Pizarcoff; Secretary, Department of Family and Community Services - [2002] AATA 183

DECISION AND ORAL REASONS FOR DECISION [2002] AATA 183

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S2001/364

GENERAL ADMINISTRATIVE DIVISION       )
           Re      SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Applicant
           And    THOMAS PIZARCOFF
  Respondent

DECISION

Tribunal Senior Member WJF Purcell

Date12 March 2002
PlaceAdelaide

Decision      For the reasons given orally at the Hearing of this matter, the Tribunal sets aside the decision under review, insofar as it decided that the respondent was not a homeowner, and substitutes a decision that the respondent is a homeowner for the purposes of the Social Security Act 1991.
  (Signed)
  WJF PURCELL
  (Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – Austudy – whether respondent is a "homeowner" for the purposes of assessing his rate of Austudy – definition of "homeowner" – reasonable security of tenure
Social Security Act 1991 sections 11
Johnston and Repatriation Commission (AAT 9508, 6 May 1994)

ORAL REASONS FOR DECISION

12 March 2002 Senior Member WJF Purcell

This is an application for review of a decision of the Social Security Appeals Tribunal (the SSAT) of 17 August 2001, insofar as it set aside the decision of an Authorised Review Officer of 24 May 2001, to treat the respondent as a homeowner for the purposes of the Social Security Act 1991 (the Act). The SSAT substituted a decision that the respondent was not a homeowner.
The evidence before the Tribunal comprised the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the T Documents), together with the exhibits tendered by the parties. Ms Odgers represented the applicant (the Department). The respondent appeared on his own behalf, and gave oral evidence.
The respondent had been in receipt of Austudy since early 1999. He is a director and holds 50% of the shares in a company known as Sun Exports Pty Ltd (the Company), which was registered on 8 January 1998. The other director and shareholder is Mr Kym Glouftsis, the respondent's brother (the brother). When he received a severance payment, the respondent lent money to the Company. The balance of the loan as at 30 June 2000, was $111,389.19.
The Company and Mr Paul Glouftsis, the respondent's father (the father), own, as joint tenants, a property situated at 6 Lomond Circuit, Mawson Lakes (the property).
The respondent resides at the property as a tenant of the Company, and has done so since April 2000. The original one-year tenancy agreement, between himself and the Company, which expired on 25 April 2001, has been renewed for a further year. The rent payable is $120 per week, which is collected by the father, as the Company's agent, and deposited by him in the Company's account. The father resides also at the property, which is a four-bedroom home, which the respondent said in evidence is worth $270,000. It is unencumbered.
On 12 April 2001, a delegate decided that the respondent should be treated as a homeowner for the purposes of determining whether his assets were below the relevant asset limit for the calculation of his rate of Austudy payment. The decision was affirmed on 24 May 2001 by an Authorised Review Officer on 24 May 2001.
The respondent's Austudy was cancelled, as his assets were calculated at the time as being higher than the maximum limit. I was informed at the Hearing that the Department has recalculated the value of the respondent's assets, and concedes that whether he is a homeowner or not a homeowner, his assets are less than the allowable limit.
The respondent applied to the SSAT for review of the decision, and on 17 August 2001 the SSAT decided that the respondent was not a homeowner for the purposes of determining whether he was below the relevant assets limit for the purposes of calculating his rate of Austudy. The Department has applied for review of that decision.
The Department contends that a person's rate of Austudy payment is calculated by reference, in part, to a person's assets, and that there is a different asset limit for a person who is considered to be a homeowner, as opposed to that applying if the person is considered to be a non-homeowner.
The term "homeowner" is defined in section 11(4) of the Act, which, as far as is relevant for the purpose of these proceedings, provides:
"11(4) For the purposes of this Act:
(a) a person who is not a member of a couple is a homeowner if:
(i)the person has a right or interest in the person's principal home; and
(ii)the person's right or interest in the home gives the person reasonable security of tenure in the home;
…"
Section 11(8) of the Act provides:
"If a person has a right or interest in the person's principal home, the person is to be taken to have a right or interest that gives the person reasonable security of tenure in the home unless the Secretary is satisfied that the right or interest does not give the person reasonable security of tenure in the home."
The Department submits that paragraphs 11(4)(a) and 11(8) of the Act are applicable, as the respondent has a right or interest in his principal home, and the right or interest in the home gives him reasonable security of tenure. The property is the respondent's principal home. It is owned jointly by the Company and the father, and rented by the respondent from the Company. As the respondent is a director and controlling mind of the Company, a shareholder of the Company, and principal debtor personally, through a loan advanced by Hal Computing Super Fund, of which the respondent is one of the two trustees, and one of the two contributors, the other being the brother.
The Department contends finally that, in the light of the inter-relationship, the parties' family relationship, the respondent would have a role in the decision-making process as to whether he would be required to leave the property.
The respondent argues that he is not the controlling mind of the Company, as far as his ongoing ability to remain in the home is concerned. His brother has a 50% say in the Company, and the father has a 50% interest in the home. The respondent has only a 25% interest in the home, via the Company. He has no security of tenure therefore. Family relationships can become strained, and if he were asked to leave the property he would do so. This is not security of tenure. The respondent argued also that in accordance with Departmental Guidelines, a 1 year lease is not regarded by the Department as providing security of tenure, and the lease was drafted accordingly.
In the course of his submissions, the respondent incorporated some paragraphs of the SSAT decision, in particular T2/8, which reads, in part:
"… A further complication Mr Pizarcoff outlined was the fact that his father, who is aged, had made provision under his will for his estate to be divided amongst the siblings (three including Mr Pizarcoff). If Mr Pizarcoff's father passed away this would also impact upon the ongoing tenancy that Mr Pizarcoff has in the property.
The other landholder, Mr Glouftsis, may also find himself in circumstances where the asset in the property may be called in, which would then also affect the arrangements Mr Pizarcoff has with respect to the leasing of the property.
In relation to entering into the twelve month lease Mr Pizarcoff said that it seemed appropriate at the time and that was the maximum that could foreseeably be allowed given economic uncertainties.
Mr Pizarcoff also said that he felt there were some problems with calculation of values of other assets and referred to his further submission.
…"

and T2/9 which reads, in part:

"…
In looking at all the documents, the Tribunal is of the view that Mr Pizarcoff is not the Registered Proprietor but has an interest in the property, being a shareholder of one of the Registered Proprietors of the property. The Tribunal is satisfied that Mr Pizarcoff is not, in the first instance, the owner of the property but does have a call on company assets, being a creditor with a loan liability that the company has in his name. Mr Pizarcoff said that the company was involved in investment and land development.
The Tribunal is of the view that Mr Pizarcoff, given the nature of the arrangement with the company and the involvement of a third party, did not have security of tenure and that it was not inappropriate for a twelve month tenancy to be entered into.
…"

The respondent gave evidence that at all times since the Company was registered on 8 January 1998, he has been a signatory of the Company's accounts, and held the Company seal. He said that the brother, who has resided in Sydney since 1998/1999, has never been a signatory of the Company accounts, but that the father became a signatory at about the time the building agreement with AV Jennings was signed. This, he said, was so that the father could pay moneys to the Company which, in turn, could be paid to AV Jennings, as progress payments. The father paid a total of $135,000, the respondent says, approximately 50% of the total cost. The costs were purchase of the land $89,000, and construction of the house $148,513 according to T9/69, a total of $237,513. The father is no longer a signatory of the Company accounts.
The respondent gave evidence also that the rental of $120 per week represents about 50% of the market rate of rental for similar four-bedroom homes in the area, and that the father collects the rent and pays it into the Company account. The Company pays all the outgoings on the property.
On the respondent's evidence, he is the only signatory now, of the Company's accounts and he holds the Company seal. The tenancy agreement is between the Company and him only. The father, being the other joint tenant, is not the landlord. He also, as a joint tenant, is not able to deal with his portion of the property by testamentary disposition. The Company will become the sole owner of the property on the father's death.
I have examined the whole of the evidence carefully and in detail, and I have taken into account the parties' submissions. In my view, the respondent is the controlling mind of the Company. The lease can only be terminated by the respondent or the Company. He is the sole signatory of Company accounts, its main creditor, one of two directors, and holds the Company seal. As the Tribunal said in Johnston and Repatriation Commission (AAT 9508, 6 May 1994) at paragraphs 41 and 42:
"41. Taken in the context of the Act, we consider that the word "tenure" should not be limited to the title by which Mr and Mrs Johnston hold the property, but should be given the more general meaning of the "holding" of the property or its occupation. It seems to us that this meaning accords with the purpose of the Act and the context in which the term is used. The narrower meaning is already reflected in the person's right or interest in the home and to read that narrower meaning also into the "tenure" would make the section meaningless. Having reached that conclusion, we consider that the words "security of tenure" mean a certainty or an assurance of occupation.
42. The security of tenure need only be reasonable. When account is taken of the rental allowance provisions of the Act and the nature of lease agreements, it might well be arguable that, generally, a lease agreement would not give a person reasonable security of tenure in the home. On the face of it, this is such a case but we think that we are entitled to look beyond the outline of the arrangements and to the identity of the lessor and the lessees. When that is done, we find that Mr and Mrs Johnston are the controlling minds of the lessor, Annandale. We cannot conceive that Mr and Mrs Johnston would pass a motion as directors of Annandale that they should be asked to quit the house. In this case, we consider that whether they have a periodic lease or a tenancy at will, their interest as lessees gives them reasonable security of tenure in the Beaumaris property."

With respect, I adopt the Tribunal's reasons.

In this matter, looking beyond the Company structure and family arrangements, I find that the respondent is the controlling mind of the Company, which will not move against his interests without his input. As was the case in Johnston, whether he has a 1 year or other periodic lease of the property, his interest in the property gives him, in my view, reasonable security of tenure. I am satisfied on the evidence therefore, that the respondent is a homeowner for the purposes of the legislation.
For these reasons, the Tribunal sets aside the decision under review insofar as it decided that the respondent was not a homeowner, and substitutes a decision that the respondent is a homeowner for the purposes of the Act.
I certify that the 21 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member WJF Purcell
Signed:         .....................................................................................
  Associate
Date of Hearing  12 March 2002
Date of Decision  12 March 2002
Counsel for the Applicant        Ms L Odgers
Solicitor for the Applicant         Centrelink
Counsel for the Respondent    In person
Solicitor for the Respondent    -