Abdulhussein and Secretary, Department of Social Services (Social services second review) - [2019] AATA 2214

Abdulhussein and Secretary, Department of Social Services (Social services second review) [2019] AATA 2214 (29 July 2019)
Division:GENERAL DIVISION
File Numbers: 2018/0006 & 2018/0091
Re:Ali Abdulhussein
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:The Hon. John Pascoe AC CVO, Deputy President
Date:29 July 2019
Place:Sydney

The decision of the Social Services and Child Support Division of the Tribunal made on 13 December 2017 in relation to Carer Payment is set aside and remitted to the Respondent for recalculation of the debt with a direction that the deposits made into the Applicant’s Commonwealth of Australia savings account and home loan account should not be considered income.
The decision of the Social Services and Child Support Division of the Tribunal made on 13 December 2017 in relation to Newstart Allowance is affirmed.
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The Hon. John Pascoe AC CVO, Deputy President
Catchwords
SOCIAL SECURITY – Newstart Allowance – Carer Payment – undeclared income – unexplained cash deposits - where applicant had not declared ownership of an investment property – whether property needed to be disclosed – whether constructive trust existed – decision set aside and remitted – decision affirmed
Legislation
Social Security Act 1991 (Cth) – ss 8, 1064, 1237AAD
Cases
Kintominas v Secretary, Department of Social Services [1991] FCA 437
Krygios and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 907
Muschinski v Dodds (1986) 160 CLR 583
Secondary Materials
Social Security Guide
REASONS FOR DECISION
The Hon. John Pascoe AC CVO, Deputy President
26 July 2019

In this matter Mr Abdulhussein (the Applicant) is seeking review of a decision of the Social Services and Child Support division of this Tribunal (‘AAT1’) dated 13 December 2017 which decided that the social security debts of Mr Abdulhussein in relation to Carer Payment and Newstart Allowance were correctly determined by an Authorised Review Officer from the Department of Human Services on 29 May 2017.
The two debts which are the subject of this application are:
(a)a Carer Payment debt of $24,590.10 which is said to have arose due to:
(i)Mr Abdulhussein not disclosing amounts deposited into his Commonwealth Bank of Australia (‘CBA’) savings account and mortgage loan account; and
(ii)Mr Abdulhussein not disclosing an investment property located in New South Wales (‘investment property’).
(b)a Newstart Allowance debt of $9,301.32 which is said to have arose due to Mr Abdulhussein not disclosing the investment property.
There were therefore two key elements in the decision, firstly the undisclosed periodic payments made to the applicant’s CBA bank accounts, and secondly the nature of the investment property that was found to have been required to be disclosed to Centrelink.
PAYMENTS TO THE CBA BANK ACCOUNTS
The Applicant contended that the payments to both accounts had been made by his son in order to assist his father and were made on the basis that the money would be repaid. He stated that an arrangement had been made where his son would deposit the amounts in his accounts for safe-keeping, which had the additional benefit of reducing the interest of the Applicant’s mortgage loan. The payments to the savings account were said to have been made by Mr Caban, the applicant’s son. The applicant’s son also made payments to the loan account and payments were also made into this account by Mr Haydar, a brother of the Applicant.
The Applicant gave evidence that all of the money provided by his son was repaid and in this regard he drew the Tribunal’s attention to transfers from his loan account to his savings account and subsequent withdrawals amounting to $138,000, which he says were paid to his son. I also note the statement from the Applicant’s son that he had made periodic payments into his father’s account in order to help reduce the size of the mortgage payments. The Respondent drew the attention of the Tribunal to the fact that the periodic payments were spasmodic and that the Applicant’s son was, at the time, a student and not in full-time employment. It was not disputed however that the Applicant’s son had part-time work and that he was committed to assisting his father. The Applicant’s son had continued to help his parents after he was in full-time employment.
The Respondent submitted that these payments should be characterised as income and therefore should have been counted for the purpose of calculating the rate of the Applicant’s Carer Payment in accordance with section 1064(1)(d) of the Social Security Act 1991 (Cth) (‘the Act’).
Income is defined in section 8(1) of the Act as follows:
“income”, in relation to a person, means:
(a)an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b)a periodical payment by way of gift or allowance; or
(c)a periodical benefit by way of gift or allowance
The Applicant contends that the funds were deposited into his account by his son under an agreement that they would be repaid, creating a loan arrangement. The Social Security Guide notes that loans are not to be classified as income, stating at paragraph 4.3.1.10:
Borrowings or loans
Bona fide recipient borrowings (loans) are NOT income. A bona fide borrowing is one where money moves from the lender to the borrower, and there is an intention that the money be repaid.
The Respondent contends that this arrangement can’t be considered a loan as it doesn’t meet the common law requirements of a legal contract. It was submitted that the agreement between the parties cannot be found to have been made with an intention to create legal relations, and that there was no genuine obligation on the Applicant to repay the money to his son. It was also argued that there is a rebuttable presumption that domestic or family arrangements are not intended to be legally enforceable, and therefore cannot be loans.
The presumption that arrangements within the family are not intended to be enforceable I find to be rebutted in the circumstances of this case. Whilst it is accepted that the Applicant’s son would be reluctant to sue his father, it is clear from the evidence that the monies paid in the Applicant’s accounts by the son were only ever intended as a temporary loan which allowed the son to save his money whilst also helping his father. In other words this served as a convenient and beneficial (to the family) alternative to a savings account.
The amounts put into the Applicant’s account by his son were understood by both parties to be ultimately used for a deposit on a house.
I accept that the monies were repaid in full.
The total amount of money involved was a very significant amount for the son and it is reasonable to assume that the intention was to create a legally enforceable contract for the return of these monies. There was certainty as to the purpose of the loan and as to when the monies were to be repaid. In other words, the contract was performed.
There was sufficient certainty in the arrangement for there to be an enforceable contract.
I accept the Applicants explanation as to the periodic payments into his savings account made by his son and that these amounts were indeed repaid, creating an enforceable loan agreement. Accordingly these payments do not constitute income in accordance with the provisions of section 8(1) and therefore should not be taken into account for the purposes of calculating any debt under the provisions of section 1064(1)(d).
THE INVESTMENT PROPERTY
The second issue related to the Applicant’s interest in the investment property. The history of this property is important. It was originally purchased by the Applicant on 17 April 2010. Subsequent to the purchase the existing home on the property was demolished and two homes were built on the land. One of them (the ‘family home’) was lived in by the Applicant and his family from the time it was ready for occupation. The home said to belong to the brother was rented for approximately $680 per week with the whole of the rent being received by the Applicant. The rented home was valued as at a number of dates with the valuation as follows:
·As at 8 March 2017 - $950,000
·As at 1 July 2015 - $875,000
·As at 1 July 2013 - $650,000
·As at 1 July 2011 - $550,000
At no stage in the purchase of the property, the demolition of the original house or the application to construct the new dual occupancy was there ever any mention of anyone other than the Applicant having any interest in the property. Further, when the Applicant applied for a mortgage in relation to the property he presented himself as the sole owner.
The Applicant’s explanation for not disclosing the property being rented was that the in fact belonged to his brother, also named Mr Abdulhussein, who resided in Iraq at all relevant times. The Applicant gave evidence that he entered into an agreement with his brother to buy a property in Australia which could be used by his brother and his family if, in the future, his brother and his family decided to come to Australia. There was no documentary evidence of this agreement, except for a Power of Attorney document dated 23 March 2009 and said to have been signed by his brother in Iraq which stated as follows:
I, Hassan Salem Abdulhussein, the signatory to this Power of Attorney hereby give my brother, Ali Salem Abdulhussein, a limited power of attorney to buy a residential property in Australia in accordance with the conditions listed below. I also give him a power of attorney to sell [the property] when necessary and after the agreement of the two parties. The selling price will be in accordance with the value of the property at the time of sale and is determined by [the prices in] the area in which the property is located.
1.    The Partnership is based on equal share of 50%.
2.    The expenses of and the profits from the property is equally shared on 50% basis.
3.    In the event of the death of one party, the other party is to inform the heirs of the other party of their rights and is to transfer those rights to them.
On 2 April 2009 the Applicant’s brother sent the amount of $107,000.00 from Iraq to the Applicant in Australia. There was no documentation in relation to the purpose for which this money was sent or as to its repayment. The money did not represent 50% of the purchase price of the property nor any other easily calculable percentage of the purchase price. No evidence was given as to how the particular amount sent was decided upon. Further amounts of money were received from Iraq on 17 September 2013 and 13 November 2013. These amounts were sent by a Mr Haydar, who the applicant said was another of his brothers, who had sent money on behalf of Mr Abdulhussein (the Applicant’s brother) because he was too busy to do so himself. Again no documentation, other than receipts confirming the transfer of the money, was presented to the Tribunal in relation to these amounts of money or the purposes for which they were sent.
The Applicant’s evidence was that he had not disclosed his brother’s interest in the home because when he was initially thinking about the purchase, the agent and a friend had told him that the brother could not own property in Australia because he was resident in Iraq. There was no evidence that the Applicant had ever sought to check this advice, raised the question with his solicitor at the time the property was purchased, or checked with the local council. He did not show anyone a copy of the Power of Attorney which would have been relevant information. His brother appears never to have made any enquiry about the property or the nature of the brother’s interest in the property. The Applicant’s brother was not called upon to give evidence to the Tribunal either orally or in writing. In fact, the brother never appears to have had any input whatsoever into the purchase, design or construction of the property despite the fact that the Applicant said that the original purpose of the money being sent from Iraq was to provide accommodation for the brother and his family if they chose to move to Australia. The brother was never advised of the property valuation which one would assume to be a matter of considerable importance if he was indeed the owner. It is simply not credible that the brother would have had no interest in a property which was intended as a future residence for him and his family.
The home that is said to belong to the brother seems to have been rented from the time of completion, most of the time through local estate agents. There was no evidence of the brother’s interest in the property ever having been disclosed to the estate agents and rent from the property was paid directly into the Applicant’s mortgage account. There is no evidence that the brother was ever informed about rental arrangements, nor the amount of rent paid or the purpose for which it was used. The Applicant said he did not disclose the rental payments to Centrelink because they belonged to his brother and were only used by the Applicant to reduce the mortgage. There was no evidence that the brother ever knew the nature of any rental agreement nor the amount of rental income received.
On the basis of the evidence presented to the Tribunal it is impossible to conclude other than that the applicant is the sole owner of the entire property (both the family home and the home said to belong to the brother). When questioned about why the property was not subdivided, the Applicant said that it was due to a problem with the manner in which the house had been constructed. If in fact the brother was the owner of one of the homes this would surely have been a critical issue at the time the house was being designed and also a matter raised with the local council and his brother at the time the plans were submitted. There is no evidence that the matter was ever raised at that time, or indeed at any time.
The Power of Attorney given by the Applicant’s brother does not appear ever to have been used. Nor is there any evidence that it was ever attempted to be used by the Applicant, or that legal advice was obtained at any stage in relation to the document.
It is appropriate for the Tribunal to consider the question of whether the property can be said to be held partly in trust for the Applicant’s brother. The applicant did not assert at any time that he held all or part of the property on trust for his brother despite having had the opportunity to do so when responding to Centrelink questions. He did not raise the issue with the Tribunal. A constructive trust can however be imposed by a court regardless of the subjective intention of the parties at the time the property was acquired. The Tribunal is capable of making a finding that a constructive trust exists (Kintominas v Secretary, Department of Social Services [1991] FCA 437). A constructive trust differs from other forms of trust in that it can be found to exist regardless of the intention of the parties (Muschinski v Dodds (1986) 160 CLR 583). Particularly in family situations the court tends to impose an objective test to determine the parties intention at the time the property was acquired, although subsequent events can be used to assist in determining the parties intention at the time of purchase time (Krygios and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 907)
In the current case, an objective assessment of what was in the parties minds at the time of purchase would lead inexorably to the conclusion that the Applicant did not intend to hold any part of the property in trust for his brother. There is no evidence that any legal advice in relation to the brother having an interest in the property was sought, no evidence that the brother expected to have an interest in the property other than the Power of Attorney which is of limited value and was never used or disclosed to relevant third parties. In fact no evidence was provided showing that the brother was ever consulted in relation to the purchase or design of the property. Such a conclusion can only be reinforced by the subsequent behaviour of the Applicant who never once appears to have taken into account the interests of his brother when dealing with the property. Nor is there any evidence that his brother expected him to do so. There were many opportunities for the Applicant to consult his brother in relation to the house, prior to purchase, at the time of purchase, at the time of demolition of the existing house, construction of the new dwelling and when making decisions in relation to the home. There is no evidence that any such consultation ever occurred or was ever contemplated.
Accordingly the Tribunal finds that the applicant is the sole owner of the investment property and that the Applicant had an obligation to disclose his ownership of the property to Centrelink so that Centrelink could take the ownership into account in calculating the entitlement and amount of the relevant benefits.
SPECIAL CIRCUMSTANCES - FINANCIAL HARDSHIP
At the final stage of the hearing the Applicant stated that he would be unable to repay the debt to Centrelink and that he in fact was suffering from financial hardship. He said that he had had to go to charity to get food and that he had no money to meet expenses. He did not present any evidence beyond his statements from the bar table as to his circumstances.
Financial hardship is dealt with in section 1237AAD of the Act which states as follows:
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act, and
(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c)it is more appropriate to waive than to write off the debt or part of the debt.
On the evidence before the Tribunal, it cannot be satisfied that there are special circumstances which apply to the applicant. There is no evidence that the Applicant’s financial difficulties have arisen other than as a result of his failure to comply with his obligations under the Act. There was no evidence of special circumstances beyond financial hardship which apply to the Applicant. He owns a very valuable property, his wife is in receipt of a disability pension and he is receiving rent from the property which he would appear to be at liberty to apply to his household expenses. The Applicant is at liberty to sell the property and move to a cheaper one.
CONCLUSION
The Tribunal finds that the Applicant is the sole owner of the investment property. It is not satisfied that any part of the property can be said to have been held on trust by the Applicant for the benefit of his brother. The Applicant therefore had an obligation to disclose the investment property to Centrelink and the AAT1 was correct in finding that it should be taken into account when calculating any debts.
The Tribunal is satisfied that the payments into the Applicant’s two CBA accounts were made by his son, that these amounts were paid back by the Applicant and that they should be considered to be a loan. They therefore do not constitute income under section 8(1) of the Act and are not to be taken into account by Centrelink for the purposes of calculating entitlements. Having made this finding, it will be necessary for the amount of Carer Payment that the Applicant was entitled to for the relevant period to be recalculated for the purpose of determining any debts.

The Tribunal does not accept the Applicant’s submission that the debt should be waived due to financial hardship. There are no special circumstances that would justify the waiving of the debts under section 1237AAD of the Act.
DECISION
The decision of the Social Services and Child Support Division of the Tribunal in relation to Carer Payment is set aside and remitted to the Respondent for recalculation of the debt with a direction that the deposits made into the Applicant’s Commonwealth of Australia savings account and home loan account should not be considered income.
The decision of the Social Services and Child Support Division of the Tribunal in relation to Newstart Allowance is affirmed.

I certify that the preceding 34 (thirty - four) paragraphs are a true copy of the reasons for the decision herein of The Hon. John Pascoe AC CVO, Deputy President

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Associate
Dated: 29 July 2019

Date of hearing: 27 May 2019

Applicant: In person

Advocate for the Respondent: Dr S Thompson

Solicitors for the Respondent: Department of Human Services

Date of hearing:	27 May 2019
Applicant:	In person
Advocate for the Respondent:	Dr S Thompson
Solicitors for the Respondent:	Department of Human Services