Hamam and Secretary, Department of Family and Community Services

[2003] AATA 197

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 197

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No S2001/420

GENERAL ADMINISTRATIVE  DIVISION		)
Re		Secretary, Department of Family and Community Services

Applicant

And Moya Hamam

Respondent

DECISION

Tribunal Hon. CR Wright QC (Deputy President)

Date28  February 2003

PlaceAdelaide

Decision The decision of the Social Security Appeals Tribunal is set aside and the rate of the parenting payment assessed by the applicant is determined to be the correct rate payable.

(signed)

Hon. CR Wright QC
(Deputy President)

CATCHWORDS

SOCIAL SECURITY - Assets test - value of assets to include amount that a person "lends" - applicant and husband directors of private company - applicant and husband borrowed money from bank by overdraft secured against their home - money used for company purposes - overdraft being repaid by company - whether applicant and husband had lent the money to the company.

REASONS FOR DECISION

28 February 2003 Hon. CR Wright QC (Deputy President)

1.      The issues in this matter are within a narrow compass. On 2 July 2001 the respondent sought, and is now being paid, a parenting payment by the applicant. In assessing the respondent’s entitlement the applicant took into account deemed income from a loan to ICOG International Pty Ltd (“ICOG”) a company of which the respondent and her husband are both shareholders and directors.

2.      The respondent sought a review by the Social Security Appeals Tribunal (SSAT) of the applicant’s decision to pay the parenting payment at a reduced rate. On the 9^th October 2001 the SSAT upheld the respondent’s application and set aside the Departmental decision. A new decision was made that the rate of parenting payment should not be calculated taking account of deemed income from a loan.

3.      The applicant applied to the Administrative Appeals Tribunal to review the SSAT decision on 5 November 2001. The review hearing took place in Adelaide on 24 February 2003. The applicant was represented by Ms A. Pugsley. The respondent represented herself. Her husband also attended and addressed the Tribunal. At the conclusion of the hearing I indicated that the application for review had been successful for reasons which I would publish shortly.

4.      The evidence before the Tribunal consisted of the Section 37 documents (the “T” documents) which, collectively, became exhibit “A” and ICOG International Pty Ltd CAN 060 899 247 Balance Sheet and Profit and Loss Statement as at 30 June 2001 (Exhibit “B”).

5. Section 1122 of the Social Security Act 1991 (“the Act”) provides as follows:

“1122. If a person lends an amount after 27 October 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.”

As the respondent had applied for a parenting payment the value of her assets were required to be taken into account in assessing her entitlement.

6.      The evidence establishes that on 30 June 2000 the respondent and her husband as directors of ICOG agreed to borrow money from the Bank of New Zealand (“BNZ”). They also agreed to then lend that money to ICOG -  Exhibit “A” T30 p.107; a memo or minute addressed to both Mr and Mrs Hamam and ICOG dated 30 June 2000 evidences that transaction.

“PG & MJ Hamam
3 Gore Street
GLENELG NORTH  SA  5045

ICOG International P/L
PO Box 591
GLENELG  SA  5045

30^th June 2000

Re: Terms & Conditions of Directors Loan to ICOG International P/L

The above named directors, Peter George Hamam and Moya Jane Hamam have agreed to borrow monies from the Bank of New Zealand and on behalf of ICOG International and on lend the same monies to ICOG International P/L as necessary. The interest charged to ICOG for this loan, shall be at the same rate as the bank charges the Hamams’ on their loan for ICOG.

The Bank of New Zealand has existing security over the Hamam’s home and therefore the loan is readily available, and it will not be necessary to request the loan in the Company name.

ICOG International will repay the above loan plus any interest and charges made by the bank, direct to the Bank of New Zealand, using the deposit book provided, when ICOG funds are available.

The Balance of the Bank of New Zealand Loan as at 30^th June 2000 is $59,650.01 as per bank statement.

Signed

Peter Hamam    Moya Hamam”

7.      By a further memo or minute dated  30 June 2001, the respondent and her husband acknowledged that further monies had been borrowed from BNZ by them and that they had lent that money to ICOG. The following is a copy of that document (Exhibit A, T30 p.108).

“PG & MJ Hamam
3 Gore Street
GLENELG NORTH  SA  5045

ICOG International P/L
PO Box 591
GLENELG  SA  5045

30^TH June, 2001

Re: Directors Loan to ICOG International P/L with the Bank of New Zealand

The above named directors, Peter George Hamam and Moya Jane Hamam have further borrowed monies from the Bank of New Zealand and on behalf of ICOG International and on lent the same monies to ICOG International P/L as necessary. The interest charged to ICOG for this loan, shall be at the same rate as the bank charges the Hamams’ on their loan for ICOG.

ICOG International will continue to repay the above loan plus any interest and charges made by the bank, direct to the Bank of New Zealand, using the deposit book provided, when ICOG funds are available.

The Balance of the Bank of New Zealand loan as at 30^th June 2001 is $104,711.21 as per bank statement.

Signed

Peter Hamam            Moya Hamam”

8.      An entry on ICOG Balance Sheet as at 30 June 2001 (exhibit “B”) is as follows:

“Non-Current Liabilities                 2001              2000

Loan – Peter Hamam  52,212           28,952

Loan – Moya Hamam  52,212           28,952”

9. I am left in no doubt that by the transactions evidenced by these documents, the only possible conclusion is that the respondent and her husband borrowed money from BNZ which they then “lent” to ICOG within the meaning of s1122 of the Act. This conclusion is fully supported by the decision of Branson J in Unicomb v Secretary, Department of Social Security 50 ALD 405. As Branson J said at p.407:

“Nothing in the terms of s 1122 of the Act, in my view, suggests that it is appropriate, for the purpose of determining whether a person has lent an amount, to consider whether, having regard to the factual circumstances which surround the transaction prima facie falling within the terms of the section, the person has gained a net advantage from such transaction so far as his or her total assets are concerned.”

It is therefore immaterial that the respondent and her husband stood to make no profit from on-lending borrowed funds to ICOG. The matter was neatly put in the applicant’s written contentions at paragraph 5:

“All that is necessary for section 1122 of the Act to operate is for a loan to be made by the person to another entity. It is not relevant to consider the reason for the loan or the structure within which the loan is made. It is not relevant to consider whether the loan was made in a private capacity or as a functionary. As long as the person has money that is theirs to use, and then lends that money to another entity, the transaction is between the person and the entity.”

I agree with this contention. Accordingly, the loan must be assessed as an asset and an income deemed (see s1078 of the Act).

10.     In my opinion the evidence does not in any way support the SSAT’s view that the debt to BNZ “is entirely the company’s debt”, but in any case that is not the relevant test. The question to be asked is “Has it been shown that the benefit-applicant has lent money to another person or entity?” In the present case the only answer to that question is “yes”.

11.     In the result the decision of the SSAT is set aside and the rate of parenting payment assessed by the applicant is determined to be the correct rate payable and must be restored.

I certify that the 11 preceding paragraphs are a true copy of the reasons for the decision herein of Hon. CR Wright QC (Deputy President)

Signed:         .......................................................................................
  Associate

Date/s of Hearing  24 February 2003
Date of Decision  28 February 2003
Counsel for the Applicant         Mr J Underwood
Solicitor for the Applicant          Centrelink
Counsel for the Respondent     In person
Solicitor for the Respondent     -