Garbutt and Department of Family and Community Services - [2001] AATA 566

DECISION AND REASONS FOR DECISION [2001] AATA 566

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/1944

GENERAL ADMINISTRATIVE DIVISION       )
           Re      CELIA GARBUTT
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Dr J D Campbell, Member

Date21 June 2001
PlaceSydney

Decision      The Tribunal determines that the decision under review be affirmed.
  [sgd] DR J D CAMPBELL
  Member
CATCHWORDS
Social Security - death of a son - death benefit from superannuation fund - issue of dependency - legal personal representative - absence of will - administration of estate - mother both dependent and administrator of estate – superannuation benefit to mother and passed to other children - gift

Social Security Act 1991, sections 1106, 1207, 1108, 1110, 1123, 1124, 1125

REASONS FOR DECISION

Dr J D Campbell, Member

In this application, Mrs Celia Garbutt ("the Applicant") seeks a review of the decision of the Social Security Appeals Tribunal ("SSAT") dated 30 November 1999, which affirmed the decision made by a Centrelink Delegate of the Secretary, Department of Family and Community Services ("the Respondent") dated 26 February, that a sum of $155,000, received as part of a total sum of $165,000 by the Applicant as part of a death benefit from her late son's superannuation fund, was assessed as an asset pursuant to the deprivation provisions of the Social Security Act 1991 ("the Act"). This latter decision was reviewed by an authorised review officer ("ARO") and affirmed in a decision dated 6 May 1999.
A hearing was held before the Tribunal in Newcastle on 11 July 2000, at which the Applicant, accompanied by her two daughters, Mrs Walters and Mrs Marshall, attended. The Respondent was represented by Mr Kenny an advocate from the Advocacy and Administrative Law Team at Centrelink.
Following some initial discussion between the Tribunal and the parties, and in particular oral statement from the Applicant and her daughters, it became evident to the Tribunal that further records from the particular superannuation fund and from the solicitor dealing with the matter on behalf of the Applicant, would assist in unravelling particular aspects of the matter. The Tribunal served subpoenas on the Trustees of the Australian Post Superannuation Scheme and on Palmiere Solicitors for documents pertaining to the estate of the late Mr Wayne Garbutt.
Following receipt of the subpoenaed material, with appropriate material drawn from the material gained by summons being included in the Tribunal Documents, a further hearing was held in Newcastle on 26 March 2001, at which the Applicant and her two daughters attended and gave evidence. Mr Kenny represented the Respondent.
The following material was placed into evidence before the Tribunal:
Exhibit No  Description               Date
T1-T39 PP1-77Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
R1      Mr Wayne Garbutt nomination of beneficiaries for Australian Post Superannuation Scheme              10 August 1990
R2      Australian Post Superannuation Scheme Consolidated Trust Deed           19 June 1990
R3      Respondent's Statement of Facts and Contentions    13 March 2001

issue

The issue in this matter is whether or not the Applicant on 23 December 1998 disposed of an asset of $155,000 and the income therefrom.
legislation
The relevant legislation in this matter is the Social Security Act 1991 ("the Act") and in particular subsections 1106(1), 1107(a), 1108, 1110, 1123(1), 1124(a), 1125(1), 1125(3).

background and file evidence

The facts in this matter are, to all extent and purposes, documented in the Tribunal documents (T documents). The essential matters are listed as follows:

(a) the Applicant, at the relevant times, was receiving an age pension together with a small retirement benefit arising from the military service of her late husband. She and her late son, Wayne, had been living in her home for many years prior to his terminal illness and death from carcinoma of the lung and neurofibroma tosis on 10 November 1997;

(b) the late Wayne Garbutt had been a long time employee of Australia Post and had been a member of the Australian Post Superannuation Scheme. The Consolidated Trust Deed of the Australian Post Superannuation Scheme ("the consolidated trust deed") dated 19 June 1990, contained in part the following specific clauses/rules:

Clause 3(a) provides that the major purpose of the scheme is to provide superannuation benefits to members upon retirement and on the death of members, for their dependants.
Rules 4.2 in Schedule 1 provides for a lump sum death benefit. Rule 5.1 permits the Trustees in their absolute discretion to substitute an annuity purchased with the death benefit;
Rule 11.6 (quoted by the SSAT) requires the trustees to pay or apply any death benefit payable to one or more of the member's dependants, the member's legal personal representative and other persons as permitted by Superannuation law "to the exclusion of others or other of them in such proportions between them and in such form, manner and subject to such conditions as the trustee shall determine";
The rule goes on to provide that the trustee is not under legal obligation to locate and identify all persons who could quality as dependants or legal personal representatives; and
Rule 11.13 (a) (quoted by the SSAT) significantly provides "No interest under the scheme or benefit payable out of the Fund shall be assignable at law or in equity either in whole or in part." Paragraph (b) of the same rule strikes down all arrangements by which a person's interest in the fund may become payable to or vested in a third party by terminating any such interest, then provides exceptions in respect to a benefit to which a member or beneficiary has become absolutely entitled or to the beneficial interest (within the meaning of the Bankruptcy Act 1966) of a bankrupt.

(c) On 10 August 1990 the late Mr Wayne Garbutt signed a nomination of beneficiaries form, which provided for the name, address, relationship and proportion of benefit for each intended beneficiary to be nominated by its member as stated below:

"In the event of my death while a member of the Australia Post Superannuation Scheme I would like the Trustees to pay the Scheme benefit to the person or persons shown below; and if more than one person is shown I would like the benefit to be shared in the proportions shown.
I acknowledge that the Trustees are not obliged to pay a death benefit to the person or persons nominated below and that a nomination cannot be considered by the Trustees unless it is in favour of my spouse or child or a person who is dependant.
Name: Next of Kin as per will."

(d) At the time of his death, the late Wayne Garbutt was a single person. Further, despite considerable effort and search, no valid will was located. A draft of a will drawn up in 1978 proposed to give his estate in equal shares to his mother (the Applicant) and his three brothers and three sisters who may survive him (T19). The Applicant was his next of kin on intestacy.
(e) On 20 January 1998 the NSW Department of Community Services and a Ms Karen Wild wrote to the Trustees of the Australian Post Superannuation Scheme indicating that the late Wayne Garbutt and Ms Wild were in a relationship for some six years prior to his death; that their relationship was one of mutual dependence; that Mr Garbutt slept at MsWild's house on a regular basis (four nights a week); that Mr Garbutt had spoken about making some provision for Ms Wild by buying her a home, but this did not eventuate before his death. Further, the Trustees were advised that a search was being made for the will and that Ms Wild had a developmental disability (T20).
(f) In a statement made by the Applicant on 19 February 1998, it was stated that she, the late Mr Garbutt and the younger boys, until they left home, cohabited at the Applicant's house and shared expenses. The Applicant indicated that Ms Wild stayed in her home occasionally; that Ms Wild had her own accommodation, needed her space and time to herself; that Ms Wild and Mr Garbutt had a joint account at a building society and that they planned and enjoyed holidays together (T21).
(g) Mrs Walters, a sister of the late Mr Garbutt in a statement dated 19 February 1998, stated that her late brother was engaged to Ms Wild; that they went for several holidays together; that the late Mr Garbutt listed her as a dependant on his private health insurance and paid the extra premium; and that their relationship had deteriorated over the last 18 months with the need for counselling (T22).
(h) On 19 March 1998, the Australian Post Superannuation Scheme (APSS) wrote to the Applicant's solicitors requesting advice as to progress on finding a valid will, and requesting details of anyone who was financially dependant on the late Mr Garbutt (T23).
(i) In a letter dated 19 March addressed to Mr P.J. Garbutt, at the Applicant's address, concerning benefit entitlement the following was included (T24):

"The definition of "Dependant" under the Trust Deed of APSS in relation to a Member or Beneficiary is given as:
i.the Spouse or Child of the Member or Beneficiary; and
ii.any other person whom in the opinion of the Trustee is, or in the case of a deceased Member or Beneficiary was at the time of his or her death, in any way dependent on the Member or Beneficiary.

The Trustee is not obliged to pay a death benefit to the person or persons nominated in the Member's Nomination of Beneficiaries form.
In order for the Trustee to decide who to pay the Member's death benefit to, we require the following documentation:

a statutory declaration with respect to dependency
…"

(j) In a letter dated 1 April 1998 the Applicant's solicitor wrote to APSS (T24) stating that he was unaware of any person who was financially dependent on the deceased and the he was awaiting instructions to apply for Letters of Administration on behalf of the Applicant, who is legally the next of kin (T25).
(k) On 15 April 1998, APSS wrote to the Applicant's solicitors requesting that statutory declarations be forwarded by any family member, and in particular the Applicant, stating whether or not they were financially dependant upon the late Mr Garbutt (T26). A similar letter was sent on 8 May 1998 (T27).
(l) On 21 May 1998 the Applicant signed an affidavit detailing the particulars of her dependency upon the late Mr Garbutt (T28).
(m) On 3 June 1998 the Newcastle Community Service Centre of the NSW Department of Community Services wrote a letter to APSS detailing the circumstances on behalf of Ms Wild (T29). A statutory declaration by Ms Wild, dated 4 June 1998, was also forwarded to APSS (T30).
(n) On 10 June 1998 APSS wrote to the Scheme Trustees forwarding all the material received, indicating that both the Applicant and Ms Wild had claimed financial dependency, with the Applicant stating in her affidavit that the late Mr Garbutt was not in a defacto relationship (T31).
(o) On 20 July 1998 the Scheme Trustees sought more information from the Department of Community Services concerning the relationship between the late Mr Garbutt and Ms Wild (T32), with a response being forwarded by the Department on 29 July 1998 (T33). The Applicant's solicitor was advised by the Scheme Trustees on 5 August 1998 that no decision as to the distribution had been made as further enquiry as to the relationship between Ms Wild and the late Mr Garbutt was being undertaken (T34).
(p) On 9 September 1998 the Benefit Administrator of the Trustees of the APSS wrote to both the Applicant and Ms Wild and indicated that a benefit of 60% of the total death benefit would be paid to the Applicant and 40% to Ms Wild (T35). On 2 October 1998, the Applicant's solicitor wrote to APSS objecting to the allocation of 40% to Ms Wild, on the grounds that the Applicant was the sole dependant. Further, the Applicant's solicitor indicated that the Applicant disputed and denied that Ms Wild was dependant upon the deceased in any matter whatsoever (T36).
(q) On 10 December 1998, the Trustees of the APSS forwarded a cheque to the Applicant for an amount of $165,103.17, tax having been withdrawn (T37).
(r) On 11 December 1998 the Applicant swore an affidavit for a grant of administration of the estate of her late son, Mr Wayne Garbutt (T38).
(s) On 21 December 1998 the Applicant deposited the superannuation benefit cheque to her account (T3, P12).
(t) On 23 December 1998 the Applicant withdrew an amount of $164,186.00 and distributed the money to the surviving siblings in accordance with what she understood to be her late son's wishes.
(u) As a consequence of her actions Centrelink considered that the Applicant had deprived herself of assets of $155,000 on 23 December 1998, with the consequence that that amount would be included in her pension assessment for five years, with a reduced rate of pension being payable (T4, T5).
(v) The Applicant appealed this decision on 25 January 1999 (T6). The decision was confirmed on 26 February 1999 (T8). On 6 May 1999, following further investigations, the decision was affirmed by the ARO (T15). The matter was further reviewed and affirmed by the SSAT in a decision dated 30 November 1999.
evidence
the applicant:

The Applicant presented limited oral evidence on both occasions, having not long been discharged from hospital on the second occasion. The Applicant stated that she did what she did, because it was her understanding and belief that she was carrying through the wishes of her late son Mr Wayne Garbutt.
The Applicant also stated that she had been assisted by her two daughters at various times and had had the matter handled by her solicitor. She did consider the approach adopted by the Respondent to be unfair in the light of all the circumstances. Further, the Applicant stated that while she was unable to state that there had been any particular discussions on superannuation with the late Mr Garbutt prior to his death, she understood that his intentions were to share the estate amongst the surviving children.
mrs walters:
Mrs Walters, a sister of the late Mr Garbutt, saw the deceased regularly prior to his death, during which time they talked about wills and superannuation, and that all his papers were kept in a locked cupboard at home. She stated that when he was ill at home, they would talk about it, and that superannuation would be part of his estate.
mrs marshall:
Mrs Marshall, a sister of the late Mr Garbutt stated that she did not discuss the issue of superannuation with her late brother; that her late brother had organised his own funeral and in discussions with the social worker at the Mater Hospital he had indicated his will was at home. Mrs Marshall stated she had some difficulty in coping with the situation and that she had advised her brother not to buy Ms Wild a unit after he was first discharged from John Hunter Hospital, because she considered in light of Ms Wild's disabilities, her current form of accommodation was more appropriate.
submissions
the applicant:
Submissions made on behalf of the Applicant made prior to the first hearing and as such did not necessarily benefit from the material that was available prior to the second hearing. The submissions, in essence, contended that monies from the superannuation fund were paid to the Applicant in her legal position of legal personal representative, and that the Applicant had a duty to properly administer the estate. Further, under the Wills, Probate and Administration Act 1898 (NSW) a grant of letters of administration would have led to herself being the first surviving beneficiary pursuant to the statutory order, and thus she could effectively hold the money in trust for herself and then could distribute the money to herself.
The Applicant further contended in later submissions, that the facts in this matter would indicate that a secret trust existed between the Applicant, the late Mr Garbutt and the surviving siblings and that the Applicant had acknowledged to her son that she would carry out his wishes. Accordingly, if it were not for the secret trust, the Applicant could have distributed the funds from herself as legal personal representative, to herself as beneficiary, but because of the secret trust she was bound not to do so. It is contended that the actions of the Applicant and the evidence of Mrs Walters, who was advised by her late brother of his instructions, would support the existence of a secret trust.
the respondent:
The Respondent contended that the late Mr Garbutt's superannuation nomination of beneficiaries form did not create or assign any interest in a death benefit which may have become payable in the event of his death, as rule 11.13 of the consolidated trust deed prevented that. The role and effect of the form was not to create interests but to guide the Trustees in the exercise of their absolute discretion, if the Trustees so wished to be guided.
The Respondent further contended that the consolidated trust deed determined that the Trustee was required to pay a benefit to any of the persons specified in clause 11.6. It was in accordance with this clause that they identified the Applicant and Ms Wild as being financially dependent on the late Mr Garbutt, and they apportioned the death benefit as their absolute discretion permitted.
The Superannuation Nomination of Beneficiaries form signed by the late Mr Garbutt, nominated the beneficiaries as next of kin as per will. As it has been established there was no will, the Applicant, pursuant to section 61B(5) of the Wills Probate and Administration Act 1898, which provides that the estate is held in trust for the surviving parent absolutely, made application for grant of administration of the estate of her son, the late Mr Garbutt, on 11 December 1998, upon such granting, the Applicant became the legal personal representative of the estate.
The Respondent contended that the death benefit was paid by the Trustee of the APSS to the Applicant as a dependant, and not as a legal personal representative of the estate, and that such a payment did not constitute a payment to the estate. Further it was contended that such a payment could not be subject to a trust arising from dealings between the late Mr Garbutt and the Applicant during his lifetime, as it was the trustees and not the late Mr Garbutt who had the power of disposition over the superannuation benefit. As such, the receipt of the superannuation benefit by the Applicant in the manner it was received (ie as a dependant), could not normally become subject to a secret trust as suggested by the Applicant.
The Respondent further contended that as the Applicant received no consideration in return for her disposition of $165,000, for the purposes of the assets test she has disposed of that asset, and that as a consequence a sum of $155,000 is to be included in the value of her assets for the next five years.
Further, it was submitted that the gifting to her children of $165,000 has also deprived the Applicant of a source of income. In effect she has disposed of ordinary income, which would have been assessed as ordinary income, until the amount of disposition ceases to be included in the value of her assets.
considerations and findings
In matters such as this, the Tribunal acknowledges that the intricacies of the law may cause difficulties and unwanted outcomes particularly for elderly people in poor health and who are attempting to carry through what they believed were the wishes and intentions of a deceased person.
In this matter the Applicant is an elderly woman who has particular health problems. Throughout the difficult period she has been assisted at varying times by one or other of the two daughters and her solicitor, in dealing with the issues surrounding the death and estate of her late son, Mr Garbutt.

The Tribunal has carefully detailed the relevant evidence placed before the Tribunal and from this finds the following facts:
(a)The late Wayne Garbutt died on 10 November 1997.
(b)The late Wayne Garbutt died, without a valid will being discovered.
(c)The Applicant did apply to the Australian Post Superannuation Scheme for consideration for payment of a death benefit arising from her late son's participation in the superannuation scheme on the grounds that she had been financially dependant on her late son.
(d)On the 28 October 1998 the Applicant's solicitor wrote to the trustees of the APSS objecting to the payment of a benefit to Ms Wild, claiming that the Applicant was the sole dependant.
(e)On the 10 December 1998 the Trustees of the APSS forwarded a cheque to the Applicant for the amount of $165,103.17, tax having been withdrawn. This amount was paid to the Applicant pursuant to her claim that she was financially dependent on her late son, prior to his death.
(f)On 21 December 1998 the Applicant banked the cheque into her account and on 23 December 1998 withdrew $144,186 and distributed the money to the surviving siblings.
(g)The Applicant believed she was acting in accord with the wishes and intentions of her late son.
(h)On the 11 December 1998 the Applicant swore an affidavit for grant of administration of the estate of her late son. Such a grant of administration of the estate occurred and the Applicant is undertaking responsibilities in relation to that estate, with the assistance of a different solicitor.
In considering this matter in the light of the material before the Tribunal and the facts that have been established, the Tribunal concludes that the benefit from the trustees of the APSS to the Applicant was a personal benefit, arising from a consideration by the Trustees of her claim that she had been financially dependant on her late son prior to his death. Such a benefit was paid by the Trustees pursuant to rule 11.6 of the consolidated trust deed.
The Tribunal wishes to emphasise that such a benefit payment was not paid to the Applicant as the member's personal legal representative, as action to apply to give the Applicant such a status did not commence until 11 December 1998, by which time the issue of to whom and what amounts of benefits would be paid had already been decided by the trustees of the APSS.
In addressing the issue of whether a secret trust could have existed, there is no evidence of the Applicant's actions in distributing the money as she did, which was in accordance with understandings given to both the Applicant and Mrs Walters by the late Mr Garbutt prior to his death. Nevertheless, the fact remains that the payment by the Trustees of APSS was made to the Applicant strictly in terms of the trust deed. The Trustees and the Trustees alone had the power of disposition over the superannuation benefit, and as such could not be the subject of a trust arising from dealings between the late Mr Garbutt and the Applicant during his lifetime. The late Mr Garbutt could only assign a superannuation benefit unless he had become absolutely entitled to it, which could not occur while he lived. In essence the death benefit was a benefit, which would be distributed by the Trustees according to their consolidated trust deed, and not be way of a will unless the benefit was paid to the legal personal representative by the Trustees. In such circumstances, and where the trustees had made the payment to the legal personal representative, and the evidence was sufficient to establish the existence of a secret trust, the next of kin, becomes a trustee of the relevant property and is required to carry out the undertaking. The important feature is that the payment of the benefit must be made to the legal personal representative and it is clear that in this matter this is not the situation. Hence, any question of a testator making a contingent gift in these circumstances does not arise.
Accordingly as a consequence of the fact that the death benefit was paid to the Applicant as one or more the member's dependants pursuant to rule 11.6 of the consolidated trust deed, such a payment is a personal payment to the Applicant and becomes an asset owned by the Applicant.
There is no argument between the parties that the Applicant disposed of this benefit of $165,000 by way of gift to the three remaining siblings on 23 December 1998, that is, no consideration was received by the Applicant. As a consequence, the Applicant has disposed of the asset pursuant to s 1123(1) of the Act. Pursuant to s 1124(a) the amount of the disposition is the value of the asset which has been disposed. Pursuant to s 1125(1), $155,000 is to be included in the value of the Applicant's assets for a period of 5 years, $10,000 having been subtracted pursuant to the disposal limit nominated in s 1125(3) of the Act.
Further, the Applicant's gift of $165,000 to the remaining siblings is a disposal of a source of ordinary income pursuant to s 1106(1) of the Act. The amount of disposition of ordinary income is assessed by the Secretary pursuant to s 1107(a), with the amount to be included in her ordinary income pursuant to s 1108, until the amount of disposition ceases to be included in the value of her assets (s 1110 of the Act).
It is the Tribunal's finding, that by virtue of the payment of the death benefit to the Applicant as a dependant of the late Mr Garbutt, such payment of a benefit becomes a personal asset of the Applicant and when gifted as she did has the consequences as described in the previous two paragraphs for the rate of age pension paid to her. That it was an unintended consequence is indeed unfortunate, but clearly when all the facts are tabled there is only one outcome, which could only have been avoided if particular advice had been sought or had been given to the Applicant at the time she was in receipt of the death benefit and prior to the distribution to the remaining siblings.
DETERMINATION
The Tribunal determines that the decision under review be affirmed.
I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Dr J D Campbell, Member
Signed: R. Quinn     .....................................................................................
  Associate
Date/s of Hearing  11 July 2000
Date of Decision  21 June 2001
Counsel for the Applicant        Self-represented
Solicitor for the Respondent    Mr Kenny