Woolley and Repatriation Commission

[2007] AATA 2059

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 2059

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/0940

VETERANS'       APPEALS        DIVISION		)
Re		ANTHONY JON WOOLLEY

Applicant

And REPATRIATION COMMISSION

Respondent

DECISION

Tribunal Dr Gordon Hughes, Member

Date14 December 2007

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(sgd) Gordon Hughes

Member

VETERANS’ AFFAIRS ‑ Determining value of assets for purposes of Service Pension – whether unrecoverable loans are to be included in the value of the Applicant's assets – legislation unambiguously requires the loans to be included in the Applicant's assets if other exemptions do not apply

Veterans' Entitlements Act 1986 ss 5J, 5L, 36N, 52(1), 52C

Re Eimberts and Repatriation Commission (1988) 16 ALD 19

Re Secretary, Department of Family and Community Services and Downes (2002) 70 ALD 100

Re Glenn and Secretary, Department of Family and Community Services and Indigenous Affairs [2006] AATA 919

Re Greenhill and Secretary, Department of Family and Community Services [2006] AATA 176

Re Juric-Kacunic and Secretary, Department of Family and Community Services [2003] AATA 15

Re Lyons and Secretary, Department of Family and Community Services (2007) 94 ALD 450

Re Mroz and Secretary, Department of Employment and Workplace Relations [2006] AATA 274

Re WBP and Secretary, Department of Family and Community Services and Indigenous Affairs (2007) 94 ALD 219

REASONS FOR DECISION

14 December 2007 Dr Gordon Hughes, Member        

1.      This is an application for review by Mr Anthony Woolley (the Applicant) of a decision by a senior delegate of the Repatriation Commission (the Respondent) on 16 February 2007 to affirm an earlier decision dated 7 August 2006 to cancel the Applicant's service pension.

2.      The principal issue for the Tribunal was to decide whether the value of loans by the Applicant to his family company, Lorbix Pty Ltd (the company), should be included in the valuation of his assets for the purpose of determining his eligibility for the pension.  The Applicant contended that as the loans were unrecoverable, they should not be included in the valuation.

BACKGROUND

3.      On 7 August 2006 the Respondent cancelled the service pension paid to the Applicant, effective from 15 August 2006.  This decision was affirmed by a senior delegate of the Respondent on 6 November 2006.

4.      On 16 October 2006 the Respondent granted the Applicant a partial service pension on the basis of new financial information.  The partial service pension was effective from 17 August 2006, and the current rate is $180.85 per week.

5.      The Applicant contends that both decisions were incorrect.  In each instance, he argues, his assets had been over-valued by the Respondent.

6.      The dispute as to the level of the Applicant's assets centres on the treatment of two loans which he had advanced to the company for the purchase of a business.

7.      A balance sheet for the company as at 30 June 2005 reveals an unsecured loan of $201,065.95 and a secured loan of $118,347.  The larger sum reflects a personal, unsecured loan from the Applicant and the latter sum represents a loan from the Commonwealth Bank of Australia secured against the Applicant's principal home.

8.      A more recent balance sheet for the company, reflecting its financial status as at 31 August 2006, shows that as a consequence of the sale of the Applicant's business for $51,593.55 and the subsequent adjustment of the secured loan, the unsecured loan is now $50,000 and the secured loan stands at $170,000.

9.      In assessing the value of the Applicant's assets for the purposes of determining his entitlement to the service pension, the Respondent took account of the value of both amounts owing to the Applicant.  The Applicant contended that as the unsecured loan was unrecoverable from the company and the secured loan had been made by a third party for business purposes, neither should be treated as personal assets.

LEGISLATION

10. Section 36N of the Veterans' Entitlements Act 1986 (the Act) provides that a veteran's age service pension rate is to be determined in accordance with the Rate Calculator.  The Rate Calculator is contained in Schedule 6 to the Act and involves the application of an assets test.

11.     Section 52D of the Act provides:

If a person lends an amount after 22 May 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.

12. Of specific reference to the secured loan, section 52C(1) of the Act provides:

Where there is a charge or encumbrance over particular assets of the person, the value of the assets, for the purposes of calculating the value of the person's assets for the purposes of this Act … is to be reduced by the value of that charge or encumbrance.

13.Section 52C(1) is then qualified by section 52C(3):

Subsection (1) does not apply to a charge or encumbrance over assets that are to be disregarded under section 52.

14.Relevantly, section 52 of the Act provides:

(1)       In calculating the value of a person's assets for the purposes of this Act…, disregard the following:

(a)if the person is not a member of a couple – the value of any right or interest of the person in the person's principal home that is a right or interest that gives the person reasonable security of tenure in the home;

…

DECISION

15.     The Applicant contended that the loans should not be regarded as assets for several reasons.  First, the loans were unrecoverable from the company; secondly the loans had been provided partially in respect of a business operation conducted by the company in the past; and thirdly, the loan from the Commonwealth Bank was a loan from a third party.

16.     The Tribunal is unable to accept the Applicant's contentions.  None of these contentions is supported by the plain wording of the relevant legislation.

17.     There can be no question that the loan represents an asset under section 52D (see also the definition of assets in section 5L(1) of the Act and the interpretation of the term property in Re Eimberts and Repatriation Commission (1988) 16 ALD 19).

18.     The loans should be assessed at face value.  There is nothing in the legislation which requires or enables the Respondent to take account of the fact that the loans are unrecoverable.  This conclusion is consistent with numerous previous decisions of this Tribunal in relation to the same or equivalent legislation, the more recent including Re Glenn and Secretary, Department of Family and Community Services and Indigenous Affairs [2006] AATA 919; Re Greenhill and Secretary, Department of Family and Community Services [2006] AATA 176; Re Juric-Kacunic and Secretary, Department of Family and Community Services [2003] AATA 15; Re Lyons and Secretary, Department of Family and Community Services (2007) 94 ALD 450; Re Mroz and Secretary, Department Employment and Workplace Relations [2006] AATA 274; Re WBP and Secretary, Department of Family and Community Services and Indigenous Affairs (2007) 94 ALD 219.

19.     This conclusion is, similarly, consistent with the Respondent's policy manual.  Under the heading Assessing Failed Loans, the policy manual states:

The assessable asset value of an existing loan is the amount still owed to the person but does not include any interest payable on the loan.  This applies whether or not the loan is performing to the terms of the loan agreement.

Loans may be secured against assets such as property.  The value of the asset the loan is secured against does not affect the asset value of the loan.

If a failed loan still exists, the loan can be:

·A disregarded asset if the hardship provisions are satisfied, and

·Exempted from deemed income rules if the deeming exemption provisions are satisfied.

The Applicant did not contend that he could avail himself of the special rules applicable in the case of hardship or a deemed exemption.

20.     In relation to the Applicant's contention that part of the loans related to a business operation conducted by the company in the past, the Respondent contended that the liabilities of a company are unaffected by the precise nature of its business activities and accordingly this was no basis for disregarding those loans in the assessment of the Applicant's assets.  The Tribunal accepts this submission, noting in any event that there was no evidence in support of the contention that a component of the loans attributable to the earlier business activities of the company was secured against particular assets associated solely with that business activity.

21. In relation to the secured loan, it is clear that it was secured by a mortgage over the Applicant's home and as such should be treated as a loan by the Applicant to the company. The combined effect of sections 52C(1), 52C(3) and 52(1)(a) is unambiguous in preventing the value of the loan from being reduced by the value of the mortgage as the mortgage relates to an exempt asset in the form of the Applicant's home.

22.     For the above reasons, the Tribunal affirms the decision under review.

I certify that the twenty‑two [22] preceding paragraphs are a true copy of the reasons for the decision herein of:

Dr Gordon Hughes, Member

(sgd):  Olympia Sarrinikolaou

Clerk

Date of Hearing:  31 October 2007
Date of Decision:  14 December 2007
Advocate for the Applicant:         Self‑represented
Advocate for the Respondent:      Mr G. Purcell, Department of Veterans’ Affairs