EVANS Applicant And SECRETARY DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2010] AATA 578
•5 August 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 578
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/0831
GENERAL ADMINISTRATIVE DIVISION ) Re JOAN EVANS Applicant
And
SECRETARY DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Ms G Ettinger, Senior Member Date 5 August 2010
PlaceSydney
Decision The Tribunal affirms the decision under review.
..................[sgd]............................
Ms G Ettinger
Senior Member
CATCHWORDS
SOCIAL SECURITY – Age Pension – payment cancelled – assets - whether sale of residence amounted to disposal of an asset – effect of oral arrangements made between family members – decision under review affirmed.
Social Security Act 1991 ss 1123, 1124, 1126AA
Frendo v Secretary Department of Social Security (1987) 77 ALR 682
Jones v Padavatton [1969] 2 All E.R. 616
Follone and Secretary, Department of Social Security (1987) 11 ALD 477
REASONS FOR DECISION
5 August 2010
SUMMARY
Ms G Ettinger, Senior Member 1. Mrs Joan Evans who is now 83 years old, is the Applicant in this Tribunal to have her age pension restored. She received the age pension from 28 July 1999 to 6 May 2009. Centrelink stopped Mrs Evans’ pension on the basis that she gifted $1,131,233 to her son on 14 September 2007 when she sold her residence, and that accordingly, the value of her assets reduced her entitlement to nil.
2. Mrs Evans suffers poor health, and her son, Mr Gordon Evans, who has her power of attorney, attended the hearing on her behalf, and gave oral evidence. Mr Price, solicitor of Price & Company Solicitors, represented Mrs Evans and her son. I had before me a doctor’s report supporting Mr Price’s explanation for Mrs Evans’ non-attendance, dated 26 June 2010, a few days before the hearing (Exhibit A1). I also had before me, a Statutory Declaration of Mrs Evans (Exhibit A2), which Mr Price conceded was written for her. As I understand Mrs Evans is likely not to have fully comprehended the Declaration she signed, and was not able to be questioned about it, I have accorded it little weight in coming to my decision.
3. I have decided that the oral arrangements the family reported they made in either 1993 or 1995 in regard to Mr Gordon Evans’ return to, and involvement in the family business, and his ensuing rights to certain proceeds of the sale of the residence, if, and when it was sold, did not amount to a binding agreement or contract. I am satisfied that the funds paid to Mr Evans on the sale of the residence amounted to disposal of an asset by Mrs Evans in terms of the Social Security Act 1991, and that the decision of the Social Security Appeals Tribunal (SSAT), to uphold the decision of Centrelink to cancel Mrs Evans’ pension was the correct or preferable decision. I have accordingly affirmed the decision to cancel Mrs Evans’ pension. My reasons follow.
THIS ISSUES BEFORE THE TRIBUNAL
4. I must decide whether:
· The $1,131,233 paid by Mrs Evans to her son on 14 September 2007 constituted a disposal of an asset within the terms of section 1123 of the Social Security Act 1991 (the Act); and if so,
· Whether the decision to cancel Mrs Evans’ age pension was the correct decision.
5. In doing so, I have to make a decision whether the agreement which I am told the Evans family entered into, either in 1993 or 1995, is a binding agreement/contract, and legally enforceable, whether there was consideration, and whether the moneys Mr Evans received from the sale of his mother’s house were in satisfaction of that contract.
6. I understand that an overpayment has been raised but I have not been asked to deal with that, and have not heard argument in that regard.
APPLICABLE LEGISLATION
7. The relevant legislation is the Social Security Act 1991 (the Act), in particular sections 1123(1) and 1124, which read as follows:
1123Disposal of assets
(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.
1124Amount of disposal or disposition
If a person disposes of assets, the amount of the disposal or 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.
8. The rate of a person’s pension is worked out using the Pension Rate Calculator pursuant to section 1064 of the Act. The amount a person can receive depends on his or her assets and income.
9. In this case, Mrs Evans and her late husband, Mr Douglas Evans, were joint registered owners of their family home at Putney which they purchased in 1949. On Mr Evans’ death, which occurred on 22 April 2006, Mrs Evans became the legal owner of their joint residence. She bought another residence, and sold the Putney property for approximately $2,250,000, settling on 14 September 2007. On that day, approximately half the proceeds, being, $1,131,233.86 were transferred to Mr Gordon Evans, their son, allegedly pursuant to an agreement, and in lieu of commercial rates of payment for his services to the family business.
10. Centrelink has held that Mrs Evans disposed of the asset by gifting half the proceeds of sale of the house to Mr Evans, and as the gift amounted to more than $10,000, its value has been taken into account pursuant to section 1126AA of the Act, in calculating her rate of pension. That rate of pension then reduced to nil, and Mrs Evans has incurred a debt which is not the subject of these proceedings.
11. I note that although the SSAT dealt with issues under the Conveyancing Act (NSW), and discussed the possibility of a constructive trust, these issues were raised, but not pursued before me. The parties agreed, and I noted that neither was pursuing the concept of a constructive trust in this matter, neither that Mr Evans had an interest in the land and real estate which was Mrs Evans’ residence when it was sold in 2007. Accordingly I have not dealt with those issues in coming to a decision.
THE EVIDENCE
12. Mr Gordon Evans attended the hearing, and produced a Statutory Declaration dated 21 May 2010, which was Exhibit A3. He is 57 years old, and the only child of Mr Douglas Evans, now deceased, and Mrs Joan Evans. His parents had a family business, Walker and Gibson, which Mr Douglas Evans started in 1960. It consisted of real estate, and at one time, there were five companies which dealt in industrial fasteners, nuts and bolts, and occupational health and safety. At various times, the companies first distributed to wholesalers, then manufactured, and also acted as a service company, consulting, and making up individual orders.
13. The companies also owned real estate, and Mr Gordon Evans and his wife and children, resided in one of the family’s houses in Newtown in the early 1990s. He said that he paid rent and outgoings such as utilities. In the mid-nineties, he moved to live at Putney.
14. Mr Evans who described himself as unemployed, told me that he is a theatre designer, that he has a degree from NIDA, that he studied production administration in Canada, and that he had been a senior lecturer at Monash University. He said that he was well respected in the industry at the time when he left it on a parttime basis to assist his parents in their business in 1989/90 because his father had suffered a heart attack. Mr Evans said things didn’t improve in the business, and by 1995, he had taken over as managing director. He gave evidence that any salary he took was very minimal. He did however receive some benefits, by way of free rental, and financial benefits from the company structure. As the only child, he stood to inherit everything from his parents when they died.
15. Mr Evans gave evidence that the house at Putney was sold, and settled on 14 September 2007. He received half the proceeds, being $1,131,233.86 on that day, which included $6,233.86 his mother owed him for expenses he had paid on her behalf. Mr Evans described how his mother’s funds were expended after the sale, renovating a house for more convenient living for his mother and his children, purchasing a motor vehicle, and other expenses. He said that the renovation came to over $400,000.
16. Mr Evans estimated that he was earning between $75 – $100,000 p.a. in the theatre in 1995, and that his friends doing similar work, presently earned in a range of $100,000 - $500,000. He estimated the loss of earnings he had suffered by joining the family company at more than $1,2000,000. for the period 1995 – 2007, and was adamant that he could not now regain theatre work due to his age and long absence. Unfortunately Mr Evans did not produce any hard data, tax returns or other corroborating evidence of earnings he claimed he had foregone.
17. As to the family agreement; Mr Evans gave evidence of several discussions with the family in the 1990s in which he says he foresaw the company’s demise, and offered to assist in saving it. He said that his father was good at small business, but was not up to strategic plans. Mr Evans said that although he wanted to get back to theatre, his second goal was to save the family home from the bank, and the creditors. He said that in 1995 he and his father agreed that he would stay on instead of pursuing his theatre career, and that the agreement made with his parents would result in the house being divided into third shares if the parents and Mr Evans were all alive at the time it was sold. Otherwise, the survivors would share the proceeds equally, and if both died, the father’s will left everything to him. Unfortunately although Mr Evans was able to name the solicitors who prepared his father’s will, he was either unwilling or unable to produce it to Centrelink or to the Tribunal. He also insisted that under the agreement, between him and his parents, he would receive the house in lieu of payments which were due to him for the time he ran the business.
18. Centrelink made several requests for the will. Mr Evans wrote to Centrelink on 25 June 2009 (T29), referring to his father’s will. He disclosed that he was the executor but said that: I may have inadvertently alluded to ‘father leaving me half of the house in his will’ which is pretty much how I saw the arrangement – but technically it was the agreement as described previous: either or both parents got to live in the house until they no longer could or wanted to and then when the property was sold proceeds split evenly to the survivors – 3,2, or 1.
19. On 20 August 2009 at T34, Mr Evans again wrote to Centrelink, stating:
1) Mrs Evans was contractually obliged under law to divide the property sale of Putney as she did. It was a legally enforceable agreement and therefore could not be categorised as a ‘gift’.
2) Mrs Evans’ agreement of 1993, under Centrelink rulings, is in the character of a ‘gift’ …. but she did so around 1993 and therefore the Centrelink 5 years rule had lapsed three-fold …
20. Mr Evans told me that he separated from his wife in the early 1990s under distressing circumstances because she was mentally ill, and that he brought up their two children alone. He spoke of a divorce in 1996/7, and the property settlement occurring in approximately 1995/6. Mr Evans gave evidence that he did not mention his share of the value of the house in relation to the property settlement when he was negotiating it because there were no proceeds of sale in existence at that time, it was not, in my mind, an asset. (Exhibit A3, para 28). He said that similarly, his mother did not disclose alienation of any asset when she applied for the age pension (T4/44), because she considered the moneys transferred to her son on sale of the Putney property as his, and not a gift from her (Exhibit A2).
21. In considering whether there was an agreement between Mr Evans and his parents, or how to characterise what status it might have, I considered the evidence before me. Firstly, I am satisfied to conclude that any agreement made was oral, there were no witnesses to it other than Mr Evans, the deceased father, and Mrs Evans, the mother, who is now not fully competent to give evidence about it, and was not called for examination in the Tribunal. Mrs Evans stated in her Statutory Declaration, (which I have already noted was prepared for her), that the family agreement was a personal matter in the family, and that accordingly they did not seek advice before entering into it. Mr Evans corroborated that.
22. No family agreement was documented in writing, and it was not disclosed to Centrelink until after Mrs Evans’ age pension had been cancelled. No time frame for Mr Evans’ stay in the family business was agreed or given. It is not clear if an agreement was made, and if so, whether it was made in 1993 (as stated in Mr Evans’ letters to Centrelink and Mrs Evans’ Statutory Declaration), or in 1995, as he said in his oral evidence.
23. Mr Evans asserted however, that had he left before the house was saved, in the early 2000s, he would have been seen to default on the agreement. Mr Evans said that the business ceased operating in approximately 2001.
24. Mr Evans stated that he considered the agreement made with his parents to be legally binding and enforceable. He said that it was made around the kitchen table, and that in return for foregoing income from his theatre work for an indefinite period, and thus saving the company, and the residence, he would be eligible for his share of the house when it was sold. His understanding was that would occur when the house was sold. There was no set timeframe, but he would either receive a third share, or if one parent had died, half of the proceeds of sale. In his oral evidence he said that I did my part, they did theirs.
25. When asked by Mr Carter, solicitor, of Sparke Helmore Lawyers, who appeared for Centrelink, what would have happened if the agreement had not been honoured, Mr Evans replied that that could not happen, as they were honourable people. He added however that he would pursue his rights even to the point of commencing legal proceedings if necessary. He said that he had sacrificed a career, with a risk of not being able to return, which was now the case, he was living at age 40 with his parents, and giving up his income and autonomy. Mr Evans agreed that if both parents died, he, as the only child, stood to inherit all the assets.
26. Mr Price submitted that Mr Evans’ rights under the agreement/contract only came into existence on the date of the sale of the house, that he was paid his share of the proceeds on the day of settlement of the sale, and that he would not have had a legally enforceable right to enforce the contract until such sale. He submitted that sections 1123 and 1124 had no application in this case, and submitted that the consideration given by Mr Evans was manifest, 12 years of work saving the business and the house, at an estimated of loss of income of $1,2000,000 for which he received $1,100,000 from the sale of the house. He noted that if the house had been sold earlier, the loss of income would have been less, and the proceeds also.
27. Mr Price referred to Frendo v Secretary Department of Social Security (1987) 77 ALR 682 which he said could be distinguished because in that case the children had future expectations, but not an obligation as in the Evans’ case. He submitted that in the Evans’ case the agreement was strictly commercial.
28. I am satisfied that the situation in Frendo was similar in that there was an oral agreement of sorts, that the Tribunal found the Applicant in that case had received no consideration in money’s worth for either of the gifts to her children, and had therefore disposed of property under the Social Security Act 1947. Similar terms exist under the 1991 Act which is relevant to the present case. The Tribunal also held, and this was upheld by the Federal Court that there was no legally enforceable agreement for a future benefit. Similarly in Follone and Secretary, Department of Social Security (1987) 11 ALD 477, the Tribunal held that whatever the family agreement was, there was no evidence of consideration, and the money the Follones transferred to their children were gifts, and constituted dispositions of property pursuant to the Social Security Act 1947, thus affecting the value of their assets.
29. Mr Price submitted that in the Evans’ case, there was an agreement, terms of the agreement, and real consideration, with an intention to create binding legal relations, and a will by Mr Evans to take legal action to assert his rights if necessary. There was therefore a binding contract, he submitted.
30. I was not satisfied when such an oral agreement was made, because Mrs Evans referred to 1993, and Mr Evans to 1993 (T34), and also to 1995. In what seemed to me to be a sort of excuse for the confusion regarding dates, Mr Evans told me that the early 1990s were a traumatic time for him. He was living with his parents because his wife was in hospital, he was bringing up two children, his father had a second heart attack, and the business was hit by difficulties due to cheap imports which competed with their products.
31. Because Mr Evans had no documents to substantiate his claims or even corroborate his evidence, he was unable to quantify the loss of earnings to which he referred. I am unable to accept the evidence regarding the existence of a binding agreement, for uncertainty. If there was a loose agreement made in 1993, or 1995, then I am satisfied there was no intention to create legal relations, and make it legally binding, and Mr Evans gave no good consideration for his future benefit, the amount and timing of which was unknown to him. I do not doubt he worked in the family business, but have no evidence upon which to rely in order to quantify any loss of earnings he suffered.
CONCLUSIONS
32. In considering whether there was an agreement between Mr Evans and his parents, or how to characterise what status it might have, I considered the evidence before me.
· I am satisfied to conclude that any agreement which may have been made was oral. There were no witnesses to it other than Mr Evans, the deceased father, and Mrs Evans, the mother, who is now not fully competent to give evidence about it, and was not called for examination in the Tribunal.
· An agreement may have been made in 1993 or 1995.
· I am satisfied from the evidence that Mr Evans did not know when he commenced working fulltime for his father’s companies in 1995 how long he would be there.
· I have no indication from any documentation what he was paid for his work, or precisely what benefits he received other than rental, and perhaps some financial remuneration.
· I have no indication from any documentation what moneys he might have foregone in his theatre career. Mr Evans was vague in his estimates and there were no written documents and no tax returns.
· There is a rebuttable presumption of fact that close relatives such as parent and child do not intend their arrangements to create legal relations. (Jones v Padavatton [1969] 2All E.R. 616)
· There is considerable uncertainty as to any agreement regarding the sale of the house and distribution of the proceeds, and I am satisfied it fails for uncertainty:
(a)there was no time frame for sale of the house.
(b)there was no indication whether either parent would still be alive and take part in the proceeds.
(c)the fact that half the proceeds of sale of the house were paid to Mr Evans on the day of settlement is not relevant.
· No agreement regarding the sale of the house was mentioned in the family law proceedings.
· No agreement regarding the sale of the house was mentioned to Centrelink in Mrs Evans’ application for age pension (T4/44), and she did not disclose she had alienated half the proceeds of the sale.
· No agreement regarding the sale of the house was mentioned to Centrelink until Mrs Evans’ age pension was cancelled.
33. I am not satisfied that there was a legally binding or enforceable agreement made between Mr Evans his parents in either 1993 or 1995 because the evidence of the dates is contradictory, and there is no corroboration on which I can rely. I have already said that I put little weight on the Statutory Declaration of Mrs Evans because of her poor health and inability to give evidence.
34. I am not satisfied with the evidence regarding the contents of an Evans will because I have not seen it, and Mr Evans has been either unwilling or unable to produce it. I am satisfied that Mr Evans mentioned a will to Centrelink in correspondence (T29). As an only child he stood to inherit all his parents’ assets under a will.
35. For the sake of completeness I note that Mr Evans told me that the company ceased trading in approximately 2000, but that he kept the name on to deposit moneys from his teaching. He told me that by the time of the hearing he had formally changed the name of the company.
CONCLUSIONS
36. I am satisfied from the evidence which I have discussed above, that whatever agreement might have taken place within the Evans family in either 1993 or 1995 was not binding for lack of certainty and a lack of intention to create legal relations. I was not satisfied there was the required level of consideration, if any.
37. I am satisfied that Mr Gordon Evans as the only child is likely to have inherited the family’s assets upon the death of his parents.
38. I am satisfied that the giving of half the proceeds of the sale of Putney to Mr Evans by his mother was a gift, and that she alienated an asset in terms of section 1123(1) of the Act in that she disposed of half the assets in her residence to her son, and diminished the value of her assets for no consideration. Accordingly her entitlement to age pension was nil as decided by Centrelink 6 May 2009. That is the correct or preferable decision in this matter.
DECISION
39. The Tribunal affirms the decision under review.
I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member
Signed: ..............[sgd]..................................................................
AssociateDate of Hearing 30 June 2010
Date of Decision 5 August 2010
Solicitor for the Applicant Mr A Price, Price & Company Solicitors
Respondent Mr A Carter, Sparke Helmore Solicitors
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