Vanderpluym and Secretary, Department of Family and Community Services
[2005] AATA 1044
•20 October 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 1044
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2004/939
GENERAL ADMINISTRATIVE DIVISION ) Re DOLORES VANDERPLUYM Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Deputy President Don Muller Date20 October 2005
PlaceBrisbane
Decision 1. The Tribunal sets aside that part of the decision of the Social Security Appeals Tribunal, dated 10 November 2004, which dealt with the period 14 November 1999 to 10 July 2001 and remits the matter to the Respondent for reconsideration in accordance with the following directions:
(i) During the period 14 November 1999 to 15 April 2001, Peter Vanderpluym and Dolores Vanderpluym were not “home owners” within the meaning of that term in the Social Security Act 1991.(ii) During the period 14 November 1999 to 15 April 2001 Peter Vanderpluym had an asset by way of an unpaid loan to Magnetic Magic Pty Ltd, as part of his assets for the purpose of calculating the quantum of parenting payment payable to Dolores Vanderpluym from time to time during the said period.
2. The Tribunal otherwise affirms the said decision of the Social Security Appeals Tribunal.
.................SIGNED.............................
D.W. MULLER
DEPUTY PRESIDENT
CATCHWORDS
SOCIAL SECURITY – applicant’s husband not a “home owner” during relevant period – company which owned family residence a separate entity from shareholders – decision set aside
Social Security Act 1991: s11(4)(b), 500Q(3), 1118
Salomon v Salomon & Co [1897] A.C 22 H.L.
REASONS FOR DECISION
Deputy President Don Muller 1.Dolores Vanderpluym was granted parenting allowance (which later became parenting payment partnered) from 28 August 1995.
2.It is the Respondent’s contention that between 14 November 1999 and 10 July 2001, Dolores Vanderpluym’s husband was a “home owner” within the meaning of that term in the Social Security Act 1991, that their combined assets exceeded the limit allowed for a homeowner and that therefore Dolores Vanderpluym was paid more parenting payment than she was entitled to receive. The overpayment is said to be $12,258.55.
3.In 1999, Mrs. Vanderpluym and her husband Peter Vanderpluym built a home on Magnetic Island and moved into it on 14 November 1999. The title to the home was held by a company, Magnetic Magic Pty Ltd., of which Peter Vanderpluym was the sole director and shareholder. Mr. and Mrs. Vanderpluym had paid for the block of land on which the house was built and then transferred ownership to Magnetic Magic. The house was built on the land owned by Magnetic Magic, using the funds of Mr. and Mrs. Vanderpluym.
4.As at 30 June 1999, the books of account of Magnetic Magic showed that the company owed Peter Vanderpluym $204,056.
5.The rate at which parenting payment partnered is paid to a person depends on a number of factors, including the total assets of the members of the couple of which the person is a member. There is an “assets value limit” above which the benefit is not payable. The “assets value limit” is lower for couples who are homeowners than it is for non-homeowners.
6.The relevant asset limits, for a person whose partner was not in receipt of a social security benefit, during the period of the overpayment were as follows:
Date
Homeowner Limit
Non Homeowner Limit
1 July 1998
$178,500
$268,500
1 July 1999
$181,500
$273,000
1 July 2000
$189,500
$285,000
1 July 2001
$200,500
$301,500
7.For the period under review, 14 November 1999 to 10 July 2001, the Respondent has treated Mr. Vanderpluym as a homeowner but has also included the $204,000 owed to him by Magnetic Magic in his assets. This took the Vanderpluyms over the “assets value limit” for a homeowner.
8.The result is that the Respondent has determined that Dolores Vanderpluym was overpaid parenting payment partnered from the time the family moved into the new home, until the date on which the loan was extinguished by a conveyance of the home from Magnetic Magic to Mr. and Mrs. Vanderpluym.
9.Dolores Vanderpluym seeks a review of the decision.
10.At the hearing, Peter Vanderpluym represented his wife and the respondent was represented by Ms. Oliver.
11.Mr. Vanderpluym quite correctly submitted that the very $204,000 which was counted as part of his assets, was spent on building the home of which he was said to be the owner. If he had realised his asset of $204,000, he would have had to sell the home and then become a non-homeowner. Thus, he submitted, he should have been assessed as either a homeowner with no asset of $204,000, or a non-homeowner with an asset of $204,000. He could not be both a home-owner and have an asset of $204,000. The $204,000 has been added to the mixture twice.
12.In my view Mr. Vanderpluym has a very good point.
13.The facts are not in issue and I find as follows:
(i)In early 1995 Dolores and Peter Vanderpluym sold their home in Sydney and moved to Magnetic Island. They cleared about $200,000 from the sale.
(ii)The Vanderpluyms and their family moved into a rented house on Magnetic Island, at 30 Compass Crescent.
(iii)Peter Vanderpluym started an internet/computing business on Magnetic Island. He registered the Business Name, Magnetic Magic in July 1995.
(iv)In late 1995 or early 1996 Dolores and Peter Vanderpluym bought a vacant block of land at 43 Compass Crescent for about $50,000.
(v)After the purchase of the land, Peter Vanderpluym was left with a deposit of about $150,000 in his bank account.
(vi)On 28 August 1995, Dolores Vanderpluym was granted parenting payment (partnered).
(vii)On 3 February 1999, Peter Vanderpluym incorporated Magnetic Magic Pty Ltd. He was the sole director and shareholder. He controls the activities of the company.
(viii)Shortly after the incorporation of Magnetic Magic, Peter and Dolores Vanderpluym transferred ownership of the land at 43 Compass Crescent to Magnetic Magic.
(ix)Peter Vanderpluym registered as an “owner builder” and supervised the building of a home on the land at 43 Compass Crescent.
(x)During the course of construction of the home, Peter Vanderpluym transferred money from his bank account to the account of Magnetic Magic. Payments were made to suppliers and contractors from Magnetic Magic’s account.
(xi)As at 30 June 1999, the books of Magnetic Magic showed a loan of $204,056 from Peter Vanderpluym.
(xii)The Vanderpluym family moved from the rented home at 39 Compass Crescent into the new home on 14 November 1999. Peter Vanderpluym paid rent on the home to a real estate agent, who then paid the money into the account of Magnetic Magic. The home at 43 Compass Crescent became the principal residence of the Vanderpluym family.
(xiii)By 30 June 2000, there had been a transfer of furniture and a motor car to Magnetic Magic. The loan account of Magnetic Magic showed that the company owed Peter Vanderpluym $239,526.
(xiv)On 15 April 2001, the house and land at 43 Compass Crescent were transferred from Magnetic Magic to Peter and Dolores Vanderpluym.
(xv)As at 30 June 2001, the Magnetic Magic loan account in relation to Peter Vanderpluym had decreased to $6,000.
(xvi)Peter Vanderpluym originally loaned his money to Magnetic Magic to allow the company to acquire an asset and to have a cash flow for the purpose of obtaining an overdraft facility for the benefit of the internet/computer business.
14.An Authorised Review Officer determined, on 25 November 2003 that:
“Section 11(8) of the Social Security Act 1991 provides that 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 landlord for Mr Vanderpluym is his private company, Magnetic Magic Pty Ltd, and as Mr Vanderpluym is the sole director and shareholder of the company he had control of the company and therefore he is obliged to act in the best interest of the company, it is unlikely that Mr and Mrs Vanderpluym’s occupancy of the house would ever be under threat. It is clear that Mr and Mrs. Vanderpluym has reasonable security of tenure.
This then would define Mr and Mrs Vanderpluym as ‘homeowner’s’ under the Act and therefore the asset test limits applicable to a ‘homeowner’ would apply and therefore the family home would be disregarded for the purposes of the assets test under section 1118 of the social Security Act 1991. Section 1118 provides that in calculating the value of a person’s assets for the purposes of this Act, if the person is a member of a couple – the value of any right or interest of the person in one residence that is the principal home of the person, of the person’s partner or of both of them that: is a right or interest that gives the person or the person’s partner reasonable security of tenure in the home can be disregarded.
During the period 11 February 1999 to 10 July 2001 Mrs Vanderpluym was not classed as ‘homeowner’ and the assets value of her husband’s loan to Magnetic Magic Pty Ltd was not taken into account, as Centrelink was not aware of Mr Vanderpluym’s private company. Mrs Vanderpluym had received numerous letters during the period from her grant of Parenting Allowance in 1998 advising to notify Centrelink if she or her partner started any form of business. There is no record of Centrelink being notified prior to the receipt of the Module Private Company details form completed by Mr Vanderpluym on 27 March 2001.
When the reassessment of Mrs Vanderpluym’s Parenting Payment for the period 11 February 1999 to 10 July 2001 was undertaken and all of their assets, including the value of the loan made by Mr Vanderpluym to his company was taken into account, it resulted in debt. Mrs Vanderpluym was paid Parenting Payment amounting to $19,474.22 and when the reassessment was completed Mrs Vanderpluym was entitled to receive an amount of $2,765.81. This means that Mrs Vanderpluym received an excess to her entitlement of $16,708.41 and this must be repaid. Under section 1223(1) of the Social Security Act 1991 provides that a person who receives a Social Security payment and is not entitled to receive for any reason the payment or any part of the payment, the amount the person is not entitled to receive, is a debt due to the Commonwealth.
Decision. Affirm. Parenting Payment debt amounting to $16,708.41 is correct and must be repaid.”
15.On 10 November 2004, the Social Security Appeals Tribunal found as follows:
“20. The first question for the Tribunal is whether Mr Vanderpluym is a homeowner or non-homeowner for the purpose of section 500Q(3). The term homeowner is defined in section 11(4) of the Act. It says so far as relevant to Mrs Vanderpluym’s case:
11(4) For the purposes of this Act:
(a) ….
(b) a person who is a member of a couple is a homeowner if:
(i)the person, or the person’s partner, has a right or interest in one residence that is:
(A)the person’s principal home; or
(B)the partner’s principal home; or
(C)the principal home of both of them; and
(ii)the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home;
21.Anyone who is not a homeowner as defined in this section is a non-homeowner for the purposes of the Act. During the period 11 February 1999 to 14 November 1999 Mr and Mrs Vanderpluym were renting their principal home at 39 Compass Crescent Nelly Bay. During this period Mrs Vanderpluym was not a homeowner because her interest in 30 Compass Crescent was that of tenant of her landlord and that interest did not give her sufficient interest or security of tenure in 39 Compass Crescent to satisfy section 11(4).
22.That situation changed on 14 November 1999 when Mr and Mrs Vanderpluym took up residence at 43 Compass Crescent. The legal title to this home was registered in the name of Magnetic Magic. Mr and Mrs Vanderpluym rented the home from the company, but on this occasion Mr Vanderpluym was the sole shareholder and director of Magnetic Magic and consequently had 100% control of the company. That is, he controlled the landlord of the premises. This control is sufficient in the Tribunal’s view to give Mrs Vanderpluym that degree of interest in the home that gave her reasonable security of tenure in the home as required by section 11(4). Therefore Mrs Vanderpluym was a homeowner for the purpose of the Act from 14 November 1999 to July 2001. After July 2001 the home was, on the evidence, registered to Mr and Mrs Vanderpluym personally.”
which led the Social Security Appeals Tribunal to decide to remit the matter to Centrelink with the following directions:
“(i)that the overpayment for the period 11 February 1999 to 13 November 1999 is to be calculated on the basis of Mrs Vanderpluym’s income during that period;
(ii)that the overpayment for the period 14 November 1999 to 10 July 2001 is to be calculated on the basis that the value of Mrs Vanderpluym’s assets exceed the asset value limit; and
(iii)that the total overpayment is a debt to the Commonwealth, which is to be recovered.”
16.As a result of the SSAT decision the period of the debt was amended to 14 November 1999 to 10 July 2001. The total debt was revised to $12,258.55.
17.There are now two matters to be determined by the Tribunal:
(i)Was Peter Vanderpluym a “home owner” between 11 November 1999 and 15 April 2001; and
(ii)Should the loan of approximately $204,000 made by Peter Vanderpluym to Magnetic Magic be included in the assessment of his total assets.
18.The term “homeowner” is relevantly defined in section 11(4)(b) of the Social Security Act 1991 (the Act) which provides:
“a person who is a member of a couple is a homeowner if:
(i)the person, or the person’s partner, has a right or interest in one residence that is:
(A)the person’s principal home; or
(B)the partner’s principal home; or
(C)the principal home of both of them; and
(ii)the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home.”
19.Section 1118(1) of the Act provides that the value of any right or interest of a person in a residence that is the principal home of the person is to be disregarded in calculating the value of the person’s assets.
“1118(1) In calculating the value of a person’s assets for the purposes of this Act…., disregard the following:
(b)if the person is a member of a couple – the value of any right or interest of the person in one residence that is the principal home of the person, of the person’s partner or of both of them that:
(i)is a right or interest that gives the person or the person’s partner reasonable security of tenure in the home;”
20.I believe that the term “homeowner” would be regarded by most members of the Australian community as referring to a person who owns a home. That is, the person would be the registered owner of a property on which a home has been constructed, even if the right or interest in the ownership is subject to a mortgage, charge or encumbrance, irrespective of the size of the mortgage, charge or encumbrance.
21.The “homeowner” is to be contrasted with the occupier of a residence whose right or interest in that residence is by way of a lease or rental agreement. A renter would not be regarded as a homeowner, irrespective of their security of tenure in the home.
22.A person who resides in a home owned by a State Housing Commission may well have greater security of tenure in that home than a so-called homeowner who is battling to pay off a large mortgage, would have in their home. They both have security of tenure so long as they make their respective payments.
23.The fact that a person has reasonable security of tenure in a home does not thereby automatically make that person the owner of the home.
24.The terms “right or interest” contained in the definition of a “homeowner” must refer to a legal or equitable right or interest in the ownership or the title to the property. It does not refer to a right or interest gained by way of lease or rental agreement.
25.In this case, the house at 43 Compass Crescent was owned by Magnetic Magic from the date of its construction until 15 April 2001. During that time the Vanderpluyms had no legal or equitable right or interest in the ownership of the property.
26.It was probably correct to say that Mr. Vanderpluym was unlikely to evict his own family while he had control of Magnetic Magic. However, if the company had encountered financial difficulties and had been wound up, a receiver or administrator would probably have evicted the family and sold the home. In such a case Mr. Vanderpluym’s loan of $204,000 would make him just another unsecured creditor. It would have done him no good to claim that he was the owner of the home.
27.The position of companies as legal entities separate from their shareholders is neatly set out in P.L. Gower and Davies Principles of Modern Company Law, 7th Ed, Sweet and Maxwell, London, 2003.
“As already emphasised, the fundamental attribute of corporate personality – from which indeed all the other consequences flow – is that the corporation is a legal entity distinct from its members. Hence it is capable of enjoying rights and of being subject to duties which are not the same as those enjoyed or borne by its members. In other words, it has ‘legal personality’ and is often described as an artificial person in contrast with a human being, a natural person.
As we have seen, corporate personality became an attribute of the normal joint stock company only at a comparatively late stage in its development, and it was not until Salomon v Salomon & Co at the end of the nineteenth century that its implications were fully grasped even by the courts.
Since the Salomon case, the complete separation of the company and its members has never been doubted. As we shall see later, there are cases in which the legislature, and to a very small extent the courts, have allowed the veil of incorporation to be lifted, but in general it is opaque and impassable. The consequences, however, are not necessarily always beneficial to the members. For example, if a trader incorporates his business he will cease to have an insurable interest in its assets even though he is the beneficial owner of all the shares. If therefore he forgets to assign the insurance policies, and to obtain any necessary consents of the insurers, nothing will be payable if the assets perish. Similarly, a parent company will not have an insurable interest in the assets of its subsidiary companies even though wholly owned, for the rule that a company is distinct from its members applies equally to the separate companies of a group. In Kahn-Freund’s striking phrase, ‘sometimes corporate entity works like a boomerang and hits the man who was trying to use it.”
28.The Australian position is set out in the recent publication of “Company Law” by Russell Hinchy and Peter McDermott, Pearson Education Australia, 2006, wherein the learned authors had this to say about the topic, at page 68:
“As a consequence of a company’s separate existence, a ‘corporate veil’ or ‘veil of incorporation’ is said to arise between the company and its shareholders and directors. The corporate veil provides incentive to invest as a shareholder or to participate in management as a director because, generally, a court will not look behind the veil to examine the conduct of shareholders and directors. However, the practical reality of the situation is that the veil may disadvantage creditors if shareholders or directors have acted improperly. This has been recognised by parliaments and courts ever since the decision in Salomon’s case.
Where there is evidence of improper conduct, that conduct will be examined. For example, at common law a court will look behind the veil where there is evidence of shareholder or director fraud. A court will also look behind the veil under the Corporations Act where directors have engaged in insolvent trading. Where this does occur, a court is said to ‘lift’ or ‘pierce’ the corporate veil. These circumstances are exceptions to the separate legal entity principle.
Relevant chapters of this text address the issue of lifting the corporate veil under the Corporations Act. However, at common law the principle and policy of lifting the corporate veil is not clear. According to Professor John Farrar in an article titled ‘Bypassing the corporate veil’ in Proctor (the Queensland Law Society’s journal, March 1999), ‘Outside the USA, piercing the corporate veil represents an incoherent jungle of principle and policy in common law and the courts and legal writers are reduced to descriptive categories which serve little analytical function in explaining and justifying the circular reasoning involved.’ The traditional common law categories of cases in which the corporate veil has been lifted include:
·Agency
·Fraud
·Corporate groups
·Trusts
·Enemy”
29.I was referred to a number of cases in which it was held that the beneficiaries of trusts, where the trusts owned the homes in which the beneficiaries resided, and the beneficiaries controlled the trusts, were homeowners for the purposes of the Act. In those cases the courts and tribunals seem to have accepted that the beneficiaries at least had an equitable right or interest in the ownership of the homes, perhaps even a legal right, and the cases turned on the question of security of tenure. I do not regard those cases as being relevant to the question currently before the Tribunal.
30.Consequently, I find that although the Vanderpluyms’ leasing arrangement with Magnetic Magic gave them security of tenure in the home in which they lived from 14 November 1999 onwards, neither of Dolores nor Peter were “homeowners” within the meaning of that term in the Act until 15 April 2001.
31.I also find that the value of the loan, as it stood from time to time, made by Peter Vanderpluym to Magnetic Magic, was an asset of Peter Vanderpluym for the purpose of assessing his assets, for the purpose of calculating the quantum of parenting payment payable to Dolores Vanderpluym from time to time during the period under review.
32.The decision under review is set aside in relation to that part of the SSAT decision which dealt with the period 14 November 1999 to 10 July 2001 and the matter is remitted to the Respondent for re-assessment in the light of the above determinations.
I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President Don Muller
Signed: .....................................................................................
R. Link, AssociateDate/s of Hearing 2 August 2005
Date of Decision 20 October 2005
Applicant Mr. Peter VanderpluymRespondent Ms. S. Oliver, departmental advocate
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