Liao and Secretary, Department of Education, Employment and Workplace Relations

[2010] AATA 721

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 721

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/1765

GENERAL ADMINISTRATIVE DIVISION		)
Re		Hong Liao

Applicant

And Secretary, Department of Education, Employment and Workplace Relations

Respondent

DECISION

Tribunal Senior Member Jill Toohey

Date of Decision  13 September 2010

Date of Written Reasons     21 September 2010

PlaceSydney

Decision The decision under review is affirmed.

...............[sgd]...............................

Senior Member

CATCHWORDS – SOCIAL SECURITY – parenting payment – member of a couple –applicant’s husband bought shares – value of shares exceeded assets test – claim that shares purchased with loan from applicant’s father-in-law – whether a loan or a gift – claims lacking in credibility – decision under review affirmed  

REASONS FOR DECISION

21 September 2010 Senior Member Jill Toohey           

1.      On 13 September 2010, the Tribunal delivered oral reasons in this matter.  These written reasons have been produced at the request of the applicant.  They reflect the transcript of the oral reasons other than for minor amendments for clarity of expression and to correct typographical errors. 

Background

2.      This case is about Ms Hong Liao’s parenting payment.

3.      Ms Liao started receiving parenting payment on 7 February 2008.  On 20 October 2009, Centrelink cancelled her payment with effect from 6 October 2009 on the ground that her assets exceeded the value limit above which parenting payment is not payable. 

4.      Ms Liao asked Centrelink to review its decision.  On 8 March 2010, Centrelink affirmed its decision and, on 20 April 2010, the SSAT affirmed the decision again.

5.      There is no dispute in these proceedings that, up until 6 October 2009, Ms Liao qualified for parenting payment.  Nor is there any dispute that she qualified again from 19 July 2010.  In the interim, however, Centrelink say that Ms Liao’s assets, which by law included those of her husband, Mr Huang, exceeded the allowable limit because of his shareholdings.

6.      Ms Liao says, in essence, that the shares were purchased with money lent to her husband by his father and that the value of the shares should be reduced by the value of the loan.

The legislation

7.      As a starting point, the rate at which a person is paid parenting payment depends on whether or not they are a member of a couple within the meaning of the Social Security Act 1991 (the Act).  There is no dispute that Ms Liao is a member of a couple. 

8.      Part 2.10 of the Act concerns qualification for, and payment of, parenting payment.  To be eligible for parenting payment, a person must satisfy the criteria in s 500.  The only criterion in issue here is whether, at the relevant time, Ms Liao’s assets exceeded the assets value limits in the Act. 

9.      The assets limits are set out in s 500Q of the Act.  If the combined assets of a couple exceed those limits, then the person seeking the payment will not qualify for it. 

10.     In submissions, Ms Liao disputed this interpretation of the legislation, apparently because she believes that “combined assets” means “assets jointly owned”.  However, s 500Q (4) makes clear that the value of a person’s assets include those of his or her partner. 

11.     The assets value limits change from time to time and certain assets, including the family home, are disregarded for the purposes of the test.  At October 2009, the limit applicable to Ms Liao and Mr Huang was $252,500.  At that time, Mr Huang’s share portfolio was worth approximately $317,000.  For present purposes, the amount in question exceeded to assets value limit at all material times.

The evidence

12.     The details of Ms Liao’s and Mr Huang’s financial arrangements, in particular to do with the purchase of their home in November 2006, were not altogether easy to follow but, essentially, they say that:

(i)they bought their home in 2006 with the help of a loan of AU$333,000 from Mr Huang’s father;

(ii)there was never any formal agreement, or evidence of the loan, which was a “gentlemen’s agreement” between Mr Huang and his father;

(iii)in early 2009, when Mr Huang wanted to invest in shares, his father declined to lend him more money but said, in effect, that Mr Huang could “borrow” the amount of the loan again;

(iv)Mr Huang took out an investment loan in order to repay his father and then reborrowed the money to purchase shares;

(v)because it was a loan, the money used to buy shares should have been deducted from the value of the shares, leaving Ms Liao eligible for PP.

13.     Centrelink say, essentially, that the money which is said to have been a loan from Mr Huang’s father was in fact a gift.

The evidence

14.     Turning firstly to the evidence about where the money came from to buy their house, Ms Liao and Mr Huang paid $685,000 for the house and approximately another $20,000 for costs.  They say they were unable to raise that amount themselves and so relied on a combination of funds.  They have given varying accounts of the sources of those funds.

15.      Ms Liao told this tribunal the money came from a gift of $237,000 from her parents, $333,000 from her father-in-law, $100,000 from a Mr Li who is a friend of her husband, and some of their own. 

16.     In contrast, the written reasons of the Social Security Appeals Tribunal (SSAT) record that Mr Huang told that tribunal that the money came from the proceeds of the sale of a unit in China, his savings, and the loan from his father. He did not tell the SSAT about the loan of nearly half the purchase price from Ms Liao’s parents, or the loan from Mr Li.  Mr Huang was unable to explain the discrepancy between the evidence given to this tribunal by himself and his wife, other than to say he cannot be responsible if the SSAT gets things wrong. 

17.     Turning to the transfer of funds from China to Australia to purchase the house, Ms Liao says the money was transferred to her and her husband in a series of transactions.  

18.     The $333,000 did not come direct from Mr Huang’s father.  Indeed, there is no evidence of any money being transferred directly from him.  Instead, it was transferred from China in a series of transfers through four different individuals, including a loan of $100,000 from a Mr Li.  I note that we know nothing about the loan of $100,000 from Mr Li.  The gift of $237,000 from Ms Liao’s parents was also made in a series of transfers.  In all, 13 different individuals were involved in transferring the money.

19.     Ms Liao and Mr Huang gave different explanations for this arrangement.  Ms Liao said in evidence that it was to overcome restrictions in China on the transfer of sums exceeding $20,000, and that many friends came to their assistance by transferring the money on lots that would not offend the restrictions.  Whether the arrangement was lawful or not is not my concern. 

20.     When asked about the people through whom the loan from her father-in-law was transmitted, Ms Liao said she knows nothing; she relied on her husband for that information.  She says the people who transferred the money from her parents were her sister and the others were friends although she did not know a couple of them. 

21.     Mr Huang gave a somewhat different explanation of the transfers.  He said he had a number of friends in China who needed cash; his father withdrew money, gave it to them; they transferred money to Mr Huang who sent them Australian currency. It was only in passing that he mentioned restrictions on currency transfers.  When pressed for details of these friends, Mr Huang said some were “friends of friends”; some he could barely remember and at least one he could not recall at all.  He was not able to give any information or contact details for any of the people who transferred amounts between $26,000 and $159,000 without anything in writing about the arrangements.  I find this claim implausible.

22.     Both Ms Liao and Mr Huang claimed that the money from his father was sent in two lots, or made available in two lots, in September and November 2006, and Ms Liao has provided a document setting out details of those transfers which were made through four people.  One of those people appears to be Mr Li who made a separate amount available.

23.     However, letters purporting to be from Mr Huang’s father refer clearly to one amount only, made available in November 2006.  Ms Liao and Mr Huang have not been able satisfactorily to explain this discrepancy.  I do not accept their explanation that it was only “a detail” that his father referred to only one amount, in November 2006, or that what he meant was that November 2006 was when the last part of the loan was made.

24.     Considering the evidence as a whole, I am not persuaded that Ms Liao and Mr Huang have been entirely frank in their evidence about where the funds came from to buy their house.  

25.     There is room for doubt that any of the money for the purchase of the house came from other sources, although I am inclined to accept that Ms Liao’s parents gave a considerable sum towards it.  

26.     There is insufficient evidence on which to reach a conclusive finding about where the money came from to buy the house in November 2006 but what evidence there is, in particular about the transfer of finds, in my view undermines the credibility of Ms Liao and Mr Huang generally.

27.     Nor am I satisfied that Ms Liao and Mr Huang have been frank about the arrangements for the purchase of shares.  Mr Huang borrowed $500,000 from Westpac for investment.  It was apparently all but spent within approximately one week.  It is not clear where it was all invested except that some went to buy shares. 

28.     Mr Huang claims that, by moving funds from his investment account into a cash management account, he was repaying his father the loan for the house and then drawing on them again himself.  I do not accept this.  Even if Mr Huang’s father did lend him money to buy the house, nothing about this arrangement had anything to do with repaying a loan.  Why ever it was done, I am satisfied it was for Mr Huang’s purposes alone.

29.     There is also conflicting oral and documentary evidence about when Mr Huang asked his father for a loan and when he approached the bank, all of which further undermines the credibility of Ms Liao’s and Mr Huang’s evidence.  

30.     Turning to the letters, I am not satisfied that the documents purporting to be letters from Mr Huang’s father are genuine. 

31.     Ms Liao has produced to the Tribunal two envelopes in which three letters from her father-in-law are said to have been received.  I accept that documents were posted in those envelopes on the dates shown on them.  However, even assuming they were written by Mr Huang’s father, it does not follow that their contents are true.  They are at odds in some significant respects with Ms Liao’s and Mr Huang’s evidence.

32.     Ms Liao and Mr Huang claim that he approached his father in January 2009 for a loan to buy shares.  However, the letter in November 2009 from Mr Huang’s father makes no reference to a request for a loan in January 2009.  I have already referred to the discrepancy between the single loan in November 2006 in the letters and the oral evidence about the loan in two amounts in 2006.

33.     Ms Liao says the most recent letter (the “repayment schedule”) was prepared at the request of the Administrative Appeals Tribunal.  I do not know what was said at a preliminary conference but it is quite possible that the conference registrar suggested that Ms Liao should obtain evidence of any agreement for repayments.  However, at its highest, the “repayment schedule” is a document created after the event. 

34.     In my view, even allowing that letters came from Mr Huang’s father, they do not assist Ms Liao’s case.

35.     One of the recent documents purporting to be from Mr Huang’s father is headed “Explanation to my statement”.  It states that Mr Huang has “carried out the process of repaying me” by means of transfers from his investment account to his cash management account.  However, nothing about these transactions indicates any transfer of funds to Mr Huang’s father, even nominally, and the evidence about transfers from the investment account to Mr Huang’s cash management account, cannot be reconciled with his bank statements that are available.

36.     Turning to the sale of the shares at the end of July 2010, initially, Ms Liao’s evidence was that there was no profit at all from the sale.  Her words were “no gain or loss”.  She thought the proceeds might have gone to the cash management account; none went to Mr Huang’s father.  She thought Mr Huang might repay his father soon – or next year – or he might invest it.  She later said he realised about $247,000 from the sale and there was some profit. 

37.     Mr Huang’s evidence about the sale of the shares was not at all satisfactory.  He was unable to say, except in the vaguest terms, what has happened to the proceeds of the sale of the shares barely 6 weeks ago.  He thought the profit was only “a few thousand” although he could not say how much.  When pressed, he thought the proceeds were over $200,000 but otherwise recalled nothing. 

38.     Mr Huang could not say anything about the current state of the investment account or the cash management account.  Although he claimed last week that he could produce all the documents about these accounts “tomorrow” he did not bring them to the resumed hearing today.   He does not suggest they are not available but, in his view, they are not needed in these proceedings, which concern his wife’s application.   

39.     Mr Huang has had an opportunity to produced documents about his sale of the shares but has declined to do so.  His decision does not help his credibility.

40.     Although both Ms Liao and Mr Huang say he sold the shares earlier on the day that she applied again for PP, 28 July 2010, the proceeds are not disclosed in either her application or Mr Huang’s partner statement.  I do not accept their explanation which, in effect, was that the information was not relevant because their interpretation of their obligations not require them to disclose the information.

41.     Each of the inconsistencies or unsatisfactory explanations on its own might be explicable and might not necessarily undermine credibility.  However, the cumulative effect of the evidence is to undermine the credibility of both Ms Liao and her husband.

42.     Turning to the character of a loan as distinct from that of a gift, I will accept that $333,000 came from Mr Huang’s father but I am not satisfied that it was a loan. 

43.     In the first place, there is no evidence of a loan.  There is nothing in writing.  Ms Liao says this was because it was between Mr Huang and his father; a gentlemen’s agreement.  I accept it is quite possible that a parent could make a loan, even of that size, without a formal agreement.  However, looking at all the circumstances, I am not satisfied with this explanation.

44.     There is no evidence at all linking the transfers of any funds from Mr Huang’s father.

45.     The only “evidence” is the “repayment schedule” from Mr Huang’s father, made in June 2010, and even that, by its own terms, was an agreement after the event.  It says:

After talking to him, I request him to repay the money by 2013.

46.     The payment has none of the characteristics of a loan.  There was no time frame for repayment and, it seems, no obligation to repay at all.  There was no interest payable.  There was no security for what was a very sizeable loan and it seems never to have been disclosed to anyone, whether Centrelink or Westpac, as a liability.

47.     The only evidence, such as it is, loan comes from Ms Liao and Mr Huang’s oral evidence and the letters from his father which were produced to Centrelink only after the parenting payment was discontinued.  In my view, all of the evidence points to the money being a gift. 

Conclusion

48.     In conclusion, I am satisfied, on the evidence before me, that in about January 2009, Mr Huang wanted to invest in the share market.  When his father declined to lend him money, he borrowed against the equity in their home to purchase shares.  In fact, Mr Huang made a revealing statement in evidence when he said that, when his father refused to lend him more money “Then I realised I could mortgage my home as security”.  He was quite entitled to do that but the effect was to put their combined assets above the value limit for parenting payment and meant that Ms Liao no longer qualified for it for the relevant period.

49.     I affirm the decision under review.

I certify that the 49 preceding paragraphs are a
true copy of the reasons for the decision
herein of Senior Member Jill Toohey

Signed:         ..............[sgd]...............................................................
           Diana Weston  Associate

Date of Hearing  13 September 2010

Date of Decision  13 September 2010
Date of Written Reasons  21 September 2010

ApplicantSelf-represented

Representative for the Respondent                Mr Anthony Carter, Sparke Helmore