Fill and Repatriation Commission (Veterans' entitlements)
[2021] AATA 3326
•13 September 2021
Fill and Repatriation Commission (Veterans' entitlements) [2021] AATA 3326 (13 September 2021)
Division: Veterans’ Appeals Division
File Number(s): 2018/2985
Re:Graham Fill and Marilyn Fill
APPLICANT
AndRepatriation Commission
RESPONDENT
DECISION
Tribunal:Deputy President R I Hanger AM QC
Date:13 September 2021
Place:Brisbane
The Decision under review is affirmed.
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Deputy President R I Hanger AM QC
Catchwords
VETERANS’ AFFAIRS – remitted appeal – claim for service pension – rate calculator – irrecoverable loans – assets – unit trusts – trustee – decision under review affirmed.
Legislation
Veterans’ Entitlements Act 1986 (Cth)
Cases
Cooper and Repatriation Commission [1997] AATA 18
MTKJ and Secretary Department of Health [2017] AATA 2911
Repatriation Commission v Fill [2020] FCA 1812
Woolley v Repatriation Commission [2007] AATA 2059
REASONS FOR DECISION
Deputy President R I Hanger AM QC
13 September 2021
This matter has a long history. The Applicants are Mr Graham and Mrs Marilyn Fill. Mr Fill had operational service in Vietnam in 1967. The Applicants’ have applied to the Tribunal for a review of a decision by a delegate of the Respondent dated 23 April 2018.[1] That decision affirmed a determination dated 2 May 2017.[2] which declined the claim by Mr Fill and his wife for service pensions under sections 36A(2) and 37A(2) of the Veterans Entitlements Act 1988 (the Act) on the basis that the pension rate of the Applicants’ would be nil. That decision was based on the extent of their assets and in particular the inclusion in their assets of loans made by them to a unit trust.
[1] Exhibit 1, T Documents, T21.1.
[2] Exhibit 1, T Documents, T9.
The decision of 23 April 2018 was appealed to the Federal Court which held that the Tribunal had erred in the application of the Rate Calculator in Part 2, Schedule 6 of the Act (the Rate Calculator) in relation to the assets of the Applicants[3] The Federal Court remitted the matter to the Tribunal to hear and determine the matter according to law on 18 December 2020.[4]
[3] Repatriation Commission v Fill [2020] FCA 1812.
[4] Ibid.
Subsequently, the matter was allocated to me, I convened a directions hearing on 5 March 2021 to ascertain the views of the parties as to how the further hearing should be conducted.
At a later directions hearing held on 14 April 2021 the Applicant and the Respondent agreed that the matter should be determined on the papers with reference to the transcript of the earlier hearing and later filed material. There was in fact only one relevant issue that related to the assets of the Applicants. Put simply, Mr Fill asserts that he and his wife have insignificant assets whereas the Respondent asserts that their assets include two sums of money which relate to loan amounts for Mr and Mrs Fill, being, $858,792, and $302,485. Mr and Mrs Fill alleged that their assets fall below the threshold for obtaining a pension and it is common ground that if their assets are as alleged by the Respondent, they exceed the amount of assets that would entitle them to a pension.
Section 52D of the Act provides:
“If a person lends an amount after 22 May 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.”
For a number of years Mr Fill practised as a solicitor. The business of his law firm was conducted through a trust.
In 1980, the Fill Unit Trust (the Trust) was established by trust deed. Mr Fill was one of the two trustees of the trust. The trustees had an absolute discretion to determine the amount of net income of the fund of the trust available for distribution to the unit holders. Mr Fill was the only unitholder in the Trust and the beneficial interest in the fund of the trust was held by the unit holder. As the unitholder Mr Fill had the power to remove a trustee from office. Subsequently Mr Fill asserts that he ceased to be a member of the the Trust and is neither a trustee nor beneficiary and had no entitlement to recover from the Trust. He appears to have resigned as a trustee of the Trust from 3 January 2017.
Financial statements were prepared for the Trust for the financial years 2015 and 2016. [5]The statement for the 2015 year recorded a loan from Mr and Mrs Fill to the trust in the amount of $858,792.[6] It also included under the description “unit holders current accounts” current liabilities of $302,485.[7] The financial statements are signed by Mr Fill as trustee and contain a declaration by Mr Fill as trustee that the statements represent the financial position of the Trust.
[5] Exhibit 9, Fill Unit Trust Statement for year ending 30 June 2015; Exhibit 5 Fill Unit Trust Statement for year ending 30 June 2016.
[6] Exhibit 5, Fill Unit Trust Statement for year ending 30 June 2016, page 3.
[7] Exhibit 9, Fill Unit Trust Statement for year ending 30 June 2015, page 3.
In respect of the 2016 year the financial statements show the sum of $824.101 as “non-current liabilities Loan-G&M Fill”. The current liabilities are again recorded at $302,485.[8] To be eligible for a service pension the value of their combined assets had to be below $821,500.
[8] Supra [6].
Apart from the two financial statements to which reference has been made, Mr Fill also wrote a letter on 17 April 2017 in reply to a request by the Respondent for further information and in that letter he said “there is a non-current loan from G & M Fill to the Fill Unit Trust of $858,792.00.”[9]
[9] Exhibit 1, T Documents, T7, page 38.
Mr Goh, an accountant, for the Fills, and related entities, in a letter dated 9 October 2017 said:[10]
“… The Fill Unit Trust has accumulated losses of $706,987 as at 30 June 2017 which were financially supported by the First and Second applicants from cash drawn against their Superfund entitlements and sale of their residence… personal loan to the firm is not supported by any tangible or intangible assets of the firm and in 2017 the debts were written off as irrecoverable and statute barred.”
[10] Exhibit 1, T Documents, T15.1, pages 104 – 105.
At an earlier point in time Mr Goh refers to part of the “loan” being repaid.[11] In 2012 Mr Goh acknowledged that there had been substantial loan repayments to the Applicants in 2009, 2010 and 2011.[12]
[11] Transcript of Proceedings, Re Fill and Repatriation Commission (14 June 2019, Senior Member Katter), page 23 Line 14 – 20.
[12][12] Affdvt Mr Fill of 23 August 2018 annexure letter by Mr Goh
Mr Fill gave evidence before the Tribunal in the first instance that he did not consider the sums advanced being loans.[13] He says that in respect of his solicitor’s practice the “losses in each year were made up by Mr and Mrs Fill”.
[13] Exhibit 1, T Documents, T20, page 432.
He says that between 2003 and 2017 $7,893,061.28 was paid to the Fill Unit Trust by his law firm. He says that the financial structure of his law firm was such that the Trust and a company called Valbide Pty Ltd would share responsibility for outgoings of the law firm. The Trust would be billed with the professional expenditure of the law firm and Valbide, the service company, would be responsible for the non-professional expenditure of the law firm. Any profit of the law firm would be passed on to the beneficiary of the Fill Unit Trust. Similarly any losses of the law firm had to be made up by the Applicants to avoid the Trust and Valbide from trading whilst insolvent.
In paragraphs 37 and 38 of the submissions filed in May 2021 Mr Fill says:[14]
[14] Applicant Submissions dated 14 May 2021, page 24.
“As of 30 June 2016, the Fill Unit Trust had an accumulated loss of $707,888. These losses were funded by Mr and Mrs Fill to avoid trading insolvently. The loan from G and M Fill stated in the balance sheet as at 30 June 2016, should in fact be treated as gifts as they were provided with no recourse to the Unit Trust and was in fact written off in the books of the Unit Trust in the year ended 30 June 2017.
(See email and attachment from Tim Goh, Accountant of Accounting 4 Success dated 13 May 2021)
it is significant that the respondent subpoenaed the records of the accountant Mr Goh but it has neglected to call Mr Goh to give evidence. Mr Goh’s latest letter justifies the position of the applicants.”
It appears to me that the amounts are retrospectively determined to be whatever suits Mr and Mrs Fill. They were treated as loans, part of which were repaid. They appear in the financial statements as loans. The financial statements on behalf of the Trust and signed by Mr Fill as trustee assert that the statements present fairly the Trust’s financial position and that the Trust will be able to pay its debts as and when they become due and payable. The amounts were referred to by Mr Goh as debts that were written off as irrecoverable and statute barred for the year ended 30 June 2017. Mr Goh in writing off the amounts refers to them as a “personal loan to the firm”. In a letter dated 21 November 2017 Mr Fill asserts “…there is no longer a loan in the Fill unit trust which was written off in 2017 as debts in the law firm as irrecoverable and statute barred”.[15]
[15] Exhibit 1, T Documents, T16, page 421.
A letter was provided outside the time-limited for provision of any further evidence, by Mr Goh. The Respondent objected to that letter on the basis it had not had an opportunity to cross-examine Mr Goh, but I have decided to admit the letter. The letter suggests that Mr Fill should add a paragraph to his affidavit in the following terms:[16]
“As at 30 June 2016 the Fill Unit Trust had an accumulated loss of $707,888. These losses were funded by Mr and Mrs Graham Fill to avoid trading insolvently. The “Loan from G and M Fill” stated in the balance sheet as at 30 June 2016 should in fact be treated as gifts as they were provided with no recourse to the unit trust and was in fact written off in the books of the unit trust in the year ended 30 June 2017”
[16] Letter to Applicant as attachment to email dated 13 May 2021, filed on 14 May 2021.
This is simply a recommendation from the accountant to the client. I do not think that takes the case for Mr and Mrs Fill any further. Given the repeated statements in writing and in documents where there is a legal responsibility to be accurate, I cannot accept the evidence of the Applicants or their accountant that the sums in question were not loans and therefore assets to be included in the rate calculator. I am satisfied that there was a loan by Mr and Mrs Fill to the trust and that their assets exceed $821,500 for the purposes of section 52D of the Act.
A number of decisions establish that the fact that loans are unrecoverable does not mean that they should not be included in the valuation of assets for the purpose of determining eligibility for the pension.[17] In Woolley, the applicant had loaned money to his family company and the loans had become unrecoverable but the Tribunal held that the loans should be assessed at face value saying: “There is nothing in the legislation which requires or enables the respondent to take account of the fact that the loans are unrecoverable”.[18] There are numerous decisions over a lengthy period to the same effect which are referred to in Wooley.[19] If they were incorrect, the legislature and appeal courts could have intervened. In the present case the Applicant asserts that the debt has been written off and that the loans are generally not recoverable because the Trust operated at a loss between 2004 and 2017 and the loans are not supported by assets[20]. The Applicants did not call the accountant Mr Goh but on 12 April 2019 he confirmed that his accounting practice had no documents that related to the writing off of the applicants’ debts of the Fill Unit Trust.[21] Furthermore in the year ending 30 June 2017 the Trust earned professional fees of $273,857[22] and in the year ending 30 June 2018 the Trust earned professional fees of $324,975[23]. If it is relevant at all, I do not accept that the debt is irrecoverable.
[17] Woolley v Repatriation Commission [2007] AATA 2059. (Wooley)
[18] Ibid [18].
[19] See also MTKJ and Secretary Department of Health [2017] AATA 2911 at [10], [16-23].
[20] Exhibit 1, T Documents, T15.1, page 105
[21] Exhibit 17.
[22] Exhibit 14
[23] Exhibit 17 p17
The fact that the loan might be statute barred has also been held to be irrelevant in this context.[24]
[24] Hawkins and Secretary Department of Family and Community Services [2005] A ATA 1219.
I am therefore satisfied that in applying section 52D of the Act, the Applicant’s loans to the Trust must be included in the value of Mr and Mrs Fill’s assets.
The Applicant was invited to make submissions in relation to the application of the Rate Calculator but did not do so. There was no dispute in the present hearing that the application of the Rate Calculator in accordance with the above finding would result in a finding that the Applicants’ assets are over the threshold amount. The overall result would be that the Applicants would be entitled to a pension rate of nil.
For completeness I should refer to section 52Y of the Act which provides as follows:
(1) “Where:
(a) either:
(i) a service pension, income support supplement or a veteran payment is not payable to a person because of the application of an assets test; or
(ii) a person's service pension rate, income support supplement rate or veteran payment rate is determined by the application of an assets test; and
(b) either:
(i) sections 48B and 48C (disposal of income) and 52G, 52H, 52JA, 52JB, 52JC and 52JD (disposal of assets) do not apply to the person; or
(ii) the Commission determines in writing that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(c) the person, or the person's partner, has an unrealisable asset; and
(d) the person lodges, at an office of the Department in Australia in accordance with section 5T, a written request that this section apply to the person; and
(e) the Commission is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
the Commission must determine in writing that this section applies to the person.
Note: For unrealisable assetsee subsections 5L(11) and (12).
(2) If a request is lodged under paragraph (1)(d), the Secretary:
(a) must investigate the matters that the request relates to; and
(b) must, when the investigation is complete, submit to the Commission for its consideration:
(i)the request; and
(ii)the evidence that the person who made the request provided in support of the request; and
(iii)any documents that are relevant to the request and are under the Department's control (including any evidence or documents relevant to the request that are obtained in the course of the investigation).
(3) A determination under subsection (1) takes effect:
(a) on the day on which the request under paragraph (1)(d) was lodged; or
(b) if the Commission so determines in the special circumstances of the case--on a day not more than 6 months before the day referred to in paragraph (a).”
That section has been held to operate as a gateway to section 52Z[25], and that section 52Y(1) operates after sub paragraphs (a) to (e) are satisfied.
[25] Cooper and Repatriation Commission [1997] AATA 18 at [19].
Mr and Mrs Fill have now lodged a written request in accordance with section 5T of the Act but that is not an application which I have jurisdiction to either consider or review. It requires specific findings at first instance.
DECISION
The decision of the Respondent dated 23 April 2018 is affirmed.
27. I certify that the preceding 26 (twenty-six) paragraphs are a true copy of the reasons for the decision herein of Deputy President R I Hanger QC
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Associate
Dated: 13 September 2021
Date of hearing:
Hearing on the papers (14 April 2021)
Applicant:
Self-represented
Solicitors for the Respondent:
Sparke Helmore
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