Dubois and Secretary, Department of Social Services (Social services second review)
[2017] AATA 2164
•10 November 2017
Dubois and Secretary, Department of Social Services (Social services second review) [2017] AATA 2164 (10 November 2017)
Division:GENERAL DIVISION
File Number(s): 2017/1353
Re:Norma Dubois
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Deputy President B W Rayment
Date:10 November 2017
Place:Sydney
The decision under review is set aside and remitted for reconsideration with the direction that the applicant is not an attributable stakeholder, pursuant to section 1207X of the Social Security Act 1991.
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Deputy President B W Rayment
Catchwords
SOCIAL SECURITY – debt repayment – age pension debt – designated private trust – trust asset attribution rules – whether applicant is an attributable stakeholder – decision set aside and remitted
Legislation
Social Security Act 1991, ss 1207P, 1207V, 1207X, 1209E
Cases
Bornecrantz v Secretary, Department of Social Services [2017] FCA 1010
Secondary Materials
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000
REASONS FOR DECISION
Deputy President B W Rayment
10 November 2017
Mrs Norma DuBois applies for review of the decision of Social Services and Child Support Division of the Tribunal given on 13 February 2017. The respondent asserted that the sum of $41,571.65 had been overpaid to the applicant in payments of age pension for the period from 1 July 2012 until 24 February 2016. The overpayment was said to arise from circumstances surrounding a company called Fumapest Australia Pty Limited, its share register and a trust deed.
The N DuBois Family Trust deed is a document dated 29 July 1996 signed by Belinda Blanda as settlor and Mrs DuBois as trustee. The settlor settled $2 to establish the N DuBois Family Trust (the Trust). The sum was, according to the trust instrument, to be used to acquire all of the issued capital of Fumapest Tempguard Pty Ltd. The means by which the acquisition was effected was that Mrs DuBois became the transferee of the company’s two issued shares and the settlor’s money was, in accordance with the trust instrument, to be used to pay the purchase price. The acknowledgement of Mrs DuBois of her interest in the shares as a trustee sufficiently appears in my opinion from her execution of the trust deed. Mrs DuBois is recorded as having become a director of the company on 22 July 1996. The respondent submitted that I should infer that the transfer took place on the same date of 22 July 1996. I do not draw such an inference. The applicant needed no shareholding qualification in order to become a director.
From 23 August 2000 the company’s name was changed to Fumapest Australia Pty Limited.
The trust deed was a discretionary trust. The eligible beneficiaries specified were the sisters, brothers, nieces, nephews, children and grandchildren of Mrs DuBois. Mrs DuBois had no entitlement to receive any distribution of capital or income under the trust deed. Nor did she receive any such distribution or any other benefit from the company. The Trust was wound up in March 2016 by distribution among the eligible beneficiaries of the shares in specie under clause 18 of the trust deed. Mrs DuBois had been the sole director of the company and resigned as a director of the company in March 2016. As a director she was accustomed to act in accordance with the wishes of her sons. Indeed she was only kept informed in a general way of the affairs of the company. She left its management and control to her two sons, who were its de facto directors.
No dividends were declared by Fumapest Australia Pty Limited and no income therefore became available for distribution by Mrs DuBois as trustee. As Mrs DuBois states in her witness statement, she at no time received any dividend, commission, loan or other financial benefit from the Trust or the company, and the Trust never received any dividend, commission, loan or other financial benefits from the company.
Mrs DuBois was recorded in the annual returns of Fumapest Australia Pty Limited as the beneficial owner of the two issued shares in the capital of that company. That was a mistaken statement, because as the trust deed shows, she held the two shares as trustee of the N DuBois Family Trust.
The legislative background to this review is that the Trust is a designated private trust within the meaning of s 1207P of the Social Security Act1991 (the Act) and a controlled private trust within the meaning of s 1207V of the Act. Therefore Mrs DuBois is an attributable stakeholder unless the respondent otherwise determines: see s 1207X(2). The Tribunal may exercise the Secretary’s power of determination.
The Secretary’s exercise of discretion is governed by the Principles set out in the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017. At the time of the decisions made at the Departmental level, there was in force the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 and that version of the Principles was in the same terms as the current version, so that it is unnecessary to decide which of the two versions affects this review. The Principles are formulated under s 1209E of the Act, and amongst other things set out the decision-making principles with which the Secretary must comply in making a determination under s 1207X of the Act.
Clause 7 of the Principles requires the Secretary to consider whether there are relevant circumstances which make it inappropriate for the individual to be an attributable stakeholder of the company or trust.
Clause 7(2) of the Principles directs attention not only to the legal structure, but to its administrative arrangements and whether the individual can reasonably be expected to exercise effective control in relation to the company or trust. As to the exercise of effective control issues mentioned in clause 7(2)(c), Mr Glenn DuBois, the applicant’s son, has stated that since about 2011, Mrs DuBois has had virtually no involvement in the Fumapest business in any capacity. He said that “I would occasionally update my mother on business progress but all decisions were left to me”. I accept that evidence. Mrs DuBois is ill. Mrs DuBois’ statement records that in 1998 she was diagnosed with “a rare form of a rapidly advancing muscle wasting disease”. She lived in an assisted care unit in Kincumber from 1999 until January 2016 when she moved to Bexley Park Aged Care facility, and in that place she has been confined to bed and a wheelchair.
Clause 8 refers to a case where the individual has made a contribution to the company or trust. Mrs DuBois has made no such contribution.
Clauses 9 and 10 refer to a case where the individual has received or is likely in the future to receive a benefit from a distribution made by the company or trust. There has been no distribution to her or anybody else and because the Trust has been wound up, there will be no distribution to her in the future.
Clause 11 refers to a case where the individual receives or derives any kind of benefit from the assets or income of the trust. Mrs DuBois does not do so.
Clause 12 refers to other cases having no application to Mrs DuBois.
Clause 13 refers to the need to consider any other circumstance that affects the involvement of the individual with the activities or the administration of the company or trust.
The Principles are such as to enable the Secretary to ensure that the Act does not operate unfairly in a particular case, consistently with the beneficial purpose of the legislation as a whole in providing pensions for those in need relative to their needs but not otherwise. The division is cast in broad terms because individuals might use private trusts or private companies to avoid the means test, and the discretion exercisable under the Principles will enable a decision-maker to take account of all the circumstances of the particular case. See generally the decision of Perry J in Bornecrantz v Secretary, Department of Social Services [2017] FCA 1010 at [36]-[40]. The Principles do not compel a particular result.
The circumstances of this case do not involve the use of the Trust or company structures to avoid the means test provisions of the Act, or any activity which has had that effect. Rather, Mrs DuBois was appointed to a position as trustee, and had no power to direct monies to herself directly or indirectly. It does not seem that she actually controlled the affairs of the company, although she was kept informed in a general way about how it was progressing. No dividends were declared. She received no payments of any kind from the company and did not work for it. Nor were any distributions made by her as trustee, except on the winding up of the Trust in 2016.
It is the correct and preferable way to exercise the discretion in this case to determine that Mrs DuBois is not an attributable stakeholder of the Trust. It follows that Mrs DuBois has not been overpaid the sum of $41,571.65, and in due course arrangements will, I understand, be made to refund to her any amounts which have been deducted from her pension entitlements in reduction of that debt.
The reviewable decision will be set aside and remitted for reconsideration with the direction that Mrs DuBois is not an attributable stakeholder, pursuant to section 1207X of the Social Security Act 1991.
I certify that the preceding 19 (nineteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President B W Rayment
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Associate
Dated: 10 November 2017
Date(s) of hearing: 7 August & 20 October 2017 Counsel for the Applicant: Mr J Simpkins Solicitor for the Respondent: Dr S Thompson, Department of Human Services
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