Amine; Secretary, Department of Family and Community Services
[2005] AATA 446
•18 May 2005
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2005] AATA 446
ADMINISTRATIVE APPEALS TRIBUNAL )
) N2003/1666 ) N2003/1908
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Applicant
And
SAMIRA AND WADIH AMINE
Respondent
DECISION
Tribunal Senior Member Mrs Josephine Kelly Date18 May 2005
PlaceSydney
Decision The reviewable decisions of the Social Security Appeals Tribunal of 19 September 2003 in proceedings N2003/1666 and of 6 November 2003 in proceedings N2003/1908, are set aside. The Tribunal remits both matters for reconsideration in accordance with the findings made in this decision. [sgd] Senior Member, Mrs Josephine Kelly
CATCHWORDS
SOCIAL SECURITY – disability support pension – disposal of assets – several properties – redevelopment of property – transfers of property to children – consideration - beneficial interest – constructive trust – agreements between family members – decision set aside.
LEGISLATION
Social Security Act 1991 sections 1123, 1124, 1125, 1125A(1), 1126
Conveyancing Act 1919 (NSW) section s 12
CASELAW
Kintominas v Secretary, Department of Society Security (1991) 23 ALD 572
Kidner v Secretary, Department of Social Security (1993) 31 ALD 63
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Commonwealth v Verwayen (1990) 170 CLR 394
Secretary Department of Social Security v Agnew [2000] FCA 59 (4 February 2000)
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
REASONS FOR DECISION
18 May 2005 Senior Member Mrs Josephine Kelly SUMMARY
1. There are two proceedings before this Tribunal in which the Applicant, the Secretary, Department of Family and Community Services seeks the review of decisions made by the Social Security Appeals Tribunal (“SSAT”) in respect of payment of disability support pension (“DSP”) to Mr Wadih Amine and his wife Mrs Samira Amine (“Mr and Mrs Amine”) under Social Security law.
2. The payments had been suspended on 25 July 2002 (Exhibit T1, p 70) and then cancelled on 30 October 2002. An authorised review officer affirmed the original decision on 20 December 2002. The reason for the cancellation was that Centrelink formed the view that Mr and Mrs Amine had disposed of assets such that they failed to satisfy the assets test for eligibility under Social Security laws. On 19 September 2003, the SSAT set aside Centrelink’s decision of 30 October 2002 to cancel payments of disability support pension to Mr and Mrs Amine.
3. The SSAT directed the recalculation of Mr and Mrs Amine’s assets as of 14 August 2002 “on the basis that there had been no deprivation of assets”. This matter is the subject of proceedings N2003/1666.
4. On 15 November 2002 Centrelink decided that Mr and Mrs Amine each had a recoverable debt of $19,117.64 for the period 21 June 2000 to 13 August 2002 (Exhibit T1 pp 121-138). On 5 March 2003 Centrelink raised a further debt of $19,014.77 for each of Mr and Mrs Amine for the period 6 January 1998 to 20 June 2000 (Exhibit T1, pp 159-178). On 6 March 2003 an authorised review officer affirmed the decision regarding total debts owed (Exhibit T1 pp 179-191). On 6 November 2003 the SSAT set aside the decisions regarding the debts and referred the matters to Centrelink for recalculation in accordance with directions made. This is the subject of proceedings N2003/1908.
5. Mr and Mrs Amine have five children. The youngest are twin girls born in 1993 who are not relevant to this decision. The other children are a daughter, Dallal, born 26 April 1976 (21/22 years old in 1998), and sons George, born 10 September 1979 (18/19 in 1998) and Danny born 8 August 1982 (15/16 in 1998). All the children live with their parents and have always done so.
6. The assets in issue are real property. Mr and Mrs Amine owned as joint tenants their home at Alford’s Point (“Alford’s Point”) from 1991 and a property at Granville (“Granville”) on which a dwelling was constructed, from an unknown date. Prior to 1998, Granville had not been habitable for the past few years.
7. In 1998 the Granville property was re-developed. The re-development comprised of the construction of six strata title dwellings - five townhouses and one villa. Two units were sold to third parties in 1999, and a third in 2000.
8. Mr and Mrs Amine assert and the Secretary has accepted that two units were transferred to George on 9 June 1999 (Exhibit T1 p115) and 2 July 1999 (Exhibit T1 p114) and one unit was transferred to Danny on 1 July 2001 (Exhibit T1 p 112).
9. In June 2000 Alford’s Point was transferred to George and Dallal. At the same time, Mr and Mrs Amine purchased a property at Barden Ridge (“Barden Ridge”).
10. It is those transfers of property to the children and the purchase of Barden Ridge which raise the issues in these proceedings.
11. For the reasons given below, I set aside the reviewable decisions in both proceedings N2003/1666 and N2003/1908 and remit the matters for reconsideration in accordance with the directions of the Tribunal given at the end of this decision.
ISSUES
12. The issues in these proceedings are:
(a) Have Mr and Mrs Amine disposed of assets, that is the properties transferred to their children, which are valued at more than $10,000, such that any amount in excess of that figure must be included as part of their assessable assets for a period of five years from the date of disposal?
(b) Have their properties been valued appropriately?
(c) Does the total value of Mr and Mrs Amine’s assets, including any amounts included as disposed assets, exceed the asset value limit for payment of disability support pension to a married home-owner?
LEGISLATION
13. The relevant sections of the Social Security Act (“the Act”) are set out below.
“ SECT 1123 Disposal of assets
1123(1) For the purposes of this Act, a person disposes of assets of the person if:
(a) the person engages in a course of conduct that directly or indirectly:
(i) destroys all or some of the person's assets; or
(ii) disposes of all or some of the person's assets; or
(iii) diminishes the value of all or some of the person's assets; and
(b) one of the following subparagraphs is satisfied:
(i) the person receives no consideration in money or money's worth for the destruction, disposal or diminution;
(ii) the person receives inadequate consideration in money or money's worth for the destruction, disposal or diminution;
(iii) the Secretary is satisfied that the person's purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage.
…
1123(2) For the purposes of subsection (1), a person has a purpose of obtaining a social security advantage if the person has a purpose of:
(a) obtaining a social security pension, a social security benefit, a parenting allowance or a service pension or enabling the person's partner to obtain such a pension or benefit, a parenting allowance or a youth training allowance; or
(b) obtaining a social security pension, a social security benefit, a parenting allowance or a service pension, or enabling the person's partner to obtain such a pension or benefit, a parenting allowance or a youth training allowance, at a higher rate than would otherwise have been payable; or
(c) ensuring that the person or the person's partner would be qualified for fringe benefits for the purposes of this Act or the Veterans' Entitlements Act.
1123(3) For the purposes of subsection (1), the value of a person's granny flat interest is to be taken not to be consideration received by the person if the interest was acquired or retained before 22 August 1990.
…
Sect 1124 Amount of disposition
If a person disposes of assets, the amount of the disposition is:
(a) if the person receives no consideration for the destruction, disposal or diminution--an amount equal to:
(i) the value of the assets that are destroyed; or
(ii) the value of the assets that are disposed of; or
(iii) the amount of the diminution in the value of the assets whose value is diminished; or
(b) if the person receives consideration for the destruction, disposal or diminution--an amount equal to:
(i) the value of the assets that are destroyed; or
(ii) the value of the assets that are disposed of; or
(iii) the amount of the diminution in the value of the assets whose value is diminished;
less the amount of the consideration received by the person in respect of the destruction, disposal or diminution.
SECT 1126 Disposal of assets--members of couples
1126(1) Subject to subsections (2), (3) and (4), if, on or after 1 March 1986:
(a) a person who is a member of a couple has disposed of an asset of the person:
(i) during a pension year of the person; or
(ii) if the person is not receiving a pension, benefit or payment of a kind referred to in subsection 11(10) but the person's partner is receiving such a pension, benefit or payment or is receiving a youth training allowance--during a pension year of the person's partner; and
(b) the amount of that disposition, or the sum of that amount and the amounts (if any) of other dispositions of assets previously made by the person or the person's partner during that pension year, exceeds disposal limit;
then, for the purposes of this Act:
(c) there is to be included in the value of the person's assets for the period of 5 years that starts on the day on which the disposition takes effect:
(i) 50% of the amount by which the sum of the amount of the first- mentioned disposition and of the amounts (if any) of other dispositions of assets previously made by the person or the person's partner during the pension year exceeds disposal limit; or
(ii) 50% of the amount of the first-mentioned disposition;
whichever is the lesser amount; and
(d) there is to be included in the value of the assets of the person's partner for the period of 5 years that starts on the day on which the disposition takes place:
(i) 50% of the amount by which the sum of the amount of the first- mentioned disposition and of the amounts (if any) of other dispositions of assets previously made by the person or the person's partner during the pension year exceeds disposal limit; or
(ii) 50% of the amount of the first-mentioned disposition;
whichever is the lesser amount.
Note 1: for disposes of assets see section 1123.
Note 2: for amount of disposition see section 1124.
HOW DID THE ISSUE OF MR AND MRS AMINE’S ASSETS ARISE IN 2002?
14. In 1992 both Mr and Mrs Amine applied for DSP. In the ‘Real Estate Details’ section of their application form dated 21 August 1992, they disclosed the Granville property, valuing it at $120,000 for which they received $160 per week rent. It was described as a fibro house with a tile roof (Exhibit T1 pp 27-28). At that time they were living at Alford’s Point which was purchased in about 1991.
15. Centrelink sent an inquiry to Mrs Amine dated 3 April 2002 seeking information about the Granville property, including the latest Rates Notice or Valuer General’s Certificate, within 14 days (Exhibit T1 p 53).
16. On 16 April 2002, both Mr and Mrs Amine’s pensions were cancelled (Exhibit T1 page 60). On about that date Mrs Amine told a Centrelink officer that their children had taken out loans and paid their parents $340,000 for Alford’s Point. The pension payments were apparently restored on 24 April 2002.
17. It appears from Exhibit T1 at page 54 and onwards that the following information was provided to Centrelink in response to the letter of 3 April 2002: a letter from Andresakis & Associates dated 4 July 2000 notifying Mr and Mrs Amine of the sale to Inthusegaram of “149 Blaxcell Street, Granville” on 30 June 2000 for $240,000 (which was actually the sale of one of the six strata title units - Unit 4 - not of the whole property); a second letter of 4 July 2000 from those solicitors to Mr and Mrs Amine advising of the purchase of Barden Ridge on 30 June 2002 for $475,000 plus outgoings of more than $20,000 (total of $495,000); a copy of the first page of the Contract for Sale of Land for that property; the valuation for Alford’s Point of $340,000 at 29 May 2000 and the transfer, stamped on 21 June 2000, of that property to George and Dallal for $340,000.
18. On their face and given their proximity in time, those documents suggest that the proceeds of sale of the Granville property ($226,080.90) and Alford’s Point ($340,000), being $566,000 approximately, were used to pay for Barden Ridge ($496,000) with some $70,000 left over.
19. Further inquiries were made. A file note dated 30 August 2002 (Exhibit T1 page 85) refers to the redevelopment of the Granville property with a block of 6, “house vacant for 2 years before knocked down” “son collecting rent from units 1, 5 and 6 and Alford’s Point”. A further file note from Centrelink refers to an attendance by Mr and Mrs Amine at the Sutherland “CSC”. It notes that there are three certificates of title in their name for three units at Granville. It also records that “the children took out loans for the construction of 6 townhouses and they were given one of the townhouses by their children. I explained to customer the Security Schedule shows her and her husband as owning units 1, 5 and 6. She said this was a mistake and will provide documentation to prove this. Their son George is collecting the rent for these 3 properties, and from Alford’s Point as well.” As is discussed later in this decision the children did not take out the loans for the construction, Mr and Mrs Amine and Dallal did.
20. As set out above, the disability support pension was suspended on 25 July 2002 and cancelled on 30 October 2002. Recoverable debts were also raised as set out previously.
FINDINGS OF FACT – PROPERTY DEALINGS
21. To understand the competing cases put by both parties, it is necessary to understand the detailed financial arrangements and property dealings that have occurred and the valuations of properties at various times. To assist understanding, the loan number references used by the Secretary in these proceedings are adopted.
22. In 1994 Dallal paid to her parents $30,000 from compensation she received for a car accident to assist them with their financial difficulties. On 29 December 1994 that money was paid to reduce the then existing Commonwealth Bank mortgage on the Alford’s Point property (page 88 Exhibit T1).
Granville
23. Prior to the redevelopment of Granville in 1998 there was no mortgage over that property. The solicitors for Mr and Mrs Amine obtained a valuation of $360,000 for the property “for the purpose of Stamp Duty” from Asset Valuations, as at 6 January 1998 (Exhibit T1 p 223-229). The valuation was of the “land value”. The valuation noted that a sewer main easement traversed the middle of the allotment and that there was a development approval and building approval “(22 July 1996)” for the erection of five two-storey, three bedroom town houses and 1 one-storey, two bedroom villa home. There were also building approval fees outstanding in the sum of $25,454.
24. I conclude that as at 8 January 1998, the value of Granville was $360,000 less $25,454, being $334,546. I do not accept the evidence of either Mr Amine or George on the issue of the value of Granville for reasons given later in this decision.
25. The total construction cost of the redevelopment according to John Alam & Partners was $657,357 (Exhibit T1 p 271). The construction was undertaken between about March and November 1998 by King Development & Construction (Exhibit T1 pp 272-283) at an apparent cost of $630,000.
26. In April 1998 Mr and Mrs Amine and Dallal took out a Bill Facility with the National Australia Bank (“the NAB”) (“the Bill Facility”) for building expenses (Exhibit T1 pp 193-202). The construction costs were noted to be $626,000, interest $27,000, and the limit on the facility was $653,000. Mr and Mrs Amine and Dallal were described as “customers” and “drawers” in the facility. The facility commenced on 30 April 1998 and ended on 31 March 1999. Mr and Mrs Amine provided Alford’s Point and Granville as security for the facility. The account title was “Wadih and Samira Amine” and account number was 45 203 1510 (“NAB 1”). The account was opened on 7 April 1998 (Exhibit R2). Mr Byrne relied on this document in support of his case, which is discussed later in this decision.
27. From 7 April 1998 until 15 December 1998, the credits into account NAB 1 (45 203 1510) were $303,984 (Exhibit A9). The maximum debit during the life of the loan was $20,000. The account was in debit from 4 August 1999 until 7 August 2002 when two deposits of $20,226.35 and $3,257.24 were made to it (Exhibit A5, annexure A8). These deposits are discussed later. The account was closed on May 2003 (Exhibit T3 document T41).
28. In May 1998, Mr and Mrs Amine took out an NAB Tailored Home Loan Package, account number 45 269 8286 which later became number 101635072 (Exhibit A5 page 22). This account will be referred to as “NAB 3”. The loan amount of $107,000 was used on 7 May (Exhibit T2, page 307) to pay out $106,453 owing to the existing Commonwealth Bank loan. The security for the new loan was Alford’s Point (Exhibit T2, page 305).
29. On 13 May 1999 $100,000 was paid into the account resulting in a debit balance of $2,201.32 (Exhibit T2 page 312 and Exhibit R2). Thereafter the account had a small debit balance of less than that figure until it was paid out on 7 May 2003 (Exhibit T2, pages 316 and 318).
30. A document headed Line of Credit – Schedule of Securities dated 5 March 1998 (in the top left hand corner) shows that the NAB had a security over Alford’s Point, registered mortgage 399 3071 dated 5 May 1998. It also discloses the amounts “primary instrument $135,000 Prime” and “$653,000” collateral (total $788,000) (Exhibit T2 p 302). Two market values were listed for Alford’s Point, $240,000 and $120,000. I infer that the first value is the improved value and the second the land value, as appears in other later similar documents in evidence. This document therefore shows that the value of Alford’s Point at 5 March 1998 was $240,000.
31. The Strata Plan for the Granville redevelopment was registered on 2 March 1999 (Exhibit A3). In accordance with the valuations contained in that Exhibit I find the Granville units were valued at that date as follows: Unit 1 $220,000, Units 2, 3, 4 and 5, $215,000 and Unit 6, $230,000. That is a total value of $1,300,000.
32. Exhibit T2 page 320, dated 10 February 1999 at the bottom of the page, is headed “Line of Credit – Schedule of Securities”. It supports the valuation of Unit 1 at 2 March 1999 at $220,000, as given in Exhibit A3. It names the customers as Mr and Mrs Amine. The security referred to is “1/149 Blaxcell Street, Granville”. The market value is shown as $225,000.
33. The first of April 1999 was a significant date. The following transactions occurred:
(1) Unit 2 was sold to a third party for $215,000. Of that amount $193,699.35 was paid to the NAB (Exhibit R3). There is no document that indicates into which account those funds were paid. However, I infer that those funds were repaid to reduce the debt arising from the construction of Granville. This is consistent with Mr Amine’s evidence that he knew that the proceeds of sale of the first two units had to be paid to the NAB.
(2) NAB Loan 4663 21068 for $353,000 was opened (Exhibit T2, pages 319 and 337). This loan became number 1021 40733 on 15 June 2000 and will be referred to as “NAB 4”. The customers were Mr and Mrs Amine. The securities required were mortgages over Units 1, 4, 5 and 6, Blaxcell Street, Granville, all of which were “given” by Mr and Mrs Amine. In June 2000 Unit 4 was removed and Barden Ridge included as a security (Exhibit T2 page 324). On 7 August 2002 this loan was paid out in the sum of $331,032. There were no large payments made into this loan during its life, just regular weekly payments in the order of $600.
(3) An NAB bridging loan 46 633 0183 in the name of Mr and Mrs Amine was opened with a debit of $100,000 (Exhibit A1) (“NAB 2”). This loan was paid out the next month.
34.I find that from the end of the life of the Bill Facility on 31 March 1999 and the refinancing reflected above, Dallal had no liability in respect of the redevelopment that had occurred.
35. On 12 May 1999 Unit 3 was also sold to a third party for $212,000. Of those funds, $100,344.08 was used to pay out the bridging loan taken out the month before (NAB 2) (46 633 0183), $100,000 was paid into Home Loan 45 269 8286 (NAB 3), and $6,418.47 was paid into account 45 203 1510 (NAB 1), a total of $206,762.55 (Exhibits A6 and R4). The loan NAB 3 had a balance of approximately $7,000 at that date. The total from the proceeds of both unit sales paid to the NAB was $400,461.90.
PROPERTY TRANSFERS TO GEORGE
36. A transfer of Unit 1 to George showing consideration of $215,000 is in evidence (Exhibit T1 page 115). It is dated 9 June 1999 and $2 stamp duty was paid on that day.
37. The transfer of Unit 5 to George is dated 2 July 1999 and stamp duty of $2 was paid on that day. The transfer shows consideration of $205,000 (Exhibit T1 page 114).
38. The evidence establishes that there was no monetary consideration paid for either Unit 1 or 5 at the date of transfer. Further, I conclude that George was not registered as proprietor of those units until 3 October 2002 after a round of refinancing with the Adelaide Bank in approximately mid-2002, which occurred after investigations had begun into Mr and Mrs Amine’s property dealings. The registration occurred contemporaneously with the registration of mortgages to the Adelaide Bank in respect of each of those units and discharge of mortgages, which I infer were the mortgages to the NAB.
39. In 1999 and 2000 Mr and Mrs Amine used those units as security to obtain new loans, which are detailed below, as well as continuing to use them as security for pre-existing loans in their name.
40. I accept the evidence of the Australian Valuation Office (“the AVO”) (Exhibit A3) in respect of the valuations of the Units at Granville at each date of valuation set out there. In particular, at the date of transfer to George, each of Units 1 and 5 was valued at $230,000, that is, a total of $460,000.
41. On 22 July 1999 Mr and Mrs Amine took out a FlexiPlus Mortgage Facility for $20,000 (Exhibit T2 pages 338 to 340). The securities were Registered Mortgages over Alford’s Point and Units 1, 4, 5 and 6 at Granville. Clearly George was not the registered proprietor of Units 1 and 5 at that date. This facility appears to have been provided as part of loan NAB 4 (46 632 1068) being included behind the cover page of material provided by the NAB in respect of that loan (Exhibit T2 page 319).
42. There are loan applications by Mr and Mrs Amine and George in evidence (Exhibit T2 pp 362 to 366) with “2/3/00” in handwriting at the top. They seem not to have been pursued. The third page of Mr and Mrs Amine’s application is missing, apparently replaced by a page relating to different people and property (p 364). However the following information is of assistance in this case. “11/1999” is the date filled in under Mr Amine’s details as the date when he commenced full-time employment as manager with George’s Mixed Business. This supports the conclusion that the applications were made around the end of 1999 or the beginning of 2000. The home address given was Alford’s Point. The value of that property was stated to be $420,000. The Granville property was listed under the heading “All other assets” with a value of $960,000. A loan of $348,000 was disclosed relating to Granville and an overdraft of $20,000, a total debt of $368,000.
43. At that time Mr and Mrs Amine were the registered proprietors of Units 1, 4, 5 and 6, although transfers to George of Units 1 and 5 existed. The value of $960,000 for Granville is fairly accurate taking into account the AVO valuations of the units (Exhibit A3) as at 2 March 1999 and at each date of transfer, the sale price of the units sold to third parties and the valuations of units 1, 4 and 5 obtained as of 5 June 2000 by Mr Amine (Exhibit T1 pages 230-269).
44. Mr and Mrs Amine were therefore representing their financial position in relation to Granville to be a net asset worth $592,000.
45. The application by George (Exhibit T2 pages 365 and 366) supports that position. It shows that he was working casually for Daverton Pty Limited as a bank officer where he had commenced on 8 February 1999, and was previously a student. The only asset disclosed is a $7,000 NAB account. Neither Unit 1 nor 5 is shown as his asset. His monthly income after tax income is shown as $520. There is no income stated as being derived from rent on units.
THE PURCHASE OF BARDEN RIDGE BY MR AND MRS AMINE AND TRANSFER OF ALFORD’S POINT TO GEORGE AND DALLAL - JUNE 2000
46. Mr Amine obtained valuations as of 5 June 2000 for Units 1, 4 and 5, Granville. Each was described as a two-storey, three bedroom townhouse (Exhibit T1, pages 230 to 269). The purpose of each valuation was stated to be: “GST Margin Scheme Assessment Under Division 75”. The valuations were $255,000 for Unit 1 and $240,000 for each of Units 4 and 5 and $210,000 for Unit 6. I find that those properties were so valued at 5 June 2000.
47. Andresakis & Associates, Solicitors for Mr and Mrs Amine, obtained a valuation of Alford’s Point for stamp duty purposes from Access Valuations (Exhibit T1, p 216 to 222). The report values the property at $340,000 at 29 May 2000. The valuation obtained by the Applicant (Exhibit A2) is the same, as at 21 June 2000. The transfer of the Alford’s Points property (FI 333/03518) to George and Dallal is undated, although the receipt for Stamp Duty of $10,790 on the purchase is dated 21 June 2000 (Ex T1 p 59 and 116). The consideration shown is $340,000.
48. That the transfer was registered on title on 24 August 2000 is apparent from the Legalco Online Information System search in Appendix A to Exhibit A2.
49. From the valuation evidence, I conclude that Alford’s Point was valued at $340,000 as of May / June 2000. Exhibit R7 was a rate notice for the financial year ending 30 June 1999 which I understood to be tendered for the purpose of establishing a value of $130,000 for Alford’s Point. It does not assist me. The base date of the valuation was 1995 and it is for land value, not improved value. What I am concerned with is the improved value of that property at the date of transfer to George and Dallal, 30 June 2000.
50. On 30 June 2000, Unit 4 was sold to a third party for $240,000. The balance of the proceeds of sale of $226,080.90 after outgoings (Exhibit T2, pages 294-295) was used for the purchase of Barden Ridge by Mr and Mrs Amine on the same day.
51. An undated one page document (Exhibit T2 p 306) discloses that at the time of the purchase of Barden Ridge by Mr and Mrs Amine and the transfer of Alford’s Point to George and Dallal, loan NAB 3 (45-269-8286) was secured by Registered Mortgage No 5082585 over Units 1, 5 and 6 at 149 Blaxcell Street, Granville “given” by Mr and Mrs Amine. “The new securities to be obtained” was a registered mortgage over Barden Ridge also “given by” Mr and Mrs Amine.
52. Similarly, a one page undated document (Exhibit T2 page 324) “Credit contract – Particulars of agreed changes” reflects the following facts at about that time. The securities for the credit contract of 4 May 1998 for loan NAB 4 (46 632 1068) in Mr and Mrs Amine’s name were: existing securities to be retained was mortgage 5082585 over Units 1, 5 and 6 Blaxcell Street Granville “given by” Mr and Mrs Amine and the new security to be obtained was over Barden Ridge to be “given by” Mr and Mrs Amine.
53. On 30 June 2000 a new NAB loan 104369654 for $260,000 was taken out (NAB 5) (Exhibits T1 pp 72 to 79 and T2 pages 341 to 348). The properties provided as security by Mr and Mrs Amine were a mortgage over Barden Ridge dated 26 May 2000 ($653,000 coll) and mortgage 5082585 dated 22 April 1998 over units 1, 5 and 6 at Granville to $653,000. George and Dallal provided Alford’s Point as security, “$260,000 prime and collateral $653,000”. The loan was made out to Mr and Mrs Amine, George and Dallal. The market value of Barden Ridge is stated to be $280,000 and that of Alford’s Point is stated to be $240,000 which is based on a valuation dated 18 March 1998. I infer that that was the valuation done when the original facilities were taken out with the NAB in 1998.
54. This NAB 5 loan (104369564) was closed on 1 July 2002 (Exhibits T1 p 71 and T2 pages 341 to 352) when it was refinanced through the Adelaide Bank which is discussed later in this decision.
55. Barden Ridge was purchased on 30 June 2000 for $475,000. The total cost, including disbursements, was $495,509.90 (Exhibit T1 pp 55-57). The purchase was funded using the proceeds of sale of Unit 4 ($226,080.90) and the $260,000 loan, a total of $486,080.90. The source of the other $10,000 is not clear on the evidence.
56. I find that at the end of June 2000 when Mr and Mrs Amine purchased Barden Ridge and transferred Alford’s Point to George and Dallal:
(a) Mr and Mrs Amine were the registered proprietors of Units 1, 5 and 6;
(b) The $260,000 loan was taken out by Mr and Mrs Amine, George and Dallal with Barden Ridge, Alford’s Point and Units 1, 5 and 6 being provided as security;
(c) At the date of transfer to George and Dallal, Alford’s Point was valued at $340,000 (Exhibit T1 pages 216-222 and Exhibit A2);
(d) At most, George and Dallal contributed $260,000 to the purchase of Barden Ridge;
(e) At highest, the consideration received by Mr and Mrs Amine from George and Dallal for the transfer of Alford’s Point was $260,000.
57. On 20 November 2000 George and Dallal took out a $20,000 personal loan from NAB (Exhibit T2 pp 355 to 359). At that time $258,853 was owed on the $260,000 loan and the market value of Alford’s Point was shown as $360,000.
TRANSFER OF UNIT 6 TO DANNY
58. There is in evidence a transfer of Unit 6 to Danny dated 1 July 2001 for consideration of $200,000 (Exhibit T1 page 112). I find that the consideration of $200,000 shown on the transfer was not paid at that date. There is no transfer number on that copy of the transfer and stamp duty notation is not clear. There is a handwritten signature and apparent OSR (Office of State Revenue) notation dated “25/11/02”. It is clear from a title search carried out on 4 February 2004 that as of 23 October 2002 Danny was the registered proprietor and the relevant transfer was T9064209 (Exhibit A3 Appendix A).The historical search and transfer provided after the hearing when the matter was reopened shows that Danny was registered on title on 23 October 2002. At that date I infer that the mortgage to the NAB was discharged and the mortgage to the Adelaide Bank was registered. The reasons for for that conclusion are dealt with below.
ADELAIDE BANK BORROWINGS AND THEIR APPLICATION
59. Exhibit A5 is of considerable interest. It is a letter dated 19 April 2004 to Centrelink from a business called Firm, signed by Mr George Amine, attaching documentation said to show loan balances during the construction period and evidencing consideration paid to Mr and Mrs Amine for Units 1, 5 and 6 and Alford’s Point. The latter comprise three “Home Loan Contract Schedule (Interstate loans)” with the Adelaide Bank Limited. Chronologically they are:
(1) A loan to George and Dallal for $252,000 with Alford’s Point as the security. The “Disclosure Date” and “Date of Offer” is “03/06/2002”. There is a signature on behalf of the Adelaide Bank. The purpose of the loan is to “Refin Bank or Other” and a condition of the loan was that Homeside Lending Loan Account #10436965-4 (i.e. the $260,000 NAB 5 loan to Mr and Mrs Amine and George and Dallal) be terminated at or before the settlement date.
(2) A loan for $190,000 to Danny with Unit 6 as the security. It is signed on behalf of the Bank. The “Disclosure Date” and “Date of Offer” is 28/06/2002. The purpose of the loan is “Investment Purchase”.
(3) A loan for $190,000 to George with Units 1 and 5 as security. It is unsigned by either the Bank or George. The only date is 09/07/2002 which is the “Disclosure Date” and the “Date of offer”. The purpose of the loan is “Investment Purchase”.
60. Those loans total $536,000. That documentation does not prove that the loans were taken out, or if taken out, how the funds were expended. However, bank statements provided in Exhibit R5 establish the following:
61. Loan NAB 5 (10436965-4) was paid out on 1 July 2002 in the sum of $247,202.69. That was the balance of the $260,000 loan taken out by Mr and Mrs Amine, George and Dallal when Barden Ridge was purchased. This is the loan number required to be paid out on settlement of the Adelaide Bank loan to George and Dallal for $252,000. I infer that this payment was made using that loan..
62. The combined loans from the Adelaide Bank to George and Danny were $380,000. On 7 August 2002 the following payments were made:
(1) Loan NAB 4 (46 632 1068) in the name of Mr and Mrs Amine was paid out by payment of $332,601.44
(2) Loan NAB 3 (45 269 8286) in the name of Mr and Mrs Amine was paid out in the sum of $1,714.84;
(3) Loan NAB 1 (42 203 1510) was paid out with two sums of $20,226.35 and $3,257.24;
(4) The loan taken out with the NAB by George and Dallal in November 2000 was paid out (Exhibit A5, annexure A9)
63. Given the payment by George and Dallal on 1 July 2002, I infer that part of the funds borrowed by George and Danny using the Granville units as security was used to the extent necessary to make the payments in respect of (1), (2) and (3) above, a total of $357,799.87, and George used part of his funds to pay out the $20,000 NAB loan to him and Dallal. The total of all the payments made was $378,200.
EVIDENCE IN SUPPORT OF MR AND MRS AMINE’S CASE
64. The oral evidence on which Mr Byrne relied was given by Mr Amine and George, and Mr David Green. Neither Dallal nor Mrs Amine gave evidence. There were also documents tendered.
MR AMINE
65. Mr Amine said that Dallal paid the proceeds of her compensation case to reduce the Commonwealth Bank mortgage over Alford’s Point when her parents were having financial difficulties in 1994. I accept that was the case. He said Dallal should have had a share of Alford’s Point but they could not afford it, by which I understand him to mean they could not afford to pay stamp duty on a transfer of a part interest in the property. He also said that they agreed to work it out later. Dallal was 18 years old in April 1994.
66. Dallal, George and Danny all completed 6 years of high school. George worked all the time. Even while he was at school he had jobs. After school he studied part-time and worked part-time. Danny is now a carpenter.
67. Mr Amine said they tried to sell the Granville property but did not remember the year. He did not remember very clearly, but thought they were only offered about $200,000 to $220,000. In cross-examination when it was put to him that a valuation for Granville before building in 1998 was $360,000, Mr Amine said that they had only been offered $270,000 or $280,000. He said that at that time Dallal was an architectural draftsperson working full-time at Canterbury Council. She suggested they redevelop the Granville property and drew up plans.
68. According to Mr Amine, he, and as far as he knows, Mrs Amine, had nothing to do with the builder or the council during the course of construction, or with the real estate agents when the development was sold. The children did everything. He made no decisions about the redevelopment or the distribution of the units. He just signed documents for the bank. All he wanted was a bigger house and no debt.
69 In 1998 George was studying at TAFE. In 1998 Danny was at school and had a job as well.
70. Mr Amine knew that the sale proceeds of the first two units sold had to go to the bank. He said George and Dallal borrowed using Alford’s Point as security to buy Barden Ridge. The reason he gave for transferring Alford’s Point to George and Dallal was that his family needed a bigger house, there being seven people living there. All the children still live with their parents at Barden Ridge.
71. He said lots of work was carried out on Barden Ridge after it was purchased which was paid for by the children. He thought the work cost $80,000 to $100,000.
72. Mr Amine said that the children pay no rent. They sometimes pay for this or that when they can but they owe too much debt to the Adelaide Bank for Granville and Alford’s Point.
GEORGE AMINE
73. George Amine also gave evidence.He said that he but initially mainly Dallal approached his parents about putting Granville on the market in about 1997. Later in his evidence he included Danny in this approach. Their parents were not well and had financial problems. Also, Dallal was interested in real estate because of her experience as a draftsperson with Canterbury Council assessing development applications. Dallal dealt with the real estate agents and kept her parents informed. He recalled the offers as being $300,000 to $320,000 which was $50,000 to $60,000 less than they wanted.
74. As they could not sell it for the price they wanted, Dallal then approached her parents about redeveloping Granville. The proposal was that if their parents made Granville available to her, George and Danny, they would carry out the redevelopment. In return, his parents wanted a bigger house and no debt. Whatever was leftover would be divided between the three children as they decided. There was no document evidencing this agreement.
75. Dallal drew the plans, got the necessary approvals, found a builder, got a quote, sought finance and supervised the project. Their parents were not involved apart from signing documents. George said he worked on the project labouring and also as he was studying accounting full-time at TAFE, was looking after the paperwork including supervising progress payments, receipts and records of construction. As well as studying, he also had part-time jobs. He finished high school in 1997. When the units were sold to third parties, Dallal dealt with the real estate agents on the sales. Their parents signed the necessary documents.
76. He said he and Dallal serviced all mortgages in 1999. He was working part-time. They were buying the properties off their parents at that time. He also said that Dallal helped him with the mortgages over Units 1 and 5. Danny was aware that he was expected to assume debt. He said the sale price of the units transferred to him and Danny was determined in accordance with valuations obtained by the solicitor. Dallal did not want a unit in her name at that time because she was engaged to someone who was overseas.
77. In 2000 he and Dallal financed part of the purchase of Barden Ridge with the $260,000 loan they took out. They bought Alford’s Point “to take it off their parents’ hands” so their parents could be debt free. George also said lots of work was done on Barden Ridge which was paid for by him, Dallal and Danny. His estimate was also about $80,000 to $100,000. Exhibit R8 is a bundle of receipts/invoices said to support that expenditure and which is also reflected in a schedule in Exhibit R9. He estimated that approximately $40,000 was spent on landscaping, and gave evidence of the purchase of various pieces of furniture, whitegoods and the payment for various repairs and painting that was done.
78. George’s work history is important. In 2000 he studied part-time while working four days a week with NAB on a contractual basis. From May 2001 to December 2002 he worked full-time for Elite Taxation Services. He has been working with Mr Green of Firm Organisation since Christmas 2002.
79. He said Danny finished school in 2000 and is now a carpenter. In 2001 Danny was an apprentice carpenter, working during the day and going to classes at night.
80. George said Alford’s Point is tenanted for $350 a week and the mortgage per month is $1,750. Therefore the mortgage payment has to be topped up by $350 a month. Units 1 and 5 are tenanted for $250 and $230 per week respectively, that is, $1,520 per month and the mortgage is $1,300 a month, a profit of $220 per month. He listed costs such as body corporate fees and council rates to point out that he does not really make a significant profit if any. Danny received $880 a month for his unit and has a mortgage of $1,300 per month and therefore has to pay $420 a month.
81. He agreed he, Dallal and Danny pay no rent to their parents but “help out” sometimes with some things.
82. He organised the refinancing with the Adelaide Bank in 2002 as he was involved in the mortgage market.
MR DAVID GREEN
83. Mr David Green, a certified practising accountant gave evidence. He is the principal of Firm for which George has worked since Christmas 2002. Nearly all of the documentary evidence presented on behalf of Mr and Mrs Amine has been provided by Mr Green. However, it was conceded by Mr Green that George had either prepared it himself or was the source of the information used. For example, George was the source of information set out in the schedules to Exhibit T1 document T27 and the amended version which became Exhibit R6. The various schedules purported to show the origin and destination of funds in the course of the development of Granville, the transfer of the Granville units and the purchase of Barden Ridge. I did not find this material of assistance. The material does not detail the sources and destination of funds in chronological order, includes information not established by or that is inconsistent with other evidence which I accept, and was otherwise not helpful in clarifying what happened. For example, it treats the amounts of “consideration” on the 1999 transfers to George of Units 1 and 5 and in 2001 to Danny of Unit 6 as reflecting monetary sums paid, which I find were not paid at those dates. In relation to the “purchases” by George, unexplained loans to him from Dallal of $15,000 per unit appear. In Schedule 2 further “internal loans” appear, between George and Danny and Dallal. In the Cash flow Schedule “outflow” in relation to construction costs of the “joint venture” included a payment for an easement of $30,000, for which there is no supporting evidence, selling costs of $45,000 and a “notional land value for Mr and Mrs Amine” of $280,000.
84. Mr Green’s oral evidence sought to support the analysis in the evidence, particularly in Exhibit R6, however, for the reasons set out above, I do not accept that evidence. I also give no weight to Mr Green’s evidence of the “joint venture” agreement between the family members which was in similar terms to that provided by Mr Amine and George. Mr Green did not know the family when the agreement was made and was repeating what he had been told, principally by George.
85. The development and building approvals were obtained in July 1996 (Exhibit A3).I accept that Dallal did suggest the redevelopment of the Granville property and drew up the plans which followed an attempt to sell Granville probably in 1995. I also accept that the intention was to improve the financial position of Mr and Mrs Amine and the children.
86. Mr Amine’s evidence about the timing and amount of the offers received for Granville was not clear. As for George’s evidence about the offers made for Granville, I find that Dallal was dealing with the real estate agents on that attempted sale. Given that he was still at school in 1997 and had part-time jobs, his knowledge of the negotiations is at best hear-say and nearly seven years later is not persuasive. For those reasons I prefer the Australian Valuation Office (“AVO”) value of Granville in 1998 as $360,000 as described in Exhibit A3.
87. As well as initiating the redevelopment of Granville, I find that Dallal made the necessary arrangements for her parents to obtain bank loans to carry out the project, retained the builder and on completion of construction, took charge of selling Units 2 and 3 in 1999 and Unit 4 in 2000. I find that George played a very small role, if any, in the period 1998 to 2000, but in 2002 he did arrange the refinancing with the Adelaide Bank. He left school in 1997, was studying full-time and working part-time in 1998 and 1999. A builder had been retained at considerable cost. I do not accept that George played any significant part in providing labour for the construction of the project during 1998. Danny did not finish school until 2000. Evidence of his participation was faintly put. I find that he had no role in the re-development of Granville in 1998.
88. Once the units had been constructed, I find that Units 1, 5 and 6 were tenanted with the rent being paid into the loan accounts held by Mr and Mrs Amine until the refinancing with Adelaide Bank in 2002. I also infer that Unit 4 was rented until its sale on 30 June 2000 and that income was also used to pay the loans.
89. I conclude that Dallal made the biggest contribution to the payments needed in excess of rent receipts to meet loan payments on the Granville properties until George began working full-time, probably in 2000. She has also contributed to the repayment of NAB 5 loan - the $260,000 mortgage taken out in 2000 when Alford’s Point was transferred to her and George and Barden Ridge was purchased.
90. George’s evidence that he, Dallal and Danny spent $80,000 to $100,000 on Barden Ridge after purchase is not supported by the receipts and invoices tendered (Exhibit R8) or by the evidence of the funds available to the family. Exhibit R8 includes documents of various dates, from a receipt for a motor vehicle dated 11 June 1999, to a receipt for furniture in 2002. Some of the documents have no date, no address and no apparent supplier, nor recipient. Those that are addressed are variously addressed to suggest they are to Mr and/or Mrs Amine, “Dallal”, Danny at Alford’s Point and Barden Ridge. This evidence does not assist me in my task.
91. From 1998 until the refinancing of loans through the Adelaide Bank in mid-2002, the security for loans was provided by Mr and Mrs Amine alone and loans were in their names, except for NAB 5. NAB 5 was in the names of Mr and Mrs Amine and George and Dallal. That loan was secured over all the property the family then owned: Units 1, 5 and 6 at Granville, Barden Ridge and Alford’s Point.
THE CASE FOR THE APPLICANT
92. In summary, the case for the Applicant put by Ms Schuster was that there had been disposal of Units 1 and 5 to George in 1999, of Unit 6 to Danny in 2001 and Alford’s Point to George and Dallal in 2000, without adequate consideration within the meaning of s 1123 of the Act. That submission implicitly recognises that the transfers in evidence reflected the transfer of the beneficial interest in those properties. That being so, it is then necessary to establish the value of the disposal under s 1124. The amount of the disposal is to be maintained against Mr and Mrs Amine for a five year period pursuant to s 1125. She argued that the evidence did not support the case put on behalf of Mr and Mrs Amine. It follows that Mr and Mrs Amine’s debt has to be recalculated accordingly.
THE CASE FOR MR AND MRS AMINE
93. Mr Byrne of counsel put the case for Mr and Mrs Amine in various ways
during the hearing. I understood his objective to be to establish that the
beneficial interest in Granville and Alford’s Point had passed variously to Dallal or
Dallal and George or to Dallal, George and Danny before the date of the first transfer
to George in 1999. However, I found his submissions confusing and contradictory.94. Mr Byrne argued that there was a concluded executory agreement between Mr and Mrs Amine and variously with Dallal alone, with Dallal and George, and with Dallal, George and Danny. The agreement was that the three children would carry out the development of Granville and provide to their parents a larger debt free home. In return, Mr and Mrs Amine assigned to the children their beneficial interest in Granville and Alford’s Point.
95. Mr Byrne said that that agreement was executory until the purchase of Barden
Ridge in 2000, when the children’s obligation was discharged. That is Mr Byrne
asserted that Mr and Mrs Amine were debt free at that date and thereafter what
happened to the wealth created had nothing to do with the parents. It was a matter
for the three children how they divided that wealth among themselves. At the end of
the day, Mr and Mrs Amine, Dallal, George and Danny were all better off.96. Mr Byrne did not address the fact that all the mortgages at that time were
secured by all the properties then owned by the Amine family, including Barden
Ridge and Alford’s point, and that Mr and Mrs Amine were parties to the loan
obtained at that time, as well as the other loans.97. Another submission Mr Byrne put was that the Bill Facility document made Dallal liable (Exhibit T1, p 193 and following, clauses 16, 17 and 21). In reliance upon the agreement with her parents, she changed her position by assuming a substantial liability to the bank. She received the beneficial interest in Alford’s Point and Granville in return for her promise to provide her parents with a larger debt free house. Her beneficial interest crystallised when the bill facility was entered into. Mr and Mrs Amine were entitled to expect Dallal to carry out her end of the bargain. If she had not succeeded in providing a larger debt free house to her parents, it could be argued that the equity Mr and Mrs Amine had in the properties did not pass to Dallal. It was an executory agreement which was completed or executed when the Barden Ridge property was purchased.
98. Mr Byrne also argued that the Bill Facility gave rise to an equitable mortgage over Alford’s Point and Granville in favour of Dallal which complied with s 12 of the Conveyancing Act 1919 (NSW) and was enforceable as a matter of law.
99. Finally, Mr Byrne argued that there was no disentitling conduct on either side in this case. Once the Bill Facility had been signed, Mr and Mrs Amine could not walk away, subject to their receiving a bigger house free of debt. They did not do so, but did what was necessary for them to do to bring about the result agreed upon, by signing transfers of the Granville units and Alford’s Point.
100. Mr Byrne referred to two cases, Kintominas v Secretary, Department of Society Security (1991) 23 ALD 572, and Kidner v Secretary, Department of Social Security (1993) 31 ALD 63, both of which concerned whether or not a particular asset, being real property, should be taken into account for the purposes of the assets test relating to pensions.
101. In Kintominas the facts accepted by the Court were that a mother and son had agreed orally that the son and his family could live in a property rent-free in return for paying outgoings and maintaining the property, including borrowing a sum for renovations, and that it would be his upon her death. Justice Einfeld reviewed relevant cases including Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 and Commonwealth v Verwayen (1990) 170 CLR 394. His Honour found that while the mother was the legal owner of the premises, they were beneficially the property of the son and therefore not to be taken into account for the purpose of the assets test for the mother’s pension.
102. Mr Byrne drew the analogy between that case and the present, arguing that Dallal’s change of position, by which I understand him to mean her assumption of liability under the Bill Facility, were similar to the son’s expenditure on his mother’s house. While it was not clear, I will assume that Mr Byrne also relied on her efforts during the development and consequent sales of Units 2 and 3 in 1999.
103. In Kidner a father agreed with his three sons that he would retire and they would take over his business which involved several areas of land he owned. There was evidence that the parties then entered into an oral agreement that the sons would purchase the land for a certain sum. They began to operate the business and improved the properties. Justice Drummond held that the Tribunal had erred in denying that a constructive trust could arise in those circumstances and in failing to consider the related question of whether the initial oral agreement was enforceable against the father because of sufficient acts of part performance of the sons.
104. Mr Byrne pointed out that this matter is different from Kidner because the agreement has been completed and each side got what had been agreed, however, as I understand it, he was relying upon the decision to illustrate the kind of agreement that results in enforceable equitable interests, although he did not refer in this case to the term “constructive trust”, but to “equities” and “beneficial interest”. Kintominas was like Kidner in that the agreement found had not been completed.
105. After I had reserved the decision, I considered that there was an argument that had not been addressed by either party and that Units 1, 5 and 6 were not relevantly transferred to George and Danny until the round of refinancing with the Adelaide Bank in 2002. As the question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal, Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577, the parties were asked to address that possibility and a further hearing for that purpose was held on 13 January 2005. Mr Byrne’s submission did not alter. The Applicant accepted that the interpretation was possible.
THE LAW
106. Before considering the arguments, I note that there is a later case which is also relevant. In Secretary Department of Social Security v Agnew [2000] FCA 59 (4 February 2000), a father, Mr Agnew, owned land on which a farming operation was carried out with his wife and three sons. In 1980 Mr and Mrs Agnew moved to another state. Before leaving, Mr Agnew had a conversation with one of his sons to the effect that the land and the farming operation were the sons’. Mr Agnew also gave evidence that in 1980 he had planned to transfer the land to the sons but the cost of stamp duty thwarted that plan. Over the next 15 years the sons improved and extended the operation, including purchasing more land and taking out a mortgage over Mr Agnew’s property which he signed to finance expenditure. The operation continued as a partnership of the parents and the sons until 1995 when it was dissolved. Mr Agnew drew no profits from the partnership. The operation continued, with the sons as partners assuming liability for their parents’ debts. Later in 1995, Mr Agnew sold the property to a trust of which the sons and their families were beneficiaries for $450,000. He signed a Deed of Release, which recited the sale and that the purchaser had taken over all the liability for the existing mortgage, then approximately $345,000.
107. The Full Court of the Federal Court held that there was a constructive trust and that it was unnecessary to attempt to determine the point in time when Mr Agnew became the bare trustee of the land for the sons, but that that had occurred well prior to 1995. It followed that the question posed by s 1125A(1) of the Act in relation to the effect of Mr Agnew’s signing the documents in 1995, was what was the value to be placed on the asset disposed of? The Court found the asset to be of no significant value. Agnew is similar to the present case because the obligations of both parties had been carried out.
108. Their Honours acknowledged that it is no longer necessary to have a common intention as to the ownership of the beneficial interest, citing Muschinski v Dodds (1985) 160 CLR 583 at 613-614, but used the term “common intention constructive trust” for the purpose of identifying the type of trust under consideration. The Court found that if upon his return from Western Australia Mr Agnew had asserted beneficial ownership of the property concerned, his claim would have been rejected and the sons’ claim to beneficial ownership upheld on the basis that there was a constructive trust in their favour.
109. Applying the principles discussed and applied in Agnew, I would need to be satisfied that there was a common intention as asserted by Mr Byrne that Mr and Mrs Amine would transfer their legal interest in the land to their children in return for the children redeveloping Granville and providing a debt free larger family home.
CONSIDERATION
110. I do not accept the evidence of Mr Amine and George that there was an agreement that Mr and Mrs Amine would transfer Alford’s Point and Granville to Dallal and one or both of her brothers in return for a larger debt free home. I do accept that there was an enterprise undertaken on the initiative of Dallal, using her knowledge and skills to develop Granville using funds raised by using both properties as security with the objective of maximising the family’s wealth.
111. I also accept that an important objective was the purchase of a larger home for the family, but on the evidence I am not persuaded that there was an intention that it be debt free. A larger debt free home could have been purchased after the sale of the first two units to third parties in 1999 and repayment of part of the NAB debt. Alford’s Point and one or more of the remaining units could have been sold to finance that purchase. That was not done. The purchase of Barden Ridge occurred in June 2000 using the proceeds of sale of one of the remaining units, the $260,000 loan and using as security the three retained units, Alford’s Point and Barden Ridge. The $260,000 loan was taken out by Mr and Mrs Amine, Dallal and George. When the family moved to Barden Ridge, Alford’s Point was tenanted and remains tenanted. The three retained units have been tenanted since construction was finished in 1998.
112. At all relevant times, the three children have lived at home and paid no board. I accept that Dallal, and later George and then Danny have contributed their earnings or part of them to service the debt to the extent that it exceeded the rent received, which is not clear on the evidence. I do not accept the evidence George gave on the amounts of rent received and contributions made to the mortgages. I infer that by June 2000, the family’s financial position had improved because George had started working full-time and had sufficient income to become a party to a loan, as well as Dallal and Mr and Mrs Amine. This enabled the $260,000 loan to be taken out which in turn enabled the family to retain Alford’s Point and purchase Barden Ridge.
113. It was only in 2002 after the Applicant started to investigate the property holdings of Mr and Mrs Amine that the refinancing occurred as described above which resulted in Barden Ridge becoming debt free. It had been one of the properties used to secure the NAB 5 loan for $260,000 taken out in 2000 when that property was purchased and Alford’s Point was transferred to George and Dallal. Mr and Mrs Amine, George and Dallal were parties to that loan. Barden Ridge also replaced Alford’s Point as security for the loans NAB 4 and NAB 3 in 2000 when Barden Ridge was purchased as set out earlier in this decision.
114. I found Mr Byrne’s submissions rather vague in terms of when the beneficial interest arose. However, at one stage, he said that the division of wealth was irrelevant after the purchase of Barden Ridge (my emphasis). That submission implicitly acknowledged that it was only after the children (or Dallal) had provided the larger debt free home that the alleged beneficial interest was transferred to them and was based on Mr Byrne’s assertion which I do not accept that it was debt free at that time. He did not address the various mortgages for which that property was security as of the date of purchase. If there had been an agreement as asserted by Mr Byrne, the beneficial interest in the land would not have vested in the children until Barden Ridge had become debt free which was in 2002.
115. The objectives of the redevelopment included purchasing a larger family home, but also to increase the family’s wealth using the available assets. It was not a matter of the children receiving the land but of the whole family benefiting from the redevelopment and consequential investments to the maximum extent.
116. The agreement alleged excluded Mr and Mrs Amine from all decisions about the redevelopment, the division of wealth and the home to be purchased. I do not accept that Mr and Mrs Amine had no involvement in the decisions made about the redevelopment of Granville and the property and financial arrangements thereafter, including the purchase of Barden Ridge. They were not involved in the practical arrangements made which were capably carried out by Dallal, but they were involved in the decision-making. The uncertainty of the terms of the children’s alleged obligation is striking. There was no time frame, location, size, the number of bedrooms and bathrooms, or value specified for the home that was to be purchased. I find that the decision about that purchase was to be made by the whole family, particularly Mr and Mrs Amine and Dallal and to some extent George. That is consistent with the family’s conduct and inconsistent with the alleged agreement. The terms of the alleged agreement were not sufficiently specific to give rise to an enforceable contract or beneficial interest.
117. I also find that the transfer of Alford’s Point to Dallal and George was not necessarily contemplated when the decision was made to redevelop Granville. However, at the time of the purchase of Barden Ridge the Amine family was in a position where the additional borrowing could be made which permitted the purchase of Barden Ridge and the transfer of Alford’s Point to George and Dallal. By the time of the Adelaide Bank refinancing in 2002, George and Danny were in a financial position where they could obtain finance independently of their parents sufficient to finance the loans they obtained in relation to the units then registered in their names.
118. Mr Byrne’s submission about the effect of Dallal’s signing the Bill Facility in 1998 is contradictory. I accept that on its face, she was assuming liability along with her parents. The security provided for the facility were mortgages over Alford’s Point and Granville which were owned by Mr and Mrs Amine. There was no evidence as to why Dallal was a party to the facility. The liability under the facility ended on 30 March 1999. As set out earlier, at that time various loans were taken out in the name of Mr and Mrs Amine using Alford’s Point and Granville as security to refinance the outstanding debt. Dallal had no liability from that point until the transfer and registration of Alford’s Points in the names of George and Dallal in 2000.
119. The first submission Mr Byrne made was that when Dallal assumed the liability under the Bill Facility, the beneficial interest in the land “crystallised”. At one stage I understood him to assert that the beneficial interested vested in her at that point such that she could have sought the transfer of the legal title to her, but later in his submissions I understood him to acknowledge that it did not vest until she had provided the larger debt free house. I understand this proposition to be made on two bases. First, she had acted to her detriment by assuming a liability on the basis of an agreement with her parents, being analogous to the circumstances of Kidner, Kintominas and Agnew, and therefore it would have been unconscionable for the parents to have refused to complete the agreement.
120. There is no evidence of any agreement between Mr and Mrs Amine and Dallal in respect of the Bill Facility. She signed it and became liable under it, but beyond that I only have the evidence of the agreement given by Mr Amine and George as described earlier. At highest this was the first step in the redevelopment of Granville which Dallal was to organise and oversee. If the project had failed before the end of the Bill Facility, Mr and Mrs Amine may have lost some or all of their land. It was in their interest for the redevelopment to proceed, and succeed and they relied on Dallal’s expertise.
121. On the evidence, Dallal’s only resource or asset was her income. If the project had failed at this point they would all have suffered. I do not consider that
Dallal’s signing the Bill Facility resulted in the beneficial interest in the land vesting in her immediately. She and her parents took a risk in order to obtain a benefit, and they were successful. It was a joint undertaking.122. The second basis was as I understand it that Dallal had an equitable mortgage over the land as a result of her signing the Bill Facility. It is not an unregistered instrument in statutory form, such as a transfer given for valuable consideration, and I find it is not an instrument which is unregisterable but which at law would be held to confer an equitable interest (see the discussion in Sykes and Walker, The Law of Securities 5th edition, LBC. Accordingly, I find Dallal did not have an equitable mortgage as a result of signing the Bill Facility.
DIVISION OF WEALTH BETWEEN DALLAL, GEORGE AND DANNY
123. An interesting aspect of the case put for Mr and Mrs Amine is that while I have found that Dallal initiated and carried out the enterprise, her share of the wealth created does not reflect that contribution. She had already contributed $30,000 to the Alford’s Point mortgage in 1994. George said that she did not want a unit in her name in 1999, but he did not say that one of his units was actually hers. She was the primary contributor to repayments of the loans relating to Granville during 1999 to 2000 and also has paid her share of the Alford’s Point loan since she and George have owned that property. While George has two units and half a share of Alford’s Point, and Danny has one unit for no contribution to the redevelopment, Dallal has only a half share in Alford’s Point.
124. Mr Byrne submitted that the division of the wealth among Dallal, George and Danny is irrelevant. That submission recognised the obvious inequity described above. He did not rely on the $30,000 contribution by Dallal in 1994 as creating an equitable interest. That was mentioned only as being a reason for the redevelopment, as Mr and Mrs Amine wanted Dallal to be compensated. How that compensation was provided to Dallal after the redevelopment had been carried out was not referred to and was contradicted by the division of wealth that then occurred as evidenced by the refinancing in 2002. The case put for Mr and Mrs Amine before this Tribunal was different from the case put to the SSAT. No explanation was given for the inequitable distribution of wealth beyond the assertion that it was a matter for the children to decide. I do not know why the properties have been disposed of as they have, but I do not accept that that it was the children who made the decisions.
THE SIGNED TRANSFERS TO GEORGE AND DANNY
125. The financial evidence before the Tribunal prepared on behalf of Mr and Mrs Amine assumed monetary consideration was received as of the date of the transfers of units to George in 1999 and Danny in 2001 as shown on those transfers, which I have found was not the case. Mr Byrne did not address that financial material to any extent, simply leaving it for Mr Green to explain. I do not accept that evidence as explained above.
126. There was no evidence about the circumstances in which the transfers to George and Danny came into existence. As found above, they were registered in 2002. I am somewhat uncertain as to what reliance Mr Byrne places on them. I thought he asserted that the legal interest arises when the transfers are signed and stamped. The legal interest is transferred only on registration. Transfers may give rise to an equitable interest where valuable consideration has been paid, which was not the case in respect of the subject transfers as of 1999 and 2001 when they were signed. I did not understand Mr Byrne to contend that they established the transfers of beneficial interests in the units.
CONCLUSION
127. In summary, I find that there was a disposal of Alford’s Point to George and Dallal on 21 June 2000, without adequate consideration within the meaning of s 1123 of the Act. Alford’s Point was valued at $340,000 and George and Dallal purchased it for $260,000. In respect of Units 1 and 5 and 6, I find that the beneficial interests in those properties were transferred to George and Danny on 7 August 2002, when payments were made to discharge loans in the name of Mr and Mrs Amine. That is George paid $190,000 for Units 1 and 5 and Danny paid $190,000 for Unit 6. It is likely that there was relevantly a disposal of those properties as of that date, however, I do not have the necessary valuation evidence to enable me to consider the matter further. Accordingly, it is appropriate in the circumstances that the matter be reconsidered by the Applicant in accordance with my findings in this decision.
DECISION
128. In each proceeding, I set aside the decision under review and remit the matter for reconsideration in accordance with the findings made in this decision.
I certify that the 128 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Mrs Josephine Kelly
Signed: Miss Sacha Keady .....................................................................................
Associate
Date/s of Hearing 11, 27, 31 August 2004, 13 January 2005
Date of Decision 18 May 2005
Advocate for the Applicant Hannelore Schuster
Assistant Advocate for the Applicant James Larcombe
Counsel for the Respondent Ian Byrne
Representative for the Respondent David Green
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