RODNEY IVORY and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2010] AATA 167

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 167

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  2009/4497

GENERAL ADMINISTRATIVE DIVISION		)
Re		RODNEY IVORY

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal  Senior Member Bernard J McCabe

Date 10 March 2010

Place Brisbane

Decision  The Tribunal affirms the decision under review

......................[SGD]........................

Senior Member

CATCHWORDS

SOCIAL SECURITY – age pension – rejection of application for rent assistance –tenant a shareholder in the company that owns the property – ineligible homeowner – right or interest in person’s principle home – right or interest gives rise to reasonable security of tenure in the home – decision affirmed

Social Security Act 1991 (Cth) ss 11, 13, 1070B, 1070C

Dart v Secretary, Department of family and Community Services [2004] FMCA 485

Secretary, Department of Workplace Relations v Vanderpluym [2007] FCA 876

REASONS FOR DECISION

10 March 2010  Senior Member Bernard J McCabe        

1.      Mr Rodney Ivory receives the Age Pension. He applied for rent assistance from the respondent, the Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs. The respondent rejected this application on 9 June 2009 on the basis that Mr Ivory was an “ineligible homeowner” within the meaning of the Social Security Act 1991 (“the Act”).

2.      The respondent’s interpretation of the law is correct. Mr Ivory does not meet the criteria for the grant of rent assistance. The decision under review must therefore be affirmed. I explain my reasons below.

The facts

3.      I understand there is no dispute as to the facts. Mr Ivory is the sole director of Aljac Pty Ltd. Prior to 2009, he was also the sole shareholder. The company was inactive until Mr Ivory used it to purchase a property in Bald Hills in February 2009.

4.      Mr Ivory said he was motivated by a desire to acquire an asset that would be of value to his family in due course. If he had to pay rent for accommodation, he reasoned, the rent might as well go towards an asset that would remain in his family’s hands.

5.      The property needed renovation and repairs. Mr Ivory attended to those things. He paid for some of the repairs on his own credit card. He explained that was necessary because the company could not obtain a credit card of its own. He advertises the rooms and manages the property. The tenants pay their rent to Aljac. Mr Ivory is, in effect, Aljac’s on-site manager.

6.      Mr Ivory occupies one of the rooms in the house. He pays $150 per week in rent. He signed a 12 month tenancy agreement that is due to expire in April 2010. He said he expects he will sign a fresh agreement in due course. The agreement, signed by Mr Ivory as the lessor’s agent, is found at p 68 in exhibit one.

7.      The property was purchased using borrowed money. Some of the money was contributed by the applicant’s estranged wife. Some of it was contributed by their son. As part of this arrangement, the applicant’s wife and son each received one third of the shares in Aljac. Mr Ivory remains the sole director, although he now holds only one third of the shares.

8.      I asked what would happen if Mr Ivory did not pay his rent under the terms of the agreement. He said that would create a financial problem that might result in the bank foreclosing on the property. He said the other shareholders would have to take action. Later, in response to similar questions from Mr McQuinlan, the Centrelink advocate, the applicant agreed that the reaction of the other shareholders would be to put the property up for sale. I note the applicant continues to have business dealings involving his estranged wife, and he says he is on good terms with his son. I was not left with the impression that the lease agreement would be enforced on its terms against Mr Ivory, although I accept the financial position of the venture is sufficiently precarious that a failure to pay rent may result in action by the bank.

The legislation

9. Sections 1070B and 1070C of the Act set out the criteria governing the grant of rent assistance. Section 1070C(b) excludes an “ineligible homeowner”. Section 13 says a person will be an ineligible homeowner if he or she qualifies as a homeowner within the meaning of s 11(4). (There are some exceptions to the general rule but they do not concern us here). A person will be a “homeowner” if he or she is not a member of a couple and:

(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;

10.     Mr Ivory is a shareholder in the company that owns the property. Shareholders do not have any legal or equitable interest in the property of a company simply because they hold shares in that company. But the cases make it clear that the social security law takes a broader view of what might constitute a right or interest in property: see Secretary, Department of Workplace Relations v Vanderpluym [2007] FCA 876; see also Dart v Secretary, Department of family and Community Services [2004] FMCA 485. A tenancy agreement like the one in this case might confer a sufficient right to satisfy the section. In Dart, a tenancy agreement was regarded as sufficient. In Vanderpluym, the Federal Court accepted that an oral, week to week tenancy might suffice. I am satisfied the applicant in this case does have a right or interest in his home in the sense intended by the legislation.

11.     The next question is whether the right or interest in question gives the person reasonable security of tenure. That inquiry requires that I consider all of the circumstances. The definition of “homeowner” is plainly intended to include those who may not formally own their home but who effectively enjoy, in all the circumstances, a similar sort of security of tenure.

12.     I think the applicant does have reasonable security of tenure. He is not merely a tenant. He is also the agent of the landlord (I note he signed the lease as the landlord’s representative). He manages the property on Aljac’s behalf and is its sole director. While it is true his fellow shareholders might vote to replace him on the board and refuse to renew his lease, the relationship between the individuals concerned suggests that is unlikely. The fact the property is heavily mortgaged is irrelevant. Many home owners are in that position.

Conclusion

13.     Mr Ivory is one of his landlord’s shareholders and provides its directing mind and will. He does not formally own the property in which he resides, but the social security law permits – indeed, requires – that the decision-maker look at the reality of the situation. Mr Ivory does not rent the property from himself, but he does the next best thing - and that does not attract rent assistance. The decision under review must therefore be affirmed.

I certify that the 13 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.

Signed: ................[SGD]...........................................................
  Patrick MacDonald, Associate

Date of Hearing  10 February 2010

Date of Decision  10 March 2010
Applicant  Self-represented
Counsel for the Respondent     Mr Rick McQuinlan