Kuklis and Secretary, Department of Social Services (Social services second review)
[2019] AATA 4620
•5 November 2019
Kuklis and Secretary, Department of Social Services (Social services second review) [2019] AATA 4620 (5 November 2019)
Division:GENERAL DIVISION
File Number(s): 2018/6520
Re:Wally Kuklis
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Member I Fletcher
Date:5 November 2019
Place:Perth
The reviewable decision, dated 10 October 2018, is affirmed.
........................[sgd]................................................
Member I Fletcher
CATCHWORDS
SOCIAL SECURITY – Age Pension – Asset Test Threshold – joint tenants in property – trusts – decision affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth) – Part 3, Part 3.18
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (Cth) – Part 2, Part 3
CASES
Anstis v Secretary of the Department of Family & Community Services [2002] FCA 1043Do and Secretary, Department of Education, Employment & Workplace Relations [2008] AATA 1175
Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.Freeman v Secretary, Department of Social Security (1988) 19 FCR 342
Hohol v Hohol [191] VR 211
Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413
McDonald v Director-General of Social Security (1984) 1 FCR 354
Ogilvie v Ryan [1976] 2 NSWLR 504
Re Follone and Secretary, Department of Social Security [1987] 11 ALD 477
(19 March 1987)Re Lindeman and Repatriation Commission [2004] AATA 225
Secretary, Department of Family and Community Services and Cocks [2002] AATA 1179
Secretary, Department of Social Security and Garvey (1989) 22 FCR 132
Shi v Migration Agents’ Registration Authority [2008] HCA 31
Singh v Kaur Bal [No 2] [2014] WASCA 88
Slamkova and Secretary, Department of Social Security [2017] AATA 137
Zhang and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 937
SECONDARY MATERIALS
Guides to Social Security Law, Department of Social Services, version 1.258
Explanatory Memorandum, Social Security and Veterans Entitlement Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Bill 2000
REASONS FOR DECISION
Member I Fletcher
5 November 2019
BACKGROUND
This is an application by Wally Edwin Kuklis (the Applicant) for a review of a decision of the Administrative Appeals Tribunal Social Services and Child Support Division (AAT1) dated 10 October 2018. The AAT1 affirmed a decision dated 15 May 2018 to cancel the Applicant’s Age Pension.
Oral submissions were made by both parties. The Applicant was not represented.
The Respondent was represented by Ms Daphne Jones-Bolla, from Sparke Helmore.MATERIAL BEFORE THE TRIBUNAL
The following material was before the Tribunal:
·
joint Statement of Wladyslaw Kuklis (the Applicant’s son), Zaklina Kuklis-Foj
(the Applicant’s daughter), and Marcin Foj (the Applicant’s son-in-law), dated
6 January 2019 (Exhibit A1);
·joint Statement of the Applicant’s daughter and son-in-law regarding ownership of Belmont Property 1, dated 28 April 2019 (Exhibit A2);
·email from the Applicant’s daughter regarding Commonwealth Bank and Centrelink property valuation, dated 24 May 2019 (Exhibit A3);
·internet Property Valuations for Belmont, received by the Tribunal on 24 May 2019 (Exhibit A4);
·
letter from Centrelink from M Penglis concerning constructive trust, dated
20 May 2019 (Exhibit A5);
·
letter from Centrelink from M Penglis concerning constructive trust, dated
20 May 2019 (Exhibit A6);
·
Applicant’s Statements and Comments undated, received by the Tribunal on
23 October 2019 (Exhibit A7);
·
statement of the Applicant’s daughter and son-in-law, dated 27 September 2019
(Exhibit A8);
·
signed statement concerning four properties, undated, received by Tribunal on
23 October 2019 (Exhibit A9);
·signed statement concerning five properties and family business, undated, received by Tribunal on 23 October 2019 (Exhibit A10);
·
Commonwealth Bank statement, undated, received by Tribunal on
23 October 2019 (Exhibit A11);
·
article from The West Australian 15 September 2018, received by Tribunal on
23 October 2019 (Exhibit A12);
·various papers, received by the Tribunal on 31 May 2019 (Exhibit A13);
·
Respondent’s Statement of Issues Facts and Contentions
(Exhibit R1);
·a copy of the Respondent’s submission, dated 31 May 2019 (Exhibit R2);
·T Documents, (T1 – T39, pp 1 – 466) (Exhibit R3); and
·Supplementary T Documents, (ST1 – ST17, pp 1 – 100) (Exhibit R4).
ISSUES
The issue to be decided in this matter is whether the decision to cancel the Applicant’s Age Pension on 15 May 2018 was the correct and preferable decision. This requires consideration of:
(a)whether the Applicant’s assets were held on trust by the Applicant and/or Dorota Kuklis (the Applicant’s wife) for the benefit of his son and daughter;
(b)if the Applicant and/or his wife were trustees of the Relevant Properties, whether or not the trust is a “designated private trust” within the meaning of Part 3.18 of the Social Security Act 1991 (Cth);
(c)if the trust is a “controlled private trust”, whether or not the Applicant and/or his wife were “attributable stakeholders” of the trust;
(d)if the Applicant and/or his wife were “attributable stakeholders” of the trust, what was their asset attribution percentage in relation to the trust;
(e)whether the Applicant’s assets exceeded the asset threshold for Age Pension as at 15 May 2018 (the date of cancellation);
LEGISLATION AND POLICY
The relevant law is contained in:
(a)the Social Security Act 1991(Cth) (the Act);
(b)the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (Cth) (the Attributable Stakeholders Determination); and
(c)the Social Security (Administration) Act 1999 (Cth) (the Administration Act).
Government policy advice contained in the Guides to Social Policy Law, Social Security Guide (the Guide) is also relevant.[1] The Tribunal has found that although policy is not binding it will ordinarily be followed unless there is a cogent reason not to do so.[2]
[1] The Guides to Social Policy Law, Social Security Guide is published by the Department of Social Services (the Guide).
[2] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634.
THE RESPONDENT’S CONTENTIONS
The Respondent’s contentions are summarised as follows:
(a)This Tribunal only has jurisdiction to consider whether the decision to cancel the Applicant’s Age Pension on 15 May 2018 was the correct and preferable decision.
(b)The Applicant and/or his wife did not hold any of the Relevant Properties on trust.
(c)The value of the Applicant’s assets as at the date of cancellation was $1,233,272.00.
(d)The asset threshold as at the date of cancellation was $1,040,000.00.
(e)The Applicant exceeded the asset threshold and his Age Pension was correctly cancelled on 15 May 2018.
(f)In the alternative, if the Applicant and/or his wife are determined to hold any of the Relevant Properties on trust (which is not conceded) they should be attributed with 100% of the value of the property in accordance with Part 3.18 of the Act.
(g)If the value of the property was attributed 100% to the Applicant and his wife,
the value of the Applicant’s assets as at the date of cancellation was $1,233,272.00.(h)The asset threshold as at the date of cancellation was $1,040,000.00.
(i)The Applicant exceeded the asset threshold and his Age Pension was correctly cancelled on 15 May 2018.
KEY FACTS – GENERAL
The Applicant was in receipt of Age Pension from 20 September 2007 (Exhibit R3, T9/113, T39/465). The letter outlining the Applicant’s entitlement advised the Applicant that he must tell the Department of Human Services (the Department) if his assets changed (Exhibit R3, T9/113).
Since 20 November 2007, the Applicant and his partner have resided at the Applicant’s son’s Belmont residence (Exhibit R3, T9/113, T28/272).
There are five properties relevant to the application (collectively known as the Relevant Properties):
(a)[omitted], Guilderton (the Guilderton Property);
(b)[omitted], Belmont (Belmont Property 1);
(c)[omitted], Belmont (Belmont Property 2);
(d)[omitted], Belmont (Belmont Property 3); and
(e)[omitted], Belmont (Belmont Property 4).
As at April 2008, the Applicant and the Applicant’s wife, son, and son-in-law were employed by ‘M.J Foj & Z.K Kuklis-Foj & D Kuklis & W Kuklis & W Kuklis’ trading as ‘Wally’s Cleaning Service’ (Exhibit R3, T21/245; Exhibit R4, ST6/98).
On 27 October 2010, the Department issued an income and assets form to the Applicant. On 10 November 2010, the Applicant returned the completed form to the Department.
‘No’ was marked in response to the following questions:(a)‘Do you (and/or your partner) own your home or have an interest in any other real estate in and/or outside Australia?’ (Exhibit R3, T11/126); and
(b)‘Are you or have you (and/or) your partner been involved in a private trust?’ (Exhibit R3, T11/128).
On 27 February 2014, the Applicant’s wife was granted Age Pension.
On 27 February 2014, the Applicant signed an Income and Assets form. ‘No’ was marked in response to the following questions:
(a)‘Do you (and/or your partner) own, or are buying, or have a life interest in your home?’ (Exhibit R3, T14/172);
(b)‘Do you (and/or your partner) have an interest in any other real estate in and/or outside Australia?’ (Exhibit R3, T14/173); and
(c)‘Are you or have you (and/or) your partner been involved in a private trust?’ (Exhibit R3, T14/172).
On 28 July 2018, the Department sent the Applicant correspondence reminding him to advise the Department ‘about any changes that may affect [his] payment’
(Exhibit R3, T15/175).On 15 May 2018, the Applicant’s Age Pension was cancelled on the basis that the Applicant’s real property exceeded the asset threshold for Age Pension
(Exhibit R3, T38/415).On 10 July 2018, the Applicant sought review of this decision (Exhibit R3, T38/415).
On 19 July 2018, an Authorised Review Officer affirmed the decision under review
(Exhibit R3, T27).The Applicant sought further review and on 10 October 2018, the AAT1 affirmed the decision under review (Exhibit R3, T2).
On 7 November 2018, the Applicant sought review from this Tribunal (Exhibit R3, T1).
Key facts – mortgage
In or around April 2008, the Commonwealth Bank of Australia (the CBA) approved a
re-mortgage of $399,726.00 (the re-mortgage) and Belmont Property 3, and Belmont Property 4 were used as security (Exhibit R3, T21/248).As at 7 March 2018, the re-mortgage with the CBA over Belmont Property 3 and Belmont Property 4 was $93,855.35 (Exhibit R3, T21/241).
As at 10 May 2018, the re-mortgage with the CBA over Belmont Property 3 and Belmont Property 4 was $128,233.74 (Exhibit R4, ST1/33).
Key facts – property valuations
On or about March 2018, Landgate provided copies of Certificates of Title in relation to the Relevant Properties.
A summary of the Relevant Properties is listed below:
Property
Encumbrances
Purchase date
Registered
DateRegistered Proprietor
the Guilderton Property[3]
-
28.02.2000[4]
20.03.2000
Wladyslaw
KuklisDorota Kuklis
(as joint
tenants)Belmont Property 1
-
21.10.1990[5]
30.11.1990
Dorota Kuklis
Zaklina Kuklis
(59/P6306) and
(60/P6306)[6]
-
-
-
Wladyslaw Kuklis
Wally Kuklis
(as joint
tenants)Belmont Property 2[7]
-
11.01.2014[8]
11.02.2014
Zaklina Kuklis-Foj
Wally Kuklis
Dorota Kuklis
(as joint
tenants)Belmont Property 3[9]
Mortgage to CBA registered on 24.01.1994
10.12.1993[10]
24.01.1994
Wally Kuklis
Dorota Kuklis
Wladyslaw
KuklisZaklina Kuklis
(as joint
tenants)Belmont Property 4[11]
Mortgage to CBA registered on 24.01.1994
16.03.1993[12]
19.04.1993
Wally Kuklis
Dorota Kuklis
Zaklina Kuklis
Wladyslaw Kuklis
(as joint
tenants)[3] Exhibit R3, T16/177.
[4] Exhibit R4, ST2/71.
[5] Exhibit R4, ST5/94.
[6] Exhibit R3, T17/178.
[7] Exhibit R3, T18/179.
[8] Exhibit R4, ST4/83.
[9] Exhibit R3, T19/180.
[10] Exhibit R4, ST3/77.
[11] Exhibit R3, T20/181.
[12] Exhibit R4, ST5/89.
On or about March 2018 a licensed valuer completed a valuation in relation to the Relevant Properties. The valuer’s findings are recorded at Exhibit R4, ST2 to ST4 and summarised at Annexure A.
Contentions
The decision under review
For present purposes s 80 of the Administration Act provides that the Respondent must cancel or suspend a social security payment (defined to include Age Pension) if the Respondent is satisfied that the payment is not or was not payable. Section 80 of the Administration Act states:
(1) If the Secretary is satisfied that a social security payment is being, or has been, paid to a person:
...
(b) to whom the payment is not, or was not, payable (other than because of the operation of Division 3AA);
the Secretary is to determine that the payment is to be cancelled or suspended.
(Emphasis added.)
The Respondent submits that the decision under review is a decision made under
s 80 of the Administration Act to cancel the Applicant’s Age Pension dated 15 May 2018.The Respondent contends, that having regard to the wording of s 80 of the Administration Act, this Tribunal only has jurisdiction to consider the decision to cancel the Applicant’s Age Pension on 15 May 2018. This is because on that date (and only that date) the Respondent determined that the ‘payment is to be cancelled’. Notwithstanding, the comments of the Authorised Review Officer, the Respondent submits that s 80 of the Administration Act does not allow for a decision to cancel to be ‘backdated’ to a date in the past.
The Respondent notes that a decision to raise and recover a debt from the Applicant has been made. The Applicant has not sought review of the decision to raise and recover the debt, and therefore that decision is not presently within this Tribunal’s jurisdiction to consider.
Accordingly, the relevant issue for this Tribunal in reviewing the decision to cancel the Applicant’s Age Pension is whether the Applicant’s combined assets exceeded the asset threshold for Age Pension at the date of cancellation only, resulting in the Age Pension not being payable to him. If the Tribunal is satisfied that the Applicant’s assets exceeded the asset threshold for Age Pension at the date of cancellation then the Tribunal must affirm the decision under review.
The Respondent relies on the following authorities in support of this submission:
(a)Justice Davies in the Federal Court in Freeman v Secretary, Department of Social Security (1988) 19 FCR 342 (Freeman) opined at 345:
The ambit of the jurisdiction of the Administrative Appeals Tribunal in relation to the review of a decision to cancel a pension or benefit is therefore less than would be the jurisdiction of the Tribunal in respect of a refusal to grant a pension or benefit or a decision suspending the payment of a pension or benefit...However, if the Tribunal comes to the view that the decision to cancel was the correct or preferable decision, then no further matter remains for the Tribunal's consideration. Any entitlement of the applicant to a pension or benefit at a subsequent time must be the subject of a further claim
(b) Justice Kirby as he was known then in the High Court in Shi v Migration Agents’ Registration Authority [2008] HCA 31 provided at [44] that, although there is a general approach that there is not a temporal element to the Tribunal’s decision making, the nature of the decision is considered:
Sometimes, it may be inherent in the nature of a particular decision that review of that decision is confined to identified past events. If, for example, under federal legislation, a pension is payable at fortnightly rests, by reference to particular qualifications that may themselves alter over time, a “review” of an administrative “decision” to grant or refuse such a pension, by reference to statutory qualifications, may necessarily be limited to the facts at the particular time of the decision.
The Applicant and his wife’s interests in the Relevant Properties
The Respondent notes that the Applicant and/or his wife are listed as joint tenants on the Relevant Properties. Prima facie they therefore hold a legal interest in the property in the proportion noted on the title.
The Respondent notes the Applicant’s claim that he holds the Relevant Properties on trust for his children and therefore did not have beneficial ownership of the Relevant Properties (Exhibit R3, T28/265). The Respondent also notes that the Applicant’s daughter, in her statement dated 28 April 2019, states that Belmont Property 1 was gifted to her by the Applicant and his wife (Exhibit A3).
The Respondent contends that the evidence does not support the existence of a trust, nor that Belmont Property 1 was gifted to the Applicant’s daughter by the Applicant and his wife.
The effect of the manner of holding the Relevant Properties is important because it is not possible to sever or divide a joint tenancy. All registered proprietors are, at the same time, owners of the whole of the land (this is often referred to as the four unities, being the unity of possession, interest, title and time). In Singh v Kaur Bal [No 2] [2014] WASCA 88, the Court said at [34]:
any joint tenant who wishes to 'transfer' his or her 'interest' to another joint tenant has, strictly speaking, nothing to convey to the other joint tenant, because the other is already seised of the whole and every part of it, and at common law the appropriate way to effect such a result was by way of 'release': Wright v Gibbons [1949] HCA 3; (1949) 78 CLR 313, 323 – 324, 331; Butt [1404].
(Emphasis omitted.)
An important feature of a joint tenancy is the right of survivorship, which means that on the death of a joint tenant, the surviving tenants remain entitled to the whole of the estate.
The right of survivorship cannot be affected by a disposition in a will (that is, an interest of a joint tenant cannot pass in his or her will). As all joint tenants, at the same time, own the whole of the estate, it is incongruent for a joint tenant to hold their interest on trust for another joint tenant.The Respondent contends that Applicant is asking the Tribunal to override the above principles of joint tenancy to find that a trust exists.
Creating a trust
The Respondent notes that there is no formal documentation establishing the trust(s) alleged by the Applicant, and contends that there is no evidence of an express trust, resulting trust or statutory trust.
It appears that the Applicant is inviting the Tribunal to find that there was a constructive trust. The Respondent notes in this regard that the Applicant’s daughter, in her statement dated
28 April 2019, vaguely describes the requirements of a constructive trust. Accordingly, the Respondent has focused the following submissions on whether a constructive trust exists.Constructive trust
A constructive trust is imposed by operation of law (being the application of established equitable principles to a particular set of facts), where it would be unconscientious for the holder of the title to a property to deny the claimant a beneficial interest in that property.[13] The claimant must show not merely that it is unfair, but that it is unconscionable for the registered owner to retain the property.
[13] H A J Ford and W A Lee, Principles of the Law of Trusts (Thomson Reuters, 2017) at 22.020.
The elements required to establish a constructive trust were first set out in Australia by the New South Wales Supreme Court in Ogilvie v Ryan [1976] 2 NSWLR 504:[14]
(a)Common intention – where the parties form a common intention as to the ownership of the beneficial interest,
(b)Detrimental reliance – where the person claiming the beneficial interest must show that they acted to their detriment on the basis of the common intention, and
(c)Equitable fraud – such that it would be unconscionable for the legal title holder to deny the claimant a beneficial interest in the property.
[14] Also see Hohol v Hohol [191] VR 211, 225.
More recently, in Imam Ali Islamic Centre v Imam Ali Islamic Centre Inc [2018] VSC 413, McMillan J confirmed the above requirements for a constructive trust and said at [402] that "[T]he onus of proving such a trust lies on the party asserting the beneficial interest against the legal owner.” (See also Hohol v Hohol [1981] VR 221, 226 (O’Bryan J)).
Issue 1 – Was there a common intention between the legal owner of the property
(the Applicant and/or his wife) and the beneficiaries (the Applicant’s children) regarding the beneficiaries’ beneficial ownership of the Relevant Properties?The Respondent contends that the common intention of the parties is to be inferred from the words or conduct of the parties.[15] The Respondent submits that any evidence at the time of the purchase of the properties should be given more weight than any evidence at a later date.
[15] Above n 1 at 4.12.3.51.
Noting that a practical onus rests on the Applicant’s children to prove their beneficial interest against the Applicant (and the legal features of a joint tenancy), the Respondent submits there is an absence of any contemporaneous evidence of a common intention in or around the date of purchase of each the Relevant Properties.
The Respondent disputes any submissions that the Applicant and his family have entered into a constructive trust and submits that there was no common intention that the Applicant and/or his wife would hold their share of the Relevant Properties for the benefit of their children.
In Re Follone and Secretary, Department of Social Security [1987] 11 ALD 477
(19 March 1987) (Follone) the AAT stated at page 478:(ii) Although it might not be necessary for the applicant's to show that agreements had been made between them and their children with the intention to create legal relations, it was necessary for them to establish that there had been agreements which went beyond the expectations and understandings typically part and parcel of family relationships.
(iii) The administration of the assets test legislation was a complex and difficult task. It was, therefore, appropriate for the respondent to require clear evidence of agreements upon which persons seeking to avoid the effect of the legislation sought to rely. In particular, there must be some external evidence of the existence of such agreements beyond the assertions of the parties who claimed to be privy to them.
and page 481:
It is possible, in the context of family life, to elevate all kinds of understandings and expectations between family members into agreements which might be claimed legitimately to have divested pension recipients of whole or part of their assets. If, through the Tribunal's interpretation of the assets test legislation, it were made possible to allow such expectations and understandings to be so elevated, the respondent would be in an impossible position in its attempts to dispute the legitimacy of disposition of assets, as part of its duty to ensure fair and equal application of the assets test formula to all who might fall within it
The Respondent submits pursuant to Follone that while at the most there may be agreements in place, they are not more than expectations and understandings typically part and parcel of family relationships and distinguishable from a trust.
In Follone at 482, the Tribunal also stated that “there must be some external evidence of their existence, beyond the bald assertions of the parties that claim to be privy to them”. Pursuant to Follone, the Respondent submits there is no satisfactory contemporaneous evidence that there was a common intention in relation to any of the Relevant Properties.
In regards to Belmont Property 2, Belmont Property 3, Belmont Property 4 and the Guilderton Property, the Respondent acknowledges the statements from the Applicant’s son dated: 28 August 1991 (Exhibit R3, T6/110), 24 January 1994 (Exhibit R3, T7/111),
20 February 2000 (Exhibit R3, T8/112) and 13 February 2014 (Exhibit R3, T28/273), and submits that it was the intention of the parties that the Applicant and/or his wife have a beneficial interest in these properties albeit at the time of the Applicant’s son’s death Clearly, if any of the Applicant’s children pre-decease him it is the joint intention that the interest will pass to the survivors which include the Applicant and/or his wife.
The Respondent submits that this clearly evidences that the Applicant and/or his wife have a beneficial interest in these properties and does not reveal any common intention that the Applicant and his wife held their interest for the benefit of their children.In regards to Belmont Property 1, the Respondent acknowledges the Applicant’s contention that this was a wedding gift given to his daughter (Exhibit R3, T29/274).
The Respondent also notes that the Applicant’s daughter, in a statement dated
28 April 2019, stated that “[O]ur common intentions were that the property of [Belmont Property 1]…will be my husband and I’s” (Exhibit A2). The Respondent submits that the gifting of a property unconditionally does not create a trust. Further, the Respondent submits that there is no evidence that Belmont Property 1 was a conditional gift.The Respondent submits this claim, which arose after the Applicant’s Age Pension was cancelled, is not sufficient to establish that it was the common intention for the Applicant and/or his wife to hold their interest for the benefit of their children, especially in circumstances where the parties held the property as joint tenants and continue to do so.
The Respondent submits that in these circumstances the Tribunal cannot be satisfied that there was a common intention for the Applicant and/or his wife to hold their interest for the benefit of their children.
Gifts may generally be classified into two categories: conditional gifts and unconditional gifts.
(a)Conditional Gifts are where: the giftor has an expectation, suggestion or wish as to how the gift should be used, this may result in a constructive trust.
(b)Unconditional Gifts are where:
(i)there is a transfer of the entire interest in property from the property owner (‘the donor’) to the recipient (‘the donee’);
(ii)the transfer of property is made voluntarily;
(iii)the transfer arises by way of a benefaction; and
(iv)no material benefit or advantage is received by the donee or a third party by way of return. It is likely that an unconditional gift has been received by the donee.
In the Applicant’s case, insofar as his daughter contends that Belmont Property 1 was intended to be a gift, the Respondent submits that:
(a)there is no evidence of a conditional gift; and
(b)an unconditional gift, of itself, will not result in a trust.
The Respondent notes that the AAT1 considered that the property sharing arrangement came into being initially through the profits of the family cleaning business Wally’s Cleaning Service (Exhibit R3, T2/12 at [18]). The Respondent submits there is no corroborative evidence of the funds used to purchase the Relevant Properties and the Relevant Properties are structured for the benefit of the family group including the Applicant.
Issue 2 – Detrimental reliance – Did the beneficiaries’ act to their detriment on the basis of the common intention as to the beneficial ownership of the property?
For the Tribunal to be satisfied of the existence of a constructive trust, an examination is required as to whether the beneficiaries acted to their detriment in reliance on the common intention as to the beneficial ownership of the property.
To establish detrimental reliance, the acts of reliance must be in respect to the actual common intention of the parties. As submitted above there is a lack of corroborative evidence in regards to the common intention of the parties in respect of the beneficial ownership and therefore the act of payment of the utility invoices and council rates does not satisfy the requisite detrimental reliance.
In Slamkova and Secretary, Department of Social Security [2017] AATA 137 (Slamkova) the Tribunal refused to make a finding that a mother held a particular property on trust for her son, even though it was said this was the arrangement between them (and the son’s father), at the time the property was purchased. The Tribunal in Slamkova at paragraph [64] was not satisfied of the existence of a trust given “the only evidence of loan repayments is from an account in Ms Slamkova’s name showing repayments from January 2000 to July 2004” and at paragraph [66] states:
It is not enough to say it is “logical” to infer that Ms Slamkova could not have put up the deposit and repaid the loan on the property on her limited income.
Senior Member J Toohey in Slamkova observed at paragraph [61] that:
there must be something of real substance to support a claim that a property of which a person is the registered owner of 100 percent, is in fact held on trust for another.
(Emphasis added.)
Belmont Property 1
In regards to Belmont Property 1, the Respondent notes the following.
The Applicant’s daughter, in her statement dated 5 August 2018, states (Exhibit R3, T29/274):
Since 2004 we [the Applicant’s daughter and son-in-law] have built a new home on that property taking on a mortgage with the help of my parents and my brother using his house [sic] [Belmont Property 3] & [Belmont Property 4] for security at the bank...Since 1998 we [the Applicant’s daughter] have lived at that address...
paid all the bills & rates.In a further statement, dated 28 April 2019 by the Applicant’s daughter and son-in-law, they stated (Exhibit A2):
Our common intentions were that the property will be my husband and I’s.
In reliance on my parents gift we then where [sic] able to demolish the old house, sign building contract with Commodore Homes in 2003 and take out a mortgage for the new house. Since then we have solely made all the repayments, paid all shire rates, bills and other expenses.
The Applicant’s daughter has provided bank statements, invoices for utilities and council rates for Belmont Property 1 (Exhibit R3, T29).
The Tribunal authorities in Zhang and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 937 and Do and Secretary, Department of Education, Employment & Workplace Relations [2008] AATA 1175, support the proposition that where there are unsatisfactory aspects in relation to the evidence, then the proper course is to rely on contemporaneous documentary records rather than on oral testimony or documentary material provided well after the fact.
The Respondent submits that the Tribunal cannot be satisfied that the Applicant’s daughter and son-in-law met the requisite detriment especially in circumstances where the security was the separate properties at Belmont Property 3 and Belmont Property 4, which were held by the Applicant’s daughter as a joint tenant.
Further, as per Senior Member Toohey in Slamkova, proof of payment for council rates, land tax, and water bills, is not something of real substance to support a claim that a property is held on trust for another especially when the parties are family members and the properties are legally held as joint tenants as opposed to tenants in common.
The Respondent submits there is a lack of corroborative evidence and the Tribunal cannot be satisfied that the Applicant’s daughter and son-in-law met the requisite detriment to the extent that it would be equitable fraud their behalf for the Applicant to assert that they did not have the beneficial interest in the property.
Belmont Property 4, Belmont Property 3, the Guilderton Property and Belmont Property 2
In regards to these properties, the Respondent acknowledges that the Applicant’s son has provided a statement and copies of bank account statements and invoices for utilities and council rates (Exhibit A13).
As per Senior Member Toohey in Slamkova, proof of payment for council rates, land tax, and water bills, is not something of real substance to support a claim that a property is held on trust for another especially when the parties are family members and the properties are legally held as joint tenants as opposed to tenants in common.
The Respondent submits there is a lack of corroborative evidence and the Tribunal cannot be satisfied that the Applicant’s son met the requisite detriment to the extent that it would be equitable fraud on him for the Applicant to assert that he did not have the beneficial interest in the properties.
Issue 3 – Equitable fraud
In the absence of common intention and reliance on that common intention (which the Respondent asserts did not exist), it is not unconscionable for the Applicant to assert his beneficial interest.
Summary – Constructive trust
The Respondent submits that there is a lack of corroborative evidence for the Tribunal to be satisfied that a constructive trust (or any trust arrangement) exists, and that the value of their combined legal interests in the Relevant Properties is to be included in the valuation of their combined assets for the purposes of calculating the Applicant’s rate of age pension.
Part 3.18 – if the Applicant and/or his wife were trustees of the Relevant Properties were they “attributable stakeholders” and if so, what is their asset attribution percentage in relation to the trust?
If the Tribunal finds that the Relevant Properties are held on trust by the Applicant
(which is not conceded), then the Respondent submits that the Applicant should nevertheless be attributed with 100% of its equitable interest by the operation of the assets provisions in Part 3.18 of the Act.Part 3.18 of the Social Security Act sets up a system for the attribution of assets of private companies and private trusts to individuals.[16] The Explanatory Memorandum for the Bill which amended the Social Security Act and introduced Part 3.18 with effect from
1 January 2002, explained the approach of Part 3.18 as follows:[17]Social Security and Veterans’ Entitlements Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Bill 2000
The Bill gives effect to a measure in the Government's 2000-2001 Budget to revise the means test treatment of private companies and private trusts. This measure aims to ensure that customers who hold their assets in private companies or private trusts receive comparable treatment under the means test to those customers who hold their assets directly. The assets and income of the structure will be attributed to the person or persons who control the company or trust, or to the person or persons who were the source of the capital or corpus of the company or trust.
(Original emphasis.)
[16][17] Explanatory Memorandum, Social Security and Veterans Entitlement Legislation Amendment (Private Trusts and Private Companies – Integrity of Means Testing) Bill 2000.
In summary, assets or income will be attributed to an individual if the:
(a)trust in question is a “designated private trust” (s 1207P of the Act);
(b)trust in question is a “controlled private trust” (s 1207V of the Act); and
(c)individual in question is an “attributable stakeholder” of the trust
(s 1207X of the Act).Attribution of assets
Section 1208E(1) in Part 3.18 of the Act provides for the attribution of assets:
1208E Attribution of assets
(1) For the purposes of this Act, if:
(a) an individual is an attributable stakeholder of a company or trust at a particular time on or after 1 January 2002; and
(b) at that time, the company or trust owns a particular asset (whether alone or jointly or in common with another entity or entities); and
(c) if, at that time, that asset had been owned by the individual instead of by the company or trust, the value of the asset would not be required to be disregarded by any express provision of this Act; and (d) at that time, the asset is not an excluded asset (see subsection (2));
there is to be included in the value of the individual’s assets an amount equal to the individual’s asset attribution percentage of the value of the asset referred to in paragraph (b).
Excluded assets
(2) The Secretary may, by writing, determine that, for the purposes of the application of subsection (1) to a specified individual and a particular company or trust, a specified asset is an excluded asset.
(3) A determination under subsection (2) has effect accordingly.
(4) In making a determination under subsection (2), the Secretary must comply with any relevant decision-making principles.
Designated private trust
A trust is a “designated private trust” unless one of the exclusions in subsection 1207P(1) applies.
1207P Designated private trusts
(1) For the purposes of this Part, a trust is a designated private trust unless:
(a) all of the following conditions are satisfied:
(i) the trust is a fixed trust;
(ii) the units in the trust are held by 50 or more persons;
(iii) the trust was not created, continued in existence or operated under a scheme that was entered into or carried out for the sole or dominant purpose of enabling any individual or individuals to avoid the application of this Part and/or Division 11A of Part IIIB of the Veterans ’ Entitlements Act; or
(b) the trust is a complying superannuation fund (see subsection (3)); or
(c) the trust is an excluded trust (see subsection (4)).
The Respondent first contends that the trust is not a “trust” within the meaning of the first line of s 1207P(1) of the Act. However, if the Tribunal finds that a trust arrangement exists then it will also be a designated private trust, and not an excluded trust.
Controlled private trust
A trust is a “controlled private trust” if the relevant “individual passes the control test”:
s 1207V(1)(a) of the Act.The Applicant passes the control test, because, if a trust exists he, as an individual, is the trustee of the trust: s 1207V(2)(a) of the Act. The control test in s 1207V(2) of the Act is broad in its application.[18] The control test in ss 1207V(2)(b)-(f) and (h) are also satisfied. Section 1207V of the Act states:
[18] Pavlakis v Secretary, Department of Families, Community Services and Indigenous Affairs [2006] AATA 233 at 9, and Secretary, Department of Family and Community Services v Linton [2006] AATA 98.
1207V Controlled private trusts
(1) For the purposes of this Part, a trust is a controlled private trust in relation to an individual if the trust is a designated private trust and:
(b)the individual passes the control test set out in subsection (2); or
(c)the individual passes the source test set out in subsection (3).
Control test
(2) For the purposes of this section, the individual passes the control test in relation to a trust if:
(a)the individual, or an associate of the individual (other than an associate covered by paragraph 1207C(1)(j)), is the trustee, or any of the trustees, of the trust; or
(b)a group in relation to the individual was able to remove or appoint the trustee, or any of the trustees, of the trust; or
(c)a group in relation to the individual was able to vary the trust deed or to veto the decisions of the trustee; or
(ca) it could reasonably be expected that the trustee of the trust would make an application of the corpus or income of the trust to the individual if the individual could not meet his or her reasonable costs of living (within the meaning of subsection 19C(5)); or
(d)the aggregate of:
(i) the beneficial interests in the corpus or income of the trust held by the individual (whether directly or indirectly); and
(ii) the beneficial interests in the corpus or income of the trust held by associates of the individual (whether directly or indirectly);
is 50% or more; or
(da) either or both of the following apply:
(i) the individual is eligible to receive an application of the corpus or income of the trust;
(ii) one or more of the individual’s associates are eligible to receive an application of the corpus or income of the trust;
and the aggregate number of entities covered by subparagraphs (i) and (ii) is 50% or more of the total number of entities eligible to receive an application of the corpus or income of the trust; or
(e)a group in relation to the individual had the power (by means of the exercise by the group of any power of appointment or revocation or otherwise) to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust; or
(f)a group in relation to the individual was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or
(g)a group in relation to the individual was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (e) or (f); or
(h)a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the individual.
...
Group
(4) A reference in this section to a group in relation to an individual is a reference to:
(a)the individual acting alone; or
(b)an associate of the individual acting alone; or
(c)the individual and one or more associates of the individual acting together; or
(d)2 or more associates of the individual acting together.
(Original emphasis.)
An “associate” mentioned throughout section 1207V(2) is defined in section 1207(1) of the Act, which relevantly provides:
1207C Associates
(1) For the purposes of this Part, in determining:
...
(b) whether a company is a controlled private company in relation to an individual; or
the following are associates of an individual:
(e) a relative of the individual;
...
In turn, a “relative” mentioned in section 1207C(1)(e) is defined in section 1027B(1) of the Act, which relevantly provides:
1207B Relatives
(1) For the purposes of this Part, a relative, in relation to a person (the first person), means any of the following:
(a)the spouse of the first person;
(b)a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, first cousin, second cousin or lineal descendant of the first person;
(c)the spouse of a person covered by paragraph (b);
(d)a parent, grandparent, brother, sister, uncle, aunt, nephew, niece, first cousin, second cousin or lineal descendant of the spouse of the first person;
(e)the spouse of a person covered by paragraph (d);
(f)a child of a person covered by any of the preceding paragraphs.
The claimed beneficiaries of the trust as asserted are the Applicant’s daughter and son who are “associates” under s 1207C(1) of the Act.
In summary, the Respondent submits if a trust exists (which is not conceded) then the Applicant and/or his wife are trustees of the Relevant Properties and the Applicant’s daughter and son are “associates” of the Applicant. The Respondent contends that the Applicant passed the “control test” in ss 1207V(2)(a) of the Act. Consequently:
(a)the Relevant Properties will constitute assets of a controlled private trust of the Applicant (sub-s 1207V(1) of the Act); therefore
(b)the Applicant will also be an “attributable stakeholder” of the trust; and therefore
(c)the assets namely, the Relevant Properties are attributable to the Applicant
(s 1208E of the Act).Attributable stakeholders
The Act does not set out an express criteria for when a person who is an “attributable stakeholder” should be determined to be otherwise, or when a person’s “asset attribution percentage” should be lower than 100%. However, the Tribunal (standing in the shoes of the Respondent) “must comply with any relevant decision-making principles” when making such determinations: ss 1207X(5) of the Act. Pursuant to s 1209E of the Act,
the Principles have been made as a legislative instrument.1207X Attributable stakeholder, asset attribution percentage and income attribution percentage
...
Trust
(2) For the purposes of this Part, if:
(a)a trust is a controlled private trust in relation to an individual; and
(b)the trust is not a concessional primary production trust in relation to the individual (see section 1208U);
then:
(c) the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and
(d) if the individual is an attributable stakeholder of the trust—the individual’s asset attribution percentage in relation to the trust is:
(i) 100%; or
(ii) if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage; and
(e) if the individual is an attributable stakeholder of the trust—the individual’s income attribution percentage in relation to the trust is:
(i) 100%; or
(ii) if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage.
(Original emphasis.)
Issue 1 – is there any basis to determine that the Applicant should not be an “attributable stakeholder” of the trust under sub-s 1207X(2)(c) of the Act?
The presumption is that the Applicant is an attributable stakeholder unless the Tribunal determines otherwise in accordance with the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 (Cth) (the Attributable Stakeholders Determination).
The Attributable Stakeholders Determination sets out decision-making principles when making a determination that an individual is not an attributable stakeholder of a company, this firstly requires consideration of Part 2 of the Principles which is headed “Determination that individual is not attributable stakeholder”.
Attribution Determination – clause 6
Clause 6 of the Attributable Stakeholders Determination provides that the decision-maker must consider the relationship between the Applicant and the Trust, and whether any of the circumstances referred to in the Attributable Stakeholders Determination,
cl 6(3)“…provides a sufficient basis on which to determine that the individual is not an attributable stakeholder…”
Attribution Determination – clause 7
Clause 7 of the Attributable Stakeholders Determination relevantly states:
(1)The Secretary must consider whether there are relevant circumstances that make it inappropriate for the individual to be an attributable stakeholder of the company or trust.
(2)For subsection (1), relevant circumstances include the extent to which the relationship between the individual and the company or trust is affected by any of the following circumstances:
(a)circumstances arising from the legal structure of the company or trust;
(b)circumstances arising from the administrative arrangements of the company or trust;
(c)whether, having regard to the relationship between the individual and the company or trust, the individual can reasonably be expected to exercise effective control in relation to the company or trust.
The Respondent submits that there are no relevant circumstances affecting the Applicant’s relationship with the trust which make it inappropriate for him to be an “attributable stakeholder”. To the contrary, the fact that the Applicant holds a legal interest as a joint tenant makes it wholly appropriate for the Applicant to be an attributable stakeholder.
The Respondent submits that at the date of cancellation the Applicant held legal title to
Belmont Property 1, Belmont Property 3 and Belmont Property 4. The Applicant was and is still able to transfer legal title to another person, use these properties as security to borrow funds, and these properties would have formed part of the Applicant’s asset pool in family law and bankruptcy proceedings.
In regards to the Guilderton Property and Belmont Property 2 the Respondent submits that the Applicant can reasonably be expected to exercise effective control in relation to the trust on the basis that the Applicant’s wife and his children each holds a share of 33%.
To be noted, s 7(2)(c) of the Attributable Stakeholders Determination refers to “effective control”. It is not necessary for the Applicant personally to be exercising control of the trust for him to have effective control for the purpose of s 7(2)(c).
The above point in [93] is illustrated by Re Lindeman and Repatriation Commission [2004] AATA 225. In that case, the Tribunal held that the applicant had “effective control” of the designated private company despite suffering an intellectual impairment requiring her son to manage her affairs. The son managed the applicant's affairs on her behalf and for her benefit. The “administrative arrangements” in the current scenario are such that the Trust is effectively administered for the benefit of the family group which includes the Applicant. The Applicant’s wife and his two children each holds a share of 33% in relation to the Guilderton Property and Belmont Property 2 and are clearly able to influence control of the trust for the Applicant’s benefit.
Similarly, the “administrative arrangements” for the remaining properties are such that the trust is administered for the benefit of the family including the Applicant.
The Respondent submits that this principle weighs in favour of the submission that the Applicant is an attributable stakeholder.
Attribution Determination – clause 8
Clause 8 of the Attributable Stakeholders Determination relevantly states:
If the individual has made a contribution to the company or trust, the Secretary must consider the circumstances in which the contribution was made and, in particular:
(a)the value of the contribution; and
(b)the proportion that the value of the contribution has to the total assets of the company or trust at the time of the contribution; and
(c)the effect of the contribution on the financial position of the company or trust; and
(d)if the individual received consideration for the contribution, the amount of consideration.
The Respondent submits that there is a lack of corroborative evidence regarding the contributions made by the Applicant and his family members.
However, the decision makers to date have found that the property sharing arrangement came into being initially through the profits of the family cleaning business of which the Applicant and his family members were employees. The Respondent also notes that the Belmont Property 3 and Belmont Property 4 have been used as security.
The Respondent submits that the limited corroborative evidence is indicative that the Applicant and his family members have all contributed to the asset pool and the Respondent submits that this principle weighs in favour of the submission that the Applicant is an attributable stakeholder.
Attribution Determination – clause 9
Clause 9 of the Attributable Stakeholders Determination relevantly states:
(1) The Secretary must consider whether the individual has received a benefit from a distribution made by the company or trust.
(2)If an individual has received a benefit, the Secretary must also consider:
(a)the value of the benefit; and
(b)if the individual has received a benefit on more than 1 occasion, the frequency with which the individual has received benefits.
(3)For this section, a distribution includes distributions:
(a)in the case of a distribution by a company — of the capital or income, or both, of the company; and
(b)in the case of a distribution by a trust — of the corpus or income,
or both, of the trust.The Respondent submits that the Applicant has benefited from the family arrangement. Further, the Respondent submits that the Tribunal can accept that the beneficiaries under the trust, the Applicant’s children, would conduct themselves in the Applicant’s best interest on the basis that there is no evidence of disharmony in the family.
The Respondent submits that this principle weighs in favour of the submission that the Applicant is an attributable stakeholder.
Attribution Determination – clause 10
Clause 10 of the Attributable Stakeholders Determination relevantly states:
(1)The Secretary must consider whether it is reasonably foreseeable that the individual may receive a benefit from a future distribution by the company or trust.
(2)If subsection (1) applies, the Secretary must also consider the likely value of the benefit.
(3)For this section, the Secretary must have regard to:
(a)the constituent documents of the company; or
(b)documents, if any, establishing the terms of the trust.
(4)For this section, a distribution includes distributions:
(a)in the case of a distribution by a company — of the capital or income, or both, of the company; and
(b)in the case of a distribution by a trust — of the corpus or income, or both, of the trust.
(Original emphasis.)
The Respondent submits that the Relevant Properties are held as joint tenants and the intention of the parties is for the properties to remain within the family group. For example, the Respondent notes that it is intended that the Applicant would benefit should the Applicant’s son pre-decease him (Exhibit R3 T6/110). Regardless of the intentions of the applicant’s family, the laws of survivorship would provide for the applicant to remain the owner of the property should the other joint tenants predecease him. The Respondent submits that the pooling of assets has been done for the benefit of the family group including the Applicant and therefore it is reasonably foreseeable that the Applicant may receive a benefit from future distributions.
The Respondent submits that this principle weighs in favour of the submission that the Applicant is an attributable stakeholder.
Attribution Determination- clause 11
Clause 11 of the Attributable Stakeholders Determination relevantly states:
(1)The Secretary must consider whether the individual receives or derives any kind of benefit (other than a benefit mentioned in section 9 or 10) from the assets or income, or both, of the company or trust.
(2) For this section, benefit:
(a) is not limited to a benefit to which the individual has a legal or equitable entitlement; and
(b) includes benefits received or derived in the form of property or services.
The Respondent submits that the Tribunal must also consider whether the Applicant receives or derives any kind of benefit (other than a benefit mentioned at clauses 9 or 10) and submits that the Applicant has received the ongoing benefit of living in the house owned by his son. The Respondent submits that “benefit” includes benefits received or derived in the form of property or services and the provision of a principal place of residence for the Applicant is a substantive benefit.
The Respondent submits that this principle weighs in favour of the submission that the Applicant is an attributable stakeholder.
Attribution Determination – clause 12
Clause 12 of the Attributable Stakeholders Determination relevantly states:
(1) The Secretary must consider whether the individual is:
(a) under the Act — an attributable stakeholder of any other company or trust; or
(b) under the Veterans’ Entitlements Act 1986 — an attributable stakeholder of the company or trust, or of any other company or trust.
(2) If subsection (1) applies, the Secretary must also consider:
(a) the asset attribution percentage attributed to the individual, if any; and
(b) the income attribution percentage attributed to the individual, if any.
The Respondent accepts that the Applicant is not an attributable stakeholder of any other company or trust and the Respondent submits that this is a neutral factor in considering whether the Applicant is an attributable stakeholder.
In these circumstances, the Respondent submits that consideration of the totality of the Applicant’s circumstances do not justify a determination that the Applicant is not an “attributable stakeholder” of the trust.
Issue 2 – Is there any basis to determine that the Applicant's “asset attribution percentage” should be lower than 100% under sub-s 1207X(2)(d) of the Act?
Section 1207X(2)(d) of the Act has the effect that the Applicant's “asset attribution percentage” is 100% unless the Tribunal otherwise determines. Whilst the provision does not create an onus of proof, the practical operation of the provision is that the Tribunal must consider whether it should determine that the Applicant's “asset attribution percentage” should be lower than 100%. If the Tribunal is left in a state of doubt, then the Applicant's “attribution percentage” remains 100%.[19]
[19] McDonald v Director-General of Social Security (1984) 1 FCR 354.
In that event, the Applicant’s asset attribution percentage is 100% unless the Tribunal determines a lower percentage in accordance with the decision making principles in Part 3 of the Attributable Stakeholders Determination.
Part 3 of the Attributable Stakeholders Determination is headed “Determination of asset attribution percentage”. Clause 15 requires the Tribunal to consider whether the nominated circumstances provide “a sufficient basis on which to determine a percentage lower than 100%” as the “asset attribution percentage”.
Part 3 of the Attributable Stakeholders Determination mirrors Part 2. The Respondent repeats the submissions above with respect to Part 2 of the Attributable Stakeholders Determination (see above [88] – [110]), for the purposes of Part 3.
In view of the evidence and the relevant decision-making principles in Part 3 of the Attributable Stakeholders Determination, the Tribunal can be satisfied that the Applicant and his wife’s asset attribution percentage in relation to the trust should remain as 100%.
The Respondent summarises their position as follows:
(a)the Applicant and his wife did not hold any of the Relevant Properties on trust for the benefit of their children;
(b)if the Tribunal finds the Applicant and/or his wife were trustees of the Relevant Properties then the Respondent submits that the Applicant and/or his wife were “attributable stakeholders” of the trust, with an asset attribution percentage of 100% in relation to the trust; and
(c)lastly, the Respondent submits that the Applicant’s assets exceeded the asset threshold for Age Pension as at the date of cancellation and relies on the following submissions.
Did the Applicant’s assets exceed the asset threshold for Age Pension as at the date of cancellation – 15 May 2018?
The Age Pension is means tested. In Secretary, Department of Social Security and Garvey (1989) 22 FCR 132 at 136, the Full Federal Court explained the fundamental policy underlying this principle, “…namely to maintain a basic level of income for those who were unable to receive sufficient income to provide for themselves.”
Section 43 of the Act provides the basic qualifications for Age Pension.
Section 44 of the Act provides that Age Pension is not payable to a person if the person’s Age Pension rate would be nil.
Section 55 of the Act provides that a person’s rate of Age Pension is worked out using the Pension Rate Calculator A at the end of s 1064 of the Act.
Pension Rate Calculator A in s 1064 of the Act requires all income and assets of a person to be included to determine the rate of age pension, subject to section 1118,[20] of the Act and section 1121,[21] of the Act.
[20] For the assets that are to be disregarded in valuing a person’s assets, see s 1118 of the Act.
[21] For the valuation of an asset that is subject to a charge or encumbrance, see s 1121 of the Act.
Section 1121(1) of the Act relevantly states:
(1)If there is a charge or encumbrance over a particular asset of the person, the value of the asset, for the purposes of calculating the value of the person’s assets for the purposes of this Act (other than Division 1B of Part 3.10), is to be reduced by the value of that charge or encumbrance.
Section 11A of the Act provides that the residence where a person spends the greatest amount of time is their principal home and is not considered an assessable asset under the assets test. The Respondent submits that none of the Relevant Properties are the Applicant’s principal home as the Applicant resided at the Applicant’s son’s Belmont residence and accordingly all of the Relevant Properties are an assessable asset.
The Guide at 4.6.5.30 states:
The value of a person's interest (1.1.I.185) in any property or real estate is assessable. Residential property is assessable even when the person, or their partner (1.1.P.85), is NOT living in it.
…
Sales between family members
Sales between family members need to be examined in more detail to determine the assessment of the vendor's interest in the property. IF the contract is NOT legally binding, the property or real estate is still the person's asset.
Explanation: To no longer be a property of the person, ownership must be LEGALLY transferred to the purchaser. Family transactions may lack the usual checks and balances afforded to commercial arrangements and it may be that the contract is not legally binding, has unmet preconditions or contains loopholes or ambiguities.
(Emphasis added.)
The asset threshold limit as at the date of cancellation is set out in A guide to Australian Government payments dated 20 March 2018 to 30 June 2018 (Exhibit R3, T5). As at the date of the cancellation:
(a)
to be eligible for a part pension, the assets for a ‘non-homeowner’,
‘couple combined’ had to be less than $1,040,000.00; and
(b)to be eligible for a part pension, the assets for a ‘homeowner’, ‘couple combined’ had to be less than $837,000.00.
The Respondent submits that there is a lack of corroborative evidence in regards to the Applicant’s (or his wife’s) right or interest in his place of residence (the Applicant’s son’s Belmont residence). The Respondent acknowledges the Applicant’s comments to the Authorised Review Officer where he states (Exhibit R3, T27/261): “…they [the Applicant and his wife] currently live at [street address redacted], Belmont, rent free. This property is owned by their son”.
Section 4 of the Act defines a homeowner as:
a person who is a member of a couple is a homeowner if:
(i) the person, or the person’s partner, has a right or interest in one residence that is:
(a) the person’s principal home; or
(b) the partner’s principal home; or
(c) the principal home of both of them; and
(ii) the person’s right or interest, or the partner’s right or interest, in the home gives the person, or the person’s partner, reasonable security of tenure in the home; and ...
The Respondent acknowledges that it is not disputed that the Applicant is a member of a couple with his wife.
The Respondent also notes that the decision makers to date have found that the Applicant is a non-homeowner and therefore subjected to more beneficial non-homeowner asset threshold than a home-owner.
The Respondent submits that on the current evidence, the Applicant’s assets are above the more beneficial asset threshold of $1,040,000.00 and therefore the Respondent does not make any submissions in relation to the Applicant’s homeowner or non-homeowner status. However, if the Tribunal is minded to find that the Applicant’s assets are under the asset threshold of $1,040,000.00 then the Respondent reserves the right to make further submissions in relation to the issue of whether the Applicant is a homeowner or not.
The Respondent acknowledges the property details submitted by email dated 24 May 2019 by the Applicant’s daughter (Exhibit A3). The Respondent submits that no weight should be placed on these figures on the basis that they are not referable to the date of cancellation. If the value of the property has changed following the date of cancellation, then in line with Freeman (see above at [33]), any entitlement of the Applicant to a pension or benefit at a subsequent time must be the subject of a further claim.
The Respondent submits that the best evidence available to the Tribunal of the value of the Relevant Properties are the valuations undertaken by a licensed valuer in March 2018 (Exhibit R4, ST2-ST4) and should be given significant weight on the basis that the figures are referable to the date of cancellation.
The Respondent submits that the value of the Relevant Properties is outlined at Annexure A and the Respondent relies on the findings of the licensed valuer in support of this.
As discussed above at [21], Belmont Property 3 and Belmont Property 4 were used as security for the re-mortgage. Accordingly, the Respondent submits that the total mortgage balance of $93,855.00 as at March 2018 (Exhibit R3 T21/241) should be apportioned equally between the two properties and represents an encumbrance that should be deducted from the total value of the two properties as at the date of cancellation. The Respondent has adopted this approach in the calculation of the figures in Annexure A and at paragraph [138] below.
The Respondent acknowledges that as at 10 May 2018 (5 days before the date of cancellation), the re-mortgage with CBA Belmont Property 3 and Belmont Property 4 was $128,233.74 as discussed above at [23]. (Exhibit R4, ST1/33). However, the Respondent submits that the mortgage balance as at March 2018 is the more relevant figure because the valuations were undertaken in March 2018, and not May 2018.
The Respondent submits that the assets of the couple (being the Applicant and his wife) must be considered together.[22] The Respondent makes the following submissions in relation to the ownership of the Relevant Properties as at the date of cancellation:
(a)in regards to the Guilderton Property, the Respondent submits that the Applicant’s wife had an apportioned interest of 50% resulting in an asset attribution of $250,000.00 to the Applicant;
(b)in regards to Belmont Property 1, the Respondent submits that the Applicant and his wife had a joint apportioned interest of 50% resulting in an asset attribution of $325,000.00 to the Applicant;
(c)in regards to Belmont Property 2, the Respondent submits that the Applicant’s wife had an apportioned interest of 33% resulting in an asset attribution of $145,200.00 to the Applicant;
(d)in regards to Belmont Property 3, the Respondent submits that the Applicant and his wife had a joint apportioned interest of 50% resulting in an asset attribution of $271,536.00 to the Applicant; and
(e)in regards to Belmont Property 4 the Respondent submits that the Applicant and his wife had a joint apportioned interest of 50% resulting in an asset attribution of $241,536.00 to the Applicant.
[22] ‘A guide to the Australian Government payments’ dated 20 March-30 June 2018 at Exhibit R3, T5/108 references the asset threshold by reference to the combined assets of a couple.
The Respondent relies on the figures in Annexure A in support of the above submission and submits that the Applicant’s real assets as at the date of cancellation was $1,233,272.00. The asset threshold as at the date of cancellation was $1,040,000.00 and accordingly the Applicant has exceeded the asset threshold and his rate of Age Pension is nil.
Accordingly, the Respondent submits that the decision to cancel the Applicant’s Age Pension was the correct and preferable decision. The Respondent submits that if the Tribunal agrees, then no further decision remains and the Tribunal should affirm the decision under review.
APPLICANT’S COMMENTS
The Applicant provided an undated statement and comment to the Tribunal (Exhibit A7). He reiterated that he and his wife had an agreement with their children that their business would be run by the children, and that the children would pay all of the expenses related to the Relevant Properties.
In answer to a question from the Respondent which related to a Centrelink Income and Assets Update signed by the Applicant on 10 November 2010 (Exhibit R3, T11/128),
the Applicant appeared to misunderstand what question 39 on the form asked.
He indicated that a ‘private trust’ meant trust between family members and not a legal entity.
Likewise, in a subsequent answer to a question from the Respondent with regard to question 28 on the form (Exhibit R3, T11/126), he stated that he had misread the question as only meaning real estate outside Australia, and not also within Australia.
In answering these questions as well as other comments, it appeared that the Applicant was acknowledging that he and his family had never had any legal trusts and that he and his wife owned property in Australia.
The Applicant also stated that the property valuations were not correct. It was pointed out that these had been undertaken by a licenced valuer, prior to the decision to cancel the Applicant’s Age Pension on 15 May 2018. Any valuations subsequent to the date of cancellation of the Age Pension cannot be used.
The Applicant provided at the hearing two copies of letters from Centrelink, both dated 20 May 2019 (Exhibits A5 and A6) which have the same content and signed by the same officer but formatted slightly differently. The letters advised that the assessment of documentation provided by the Applicant and his family for the purpose of a constructive trust for each of the properties that they own, does not support that a constructive trusts exists with any of the Relevant Properties. The letter stated that there was a failure to prove the source of the funds to purchase the property, and the past, present, and future payments to the mortgage and ongoing maintenance of the properties sufficiently. The same document is also at Exhibit R4, ST7.
When questioned on the Centrelink correspondence referred to Exhibits A5 and A6,
the Applicant accepted the assessment.
CONSIDERATION
Based on the Applicant’s statements and supporting documentation (Exhibits A1 to A15) and the Statement of Facts, Issues and Contentions (Exhibit R1) as well as the Respondent’s Submission (Exhibit R2), there is no evidence that there is any formal documentation associated with the creation of an express trust, resulting trust or statutory trust. Further, it has been assessed that a constructive trust does not exist for any of the five properties.
The Relevant Properties all have on the Certificate of Title the Applicant and/or his wife listed as joint tenants. It is not possible to sever or divide a joint tenancy – all registered proprietors are, at the same time, owners of the whole land.
The right of survivorship is an important feature, in that on the death of a joint tenant, the surviving tenants remain entitled to the whole of the estate.
Belmont Property 1 was given by the Applicant and his wife to their daughter as a wedding present around 1990, according to the Applicant’s daughter and son-in-law,
in statements dated 5 August 2018 (Exhibit R3, T29/274), 28 April 2019 (Exhibit A2) and
27 September 2019 (Exhibit A8). Apart from this there is no other evidence to confirm the gifting of the property.
The Certificate of Title shows the Applicant and his wife as joint tenants with their daughter.
The fact is, the Relevant Properties are not in trust and the Applicant and/or his wife are joint tenants in the five properties. The value of the assets must be taken into consideration when determining eligibility for an Age Pension. At the time of cancellation the value of assets was $1,233,277.00.
The asset threshold at the date of cancellation was $1,040,000 for a non-home owner.
The Applicant exceeded the asset threshold resulting in his Age Pension being cancelled on 15 May 2018.
Decision
In accordance with s 43(1) of the Administrative Appeals Tribunal Act 1975,
the reviewable decision dated 10 October 2018 is affirmed.
I certify that the preceding 151 (one hundred and fifty-one) paragraphs are a true copy of the reasons for the decision herein of Member I Fletcher
.................[sgd].......................................................
Associate
Dated: 5 November 2019
Date(s) of hearing: 23 October 2019 Applicant: In person Counsel for the Respondent: Ms Daphne Jones-Bolla Solicitors for the Respondent: Sparke Helmore Lawyers Annexure A[23]
[23] Table above produced in full from Respondent’s SFIC, p30 Annexure A. Footnotes above from original.
Property
Guilderton property
Belmont Property 1
Belmont Property 2
Belmont Property 3
Belmont Property 4
Purchased27
28.02.2000
21.10.1990
11.01.2014
10.12.1993
16.03.1993
Registered28
20.03.2000
30.11.1990
11.02.2014
24.01.1994
19.04.1993
Ownership29
Applicant’s wife = 50%
Applicant and wife = 50%
Applicant’s wife = 33%
Applicant and wife = 50%
Applicant and wife = 50%
Valuation date
Value
Mortgage
Value less mortgage
Value
Mortgage
Value less mortgage
March 2018
$500,000.00
$650,000.00
$440,000.00
$590,000.00
$46,927.6830
$543,072.30
$530,000.00
$46,927.68
$483,072.30
27 ST2/71; ST5/94; ST4/83; ST3/77; and ST5/89
28 T16/177; T17/178; T18/179; T19/180; and T20/181
29 Per the certificates of title at T16 to T20
30 T21/241 – Debit balance = $93,855.00 shared equally between the two properties used as security namely [Belmont Property 3] and [Belmont Property 4].
See Secretary, Department of Family and Community Services and Cocks [2002] AATA 1179, and
Anstis v Secretary of the Department of family & Community Services[2002] FCA 1043.
0
12
0