Mr Dart did not execute the transfers until 24 June 1997. The execution of the documents was an essential task that no one else could complete on his behalf. It follows the gift did not take effect until 24 June 1997 when he did the remaining thing that only he could do.”
The letter to the Appellant of 23 June 1997 from his solicitors Bowdens (page 518 of T documents), says that the Appellant wished :
“to proceed with the gift of shares prior to 30 June.”
The documents relied upon and before the Member show an allotment of 53 shares in 1996. I infer that these were allotted to the Appellant. It was available to the Appellant, who controlled SOBRANTE PTY LTD at the time, to allot the shares differently – for example to his children.
He did not do so. Overall the conduct of the Appellant as found by the Tribunal was consistent with not perfecting the gifts of shares until June 1997. Consistent with the law as set out in the learned Members reasons, the gift look place in June 1997 – within the period of five years before the pension application was made by the Appellant.
No sustainable ground of appeal is established.
VALUE OF SHARES:
No expert evidence was offered to the Tribunal as to the value of the shares in SOBRANTE PTY LTD. The best evidence, and the evidence accepted by the Member, was that:
a)At 30 June 1996, the Balance Sheet for the company revealed net assets of $205,787.57
b)As a result of the allotment of sales (earlier referred to in these reasons) at 30 June 1996 there were:
70 ordinary shares (with no voting rights)
20 “Z” class shares (voting only – no dividend rights)
For the purpose of assessing a value of the shares “gifted” to the children in June 1997 a share value of $2,286.52 was determined – being the Net Asset backing divided by 90.
On this basis, the “gift” of 65 shares in June 1997 was calculated to amount to $148,624.35.
The Appellant contests this assessment on the basis that the voting shares have less value than the non-voting, but dividend earning shares. Having disposed of the Appellant’s submissions as to the effective date of the gift of shares, it is not necessary to consider the alternate argument of value founded on the balance sheet assets of the company at 30 June 1996.
The Member considered the argument advanced by the Appellant again before me and said (at paragraph 49) that:
“There are important differences between the shares given to Mr Dart’s children and those held by Mr Dart. Those differences suggest the different classes of share will be valued differently. Mr Dart says the “Z” class shares only ? a nominal value, but that is not true. Those shares give Mr Dart control of the company, and control is valuable.”
That finding was open to the Tribunal on the evidence available to it.
The appropriate date to assess the value of the remaining shares held by the Appellant in the company was the date of lodgement of his pension application (18 July 2001). A figure of $105,562 has been adopted by the Tribunal with the Member indicating it was:
“unnecessary for the purposes of this decision to consider the different methods of valuation in detail.”
The Member accepted Centrelink’s approach to the valuations of the shares in the company which were still held by the Appellant. Issues as to whether the shares held rights to participate in any surplus (upon winding up) were unresolved by the Member – notwithstanding the letter from his Solicitors to that effect.
The Tribunal did not accept that the “Z” class shares held by the Appellant had a nominal value. Such a finding was open to the Member on the evidence.
I am not required, for the purpose of this appeal to make a finding as to the value of the Appellant’s 20 “Z” class shares at the time of his application for a pension. Such a value could have been determined (at $105,362) in the following manner:
Nett assets of Company at 30 June 2001 = $474,000
90 shares issued = $5,266 share
20 shares held - $105,333 (20x $5,266) = $105,333.00
Although not specifically dealt with in the Member’s reasons, based on his findings of parity of value between all class of shares, it was open to him on the evidence to so find.
CONCLUSION:
None of the grounds of appeal are made out. It follows from my analysis above that at the relevant date, the assets of the Appellant exceeded those permitted to be entitled to receive a full age pension.
Having dealt with the requirements under the assets test, it was unnecessary for the Member to consider arguments under the income test criteria.
Of course, as the SSAT noted, the Appellant’s position may be quite different now after the expiration of the five year limit of the gift made and the “offsetting” or satisfaction of debts in the books of the companies referred to earlier.
In respect of this Appeal however, I am bound to dismiss it.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
Date:
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