D'Souza and Secretary, Department of Education, Employment and Workplace Relations

[2008] AATA 635

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 635

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/0590

GENERAL ADMINISTRATIVE DIVISION		)
Re		CANUTE D'SOUZA

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Senior Member, Mrs Josephine Kelly

Date21 July 2008

PlaceSydney

Decision The reviewable decision is varied only to the extent that the debt begins on 3 June 2005 rather than 1 June 2005. 

..................[sgd].......................

Senior Member
  Mrs Josephine Kelly

CATCHWORDS

SOCIAL SECURITY - disability support pension – whether disposal of assets -  debt raised – applicant executor and sole beneficiary of mother’s will – property transferred to applicant - proceeds distributed between siblings – whether siblings had beneficial interest in property or applicant sole beneficial owner - whether debt should be waived - held siblings had no beneficial interest in property – applicant sole owner - no special circumstances -  debt not waived – reviewable decision varied

Family Provision Act 1982 (NSW), s 9

Social Security Act 1991, ss 11, 117, 1064, 1123, 1126AA, 1237AAD

Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694

Dyer v Dyer (1788) Cox Eq 92

Kidner v Secretary of Social Security (1993) 31 ALD 63

Romano v Romano [2004] NSWSC 775

REASONS FOR DECISION

21 July 2008 Senior Member, Mrs Josephine Kelly     

1.        Mr Canute D'Souza's mother died on 13 April 2005.  Mr D'Souza was the executor and sole beneficiary of her estate.   Her will was dated 18 April 1991.   The principal asset of the estate was his mother's home at 60 Sheffield Street, Auburn (Sheffield Street).  Probate was granted on 3 June 2005.  

2.        Rather than receiving all of the proceeds of sale, Mr D'Souza agreed with his brother and two sisters to the following distribution from the proceeds of sale of Sheffield Street:  $50,000 be paid to Mr D'Souza because of his contributions to that property, and the balance from the proceeds of sale, after deduction of costs and expenses, to be distributed equally between him, his two sisters and brother.  This agreement is set out in a letter of instruction to Mr D'Souza's solicitor dated 15 June 2005.

3.        A Deed of Release dated 12 July 2005 was entered into by the siblings, which reflected those instructions.   Paragraph D of that document stated: 

In order to promote harmony between himself and Walter, Clotilda and Margaret, and to avoid claims being made under the Family Provision Act [1982 (NSW)] the parties desire to compromise upon the terms contained in this deed which they deem to be fair and reasonable and in settlement of all claims or rights in relation to the Deceased's estate.

4.        On 11 April 2006, Sheffield Street was sold for $260,000.  Each of Mr D'Souza's brother and two sisters received $49,709, that is, a total of $149,128.  Mr D'Souza received $95,839.   

5.        Mr D'Souza has been receiving disability support pension (DSP) since 10 February 2003.  In order to understand what is in dispute in these proceedings, it is necessary to set out the decisions that have been made.

6.        On 4 July 2006 Centrelink decided to raise and recover against Mr D'Souza a DSP debt of $10,885.75 for the period 3 June 2005 to 31 May 2006, because when ownership of Sheffield Street was taken into account, the value of his assets exceeded the allowable assets limit in the Act, to the extent that his entitlement to disability support pension was reduced. His ongoing disability support pension rate was also reduced by deeming $139,128 as his assessable asset ($149,128 less the amount given to his siblings less $10,000 (the allowable yearly disposal of assets amount).

7.        Mr D'Souza sought review of those decisions. On 30 November 2006, an authorised review officer decided to vary the debt decision by reducing it to $10,563.83, because an amount of $1,455 had been added incorrectly to Mr D'Souza's assessable assets. The ARO considered that the giving of part of the proceeds of sale to his siblings was for inadequate consideration and therefore a gift that must be deemed an assessable asset for five years under the disposal of assets rules contained in s 1123 and 1126AA of the Social Security Act 1991 (the Act).

8.        The reviewable decision made by the Social Security Appeals Tribunal (“the SSAT”) was despatched on 8 February 2007.   The terms of that decision were:

a) The money that Mr D’Souza paid to his siblings amounting to $149,128 was not a disposal of an asset for inadequate consideration and is therefore not an assessable asset for five years from 11 April 2006. His rate of disability support pension must be adjusted accordingly.

b) Mr D’Souza owes a disability support pension debt for the period 1 June 2005 to 31 May 2006, but the debt for the period 11 April 2006 to 31 May 2006 is to be recalculated taking into account paragraph (a) above. Once recalculated, the debt is to be recovered from Mr D’Souza in full.

c) In light of paragraph (a), Centrelink must pay Mr D’Souza arrears of disability support pension from 11 April 2006.

9.        This was a significant success for Mr D'Souza, however, he has appealed to this Tribunal.   The Secretary does not contest the SSAT's finding (a) set out above and therefore I have not considered that matter.  

10.      I note that it seems that the SSAT adopted an error made by the ARO.  In paragraph (b) of its decision it refers to 1 June 2005 rather than 3 June 2005 as the date the debt begins, which was the date found by the primary decision-maker.   In my opinion, 3 June 2005 is the appropriate date, as it was the date that probate was granted.   Before that date, Mr D'Souza would have held the legal and beneficial interests in Sheffield Street as the executor of the will, not as a beneficiary of the estate: Romano v Romano [2004] NSWSC 775; Commissioner of Stamp Duties (Queensland) v Livingston [1965] AC 694.

ISSUES

11.      The issues in these proceedings are best understood by quoting an extract from the Statement of Facts and Contentions filed on behalf of Mr D'Souza:

The reason for this appeal is that the SSAT decision in practical terms gives the applicant the benefit of the valuable consideration only from the date of sale of the property.  It is argued by the applicant that this result fails to pay proper regard to the (Deed of Release).  Additionally, the SSAT decision fails to explore and thus understand the nature of the claims on the estate by the siblings.

12.      The issue is therefore whether Mr D'Souza's siblings had equitable interests in the property at Sheffield Street, Auburn, between 3 June 2005 and 11 April 2006, or whether Mr D’Souza was the sole beneficial owner.   

13.      A further issue was whether the debt between 1 June and 12 July 2005 should be waived pursuant to s 1237AAD of the Act.

THE LEGISLATION

14.      Section 11 of the  Act defines the term "assets".  Section 117 sets out how to work out a person's DSP rate, and Module G in s 1064 of the Act sets out the effect of the assets on the rate of a person's DSP.

BACKGROUND

15.      Mr D'Souza and his family were originally from Pakistan.  It was not quite clear on the evidence but it seems that one of Mr D'Souza's sisters was in Australia before 1977.  Mr D'Souza's parents and his second sister moved to Australia in 1977.   It is not clear whether Mr D'Souza's brother ever lived in Australia.  He has been a resident of the United States for some years and comes and goes frequently as he works for an airline. 

16.      Mr D'Souza moved to Australia in 1982 and lived with one of his sisters and his parents. It seems that Mr D'Souza's father never worked in Australia and was not permitted to access any pension benefit for at least 10 years after his arrival.  Mr D'Souza's mother did work in Australia. 

17.      In 1983 Sheffield Street was purchased by Mr D'Souza.  There is a statutory declaration dated 10 December 1990 in which Mr D'Souza stated his intent to transfer the property to his parents as a Christmas present on 10 December 1990.  The date of registration was probably 6 June 1991, as shown in an internet search document, which also shows that the purchaser was "T. D'Souza", for the sum of $1.  Mr D'Souza's mother's first name was Theresa.  

THE CASE FOR MR D’SOUZA

18.      The case for Mr D'Souza was said to be based on the law of trusts.  Mr Hodges, who appeared for Mr D'Souza, relied on Kidner v Secretary of Social Security (1993) 31 ALD 63, and in particular the finding that "assets" in the context of s 1064 of the Act, and as defined in s 11 of the Act, bears its ordinary English meaning, and would not be regarded as including property of which a person was the bare legal owner when the beneficial interest was vested in another.

19.      The first argument put by Mr Hodges was that, as of the date of the Deed of Release, 12 July 2005, each of Mr D'Souza's siblings obtained an equitable interest in the property as set out in that Deed.  The consideration for that interest was their forbearance to sue.   As stated in the Statement of Facts and Contentions,

With the signing of the deed, all discussions and any animosity about and because of the terms of the mother's will would have abated.  Each would then have been satisfied that the issue was settled.

20.      Therefore, it was argued, the relevant date of disposal was the date of the Deed of Release.  It followed that the amount of that disposal was not an assessable asset at any time after 12 July 2005.

21.      The second argument put by Mr Hodges related to the "debt" that arose between 3 June 2005 and 12 July 2005.  As I understand the argument, it was that Mr D'Souza's siblings had equitable interests in Sheffield Street arising from their contributions to the deposit, the mortgage repayments, and their parents' finances generally.  If this argument were correct, those equitable interests would have existed until the sale of the property.  

22.      The third argument was that there were special circumstances which warrant waiver of the debt pursuant to s 1237AAD of the Act. Factors pointed to as "special" to support waiver of the debt between 1 June and 12 July 2005  were:

(a)The short period involved;

(b)The resulting relatively small debt;

(c)Mr D'Souza's conscientious attention to his reporting obligations; and

(d)D'Souza's conscientious attention to his reporting obligations.

CONSIDERATION

23.      I make the following findings based on the evidence of Mr D'Souza.  The purchase price of Sheffield Street in 1983 was $37,000 or $38,000.  The deposit had been 5% or 10% of the value.   He obtained a loan for the purchase.  At some stage the family home in Pakistan was sold and the proceeds were received by Mr D'Souza's parents.  He gave his mother money while he worked.  He worked until   around 2000.  He paid the mortgage and sometimes she did. The loan for the purchase of Sheffield Street had been paid off before 1991. This was not what Mr D'Souza had told the SSAT.   Mr D'Souza paid council and water rates. 

24.      Mr D'Souza bought another property, a home unit in Station Road, Auburn, at the same time he bought Sheffield Street.   He lived with his parents until 1988, when he married.   The Station Road property had been paid off before 1988.  At some stage he had worked in Saudi Arabia and had been well remunerated.  Mr D'Souza was aware his siblings were giving money to his mother but she did not tell him how much they were giving her.    

25.      Mr D'Souza lived with his mother again for a few years before her death.  His marriage had ended by 2000.

26.      There is no evidence that any of his siblings were consulted about the transfer by Mr D'Souza in 1991.   That Mr D'Souza's mother made him the sole beneficiary of her will around the time of this transfer is consistent with Mr D'Souza alone being the owner of Sheffield Street at the date of transfer and that his mother acknowledged that that was the case.   

CONCLUSION

27.     In relation to the first argument put by Mr Hodges, as set out above, the SSAT found that the siblings "forbearance to sue" under the Family Provision Act 1982 (NSW) was valuable consideration and that finding has not been challenged before me.

28.     I find that the Deed of Release was a contract which entitled Mr D'Souza's siblings to the specified  amounts from the proceeds of the sale of Sheffield Street.   It conferred no legal or equitable interest in Sheffield Street on the siblings.  If Mr D'Souza had breached the agreement, damages would have been the appropriate remedy.  Until Mr D'Souza paid his siblings the amounts set out in the Deed, the siblings retained their right to make a claim under the Family Provision Act 1982 (NSW).

29. In relation to this argument, Mr Hodges seemed to imply that an equitable interest arose because of the requirement in s 9 of the Family Provision Act 1982 (NSW) that the Court take into account the contributions made by the person, whether of a financial nature or not.  For clarity, I also find that assuming each of the siblings was an eligible person under the Family Provision Act 1982 (NSW), a right to make a claim under that Act did not give rise to an equitable interest in the estate which was somehow recognised and incorporated into the Deed of Release.

30.      I also do not accept Mr Hodges' second argument that Mr D'Souza's siblings had equitable interests in Sheffield Street arising from their contributions to their parents' finances.   As was conceded by Mr Hodges, mathematical assessment of any such contributions is impossible.

31.      One of Mr D'Souza's sisters claimed to have contributed $10,000 towards the deposit on her parents' home and had "continued to help" (her parents) "financially", "I gave them cash for their birthdays and for gifts at other times", and when they asked for it.   Given the purchase price and the percentage of the deposit set out above, I do not accept the figure of $10,000 is correct.  Further, Mr D'Souza purchased Shefffield Street.  He said he had no knowledge of the amounts of money his siblings had given his parents.  If such a large amount or even a significant amount had been paid at the time of the purchase towards the deposit by one of his siblings, in my view it is unlikely that he would not have known about it.   Given the subsequent transfer by Mr D'Souza in 1991 and his mother's will made at the same time, I do not accept that Mr D'Souza's sister's evidence that she contributed to the deposit for the purchase of Sheffield Street.

32.      Mr D'Souza's brother stated that he had contributed to the deposit for Sheffield Street, and was unsure how much he had contributed but estimated that over the years he had contributed "between $45,000 and $50,000".  The second sister said that she also helped with the deposit but was also unsure, and estimated giving her parents "around $50,000" "over the years".   No documentation was provided in support of any of the figures. 

33.      On the evidence, I find that those amounts are speculative and reflect what the siblings decided was an acceptable outcome following discussions after their mother's death in the context of potential claims under the Family Provision Act (NSW) 1982, which outcome was formalised into the terms of the Deed of Release.  They do not reflect the actual amount of the contributions each of the siblings made.  I do not criticize Mr D'Souza's siblings.  I find that they were helping their parents financially to the extent each felt appropriate in the circumstances.  That they did not provide any records to show what their contributions were reflects that they did not expect to benefit in proportion to the gifts of money they gave their parents or to some consequential ownership interest in Sheffield Street.

34.      The cases of Dyer v Dyer (1788) Cox Eq 92 and Kidner v Secretary, Department of Social Security (1993) 31 ALD were relied upon by Mr Hodges.

35.      I do not accept that the equitable principles relating to trusts set out in those cases apply here.  None of the siblings stated that there was an agreement with their parents, or that their parents had made representations or promises that their contributions, either to the initial purchase or mortgage payments on Sheffield Street, or to their parents' finances generally, would entitle them to an ownership interest in the property Sheffield Street.   There is no evidence that their parents' conduct otherwise gave rise to an expectation that the Mr D'Souza's siblings would obtain a beneficial interest in that property.   As stated above, the financial contributions made were by way of gifts.

36.     Mr Hodges' pointed to the siblings' reactions to being left out of their mother's as showing that each believed that they had a claim to the estate.  That may be so,  but such a belief does not give rise to an equitable interest in Sheffield Street.

37.     It follows that I find that Mr D’Souza was the sole beneficial owner of the Sheffield Street property from the time probate was granted on 3 June 2005 until 31 May 2006.

38.      Finally, I am not persuaded that the factors relied upon are special circumstances, such that any part of the debt should be waived pursuant to s 1237AAD of the Act.  I note that the submission was made only in respect of the period 3 June to 11 July 2005.  

DECISION

39.      For the above reasons, I vary the reviewable decision only to the extent that Mr D’Souza’s debt begins on 3 June 2005 rather than 1 June 2005.

I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member,
Mrs Josephine Kelly.

Signed: ………[sgd].………..

Steven Mulipola, Associate

Date of hearing:  4 March 2008

Date of decision:  21 July 2008

Solicitor for the Applicant:             Mr Stephen Hodges

Solicitors for the Respondent:      Centrelink Legal Services