Fine and Secretary, Department of Families, Community Services and Indigenous Affairs
[2007] AATA 1094
•1 March 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1094
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2006/321
GENERAL ADMINISTRATIVE DIVISION ) Re ZENA FINE Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Senior Member P McDermott, RFD Date1 March 2007
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
....................[Sgd]..........................
Senior Member
CATCHWORDS
SOCIAL SECURITY – age pension – disposal of asset – whether money loaned from son to mother – absence of written agreement and definite terms – whether a legally enforceable agreement existed – whether an equitable proprietary interest exists – whether a trust was created – decision affirmed
Bankruptcy Act 1966 (Cth) ss 58, 116
Social Security Act 1991 (Cth) ss 1123
Conveyancing Act 1919 (NSW), s 23COfficial Receiver in Bankruptcy v Schultz (1990) 170 CLR 306
Cummings v Claremont Petroleum NL (1995) 185 CLR 124
Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458,
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353
Calverley v Green (1984) 155 CLR 242
Trustees of the Property of John Daniel Cummins, A Bankrupt v Cummins (2006) 224 ALR 280REASONS FOR DECISION
1 March 2007 Senior Member P McDermott, RFD Introduction
1. On 1 January 2005 Mrs Zena Fine made a claim to be paid an age pension. On 30 March 2005 she withdrew an amount of $144,579.00 from her bank account and paid it to her son, Mr Brian Fine. I have to decide whether this payment to her son was the disposal of an asset or whether the payment was made under an enforceable legal or equitable obligation.
Decisions
2. On 20 May 2005 Centrelink made a decision that an amount of $116,506.00 which was paid by Mrs Fine to her son, Mr Brian Fine, was the disposal of an asset and should be taken into account as an asset until 29 March 2010. Mrs Fine sought a review of this decision.
3. On 27 October 2005 an authorised review officer varied this decision by deciding that the amount of $144,579.00 paid to Mr Brian Fine was the disposal of an asset. Mrs Fine sought a review of this decision.
4. On 11 April 2006 the Social Security Appeals Tribunal affirmed the decision of the authorised review officer. Mrs Fine has sought a review of this decision by this Tribunal.
Relevant Legislation
5. The effect of s 1123 of the Social Security Act 1991 (“the Act”) is that a person is taken to dispose of an asset if that person receives no consideration or inadequate consideration, then the value of that asset will be deemed to be included in a person’s assets for the purpose of assessing that person’s entitlement to age pension for a period of five years from the date of disposal.
History of the Matter
6. Mrs Fine migrated to Australia from Zimbabwe in 1986 under the sponsorship of her son, Mr Brian Fine. Mr Brian Fine lived in Sydney. When she arrived in Sydney she did not have funds to enable her to purchase a house. Her funds only enabled her to meet her immediate living expenses.
7. In 1986 Mrs Fine purchased a home unit at 2/5 Isabel Avenue, Vauclause for the purchase price of $78,000.00. Mr Brian Fine provided a deposit of $8,000 and a cash sum of $28,072.00. The St George Building Society gave Mrs Fine a loan of $45,000.00 which was secured by a mortgage. This loan was guaranteed by Mr Brian Fine. Between June 1986 and May 1987 Mr Brian Fine also made loan repayments which totalled $8724.00. In 1987, upon the sale of his business, Mr Brian Fine made a payment of $42,961.00 to the St George Building Society to discharge any outstanding liability under the mortgage.
8. Mr Brian Fine stated that he advanced the money to purchase the home unit to enable his mother to have a secure place to live. For this reason he ensured that the property was placed in the name of his mother. He did not want to place the property in his own name because he was concerned about what would occur in the event of the failure of his business (Besani Pty Ltd). Mr Brian Fine expressed his concern about what could happen if his business failed. He remarked: “If so, if anything that I owned in my own name may have been at risk in the event of my bankruptcy following liquidation of the company”. (Exhibit 3, para 8).
9. In early 2002 Mrs Fine decided to move to Brisbane to live closer to her other son, Dr Stephen Fine. At that time the children of Mr Brian Fine were leaving home. Dr Stephen Fine had young children. Mr Brian Fine was supportive of her move to Brisbane and he had suggested that she sell the Vaucluse home unit. Mr Brian Fine assisted her in negotiating a sale price of the property. After payment of legal expenses and real estate fees, Mrs Fine received the sum of $419,000.00 from the sale of the Vaucluse home unit.
10. In December 2004 Mrs Fine purchased a unit in a retirement complex in Brisbane for $259,000.00. After the purchase of the unit she had some funds from which she made the payment to Mr Brian Fine which is at issue in these proceedings. This is the payment on 30 March 2005 of the amount of $144,579.00 from her bank account.
11. There was some evidence before me as to how the amount of $144,579.00 was calculated. Mrs Fine stated that the amount was calculated as follows:-
Deposit $8,000.00
Cash $28,072.00
Payments to St George Building Society(from 30 June 1986 to 31 May 1987) $8,724.00
Discharge of mortgage St George Building Society $42,961.00
____________
$87,757.00
Simple interest at 3.5% over 18.5 years $56,822.00
____________
TOTAL $144,579.00
12. The amount of the interest was calculated by Dr Stephen Fine. Mrs Fine remarked that Dr Stephen Fine was a “neutral” family member who could best determine an appropriate rate of interest (exhibit 1, para 21). Dr Stephen Fine settled on the interest rate of 3.5% as being linked to the consumer price index.
13. Mrs Fine had earlier, on 20 January 2005, made a payment of $10,000.00 to Mr Brian Fine. Mr Brian Fine stated that this payment was made “as a sign of her gratitude” for his “assistance over the years”.
Consideration Of The Application
14. At the hearing before me, the argument that was presented on behalf of Mrs Fine was that the payment to Mr Brian Fine of the amount of $144,579.00 was made by her because of a legally enforceable agreement between Mrs Fine and Mr Brian Fine.
15. The initial argument that was presented before me was that Mrs Zena Fine had a contract of loan with Mr Brian Fine.
16. The respondent submitted that there was no legally enforceable contract and pointed out that:-
- there was no written note of the loan agreement;
- the interest rate was never agreed upon;
- the specific time for repayment was not agreed;
- the circumstances in which repayment would be made were not discussed.
17. In addition, the respondent also submitted that the arrangement was done in a close family relationship and that an objective observer would conclude that in making the arrangement there was no intention to create legally binding relations.
18. I mention that there was some discrepancy between the evidence of Mrs Fine and Mr Brian Fine as to the amount that Mrs Fine owed Mr Brian Fine under the alleged loan. Mrs Fine stated that the sum of $144,579.00 represented the “calculation of the amount that I owed to Brian”. However, it is clear from the evidence of Mr Brian Fine that he considered that he should be paid more than the amount that his mother paid him. He stated that he “would expect an eventual adjustment to allow for a reasonable commercial rate” (exhibit 3, para 36).
19. Mrs Fine does not now press a claim in contract. I consider that this concession was correctly made, particularly when you have regard to her own evidence when she stated that she remarked that Mr Brian Fine would benefit by an inheritance upon her death. She had certainly not given any evidence that there was any agreement with her son concerning repayment of the loan. Indeed, in cross-examination Mrs Fine agreed that there was no agreement that Mr Brian Fine could demand repayment at any time.
20. Mrs Fine now advances a claim in equity that she held the Vaucluse unit on either a constructive trust or a resulting trust for Mr Brian Fine. In this regard her submission is essentially that Mr Brian Fine had an equitable proprietary interest in the Vaucluse unit. It was submitted that at the time of purchase Mr Brian Fine had no intention of passing the beneficial interest in the Vaucluse unit to his mother. Rather his intention was that he was to retain the property with his mother enjoying a right to reside free from rent, for the duration of her life.
21. I accept the submission of the applicant that the fact that there is no writing which evidences the existence of a constructive or resulting trust would not prevent a court of equity from ruling that such a trust is in existence: see Conveyancing Act 1919 (NSW), s 23C.
22. I, however, consider that there are some fundamental obstacles to my finding that Mr Brian Fine had an equitable proprietary interest in the Vaucluse unit.
23. First, the evidence of Mrs Fine was that Mr Brian Fine had made a loan to her. There was no suggestion in her evidence that Mr Brian Fine had an interest in the Vaucluse unit. In fact the tenor of her evidence was that the Vaucluse unit was her property. In her evidence Mrs Fine had stated that “the unit was purchased in my name to give me the security of owning a unit, to not antagonise Brian’s wife and to minimise risk” (Exhibit 1, para 10). Mrs Fine also stated that Mr Brian Fine “felt it necessary that I have the security of having a house of my own” (Exhibit 1, para 4).
24. It will also be recalled that Mr Brian Fine assisted his mother to purchase the Vaucluse unit at a time when there was a risk of his being declared bankrupt in the event that there was a failure of his business. Mr Brian Fine was asked whether, in the event of his bankruptcy, he would have declared an interest in the Vaucluse unit on his statement of affairs. His answer to that question was that he would not have declared such an interest.
25. If Mr Brian Fine indeed had an equitable interest in the Vaucluse unit, in the event that he was declared bankrupt that interest would certainly vest in his trustee in bankruptcy. This would be as a consequence of the operation of s 116 (1)(a) of the Bankruptcy Act 1966 which provides that “all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge”… “is property that is divisible amongst the creditors of the bankrupt”. Such property would vest in the official trustee or other trustee in bankruptcy pursuant to s 58 of the Bankruptcy Act 1966.
26. In Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306, the High Court of Australia made reference to the definition of “property” in s 5(1) of the Bankruptcy Act 1966 which provides: “‘property’ means real or personal property of every description …., and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property”. In Cummings v Claremont Petroleum NL (1995) 185 CLR 124 at 132 Brennan CJ, Gaudron and McHugh JJ also remarked that the term “property” is “broadly defined” by s 5(1) of the Act.
27. I consider that the definition of “property” in the Bankruptcy Act 1966 would certainly include any equitable interest that a bankrupt has in property. In Pridmore v Magenta Nominees Pty Ltd (1999) 161 ALR 458, RD Nicholson J remarked (at 468): “In relation to s 58(1)(a) ‘the property of the bankrupt’ as defined in para 116(1)(a) would include any choses in action which the applicants had to enforce equitable rights. Such rights, being property being divisible among the creditors of the bankrupt, would vest in the official trustee”.
28. It is therefore clear that if Mr Brian Fine had an equitable interest in the Vaucluse unit then he would have to disclose that interest in his statement of affairs if he had been declared bankrupt at a time when his mother was registered as the legal owner of the Vaucluse unit. The fact that he would not have been prepared to disclose an interest in the Vaucluse unit in his statement of affairs leads me to the view that his paramount concern was that his mother would have a secure place to live, rather than to a conclusion that he would be prepared to make a false statement in his statement of affairs.
29. In examining the claim of Mr Brian Fine that he had an equitable interest in the Vaucluse unit, I consider that, on the prevailing state of the authorities, it is legitimate for me to examine the events which transpired following the sale of the Vaucluse unit. At one time it may have been thought that “[a]part from admissions the only evidence that is relevant and admissible comprises the acts and declarations of the parties before or at the time of the purchase”: see Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 365. However, in Calverley v Green (1984) 155 CLR 242 at 269 Deane J explained that this “passage should not, however, be accepted as good law to the extent that it purports to lay down that no evidence other than that mentioned will ever be admissible”.
30. I therefore consider that it is legitimate for me to examine the events after the sale of the Vaucluse unit. There is clear evidence that Mrs Fine took the proceeds of sale. There is no suggestion that Mr Brian Fine had then, or indeed at any other time, made a claim on the proceeds of sale. This is even though in his evidence-in-chief he had stated that he thought that the money would be repaid when his mother moved to a retirement home.
31. I also consider that the assertion that Mr Fine had an equitable interest in the proceeds of sale is inconsistent with his expectation that he would “expect an eventual adjustment to allow for a reasonable commercial rate” (exhibit 3, para 36). This is quite inconsistent with his assertion that he was entitled to all of the proceeds of sale.
32. I do not consider that Mr Brian Fine can sustain an argument that he held an interest in the Vaucluse unit under a resulting trust. This is because he stated that he “felt it necessary to ensure that my mother had the security of a home of her own”. In these circumstances this is evidence that it was the intention of Mr Brian Fine that he intended that Mrs Fine acquired the beneficial interest, as well as the legal interest, in the Vaucluse unit: see Calverley v Green(1984) 155 CLR 242 at 246. Any suggestion that Mr Brian Fine would have an equitable interest would defeat his aim for his mother to have “the security of a home of her own”.
33. I also comment that in Calverley v Green (1984) 155 CLR 242 at 246, Gibbs J commented that for a presumption of resulting trust to apply “the money must have been provided by the purchaser in his character as such – not, e.g., as a loan”.
34. I do not consider that a valid trust exists in this case which prevents Mrs Fine from freely dealing with the proceeds of sale of the Vaucluse unit. I consider that she has the full beneficial ownership of those proceeds of sale, or, in terms recently expressed by the High Court of Australia in discussing resulting trusts, the “equitable interest is at home with the legal title, because … no … trust has arisen”. (Trustees of the Property of John Daniel Cummins, A Bankrupt v Cummins (2006) 224 ALR 280 at 293, citing Calverley v Green (1984) 155 CLR 242 at 267 per Deane J.)
35. I find that the amount of $144,579.00 which was paid by Mrs Fine to her son, Mr Brian Fine on 30 March 2005, was the disposal of an asset for no consideration.
Decision
36. I affirm the decision under review.
I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member P McDermott, RFD
Signed: .....................................................................................
Fiona Kamst, AssociateDate/s of Hearing 7 November 2007
Date of Decision 1 March 2007
For the Applicant Mr N Kidson, of Counsel
For the Applicant O'Reilly Lillicrap, Solicitors
For the Respondent Mr M Black, Departmental Advocate
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