Makridis; Secretary, Department of Family and Community Services

[2003] AATA 850

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 850

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2002/65&66

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES

Applicant

And DIMITRIOS MAKRIDIS AND GEORGINA MAKRIDIS

Respondents

DECISION

Tribunal Mr M Allen, Member

Date              29 August 2003

PlacePerth

Decision The decision of the Social Security Appeals Tribunal made on 17 June 2002 is affirmed.

..............(sgd M Allen).......................

Member

CATCHWORDS

SOCIAL SECURITY – aged pensions – whether value of properties should be included in assets of respondents for purposes of the assets test – whether properties were partnership property – whether properties were the subject of a constructive trust

Administrative Appeals Tribunal Act 1975 s37

Social Security Act 1991 ss 1118, 1121

Partnership Act 1895 (WA) ss 30, 31, 33

Property Law Act 1969 (WA) ss 34

Transfer of Land Act 1893 (WA) ss 58, 82

Secretary, Department of Social Security v Agnew [2000] FCA 59

REASONS FOR DECISION

29 August 2003 Mr M Allen, Member          

1.      This is an application by the Secretary of the Department of Family and Community Services for review of a decision made by the Social Security Appeals Tribunal (“SSAT”) on 17 January 2002.  In that decision the SSAT decided to set aside a decision made by a delegate of the Secretary on 23 July 2001 (affirmed on internal review) to reject a claim made by Mr and Mrs Makridis for aged pensions (“AP”). 

2.      The SSAT sent the matter back to the Secretary for reconsideration in accordance with a direction that the properties at 39 Bassendean Road, Bayswater (“the Bassendean Road property”) and 4 Munt Street, Bayswater (“the Munt Street property”) should not be included as assets of Mr and Mrs Makridis for the purposes of their AP claims.

3.      At the hearing of the matter Mr Ellis from Centrelink’s Advocacy and Administrative Law Team represented the Secretary and Mr and Mrs Makridis represented themselves, with the assistance of an interpreter.  The Tribunal received into evidence:

·the documents filed pursuant to s37 of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”) in these proceedings (T1 - T24);

·documents filed pursuant to s37 of the AAT Act in Tribunal proceedings W2000/412 and 413 in which Mr and Mrs Makridis were the applicants and the Secretary was the respondent (which I will refer to as PT1 – PT78); and

·Exhibits R1 – R4 tendered by Mr and Mrs Makridis.

No sworn oral evidence was given in the proceedings.  The main part of the hearing took the form of Mr Makridis answering questions asked by me about the documentary evidence and elaborating where necessary.  At times this required the use of the interpreter but at other times Mr Makridis was able to converse in English that was quite understandable and proficient.

Background

4.      The efforts of Mr and Mrs Makridis to obtain AP have a long history, which must be understood to appreciate the issues raised in these proceedings.  The following background information was not in dispute between the parties and the following findings of fact can be made.

5.      At all relevant times Mr and Mrs Makridis resided at their matrimonial home at 23 Leake Street, North Perth (“the Leake Street property”), which had originally been owned by Mr Makridis’ father - who died in 1986. This property was registered in the name of Mr Makridis as Administrator of his father’s estate in August 1985 and in August 1996 Mr Makridis became the registered proprietor in his own right. 

6.      Shortly before their marriage in September 1963 Mr Makridis entered into an Agreement with a State government department under which he acquired the right to purchase the Bassendean Road property by way of conditional purchase.  This required the making of regular instalment payments and the establishment of improvements on the property.  The property was to be used for the business of manufacturing putty established in 1963 by Mr and Mrs Makridis by way of a partnership trading as J and J Products.  They were the only two partners and had equal shares in the partnership.

7.      Over the next seven years all the amounts due to the Government department were paid and improvements made to the property.  Accordingly, by 1970 Mr Makridis was able to obtain freehold title over the Bassendean Road property and he became the registered proprietor thereof in his name alone.  Whether the Bassendean Road property became partnership property at that time or subsequently is considered below.

8.      The partnership business was relatively successful and in 1980 Mr and Mrs Makridis purchased and became the registered proprietors jointly of the Munt Street property (which adjoins the Bassendean Road property).  This enabled the business to expand and gave better access to the Bassendean Road property.  Whether the funds required for the purchase of the Munt Street property came from partnership funds and whether that property became partnership property is also considered below.

9.      In 1991 the partnership ceased the putty manufacturing business and commenced a business of buying and selling hay.

10.     In 1992 litigation was commenced against Mr and Mrs Makridis as partners of the partnership in relation to events that occurred in 1991.

11.     In 1993 Mr and Mrs Makridis’ son, Mr Gregory Makridis (“Gregory”), became a partner in the partnership as did a company, Zengak Pty Ltd (“Zengak”).  The circumstances in which these two became partners are considered further below. 

12.     In June 1994 a judgment was entered against the partners of the firm for approximately $117,000 (including interest) and the judgment creditor lodged caveats against the Bassendean Road and Munt Street properties.  In March 1995 a further judgment was entered against the firm for approximately $214,000 (including interest).  In mid 1995 the Bassendean Road and Munt Street properties were executed against by way of a writ of fieri facias and goods belonging to the partnership (hay processing machinery) were seized by the Sheriff.

13.     During 1995 Mr and Mrs Makridis made various attempts to borrow money in order to pay out the judgment creditors and thereby avoid the sale of the properties.  Those attempts were unsuccessful because of Mr Makridis’ age, the fact that the partnership already owed approximately $210,000 secured by an existing mortgage over the Bassendean Road property, and the existence of the caveats referred to above.  However, eventually the Manager of the National Australia Bank (“the Bank”) in Bayswater suggested that the Bank would lend the monies to enable the judgment debts to be paid if Mr and Mrs Makridis retired from the partnership and their two children, Gregory and Mrs Helen Moulatsiotis (“Helen”), became the partners and thereby responsible for the repayment of the partnership debts, and provided adequate security by way of mortgages over real estate could be obtained.

14.     It appears that Mr and Mrs Makridis retired from the partnership in about September 1995 and Helen joined the partnership at about that time.  According to PT32, at 30 June 1996 the three partners of the firm were Gregory, Helen and Zengak.

15.     Following an unsuccessful appeal against the judgements the monies due under the judgements became due in mid 1996 and approximately $314,000 was paid to the judgement creditor in September 1996.  Those funds were provided by Gregory and Helen (as partners of the firm) borrowing from the bank two separate loans, each of $125,000, and $50,000 by way of a business overdraft; and making a contribution of a further $15,000 (PT39).

16.     The borrowings referred to above were secured by a guarantee and indemnity for $300,000 given by Mr Makridis and mortgages granted by Mr Makridis over the Bassendean Road and Leake Street properties.  These two properties were selected because they were in Mr Makridis’ name alone and the inclusion of the Leake Street property made the security more attractive to the Bank and resulted in a somewhat lower rate of interest charged to Gregory and Helen.

17.     In April 1995 Mr and Mrs Makridis had first claimed an AP and Wife Pension respectively – at which time they were still partners in the firm.  It appears that they received the pensions for various periods.  There was considerable correspondence between Centrelink and Mr and Mrs Makridis concerning what interests they had in real estate – with Centrelink apparently contending that Mr and Mrs Makridis retained an interest in the Bassendean Road and Munt Street properties.  In January 1997 Mr Makridis executed a transfer of the Bassendean Road property in favour of Gregory for a consideration expressed to be “natural love and affection” – but that transfer never took effect because it was never stamped or submitted for registration.  In June 2000 the Secretary cancelled the benefits on the basis that Mr and Mrs Makridis had interests in real estate (the Bassendean Road and Munt street properties) valued at $560,000 (which exceeded the value of assets allowed to be held) and the value of the encumbrances against the properties could not be deducted from that value.

18.     In October 2000 the SSAT set aside that decision on the basis that:

·Prior to 1995/96, although the Bassendean Road and Munt Street properties appeared in the financial statements of the firm after the entry of Gregory and Zangak into the partnership, the intention of the parties was that the properties remained the assets of Mr and Mrs Makridis, even though the partnership shared the profits from the use of the properties.

·After 1995/96, the relinquishment by Mr and Mrs Makridis of their interest in the partnership and the granting of the guarantee and indemnity and the mortgage security by Mr Makridis to secure partnership borrowings constituted consideration for the partnership assuming liability for Mr and Mrs Makridis’ share of the judgement debt.  Accordingly, no constructive trust arose in relation to the two properties in favour of Gregory and Helen.

·However, because the partnership had spent money improving the Bassendean Road property, Mr Makridis could not assert full beneficial ownership of that property and the partnership had a beneficial interest to the extent of the amount by which it had enhanced the value.

·The amount secured against the Leake Street property could not be considered because, as the home of Mr and Mrs Makridis, the value of the Leake Street property is to be disregarded as an asset under s1118 and s1121 of the Social Security Act 1991 (“the Act”).

·The amount secured by the mortgage over the Bassendean Road property was a charge given for the benefit of Gregory and Helen (to fund their trading overdraft) and hence not able to be deducted because of s1121(2)(b) of the Act.

·The SSAT also made some other observations that it thought may be relevant to the assessment of Mr and Mrs Makridis’ entitlement to the pension.

·The matter was remitted for the Secretary to assess the amount by which the Bassendean Road property was enhanced by partnership expenditure since 1995/96 and that amount was to be deducted from the value of that property when applying the assets test.

19.     Mr and Mrs Makridis appealed that SSAT decision to this Tribunal in proceedings number W2000/412 and 413.  In March 2001, Senior Member Fayle delivered a decision to the effect that:

(a)      He accepted the evidence of Mr and Mrs Makridis, and Gregory and Helen, that it was always understood and intended that the Bassendean Road and Munt Street properties became the exclusive property of Gregory and Helen from about September 1995 and that the properties were not transferred to them because the stamp duty cost was prohibitive.

(b) Because no instrument of transfer had been registered pursuant to sections 58 and 82 of the Transfer of Land Act 1893 (WA) and because such an instrument had to be in writing under s34 of the Property Law Act 1969 (WA), no interest in the land in favour of Gregory or Helen had been effectively created – despite the agreements between and intentions of Mr and Mrs Makridis and the two children.

(c) The charge over the two properties was a collateral security for loans granted to Gregory and Helen and therefore could not be used to reduce the value of the properties: s1121(2)(a) of the Act.

(d)      It was not necessary to address the question of whether a constructive trust over the two properties arose in favour of Gregory and Helen because of the finding in (b) above.

(e)      The decision of the SSAT was set aside and the matter remitted to the Secretary with a direction that the value of the assets for asset test purposes was $480,000.

20.     On the strength of Senior Member Fayle’s decision, the Secretary again assessed that the value of Mr and Mrs Makridis’ assets exceeded the allowed amount for AP purposes.  In May 2001 Mr Makridis purported to sell the Bassendean Road property to Gregory and Helen for $1000 and lodged a further application for AP on the basis of that disposal.  The Secretary’s response was that it would be necessary to consider whether the property had been disposed of for adequate consideration.  Mr Makridis referred the Secretary to the amounts spent on the loans and legal fees by Gregory and Helen.

21.     On 23 July 2001 the decision under review was made to refuse the applications because the value of assets was excessive - the amount of $289,000 being regarded as a gift ($300,000 value of property less $1000 consideration less $10,000 allowable gift) and to be maintained as an asset for five years for asset test purposes.

22.     On review of that decision the SSAT concluded that:

(a)      Although there was some evidence that the Bassendean Road and Munt Street properties were, and remained, partnership assets, there was insufficient evidence to conclude that this was the case.

(b)      There was a clear and common intention that the ownership of the two properties had passed to Gregory and Helen.

(c)       A claim now by Gregory and Helen to be the beneficial owners of the two properties would succeed because by borrowing from the Bank and taking on and servicing all the partnership debts, as well as improving and maintaining the properties and paying the rates and taxes, they had acted to their detriment – in reliance on their parents statements (which they believed) that the properties belonged to them.

(d)      A constructive trust in favour of Gregory and Helen came into existence by at least September 1996, although further acts of detriment occurred after that date.

(e)      Accordingly, by the end of September 1996 Mr and Mrs Makridis were not the beneficial owners of the two properties and the value of those properties should not have been included in their assets when determining entitlement to AP – from the date of their claim, 16 May 2001.

The Issues

23.     The issue for determination in this case is whether, on all the material before me, the Bassendean Road and Munt Street properties should be considered as assets of Mr and Mrs Makridis for the purposes of determining their AP entitlements.  If they are to be regarded as assets then a second issue arises, namely, whether the amount of any charge over or encumbrance on the properties can be deducted from the value of the two properties.

Other Evidence

24.     Apart from the background evidence and material referred to above, the following additional material can be identified as relevant to the determination of the issues.

25.     Mr Makridis said that although in the early days he and his wife did not separate their personal banking from their business banking, they at all times considered the properties to be part of the business and the partnership between he and his wife.  All the payments for the purchase of the properties, their improvements, and rates and taxes were made from partnership/business funds and the properties always appeared as assets of the partnership in the financial statements.  No distinction was made between the Bassendean Road property (which was registered in his name only) and the Munt Street property (which was registered in the names of both he and his wife).  A building on the properties not needed by the business had been rented out to third parties and the rental income had always been regarded as business income of the partnership.  In the five years between 1993/94 and 1997/98 that rental income (as shown in the partnership accounts) averaged about $9,100 per annum.

26.     Mr Makridis said that Gregory had always worked in the business during holidays from school and had worked full time in the business since leaving school in 1981.  In a statement provided to Centrelink in May 2001 (T15) Gregory said that he received no pay for his work.  He lived at home and did not go out socially.  He was often told he would be made a partner and he never doubted his parents’ statements to that effect.  When he became a partner in 1993 he had an oral agreement with his parents that the litigation, which by then had commenced, would not affect or involve him as the case was not his concern.  In 1995 the family arrangement was that he and Helen would take over the property, buildings, debts and business – paying the judgement and rescuing the properties that would otherwise be sold.  His mother and father had said “in return for paying our debts and for all your hard work you can have the properties, they’re yours”..  Since 1995 he had worked hard to establish a better business and had spent money re-roofing the Bassendean Road property building.  Partnership funds had been used for all the expenditure and he had never asked his father for any permission to do any of this – because the business and properties were, in his opinion, now “owned” by he and Helen.

27.     Helen gave evidence to the SSAT on the first occasion and also provided statements to Centrelink.  In T15 (of March 2001) she said that she had also worked in the business during her school years and then part-time for some years and then full-time prior to her marriage in 1989.  Since about 1991 or 1992 she had done clerical work for her parents’ business on a part-time basis without pay.  Helen described a family meeting “of great importance” in 1995.  The family was in a terrible position because of the court action and faced losing everything.  It was feared that if all the properties went to auction they would be sold cheaply, meaning that all the land and business would be lost and all the family’s hard work over the years also lost – although the loss of the properties was the main concern because the business could be conducted from other premises.  Helen described the forming of “a trust” between them that she and Gregory would take over the business and the properties and pay out all their parents’ debt.  In return she and Gregory would get ownership of the business and the properties.  She was concerned about taking on a total debt load of about $510,000 that “came along with the deal” because if the business failed they could not repay it.  However, she was comforted by the knowledge that she and Gregory could sell one of the properties if that happened.  As it turned out that scenario did not eventuate because of Gregory’s hard work since then and the help she had been able to give him.  Her father did not try to interfere in business decisions.  She and Gregory make all the business decisions alone.  A subsequent statement made in November 2001 (R2) was to similar effect.

28.     It is not entirely clear when Gregory and Zengak became partners.  Gregory identifies, in T15, July 1993 as the time he became a partner.  However, in the partnership financial statements for the year ended 30 June 1994 (T7), which were prepared in May 1995 and also contain comparable figures for the year ending 30 June 1993, Gregory is shown as having a capital and current account in the partnership in both years.  Zengak is shown as a partner for the 1994 year but not as having a partner’s equity account.  Mr Makridis said that Gregory had contributed $28,500 to the capital of the partnership when he became a partner in 1993, being the amount he had received from a lump sum workers’ compensation claim.  Zengak was a company in which Mr Makridis had become involved with a third party in an unrelated venture.  The result was that a considerable amount of money was lost and Zengak had become a partner only on the advice of the firm’s accountant because there were some taxation advantages to be gained – because its share of the partnership profits could be offset against losses carried forward.  I was told that when Zengak’s losses had been utilised it ceased to be a partner – but there was no documentary or other evidence of when that may have occurred.  In all the circumstances, and because the Secretary has been aware of Zengak’s involvement in the partnership for many years, I do not consider that I need attach any particular significance to Zengak’s involvement.  I am satisfied that its involvement in the partnership was solely for the taxation benefits that were thought to be involved.  On balance I find that agreement was reached in about July 1993 for Gregory to become a partner – but with effect from the 1992/93 financial year.

Consideration

29.     Overall, I accept the evidence of Mr Makridis and the documentary evidence before me.  Several preliminary observations and findings can be made about this case.  The first is that Mr and Mrs Makridis are not highly educated persons and, in the case of Mrs Makridis, has little English.  Secondly, it is apparent that they have taken little specific professional advice about their business affairs.  There has never been a formal partnership agreement and no final accounts were apparently prepared when Mr and Mrs Makridis left the partnership and Helen joined it.  Likewise, although on the evidence it is clear that very significant matters were discussed and agreed in 1995 and 1996, there was no attempt to document whatever it was that was agreed.  It is apparent that the family members are close and that there has been a high degree of personal trust between them.

30.     Finally, it can be observed (and I so find) that, whatever the legal consequences may have been, and whatever pre-existing interest Gregory may have had in the partnership and the Bassendean Road and Munt Street properties at that time, in 1995 there was an agreement reached between Mr and Mrs Makridis and Gregory and Helen to the effect that, thereafter, Mr and Mrs Makridis would relinquish their interests (whatever they were) in the business and the two properties; that Gregory and Helen would become responsible for the re-payment of approximately $510,000 in debts due by the firm; that Gregory and Helen would become the owners of the business and the two properties; and that Mr Makridis would provide a guarantee and indemnity to the Bank in relation to the repayment of the debts, and that mortgages over property would secure that obligation.  Those agreements were given effect to in 1995 when the partnership arrangements changed and in September 1996 (after the unsuccessful appeal) when the additional borrowings were  made from the Bank and the security arrangements put in place.  Although not strictly relevant I observe that, on the basis of evidence that was similar to that which was before me, both this Tribunal in proceedings 2000/412 and 413 and the SSAT in the current matter concluded that there was an intention in 1995 that Gregory and Helen would acquire exclusive ownership of the Bassendean Road and Munt Street properties as part of the 1995 agreement.

31.     The first issue that I address is whether the Bassendean Road and Munt Street properties at any time became partnership property or whether they were the separate personal assets of Mr and Mrs Makridis.  Relevant provisions of the Partnership Act 1895 of Western Australia are as follows:

“30.     Partnership property

(1) All property and rights and interests in property originally brought into the partnership stock, or acquired, whether by purchase or otherwise, on account of the firm or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement.

(2) Provided that the legal estate or interest in any land which is partnership property shall devolve according to the nature and tenure thereof, and the general rules of law thereto applicable, but in trust so far as necessary for the persons beneficially interested in the land under this section.

(3) ….

31.      Property bought with partnership money”

Unless the contrary intention appears, property bought with money belonging to the firm is deemed to have been bought on account of the firm.

….

33.      What is a partner’s share

The share of a partner in the partnership property at any time is the proportion of the then existing partnership assets to which he would be entitled if the whole were realized and converted into money, and after all the then existing debts and liabilities of the firm had been discharged..”

32.     On the evidence before me I find that although Mr Makridis entered into the conditional purchase agreement for the Bassendean Road property shortly before his marriage, it was with the intention of using it for the purposes of the business to be established by he and his wife in partnership shortly thereafter – and that this in fact occurred.  To that extent all Mr Makridis’ rights and interests in that property were brought by him into the partnership when it was formed by he and his wife.  I accept that thereafter all payments to the State government as purchase instalments and expenditure on improvements were from money generated from the firm’s business activities and were made on account of the firm, for the purposes and in the course of the partnership business.  Likewise, on the evidence I find that the Munt Street property was purchased on account of the firm, for its purposes and in the course of the firm’s business.  I find, therefore, that the two properties had been partnership property for many years prior to 1993.

33. Accordingly, on his admission to the firm in that year Gregory became entitled to a share in those properties. The extent of that share would have been, from time to time, calculated in accordance with s33 of the Partnership Act ie. the proportion, from time to time, to which he would have been entitled if the whole of the partnership assets were realised and converted to money and after the discharge of all partnership debts and liabilities. Whilst the legal ownership of the two properties remained with Mr and Mrs Makridis they would have held the two properties on trust to the extent needed to reflect Gregory’s beneficial interest (whatever it was): s30(2).

34.     The same principles apply in relation to when, in 1995, Mr and Mrs Makridis informally retired from the partnership and Helen entered it.  Clearly, at that point the respective financial positions of Mr and Mrs Makridis and Gregory in relation to the partnership were complicated and not fully reflected in the partnership accounts..  For example, as a partner Gregory had a liability in respect of the judgements, but I accept the evidence that his parents had agreed to indemnify him in respect of that because the events giving rise to the judgement debts had occurred before he became a partner.  The fact that formal final accounts were not prepared at the time is, however, understandable in view of the complicated situation and the circumstances in which the partnership reorganisation occurred – and in view of the agreements reached between the family members as set out in para 30 above.  Whatever a formal accounting exercise may have shown at that time was of no consequence to the family members.  They had reached certain agreements, which were to operate in place of what had previously applied.

35.     In my opinion the members of the newly-constituted partnership became the beneficial owners of the two properties in proportions related to their respective shares in the partnership – and the legal owners of the properties (ie. Mr and Mrs Makridis) continued to hold the properties in trust for those persons in those shares.  In my opinion, as retired partners, Mr and Mrs Makridis retained no beneficial interest in the two properties from the time of their departure from the partnership.

36.     The above represents, in my opinion, the legal consequences of the events that occurred up to 1996 based on the principles of partnership law.  However, if the views I have expressed are incorrect such that Mr and Mrs Makridis continued to hold beneficial interests in the two properties after they ceased to be partners, then I turn to consider whether, from some time in 1995 or thereafter a constructive trust arose in respect of the two properties in favour of Gregory and Helen.  It will be recalled that the SSAT concluded that such a trust did arise by the end of 1996.

37. I pause at this point to make a comment concerning the decision of this Tribunal referred to in para 19 above, specifically in relation to there being no need to consider the question of whether a constructive trust arose in favour of Gregory and Helen because of the view taken in relation to s 34 of the Property Law Act 1969. With all due respect, it appears that the provisions of subs 34(2) of that Act may have been overlooked – which provides that “this section does not affect the creation or operation of resulting, implied or constructive trusts.”

38.     In my opinion the present case involves what the Full Federal Court in Secretary, Department of Social Security v Agnew [2000] FCA 59 referred to as a “common intention constructive trust” – although, as the Full Court pointed out, it is not necessary to show a common intention: at [12]. It is necessary to show that a person claiming beneficial ownership has acted to his/her detriment in reliance upon a believed state of affairs and that it would be a fraud on the claimant, or unconscionable, for the legal owner to deny the interest.

39.     In fact, in this case it is clear, and I find, that in 1995 the family arrived at a common intention to do the things set out in para 30 above as a means of retrieving what had become a very precarious financial position for the family (or at least Mr and Mrs Makridis and Gregory).  I find that Mr and Mrs Makridis, Gregory and Helen all intended that Mr and Mrs Makridis would relinquish whatever beneficial interest they may have had in the business and the Bassendean Road and Munt Street properties and that Gregory and Helen would thereafter be the sole beneficial owners of the land and business – but subject to their servicing of the debt that amounted to more than $500,000.

40.     Further, by taking on the personal obligations to repay the debts; by reducing the amounts owing to the Bank; by thereafter spending money on improving the properties; and by devoting themselves to the rebuilding of the business, Gregory and Helen have, in my opinion, acted to their detriment.  In addition, if Mr and Mrs Makridis were to, at any stage, renege on the arrangement and refuse to transfer legal title to them there would be further detriment by depriving them of a rightful proprietary interest in the land.

41.     Those factors, in my opinion, would make it unconscionable for Mr and Mrs Makridis to now deny the interests of Gregory and Helen in the land.  The common intention was formed in September 1995 and the acts of detriment (mainly the running of the business) started at that time.  However, in my opinion the principal detriment occurred in September 1996 when the debt obligations were taken on by Gregory and Helen and have continued since then.  By no later than the end of September 1996 the circumstances existed that would have made it unconscionable for Mr and Mrs Makridis to attempt to deny Gregory and Helen’s beneficial interest in the two properties.  I find that a constructive trust, pursuant to which Mr and Mrs Makridis held the Bassendean Road and Munt Street properties on trust for Gregory and Helen, arose by at least that time.  It is not necessary to try to be any more precise as to when that trust arose.

42.     Reference should be made to the two aborted attempts to transfer the properties to Gregory and Helen, the first in January 1997(see para 17 above) and the second in May 2001 (see para 20 above).  Likewise, reference should be made to Mr Makridis’ guarantee of the performance of Gregory and Helen in repaying the amounts due to the Bank and providing mortgage security over the Bassendean Road and Leake Street properties.

43.     It might be said that such actions demonstrate that Mr Makridis continued to regard himself as the beneficial owner of the Bassendean Road property – rather than recognising any interest of Gregory and Helen.  In my opinion, those actions are not inconsistent with the view I have taken about the existence of a trust – or, indeed, the view that the Bassendean Road and Munt Street properties were partnership property.  In relation to the two attempted transfers, they are not inconsistent with the belief that the beneficial owners were Gregory and Helen and it is apparent that the continuing legal ownership by Mr Makridis was causing problems with Centrelink. Apart from the stamp duty cost consideration I have no doubt the properties would have been transferred in 1996 or 1997.  In my opinion, the various explanations given to Centrelink and the various actions attempted to be taken reflect that Mr and Mrs Makridis did always regard themselves as having no beneficial interest in the properties from at least 1996 – but lacked the degree of legal knowledge, that may have come from professional advice, to explain that in a way that made sense to Centrelink.

44.     In relation to the guarantee and mortgages given by Mr Makridis the fact was that the legal title of the Bassendean Road property remained with Mr Makridis and the Bank required security for the loan and wanted it from the registered proprietor of the land charged – without any apparent consideration of whether other persons may have had a beneficial interest therein.  The inclusion of the Leake Street property in the mortgage security granted by Mr Makridis was to obtain a lower rate of interest – and indicates that Mr Makridis’ guarantee was a meaningful contribution by him to the overall package of arrangements with the Bank.  None of that is inconsistent with the view that Gregory and Helen were regarded as the beneficial owners of the Bassendean Road and Munt Street properties.

45.     My conclusion is that, whether by the application of principles of partnership law or of constructive trusts, at least by September 1996 Mr and Mrs Makridis had no beneficial interest in the Bassendean Road or Munt Street properties.  The value of those properties should not, therefore, have been included in the assets for Mr and Mrs Makridis for the purposes of assessing their entitlement to AP under their claim of 16 May 2001.  It is not, therefore, necessary for me to consider the second issue identified in para 23      above.

46.     The decision of the Tribunal is that the decision of the SSAT made on 17 June 2002 is affirmed.

I certify that the 46 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M Allen, Member

Signed:         .............(sgd V Wong)....................................
  Associate

Date/s of Hearing  28 April 2003
Date of Decision  29 August  2003
Counsel for the Applicant         In person
Counsel for the Respondent     Mr S Ellis
Solicitor for the Respondent     Service Recovery Team, Centrelink