George Maatouk Marie Maatouk and Secretary, Department of Social Services
[2014] AATA 417
•25 June 2014
[2014] AATA 417
Division GENERAL ADMINISTRATIVE DIVISION File Number
2011/0293
Re
George Maatouk
Marie Maatouk
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Regina Perton, Member
Date 25 June 2014 Place Melbourne The Tribunal sets aside the decision under review and remits the matter to the respondent under section 43 of the Administrative Appeals Tribunal Act 1975 to recalculate Mr and Mrs Maatouk’s assets and entitlements in the period ending 18 May 2010.
......[sgd]..................................................................
Regina Perton, Member
SOCIAL SECURITY – social security payments – assets test – former directors and shareholders of private company – consideration of factors in Principles – effective control – attributable assets – decision set aside and remitted for re-calculation of assets held by applicants
Legislation
Social Security Act 1991 ss 1123, 1124, 1207, 1207C, 1207N, 1207Q, 1207X, 1209E, Part 3.18
Social Security (Attributable Stakeholders and Attribution percentages) Principles 2000
REASONS FOR DECISION
Regina Perton, Member
25 June 2014
George Maatouk and Marie Maatouk have been the recipients of social security benefits for several years. Mr Maatouk was initially on a newstart allowance (NSA) and then later on a disability support pension (DSP). Mrs Maatouk was paid partner allowance. Mr and Mrs Maatouk were directors of, and shareholders in, a private company, Parlo Nominees Pty Ltd (Parlo) that had purchased a commercial property in Reservoir (the Reservoir property) in 2001. That Reservoir property was used by one of their four adult children for his business. Because of difficulties caused by a later disbarred solicitor, it took many years from the purchase of the property for the title to be transferred into Parlo’s name. Therefore, Mr and Mrs Maatouk were unable to register a mortgage over the Reservoir property and instead took out a mortgage on their residential home to help finance the purchase of the Reservoir property. As a result of that mortgage and additional monies used to purchase the Reservoir property, they were listed as lenders to Parlo. That loan was considered as part of Mr and Mrs Maatouk’s assets.
On 18 May 2010 Centrelink cancelled Mrs Maatouk’s partner allowance and significantly decreased DSP payments to Mr Maatouk. A few weeks later, Mrs Maatouk qualified for DSP but it was paid at a low rate due to Centrelink’s determination of the value of their assets.
On 1 June 2010 the original decision maker affirmed the decision (the original decision). On 8 July 2010 an authorised review officer (ARO) affirmed the original decision. On 4 January 2011 the Social Security Appeals Tribunal (SSAT) affirmed the ARO’s decision. On 25 January 2011 Mr and Mrs Maatouk lodged an application for review of the SSAT’s decision by this Tribunal.
The Social Security Act 1991 (the Act) contains provisions designed to prevent people from using private companies and trusts to remove assets and income from the means‑testing provisions for social security benefits. These include the concept of attributable assets in circumstances where a private company is controlled by associates of the person receiving the pension. The degree of control that a person may still have of a private company even after her/his resignation as a director or shareholder is one of the factors taken into account.
The main issue before the Tribunal is the value of Mr and Mrs Maatouk’s assets as at 18 May 2010 and several years prior and whether their asset value includes attributable assets as a result of the assets belonging to Parlo. The Tribunal has limited discretion in deciding whether the company's assets should still be attributed to them after their resignations as directors.
RELATIONSHIP BETWEEN MR AND MRS MAATOUK AND PARLO
Mr and Mrs Maatouk registered Parlo in December 1987 on the advice of their accountant. At that time, Mr Maatouk worked as a motor mechanic.
In March 2001, Mr Maatouk purchased the Reservoir property for $350,000. Initially, Centrelink formed the view that the Reservoir property was in Mr Maatouk’s name and that he had transferred it into Parlo’s name some years later. However, evidence before the Tribunal and a title search undertaken by Centrelink’s advocate, Mr T de Uray indicates that he purchased the Reservoir property in his name and/or nominee. Mr Maatouk gave evidence that it had always been his intention to purchase the Reservoir property in Parlo’s name. The Reservoir property was bought to enable Mr Maatouk’s son, Pierre Maatouk, to run an automotive business from the premises.
Mr Maatouk ceased working as a motor mechanic for health reasons. He qualified for DSP from 15 September 2005 after receiving the NSA for some time. Prior to the grant of DSP, Mr and Mrs Maatouk’s accountant, CNA Accountants (CNA) sent a letter to Centrelink dated 5 May 2005 in which they stated:
1. The company Parlo Nominees Pty Ltd is not trading and has no financial statements whatsovere [sic].
2. No trust exists
We enclose Module PC duly completed for your attention.
Please note that George Maatouk is totally reliant on Centrelink Sickness Benefits.
The Module PC is a form used by Centrelink for information about private companies in which a recipient or potential recipient of a social security benefit is required to provide details about the company. The form, signed by Mr and Mrs Maatouk but apparently prepared by the accountant, indicated that they were the only shareholders in Parlo with one share each. There was no mention of Parlo owning, or having an interest in, the Reservoir property. Mr and Mrs Maatouk were each attributed 50 per cent control of Parlo.
On 24 August 2006 CNA sent Mr and Mrs Maatouk’s tax returns for the previous year to Centrelink. In a covering letter, CNA stated that Parlo had not traded for the previous five years and that the only asset was cash in hand of $50. A Centrelink officer decided not to change the 50 per cent attribution to Mr Maatouk or the 50 per cent attribution to Mrs Maatouk.
Centrelink annually reviews clients who are involved with private companies or trusts. On 18 June 2007 and 26 June 2008 Centrelink officers decided not to change the attribution decisions concerning Mr and Mrs Maatouk as they were advised by CNA that Parlo had not traded in the relevant financial years.
On 3 April 2008 Mr and Mrs Maatouk resigned as directors of Parlo. Mr Maatouk also resigned as Secretary of Parlo. The four adult children of Mr and Mrs Maatouk, namely Pierre Maatouk, Paul Maatouk, Robert Maatouk and Rania Maatouk were appointed as directors of Parlo. Rania Maatouk was appointed Secretary of Parlo.
Parlo’s tax return and accompanying financial statements for the year ended 30 June 2009 showed a gross rental profit of $24,000 and net taxable income of $11,436. The financial statements showed a directors’ loan of $331,815 and ownership of the Reservoir property with a value of $343,750. This prompted a request from Centrelink for relevant documents pertaining to the purchase and financing of the Reservoir property.
On 24 March 2010 CNA provided documents including the contract of sale for the Reservoir property and correspondence relating to the dispute the Maatouks had with the solicitor who acted for them in that purchase, loan documents, copy of Certificate of Title and other information regarding the transfer of the company to their four children.
The contract for the purchase of the Reservoir property for $350,000 was signed on 13 March 2001 with the purchaser being George Maatouk and/or nominee. The copy of the Certificate of Title provided at that time did not have Mr Maatouk or Parlo as the registered owner. The rates notice for 2009-10 was addressed to Parlo.
Documents were provided to Centrelink concerning legal action initiated by Isaac Brott & Co on behalf of Mr Maatouk and Parlo in late 2006 against the now disbarred solicitor who had acted for them in the purchase of the Reservoir property and had not arranged for the transfer of the title to Parlo or Mr Maatouk.
Documents were also provided showing that Mr and Mrs Maatouk had taken out a mortgage of $150,000 on their previously unencumbered Northcote home in April 2001 to assist in financing the purchase of the Reservoir property. There was also documentation indicating that Pierre Maatouk had registered himself as a sole trader for tax purposes in April 2001.
A company search of Parlo on 31 March 2010 showed Mr and Mrs Maatouk and their four children as each holding one ordinary share in the company, a total of six shares.
On 11 May 2010 the Australian Valuation Office valued the Reservoir property as follows: $500,000 as at 3 April 2010, $444,000 as at 3 April 2009 and $420,000 as at 3 April 2008.
On 18 May 2010, a complex assessment officer of Centrelink determined that Mr Maatouk had purchased the Reservoir property in his name and taken out a mortgage. He found that Mr Maatouk had not declared the asset to Centrelink. He also found that the title was transferred to Parlo on 3 April 2008, the day on which Mr and Mrs Maatouk resigned as directors. Mr Maatouk’s pension was cancelled from 1 March 2004 to 16 March 2010 because his and his wife’s assets exceeded the allowable limits. Mrs Maatouk’s partner allowance was cancelled from 15 March 2005.
A fresh title search of the Reservoir property in February 2012 indicated that the transfer from the previous owner who sold the property in 2001 to Parlo was not registered until 3 April 2008. The property had never been in the name of Mr Maatouk. The Tribunal accepts Mr Maatouk’s evidence that it was always intended to have the property in Parlo’s name.
THE FINANCING OF THE PURCHASE OF PARLO’S PROPERTY
Parlo’s documentation from 2009 onwards shows a directors’ loan of around $350,000 or thereabouts, which was the sale price of the Reservoir property in 2001. Mr Maatouk has stated that he did not personally provide the full amount for the purchase. He stated that he contributed $150,000 by mortgaging their residential home but that the additional $200,000 was contributed by his four children in differing amounts.
In a letter dated 11 May 2011, Mr C Nahas, principal of CNA, stated:
We act as Accountants for Parlo Nominees Pty Ltd and can confirm the followings [sic]:
- The property…was purchased in 2001 for $350,000
The following persons contributed the sum of $350,000 as follows:
Pierre, Paul, Robert, Raymond [sic] Maatouk contributed $200,000 and George and Marie Maatouk borrowed the sum of $150,000 and lent it to the children to pay the balance of the property.
- Pierre, Paul, Robert and Raymond [sic] Maatouk paid $150,000 owing to their parents in full.
- The loan reflected in the balance sheet of Parlo Nominees belongs to Pierre, Paul, Robert and Raymond [sic] Maatouk.
- Measures will be taken to reflect the ownership of the loan.
Acknowledgements of Term Deposits in the Commonwealth Bank showed a sum of $10,000 held in trust by Mrs Maatouk on behalf of Rania and Robert Maatouk as at 14 December 1999; another held in trust by Mrs Maatouk for $14,000 from 1997 on behalf of Paul and Pierre Maatouk and another in Pierre Maatouk’s own name from 1996 for $20,000.
Statutory declarations from the four children were made in September 2011 and provided to Centrelink by Mr Anthony Helou JP, a community worker who was helping Mr Maatouk with the review on a pro bono basis. Pierre Maatouk, in an unsigned statutory declaration, stated he contributed approximately $43,000 towards the purchase price. Rania Maatouk, in a statutory declaration signed on 12 September 2011, stated that she had contributed $32,000. Robert Maatouk, in a statutory declaration signed on 14 September 2011, stated that he provided $30,000. Paul Maatouk, in a statutory declaration dated 12 September 2011 stated that he contributed $38,000.
Mr de Uray pointed out that the amount specified in the statutory declarations totalled $143,000 not $200,000. He also pointed out the lack of supporting evidence for the sources of the funds specified by the four children. Mr de Uray stated that it had been said at earlier stages in the review process that Mrs Maatouk had saved up the family allowance payments she received and gave them to the children. He submitted that they were Mrs Maatouk’s funds for family expenses, not those of the children. Mr de Uray therefore stated that the Secretary found it difficult to accept that the $200,000 applied to the purchase of the property was funded by Mr Maatouk’s children’s money.
The Tribunal was presented with a diary that appeared to have been kept by Mrs Maatouk. Amounts were put down that she said had been given to her by the children to hold on their behalf. She gave evidence that most of the amounts of money the children had actually given her were through their part-time or full-time work although some amounts, around Christmas for example, were Christmas gifts to the children. Both Pierre Maatouk and Rania Maatouk gave evidence that their parents did not buy actual presents but rather gave them monetary gifts. They stated that their parents were not accustomed to spending on frivolous or fashionable items.
Mr Nahas gave oral evidence that it was his understanding that the directors’ loans cited in the documentation represented loans to the family. He indicated that as Mr and Mrs Maatouk were no longer directors, the loans would not be theirs as the loans are not listed in their individual names but rather as directors’ loans.
Mr Nahas suggested that within their culture, parents such as Mr and Mrs Maatouk would have been saving money on behalf of their children from when they were quite young. He said that would explain why the children could provide for a large contribution towards Parlo’s purchase of the Reservoir property. Mr Nahas undertook to provide further documentation to the Tribunal but unfortunately that took a very long time. When the documentation was presented, there were some anomalies that made it appear as if Pierre Maatouk had signed off on returns prior to becoming a director. However the Tribunal is satisfied that Pierre Maatouk had not signed off on anything until he became a director.
Mr Maatouk, in his oral evidence, said that when Pierre Maatouk wanted to start his own business, they purchased the Reservoir property rather than have him pay rent which would be dead money. He spoke of family and the need to help each other. Mr Maatouk said that there is nothing in writing about Pierre Maatouk paying off their mortgage because families do not operate that way.
In oral evidence, Pierre Maatouk explained that whenever he earned money, he would give it to his mother to put into savings on his behalf. His mother was the one who put together the amounts they all contributed towards the purchase of the Reservoir property. He was not sure of the exact amount his siblings had contributed to Parlo’s purchase of the Reservoir property.
Pierre Maatouk also stated that there was no lease between him and Parlo because initially he was just paying the mortgage. They only started paying rent in 2009 after the mortgage was paid off.
The evidence as to exactly how much the children put into the purchase of the Reservoir property is difficult to ascertain. The Tribunal is certainly satisfied that they did contribute significantly. In relation to the point raised by the SSAT and Mr de Uray suggesting family allowances received by Mrs Maatouk should not be classified as part of the children’s contribution to Parlo, the Tribunal received the following written submission from counsel for the Maatouks dated 4 November 2013:
…
The source of funds
25. The source of the funds used to purchase the property were a combination of funds lent by the NAB [sic] and funds saved by Mrs Maatouk over a long period of time. The saved funds consist of the money given by each of the children to Mrs Maatouk for her to look after on their behalf, and money which Mrs Maatouk accumulated over a long period of time, largely from the receipt of family allowance.
26. The saved funds were always intended to be for the use of the children. As such, the saved funds were intended to be held for the benefit of the children, not for the benefit of either Mr or Mrs Maatouk. For this reason it can be argued that the saved funds were imprinted with the character of an implied or constructive “trust”.
27. Contrary to what the SSAT found, [at 11] it is contended that the very fact that family allowance payments were made to Mrs Maatouk for the children’s benefit, with Mrs Maatouk having the choice to save or spend those sums, and that Mrs Maatouk chose to save those sums for the benefit of the children, that does not deprive those savings of the character of a trust. Similarly, where the SSAT acknowledges that the children paid money to their mother once they started working, [also at 11] the SSAT goes on to say that these funds became the savings of the parents. They then conclude that these funds could not be trust money because they had passed from the hands of the children to the hands of the parents. It is contended that this reasoning is wrong.
…
29. The trusts could be created in the mind of the settlor of trust funds, in this instance Mrs Maatouk. It is contended that it is wrong to say that the children or any other source of funds, determines whether or not a ‘trust’ relationship comes into existence. It is more relevant to look at the intention of the person holding the funds and whether they intend to hold those funds to their own benefit or for the benefit of someone else.
The Tribunal is satisfied that the four Maatouk adult children contributed to the purchase of the Parlo property. However the Tribunal is not satisfied that the total was precisely $200,000. The purchase took place over 13 years ago and the family members did not document the various contributions at that time. In terms of putting a figure on it, the Tribunal is prepared to accept the original figures in the statutory declarations made in September 2011 by each child individually, namely $143,000. The Tribunal finds that the four Maatouk children contributed $143,000 to Parlo for the purchase of the Reservoir property. That leaves around $57,000 that would have been contributed by Mr and Mrs Maatouk.
WHO CONTROLLED PARLO?
Part 3.18 of the Act sets out the means test treatment of private companies. Section 1207 of the Act states, among other things, that Part 3.18 sets up a system for the attribution to individuals of the assets and income of private companies and private trusts. Section 1207N of the Act describes designated private companies that are covered by the Act. The Tribunal is satisfied that Parlo is a designated private company within the meaning of s 1207N.
There is also no disagreement that Parlo is a controlled private company pursuant to section 1207Q of the Act, on the basis that associates of Mr and Mrs Maatouk control the company. Section 1207C(1) states that relatives, including children, of a pension beneficiary, are associates. The control test for a private company is set out in s 1207Q(2) which states:
(2)For the purposes of this section, an individual passes the control test in relation to a company if:
...
(c)the company is sufficiently influenced by:
(i) the individual;
(ii) or an associate of the individual; or
...
The Tribunal is satisfied that as at 18 May 2010, Mr and Mrs Maatouk did not officially control the company themselves but that their children did. Prior to the change of directors on 3 April 2008, Mr and Mrs Maatouk were the sole shareholders and directors. The Tribunal therefore finds that Parlo is a controlled private company throughout the period covered by this review.
In relation to the assets of Parlo, the Tribunal notes that the transfer of title to the Reservoir property was not in Parlo’s name until 3 April 2008. However it was also not in Mr Maatouk’s name. Nonetheless, Parlo occupied the premises from the date of settlement in 2001 notwithstanding the title not being in its name. Mr Maatouk gave evidence that the previous owner had signed the transfer but it had not been registered with the relevant authority. The municipality and water authority had been notified by the vendor’s solicitor of the change of ownership so rate notices were in Parlo’s name and the Maatouks paid the rates.
Therefore, whilst not officially registered as being owned by Parlo on the Certificate of Title, the Tribunal is satisfied that the Reservoir property should nonetheless be considered as Parlo’s asset. As stated earlier, the Tribunal is satisfied that Mr Maatouk had always intended that the purchase be in Parlo’s name, hence the and/or nominee clause in the contract of sale. That may provide an explanation as to why Mr Maatouk did not declare the property as his asset when he first sought a pension. However, that does not mean the property should not have been treated as Parlo’s asset from the date of settlement in 2001 and should have been identified as such in the documentation concerning the company.
When a private company is a controlled private company, the assets of the company are attributed to the persons receiving the pensions pursuant to s 1207X(1) of the Act:
(1)For the purposes of this Part, if a company is a controlled private company in relation to an individual:
the individual is an attributable stakeholder of the company unless the Secretary otherwise determines; and
if the individual is an attributable stakeholder of the company – the individual's asset attribution percentage in relation to the company is:
100%; or
If the Secretary determines a lower percentage in relation to the individual and the company – that lower percentage…
…
Section 1209E of the Act gives the Secretary authority to formulate decision making principles which are to be followed in making decisions concerning s 1207X. The Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000 (the Principles) have been gazetted pursuant to s 1209E. The Principles set out various factors to be taken into account by decision makers in determining whether a person should not be held to be an attributable stakeholder and for determining a lesser asset attribution percentage than the 100 per cent which is automatically applied under section 1207X of the Act.
MR AND MRS MAATOUK AS ATTRIBUTABLE STAKEHOLDERS
Part 2 of the Principles (paragraphs 7 to 13) sets out the factors to be taken into account in determining whether Mr and Mrs Maatouk should not be considered attributable stakeholders.
Paragraph 7 of the Principles considers the individual's circumstances affecting the relationship with the company. Parlo was set up in 1987 with two shareholders being Mr and Mrs Maatouk, each holding one share. They remained as directors and sole shareholders until 3 April 2008 when their children took over as directors.
As at 3 April 2008, there were six shareholders each holding one share. Mr Maatouk appears to have gradually reduced his role in the company with Pierre Maatouk becoming the major decision-maker. Parlo retained the same accountant who had set up the company but Pierre Maatouk gave evidence that he personally does not use them for any of his business’s accountancy needs. Mr Maatouk retained the administrative role of asking CNA to do the yearly tax returns and Mrs Maatouk sometimes did some banking for her son. After 3 April 2008, Mr and Mrs Maatouk jointly held one-third of the shares.
The evidence before the Tribunal demonstrates that Pierre Maatouk, is in effective control of the company at present; and that he had, for some years, been making the decisions about the company's assets in conjunction with his sister, who is listed as the company secretary. The other two brothers seem to take little active part in the management of the company.
The company was set up by Mr and Mrs Maatouk and they were in total control of its activities until 3 April 2008. However, after that date, the Tribunal is satisfied that they no longer were. They occasionally helped their son with minor administrative matters as parents often do when their children are in a business but were not in control of the company.
Paragraph 8 requires consideration of the contribution of an individual to the company. Mr and Mrs Maatouk were the sole directors and shareholders until 3 April 2008. Hence the assets of the company, comprising the Reservoir property, were attributed to them. Unfortunately, because of the difficulties with the title, Parlo’s accounts did not indicate that there was actually an asset that Parlo had paid for in full from mid-2001 and was allowing the directors’ son, Pierre Maatouk, to use. The loan of $150,000 taken out with a mortgage over their family home could not be considered as lowering the asset value of the Parlo property as the family home is exempt from the assets test. The mortgage would have had to have been over the Parlo property. Unfortunately that was not possible because of the difficulties with the title.
Paragraph 9 considers past benefits received from distributions by the company. Mr and Mrs Maatouk’s counsel, Mr De Zilwa, who was only appointed towards the end of the protracted proceedings in this matter, submitted that neither Mr Maatouk nor Mrs Maatouk received a benefit from Parlo. They took out a loan over their residential home to purchase the Reservoir property which was repaid by Pierre Maatouk by way of rental for the property. They would not have taken out that loan but for the need to finance the purchase. They had not received any distribution from Parlo by 18 May 2010.
Paragraph 10 looks at future benefits likely to be obtained by the attributable stakeholders. Mr and Mrs Maatouk were not directors of the company at 18 May 2010 but jointly retained a one-third share. Mr De Zilwa contended that it is not reasonably foreseeable that either Mr or Mrs Maatouk will receive a benefit from a future distribution by Parlo. Certainly as at 18 May 2010 and since then, there does not appear to have been any benefit provided to Mr and Mrs Maatouk.
Paragraph 11 looks at any other kind of benefit not covered by the previous two factors. While Mr and Mrs Maatouk do not receive a financial benefit from Parlo and probably did not at the relevant dates, it could be argued that the satisfaction they derive from their children having invested wisely and Pierre Maatouk being in premises that he cannot be evicted from is an indirect benefit. However, it does not appear that this is the nature of the benefit envisaged under the Principles.
In relation to paragraph 12, Mr and Mrs Maatouk are not attributable stakeholders of any other company or trust.
In weighing up all the factors set out in Part 2 of the Principles, the Tribunal gives considerable weight to the contributions that Mr and Mrs Maatouk made to Parlo towards the purchase of the Reservoir property. Mr and Mrs Maatouk were the directors when the Reservoir property was purchased. As indicated earlier, in the Tribunal’s view, the property should have been declared as Parlo’s asset notwithstanding that the transfer of title to Parlo had not taken place. Therefore, it would have been considered an asset of Mr and Mrs Maatouk who had 100 per cent of the shares in Parlo. The Tribunal notes that from 3 April 2008, Mr and Mrs Maatouk’s share of Parlo diminished. However, given that their associates are now the other beneficiaries of the company, the Tribunal is satisfied that Mr and Mrs Maatouk remained attributable stakeholders of Parlo pursuant to s 1207X(1)(a) of the Act as at 18 May 2010.
WHAT ARE MR AND MRS MAATOUK’S ASSET ATTRIBUTION PERCENTAGES?
Part 3 of the Principles (paragraphs 15 to 27) sets out the factors to be taken into account in determining whether Mr and Mrs Maatouk, as attributable stakeholders, should have an asset attribution percentage lower than 100 per cent.
Paragraph 16 requires the decision-maker to consider whether there are relevant circumstances which include the extent to which the relationship between the individual and the company is affected by circumstances arising from the legal structure and administrative arrangements of the company; whether the individual can reasonably be expected to exercise effective control of the company; and if so, the extent of that control. Until 3 April 2008, Parlo consisted of two shares with Mr and Mrs Maatouk as its only directors and shareholders. As at 18 May 2010 Parlo comprised six shares, one third of which were held by Mr and Mrs Maatouk. Pierre Maatouk and Rania Maatouk undertook the day–to-day management of Parlo. The Tribunal heard evidence from Mr Maatouk and Pierre Maatouk that Mr and Mrs Maatouk reluctantly continued as shareholders at the behest of their children. The Tribunal accepts that they were minority shareholders as from 3 April 2008. The Tribunal accepts their submission that there is no formal or informal mechanism in Parlo to allow either Mr or Mrs Maatouk to control the company. The Tribunal is satisfied that Mr and Mrs Maatouk did not exercise effective control of the company as from 3 April 2008
Paragraph 17 requires consideration of the contribution made to the company and the circumstances in which the contribution was made. Based on its earlier findings of the contributions made by their four children totalling $143,000, the Tribunal finds that in 2001, Mr and Mrs Maatouk provided $207,000 to Parlo for the purchase of the Reservoir property. $150,000 was repaid to them over time to discharge the mortgage over their home. There is no evidence before the Tribunal as to when this occurred and at what rate. That $150,000 could have been considered as the equivalent of a directors’ loan which has now been discharged. In cases such as this one, where only the family is involved in a company, there are often no or few records kept of what is paid to whom and when. There do not appear to have been any other distributions by the company in the period covered by this review.
Appropriate responses to the issues raised in paragraphs 18 to 21 have already been discussed.
Paragraph 22 invites the Secretary (and Tribunal) to consider any other circumstances of the individual with the activities or administration of the company. In this case, the Tribunal notes that Mr and Mrs Maatouk’s administration of Parlo has been affected by the actions of professionals on whom they have relied such as their lawyer for the conveyance who did not act appropriately and who, the Tribunal understands, not only lost his practising certificate but was convicted of fraud in late 2006 and given a three year jail sentence (
Michael Bakhaazi jailed for 3 years for stealing a quarter million dollars
June 10th, 2007 ·
On 13 December 2006, Justice Curtain jailed Elias Michael Bakhaazi, a solicitor, for three years and three months, with a non-parole period of eighteen months, and ordered him to pay back that part of the stolen funds that had not already been paid back: R v Bakhaazi[2006] VSC 496.Incidentally, he was Daming He‘s solicitor. He stole more than a quarter of a million dollars in five separate transactions with six victims, mainly in 2001 and 2002. His victims were hard-working Lebanese who trusted him because of his links with that community as well as because he was their solicitor. It seems Mr Bakhaazi lost $700,000, turned to gambling, lost his marriage, became suicidal, and now has excellent prospects for rehabilitation. Of the victim impact statements, her Honour said:
‘[24] Victim impact statements tendered in evidence, made by Mr Maatouk, Mr Makari, Mr Hamod and Mr Abdullah each speak eloquently of the impact of your criminality upon each of them. Mr Maatouk describes the stress he has suffered and ongoing worry as the property, the subject of that transaction, has still yet to be transferred into his name. Mr Hamod speaks of the loss of three businesses, the stress of these matters and its impact upon his marriage and health. Mr Makari stated that the $20,000 was his hard savings earned from “the very hard work that he had to put up with over the years.” He describes you as a heartless man and blames himself for being fooled by you. Mr Abdullah is still repaying the interest of $3,000 per quarter on the loan of $150,000. He has had to sell two properties and borrow from family and friends to make ends meet and states that, financially, his retirement is ruined.’
Mr and Mrs Maatouk also relied heavily on their accountant who submitted much of the documentation to Centrelink and the Tribunal. The Tribunal is not suggesting that their accountant deliberately acted inappropriately but it appears he may not have been fully aware of the implications of the company’s assets and structure on Mr and Mrs Maatouk particularly when compounded by the problems caused by Mr Bakhaazi. The Tribunal notes that the Judge’s comments cited above mentioned the transfer of the property into Mr Maatouk’s name but it is satisfied on the evidence before it that the transfer was to be in the name of Parlo. The lengthy legal battle may well have impacted on Mr and Mrs Maatouk’s plans to transfer control of Parlo to their children at an earlier date than 3 April 2008.
In weighing up the various factors in deciding whether Mr and Mrs Maatouk’s asset attribution percentage should be less than 100 per cent, the Tribunal gives considerable weight to the other circumstances and to Pierre Maatouk’s evidence as to the degree of control he has had over Parlo since 3 April 2008. In light of all the evidence, the Tribunal is satisfied that Mr and Mrs Maatouk genuinely resigned as directors of Parlo but have remained as shareholders at their children’s behest. The Tribunal finds that Mr and Mrs Maatouk were 100 per cent attributable shareholders until 3 April 2008. After that date, they held two of the six shares. As at 18 May 2010, the date of Centrelink’s original decision, Mr and Mrs Maatouk held one-third interest in Parlo . Taking into account all the matters in the Principles, the Tribunal is satisfied that from 3 April 2008, Mr Maatouk’s asset attribution percentage should be 16.67 per cent and that Mrs Maatouk’s should also be 16.67 per cent, making a total of 33.3 per cent for the both together.
In summary, the Tribunal makes the following relevant findings:
·Mr and Mrs Maatouk were each 50 per cent attributable shareholders in Parlo up to and including 2 April 2008;
·Mr and Mrs Maatouk were each 16.67 per cent attributable shareholders in Parlo as from 3 April 2008;
·Mr and Mrs Maatouk’s financial contribution to Parlo’s purchase of the Reservoir property in 2001 was $207,000 out of the total of $350,000;
·The Reservoir property is deemed to be an asset of Parlo from the date of settlement of the property; and
·The Reservoir property was always to be Parlo’s purchase rather than that of Mr Maatouk.
The calculation of what asset value should be assigned to Mr and Mrs Maatouk at various times is complex, involving not only changes of asset attribution but also differing asset limits during the five or so years covered by the Tribunal’s decision. The Tribunal will remit the decision to the Secretary for a recalculation of Mr and Mrs Maatouk’s entitlements.
DECISION
The Tribunal sets aside the decision under review and remits the matter to the respondent under section 43 of the Administrative Appeals Tribunal Act 1975 to recalculate Mr and Mrs Maatouk’s assets and entitlements in the period ending 18 May 2010 in accordance with its findings in these Reasons for Decision.
I certify that the preceding 62 (sixty‑two) paragraphs are a true copy of the reasons for the decision herein of Regina Perton, Member .......[sgd].................................................................
Associate
Dated 25 June 2014
Dates of hearing 22 February 2012, 22-23 April 2013, 6 November 2013 and 7 April 2014
Counsel for the Applicant Mr De Zilwa (from 6 November 2013) Advocate for the Applicant Mr A Helou (prior to 6 November 2013) Solicitors for the Applicant RS Chase Lawyers (from 16 April 2014)
Seoud Solicitors (prior to 16 April 2014)Advocate for the Respondent Mr T de Uray Solicitors for the Respondent Department of Human Services Legal Division
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