House; Secretary, Department of Family and Community Services
[2003] AATA 1273
•15 December 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 1273
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2002/500
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Applicant
And
MARJORY HOUSE
Respondent
DECISION
Tribunal Ms L Savage Davis, Member Date15 December 2003
PlacePerth
Decision The Tribunal affirms the decisions under review.
..............(sgd L Savage Davis)..............
Member
CATCHWORDS
SOCIAL SECURITY – age pension – overpayment – cancellation - beneficial ownership in shares – estoppel by representation – constructive and resulting trusts
Social Security Act 1991 (Cth) s 11
Social Security and Veterans’ Entitlement Legislation (Private Trusts & Companies – Integrity of Means Testing) Act 2000 (Cth)
Baumgartner v Baumgartner(1987) 164 CLR 147
Charles Marshall Pty Ltd v Grimsey (1956) 95 CLR 353
Commonwealth v Verwayen (1990) 170 CLR 394.
Re Cowling and Secretary, Department of Social Security (1986) 12 ALD 16Department of Social Security v Agnew [2000] FCA 59
Formosa v Secretary, Department of Social Security (1988) 15 ALD 657
Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82
Minister for Immigration v Kurtovic (1990) 21 FCR 193.
REASONS FOR DECISION
15 December 2003 Ms L Savage Davis, Member 1. This is an application by the Secretary, Department of Family and Community Services (“the applicant”), for a review of the decisions of the Social Security Appeals Tribunal (“SSAT”) made on 15 November 2002 that set aside the decisions made by a Centrelink officer on 4 July 2002, as varied by an Authorised Review Officer (“ARO”), to raise and recover an overpayment of age pension (“AP”) of $139,998.98, for the period 1 July 1985 to 21 May 2002; and to cancel Mrs House’s AP from 23 May 2002. The SSAT decided to set aside these decisions and:
(1) substitute its decision that there is no debt because Mrs House is not the beneficial owner of shares in M House Pty Ltd; and
(2) send the matter back to the Chief Executive Officer of Centrelink for reconsideration of Mrs House’s eligibility for AP because Mrs House is not the beneficial owner of shares in M House Pty Ltd.
2. The applicant was represented by Mr Callum Fraser of Sparke Helmore, Barristers and Solicitors. Mrs House (the respondent) was represented by Senator David Johnston. Mr Omar Bahemia, Complex Assessment Officer, Centrelink, gave oral evidence to the Tribunal.
3. The Tribunal had before it the T-documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (T1-T86/1-523), as well as the following exhibits tendered by the parties.
EXHIBIT
DESCRIPTION
DATE
A1
Applicant’s Statement of Facts and Contentions
20 May 2003
A2
Respondent’s tax return 2001/2002
R1
Respondent’s Statement of Facts and Contentions
30 June 2003
R2
Affidavit of Mrs Marjory House
5 March 2003
R3
Affidavit of Mrs Rosamond Stewart
5 March 2003
R4
Affidavit of Mr Richard House
5 March 2003
4. The following facts were not in dispute. In 1971 M House Pty Ltd was established to avoid death duties. The respondent, her son Mr Richard House and her daughter Mrs Rosamond Stewart were appointed as the directors of the company. The shares in the company are held by Mr Richard House and Mrs Rosamond Stewart. Mrs Stewart holds some of the shares on behalf of her children. The respondent has been in receipt of AP continuously since 1983. It is agreed by the parties that the central issue is who is the beneficial owner of the shares in M House Pty Ltd that are held by Mr Richard House and Mrs Rosamond Stewart.
Legislation
5. The relevant legislation is contained in the Social Security Act 1991 (“the Act”) and the Social Security and Veterans’ Entitlement Legislation (Private Trusts & Companies – Integrity of Means Testing) Act 2000.
6. Section 11 of the Act defines, amongst other terms, “asset” to mean property. Shares in a company are property for the purposes of the social security law (see Re Cowling and SDSS (1986) 12 ALD 169). Module G of section 1064 of the Act deals with the effect of assets on the calculation of the rate of AP. The amendments to the Act made by the Means Testing Act marked a significant change in the treatment of an individual’s relationship to private companies and trusts for the purpose of calculating entitlement under the social security law with effect from 1 January 2002.
Mr Bahemia’s Evidence
7. Mr Bahemia told the Tribunal that he was a Complex Assessment Officer at Centrelink. His role was to provide the complex assessment advice needed to calculate payment of benefits and allowances by Centrelink. His qualifications included a degree majoring in environmental science and economics from Curtin University, an MBA from the University of Western Australia and a post-graduate diploma in Applied Finance and Investment. It was because of his position as a Complex Assessment Officer that he was involved in the matter before the Tribunal.
8. Mr Bahemia explained that the attribution of the beneficial interest in the shares in M House Pty Ltd (“the company”) had originally been to the children of the respondent, Mr Richard House and Mrs Rosamond Stuart (“the children”). This had been done by one of his colleagues. Subsequently overpayments had been raised by another of his colleagues in Centrelink against the children, and Mrs Beverley House (who is Mr Richard House’s wife). Mr Bahemia explained that since 1 January 2002 there has been a significant change in the legislation and the basis upon which someone may be identified as having control of shares in a company. This change went beyond what was merely apparent on that basis of who were shareholders and directors. As a result of these changes Mr Bahemia said a search was done which identified the children as being involved in the company. Information from the Australian Securities and Investments Commission (“ASIC”) showed on the face of it that the children each controlled roughly half the company. This interest had not previously been declared. The company was valued. This led to a recalculating of their entitlements and subsequently the raising of the overpayments.
9. Mr Bahemia recalled attending a meeting on 7 May 2002 in regard to the overpayments. Mr Nick Goiran of Bruce Havilah and Associates, whom he understood to be the family’s lawyer, was present, as was the family’s accountant, Mr Len Creagh from Creagh Barker and Associates. Also present were the children, Mrs Beverley House (“Beverley”) and Mr Nick Stephens from Centrelink. The respondent was not present. At that meeting Mr Bahemia said the children’s and Beverley’s overpayments were discussed, as well as the relevant legislation and the operation of the assets test. Mr Nick Goiran then explained that the children in fact did not own the shares, they were simply holding them on behalf of their mother. Mr Bahemia recalled he said that that was hard to accept because the ASIC database explicitly shows the children as the beneficial owners of most of the shares. Mr Bahemia said the children were clear that they were only ever holding the shares on behalf of their mother. Mr Bahemia said he recalled pointing out that there was still a legal debt that was required to be repaid. He recalled Mr Goiran asking if repayment of the debt could be deferred and saying no. Mr Bahemia said Mr Goiran then offered to provide evidence that the children and Beverley did not own the shares in the company. Mr Bahemia said he would accept such evidence if it were provided within a fortnight.
10. Mr Bahemia was asked to comment on paragraph 21 of the respondent’s Statement of Facts and Contentions (R1) that ends with the sentence, “A suggestion that the applicant was the initiator of.” Mr Bahemia said that he believed this referred to him saying that if they were not the beneficial owners of the shares the debt raised against them would not exist. This was because the debt flowed logically and directly as a consequence of the beneficial ownership of the shares and the value of the shares in the company. Mr Bahemia said it was Mr Goiran who first raised the issue about who were the true beneficial owners of the shares.
11. Mr Bahemia said he subsequently received the statutory declaration of the respondent dated 19 May 2002 (T51/246-248). It addressed all the points raised at the meeting, including who controlled the company, who made the decisions and who got the benefits. It showed that the respondent beneficially owned the shares in, and controlled the company. Mr Bahemia confirmed that the statutory declaration was accompanied by a letter dated 21 May 2002 from Bruce Havilah and Associates (T51/244-245). Mr Bahemia said he accepted this as evidence that the respondent was in fact the informal controller and owner of the shares in the company. As a result he cancelled the debts owed by the children and Beverley. He then worked through the attribution under the provisions of the social security law and attributed control of the company to the respondent. The value of 100% of the assets of the company therefore flowed to the respondent and that meant she did not qualify for payment of AP under the application of the assets test. It also resulted in a debt. Mr Bahemia said it took considerable research to determine how far back the debt went. The AP had, he explained, only been asset tested since 1986. Mr Bahemia said original claim forms by the respondent were located, along with responses to a wide ranging data match done in 1991 asking people about their ownership of shares in listed and unlisted companies. Prior to 1 January 2002 he said an obligation still existed to inform Centrelink if you held assets, whether in your own name or not. If they were held on trust for you, they still formed part of your assets. Mr Bahemia said after he had calculated the debt he recalled speaking to Beverley. He advised that the decision regarding the overpayment to the respondent could be reviewed by an ARO. This he said was done resulting in a recalculation of the debt, increasing it slightly.
12. Mr Bahemia recalled receiving the letter of 9 September 2002 from Bruce Havilah and Associates marked to his attention which stated that they were acting for the Mrs Majory House (T76/497-498). Mr Bahemia said all interactions were by that time in writing. He had replied on 10 September 2002 (T77/499-500) in response to the query about the Limitations Act 1953. Mr Bahemia said on 18 September 2002 (T80/506-10) he wrote to in response to Mr Goiran’s letter of 16 September 2002 (T78/501-503). In that letter he said that after reviewing a debt, it would only be reviewed again if there was new evidence. Mr Bahemia said there was no new evidence.
13. Mr Bahemia commented on why he wrote in his letter of 18 September 2002 that…”There can be no dispute on the fact that Mrs Majory House was and continues to be a director of M House Proprietary Limited.” Firstly it was because the ASIC database shows the respondent to be a director of the company and also chairman of directors. In addition the respondent has always signed the annual reports year in, year out, going back to the late eighties.
14. Mr Bahemia said the respondent established the company with her own money. He said Mr Nick Goiran had been quite explicit that nobody else had contributed funds. There was, he said, no evidence that anybody else including the children had actually added money to the company. The assets of the company grew because of dividend reinvestments, astute share managing and the gradual organic growth in the value of the shares.
15. Mr Bahemia was referred to Exhibit A2. He said this showed that the respondent had received $14,000 in director’s fees in the financial year ending 2002. To the best of his knowledge she was not involved in any other company and so he presumed the fees came from M House Pty Ltd. This tax return had been sent to him by Mr Len Creagh.
16. Mr Bahemia said he believed the debt had been raised under section 1223 of the Social Security Act 1991 (“the Act”) which was the usual way when there is a failure to provide evidence that indicates a change of circumstances within 14 days. He then agreed the debt had been raised under section 1224 of the Act on the basis that if a person receives more payment than they are entitled to be paid because they failed to tell Centrelink something they are required to, the excess amount received is a debt due to the Commonwealth.
Cross-Examination
17. In cross-examination Mr Bahemia disputed that the calculation of the debt is in fact the complex part of the assessment. He said there are two complex parts. The first is the attribution of the company, meaning attribution of control over the company’s income and assets. The second part is the calculation of the overpayment. Mr Bahemia confirmed that initially Rosamond Stewart and Richard House were determined to be the beneficial owners of shares in the company. He acknowledged that was also the finding of the SSAT. Mr Bahemia confirmed that the initial decision had been made by Mr Wilson-Croft, a man known to him within the department. Mr Bahemia said he believed the original decision was made by Mr Stevens who is also a colleague of his. Mr Bahemia denied that they worked at his direction, saying they were his colleagues. Mr Bahemia accepted the contention that the original documentation was very clear in indicating that the children were the beneficial owners on the basis of the information at the time.
18. Mr Bahemia was referred to T40/221 and the sentence reading, “At this stage, I hope we are in agreement regarding who beneficially holds the issued shares in the private company M House Pty Ltd. Of 40 issued Ordinary shares and 1202 issued Preference shares Centrelink currently considers that Richard House beneficially holds 20 of the Ordinary shares and 601 of the Preference shares, that Rosamond Stewart beneficially holds 11 of the Ordinary shares and 601 of the Preference shares, and that Rosamond Stewart also holds, on behalf of her three children, 9 of the Ordinary share.” Mr Bahemia confirmed that Mr Yabuka, who wrote this letter dated 16 February 2002, is his manager. Mr Bahemia agreed that the nub of the question was who beneficially owns the shares, adding that it was coupled with the valuation of the company. He confirmed that when this letter was written the respondent was not involved in the issue.
19. Mr Bahemia explained that about 100,000 data-matching forms had been sent out. Unless there were glaring errors or obvious discrepancies the information was accepted at face value. There was not, he said the resources to examine each and every company in more detail. Mr Bahemia said they did not go behind the information provided because they weren’t equipped to, nor were they in a mind-set to go chasing after the details about private companies.
20. Mr Bahemia confirmed that his colleague Mr Nick Stephens, lawyer Mr Nick Goiran, accountant Mr Ben Creagh, Mr & Mrs Richard and Beverley House and Mrs Rosamond Stewart were at the meeting of the 7th May 2002. He, Mr Creagh and Mr Goiran did most of the talking. He said the children and Beverley mainly listened. Mr Bahemia confirmed that this was the first time he had become aware of the issue of beneficial ownership. He was attending the meeting to explain the details of the overpayments to the children. His colleague was meant to talk about the attribution issues but had felt intimidated by the accountant, Mr Creagh. Mr Bahemia said he explained about the attribution but was not aware of the significant body of background information that had accumulated to date because at that stage it was a straightforward assessment. Mr Bahemia confirmed Senator Johnston was not involved in the matter at this stage and also that the respondent was not present. At that meeting Mr Bahemia said Mr Goiran put the proposition that there was no debt owing because the children and Beverley were not beneficial owners of the shares. No comment was made as to the respondent’s position with respect to that proposition.
21. Mr Bahemia said he explicitly asked the lawyer whom he was acting for. He did this because Mr Goiran had always been appearing with the children. Centrelink had permission for him to speak on behalf of the respondent. Mr Bahemia said however that he asked because he needed to know if he was the accountant’s lawyer, a friend of the family, or the children’s lawyer. Mr Bahemia said Mr Goiran presented himself explicitly as the family’s lawyer. Mr Bohemia was not certain when he asked Mr Goiran explicitly who he was acting for, but said he was sure it wasn’t on the 7th May 2002. He believed he would have asked around the time that the statutory declaration was provided. Mr Bahemia said that at the meeting of 7th May 2002 he did not think about the implications of who the lawyer was acting for because he felt that they were still establishing facts. At that stage he was not aware that there would be contradictory sets of facts. Mr Bahemia explained he didn’t stop to think that the children would have one perspective, and the mother another. It was only after the letter that contained the statutory declaration arrived that it became clear that the mother would be seriously disadvantaged. Mr Bahemia confirmed that by the time the statutory declaration reached him on the 21st May 2002, he became aware that it would affect the respondent’s assessment.
22. Senator Johnston asked Mr Bahemia if he disclosed his concerns to Mr Goiran. Mr Bahemia said he did not and said that he had not because the question had not been asked and in addition he had to be very careful in situations such as this. Mr Bahemia agreed that at the meeting of 7 May 2002, the children, via their lawyer and accountant were attempting to rebut the clear evidentiary material before him and Centrelink that had been taken into account to determine that they were the beneficial owners. Mr Bahemia agreed that Centrelink accepted the statutory declaration by the respondent as conclusive evidence that she was the beneficial owner of the company. Mr Bahemia said that he recalled the accountant actually raised the issue that if the children didn’t own the shares there would be no debt to the children. He recalled that he confirmed that the debt flowed directly as a consequence of their ownership and control of the company. Mr Bahemia confirmed that the issue at that meeting was who had actual ownership of the company and that there was no focus on the consequences for the respondent in terms of the assets test for her pension dating back 20 years.
23. Mr Bahemia was questioned again about whom he believed Mr Goiran was acting for at the meeting of 7 May 2002 and confirmed again that he understood he was acting for the family, including the respondent. Mr Bahemia said this subsequently changed and as a result he had started to document whom Mr Goiran said he was acting for. He confirmed a note he had made that he had received a call from Mr Goiran on 31 May 2002 stating that Marjory House was not his client at this stage (T53/250). He did not recall that any explanation was given. He understood this to mean that at this stage, that is here, now, in the present, at this point in time that Mr Goiran was not acting for the respondent. Mr Bahemia said it struck him as significant enough to record it because he thought at some stage this had a chance of becoming important. Mr Bahemia did not accept that the words “at this stage” implied that Mr Goran had never acted for the respondent. Mr Bahemia said he could not ever recall Mr Goran specifically saying he was acting for the respondent but presumed that he is was acting for the House family which included the mother. It was because of his surprise when he was told over the phone by Mr Goiran that he was not acting for the respondent at this stage, that he documented it.
24. Mr Bahemia said that he reversed the assessment of the beneficial owner of the company on the basis of the statutory declaration dated 19 May 2002 (T51/246-248). Having received the statutory declaration, Centrelink knew there would be an overpayment somewhere. The overpayment would either be with the children or with the respondent. Mr Bahemia said that that would not have occurred to him at the meeting of 7 May 2002 because at that meeting, they weren’t even discussing the calculation of the respondent’s pension. The aim was just to get information. The downstream assessment ramifications weren’t an issue in much the same way he said that at that stage, they weren’t looking into the implication for the respondent’s nursing fees. He doubted the lawyer or accountant understood the implications themselves. Mr Bahemia said that once they received the statutory declaration obviously there were no debts owed by the children and Beverley.
25. Mr Bahemia said that he did not initially attribute the company to the respondent. As soon as he cancelled the children’s overpayment he did however realise there would be an overpayment to the respondent. Mr Bahemia was asked whether he believes he could change his decision again. Mr Bahemia said he could if there was sufficient evidence. Mr Bahemia said they acted on the face of the evidence they received in making the first assessment leading to the children and Beverley’s overpayments. It would have ended there because they would not have probed any further. Subsequently there was more evidence and the affidavit (Exhibit R2). Then Mr Bahemia said they actually started looking at what was the intention, what were all the circumstances and that was because in the social security law there is the latitude to look not just at facts and evidence but also draw reasonable inferences.
26. Mr Bahemia said it was unusual in the case of a company for this to happen because there is share ownership and sometimes there is a governing director and the ownership or control of the company is clear cut. He said whilst the statutory declaration made it easy, it is not the only thing relied upon. In addition he said there are the ASIC documents that show who is the chairman. The chairman has influence on a company. In this case the respondent is also the company secretary and she looks after the paperwork and has been signing it. Mr Bahemia said the respondent has been receiving obvious benefit from the company. Evidence at a later date showed that when pension was cancelled and she needed more money, the company could increase her director’s fees from some small amount of around $3,000 to $14,000. This he said reflected her ability to benefit and gain from the company despite the fact that she is not a shareholder. It is the totality of the evidence that Mr Bahemia said led to the decision to attribute the company to the respondent. Mr Bahemia said if other evidence became available he could revisit and reconsider the decision. Mr Bahemia said that the annual payment of some $3,000 was suggestive rather than indicative of control. Mr Bahemia said that he understood the company had been set up for the respondent’s benefit using her assets. He believed she lived in an old people’s home and had the contents of her room and probably not much else. However, when she has needed money, the company has been able to pay her by increasing her director’s fee payments. Mr Bahemia said she is in fact the only director that receives any payments. Mr Bahemia said that the company had been set up originally to avoid death duties. He disagreed that the children were the sole beneficiaries already as the company’s shareholders prior to the respondent’s death. Mr Bahemia said there was the advantage to the respondent of knowing that she is leaving money to the children, as well as having these are funds on call, if necessary. He expressed the opinion that she would have been able to call on her children for more assistance, if necessary, although he had no actual knowledge of this. Mr Bahemia agreed that the children had never attempted to hide that they receive dividends in their tax returns, but added they had not declared their ownership in the company to Centrelink.
27. In re-examination, Mr Bahemia said that other additional evidence he considered was that the children had said they were applying dividends to help look after their mother.
28. Final submissions by the applicant and respondent were provided in writing. In considering the matter the Tribunal has given consideration to the entirety of the material placed before it, including the submissions made on behalf of each party and the authorities cited. The issues raised in the submissions can be summarised as follows;
Estoppel
29. The applicant submitted that the respondent was estopped from making any statement at odds with the statutory declaration dated 19 May 2002 (T51/246-248). The Tribunal was referred to Estoppel by Representation (Spencer Bower, 2nd ed, pp 4-5) and to Commonwealth v Verwayen (1990) 170 CLR 394. The respondent referred the Tribunal to a number of cases including Minister for Immigration v Kurtovic (1990) 21 FCR 193. This case, it was submitted, was authority for the proposition that estoppel by representation cannot interfere with the exercise of a statutory power or the performance of a statutory duty by agents empowered with statutory functions.
30. Consideration of estoppel in administrative law has overwhelmingly concerned its application to the power of an official where the official has made a representation about existing facts. Unusually in this case it is a public authority that seeks to rely on it against a citizen. A review of the authorities indicates that notwithstanding the distinction between its application when the exercise of power is in the performance of a statutory duty, or a statutory discretion, the weight of authority supports the conclusion that there is a strong prohibition on the operation of estoppel in public law (Formosa v Secretary, Department of Social Security (1988) 15 ALD 657 at 664-665; Minister for Immigration v Kurtovic (1990) 21 FCR 193 at 210). Courts have been reluctant to apply estoppel to an official because it would deny the supremacy of parliament by allowing executive action to alter the operation of statute; that it would undermine ultra vires and that it may encourage fraud and collusion (For a more detailed discussion see Christopher Enright “Federal Administrative Law” 2001).
31. The Tribunal has formed the view that estoppel by representation cannot be invoked by the applicant against the respondent. In reaching this conclusion the Tribunal notes that it is not a common law jurisdiction. The powers of the Tribunal are prescribed by statute and it may only review those decisions in relation to which it has been given jurisdiction. The hearing is a hearing de novo and in reviewing a decision the Tribunal exercises all the powers of the original decision-maker (section 43(1) of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”)). The Tribunal is able to access within reason whatever information is necessary to fully inform itself and so carry out its role. In particular the Tribunal is not bound by the rules of evidence (section 33 of the AAT Act). The Tribunal considers that its pre-eminent responsibility in the matter before it is to ascertain whether or not the respondent was, or was not, entitled to receive AP for the period I July 1985 to 21 May 2002, and whether she is or is not qualified AP from that date. For this reason the Tribunal does not accept that the respondent is prevented from making any representations at odds with the statutory declaration because to accept this would in fact would limit the Tribunal’s jurisdiction.
Trusts
32. The applicant submitted that the shares in the company were at all times held on trust (either resulting or constructive) for the respondent. It was submitted that a resulting trust exists because the respondent wholly and solely contributed to the assets of the company. Alternatively it was submitted that a constructive trust exists for that reason, and also because the respondent has always been the only person to receive a benefit from the company; the respondent has always had a controlling interest in the company as chairman of directors and company secretary, and finally because the company was set up to avoid death duties and so it was never the intention that the company property would pass to the children until the respondent died. It was submitted that evidence given by Mr House to the SSAT supported this (T2/7 para 9).
33. The respondent submitted that the constructive trust is a remedial institution imposed by equity for the enforcement of proprietary rights, or to avoid unconscionable conduct or a restitutionary remedy. The respondent was not seeking any remedial right or interest in the company. The company was established by the respondent to pass the legal and beneficial ownership of the company to her children in the face of the then existing, death duty legislation. The Tribunal understood the respondent’s submission to imply, if not specifically assert that in the absence of the respondent seeking equitable relief, the Tribunal may not have a role in making determinations as to rights to assets by way of equitable doctrines such as constructive trusts. The Federal Court decision of Kintominas v Secretary, Department of Social Security (1991) 103 ALR 82 is authority however that the Tribunal can, and in fact may be required to, recognise equitable interests to correctly identify the property of a person.
34. The common feature of all resulting trusts is an incomplete disposition of the beneficial interest. An equitable or beneficial interest results if the person causing the transfer does not intend to dispose of the beneficial interest. The critical issue therefore is whether the respondent intended to transfer only the legal and not the beneficial interest. If she did not intend to transfer the beneficial interest a resulting trust is presumed. Evidence that a transfer of the beneficial interest was not intended would rebut the presumption of advancement that arises because of the relationship between the respondent and her children. (Charles Marshall Pty Ltd v Grimsey (1956) 95 CLR 353).
35. A person subject to a constructive trust is prevented from asserting beneficial ownership of certain property for themselves when it would be unconscionable for them to do so. Three members of the High Court approved of unconscionability as the overall principle that justifies the imposition of constructive trusts (Baumgartner v Baumgartner (1987) 164 CLR 147). The beneficial interest arises from the time of the event giving rise to the constructive trust. The Tribunal accepts the applicant’s submission that the lack of common intention by both parties as to the ownership of the beneficial interest will not alone defeat a party that seeks to assert a beneficial interest by way of constructive trust (Baumgartner supra).. However the intentions of the parties is evidence as to what was understood to be the consequences of the events in 1971 and since that time. What is necessary to show is that the party claiming a beneficial interest has acted to their detriment in reliance upon a believed state of affairs, and that it would be unconscionable for the other party to assert that the claimant had no beneficial interest in the property (Department of Social Security v Agnew [2000] FCA 59).
36. The applicant has submitted that an inference should be drawn that due to the failure of the respondent to give evidence on her own behalf, or call her children as witnesses (Jones v Dunkel (1959) 101 CLR 298). The applicant did not subpoena these witnesses. The Tribunal is mindful that it may fail in its duty to arrive at the correct or preferable decision if it does not consider calling a witness itself as it is entitled to do. The evidence before the Tribunal in the T-documents and exhibits is, however, substantial, and the parties represented, leading me to conclude that I am in a position to carry out the obligations of the Tribunal on the evidence before me.
37. Evidence from the respondent is contained in the statutory declaration dated 19 May 2002 (the statutory declaration) (T51/246-248) and the affidavit of 5 March 2003 (the affidavit) (Exhibit R2) They are as follows;
“Statutory Declaration of
Marjory House
I, Marjory House of 7 Broome Street, Forrestdale in the state of Western Australia, Secretary, do solemnly and sincerely declare that:
1.I am a Director of M. House Pty Ltd (“the company”) and I was appointed a Director of the company on 2 March 1971.
2.When the company was incorporated, Mr Bernard John West was a shareholder with me.
3.At that time in 1971, the existing company laws required that there be two natural persons as Company Officers and as shareholders.
4.On 2 March 1971, the shares held by Mr West was transferred under a Deed of Trust to me.
5.At that time on 2 March 1971 the 7% preference shares were created by the extraordinary general meeting held on that day.
6.The extraordinary general meeting also approved the issue of ordinary and preference shares to my adult children Richard House and Rosamond Stewart.
7.Whilst the company records indicate them to be the beneficial owners of those shares, they have effectively only held those shares on my behalf to conform to the requirements of the then companies act.
8.They were not at that time, or at any time later including the present, directly involved in the daily administration of the company.
9.Richard House and Rosamond Steward have at all times acted in accordance with my specific instructions in any and all company matters.
10.A formal Deed of Trust to give effect to these permanent arrangements was not put in place, but irrespective of that, company affairs were and are still managed up to this present point in time in this matter.
11.The company has been operating for more than 30 years and throughout this time, the companies investment activities have been directly controlled by me so that any income generated can be primarily applied to my support in whatever manner that I require.
12.From time to time, I have been assisted by stockbrokers.
13.I am advised by my accountant and I verily believe it to be true and correct, that the taxation treatment of the company income has been consistently dealt with as fully franked dividends to the recorded beneficial owners Richard House and Rosamond Stewart.
14.While on an accounting record basis it may appear that Richard House and Rosamond Stewart received dividends, I can confirm that they did not get any cash in their hand from those dividends.
15.The initial share portfolio of the company in 1971 was valued at $108,000.00 and this value was provided by me personally.
16.My accountant in 1971, CP Bird & Associates recommended and set up the company for me to negate the impact of death duties.
17.The intention from the first day of incorporation was to provide for my personal living expenses throughout my retirement years.
18.I swear this Statutory Declaration to be true and correct.
And I make this solemn declaration by virtue of Section 106 of the Evidence Act, 1906.
…”
Affidavit
“…
I, Marjory House of Regents Garden Aged Care, 2 Amur Place Bateman, in the state of Western Australia, an aged pensioner, being duly sworn make oath and say as follows:
1.I am a Director of M. House Pty Ltd (“the company”) and I was appointed a Director of the company on 2 March 1971.
2.I am 90 years of age having been born on the 18th day of February 1913 and reside in nursing care on a full time basis and have done so for the past three years.
3.I first became aware of the significance of the value of the assets of the Company when my two children Rosamond Stewart and Richard House spoke to me in 2002 and explained that there was a problem with the assets of the company is so far as Centerlink was concerned and that they were having difficulty with respect to obtaining any assistance. I was told that the lawyers they had retained had prepared a statutory declaration which would clarify the situation so far as they were concerned.
4.I am very close to my children and was intent upon providing them with any assistance that I could. Accordingly, I signed a statutory declaration which set out the situation as I was then led to believe it was. I have now had the benefit of independent legal advice as to the nature of the company’s legal and beneficial ownership and more particularly the legal and beneficial ownership of the shares and equities held by the Company.
5.In further discussions with my solicitor and then with my two children Rosamond and Richard, I now know and understand that they have at all times received the direct benefit of the proceeds of any dividend income generated by the Company. They have used those monies entirely at their own discretion and apparently personally paid any income tax assessable. Whilst for many years in the early 1970s I was an active participant in the running of the company it is now clear to me that they encouraged me to believe that I was making day to day decisions with respect to the running of the Company when in fact they have managed the affairs of the Company and simply kept me informed. Each of my children have enduring powers of attorney enabling them to act upon my behalf and I now know and understand that they have been so acting. This arrangement has subsisted for several years now.
6.I now believe that in reality I should have relinquished my directorship to one of my children to more accurately reflect the true nature of events.
7.I believe that each of my children have acted at all times in accordance with my instructions and wishes in so far as the Company is concerned however when I turn my mind to what instructions I may have given I cannot think of any circumstances where I have actually given instructions. The Company’s affairs have always been taken care of by either my children or my accountant.
8.From time to time I have been the beneficiary of some of the proceeds of the income of the Company however this has been entirely at the discretion of my children and in the nature of gifts and any such sums which I have received I believe have been in such amounts as to be below a level which would impact upon my entitlement to receive the aged pension.
…”
38. The applicant submitted that the statutory declaration and the affidavit were contradictory and the statutory declaration was to be preferred. In particular the assertion in the affidavit that the respondent has received “independent legal advice” (clause 4) was, the applicant maintained absurd, and casts doubts on the contents of the affidavit itself as solicitors Bruce Havilah & Associates were involved in the preparation of both the statutory declaration and the affidavit. The respondent submitted the statutory declaration was a ‘contrived’ document, its being in relation to the children’s debts and their interests, rather than the respondent’s interests.
39. The Tribunal notes that the issue as to whom Bruce Havilah & Associates were representing at any particular time was the focus of lengthy submissions. What is clear from the evidence is that they were the only lawyers to provide legal advice to the children, or the respondent, and were involved in the preparation of both the statutory declaration and the affidavit. I accept the evidence of Mr Bahemia, who at all times I found to be a credible and helpful witness, that the meeting of 7 May 2002 was concerned solely with the overpayments of the children and Beverley. The possible impact on the respondent was not considered by the children, their lawyer or accountant at that time. Whilst common sense suggests that the statutory declaration was, as the respondent submits, prepared with the children’s overpayments in mind, there has been no evidence to suggest that the respondent was not capable of swearing the statutory declaration. Indeed Senator Johnston expressed to the Tribunal that there was no question as to the respondent’s capacity. It is not to the Tribunal contentious that the motivation for preparing the statutory declaration was to respond to the children’s overpayments. The Tribunal believes it is only logical also to conclude that the motivation for the subsequent affidavit was in response to the raising of the overpayment against the respondent herself. The respondent’s motive for signing the statutory declaration can in fact, the Tribunal believes, be gleaned from the affidavit at clause 4 that reads “I am very close to my children and was intent upon providing them with any assistance that I could. “ The sequence of events leads me to conclude that the statutory declaration and the affidavit were created in response to the children and Beverley’s overpayments, and the respondent’s overpayment respectively.
40. The original insistence, and acceptance by the applicant that the children were the beneficial owners of the shares (T40/221), only altered when the children’s assertion that they were not, was supported by the respondent’s statutory declaration. The applicant responded in a timely and appropriate way to the statutory declaration that specifically says “Whilst the company records indicate them to be beneficial owners of the shares, they have effectively only held those shares on my behalf to conform to the requirements of the then companies act. ” The affidavit whilst not specifically refuting this states that at all times the dividends have been paid to the children. This is supported by the children’s tax returns and the company returns contained in the T-documents (see T8 & T14). The respondent has received a cash distribution by way of director’s fees that has enabled her to receive the AP. Mrs House’s income tax return for the year ending 30 June 2000 reflects the payment of director’s fees to the respondent in the sum of $3,120. This is the identical sum and the only director’s fees paid by the company for that financial year, and that sum and the respondent’s pension, was her only income in that year (T8/57). In re examination Mr Bahemia said that the children had said they were applying dividends to help look after their mother. This is consistent with evidence recorded by the SSAT. All dividends were paid to the children and “…From this dividend they gifted back to Mrs House as much income as she was allowed to still enable her to get the pension.” (T2/7) In a letter dated 30 August 2001 Mr L G Creagh, the children and Beverley’s accountant writes (T18/93);
“Richard and Rosamond being the only shareholders have been recipients of the income distributed by M House Pty Ltd in the form of fully franked dividends which has been declared as part of their own taxable income in each and every year. However they have not received any cash distribution from the company as those proceeds were wholly applied to support Marjory House.”
41. The Tribunal was not able to ascertain whether the respondent received cash over and above the director’s fees from the children or whether the cash distribution referred to was one and the same as the director’s fees.
42. In reaching its decision the Tribunal notes that the company was set up in 1971. The initial share portfolio of the company, valued at that time at approximately $108,000, was contributed solely by the respondent (T51/247). The applicant conceded in its written submission that it was established with the aim of avoiding payment of death duties on the death of the respondent. This intention would have been defeated if the respondent retained the beneficial ownership of the shares.. The directors of the company are the respondent (chairman of directors and company secretary), Richard House and Rosamond Stewart. The shareholders in the company are the children although the affidavit indicates that initially the shares were held by the respondent and another. Mrs Rosamond Stewart also holds a number of shares on behalf of her 3 children (T55/270) which, in itself is also inconsistent with the proposition that the beneficial interest in the shares has remained solely with the respondent..
43. The applicant has submitted that the fact that the company was set up to avoid death duties, is evidence that it was intended that the company assets were not to pass to the children before her death. As noted already if this had been the case it would have defeated the purpose that the company was established for. The applicant has submitted that this is supported by the children’s evidence to the SSAT that they would not wind up the company before her death (T2/9 para9). The Tribunal notes however that the SSAT records that they went on to say;
“…..However, Mr House said that if the company were wound up then, as the shareholders, he and his sister, Mrs Stewart, would receive the proceeds because they were the shareholders of the company. They would, however, make sure that their mother was looked after because they were her children and felt an obligation to do so”.
44. The role of the Tribunal is to view the available evidence against the statutory requirement in question, in this case to cancel the respondent’s AP and raise and recover an overpayment of AP in accordance with the relevant sections of the social security law. Critical to this is the ownership and the value of the assets in the company.
45. The Tribunal is not satisfied that there is sufficient evidence before it to be reasonably satisfied that the respondent has either never intended to confer the beneficial ownership in the shares in the company to the children, or that on the balance of probabilities a constructive trust existed. The statutory declaration is to some extent countered by the affidavit. The purpose of the meeting of 7 May 2002 was the children and Beverley’s overpayments, and the correspondence from Bruce Havilah & Associates that accompanied the statutory declaration (T51/215-216), reasonably leads to the conclusion that it was produced in response to the children’s overpayments. The respondent of her own volition established the company and issued shares to her children. The express intention was to benefit her children, initially by way of the dividends and at some date, sooner or later by passing on the entire asset without death duties. The accepted intention of establishing the company to avoid death duties is inconsistent with the respondent retaining the beneficial interest in the shares. Notwithstanding the abolition of death duties the company has continued to operate. The Tribunal has little evidence before it of the 30-year history of the company. What evidence is before the Tribunal supports the conclusion that dividends have always been paid to the children and director’s fees have been paid to the respondent. The Tribunal concludes that the respondent at the request of her children, following advice they received, has signed the statutory declaration to assist them in regard to the overpayments that had been raised against them. It is this that has brought to light an arrangement that has been in place for some 30 years. The Tribunal is not satisfied on the evidence before it that a resulting or constructive trust would arise in these circumstances. Therefore it finds that the respondent does not hold the beneficial interest in the shares in the company. Accordingly pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal affirms the decisions under review that there is no debt because the respondent is not the beneficial owner of the shares in the company and the matter be sent back to the Chief Executive Officer of Centrelink for reconsideration of the respondent’s entitlement to AP since date of cancellation.
I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of Ms L Savage-Davis, Member
Signed: ..................(sgd V Wong)............................
AssociateDate/s of Hearing 1 September 2003
Date of Decision 15 December 2003
Counsel for the Applicant Mr C Fraser
Solicitor for the Applicant Sparke Helmore
Counsel for the Respondent Senator D Johnston
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