El Armaly and Secretary, Department of Social Services (Social services second review)
[2020] AATA 984
•30 March 2020
El Armaly and Secretary, Department of Social Services (Social services second review) [2020] AATA 984 (30 March 2020)
Division:GENERAL DIVISION
File Number: 2017/5834
Re:Moura El Armaly
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Dr Damien Cremean, Senior Member
Dr Stewart Fenwick, Senior MemberDate:30 March 2020
Place:Melbourne
The Tribunal sets aside the decision under review. In substitution, the Tribunal decides that:
(1) the Applicant is not liable to pay the amounts alleged to be overpayments in respect of Newstart and Disability Support Pension (respectively $23,825.32 and $212,337.17); and
(2) the matter is no longer remitted for calculation.
..............[sgd].................................................
Dr Damien Cremean, Senior Member
Catchwords
SOCIAL SECURITY— Newstart and Disability Support Pension–alleged overpayments—alleged indebtedness—decision raising debts–whether attributable assets in real property principal home and other properties—whether trust created—nature of a trust—express trust created—no attributable assets—decision set aside
Legislation
Family Law Act 1975 (Cth) ss 11,11A,78,79
Social Security Act 1901 (Cth) ss 1062,1064,1118,1207,1207P,1207V,1207X
Duties Act 2000 (Vic) s 34Social Security (Means Test Treatment of Private Trusts –Excluded Trusts) Declaration 2015
Cases
Federal Commissioner of Taxation v Vegners [1989] FCA 480
Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413
Korda v Australia Executor Trustees (SA) Ltd [2015] HCA 6Raftland Pty Ltd as Trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21
REASONS FOR DECISION
Dr Damien Cremean, Senior Member
Dr Stewart Fenwick, Senior Member30 March 2020
INTRODUCTION
Mrs El Armaly applied for review of a decision of the Social Security and Child Support Division of the Tribunal (Tier 1) dated 25 August 2017 which affirmed a decision by a delegate of the Secretary of the Department of Social Services (the delegate) (the Secretary) in relation to overpayment of Newstart allowance and to set aside and remit for recalculation a decision in relation to overpayment of Disability Support Pension (DSP).
The earlier decision of the delegate, dated 1 September 2016, was affirmed by an Authorised Review Officer (ARO) on 19 January 2017. By the decision, Mrs El Armaly was found to owe $23,825.32 for overpayment of Newstart allowance for the period 2 May 2000 to 4 November 2002, and $212,337.17 for overpayment of DSP for the period 5 November 2002 to 29 August 2016.
This review concerns the effect on Mrs El Armaly’s entitlements of the applicable asset limits and the impact of certain arrangements claimed to have been made in relation to certain assets. The reason debts were said to exist relates to the value attributable to Mrs El Armaly’s interests in three separate properties. These properties are:
(a)the original family home in Brunswick (‘Brunswick’);
(b)a semi-rural property in Avalon known as ‘the farm’ (‘Avalon 1’); and
(c)the immediately neighbouring property in Avalon (‘Avalon 2’).
The attributable value of her assets is dependent on factual issues which arise, which include Mrs El Armaly’s living arrangements and the status of written agreements entered into between her and family members as to her interests in such properties. It is not in dispute that Mrs El Armaly, while legally married, was separated from her husband at the relevant time and so treated as single for the purposes of calculating benefits.
Mrs El Armaly was represented at the hearing by Dr Adam McBeth of Counsel and the Respondent was represented by Mr Pietro Nacion of Sparke Helmore Lawyers.
The hearing was conducted over four days: 10 and 11 April; 25 July; and 6 September, 2019. The extended schedule was primarily due to issues with witness and counsel availability.
Evidence was heard from the Applicant, Moura El Armaly, her husband Paul El Armaly, and two of their children, Paula Wardan and Tony El Armaly. Evidence was also given by Tony’s wife Therese Taouk, and a community member George Younes.
Mrs El Armaly and her husband gave sworn evidence with the assistance of an Arabic interpreter. It became apparent during the hearing that Mrs El Armaly has significant difficulty with English and could be considered illiterate in any language, including her native Arabic.
A Chronology of Events agreed by the parties was submitted at the Tribunal’s request. Additional documents were sought by the Tribunal following questions arising of a witness on the second day of the hearing. These related primarily to the tax affairs of Mr and Mrs El Armaly, but material relating to Tony El Armaly’s affairs was also identified.
LEGISLATION
Calculation of the payment rate of benefits is set out in Chapter 3 of the Social Security Act 1991 (the Act). The steps are found in s 1062(1) and include the application of income and assets tests (s 1062(1)(c)).
Under s 1118(1)(a) of the Act, for a person who is not a member of a couple, the value of ‘any right or interest of the person in the person’s principal home’ is to be disregarded in calculating the value of their assets for the purposes of the Act.
Rate Calculators for different payment types are set out in several parts of Chapter 3 of the Act. For DSP, the asset test is found in Module G of Pension Rate Calculator A, in s 1064 of the Act. The method requires ascertaining whether a person’s assets exceed the relevant asset value limit found in Table G-1. There is no similar module applicable to Newstart allowance.
The attribution of assets said to be held in private trusts is addressed, initially, in s 1207. Under this section, for a trust asset to be attributable, all three of the following criteria must be met: the trust must be a designated private trust (s 1207P); the trust must be a controlled private trust, in relation to an individual (s 1207V); and, the individual must be an attributable stakeholder of the trust (s 1207X).
Under s 1207P of the Act, a trust is deemed to be a designated private trust unless it meets certain criteria set out in s 1207P(1)(a), none of which apply in this case. Under s 1207P(4) the Secretary may declare a specified class of trust an excluded trust for the purposes of the section. Under the Social Security (Means Test Treatment of Private Trusts – Excluded Trusts) Declaration 2015 a fixed trust created before 9 May 2000 is an excluded trust where there has been no variation or transfer of property to the trust after the reference date. A fixed trust is defined in the Act only in relation to its use earlier in s 1207P(1)(a) as a trust where persons have fixed entitlements to all of the income and corpus of the trust. This definition largely accords with the commonly accepted definition of a fixed trust which can be summarised as a trust where identification of beneficiary and beneficial interest are not subject to the discretion of the trustee.[1]
[1] See for example Federal Commissioner of Taxation v Vegners [1989] FCA 480 at [12].
A person passes the control test for controlled private trusts under s 1207V if that individual is the trustee. A person is an attributable stakeholder under s 1207X unless the Secretary determines otherwise, and their attribution percentage is 100%, unless the Secretary determines otherwise. Such a determination must be made in accordance with the Social Security (Attributable Stakeholder and Attribution Percentages) Principles 2000 (the Stakeholder Principles) (s 1207X(5)).
EVIDENCE
Before moving to the evidence at the hearing, the following table based upon the chronology submitted by the parties provides a summary of key information relating to key events and to actions in relation to the properties:
Date
Event
Reference
6 Jan 1972
Moura and Paul El Armaly purchase Brunswick as joint proprietors
T56, p 254
15 Jun 1987
Moura and Paul purchase Avalon 1 as joint proprietors
T56, p 254
31 Dec 1997
Tony El Armaly recommences on social security benefits receiving Newstart Allowance (NSA)
ST5, p 78
c. Feb 1998
Paul proposes to Tony that he purchase Avalon 2
c. Feb/ Mar 1998
Meeting at bank with George Younes to discuss purchase of Avalon 2
6 Mar 1998
Bank offers loan for Avalon 2 to Paul and Moura
ST1, p 1
7 Mar 1998
Memorandum of Agreement signed by Moura and Tony regarding interests in Avalon 2
T5, p 20
18 Mar 1998
Moura and Paul accept bank loan offer
ST1, pp 14-15
18 May 1998
Transfer of Title for Avalon 2 to Moura as sole proprietor
T47, p 112
c. 2000/2001
Relationship between Moura and Paul breaks down
9 May 2000
Moura commences receiving NSA
T56, p 280
26 April 2001
Paul lodges claim for Disability Support Pension (DSP)
30 May 2001
Personal Agreement Deed signed by Moura and Paul regarding interests in Brunswick and Avalon 1
T7, p 22
c. 2001
Moura commences splitting time between Brunswick and Avalon 1
14 Nov 2001
Tony’s NSA cancelled
ST5, p 78
12 Nov 2001
Moura commences receiving DSP
T56, p 279
26 Oct 2010
Bank loan for Avalon 2 fully paid
T11, p 29
6 Nov 2014
Department issues Request for Information notice regarding property interests
T26, p 54
28 Jan 2015
Transfer of Title for Avalon 1 to Moura as sole proprietor prepared
T29, p 66
28 Jan 2015
Transfer of Title for Brunswick to Paul as sole proprietor prepared
T30, p67
3 Mar 2017
Transfer of Land for Avalon 2 from Moura to Tony signed but not lodged
T49, p 137
Mrs El Armaly
The early stages of Mrs El Armaly’s evidence addressed the nature of the Avalon 1 property and were accompanied by a number of photographs internal and external to the building (Exhibit A1) and the playing of a video (Exhibit A2). The Exhibits depict a large structure in the form of a steel shed at the end of a driveway, fitted out inside with plaster walls and ceilings and the typical fittings of a house. The area around the structure is also shown including garden plots, a bird cage, and a chook run.
Mrs El Armaly stated that she moved to Avalon 1 just over 15 years ago, after her separation from her husband. She confirmed separation from her husband in 2001, as set out in her written statement (Exhibit A3). She typically sleeps at Avalon 1 four to five nights a week. During her time there, Mrs El Armaly stated that she occupies herself with tending to birds and chickens (of which there are 30-40), and praying at two small shrines (to the Virgin Mary and to St Charbel, a Lebanese Saint).
Mrs El Armaly described the property as comprising of three bedrooms, and a combined family room and kitchen. The property has town water, and waste water goes to a septic tank. She stated that she and her husband originally bought Avalon 1 as an investment property and no one lived there at that time.
When not living at Avalon 1, Mrs El Armaly stated that she stays at Brunswick, where she has her own room. Every Monday night she has dinner there together with her family. Mrs El Armaly said she drives herself to Brunswick on Saturday or Sunday, and returns Wednesday, but the timings sometimes varied from this pattern.
Mrs El Armaly explained that until recently all her mail was addressed to her at Brunswick because her English is poor and she needs help from her daughter to interpret letters received, which would take place at Monday dinners.
Mrs El Armaly further confirmed in evidence that she wanted to make an agreement with her husband which resulted in the document titled ‘Personal Agreement Deed’, dated 30 May, 2001 (T7 at p 22). The operative parts of this document read as follows:
1. We have been separated since 30- May 2001
2. I Moura Elarmaly and Paul Elarmaly agreed to split the assets between us as follows.
3. I Moura Elarmaly no longer have any interest in [Brunswick]. Subject to that my former husband allows me to stay in the property (house) at [address] Brunswick at no cost – apart sharing the bills, rates, water – gas. till I decide to move elsewhere. Or the house sold to a third party, also I am not entitled to any assets from the sale. The whole house belongs to Paul Elarmaly my former husband.
4. [Avalon 1] belongs to Moura Elarmaly And Paul Elarmaly have no interest the said property what so ever.
5. We both Moura Elarmaly and Paul Elarmaly agreed to this agreement and acknowledge that this deed is enforceable and can not be challenged in this court.
Mrs El Armaly gave evidence that, consistent with her written statement, she believed this agreement was ‘sufficient to transfer my interest … and that nothing further was required’. The Tribunal posed questions as to why other property and assets were not addressed in the agreement. Mrs El Armaly confirmed that she and her husband each had a car, which they kept, and she had no money in the bank. It was also put to Mrs El Armaly, following a question from the Tribunal, that the agreement did not deal with Avalon 2. She replied that this was not necessary as this was ‘Tony’s property’.
Mrs El Armaly confirmed this understanding was based on another document, titled ‘Agreement’, between her son Tony El Armaly and herself, dated 7 March 1998 (T5 at p 20). This was written by an advisor in the Lebanese community and she understood that it was ‘like a legal document as was explained to me by that advisor’. She wanted it so that her sons-in-law could not interfere in the future.
This document, in its operative parts, reads as follows:
(a)That Moura Elarmaly acknowledges that [Avalon 2] Belong to Tony Elarmaly.
(b)Tony Elarmaly acknowledges that his mother Moura Elarmaly and his father Paul Elarmaly put the initial deposit to pay for the property at …, and borrows the rest of the monies from the bank to settle the sale of the property, with conditions that:
Tony Elarmaly will make the payments on the mortgage till the land is paid off.
(c)Upon the load paid off, its up to the parties or tony to transfer the land to his name.
(d)Moura Elarmaly upon Tony paid off the loan on the said property, cannot hold the transfer if Tony wish to transfer or sell the land at …. Also Moura Elarmaly acknowledge have no interest in the property from the date of purchased.
(e)This is a legal document as enforceable if any dispute or action taken by court.
Mrs El Armaly agreed with the statement put to her that she and her husband were keen for Tony to buy Avalon 2 in 1998 when it came up for sale. In her written statement she describes her son as ‘just establishing himself in life’. When asked how old her son was at the time of the purchase she stated ‘fourteen/fifteen years … I don’t know any of my children’s birth because my memory is really poor’.
Mrs El Armaly stated that her husband paid the deposit for Avalon 2 from funds made available when he ceased working. She gave evidence that Tony was unable to obtain loan approval from a bank but that he would be responsible for repayments. As she was working, a loan was approved in her name and Brunswick was used as security.
Mrs El Armaly then stated that she was concerned about what might happen in the future with the Avalon 2 property in her name. There may be a dispute when she died between Tony and his sisters. A member of the Lebanese community told her he could write a document to help her.
The Tribunal asked Mrs El Armaly to clarify what arrangements were in place at that time, with regard to inheritance of assets in her and her husband’s names. This question took some time to resolve. Mrs El Armaly stated that in their original wills assets passed to the surviving spouse. She also stated that she had made a new will in which her property passes directly to her children.
Following the finalisation of the agreement with her son (T5), Mrs El Armaly stated in evidence that her understanding of the status of Avalon 2 was ‘this is for Tony and nothing to do with his sisters. This property only for Tony’.
When asked who made repayments on the loan, Mrs El Armaly responded that she had never made any repayments: ‘the repayment being made by Tony all the time and I believe that his wife was helping him financially as well after they got married’.
Mrs El Armaly agreed that Tony was receiving Newstart between 1997 and 2001 and stated that he was living at home, and she did not charge him for this. Mrs El Armaly was shown a Centrelink customer contact record dated 14 August 2001 (ST5 at p 92) indicating that Tony advised Centrelink he was paying $60 per week board. She stated in response that she did not remember if he was paying her. When the question was repeated, Mrs El Armaly then replied ‘yes, I remember vaguely he did pay me $60’.
Mrs El Armaly agreed that once Tony paid the loan it was up to the parties to transfer the title to the property. She stated that she ‘kept harassing’ Tony to change the title but he delayed because of the cost of transfer and wanted to wait until he was financially better off. Mrs El Armaly understood the loan was paid off around 2010. She agreed that a transfer of the property was prepared following receipt of notification of a debt from Centrelink in early 2017.
When asked whether she intended to create a trust over Avalon 2, the interpreter stated Mrs El Armaly ‘doesn’t understand. She doesn’t understand the concept of ‘trust’’. Mrs El Armaly was then shown a page from a Claim for Newstart Allowance form dated 3 May 2000 (ST2, pp 16-38, at p 29). In ‘Section E Income and assets details’ in response to the question ‘Do you have an interest in a trust?’ (to which she had ticked the ‘No’ box) Mrs El Armaly stated in evidence ‘No, I don’t have any’. Mrs El Armaly stated: ‘I didn’t understand and people helped me to fill it out’.
A discussion then ensued in the hearing as to how and when Mrs El Armaly completed this form. Mrs El Armaly stated ‘I can’t read English and anybody around me would fill it out’. She was asked by the Tribunal whether she completed the form and whether she could recognise the handwriting. Mrs El Armaly stated that she could not remember where the form had been completed, and said further: ‘I can’t read. How can I recognise somebody’s writing?... I can only sign my name, I can’t write.’
When asked about an ‘Income and Assets Update’ form signed by her and dated 2 August 2015 (T32, pp 69-80), she agreed that the form included several declarations, although she reiterated that ‘They filled it out for me … I didn’t do it by myself’. Mrs El Armaly was directed to the part of the form dealing with finances (T32 at p 72) where it was declared that she did not have any bank accounts (with any financial institutions) and no cash. Mrs El Armaly was asked by the Tribunal how it came to be that the words ‘and/or your partner’ came to be crossed out in the questions on this page. She answered that a man named ‘Joe’ at the ‘community centre’ had helped her complete the form. She stated that she told him she was separated, but that she did not want her children or the broader community to know, due to the stigma.
Mrs El Armaly was also directed to a question about having an interest in any other assets to which she did not provide a response on the form (T32 at p 78). She stated that she was asked whether she had ‘any property that bring me money … I said no, I don’t have’. Mrs El Armaly was further asked why she did not respond to the question ‘Are you or have you (and/or your partner) been involved in a private trust?’ (T32 at p 78). She stated in response ‘Yes, because we don’t have a trust’.
This response led to an exchange between the Tribunal and counsel involving the witness’s understanding of a trust. It appeared that the interpreter may have attempted to explain the question to the witness. Counsel for the Applicant objected and reiterated that Mrs El Armaly had given evidence that she did not understand the concept of a trust.
Mrs El Armaly was asked why she did not complete the section of the form relating to ownership of a motor vehicle. She replied that she has a car but questioned the year; the Tribunal then reminded her that this form was completed in 2015. When the witness then claimed that her signature was not on the document; she was reminded that she had signed the form (T32, p 80). Mrs El Armaly then stated that she had not signed that particular page. Mrs El Armaly further stated that she had always had a car and said ‘Now why this guy don’t tick, I don’t know. Its impossible’.
When asked why household effects were valued at $1,000 (T32 at p 77), Mrs El Armaly stated ‘this is impossible, that doesn’t make sense …’. She was then asked why there was no answer to the question on the form as to whether she received assistance in filling it out, to which the interpreter responded ‘the witness keeps saying ‘its impossible’’.
After confirming that she had transferred her interest in Brunswick to Mr El Armaly in December 2014, Mrs El Armaly was asked why, eight months later, she did not declare this on the form at question 37 (T32, p 78). [Question 37 reads: ‘In the last 5 years, have you (and/or your partner) given away, sold for less than their market value, or surrendered a right to, any cash, assets, property or income?’] Mrs El Armaly replied: ‘I haven’t given anybody anything. And I didn’t get this – the paper is empty, its not filled’.
Mrs El Armaly was then directed to a form ‘Real estate details’ [Centrelink Mod R] dated 15 December 2014 (T27, pp 56-63). She confirmed that it related to Avalon 1, and when asked why she identified the property on the form as ‘Vacant land’ she responded that ‘When I bought it, it was empty’. Mrs El Armaly was reminded that the form was from 2014 and she confirmed that the property as displayed to the Tribunal in the video evidence, appeared the same in 2014. She stated: ‘The person who filled out the form asked me is there a house there, I said no, there is a shed’.
Mrs El Armaly was directed to question 28 on the form (T27 at p 60) in which the building on the property is described as a 200 square metre, 15 year old aluminium shed. She was then asked why the interior fit out of the shed including toilet, bedrooms, living room and dining room was not described. [Question 28 provides space for description of the building interior, number of rooms, and number of bedrooms (for a residential property)]. Mrs El Armaly then questioned why her signature was not on this piece of paper and she stated further: ‘Always when they will out forms, they ask me questions and they fill it out and then I sign it. Here there is absolutely no signature’.
The Tribunal questioned the current market value of household contents and effects to which a figure of $2000 had been ascribed (T27, p 27), which appeared inconsistent with the state of the property in the video and photographic evidence. She replied ‘The shed was quite expensive, it’s not $2,000’. The Tribunal further observed that the particular question was only to be answered for a property that was not a principal home. The witness again claimed that her signature was not evident on that page, and had to be reminded that she had signed the form. She also stated that the shed was fitted out ‘a long time ago’ and added ‘fifteen, sixteen years’.
Mrs El Armaly was asked why the form states that neither she nor her partner live at Avalon 2 (T27, p 59). In her answer she again referred to the lack of a signature and added ‘my husband needs to go there’. She was asked to confirm her evidence and further stated that ‘sometimes’ he goes to ‘the farm’. On further questioning she stated he went to the farm ‘sometimes – not often, sometimes often’. When asked whether as at December 2014 he stayed overnight, Mrs El Armaly stated that ‘sometimes he did stay, he has a room’. She further stated ‘Yes, he – one night, two nights. No problem, he can sleep as much as he wants’.
At this point, Mrs El Armaly confirmed her evidence that she ordinarily stayed four to five nights a week at Avalon 1. It was put to her that therefore as at December 2014 she would spend quite a bit of time with Mr El Armaly in a week. Mrs El Armaly answered ‘as I said, there is no problem between me and him we are friends. Every one of us has his own bedroom’. The Tribunal sought clarification as to whether they lived as husband and wife. She replied: ‘We lived – not – without intimacy, but we live under the same roof sometimes. A lot of people live like that, there is no problem. For me, it is not a problem’.
Mrs El Armaly identified her signature on a transfer of land document for Avalon 1 dated 29 December 2014 (ST3, pp 39-40). She acknowledged that this transfer to her was prepared ‘one month after Centrelink contacted you about your assets …’. Following an objection from her counsel relating to the form of questions relating to documents, Mrs El Armaly was asked by the Tribunal to confirm her level of education. She replied:
‘I have never been to school, I have never been to school, I can’t read, I can only sign and write my name. I know the beginning of the alphabet. I have been in school for maybe three years’.
The Tribunal asked Mrs El Armaly questions about statements contained in a Statutory Declaration dated 28 November 2016 (T47, pp 109-110) which appears to amount to a request that Avalon 2 be transferred to Tony free of stamp duty. She confirmed to the Tribunal that she understood the importance of a declaration and that it must be true and correct. The Tribunal drew Mrs El Armaly’s attention to the fact that the document states that she declares that she held the property on trust for her son.
TRIBUNAL:So you did understand, or – you must have understood at that time, what a trust was.
WITNESS: Yes, of course.
TRBUNAL: What was that?
WITNESS: Yes, of course.
TRIBUNAL: Well why did you tell us that you don’t know what a trust is?
WITNESS:At the time I didn’t understand what you’re talking about, but now I understand that this is the trust I hold for Tony.
TRIBUNAL: So you do understand what a trust is?
WITNESS: Yes, now I understand.
Mr Paul El Armaly
Mr El Armaly confirmed the content of his written statement. He confirmed that he and his wife separated and that they signed an agreement dated 30 May 2001. When asked to confirm the contents of the agreement Mr El Armaly stated ‘I can’t read’. The document was translated for him by the interpreter (T7 at p 22).
In response to a question from the Tribunal, Mr El Armaly stated the person in the Lebanese community who assisted with this document was the only person they spoke to about their separation. In response to questions from the Tribunal at a later stage in his evidence, Mr El Armaly identified the witnesses to the agreement as his brother-in-law, and Mrs El Armaly’s nephew.
Mr El Armaly stated that, under the agreement, Avalon 1 belonged to Mrs El Armaly: ‘She lived in her house and I lived in my house’. He agreed that she stayed at Brunswick when she came on Sunday for the family dinners on Monday nights, and also when she has doctor’s appointments. She spends two or three days a week in Brunswick ‘maximum, but not more than that’.
He agreed that he ‘sometimes’ stays at Avalon 1: ‘Not every week, maybe once every – maybe once every second week and sometimes I come back. Or if I am tired, I would sleep there’. When there he would check on his son’s land at Avalon 2 and water plants at Avalon 1. Mr El Armaly was asked whether Tony helps with Avalon 2. The answer was: ‘No. He can’t leave his work. He is busy, he can’t leave his work and help’.
Mr El Armaly also stated that he sometimes feeds sheep that graze at Avalon 1. If there is no more feed there, the gate between the two properties is opened to let the sheep graze on the other block at Avalon 2. The Tribunal sought to determine the size of the flock and Mr El Armaly stated that there were more than 10 sheep and agreed that it could be more than 20. When asked whether it could be 50, Mr El Armaly answered ‘maybe’, but also said it could be less. He stated that the sheep were purchased to manage the grass in response to an infringement notice from the Council during fire season.
Mr El Armaly stated that he was keen for his son Tony to buy the property at Avalon 2 and asked him to buy it twice. He did not want his son spending all his money and wanted him to take some responsibility. Mr El Armaly stated that he paid the deposit on the property but after that ‘didn’t give one cent to the bank. He was the one paying the bank’.
Mr El Armaly was asked why the properties the subject of the 2001 agreement with Mrs El Armaly were not transferred until December 2014. He stated ‘we didn’t register – transfer the land because we didn’t have the money’. Mr El Armaly agreed to the proposition that prior to this Brunswick would go to his wife on his death, but disagreed this was the reason that the transfer had not been made.
In re-examination Mr El Armaly agreed that the reason the transfer of properties as between himself and his wife only took place in 2014 was because the issue was raised by Centrelink.
Mr Tony El Armaly
Tony El Armaly confirmed the content of his written statement. He was unable to obtain a loan for Avalon 2 as, at the time of purchase, he had only been in full-time work for a short period of time, prior to which he was in casual jobs or in receipt of social security payments.
His parents arranged to obtain a loan, telling him: ‘as long as you pay the loan we’ll get the loan for you or mum got the loan for me anyway’. When asked what his understanding about who the owner of the property was, he answered ‘I always thought it was me’.
Tony El Armaly stated that his parents paid the deposit on Avalon 2 and he repaid the loan himself and paid all outgoings. The only other person to make repayments on the property was his (Tony’s) wife.
He stated the first time he ever knew Avalon 2 was not in his name was at the time he the purchased his family home with his wife in around 2006. He informed the mortgage broker that he owned a property but was advised by the broker that the property was rural land and was not in Tony’s name: ‘First time I ever knew it wasn’t in my name’.
In response to a question from the Tribunal Tony confirmed that at the time of buying his own home he was paying off two loans. He stated he was no longer on benefits but had started a blinds business in around 2001. He paid about $2,500 per month for his own home and about $500 per month on Avalon 2.
Tony El Armaly was asked whether he showed his mortgage broker the ‘1998 agreement’. He replied ‘I don’t know what it is. What’s the 98 agreement?’ When asked why he did not transfer the property into his own name he stated that the cost of $40,000 to $42,000 was more than the deposit on his own home. He accepted the proposition that he had, at the time, about $360,000 in equity in Avalon 2 but did not consider selling it because he was ‘not desperate’, and it would continue to increase in value.
In re-examination Tony El Armaly confirmed, when shown bank statements, that he and his wife were responsible for repayments on Avalon 2. In response to a question from the Tribunal he stated that in the event of his parents’ death, his sisters would give him the property in his share of the estate as the whole family knew it was his.
When asked whether the family knew a trust was involved he responded: ‘No, no. I never wanted a trust. I know nothing about a trust’. He acknowledged, in response to a question from counsel, that he did have a family trust for his business. On further questioning from the Tribunal the witness restated that he did not know what the 1998 agreement referred to. When it was suggested the agreement was with his mother he answered ‘Well we had an agreement that she gets the loan for me I’ll pay it’. When asked whether there was a written agreement he responded ‘Maybe. I don’t know’. When shown the agreement he acknowledged that he signed it and when asked why he could not recall making it he stated it was 21 years ago. It was only when shown the document that he remembered the agreement existed. The witness could not recall any of the circumstances around its execution and stated ‘I have never had a copy of it’.
Other witnesses
Mr George Younes gave evidence and affirmed the content of his undated written statement (Exhibit A4). He stated that he had known Paul and Moura El Armaly for a very long time and had interpreted for them on different occasions.
He was asked to explain how the topic of Tony buying a property came up. Mr Younes explained that Tony was a ‘bit irresponsible’ in his twenties and the relationship with his parents wasn’t perfect. Mr Younes stated he was asked by the El Armaly’s to attend the bank with them and he agreed to help them make arrangements in relation to the loan for Avalon 2.
Tony El Armaly’s wife, Therese Taouk, gave evidence that she visited Avalon 2 with Tony in the early years of their relationship prior to getting married. Their relationship started in 2000-2001 and they were married in 2005. She understood that the property was his ‘100 percent’. She stated that she encouraged him to sell the property because at the time they were saving for a home deposit.
Ms Taouk stated that it was only when discussing loans with a financial advisor that they both realised that the property was not in Tony’s name. She also gave evidence that they were informed transfer into Tony’s name would cost $35,000 which they preferred to put towards a house purchase. Ms Taouk stated that she was ‘pretty sure’ she made repayments on Avalon 2 before she married Tony, and kept making payments afterwards. She gave evidence that she made the payments herself out of either her funds or Tony’s, and in the final year of repayments, direct from her own account.
Mrs El Armaly’s daughter Paula Wardan confirmed the contents of a written statement. She stated that she did not assist her mother to complete a Centrelink form updating her mother’s real estate details (T27) but acknowledged that she was listed as a contact person. The witness also stated she did not complete the Income and Asset Update form for her mother (T32).
Ms Wardan was able to identify the writing on Mrs El Armaly’s Newstart Allowance claim form (ST2) as her own and confirmed she filled it out on behalf of her mother. She was directed to the question ‘Do you have an interest in a trust?’ (ST2, p 29). When asked her understanding of this question she responded: ‘I would believe that you would have to have a business in order to have a trust’.
In response to questions from the Tribunal, she was unable to recall the circumstances leading her to answering in the negative to her mother having an interest in a trust. She was unable to state why the form was unsigned, and why there was no information provided to the question ‘Did someone help you fill out this form?’ In relation to other parts of the form, the witness was asked ‘Why are you saying no to all these things if you haven’t got the information?’ to which the answer was ‘I don’t know to be honest’.
In cross-examination Ms Wardan confirmed that her parents are separated and stated that she only sees her mother at family dinners at Brunswick. She was unable to confirm how long her parents had been separated and stated she was first advised of their status following a call to her from ‘Social Security’. She said ‘So they actually kept it hush hush from all the children’.
Ms Wardan agreed she was her mother’s nominee for Centrelink purposes. She was directed in evidence to a customer contact call record of 17 September 2015 (T56 at p 252) in relation to Mrs El Armaly domestic living arrangements, the trust arrangement with Tony, and property title details. Numerous passages from the call record were quoted to the witness who was unable to recall the conversation. She was unable to recall a conversation recorded with a nominee and relating to Tony’s ownership of Avalon 2.
CONSIDERATION
The issues arising are:
(a) What property constituted Mrs El Armaly’s principal home and at what time?
(b) Which of the properties can be considered attributable assets and at what times?
(c) Was Mrs El Armaly an attributable stakeholder of such properties and, if so, what is the attribution percentage?
Prior to addressing these issues it is necessary to determine the nature of the key agreements, being the 1998 agreement about Avalon 2 between Mrs El Armaly and her son Tony, and the 2001 agreement about interests in Brunswick and Avalon 1 with her ex-husband Paul. This is because they purport to create beneficial interests altering her legal interests in the relevant properties.
Quality of evidence
The Tribunal accepts that Mrs El Armaly clearly has very limited English language skills. The Tribunal also accepts her evidence, and submissions made, regarding her limited education and general low level of literacy. However, when giving evidence Mrs El Armaly had a clear tendency to obfuscate and delay when pressed to answer questions. For example, on a number of occasions she sought to question the veracity of documents when she could not immediately sight her signature, rather than focus on the issue and attempt to answer the question.
Mrs El Armaly also claimed to have a poor memory. In some respects this may be allied to her limited literacy skills, in that she stated that she could not remember birthdays and phone numbers. On the other hand, Mrs El Armaly answered many questions about past events, the details of transactions, and the content of documents without raising any challenge at all. Her evidence also demonstrated a capacity to live and travel independently.
Central to the matter is the existence of agreements said to be creating trusts. As seen in the evidence of more than one witness, no family member appeared to understand the concept of a trust in its simplest sense. Tony El Armaly himself claimed not to know of the existence of the arrangement in which he was said to have been given ownership of Avalon 2, as well as not having and not having seen a copy of the document. Both he and his sister, however, understood generally what a family trust was, in the context of running a business.
The process of translating documents through the interpreter may have at one point played a part in impeding the Tribunal’s understanding of what in fact Mrs El Armaly may have appreciated about the meaning of these agreements. It appears that in the case of a number of official documents she completed, with the assistance of others, she failed to acknowledge such agreements. However more recently, when completing a Statutory Declaration about stamp duty on the intended transfer of Avalon 2, she had the opportunity to turn her mind to the ownership arrangements, described in that document as a ‘trust’. Despite this recent exposure to the concept initially, in the hearing, Mrs El Armaly stated that she did not know what this kind of arrangement was.
2001 Agreement
Mrs El Armaly was, at law, the joint proprietor of both Brunswick and Avalon 1 until 28 January 2015 when transfers of title were executed. It is contended on her behalf, however, that the 2001 agreement constitutes an express trust that operated, in the case of Mrs El Armaly, to erase her financial interest in Brunswick and vest full beneficial ownership of Avalon 1.
The Tribunal notes that before both Tier 1, and in the Statement of Facts Issues and Contentions (‘Applicant’s SFIC’) lodged on her behalf, Mrs El Armaly‘s representatives submitted that this 2001 agreement would have been unenforceable, including in any family law proceeding. This however was not the approach taken at the hearing or in the written submissions lodged by Mrs El Armaly’s counsel.
There are a number of factual issues that raise questions about the construction sought to be given to this agreement on behalf of the Applicant. The first issue is the status of the El Armaly marriage, noting that, as set out above, Mrs El Armaly’s status as single for the purposes of assessing benefits is not in issue here. The principal concern is that the document was said to be created for the purpose of settling interests in two properties as a result of a marital separation about which there was little, if any, independent, corroborating evidence. Their children appeared to be ignorant of the separation and the evidence indicates that only community members and witnesses assisting with its creation and execution had knowledge of it. It also emerged in evidence that those witnesses were in fact members of the wider family.
No efforts were apparently made to settle, in formal terms, any other aspect of their relationship. The El Armaly’s did not update their wills on separation and the evidence indicated that the properties in question would ultimately pass to the children in any event. Steps were only taken to legally effect transfer of interests following an approach from the Department in late 2014. The evidence was that they could not previously afford to transfer their interests.
Further, Mr and Mrs El Armaly each asserted in evidence that they were indeed separated and no longer ‘intimate’, yet continued to spend large amounts of time together, split across Brunswick and Avalon 1. They maintained separate bedrooms at each property for their sole use, and each moved freely between the properties as their preference or other demands dictated. From the perspective of the Respondent, Mrs El Armaly continued to declare Brunswick as her residential address. No declarations were made in numerous other lodgements with Centrelink about the agreement.
What, then, is the status of the agreement in law? The Respondent contended in its Statement of Facts Issues and Contentions that the agreement cannot be construed as a trust due, in essence, to the lack of capacity (linguistic and/or legal) of Moura and Paul El Armaly. In the Respondent’s closing submissions the argument was put, simply, that the Tribunal should put little weight on the 2001 agreement as it was not clear that the document served any purpose. As noted above, it was contended on behalf of Mrs El Armaly that the document evidenced an express trust. It was submitted that intention of the parties (assessed objectively) was the critical test and that specific wording, or the parties understanding, were not essential elements.
The position put on behalf of the Applicant is consistent with authorities, for example Korda v Australian Executor Trustees (SA) Limited (Korda) ([2015] HCA 6, at [5]) and Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc ([2018] VSC 413, at [389]). In Korda the High Court also observed (at [11]) that intention to create a trust needs to be imputed based on ‘construction of the relevant text or oral dealings in their context … A trust is not to be inferred simply because a court thinks it is an appropriate means of protecting or creating an interest’.
Does the context of this agreement provide sufficient scope to challenge the Applicant’s preferred construction? While, as noted, the construction and purpose of the agreement may be open to question on certain interpretations of the evidence, the evidence led on behalf of the Applicant at the hearing directly addressed the concerns as set out. The separation, while apparently something of a family secret, was affirmed by Mr and Mrs El Armaly, and their domestic arrangements are consistent with this fact. The failure to disclose her financial and related affairs including assets and any trusts is said to result from Mr El Armaly’s limited literacy. Furthermore, any lack of capacity, or indeed lack of legal understanding, cannot, without other evidence, be read as overcoming the application of the law to the agreement.
However implausible this arrangement may appear, there was no clear alternative proposition argued on behalf of the Respondent. Submissions were made challenging the agreement, but no specific hypothesis-- such as that the agreement was a sham transaction created to subvert the assets test--, was advanced. Indeed, when raised by the Tribunal, the Applicant’s Counsel observed that no such submission had been made and no evidence had been introduced that might lead the Tribunal to question the intention of the parties as expressed in the agreement documented in 2001. Where the concept of sham is not deployed, or is inappropriate (because it denotes fraud), there is a need to demonstrate evidence of an intention that the agreement served ‘some other purpose other than that of constituting the whole of the arrangement’ (Raftland Pty Ltd as trustee of the Raftland Trust v Commissioner of Taxation [2008] HCA 21 at [33]-[36]).
In this case, an alternative conception of the intent of both Mr and Mrs El Armaly only arises by weak inference from some of the evidence, and other direct stronger evidence of intention has to be preferred. On this basis, the Tribunal must accept the evidence on behalf of the Applicant as being the best explanation for the creation of the agreement. Accordingly, the Tribunal, with some hesitation, accepts that the agreement must be construed as an express trust.
This finding is contrary to that of Tier 1 which found that the 2001 agreement could not effect an alteration of interests in the two properties. This was because Mrs El Armaly’s legal representative ‘conceded that the agreement was unlikely to be enforceable if either party instituted family law proceedings’, and because ‘in any event, Mrs El Armaly retained a legal interest in [Brunswick] until 28 January 2015’. This approach was restated in the Applicant’s SFIC (at [9]): ‘upon receiving legal advice the Applicant now accepts that the ‘personal agreement deed’ was not effective as an enforceable property settlement under the Family Law Act’. It followed, according to the Applicant’s SFIC, that it should be understood as an implied or constructive trust. A further reason stated by Tier 1 was that Mrs El Armaly’s right to stay at Brunswick was preserved in the agreement ‘therefore the requirements of subsection 11(4) of the Act were met and Mrs El Armaly was a homeowner for the purposes of the Act until 28 January 2015’.
These prior submissions were not maintained by Mrs El Armaly’s counsel at the hearing, who explicitly put a contrary position to the Tribunal, and there was no submission made at the hearing by either party as to the impact of the Family Law Act 1975 (FLA). It is the case that sections 78 and 79 of the FLA provide discretion to a court operating under that Act to declare the title or rights, if any, that a party to a marriage may have in respect of existing title or rights in property, and to make such order as to the alteration of property interests as it considers appropriate. There is no reason to consider that construction of the agreement should be undertaken with reference to the FLA, nor that the ordinary law of trusts should not be applied. The fact that a legal interest was retained in Brunswick also does not mean that the beneficial interests in the properties could not be created as claimed. Finally, the provisions relating to ‘homeowner’ in s 11(4) of the Act arise in the context of the notion of ‘principal home’. This term is addressed in s 11A of the Act, albeit that the phrase itself is not specifically defined in that section. For reasons that will be given below, the evidence does not support the view that Brunswick was Mrs El Armaly’s principal home.
1998 Agreement
Mrs El Armaly was the sole legal proprietor of Avalon 2 from 18 May 1998. This title remained unchanged until at least 3 March 2017 when, according to the evidence, a transfer to Tony was prepared, but not registered. It was submitted that the transfer was held up due to action taken by the Department. It was also submitted that the State Revenue Office, Victoria, had accepted that the property was exempt from duty upon transfer, as evidenced by a Duty Statement dated 3 March 2017 (T51, p 144). That statement cites s 34 of the Duties Act 2000 (Vic) as the basis for exemption. This section deals with property vested in an apparent purchaser in situations where a trust exists. A Statutory Declaration by Mrs El Armaly is said to have been prepared in support of the stamp duty exemption (T47, pp 109-110).
It was contended on Mrs El Armaly’s behalf that the 1998 agreement constituted an express trust, and in the alternative that it constituted a constructive trust. On behalf of the Secretary, it was contended that the parties to the agreement lacked the requisite intention for the creation of a trust; for example, the evidence indicated that the agreement on its face demonstrated an intention for a trust to come into effect only upon repayment of the loan. In addition, Tony El Armaly himself appeared, from his evidence, to be almost entirely unaware of the existence of the formal agreement. Tier 1 accepted that this agreement evidenced an express trust in which Avalon 2 was held by Mrs El Armaly subject to the condition that Tony made the loan repayments. It also held that this was not a fixed trust prior to the reference date of 9 May 2000, on the basis argued for by the Respondent, that the trust itself did not arise until the repayment obligation was met.
It is certainly curious that Tony El Armaly, as the sole beneficiary of an agreement about a property that was, on the evidence, purchased after quite a deal of discussion both within the family and with others including the lender, would appear to have such limited recollection of the document. The same issues traversed above in relation to the witnesses’ general lack of appreciation of a trust, other than a vehicle set up for the purposes of conducting a business, also arise in relation to this agreement.
There also remain some questions about repayments made, and Tony El Armaly’s capacity to pay, particularly in the early years of the mortgage. There is in fact no documentary evidence of repayments until bank statements from 2009/2010. However, the oral evidence was consistently to the effect that he was always responsible-- and later, together with his wife-- for these repayments. The evidence was also consistent as to the fact that Avalon 2 was always considered to be ‘Tony’s property.’
These reservations are not sufficient basis for the Tribunal to not accept that the document constitutes an express trust as contended for on behalf of Mrs El Armaly. The position contended for by the Respondent, and, with respect, that taken by Tier 1, do not appear to accord with the terms of the agreement, nor the evidence on this occasion. The agreement states in clauses 1 and 4 that Mr and Mrs El Armaly have no interest in the property. The condition in relation to paying off the loan is stated in clauses 3 and 4 as having to be met prior to the transfer of legal title, or otherwise to the sale of the property. The best evidence is that Tony acted to his detriment in making payments as required by the agreement.
If the agreement were not an express trust, it may either constitute a constructive trust or some other form of equitable interest or, if not, a contract to create a trust. The evidence of the parties as to intention, and their conduct in general, including the meeting of the condition to make payments, suggest that the agreement must be a form of trust. As stated, the Tribunal considers the agreement capable of being interpreted as an express trust.
Issues
Principal home
As noted above, it is contented for Mrs El Armaly that Brunswick was her principal home until 30 May 2001 and from this date, when the 2001 agreement came into effect,
her principal home was Avalon 1.The evidence as to Mrs El Armaly’s domestic living arrangements are set out briefly above. That is, Mrs El Armaly states that she lived at Avalon 1 for much of the week and routinely returned to Brunswick on weekends. Mr Paul El Armaly, equally, was free to visit ‘the farm’ and did so, but the evidence does not determine the frequency of his visits.
This issue was considered by Tier 1 and much was made of the fact that Mrs El Armaly appeared to live in a ‘shed’. This arose from the description of the property in Centrelink forms. Evidence provided at the hearing was more than adequate to demonstrate that while the dwelling at Avalon 1 is in the form of aluminium construction, it is in fact clearly a domestic residence and more than merely a shed. Mrs El Armaly also gave evidence as to her environment and routines, which were also substantiated in the other material introduced in evidence. In short, the evidentiary concerns that were of significance before Tier 1 do not arise on this occasion in the light of further evidence .
Accordingly, the Tribunal finds that Brunswick was Mrs El Armaly’s principal home until 30 May 2001 and, thereafter, her principal home was Avalon 1.
Attributable assets
It follows from the above that Mrs El Armaly’s interest of 50 per cent of the value of Avalon 1 until 30 May 2001 is an attributable asset for the purpose of calculating her entitlements.
The Tribunal has also accepted that the 1998 agreement is an express trust in favour of Tony El Armaly. It is also apparent that this is an express fixed trust and the trust came into effect prior to the reference date. Accordingly, Avalon 2 is not an attributable asset. It is therefore not necessary to address the attribution question.
CONCLUSION
It follows from the above that the Tribunal is not satisfied that the decision under review is maintainable as the correct or preferable decision in all the circumstances.
DECISION
Accordingly, the decision under review is set aside and a decision is substituted that the Applicant is not liable for overpayment either in respect of Newstart or in respect of DSP.
That being so, the matter is no longer subject to remittal for recalculation in any respect.
I certify that the preceding 106 (one hundred and six) paragraphs are a true copy of the reasons for the decision herein of Dr Damien Cremean, Senior Member and Dr Stewart Fenwick, Senior Member
.............[sgd]...........................................................
Associate
Dated: 30 March 2020
Dates of hearing: 10 - 11 April 2019, 25 July 2019 &
6 September 2019Counsel for the Applicant: Dr Adam McBeth Solicitors for the Applicant: Nanscawen Lawyers Solicitors for the Respondent: Mr Pietro Nacion
Sparke Helmore Lawyers
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