Hanchett and Secretary, Department of Social Services (Social security) - [2025] ARTA 651

Hanchett and Secretary, Department of Social Services (Social security) [2025] ARTA 651 (14 January 2025)

Applicant:Mrs Hanchett (AKA Hanchett)

Respondent: Secretary, Department of Social Services

Chief Executive Centrelink

Tribunal Number: 2024/S190619
Tribunal: Member M Horsburgh
Place:Sydney
Date:14 January 2025

Decision: The decision under review is set aside and, in substitution, the amount of $790,000 is not an assessable asset in respect of Hanchett’s age pension.
This means that the application is successful.

From 14 October 2024, the Administrative Appeals Tribunal (AAT) became the Administrative Review Tribunal (the Tribunal). Under the transitional provisions in the Administrative Review Tribunal (Consequential and Transitional Provisions No. 1) Act 2024 (the Transitional Act), applications for review to the AAT that were not finalised before 14 October 2024 are taken to be an application for review to the Tribunal. The Transitional Act gives the Tribunal the authority to continue and finalise any aspect of the review not already completed by the AAT. This decision and statement of reasons is made by the Tribunal.

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances – age pension – not a common intention constructive trust – a joint endeavour constructive trust – sum of $790,000 is not an assessable asset for the purposes of age pension – decision under review set aside

Names used in all published decisions are pseudonyms. Any references appearing in square brackets indicate that information has been omitted from this decision and replaced with generic information pursuant to subsection 201(1A) of the Social Security (Administration) Act 1999.

Statement of Reasons

BACKGROUND

This application is about a decision, made by Services Australia (Centrelink) on 17 June 2024 to reduce the rate of Mrs Hanchett’s age pension by assessing as an asset a gift of $790,000. An authorised review officer affirmed this decision on 24 June 2024.
On 27 August 2024, Mrs Hanchett lodged an application for review with the AAT. I heard her application on 8 January 2025. Mrs Hanchett, who is in residential care, did not attend but was represented by her daughter, Mrs [A], who gave evidence. Her daughter-in-law, [Mrs B] , and grandson, [Mr C] , also gave evidence. All the persons referred to in these reasons, including the applicant in her alternative name, have the surname [name]. For clarity, but without any disrespect, I will refer to them by their first names.

ISSUES

The rate of payment of age pension is calculated under the provisions of section 1064 of the Social Security Act 1991 (the Act). The calculation involves both an income test and an assets test. The test that gives the lower rate of pension is the one that is used. In this application, the assets test was used.
Division 2 of Part 3.12 of the Act deals with the disposal of assets. Section 1123 of the Act says that a person disposes of assets if they are transferred to another person for no consideration in money or money’s worth. According to section 1125 of the Act, a person may dispose of assets to the value of $10,000 in a single year without any effect on the person’s pension. The net amount of the disposal remains an asset for the next 5 years.
The issue in this case is whether the applicant, Mrs Hanchett, disposed of an asset to the value of $800,000, giving rise to an assessable asset of $790,000.

CONSIDERATION

It is not in dispute that, on 29 May 2024, Mrs Hanchett transferred the title of her home at [Address 1]to her grandson, [Mr C], without receiving any consideration. Her argument is that she had held that property in trust for her late son, [Mr D]. She does not assert a formal trust, rather that there was a constructive trust in [Mr D]’s favour.
[Mr D], the son of Mrs Hanchett and the late [Mr E], was born on [date], and died, after 3 years of [a] disease, on [date] August 2021, aged [age] years. On 21 August 1980, [Mr D], then almost [age] years, suffered a work injury at his place of employment, [a company]. The work involved [details deleted]. It is not necessary here to go into the details of the accident, which are described in a judgment by [name], dated 25 February 1982, in the Workers’ Compensation Commission of New South Wales (pages A436-A439). The injuries are substantial, and the judgment ordered an ongoing payment of wages. There was another judgment ordering a lump sum payment of $64,000. Because of the age of the action, this judgment could not be recovered (pages A440-A441). For reasons that will appear, I accept the alleged value of the lump sum payment.
In an affidavit, dated 14 July 2020, and prepared for a potential legal action, [Mr D] described what happened to his compensation payments (pages A194-A206). Because he was originally a minor, his wages were paid to the NSW Public Guardian. He says that he would attend their offices with his father, [Mr E], and withdraw his wages, which were then taken and spent by [Mr E] on household expenses and gambling. [Mr D] says that he received none of the wages for his own use. The lump sum payment of $64,000 was made directly to him because he had, by that time, become a legal adult. [Mr D] says that his wages and lump sum came to $72,000.
At the time of the compensation settlement, both Mrs Hanchett and [Mr E] were unemployed and receiving social security payments, [Mr E] since 1975, which was confirmed at the hearing by [Mrs A]. The family was living in public [housing]. [Mr D] says that he wanted to use his lump sum money to buy a taxi licence, but his parents thought that he should buy a house to ensure his future. At the hearing, [Mrs A] said that her parents had expressed the view that [Mr D] might fritter his money away.
At the hearing, all 3 witnesses spoke of [Mr E]’s domestic violence and alcohol consumption. [Mrs A] described him as a “tyrant” to whom one could not speak. In his affidavit, [Mr D] recalled that, during the arguments about the disposition of the money, he ran away and spent the night in a nearby park. On his return he was tied to his bed and belted. He described other forms of violence towards him.
In the end, [Mr E] prevailed and, on 4 November 1983, a property [Address 2] was bought for $63,000. [Mr D] says that he was excluded from the meetings at which the contracts were drawn up and the cash settlement made. [Mr D] understood that the property would be in his name. Instead, the property was registered in the names of his parents as joint tenants. [Mr D] asserts that [Mr E] claimed $7,000 in the First Home Rebate and kept that sum for his own use.
In 1984, [Mr D] became engaged to his cousin [Mrs B]. They married on 6 April 1985 after she had migrated from [Country 1]. [Mr D] and [Mrs B] lived in a granny flat attached to the [Address 2] home (page A222). [Mr D] says that he converted the garage into the granny flat at his own expense. For a short period following arguments with his father and having been the subject of assault, [Mr D] and [Mrs B] moved to their own home in [a suburb], after which [Mr E] rented the granny flat. In January 1987, shortly before the birth of their daughter, [name], they moved back to [Address 2]. The tenant had left and [Mr E], who did not own a car or drive, required them to be available to transport him and Mrs Hanchett.
On 10 August 1987, [Mr E] sold the [Address 2] house for $86,000 without consulting [Mr D], who says that he discovered the potential sale only when a real estate agent attended the house. [Mr E] then purchased in his and Mrs Hanchett’s names, a house at [an address] [Suburb 1] for $84,350. [Mr D] said that he and [Mrs B] lived at [Suburb 1] until late 1990, when they obtained public housing at [address], also in [Suburb 1]. He stated that, while living with his parents, he paid all the maintenance costs of the [Suburb 1] house.
On 18 October 1990, [Mr E] sold [Suburb 1] for $157,000 and bought a property at [Address 3] for $113,500. [Mr D] says that his parents gave him $30,000 of the proceeds towards the purchase of their own home but used the balance for the new house. This could be regarded as giving [Mr D] a share in the capital gain on the [Suburb 1] house, but [Mr D] suggests that he had confronted his parents with his need to move out of public housing. The $30,000 was all the help they said they could give him. That is, it was a gift. Even if it was a capital gains share, any trust was not extinguished by it. Rather the presence of a trust was supported.
A succession of sales and purchases followed. In August 1992, [Address 3] was sold for $117,000 and [Address 4] bought for $108,000. In January 1995, the [Address 4] house was sold for $132,500 and a property at [Address 5] was purchased for $102,000. Finally, in November 1999, [Address 5] was sold for $132,500 and [Address 1] bought for $129,000. This is the property that Mrs Hanchett transferred to [Mr C]. The evidence for these transactions is contained in the attachments to [Mr D]’s affidavit.
[Mr D] says that, in 2016, while visiting his parents, he discovered, again through the presence of a real estate agent, that his father was intending to sell the [Address 1] property and return to [Country 1] with the proceeds. [Mr D] then lodged a caveat on the title based on a “claim to an Estate or Interest in (the) Land” (page A74). After [Mr D]’s death, [Mrs B] lodged a caveat in her own name (page A76).
[Mr D] took other actions within his [community] to no avail. When he was diagnosed with his terminal illness, [Mr D] unsuccessfully asked for the [Address 1] property to be transferred to [Mrs B].
On 3 January 2025, [Mrs B] executed an affidavit to the same effect (pages A222-A273). This affidavit contains all the documents related to actions taken after [Mr D]’s death. [Mr E] had died on [date] May 2019 and the property was now in Mrs Hanchett’s hands. Those actions involved trust agreements ensuring Mrs Hanchett’s life interest in the [Address1] property with the property to go to [Mr C] on her death. These arrangements came to an end when Mrs Hanchett’s health required her to enter care. This is when she transferred the property to [Mr C].
At the hearing, [Mrs A] recounted her family knowledge of the history of house purchases and [Mr D]’s longstanding view that the original home purchase was his. She confirmed [Mr D]’s account of [Mr E]’s character and behaviour. She also said that, on each sale, [Mr E] “traded down”, that is, he bought for a lesser price than the previous sale and kept the capital gain. She also said that [Mr D] stopped the proposed court action, for which he had sworn in his affidavit, because he did not want to take his father to court.
At the hearing, [Mrs B] confirmed the contents of her affidavit, particularly her knowledge of the house dispute from her engagement to [Mr D]. [Mr D]’s dying wish was that the house be returned to his family.
In evidence, Mrs Hanchett submitted translated transcripts of recorded family conferences on 12 December 2018 and 17 October 2019 (pages A290-A346). There appear to have been multiple attendees and the speakers are not identified. Both [Mr D] and [Mr E] appear to have been present. It is difficult to make sense of the conversations but, on page A302, [Mr E] appears to accept that he bought [Address 2] with [Mr D]’s money. There is a dispute over the price of the house, with [Mr E] suggesting that the cost was around $30,000, which he subsequently repaid to [Mr D].
The question before me is whether there is a constructive trust in favour of [Mr D] and his heirs. The decision under review has concluded that there was no trust, and that Mrs Hanchett transferred the property to [Mr C] for no consideration, thus activating the gifting rules and reducing the rate of her age pension.
In considering this question, I have been assisted by the AAT decision in Thomas; Secretary, Department of Social Services and (Social services second review) [2022] AATA 2324, where Deputy President J Sosso said:
66. The Tribunal’s attention was also drawn to the Victorian Supreme Court case of Imam All Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413. Her Honour, McMillan J, provided the following helpful summary of the law governing constructive trusts :
396. The term constructive trust is used in various manners to identify a remedy provided by a court of equity. Some variations of constructive trusts create proprietary interests while some merely impose a personal liability. The chief motivation of the courts of equity in imposing a constructive trust over property is to ensure that, ‘when property has been acquired in such circumstances that the holder of the legal title may not in good conscience retain the beneficial interest, equity converts him into a trustee’.
397.The imposition of a constructive trust over property is a serious measure. A court will consider whether there is an appropriate equitable remedy that falls short of the imposition of a constructive trust. Although the catalyst for the imposition of a constructive trust may be unconscionability by a party in the assertion of a legal interest free of equitable encumbrance, the construction of such a remedy must be determined by reference to established equitable principles and not a vague notions of fairness or justice. In particular, mere unjust enrichment is not a sufficient basis for the award of a constructive trust.
398.There are a variety of recognised categories of constructive trusts. These categories are not closed. The principles governing some of the key categories of constructive trusts for the purposes of the current case are explained as follows.
Joint endeavour constructive trust
399.The first category of constructive trust is called a joint endeavour or Baumgartner constructive trust. This form of trust is commonly associated with the circumstances where a person in whose favour a constructive trust is found has, directly or indirectly, made financial contributions towards the cost of acquiring, improving or maintaining the property.
400.This form of trust was most notably considered by the High Court in Muschinski v Dodds and Baumgartner v Baumgartner. In the former case, Deane J stated that such a trust will arise:
‘...where the substratum of a joint relationship or endeavour is removed without attributable blame and where the benefit of money or other property contributed by one party on the basis and for the purposes of the relationship or endeavour would otherwise be enjoyed by the other party in circumstances in which it was not specifically intended or specially provided that that other party should so enjoy it. The content of the principle is that, in such a case, equity will not permit that other party to assert or retain the benefit of the relevant property to the extent that it would be unconscionable for him so to do...’
401.This form of constructive trust may be imposed regardless of the actual or presumed intention to create a trust. This form of constructive trust is not advanced by the plaintiffs.
Common intention constructive trust
402.The second class of constructive trust is a common intention constructive trust, which is distinct from the joint venture constructive trust. The court will construe a common intention constructive trust where:
‘(a) there is an actual or inferred common intention of the parties as to their beneficial interest in a property;
(b) there has been detrimental reliance on that common intention by the claimant; and
(c) it would be an equitable fraud on the claimant to deny his or her interest in the property.’
The onus of proving such a trust lies on the party asserting the beneficial interest against the legal owner.
403 The parties’ intentions can be found or inferred from the party’s contemporaneous words and conduct, also having regard to the surrounding circumstances and context in which they were uttered or performed. The relevant intention may arise after the property has been acquired. The intention to be established need not designate a specific share of the property; it is sufficient that the claimant should have a beneficial interest.
The decision under review considered whether, in this case, there was a common intention constructive trust and concluded that there was not. I agree with that conclusion. Although [Mr E] might have argued publicly within the family that he was acting to protect [Mr D]’s capital, his actions bely that intention. I accept [Mr D]’s sworn evidence that he was persuaded under pressure to allow his money to be used to buy the [Address 2] property. I accept that he was excluded from the events where the transaction was made, apart from withdrawing the money from his bank account. [Mr E] at all times acted as though the purchased properties were his. I accept the accounts of [Mr E]’s character and violent behaviour. [Mr D] might have had an intention, but [Mr E] did not. It could more accurately be said that [Mr E] intentionally misappropriated [Mr D]’s money for his own purposes.
I am satisfied that the money used to purchase the [Address 2] property was [Mr D]’s. He received his lump sum compensation payment as an adult. The coincidences of time and the sums of money involved support that conclusion. I place weight on [Mr D]’s and [Mrs B]’s actions in placing caveats on the [property] as evidence of their intention to contest any sale at law.
Although this was not a common intention constructive trust, I think that the facts support the conclusion that this was a joint endeavour constructive trust, in that, the “person in whose favour a constructive trust is found has, directly or indirectly, made financial contributions towards the cost of acquiring, improving or maintaining the property”. In this case, [Mr D] contributed the whole of the cost of the [Address 2] purchase. Also, “[t]his form of constructive trust may be imposed regardless of the actual or presumed intention to create a trust”.
Once the [Address 2] property is found to be subject to a constructive trust, the capital gains also belong to the trust, as do the subsequent properties purchased with the successive sales. After [Mr D]’s death, [Mrs B] became the beneficiary of the constructive trust. Subject to a Deed of Agreement, a Trust Deed and a Deed of Life Estate (pages 89-92, 116-124, 125-129) Mrs Hanchett recognised the existence of a constructive trust in [Mr D]’s favour and arranged for its ultimate transfer. By Deed of Gift (pages 93-101), [Mrs B] gave the final [property] to [Mr C]. When Mrs Hanchett transferred the property to [Mr C], she did so because of the constructive trust. It follows from this that Mrs Hanchett did not dispose of the property under terms that would activate the provisions of Division 2 of Part 3.12 of the Act. The sum of $790,000 is not an assessable asset for the purposes of Mrs Hanchett’s age pension.

DECISION
The decision under review is set aside and, in substitution, the amount of $790,000 is not an assessable asset in respect of Hanchett’s age pension.

Date of hearing:	Wednesday, 8 January 2025
Representative for the Applicant:	Mrs [A]