Ng; Secretary, Department of Social Services and (Social services second review)
[2021] AATA 2
•8 January 2021
Ng; Secretary, Department of Social Services and (Social services second review) [2021] AATA 2 (8 January 2021)
Division:GENERAL DIVISION
File Number(s): 2020/6642
Re:Secretary, Department of Social Services
APPLICANT
AndMichael Ng
RESPONDENT
DECISION
Tribunal:Senior Member A Poljak
Date:8 January 2021
Place:Sydney
The decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal made on 18 September 2020 will be stayed pending final determination or until further order of the Tribunal.
..............................[SGD]..........................................
Senior Member A Poljak
CATCHWORDS
PRACTICE AND PROCEDURE – stay application – age pension – cancellation – debt private controlled company – attributable stakeholder – prospects of success – prejudice to the parties – public interest – whether review would be rendered nugatory – stay application granted
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s 41
Social Security (Administration) Act 1999 (Cth) s 63
Social Security Act 1991 (Cth) ss 1207Q, 1207X
CASES
Secretary, Department of Employment and Workplace Relations v Anastasiadis [2007] AATA 1065
SECONDARY MATERIALS
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017
REASONS FOR DECISION
Senior Member A Poljak
8 January 2021
The Secretary, Department of Social Services (the Secretary) seeks to review the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (SSCSD) made on 18 September 2020 (substantive proceedings). The SSCSD set aside the decision of an authorised review officer (ARO) dated 7 April 2020. The ARO found that Mr Ng, the respondent, failed to disclose his interest in a company called Liface Pty Ltd (the company) and decided to cancel his age pension (AP) with effect from 5 April 2016 to 17 February 2020 and to raise a debt of $90,813.03. In substitution, the SSCSD decided that the respondent’s AP was to be restored from the date of cancellation and no debt arises. This was based on its finding that the respondent was not an attributable stakeholder of the company in accordance with section 1207X of the Social Security Act 1991 (Cth) (the Act) and the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (the Principles).
On 30 October 2020, the respondent lodged a new claim for AP. As of the date of these proceedings, the respondent’s claim is yet to be determined as the Secretary advised that further documents have been requested from the respondent.
These interlocutory proceedings concern an application for an order under subsection 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AATAct) staying the operation of the decision until final determination of the substantive proceedings before this Tribunal.
The respondent opposes the granting of a stay order.
POWER TO GRANT A STAY
Subsection 41(1) of the AAT Act provides that the making of an application to the Tribunal for a review of a decision does not affect the operation or implementation of the decision under review. In other words, the decision under review has full effect until and unless it is set aside or replaced.
The Tribunal may, after taking into account the interests of any persons who may be affected by the review, make such orders staying the operation or implementation of the decision pursuant to subsection 41(2) of the AAT Act, as it considers appropriate for the “purpose of securing the effectiveness of the hearing and determination of the application for review”.
In Secretary, Department of Employment and Workplace Relations v Anastasiadis [2007] AATA 1065 at [6]-[7], the Tribunal summarised the well-established relevant factors and principles which may be considered when determining a stay application:
[6] The decision whether to grant a Stay is entirely discretionary. It follows that an applicant does not have an automatic right to a Stay. Given the effect of s 41(1) of the AAT Act, it must necessarily be inferred that the reviewable decision, the decision of the SSAT in this case, is correct until proven otherwise. Further, the general principle applied by the courts that, prima facie, the successful party has the right to the fruits of a judgement should also apply in the case of Tribunal decisions. In the courts, an applicant for a Stay is required to show that there are special circumstances which would justify the stay of execution of the judgement.
[7] The matters which are considered by the courts to constitute special circumstances are similar to those enunciated by the Tribunal when dealing with Stay applications. Deputy President G.D. Walker in Re Secretary, Department of Workplace Relations and Nicholas [2006] AATA 497 at [21] and Senior Member B.J. McCabe in Re Labrador Liquor Wholesale Pty Ltd and CEO of Customs [2006] AATA 485 at [5] set out the following factors which may need to be considered in determining whether a Stay should be granted.
a)The prospects of success or the merits of the applicant’s case on review.
b)Whether there will be prejudice to the parties or anyone else if a Stay were not granted.
c)Whether it is in the public interest to grant a Stay.
d)That the review application, if successful, would be rendered nugatory or pointless if the Stay was not granted.
(emphasis added)
PROSPECTS OF SUCCESS
Although it is neither necessary nor appropriate for me to determine the substantive matter in these interlocutory proceedings, it is relevant for me to form a view as to the prospects of the Secretary’s application for review.
Below is a brief summary of the available relevant evidence:
(a)In a statutory declaration dated 28 August 2020, the respondent stated that he began the company in 1986 with his former de facto partner Ms Ann Louey (also known as Chi Ying Ann Lau) and Ms Sandy Lau. The company purchased a property in Warriewood NSW (Warriewood property). The respondent, Ms Louey and their children resided at the Warriewood property and also derived an income from leasing out the ground floor, which was predominantly used to repay a Westpac bank loan. In about 2000, the Westpac loan was fully repaid and from then the respondent and Ms Louey shared the income derived from the property. In about 2012, the respondent stated that his relationship with Ms Louey broke down and they went about splitting their joint assets. Shortly before their separation, the respondent operated a Chinese restaurant, Sea Star Restaurant, out of the Warriewood property until about May 2013. He paid discounted rent to the company while operating the business.
(b)Until 29 April 2013, the respondent held 49 of the 100 shares of the company, with the other 51 shares held by Ms Lau. On that date, Ms Lau surrendered her 51 shares. The transfer resulted in the shares being held as follows: Ms Louey held 30%; the respondent held 30%; and the respondent and Ms Louey both held 40%. In his statutory declaration, the respondent stated that the joint shareholding was for their four children; 10% for each one. The respondent stated that they estimated at the time that the Warriewood property was worth about $1 million, so he was entitled to $300,000. Around July 2013, Ms Louey and the respondent jointly purchased a separate property in Dee Why (Dee Why property) for the respondent to reside in. The respondent stated that in receiving joint ownership of the Dee Why property, it was understood he had forgone all his rights in relation to his 30% share in the company. After 2014, he claimed that he was not involved in the company nor received any money or benefits (informal agreement). This informal agreement was not formalised until 2019.
(c)The respondent’s income tax return for the 2014/2015 financial year shows that the respondent received director’s fees totalling $17,000.
(d)On 18 April 2016, the respondent claimed AP, which was subsequently granted with effect from 5 April 2016. The respondent also provided an Income and Assets form in which he did not disclose his involvement or shareholding in the company.
(e)On 14 October 2019, the respondent was issued with a notice under section 63 of the Social Security (Administration) Act1999 (Cth) (the Administration Act) requesting that he provide his personal tax returns and income tax returns for the company for the 2015 to 2018 financial years.
(f)On 24 October 2019, the respondent surrendered the entirety of his shares in the company to Ms Louey and resigned as director.
(g)The Warriewood property is owned by the company to this day and is unencumbered. On 17 December 2019, the respondent advised that the property had an estimated value of $2 million.
As submitted by the respondent to the SSCSD, he maintains that the company was not a “controlled private company” in relation to him for the purposes of section 1207Q of the Act since 2013, when he entered into the informal agreement with Ms Louey. He submits that he only held a 40% share of the company jointly with Ms Louey for their children, but otherwise had forgone his voting rights and involvement in the company. In submissions, the respondent stated that at the time of applying for the AP, he did not consider himself a director or shareholder of the company after the property settlement of the Dee Why property, so he answered “no” on the application form in relation to his company directorship and shareholdings.
The Secretary contends that at the relevant time, the respondent had a direct voting interest of 50% in the company and therefore passed the control test under subsection 1207Q(2) of the Act. As such, the Secretary further contends that the company was a “controlled private company” in relation to the respondent and that, contrary to the findings of the SSCSD, the respondent was an attributable stakeholder of the company from 5 April 2016 for the purposes of paragraph 1207X(1)(a) of the Act.
Paragraph 1207X(1)(a) of the Act gives the Secretary a discretionary power to determine whether an individual is an attributable stakeholder of a company. In making such a determination, the Secretary must comply with the Principles: subsection 1207X(5) of the Act.
I have reviewed the available evidence and considered the submissions of both parties. There does not appear to be an adequate explanation or evidence as to why the respondent and Ms Louey held shares in trust for their children and why the shares were not surrendered to them formally on 24 October 2019. Each of the children are adults at the relevant time and could have been made shareholders. Two of the children are directors of the company.
I am also not convinced on the terms of the informal agreement between the respondent and Ms Louey. The restructuring of the company which took place in April 2013 is inconsistent with the purported agreement as the respondent continued to hold a 30% share in the company. It was not until 24 October 2019 that the respondent surrendered the entirety of his shares in the company and his directorship.
Having regard to the Principles, on the available evidence, it appears that the respondent contributed to the company and benefited from the assets of the company over the years. He received director’s fees in the 2014/2015 financial year. He contributed to the repayment of the Westpac loan held over the Warriewood property, which was fully repaid in 2000. In about 2012 to 2013, the respondent also operated a business out of the Warriewood property and paid a discounted rate of rent to the company. A cursory review of the merits suggests there are reasonable prospects of a finding being made under section 1207X of the Act that the respondent was an attributable stakeholder of the company from 5 April 2016. However, the factors discussed above will require further analysis at the hearing of the substantive proceedings.
On the available evidence, it appears that the respondent has capacity to repay the debt. He shares joint ownership of the Dee Why property which is unencumbered and valued at approximately $1 million. He also receives regular funds from his son in the amount of $1,200.
While I accept that the respondent may file further evidence in the substantive proceedings, and without making any formal findings, I am satisfied, on the available evidence, that the Secretary has reasonable prospects of success in the substantive proceedings.
PREJUDICE TO THE PARTIES AND THE PUBLIC INTEREST
The Secretary contends that it will be prejudiced in the event that the stay is not granted by the Tribunal because if the decision under review were to be implemented, any amount of benefit paid to the respondent would be debts due to the Commonwealth should the substantive application be successful. The respondent lodged a new claim for AP on 30 October 2020. Assuming the Secretary’s substantive application is successful, should the 30 October 2020 claim be granted, and the stay order sought by the Secretary be refused, the respondent’s debt would be increased by the amount of any AP paid to him between 17 February 2020 and 30 October 2020. If the new claim is not granted, the respondent would be at risk of an even higher increase in the size of the debt.
It is in the public interest to avoid overpayments of public monies in circumstances where there are questions regarding the respondent’s qualification for payment. I accept that, if a stay is granted and the Secretary is ultimately unsuccessful in the substantive proceedings, the respondent may be without AP for a period. However, this is ameliorated by the fact that the respondent receives regular payments from his son in the amount of $1,200. No evidence has been provided demonstrating financial hardship. I also note that the respondent has re-applied for the AP and at the date of hearing, the outcome of this application is imminent pending the provision of further documents from the respondent.
For these reasons, I am satisfied that the public interest outweighs the prejudice caused to the respondent if a stay were to be granted.
APPEAL RENDERED NUGATORY
It is accepted that if the stay application is refused, the substantive proceedings would not be rendered nugatory.
DECISION
The decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (SSCSD) made on 18 September 2020 will be stayed pending final determination or until further order of the Tribunal.
I certify that the preceding 22 (twenty-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak
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Associate
Dated: 8 January 2021
Date(s) of hearing: 16 December 2020 Date final submissions received: 18 December 2020 Solicitors for the Applicant: Services Australia Solicitors for the Respondent: Advance Lawyers Group Pty Ltd
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