Sidhu and Secretary, Department of Family and Community Services
[2005] AATA 873
•8 September 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 873
ADMINISTRATIVE APPEALS TRIBUNAL Nº V2003/748
GENERAL ADMINISTRATIVE DIVISION
Re: NATALIE SIDHU
Applicant
And: SECRETARY,
DEPARTMENT OF FAMILY ANDCOMMUNITY SERVICES
Respondent
DECISION
Tribunal: Regina Perton, Member
Date: 8 September 2005
Place: Melbourne
Decision:The Tribunal affirms the decision under review.
(sgd) Regina Perton
Member
SOCIAL SECURITY ‑ parenting payment (partnered) ‑ assets test ‑ whether assets unrealisable ‑ decision affirmed
Social Security Act 1991 ss 9, 11(1), 11(12), 11(13), 500Q, 1118, 1208H
Social Security (Attribution of Assets) Principles 2001 clauses 11, 12, 13, 14
REASONS FOR DECISION
8 September 2005 Regina Perton, Member
1. Natalie Sidhu (the applicant) is seeking review of a decision of the Social Security Appeals Tribunal (SSAT) dated 12 June 2003. The SSAT affirmed a decision of a delegate of the Secretary to the Department of Family and Community Services (the respondent) dated 9 April 2002 that the applicant was not eligible for parenting payment (partnered) (PPP) on the ground that her and her husband’s assets exceeded the amount permitted under the assets test.
2. At the hearing on 10 November 2004, Mr Henry Magistrado, a solicitor with Fernandez and Johnson represented the applicant. Mr Martin Lockett of the Australian Government Solicitor represented the respondent.
3. The documents before the Tribunal included the T documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T1-T105) as well as additional documents tendered by the parties before and at the hearing (Exhibits A1 to A3).
BACKGROUND
4. The applicant had been receiving PPP for some time when it was cancelled on 28 December 2001. The reason for the cancellation was that she had failed to respond to Centrelink’s request to provide specified documents concerning the financial affairs of her husband, Paul Sidhu. On 15 January 2002, the applicant lodged a Parenting Payment re‑claim form. Centrelink sought and was provided with further information about a private family company, Bluespure Pty Ltd (Bluespure) of which the applicant’s husband was a director, the Secretary and a shareholder at the time of the claim. On 9 April 2002, a Centrelink officer, as a delegate of the respondent, rejected the claim for PPP because the combined assets of the applicant and her husband exceeded the allowable limit, namely $200,500, at the time of application.
5. On 19 November 2002, an authorised review officer affirmed the delegate’s decision. On 5 February 2003, the applicant applied to the SSAT for review; and on 12 June 2003, the SSAT affirmed the decision. An application for review by this Tribunal was lodged on 15 July 2003.
6. The issue before the Tribunal is whether the applicant’s assets exceeded the allowable limit at the time of the claim.
EVIDENCE
7. Documents concerning some of the financial affairs of Paul Sidhu, including property and loan transactions in his name and in the name of Bluespure, have been presented to the Tribunal. The applicant’s and her husband’s motor vehicles and personal and household effects were given an estimated value of $22,500, to which was added $395 in bank accounts (T91). Paul Sidhu owned 40 of the 120 shares in Bluespure. His brothers Ajmair Sidhu, who was based in Singapore, and Avtar Sidhu, an Australian permanent resident working offshore but based in Melbourne, also held 40 shares each (T58). Mr Paul Turville, a Certified Practising Accountant, and Bluespure’s accountant provided a statement on 18 February 2002 at Centrelink’s request, which showed that the applicant’s husband had loaned Bluespure $79,000 which remained outstanding at the time of the application (T61). Mr Turville indicated that there was no written loan agreement.
8. The assets of Bluespure at the time of application included an apartment in Spencer Street, Melbourne to which the accountant ascribed a value of $180,000 (T61). The Australian Valuer’s Office (AVO) estimated the value of the apartment at $240,000 (T77). Bluespure’s Balance Sheet, for the financial year ending 30 June 1998, indicated that it was owed $738,783 by Fulbright Pty Ltd (Fulbright) in relation to project finance (T40).
9. Mr Turville told the Tribunal that he had been Bluespure’s accountant undertaking all of its financial reporting until Fulbright took over the control of the Spencer Street development in 1996 and its accountant took over matters concerning that development. Mr Turville said that he continued with other accounting work for Bluespure. He provided details of the transfers of funds into Bluespure from Singapore. He indicated that these funds came from various Singaporean companies mostly associated with Ajmair Sidhu and from other individuals. He conceded that he did not have full details about the structures of the companies that had provided funds to Bluespure. Mr Turville stated that the last comprehensive financial statements for Bluespure had been drawn up in 1998. He explained that there had been no differentiation in the accounts between the funds used for an earlier development by Bluespure in Parkville and the funds used for the Spencer Street project, of which the apartment owned by Bluespure was a part. He said that the company had, to his knowledge, been complying with company law requirements, albeit sometimes a little late. Mr Turville confirmed that, according to the figures he and Fulbright’s accountant had used in the 1998 financial statements, Fulbright owed Bluespure $738,783. He also indicated that, to his knowledge, none of the moneys coming into Bluespure from Singapore was by way of secured loans. He said that he was not aware of any documents spelling out terms of the loan, an interest rate or repayment period.
10. Mr Paul Sidhu, the applicant’s husband, told the Tribunal that he is still a director of Bluespure but had not been a shareholder for at least a year. He confirmed Bluespure’s involvement in a property development in Spencer Street. He indicated that his brother, Ajmair Sidhu, was the driving force and major financial backer of the company. However, as both his brothers had been based in Singapore at the time of the development, he undertook much of the local management. Mr Sidhu said that they had paid $250,000 as a 10 per cent deposit on the building and their subsequent total investment was to be converted into apartments in the development. He described the method of funding of the project including transfer of funds from Singapore to meet the costs of the architects, surveyors, designers etc. Mr Sidhu said that he works as a taxi driver while the applicant was at home, caring for their three children aged 7, 8 and 13, the eldest of whom is his stepchild. He said that the family is dependent on his income as well as a Centrelink family allowance. He said that he does not own or lease a taxi but that he receives a proportion of the fares when he drives the taxi.
11. In cross‑examination, Mr Sidhu confirmed that he had, at various stages since he migrated in 1983, owned three properties in his name in Australia. He stated that one of those had been in trust for his brother, Avtar Sidhu. He said that as at January 2002, the only house he owned was his place of residence which was in his name and that of the applicant. He provided details of purchasing a property in his name in 1988, with funds provided by Ajmair Sidhu, with the intention that Avtar Sidhu, who had applied to migrate to Australia, would live there. He confirmed that there had been no documentation concerning the arrangement and that he transferred the house to Avtar Sidhu in November 1999 (T82). He stated that the rent from that property, prior to the transfer, went into a shared bank account from which the moneys were generally used for business transactions by Ajmair Sidhu. He stated that the brothers trusted each other and hence they did not document all transactions.
12. Mr Sidhu stated that he did not derive any income from his directorship of Bluespure between January 2002 and the present, commenting that there is no money in it. He confirmed that there was an ongoing Supreme Court action against Fulbright for around $3.8 million. He said that attempts at mediation had failed and the case was still pending. Mr Sidhu said that if any moneys are recovered, they would go to Ajmair Sidhu who had put about $3 million into the Bluespure’s project. The Supreme Court proceedings were instituted in October 2002. He said that the dispute had been running for about six years when the Supreme Court action was initiated.
13. Mr Sidhu confirmed that the Spencer Street apartment had been sold for $270,000 in May 2003. He said that after payment of commission, legal fees etc, $87,000 was transferred to Bluespure and ultimately to Ajmair Sidhu via Avtar Sidhu, who works for Ajmair’s company. Mr Sidhu confirmed that the $79,000 he had loaned to Bluespure remains outstanding and that he did not receive any of the proceeds from the sale of the apartment. He also indicated that there has been no discussion on payment of interest on the loan. He also stated that the moneys used for the Spencer Street project came from Singapore in differing amounts, as required. He confirmed that the brothers, as directors, had kept minimal records of Bluespure’s activities. He also confirmed that in January 2002 Bluespure was still actively seeking moneys from Fulbright.
14. The applicant told the Tribunal that she and Paul Sidhu were married in 1995. She said that she did not know if her husband had received any payment from Bluespure for managing its affairs in Australia. She stated that she was not in the paid workforce and relied on her husband’s work as a taxi driver and family assistance payments to pay for the family’s upkeep. She said that it was not easy to manage financially. She indicated that it was her understanding that Bluespure was still taking legal action against Fulbright and that her husband might therefore be able to get some of his loan moneys back. She confirmed that the brothers were close and trusted each other.
15. Ajmair Sidhu gave evidence via mobile telephone from Malaysia. He indicated that he had personally funded the purchase of the Spencer Street property and that he had supplied funds to Bluespure for its development. He estimated that he had provided in excess of AUD$3 million. He said that there were no documents created attesting to the level of contribution, apart from accounting records. This was because it was a family business. He indicated that the money came from his own companies and personal funds. He said that the project has not provided a return to date. He said that as a result he has taken a large loss. He stated that he was not aware of the smaller details of the project as he left that to the two other brothers. Ajmair Sidhu said that he had not received any return from the sale of the apartment. He indicated that there is legal action continuing which he hoped would result in recovery of part of his investment. He stated that he did not think Paul Sidhu would get any refund of his loan as he did not expect that Bluespure would retrieve all the moneys owed.
16. Under cross‑examination Ajmair Sidhu was asked about the circumstances in which he signed a document on 18 April 2003, acknowledging a loan of $3,181,200 to Bluespure (T100). He said he was asked to sign the document by his brother Avtar, but he did not know why it was required at that particular time. He stated that all of the transactions were genuine and there would be audits available indicating the amounts he had received. However, he could not recall a particular amount of $300,000 being repaid.
17. Avtar Sidhu also gave evidence by telephone from Thailand. He confirmed that the funds for Bluespure’s projects had come from overseas. He said that part of the money had come from their aunt and part from Ajmair Sidhu and himself. His aunt had provided around SGD$700,000, which was worth approximately AUD$600,000 at the time. He estimated that just under AUD$3 million was invested in Bluespure. He said that they were keen to pay back their aunt and others who have invested in the company. He stated that his aunt had been repaid less than $50,000 to date. Avtar Sidhu said that they had to sell the apartment to finance the Supreme Court proceedings and to repay loans from some friends in Australia. His aunt also received a small amount from the proceeds of the sale. He stated that neither Ajmair Sidhu nor he received any moneys. He stated that the company still owed money to someone in Australia, as well as to his aunt. He expressed the view that Paul Sidhu would be unlikely to recover much, if anything, from Bluespure. He anticipated paying his aunt back first if the Supreme Court proceedings were successful. He confirmed the lack of record-keeping in relation to the loans to Bluespure. He confirmed that Paul Sidhu had put in about $80,000, which was partly borrowed from friends.
CONSIDERATION OF THE ISSUES
18. The income and assets of a person and of their partner are taken into account in assessing a person’s eligibility for PPP. The term asset is defined in s 11(1) of the Social Security Act 1991 (the Act) as property or money (including property or money outside Australia). Section 1118 of the Act allows for certain assets to be disregarded, including the principal place of residence, and attributes a value of $10,000 to the contents of that residence; unless there is evidence that the value is less. Financial assets are defined in s 9 of the Act and include a loan that has not been repaid in full.
19. Section 500Q of the Act states that PPP is not payable at the time of the claim if a person and of their partner’s assets exceed a certain level. On 15 January 2002, that level for a homeowner who is a member of a couple was $200,500.
20. The evidence in this matter is centred on the assets of Bluespure at the time of the claim for PPP, the sources of its funds, and in particular, the contribution and entitlements of the applicant’s husband as one of its three directors. Particular matters in dispute include the value of an apartment in Spencer Street, held by Bluespure at the time of claim; and whether a loan of $79,000 made by the applicant’s husband to Bluespure was realisable. The sources of the financial contributions to the company and the financial relationships between the three Sidhu brothers also formed a major part of the evidence.
21. Documentary and oral evidence indicates that on 15 January 2002, the applicant’s husband held 40 out of 120 shares in Bluespure (T58). It has not been disputed that Bluespure’s assets at the time included an apartment and a loan from the applicant’s husband of $79,000. Evidence was also given that around $3 million was put into Bluespure by the other directors, primarily Ajmair Sidhu, either through his companies in Singapore or from his personal funds. There also appears to have been contributions by an aunt and unnamed persons in Australia. The oral and written evidence suggests that only a small proportion of those funds has been realised to date. The evidence from all the witnesses and in the documents indicates that Bluespure is taking legal action against Fulbright in the Supreme Court to obtain moneys Bluespure asserts is owing to it. The court proceedings against Fulbright were not initiated until October 2002, after the date of claim for PPP. But there is documentary and oral evidence indicating that the dispute was in existence in January 2002.
22. Initially, the value of the Spencer Street apartment was one of the issues in dispute. Mr Magistrado queried the AVO valuation. Mr Lockett submitted that the AVO’s estimate of $240,000 was an appropriate value for the property, which was sold in August 2003 for $270,600. The Tribunal finds that the apartment’s value at the time of claim was $240,000.
23. In the applicant’s Statement of Facts and Contentions, Mr Magistrado suggested (at Paragraph 7) that the proceeds from the sale of the Spencer Street property in August 2003 were reduced by a mortgage of $133,359.38 and that moneys from that transaction were also used to fund the Supreme Court action. However, the copy of the Certificate of Title provided to Centrelink on 20 February 2002 shows a clear title, with no mortgage registered (T62). In a Centrelink form entitled Real estate details, signed by the applicant and her husband on 18 February 2002 (T63), the applicant’s husband is recorded as owning one‑third of the Spencer Street property. In response to Question 6, which asks if the property is mortgaged or encumbered, they have said that it is not. The Tribunal finds that the Spencer Street property was an asset of the applicant’s husband at the time of the claim, with a value of $80,000.
24. Mr Magistrado submitted that Mr Sidhu’s $79,000 loan to Bluespure was unrealisable. Sections 11(12) and 11(13) of the Act sets out when an asset can be considered an unrealisable asset. The loan was shown in Bluespure’s financial report and Mr Sidhu acknowledged it was still outstanding. Mr Sidhu and other witnesses said that they were not confident the loan would be repaid. Nonetheless, the applicant’s husband had taken no action to seek repayment of the loan at the time of the claim. The Tribunal does not accept that the $79,000 loan in the applicant’s name was an unrealisable asset at the time of the claim. Accordingly, the Tribunal finds that the outstanding loan for $79,000 formed part of the assets of the applicant’s husband at the time of the claim for PPP.
25. The oral evidence of the three Sidhu brothers illustrated that their financial relationship was based on trust with minimal documentation. The sources of funds provided to Bluespure were also poorly documented. There was general agreement that Ajmair Singh and companies associated with him were a major source of funds; but others emerged during the hearing. Avtar Singh mentioned that an aunt is said to have invested around $600,000 to $700,000, and he also stated that unnamed Australians were owed unspecified amounts. A summary of funds received by Bluespure by way of overseas transfer (Exhibit A1) indicated that just under $2.1 million had been transferred into Bluespure’s bank accounts between 1993 and 1996. Approximately $1.7 million was identified as coming from Ajmair Singh or companies associated with him. This contrasted with the estimates of between $2 million and $3 million given by the witnesses. Evidence was given that rental income from Bluespure properties was used, as needed, for purchases of goods by Ajmair Singh and his companies. Mr Sidhu stated that just over $300,000 had been transferred to Ajmair Sidhu, but Ajmair denied knowledge of any such payment to him. The Tribunal is not in a position to definitively identify how much of the funding of Bluespure came from each source, nor how those funds will be distributed when the company concludes the Supreme Court proceedings which, it appears, are still on foot against Fulbright.
26. Mr Turville, the Bluespure accountant, gave evidence that the most recent financial statement prepared for Bluespure, of which he was aware, was as at 30 June 1998. This was provided to Centrelink as part of the claim for PPP on 15 January 2002. A note of a telephone conversation between Mr Turville and a Centrelink officer on 26 March 2002 (T57) indicates Mr Turville’s belief, that Fulbright owed $738,783 in management fees to Bluespure. This amount forms part of the moneys sought by Bluespure from Fulbright. All three Sidhu brothers gave evidence that apart from the moneys realised from the sale of the Spencer Street apartment and rental moneys received for properties owned at various times by Bluespure, the bulk of the money invested in Bluespure still remained outstanding. The validity of the financial statement dated 30 June 1998 was not disputed. The Tribunal is satisfied that at least $738,783 was owing to Bluespure as at 15 January 2002.
27. The Sidhu brothers gave oral evidence that Paul Sidhu was unlikely to receive a substantial amount even if the Supreme Court action against Fulbright was successful. However, as indicated earlier, there is little corroborating evidence to indicate that once outstanding debts were paid, the applicant’s husband would not receive one‑third of the balance of the amount recovered, as a shareholder. Ajmair Sidhu signed a document on 18 April 2003, in which he stated that he had loaned the sum of just over $3.1 million to Bluespure. However, Ajmair Sidhu acknowledged that he had signed that document which had been given to him by Avtar Sidhu. He indicated that he did not know the purpose of the document, which the Tribunal notes was prepared around the time of the SSAT review. The Tribunal is not satisfied that the information document signed by Ajmair Sidhu is reliable, given its source and timing. The Tribunal also notes that it is not in keeping with the way that the brothers usually conducted business. The contents of the document are also inconsistent with the oral evidence of the brothers, who gave differing and imprecise estimates of the amount of money flowing into Bluespure. Their descriptions of the outgoings were also inconsistent and vague. Based on the evidence before it, the Tribunal is not satisfied that at the date of claim, Bluespure had liabilities of $3.1 million to Ajmair Singh that would need to be paid out, before any moneys were distributed to the other shareholders.
28. Given the nature of the monetary relationship between the brothers, which Paul Sidhu acknowledged included the purchase of a property in his name on his brother Avtar's behalf and the transfer of funds between them as needed, the Tribunal is not satisfied that Paul Sidhu would not have obtained a share of the moneys Bluespure was seeking to recover from Fulbright at the time of claim.
29. The Tribunal has already determined that the document purporting to show that Ajmair Singh has an unsecured loan of $3.1 million is unreliable, given the circumstances and timing of its creation. However, the Tribunal is satisfied that Ajmair Singh and others have contributed uncertain and undocumented amounts of funds by way of unsecured loans to Bluespure. Section 1208H(1) of the Act allows for the value of the assets of a company to be reduced in certain circumstances where there are unsecured loans, and allows for assets of the company to be reduced if the respondent (and Tribunal) believe it appropriate. There is no automatic reduction in the value of the assets of Bluespure due to the amount loaned to Bluespure by Ajmair Singh or by others who may have invested in the company.
30. Section 1209E allows for the Secretary to formulate decision‑making principles in relation to s 1208H and other sections. These are disallowable instruments, which the Tribunal takes into account. Part 4 of the Social Security (Attribution of Assets) Principles 2001 (the Principles) set out the following decision‑making principles for s 1208H:
…
11 Purpose of Part 4
This Part sets out decision-making principles with which the Secretary must comply in making a determination under subsection 1208H (1) of the Act.
12 Effect of unsecured loan on value of assets
In relation to an unsecured loan, the Secretary must take into account:
(a)whether a transaction that gave rise to the loan was an arm's length transaction, having regard to the criteria described in section 13; and
(b)the matters referred to in section 14.
13 Criteria for arm's length transaction
(1) For paragraph 12 (a), a transaction is an arm's length transaction if:
(a)the transaction is for the purposes of the business activities of the company or trust; and
(b)the transaction is made under a written agreement that is signed by each party to the agreement, and witnessed by an individual who is not a party to the transaction; and
(c)each party to the transaction is:
(i)at least 18 years old; or
(ii)at least 16 years old and engaged in a full-time occupation; or
(iii)at least 16 years old and receiving a social security entitlement; and
(d)the transaction is made for an arm's length amount.
14 Other matters
For paragraph 12 (b), the Secretary must also take into account, in relation to the transaction that gave rise to the charge or encumbrance:
(a)whether the individual is the sole attributable stakeholder, or a member of a couple both members of which are the only 2 attributable stakeholders of the company or trust; and
(b)whether the loan is secured by a charge or encumbrance over an asset other than an asset described in paragraph 1208H (1) (b) of the Act; and
(c)the commercial, social and familial relationships (if any) between the parties to the transaction; and
(d)the nature and circumstances of the transaction.
31. The Tribunal is not satisfied that the unsecured loans made to Bluespure by Ajmair Singh were arms-length transactions. The Tribunal is satisfied that the loans were made for the purposes of the business activity. However, the transactions were not made under a written agreement and witnessed by an individual who was not a party to the transaction. The Tribunal is not satisfied that the document signed by Ajmair Sidhu on 18 April 2003 (T100) meets the criteria set out in clause 13 of the Principles. There is no witness to the document and it is signed only by one person, Ajmair Sidhu. Ajmair Sidhu gave oral evidence that he had signed that document which was given to him by Avtar Sidhu, without his asking or knowing the reason for its preparation. Clause 14 of the Principles also needs to be taken into account. Paragraph (a) does not apply to Bluespure, which was a company of which all three directors were the Sidhu brothers. The applicant has no interest in or relationship with Bluespure. The loans were unsecured. All three brothers gave evidence that they did not bother with documents formalising loans or other transactions between them. Taking into account the matters raised in the Principles, the Tribunal finds that it is not appropriate to apply s 1308H of the Act in relation to the application under review.
32. The Tribunal finds that the assets of the applicant and her husband, for the purposes of the assets test on 15 January 2002, included their house and personal effects valued at $22,500, the applicant’s bank account with a balance of $395 and the loan of $79,000 which the applicant’s husband made to Bluespure. The Tribunal is also satisfied that the applicant’s husband had a one‑third share in the Spencer Street apartment, valued at $80,000. The total of those assets is $181,895.
33. However, the assets of Bluespure at the relevant date need consideration. The Tribunal is satisfied that at the very least, Mr Sidhu as a shareholder was entitled to one‑third of the $738,783 that Fulbright was recorded as owing to Bluespure. The amount sought from Fulbright in the legal proceedings is considerably higher but, as stated earlier, there is approximately $2.1 million that is owed on loans made to Bluespure as evidenced in Exhibit A1. Taking the figure of $738,783 owed by Fulbright as a Bluespure asset, Mr Sidhu’s share would be $246,261.
34. Therefore, the Tribunal finds that the assets of the applicant and her husband exceeded the disqualifying amount of $200,500 set for PPP at the time of claim. The applicant was therefore not entitled to PPP.
DECISION
35. The Tribunal affirms the decision under review.
I certify that the thirty-five [35] preceding paragraphs are a true copy of the reasons for the decision of:
Regina Perton Member
signed: (sgd) Olympia Sarrinikolaou
Clerk
Date of hearing/submissions: 10 November 2004, 22 December 2004
Date of decision: 8 September 2005
Advocate for applicant: Mr H Magistrado, Fernandez & Johnson
Advocate for respondent: Mr M Lockett, Australian Government Solicitor
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