Mozumder; Secretary, Department of Education, Employment and Workplace Relations and
[2008] AATA 671
•1 August 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 671
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/0039
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS Applicant
And
FARDOUS MOZUMDER
Respondent
DECISION
Tribunal Ms G Ettinger, Senior Member Date1 August 2008
PlaceSydney
Decision The decision of the SSAT is set aside and in substitution the Tribunal decides that Mrs Fardous Mozumder has incurred a debt of $32,565.75 for Parenting Payment Partnered. I do not find special circumstances under which the debt may be waived in full or in part, and accordingly the full amount must be recovered.
…………………………………………
Ms G Ettinger
Senior Member
CATCHWORDS
Parenting Payment Debt - assets - did the transfer of real property from the Applicant's husband's brother, her brother-in-law, Iqbal Mozumder constitute a trust arrangement – questions regarding legal and beneficial ownership of real property – Tribunal not satisfied that the transfer was simply so that the Applicant could act as trustee and make arrangements for the property while his brother was overseas – issues of credit in the evidence – false information given by Mr and Mrs Mozumder to obtain loans – decision of SSAT set aside – decision of the Secretary restored – couple’s assets exceed limit for PPP – debt has arisen - no special circumstances – debt must be recovered.
Social Security Act 1991 ss 500Q
Kintominas v Secretary, Department of Social Security (1991) 30 FCR 475
Baumgartner v Baumgartner (1987) 164 CLR 137
Kidner v Secretary, Department of Social Security (1993) 31 ALD 63
Repatriation Commission v Tsourounakis [2004] FCAFC 332
Repatriation Commission v Tsourounakis and Anor (2007) 158 FCR 214
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
REASONS FOR DECISION
1 August 2008 Ms G Ettinger, Senior Member 1. Mrs Fardous Mozumder has come to Australia from Bangladesh with her husband, Nuralam Mozumder. They have two children aged approximately nine and five years old. Mrs Mozumder has been receiving Parenting Payment Partnered (PPP) since 2001 (T6/67).
2. Mrs Mozumder completed her schooling to the age of 15 years, and told me that she cannot read English well. Mrs Mozumder told me that she did not understand her husband’s business, although she knew he drove taxis at one time, and that he operates a restaurant called Little India where she helps out. As to documents, including those from Centrelink, she said that she did not read or understand them, and simply signed as her husband asked her to.
3. The Secretary, Department of Education, Employment and Workplace Relations, (the Secretary) held that the Mozumders’ assets exceeded the threshold for the receipt of PPP, cancelled Mrs Mozumder’s PPP on 10 July 2006, and raised a debt of $41,218.58 for the period 1 January 2002 to 10 July 2006, which was on recalculation, reduced to $21,565.75 for the period 1 January 2003 to 10 July 2006.
4. The debt arose because in 2000, Mr Mozumder’s brother, Mr Iqbal, transferred the title to his land at Blacktown to Mr Nuralam Mozumder which they held jointly until 2002, when he transferred the full legal title to Mr Nuralam. This was held to have increased the size of the Mozumders’ assets. Section 500Q of the Social Security Act 1991 provides for PPP not to be payable to a person if the value of the person’s assets exceeds the threshold for the payment of PPP.
5. Mrs Mozumder applied for internal review of the Secretary’s decision; that decision affirmed the primary decision of the Secretary. She then appealed the decision of the Authorised Review Officer to the Social Security Appeals Tribunal (the SSAT), which set aside that decision, and held that Mrs Mozumder does not have a debt of PPP. The matter comes before this Tribunal on application by the Secretary.
6. I am satisfied that the transfer of the property from Mr Iqbal to Mr Nuralam was not by way of trust, and that no constructive trust has arisen as a result.
7. There were serious issues of credit in the evidence before me.
8. I have set aside the decision of the SSAT and found that Mrs Mozumder has incurred a debt of PPP, as held by the Secretary, due to the level of assets held by the family. I am satisfied that no special circumstances exist in order for me to waive the debt either in full or in part.
9. My reasons follow.
THE ISSUES BEFORE THE TRIBUNAL
10. The issue in this case is the application of the assets test for PPP, and in particular, whether the value of the two properties at Blacktown to which Mr Nuralam Mozumder has legal title must be included in the calculation of Mrs Fardous Mozumder’s family assets for the purpose of determining whether PPP was payable to her from 1 January 2003 to 10 July 2006.
11. I must determine whether a constructive trust arose when legal title of the property at Blacktown was transferred from Mr Iqbal to his brother Mr Nuralam in 2002.
12. I must decide whether Mrs Mozumder has incurred a debt of PPP, and if so, whether there are special circumstances in order to exercise the discretion to waive all or part of the debt.
LEGISLATIVE CONTEXT
13. Section 500Q of the Social Security Act 1991 (“the Act”) provides that PPP is not payable if the value of a person’s assets exceeds her assets value limit. Pursuant to section 500Q(4) the person’s assets includes their partner’s assets. There is no doubt that the value of real property is included in a person’s assets.
14. At the relevant times the assets value limits (homeowner) were applicable to Mrs Mozumder.
DID A CONSTRUCTIVE TRUST ARISE AS A RESULT OF THE TRANSFER OF THE BLACKTOWN PROPERTY FROM IQBAL TO NURALAM MOZUMDER
Transfer of the Property at Blacktown from Iqbal Mozumder to Nuralam Mozumder
15. It is not in dispute, and I accept that in 2000 Mr Iqbal transferred title of the vacant real property at Blacktown which he purchased in 1995, and owned, to his brother Mr Nuralam, husband of the Respondent in these proceedings, Mrs Fardous. The property was held jointly by the brothers until a second transaction took place in 2002, when Mr Iqbal transferred the whole legal title to his brother. Mr Nuralam has since that time held legal title to the whole property, now subdivided. I understand there has been construction since that time, and that two houses have now been built on the land, one of which is occupied by Mr Iqbal and his family.
16. The Respondent has argued that Mr Nuralam is the bare legal owner, and that the true beneficial owner of the two properties is Mr Iqbal, and that accordingly, the value of the properties should not be included in the assessment of Mrs Fardous’ assets, in turn affecting her eligibility for PPP.
17. I have considered the evidence surrounding the transfers because I have to decide whether a constructive trust arose in the transfer as claimed by the Respondent, or whether the ownership of the property means that the Mozumders’ joint assets exceed the threshold for PPP.
18. Both Mr Iqbal and Mr Nuralam gave evidence that the first transfer in 2000 took place because Mr Iqbal was travelling back and forth to Bangladesh to care for his sick parents, as one of their brothers had died. I noted the Secretary’s submission that in the relevant period extracts from Mr IqbaI's passport indicate he arrived in Bangladesh on 1 February 2001, and departed on 30 March 2001. The next trip to Bangladesh was on 17 December 2002, with departure from Bangladesh to Sydney on 26 March 2003. The Applicant submitted that this did not indicate that Mr IqbaI had relocated to Bangladesh to care for his parents. The frequency and duration of Mr IqbaI's trips did not appear to vary before November 2000 and afterwards. The Secretary contended that the passport details do not support the explanation given for transfer of the Property. I am satisfied the periods Mr Iqbal has spent in Bangladesh do not accord with his stated intention to transfer his family to live in Bangladesh, neither does the length of the visits indicate he spent a lot of time there as a carer for his parents such that he could not attend to administering his vacant land at Blacktown.
19. Both brothers indicated that the transfer of title was to facilitate the management and administration of the property in Mr Iqbal’s absence. Mr Iqbal also told me that if he required funds because he had relocated to Bangladesh, on his instruction, Mr Nuralam could sell the property on his behalf.
20. Mr Nuralam conceded when giving his evidence that he could have paid bills such as Council rates, and attended to the lawn mowing on the vacant property which were the duties he assumed in Mr Iqbal’s absence, without any ownership of the property. He could also have made decisions and conferred with Council and other authorities if his brother had simply given him a power of attorney.
21. Both brothers said that Mr Iqbal reimbursed Mr Nuralam for any outgoings. I am mindful there was no paper trail, and no receipts for such payments, which were said to always have been made in cash.
22. I noted also a file at T37/230 in which an Authorised Review Officer wrote on 26 September 2006 with regard to the transfer of the land at Blacktown to Mr Nuralam:
“He (Mr Nuralam), said his brother pays the rates. There is no written arrangement about this deal and that his brother could ask for the land back at any time. … At first he said the brother transferred the land to him in exchange for property the brother received from their father, but when I asked was this an inheritance he did not reply and said his brother just transferred it to him because his brother was going overseas.”
23. I noted from file note at T37/230 that whilst Mr Nuralam had earlier indicated the transfer of the land at Blacktown to him was concerned with an equalisation of assets because his father had given property to Mr Iqbal, at the Tribunal he denied his father had assets or was able to make such gifts. By way of contradiction, Mr Iqbal said that he managed his father’s land and assets when he visited in Bangladesh, and sustained his own family in that way. It seems Mr Mozumder senior has some assets in Bangladesh.
24. I note further that what the Authorised Review Officer has written is in contradiction of the evidence of Messrs Nuralam and Iqbal before me, who maintained that the transfer was simply to facilitate management of the land in Mr Iqbal’s absence.
25. I noted further inconsistency in the evidence before me. In the submission made to the SSAT by Logical Legal on behalf of Mrs Fardous on 2 December 2006 (T39/237), argument was made in relation to the level of assets of the Mozumders based on the AVO valuations for 2003 – 2005. The solicitors have asserted that a sum of $100,000 borrowed by Mr Nuralam was a loan to his brother for the sub-division of Blacktown, (17 May 2006), and the rate of assessment should have been apportioned to be 50 percent of the value of the property by Centrelink because Mr Nuralam only owned half the property. The submission that the land was transferred to Mr Nuralam in order that he could care take of it was not made until the time of the appeal to this Tribunal.
26. Both brothers and certain witnesses to whom I shall refer below, gave evidence that the transfer of the property occurred on the understanding that beneficially the property was always Mr Iqbal’s, and that Mr Nuralam was to do his bidding. Mr Nuralam gave evidence that he always considered his brother the legal owner who could take back the property at any time. I am mindful that no documentation was produced to evidence those intentions. Mr Nuralam agreed at the Tribunal that he now knows that in order to look after the property in his brother’s absence, there did not need to be a transfer of the title, but that at the time, he was not given that advice.
27. Mr Nuralam also told me that the transfers were done at two different times because his brother could not afford to pay all the stamp duty involved at one time. I am not satisfied with the reasons given for the second transfer (full transfer of legal title), because Mr Nuralam, as 50% owner would have been able to make decisions and confer with Council, something he could in fact have done even with a power of attorney from his brother.
28. I am mindful that notwithstanding it appeared that Mr Iqbal transferred the Blacktown property to his brother free of encumbrances, Mr Iqbal’s Westpac Classic Plus Account for 3 July 2002 (noting that 2000 is not available) showed a deposit of $22,000 on 3 July 2002, and another of $23,000 on 9 July 2002, on dates very close to the time when the Blacktown property was transferred to Mr Nuralam on 3 July 2002 (Exhibit A2). Mr Nuralam confirmed the funds went from him to Mr Iqbal, and gave evidence that the money was in repayment of a debt to Mr Iqbal from a third party, Mr Zihed, from whom there was no evidence before the Tribunal. It is curious that a third party owing money to Mr Iqbal would pay money to Mr Nuralam to be onpaid to Mr Iqbal at a time close to the transfer of the real property. There was no satisfactory explanation for those two transactions; I am not satisfied about the veracity of the evidence, and I do not accept it.
29. In summary, I have considered the transfer of the property at Blacktown from Mr Iqbal to Mr Nuralam in 2002, and am satisfied there are inconsistencies in the evidence surrounding the reasons for it.
(a) Clearly, I am satisfied, and this is acknowledged by Mr Nuralam, a transfer of title was not necessary in order to pay bills and provide for lawn mowing on vacant land.
(b) The inconsistencies in the evidence regarding the reasons for the transfer included:
·Mr Nuralam’s early statement to the Authorised Review Officer that the transfer occurred because Mr Iqbal had received property from their father, and his denial of that at the Tribunal.
·In a submission to the SSAT, solicitors for Mr Nuralam did not argue that he did not own the land at Blacktown, but argued in relation to the Mozumders’ level of assets based on the AVO valuations for 2003 – 2005. The solicitors asserted that the $100,000 borrowed by Mr Nuralam was a loan to his brother for the sub-division, (17 May 2006), and the rate of assessment should have been apportioned to be 50 percent of the value of the property by Centrelink because Mr Nuralam only owned half the property.
·In later evidence, including to the Tribunal, the situation was represented as only legal title had passed to Mr Nuralam, so he could pay bills and organise lawn mowing, and Mr Iqbal remained the beneficial owner.
30. As to the payment of $45,000 from Mr Nuralam to Mr Iqbal within a short time after the transfer of title; I am not satisfied that that was in satisfaction of a debt, and in the absence of a credible explanation, consider it was more likely to have been a direct payment from Mr Nuralam to Mr Iqbal as consideration for the transfer.
31. I noted that neither Mr Nuralam nor Mrs Fardous told Centrelink about the change in the level of their assets in 2001 or 2002. They later told Centrelink in 2006, informing the Tribunal that a friend had advised they should. I preferred to rely on the fact that the disclosure was dated to the time when a data matching exercise done by Centrelink was disclosed to the Mozumders.
Evidence of Friends
32. Mr Mohammed Shah Alam Syed made a Statutory Declaration on 21 March 2007 (Exhibit R8), and gave oral evidence at the Tribunal. He stated that he had known Mr Iqbal for ten years, and also knew Mr Nuralam. He deposed that Mr Iqbal told him about buying land in Blacktown in 1997, and that in 2001/2 he made a decision to transfer to Bangladesh due to family problems. He deposed that Mr Iqbal transferred the land to his brother but that “he is the legal owner of this land, his brother acts as a care taker.”
33. In his oral evidence Mr Syed said that he had never visited the land, nor had he seen any documentation evidencing ownership. His evidence is accordingly not of assistance to the Tribunal.
34. Exhibit R9 was a Statutory Declaration of Alfredo Aban who said he was an architect, but worked as a designer in Australia, and designed the development of the property. He deposed that Mr Iqbal was in constant touch with him throughout the process of design.
35. In his oral evidence Mr Aban said that both brothers came to see him in early 2006, and that Mr Iqbal said that it was his property, but that it was in Mr Nuralam’s name. He said that the designs were prepared in Mr Nuralam’s name because Mr Iqbal was going to be away. He also said that Mr Nuralam was the person who paid him, and it was in cash. I noted further that the architectural drawings and Council documents including the development application were in the name of Mr Nuralam as proprietor.
36. A Statutory Declaration of Mr Ghayur Ali Khan dated 14 March 2007 was Exhibit R10. In it, Mr Khan deposed that Mr Iqbal had to depart for Bangladesh for an indefinite period, and accordingly transferred the property at Blacktown into Mr Nuralam’s name. He also stated: “Mr Iqbal Mozumder is arranging some funds so he can change back the ownership onto his name as soon as possible.” That was the first time I had come across that intention which was not expressed by anyone else involved, including Mr Iqbal.
37. In his oral evidence Mr Khan said that he was a family friend, but he did not have any information about the transfer of the property from one brother to the other, nor what amounts of money may have been owing. Accordingly his statement was not of assistance to me.
38. There was also a statement of Jian Chen dated 21 May 2007 (Exhibit R11). He stated that he was a handy man who had been helping Mr Iqbal with the building works. He said he had been dealing with Mr Iqbal, and not with Mr Nuralam. He did not give oral evidence and his evidence could not be tested.
39. In summary:
(a) I noted the evidence of Mohammed Shah Alam Syed corroborated the evidence that Mr Iqbal was relocating to Bangladesh in 2001/2 due to family problems. His evidence was that Mr Iqbal transferred the land to his brother but that “he is the legal owner of this land, his brother acts as a care taker” has no weight in that he admitted he had never visited the land, nor had he seen any documentation evidencing ownership. I did not find the evidence of Mr Mohammed Shah Alam Syed of assistance.
(b) Alfredo Aban designed the development of the property, stating that Mr Iqbal was in constant touch with him throughout the process of design. However, he said that the designs were prepared in Mr Nuralam’s name because Mr Iqbal was going to be away, and that Mr Nuralam paid him in cash. As there are no records of any repayment, I am unable to be satisfied that Mr Iqbal repaid Mr Nuralam for his outgoings. The fact that the designs were produced in Mr Nuralam’s name are an indicator that they were produced for him as proprietor of the land. Further, the development applications and other Council documents were all in Mr Nuralam’s name.
(c) Mr Ghayur Ali Khan stated: “Mr Iqbal Mozumder is arranging some funds so he can change back the ownership onto his name as soon as possible.” That was the first time I had come across that intention which was not expressed by anyone else involved. Mr Khan also stated that he did not have any information about the transfer of the property from one brother to the other, nor what amounts of money may have been owing. Accordingly his evidence is not of any assistance to me in the decision I have to make.
(d) As there was no oral evidence from Jian Chen, he could not be questioned more closely about his relationship with the two brothers.
The Valuations
40. I noted that there was discussion regarding the valuation of Blacktown between Centrelink and the Mozumders.
41. In a Centrelink form dated 5 July 2006, Mrs Fardous included Mr Nuralam as sole owner of the Blacktown property, and gave it a valuation of $132,000. At T26/160 the AVO valuation for the property was $200,000.
42. At Exhibit A5, there is a document dated 17 August 2006 which was before the construction of the two houses on the subdivided land which notes that Mr Nuralam supplied the value as $390,000 while the AVO held it to be worth $200,000. I note there are further AVO valuations given at T26.
43. In the absence of other formal valuations from the Mozumders, I have accepted the valuations of the AVO as given in the documents. The AVO valuation of the property ranged from $220,000 in January 2003, increasing to $390,000 in May 2006.
44. As Mr Nuralam was shown as the legal owner of the property at Blacktown, and I have found in the paragraphs below that no constructive trust has arisen in the transfer of the land from Mr Iqbal to Mr Nuralam, the value of the property must be added to the family’s assets for purposes of calculating PPP. The value of the property at Blacktown increased the value of the family’s assets at the relevant time in excess of the threshold for PPP, and it is for this reason that Mrs Fardous incurred her debt of PPP.
The Loans
45. Relevant to this matter are three loans, the first being for $100,000 taken out by Mr Nuralam mortgaging his family home to provide money to subdivide the property at Blacktown which cost approximately $70,000 and took place on 17 May 2006. I noted that Logical Legal wrote to the SSAT on 2 December 2006 on Mrs Fardous’ behalf (T39/237), submitting that Mr Nuralam took out a mortgage of $100,000 to help fund his brother’s subdivision of the Blacktown property.
46. Both Mr and Mrs Mozumder were shown on the documents before the Tribunal as borrowers of $270,000 (Exhibit A9), from Nationwide Mortgage Corporation Pty Ltd, with the mortgagee being Perpetual Trustees Victoria Ltd, in a loan approved on 18 April 2005 (Exhibit A8). Perpetual Trustees Victoria Ltd was the credit provider. The security address was the Mozumder’s home shown with the value of $340,000, and also shown as $360,000 in other documents.
47. In the application for the loan at Exhibit A9 dated 10 April 2005, Mr Nuralam was shown as earning an annual salary of $85,879 from taxi driving and Little India, whereas Mrs Fardous was shown as earning $35,350 per annum from Toblu Cleaning. Both told me that the information had been entered by the finance broker, and that they agreed to sign the completed documents, Mrs Fardous saying she did not ever read anything, and relied on her husband to tell her what to do. Both agreed their signatures appeared on the documents. Mrs Fardous confirmed that she had never worked as a cleaner for anyone outside of doing some unpaid work at Little India occasionally. Mr Nuralam agreed that he permitted the broker to write anything at all, including information he knew to be false in order to obtain the loan, and agreed both figures were completely wrong and bore no relation to their real earnings. Mr Iqbal distanced himself from the loans saying he was not present when the forms were completed, and when the loans were negotiated, and had only recommended the broker to the couple.
48. Accompanying the loan applications were company reports for Little India Tandoori Restaurant Pty Ltd, and tax returns for 20002/3 and 2003/4 which the couple said they had not seen, but had been prepared by their broker. I noted that the tax return for Mr Nuralam for 2003/4 indicated that his taxable income was $85,879 with $55,879 from taxi driving and $30,000 from the Restaurant. The income figure for Mr Nuralam for 2002/3 was shown as $82,454 which Mr Nuralam said was also false. He added that he had never before seen the document. It is likely the returns were never lodged. There were also what purported to be tax returns prepared for Mrs Fardous at Exhibit A9 showing earnings of $34,550 from Toblu Cleaning Company, and allowances and earnings and director’s fees. Mrs Fardous said that she was not aware of these documents either. When asked about her directorship of the company she said she knew nothing about it. Mrs Fardous’ evidence was that she only became aware of the transfer of the property to her husband when she was asked to sign loan documents in 2005. The enterprising accountant had also shown a gross profit from trading of $158,449 for the Restaurant for 30 June 2004.
49. Then there were loan transactions between Mr Nuralam and Perpetual Ltd at Exhibits A4 & A6, the latter dated 15 November 2006.
50. A letter of Blacktown City Council dated 31 May 2007 (Exhibit A10), in reply to Centrelink indicated that rate notices for the Blacktown property from 1 July 1996 to 1 July 2000 were addressed to Mr Iqbal, that from 1 July 2001 to 1 July 2002 they were addressed to the two brothers, and from 1 July 2003 to 1 July 2006, they were addressed to Mr Nuralam alone. Copies of rate notices confirm the information in the Council’s letter, and were attached and form part of Exhibit A10.
51. When it came to construction at Blacktown, the development and building applications, and consent to build signed on 13 April 2005, were in the name of Mr Nuralam. There were numerous other documents including the plans at Exhibit A10 in relation to the construction which were all in the name of Mr Nuralam, adding weight to the argument that Mr Nuralam was not just the holder of the bare legal title to the property.
52. Mrs Fardous said that she has no knowledge of financial matters and defers to her husband in all things, including the provision of information to Centrelink. I am mindful Mrs Fardous’ evidence is that she completed her schooling to the age of 15 years, and that she cannot read English well. She claims to sign documents as requested by her husband without reading or understanding them, and relies on him. She also said that she did not visit the property at Blacktown, but said that she understood her husband was helping his brother out with it. Mrs Fardous told me that she did not know what the repayments were for the loans which had been taken out by her husband, or whether the payments were up to date. I note that Mr Sutherland submitted this was suggestive that Mr Nuralam took no significant interest in the property, and that it in fact belonged to Mr Iqbal. I am not satisfied and reject Mr Sutherland’s submission as all the indicia point to Mr Nuralam as the owner. Amongst other things, he holds legal title to the land, the rate notices were addressed to him and not Mr Iqbal after the transfer of title, the building application and other construction documents were in his name, and he continues to pay the mortgage.
53. Loan repayments made to ING Bank were also at Exhibit A9, and a document in both Mr Nuralam and Mrs Fardous’ name for the first quarter of 2005 showed they made the interest payments of approximately $1,000 per month by direct debit in that period. Rate notices from Campbelltown City Council for 2005 also at Exhibit A9, were in the names of Mr Nuralam and Mrs Fardous.
54. I conclude from the above that Mr Nuralam was prepared to agree to false information being supplied if that was going to be necessary to obtain loans, and that he in fact authorised his broker to fill in forms which both he and his wife signed. I accept that Mrs Mozumder is unlikely to have known exactly what the forms claimed the couple each earned. She did however sign several documents which included data which was false. There is no evidence before me to satisfy me that she inquired about the data as she should have.
Did a Constructive Trust Arise as a Result of the Transfer of the Property from Iqbal Mozumder to Nuralam Mozumder
55. In considering the ownership of the property at Blacktown, I noted that pursuant to section 23C of the Conveyancing Act 1919 (NSW), interests in land must be created in writing. However equitable interests in property can be recognised through the concept of constructive trusts, and it is the creation of the latter which the Respondent argues in this case. If Mr Nuralam can be found to be holding the property as a constructive trust for his brother, and if he has no beneficial interest in it, then this will impact on the Mozumder family’s assets, and accordingly the debt raised by Centrelink in relation to payments of PPP to Mrs Fardous. The circumstances of the transfer of the property between the brothers has been explored in the paragraphs above.
56. Both parties have cited Kintominas v Secretary, Department of Social Security (1991) 30 FCR 475, a case where the Federal Court considered the assets test in connection with the Social Security Act 1947, the predecessor to the present legislation. In that case, a son who had spent considerable time and money in maintaining a property promised to him on his mother’s death, was found to have an equitable interest in her property during her lifetime. The Court in Kintominas held that the existence of the equitable interest by the son was relevant in determining the value of the mother’s interest in her asset, and reduced her interest in the property.
57. In considering the present case, I note that Mr Nuralam was the legal owner of the Blacktown property, and the Council rates and other notices were addressed to him after 2002. His evidence was that he paid them, but he also told me that he was reimbursed by his brother in cash for all the outgoings related to the property. I have noted above that there is no documentation to satisfy me that such reimbursement occurred. Further there was no suggestion Mr Nuralam did not pay the mortgage.
58. Another leading case in relation to trusts is Baumgartner v Baumgartner (1987) 164 CLR 137, where the principle of unconscionability was restated. In a joint judgement, their Honours stated:
“In rejecting the notion that a constructive trust will be imposed in accordance with idiosyncratic notions of what is just and fair his Honour (in Muschinski v Dodds (1985) 160 CLR 583) acknowledged that general notions of fairness and justice are relevant to the traditional concept of unconscionable conduct, this being a concept which underlies fundamental equitable concepts and doctrines, including the constructive trust.”
59. Ms Schuster argued on behalf of the Applicant that in Kidner v Secretary, Department of Social Security (1993) 31 ALD 63, the Court held that the term “assets” should be construed as bearing its ordinary meaning, and that “[in] ordinary parlance, a person’s assets would not be regarded as including property of which that person was the bare legal owner when the beneficial interest was vested in another”. The Court stated:
“33. What is essential before a constructive trust can arise where the owner of property has its value increased by means of direct or indirect financial contributions or work or labour provided by another is that it must be unconscionable, having regard to all the relevant circumstances of the case, for that owner to assert unfettered beneficial ownership of the improved property. If the other person made the improvements on a common understanding with the owner that he or she would have beneficial interest in the property, that will often provide this element of unconscionability sufficient to make the property subject to a constructive trust of appropriate content for that other person.”
60. Ms Schuster submitted that what was crucial in the abovenamed case was the considerable sums of money the family members had spent in improving and maintaining the properties in question. She submitted that furthermore, in Kidner “there was no factual dispute and no issues of credit in relation to the original agreements or promises or the sums expended by the parties”.
61. I am mindful that in two recent cases, Repatriation Commission v Tsourounakis [2004] FCAFC 332 and Repatriation Commission v Tsourounakis and Anor (2007) 158 FCR 214, the Federal Court restated the positions taken in Kidner and Kintominas. I note that the Tsourounakis cases concerned the application of the assets test under the Veteran’s Entitlements Act 1986, which is essentially identical to the assets test and the definition of assets in the social security law.
62. The first Tsourounakis case in 2004 concerned a decision by the Repatriation Commission that Mr and Mrs Tsourounakis’ interest in a property was 61.87%. This was on the basis that the property had been promised to their son, who had expended considerable sums and taken on a loan to improve the property. The AAT set aside the Commission’s decision and found that the parents had entirely disposed of the property in 1992. The Court found that the evidence was not capable of supporting the conclusion drawn by the AAT, given that the parents had remained legal owners, and had declared the property as theirs in various forms provided to the Commission. The Court remitted the matter to the AAT, and noted that the question was whether, if the parents were to assert beneficial ownership of the property, their son would have a remedy in a court of equity. The Court noted that the remedy available depended on the facts of the case and that “a court must first decide whether there is an appropriate equitable remedy that falls short of the imposition of a trust: see Giumelli v Giumelli...”. The Court stated that the Tribunal was required to “examine the extent to which a court of equity would require Mr and Mrs Tsourounakis to compensate Michael as a term of being permitted to dispossess him and his family and to sell the Property” (Tsourounakis 2007).
63. The judges noted:
“52 The object of the remedy that might be ordered by a court of equity in a case of proprietary estoppel is not necessarily to make good the belief and expectation encouraged by the conduct of the owner, but to recompense the claimant for the expenditure or other detriment suffered as a consequence of reliance on the belief and expectation so encouraged. In many cases where the requirements summarised above are satisfied, it will be possible for the owner of property to fulfil the equitable obligation owed only by conveyance or transfer of the interest, the expectation of which was encouraged by the owner’ conduct. However, in other cases, it will be appropriate for lesser relief to be awarded. For example, where the expenditure or detriment is slight in comparison to the value of the property in question, it would be inappropriate to penalise the owner by depriving the owner of full ownership of the property.
...
55 Cases of proprietary estoppel involve a situation where departure from an assumed state of affairs would be contrary to the requirements of conscience. Whether departure is to be permitted, and the extent to which it is to be permitted depends upon all of the circumstances of the case. In some cases a court may require the party estopped to make good the assumption: see Commonwealth v Verwayen (1990) 170 CLR 304. Alternatively, the court may, in an appropriate case, impose terms upon departure from the assumption, determining that some lesser relief is appropriate. The court may require that a sum of money be paid to compensate a claimant as a consequence of the departure from the assumption.”
64. On reconsideration the AAT determined that the Tsourounakis’ son’s interest in the property was 50% on the basis of the maxim “equity is equality”. On appeal to the Federal Court, the AAT’s decision was set aside in a judgment of Dowsett and Edmonds JJ, Spender J, coming to the same decision, but on a different basis.
65. In a majority judgment Dowsett and Edmonds JJ determined that an equitable obligation in relation to the property, in favour of their son, had arisen and that this obligation was “a clear limitation upon Mr and Mrs Tsourounakis’ proprietary rights of the property, lessening its value to them. We consider that to be an encumbrance upon the property for the purposes of s 52C” (Tsourounakis 2007).
66. The judges further determined that the son had made contributions to the property for which he ought to be compensated, but that he had not in fact gained beneficial ownership of the property.
67. Ms Schuster submitted that the line of authorities cited make clear that equitable interests may affect the value of a person’s interest in a property for the purposes of the social security law. However, the crucial question to determine is whether a court of equity would provide a remedy if the legal owner was to assert full ownership to the property. Such a remedy, whether it is by way of a constructive trust being imposed or another equitable remedy, depends not only on any promise or undertaking given by the legal owner, but also the detriment incurred by the person seeking to assert an equitable interest, and the fact that it would be a fraud or unconscionable for the legal owner to assert his ownership. What is very clear in the decisions is that evidence of detriment is crucial to the question of whether an equitable interest has been created.
68. Ms Schuster submitted that the Secretary contends that in this case there is real doubt as to whether Mr Iqbal has acted to his detriment at any stage although he transferred the real property to his brother in full, allegedly for no consideration. I am mindful however, that notwithstanding it appeared that Mr Iqbal transferred the Blacktown property to his brother free of encumbrances, as already stated above, Mr Iqbal’s 2002 accounts showed two deposits totalling $45,000 very close to the time when the property was transferred to Mr Nuralam, which Mr Nuralam confirmed were transfers from him to Mr Iqbal, albeit from a third party. Mr Nuralam gave evidence that it was in repayment of a debt to Mr Iqbal from a third party from whom there was no evidence before the Tribunal. In the absence of credible evidence from that third party, I consider the scenario doubtful, and am not satisfied about the veracity of that evidence. I do not accept it, and characterise the transfers as a payment from Mr Nuralam to Mr Iqbal.
69. Ms Schuster also argued that it appeared to be Mr Nuralam rather than Mr Iqbal who has acted to his detriment in relation to the property because he took out a loan over his home to finance the development application, and it was he who paid the rates and other outgoings. It is also Mr Nuralam who continues to pay the Nationwide mortgage loan repayments, Ms Schuster argued.
70. Mr Sutherland on the other hand, argued that the SSAT had found a constructive trust had been created between the Mozumder brothers because the clear understanding and common intention had been that Mr Nuralam held the legal title merely as a matter of convenience for Mr Iqbal. He submitted that the critical issue was that Mr Iqbal had intended to transfer only the legal, and not the beneficial interest to his brother as a matter of convenience while he travelled to Bangladesh. He acknowledged that the intentions were not evidenced in writing, pointing out that Mr Nuralam now knew and acknowledged that a trust deed of power of attorney could have provided for him to look after the property.
71. Mr Sutherland also referred to Kintominas, and to the principle of unconscionability as expressed in Baumgartner. Mr Sutherland referred to the evidence of Mrs Fardous in support of the constructive trust argument, being that Mrs Fardous had not visited the property, and said that she talked about her brother-in-law’s property, and that her husband was helping his brother out. Mr Sutherland also referred to the evidence of Mr Nuralam which was that he had the caretaker role for the property because Mr Iqbal was required to travel to Bangladesh to assist his sick parents. He also said that Mr Nuralam’s evidence was that he paid rates and outgoings, and was reimbursed on Mr Iqbal’s return. He also referred to Mr Nuralam’s evidence that the Mozumders had not notified Centrelink of the property because they did not believe that Mr Nuralam owned it, however that in 2006 he was advised by a friend to do so. Mr Sutherland also referred to the mortgage taken out by Mr Nuralam in 2005 to re-finance his existing home loan and an investment, submitting that unfortunately notwithstanding misgivings Mr Nuralam had regarding the incorrect information, it was common practice in the community to exaggerate income in order to obtain loans. In further support of his argument Mr Sutherland submitted that once the property had been sub-divided and construction had taken place, Mr Iqbal and his family live rent free in one of the houses which was built, and intends to reimburse Mr Nuralam for his costs once the properties are sold. Mr Sutherland also referred to the evidence of Messrs Syed and Khan who said that Mr Iqbal had told them Mr Nuralam was in the caretaker role for the property, and that Messrs Chen and Aban said they dealt with Mr Iqbal.
72. Mr Sutherland also submitted that the $45,000 paid to Mr Iqbal by Mr Nuralam was, as given in evidence by the Respondents, on behalf of another person.
73. I preferred Ms Schuster’s submissions, noting issues of credit in the evidence of the Mozumders, particularly as the Mozumders agreed that the income they were shown as earning in the applications for loans was grossly inflated, and false. Further financial statements which were prepared in regard to the restaurant also contained false information. I noted that Mr Iqbal denied knowledge of those matters although he had recommended the broker.
74. In coming to a decision that no constructive trust arose when the legal title to the property at Blacktown was transferred from Mr Iqbal to Mr Nuralam, I have taken into account the evidence before me and the law, specifically the principles established in cases such as Kintominas, Baumgartner and Tsourounakis. I note as follows:
(a) There are inconsistencies in the evidence. I note Mr Nuralam’s early statement to the Authorised Review Officer that the transfer of title occurred because Mr Iqbal had received property from their father, and his denial of that at the Tribunal.
(b) In a submission to the SSAT, solicitors for Mr Nuralam did not argue that he did not own the land at Blacktown, but argued in relation to the Mozumders’ level of assets based on the AVO valuations for 2003 – 2005. The solicitors asserted that the $100,000 borrowed by Mr Nuralam was a loan to his brother for the sub-division, (17 May 2006), and the rate of assessment should have been apportioned to be 50 percent of the value of the property by Centrelink because Mr Nuralam only owned half the property.
(c) In later evidence, including to the Tribunal, the situation was represented as only legal title had passed to Mr Nuralam, so he could pay bills and organise lawn mowing, and Mr Iqbal remained the beneficial owner.
(d) I am satisfied, and this is acknowledged by Mr Nuralam, a transfer of title was not necessary in order to pay bills and provide for lawn mowing on vacant land.
(e) As to the payment of $45,000 from Mr Nuralam to Mr Iqbal within a short time after the transfer of title; I am not satisfied that that was in satisfaction of a debt to a third person, and in the absence of a credible explanation, consider it was more likely to have been a direct payment from Mr Nuralam to Mr Iqbal as consideration for the transfer.
(f) The Council rates after the transfer in mid 2002 have been in the name of Mr Nuralam, and he paid the bills and the mortgage payments. There is no record of Mr Iqbal having reimbursed Mr Nuralam for the rates and outgoings, and I am not satisfied the reimbursement occurred as given in evidence. Mr Nuralam is also shown as the proprietor in development and building applications, correspondence and architectural plans.
(g) I am satisfied from the evidence of the conduct and dealings between the brothers that the common intention on transfer of the title was not that Mr Nuralam hold the legal title merely as a matter of convenience for Mr Iqbal.
(h) I note that neither Mr Nuralam nor Mrs Fardous told Centrelink about the change in the level of their assets in 2001 or 2002. They later told Centrelink in 2006, informing the Tribunal that a friend had advised they should. I preferred to rely on the fact that the disclosure was dated to the time when a data matching exercise done by Centrelink was disclosed to the Mozumders.
(i) I am satisfied that it is Mr Nuralam, rather than Mr Iqbal who acted to his detriment in regard to the property, paying $45,000 to Mr Iqbal at the time of transfer of title, obtaining and paying a mortgage on his principal place of residence, taking out a further mortgage in 2006, and paying for rates and outgoings. I note further that false information regarding the level of income of Mr Nuralam and Mrs Fardous was included on loan documents and the level of their assets given was $897,000 which included the value of the Blacktown property. No trust was asserted at that time.
75. The evidence of the additional witnesses was of little assistance, Mr Syed asserting Mr Nuralam was intended to be caretaker of the property without having been privy to any of the discussions between the brothers; similarly Mr Khan. Mr Aban had no knowledge of the arrangements between the brothers, but produced drawings in Mr Nuralam’s name and was paid by Mr Nuralam.
76. I am not satisfied there is satisfactory evidence regarding the arrangements to take place after the sale of the houses, and I do not rely on the evidence given that Mr Nuralam will be reimbursed for having paid the mortgages. In summary, I am satisfied to the requisite standard that no constructive trust which a Court would recognise has arisen in the transfer of the title of Blacktown from Mr Iqbal to Mr Nuralam. The value of Blacktown must form part of the assets of the Mozumders and accordingly impact upon Mrs Fardous’ eligibility for PPP from 2003.
WHETHER MRS FARDOUS’ PPP WAS CORRECTLY CANCELLED ON 10 JULY 2006; WHETHER SHE HAS INCURRED A DEBT OF PPP, AND WHETHER THERE ARE SPECIAL CIRCUMSTANCES TO EITHER WRITE OFF OR WAIVE THE DEBT EITHER IN PART OR IN FULL
77. The Secretary has raised a debt of PPP because he holds that the Mozumder’s assets exceeded the threshold for the payment of PPP to Mrs Fardous from 2003 – 2006. That debt has arisen pursuant to section 1223(1) of the Act because the Secretary held that PPP, a social security payment, was made to Mrs Fardous when she was not entitled to it.
78. Mr Sutherland submitted that if I did not find that the transfer of the property at Blacktown created a constructive trust, and a debt of PPP has arisen for Mrs Fardous due to the level of assets of the family, then I should find that there are special circumstances to either waive the debt in part or in full. In the alternative, given the inability of the Mozumders to repay, he submitted the debt be written off.
79. He submitted, with reference to the profit and loss statements of Little India, (losses in 2004 and 2005), and that Mr Nuralam only draws a salary of $10,000 from the business, that the couple’s financial position is troublesome, and that special circumstances could therefore be found to assist with the debt.
80. I am satisfied as stated in the paragraphs above, that no constructive trust arises in relation to the ownership of Blacktown, and that accordingly the value of the property must be take into account in considering Mrs Fardous’ eligibility for PPP. I accept the valuations as given by the AVO, and find that accordingly since at least 2003, Mrs Fardous’ level of assets exceeds the threshold for PPP. Accordingly, she has incurred a debt of PPP as calculated.
81. I am also mindful that prior to deciding whether a debt can be written off or waived, I must consider how the debt arose. I find that the debt arose because the Respondent did not disclose to Centrelink that the property at Blacktown had been transferred to Mr Nuralam, and formed part of the Mozumders’ assets. Mr Nuralam’s evidence was that he disclosed it in 2006 when a friend advised he should, but coincidentally that was when a data matching exercise had been undertaken by Centrelink. Accordingly I am satisfied that it was the latter reason which motivated the disclosure, and that the Mozumders knowingly failed to report their ownership of Blacktown.
82. Write-off is only available where there is no possibility of recovering the debt. I understand Mrs Fardous still receives family tax benefit and accordingly the debt may be recovered by deductions from those payments.
83. I have not heard argument which has convinced me that special circumstances exist in order to waive Mrs Fardous’ debt in part or in full.
84. Special circumstances in the context of the Social Security Act 1991 have been considered many times before by this Tribunal, and they are not defined as such. In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Federal Court, in examining “special circumstances” within the terms of section 102(1) of the 1947 Act said:
“It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given.”
85. In the leading case of Re Beadleand Director-General of Social Security (1984) 6 ALD 1, the Court defined “special circumstances” as being those which are “unusual, uncommon or exceptional”, and this has been reinforced in many cases which have been decided since.
86. I find, relying on authority in Re Beadle and Director-General of Social Security, Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690, that unless the circumstances of Mrs Fardous’ case are “unusual, uncommon or exceptional” as contemplated in the cases above, then I am precluded from exercising the discretion to waive all or part of the debt.
87. I am satisfied that Mrs Fardous’ circumstances do not meet the tests for special circumstances. Being in straitened financial circumstances alone is not sufficient to meet the test. The family operate Little India which produces income, and own real estate in excess of the threshold limit. The reason the debt has arisen is because that threshold was breached through non-disclosure, and loans were obtained after false information regarding incomes of the Mozumder family were given to lenders. Accordingly I am not satisfied that I should exercise the discretion to waive all or part of Mrs Fardous’ debt of PPP. A capacity to repay remains, and write-off is not applicable.
CONCLUSION
88. I am not satisfied with the evidence of Mr Nuralam and Mr Iqbal. I did not accept that Mr Iqbal, in transferring the title of the property at Blacktown to Mr Nuralam in full in 2002 intended to transfer legal title only. I did not accept that the intention was that a constructive trust be created. I am satisfied that Mr Nuralam has been the full legal and beneficial owner of the Blacktown property since 2002, which he did not disclose to Centrelink until 2006 when a data matching exercise was taking place.
89. I am satisfied that the Mozumders provided false financial evidence to lenders in order to obtain loans, and that they have admitted that. They did not disclose the loans in relation to the construction at Blacktown to the SSAT.
90. There were many inconsistencies in the evidence as indicated in the paragraphs above.
91. As I have found that Mr Mozumder does not just hold bare legal title to the property at Blacktown, the value of the Blacktown property must be added to the Mozumders’ assets for purpose of social security law. Accordingly their assets at the relevant time exceeded the threshold for PPP, and this has resulted in a debt of PPP to Mrs Fardous. I am satisfied there are no special circumstances for me to exercise the discretion to waive the debt in full or in part. The debt cannot be written off as Mrs Mozumder still receives family tax benefit (Applicant’s submissions), and accordingly it can be recovered, and must be repaid.
92. The decision of the SSAT must therefore be set aside and the decision of the Authorised Review Officer of Centrelink restored.
DECISION
93. The decision of the SSAT is set aside and in substitution the Tribunal decides that Mrs Fardous Mozumder has incurred a debt of $32,565.75 for PPP. I do not find special circumstances under which the debt may be waived in full or in part, and accordingly the full amount must be recovered.
I certify that the 93 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member
Signed: .............[sgd]...................................................................
AssociateDates of Hearing 19 February, 21 April and 13 May 2008
Date of Decision1 August 2008Advocate for the Applicant Ms H Schuster, Centrelink Legal Services
Branch
Solicitor for the Respondent Mr S Sutherland, Logical Legal Solicitors
0
9
0