Peter Jones and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2013] AATA 453
[2013] AATA 453
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2012/3423
Re
Peter Jones
APPLICANT
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal The Hon R J Groom AO (Deputy President)
Date 3 July 2013 Place Hobart The decision under review is set aside and the matter remitted to the respondent for the purpose of assessing, in accordance with these reasons for decision, the applicant’s entitlement to the age pension.
[Sgd Hon R J Groom]
Deputy President
SOCIAL SECURITY – age pension – assets test – whether the value of the applicant’s assets exceeds the assets value limit – whether applicant and his wife made a loan to a private company – the amount of that loan – whether a company, the assets of which are wholly attributable to the applicant, owns one half or one third interest in two properties – decision under review set aside and remitted
Social Security Act 1991, ss 11(1), 1122, 1207N, 1207Q
Social Security (Administration) Act 1999
Melbourne and Secretary, Department of Social Security (1988) 20 FCR 496
Cziesche and Secretary, Department of Family and Community Services [2003] AATA 1232
Barry v Heider (1914) 19 CLR 197
REASONS FOR DECISION
The Hon R J Groom AO (Deputy President)
This is a review of a decision made by the Social Security Appeals Tribunal (“SSAT”) on 5 July 2012. That decision affirmed an earlier decision by Centrelink cancelling Mr Jones’ age pension. His pension was cancelled on 16 January 2012 because Centrelink determined that his assets exceeded the assets value limit for the age pension. The cancellation was effective from the date of claim, namely 29 April 2011.
Mr Jones is an Australian citizen who moved to live in New Zealand following his retirement from the building business he had conducted in Australia. He qualified for the age pension subject only to the application of the means test on his assets.
The effect of the assets test is that, as at 29 April 2011, a member of a “homeowner couple” will have his or her rate of age pension reduced to nil if the couples combined assets exceeds $991,000. It is therefore necessary to consider the combined assets of Mr and Mrs Jones.
The relevant legislative provisions are found in the Social Security Act 1991 (“the Act”) and the Social Security (Administration) Act 1999 (“the Administration Act”).
The only issues in dispute between the parties in these proceedings are:
(a)At the relevant time what is the value of Mr and Mrs Jones’ assets?
(b)Was Mr Jones then entitled to be paid the age pension?
The SSAT determined that the value of Mr and Mrs Jones’ assets exceeded the amount at which any rate of age pension was payable to Mr Jones. In paragraph 42 of its decision it concluded:
“Applying the assets test in Module G of section 1064 of the Act, the rate of age pension payable to Mr Jones is nil. As a consequence he is not entitled to be paid age pension”.
Section 11(1) of the Act defines the term “asset” to mean “property or money (including property or money outside Australia)”.
The word “property” is not itself defined in the Act but has been broadly interpreted by the Tribunal and Courts to include all real and personal property. (See, for example, Melbourne and Secretary, Department of Social Security (1988) 20 FCR 496).
The Act expressly provides that a loan made by the person is an asset for the purpose of the assets test. (See section 1122 of the Act and also Cziesche and Secretary, Department of Family and Community Services [2003] AATA 1232).
At paragraph 41 of its decision the SSAT summarised its findings on the combined assets of Mr and Mrs Jones as follows:
“Personal effects $ 10,000
Motor vehicle $ 10,000
Funds held in bank and cash management accounts $ 52,238
Loan from P & M Jones to Northrow Pty Ltd $ 202,449
Loan from P & M Jones to Limeplace Construction Pty Ltd $ 482,282
Northrow Pty Ltd $ 251,130
Limeplace Construction Ltd Nil
Total Assets$1,008,099”
At the hearing it was agreed by the parties that the list of assets as set out in paragraph 41 of the SSAT decision was a helpful starting point for the Tribunal in its consideration of the value of Mr and Mrs Jones’ assets.
Neither party disputes the items and values set out in the SSAT list for “personal effects ($10,000), motor vehicles ($10,000), funds held in bank and cash management accounts ($52,238) and the loan from P & M Jones to Limeplace Construction Pty Ltd ($482,282). The Tribunal is satisfied that those assets are assessable assets of the applicant and finds that the values mentioned are accurate.
The only assets remaining in dispute are:
(a)The $202,449 loan from P & M Jones to Northrow Pty Ltd and
(b)The value of the assets at Northrow Pty Ltd.
THE LOAN TO NORTHROW PTY LTD
The SSAT decided that Mr Jones and his wife had lent $202,449 to Northrow Pty Ltd and as that loan had not been repaid it is an asset for the purposes of the Social Security law. (See paragraph 24 of the SSAT decision)
The balance sheet for Northrow Pty Ltd for the year ended 30 June 2011 lists the following liabilities:
“Income tax payable $ 2,512.00
Loan bank $113,551.00
Loan other $332,814.00
Total Liabilities $448,880.00”
(See T22, page 196)
In an email to Mr Jones’ accountant, Mr Jon Kneeves, dated 14 December 2011 Patricia Middleton of Centrelink asked:
“Hello Jon,
Thank you for the information.
Can you please advise:
1. What is the security for the bank loan?
2. The amounts of each ‘loan other’ and the person(s) who have loaned the money?
Thank you,
Patricia Middleton”. (T23, page 197)
Mr Kneeves replied to Ms Middleton by email dated 20 December 2011 in the following terms:
“Hi Patricia
Peter Jones advises as follows:
1. Security for the loan was the principle (sic) residence of P & M Jones.
2. Loan Other is:
Loan Limeplace Pty Ltd $130,365
Loan P & M Jones $202,449
Hope this helps
Jon Kneeves” (T23, page 197)
It should be mentioned that Mr Jones said in evidence that Mr Kneeves had been his accountant for “quite a while”. The evidence indicates he is a certified practising accountant. It is reasonable to infer from the evidence that Mr Kneeves was an experienced accountant with an understanding of Mr Jones’ companies and of his financial affairs.
Mr Jones denies that he and his wife had ever personally lent Northrow Pty Ltd the amount of $202,449 “nor any other amount”. He made a handwritten statutory declaration dated 15 April 2013 declaring that:
“P & M H Jones have never personally loaned Northrow Pty Ltd the amount of $202,449 nor any other amount as shown by “Loan Other” from the tax file of Northrow Pty Ltd OF2011.
All money loaned to Northrow Pty Ltd was through Limeplace Pty Ltd and a Westpac bank loan.
An amended set of accounting figures was produced to verify these changes”.
In his oral evidence to this Tribunal Mr Jones said:
“I’m not disputing that money wasn’t lent to Northrow, but I did not personally – my wife and I, which is P & M Jones – we did not personally lend that money to Northrow, even though my accountant sent an email to Centrelink at one stage, saying that the loan – it was called “loan, other” and somebody queried what “loan, other” meant, and he said, “Loans from P & MH Jones. That was sent from my accountant without my knowledge at the time, because Centrelink had asked him if he could forward it. I’ve since spoken to my accountant about that; he has changed the wording of it so the loan was actually through Lime Place Proprietary Limited to Northrow Proprietary Limited, and not from me personally, or my wife personally, so that $202,449 shouldn’t be counted in.”
(Transcript page 8)
When making his application to this Tribunal Mr Jones placed reliance on the revised balance sheets for both Limeplace Pty Ltd and Northrow Pty Ltd prepared by Mr Kneeves and forwarded to Mr Jones by email on 2 August 2012. This email (T1, page 7) was in the following terms:
“Hi Peter
Based on your information
Attached is Balance Sheets as at 30 June 2012
For Limeplace and Northrow for your review.
1. Paying out Bank Loan from Super is still loan from you – now $113,551
2. All other loans now between Limeplace and Northrow – now $332,814 in each
3. Your loan to Limeplace not adjusted.
Jon”
It is of significance that the Northrow Pty Ltd revised balance sheet, which Mr Kneeves said is based on information provided by Mr Jones himself, records “loan – P& M Jones” $113,551. It is noted that this revised financial statement is in conflict with the statutory declaration he made when he said that he and wife had never made any loan to Northrow Pty Ltd.
In his oral evidence Mr Jones disputed the accuracy of the revised balance sheet prepared by Mr Kneeves even though he had forwarded it with his application to the Tribunal. Mr Jones told the Tribunal in his oral evidence that the reference to a loan of $113,551 was wrong and that “I’ve since resolved that little thing”. (Transcript page 20)
If Limeplace Construction Pty Ltd had lent Northrow Pty Ltd $332,814 why wasn’t that loan included as an asset of the company in its balance sheet as at 30 June 2011? The only loan mentioned in that balance sheet is the loan of $130,365.26 to Northrow Pty Ltd. (See paragraph 39 of the SSAT decision) Mr Jones had declared the information in the statement of accounts to be “true and correct”. (See T18 page 164)
The changes to the company’s financial statements which had previously been considered and approved by Directors’ (see T5 page 44) obviously raise questions as to the accuracy and reliability of those changes.
The Tribunal must base its decision on the material before it after assessing the credibility of that material. Mr Kneeves said in his email of 20 December 2011 that the information in the email was as advised by Mr Jones. Mr Jones denies he provided that information. Sometimes misunderstandings occur between a client and an adviser. It would have been helpful however if Mr Kneeves had given evidence and explained the contradictions. Apparently Mr Jones asked Mr Kneeves if he “wanted” to give evidence but he had indicated he would not be available. (Transcript page 20)
After considering all of the material before it the Tribunal concludes that the most credible evidence about loans made to Northrow Pty Ltd was that provided by Mr Kneeves in his email of 20 December 2011 in response to an enquiry from Patricia Middleton when he stated that “Peter Jones” had advised that “loan other” included a loan of $202,449 from “P & M Jones”.
The Tribunal therefore concludes from the evidence before it that, as at 29April 2011, the assessable assets of Mr and Mrs Jones included the loan of $202,449 to Northrow Pty Ltd.
THE VALUE OF THE ASSETS OF NORTHROW PTY LTD
It is not in dispute that the applicant is sole shareholder in Northrow Pty Ltd. Also that it is a designated private company (section 1207N of the Act) and a controlled private company (section 1207Q of the Act). The Tribunal finds that 100% of the company’s assets are attributable to the applicant.
The issue is whether Northrow Pty Ltd owns one half or one third of two units situated in Vista Drive at Ashmore in Queensland.
Mr Jones has consistently maintained that Northrow Pty Ltd owns only a one third interest in the properties. He told the Tribunal that Northrow Pty Ltd and DNA Developments Pty Ltd purchased the two units after their representatives had attended the auction of the properties. A third company D & C Tiling (Qld) Pty Ltd later purchased a one third interest in the units. The title to the two units however remain in the names of Northrow Pty Ltd and DNA Developments Pty Ltd only. Mr Jones said it would “only cost stamp duty” if ownership was changed on the title to include D & C Tiling (Qld) Pty Ltd.
Mr Jones said in his oral evidence:
“It was one of those things where, you know, three of us got together to do a development and DNC (Sic) Tiling were overseas at the time, when the land came up for auction, so DNA Developments and Northrow Proprietary Limited attended the auction, bought the land and to save a bit of a hassle, we bought it in the two names and just – consequently, talked to DNC Tiling and said, well, we have got the land, you know, you’re a third share of it. And to save changing the title after we had signed for it, which only cost stamp duty, we just left it like it was”. (Transcript page 13)
The Tribunal has before it statutory declarations made by Directors on behalf of D & C Tiling (Qld) Pty Ltd and DNA Developments Pty Ltd stating that those two companies have a one third interest in the two units in Vista Drive. Although it would have been preferable for the makers of the two statutory declarations to have been called to give evidence and be subject to cross examination the Tribunal does accept the authenticity of the two declarations.
The SSAT recognised that a legal person (in this case the company) may have an equitable interest in a property even though the person’s name does not appear on the title. That Tribunal, however, said it could not be satisfied that an equitable interest exists without further documentary evidence in support of that contention. It said (at paragraph 34) :
“For me to be satisfied that such an arrangement exists I would need to have before me documentary evidence from the directors of all three companies – Northrow, DNA Developments Pty Ltd and D & C Tiling Qld Pty Ltd – confirming the circumstances of the ownership of the properties. It was Mr Jones’ evidence that no such documentation exists as the arrangement is a ‘gentleman’s agreement’. In the absence of any written evidence to the contrary, it follows that I must apply the attribution of ownership which appears on the face of the certificates of title. The certificates of title show that Northrow owns a ½ interest as a tenant in common in both properties with DNA Developments Pty Ltd.”
A company may have an equitable interest in a property despite its name not appearing on the title. If it does have such an interest it could seek a remedy in equity to protect that interest. Even under the Torrens system of title a registered proprietor is bound by an established but unregistered equitable interest. (See Barry v Heider (1914) 19 CLR 197).
The Tribunal is satisfied on the evidence, in particular Mr Jones’ consistent statements on this issue and the statutory declaration by Mr Benton and Ms Dal-Cin, that Northrow Pty Ltd has only a one third interest in the two units in Vista Drive at Ashmore.
CONCLUSION
The Tribunal therefore finds as follows:
(a)A loan of $202,449 from Mr and Mrs Jones to Northrow Pty Ltd was, at the relevant time, an asset of Mr Jones for the purpose of assessing his entitlement to the age pension.
(b)Northrow Pty Ltd had, at that time, only a one third interest in the two units at Vista Drive at Ashmore.
DECISION
The decision under review is set aside and the matter remitted to the respondent for the purpose of assessing, in accordance with these reasons for decision, the applicant’s entitlement to the age pension.
I certify that the preceding 38 (thirty-eight) paragraphs are a true copy of the reasons for the decision herein of The Hon R J Groom AO (Deputy President)
.............[Sgd]..............
Administrative Assistant
Dated : 3 July 2013
Date(s) of hearing 30 April 2013 Applicant On his own behalf via telephone link Counsel for the Respondent Mr B Sparkes Solicitors for the Respondent Program Litigation and Review Branch
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