Stanbouli and the Secretary, Department of Family and Community Services
[2006] AATA 78
•1 February 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 78
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2004/1495
GENERAL ADMINISTRATIVE DIVISION ) N2004/1496 Re JOSEPH AND MARY STANBOULI Applicant
And
THE SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Senior Member, Mrs Josephine Kelly Date1 February 2006
PlaceSydney
Decision The decision under review is set aside and the matter is to be remitted for reconsideration in accordance with the findings set out in this decision.
[sgd] Senior Member, Mrs Josephine Kelly
CATCHWORDS
SOCIAL SECURITY – disposal of assets –investment property – whether Applicant disposed of asset by mortgaging the property and transferring the property – disposal of asset when transferred property to daughter-in-law – disposal of assets when repaid loan taken out to finance sons’ business without consideration – no loans to family members existed – decision set aside.
LEGISLATION
Social Security Act 1991 sections 1121, 1122 and 1123REASONS FOR DECISION
1 February 2006 Senior Member, Mrs Josephine Kelly Proceedings
1. Mr Joseph and Mrs Mary Stanbouli seek the review of the decision to cancel Mr Stanbouli’s Age Pension and Mrs Stanbouli’s Wife Pension because they did not satisfy the assets test. On 22 October 2004, the Social Security Appeals Tribunal (“SSAT”) (T2/3-13) affirmed the decision made by Centrelink on 30 June 2004. The asset that gave rise to the decision was an investment property at Young Street, Redfern (“Young Street”) owned by Mr Stanbouli. Young Street was mortgaged to Magney Mortgages Limited (“Magney”) from 2002 until May 2004 when Mr Stanbouli transferred it to his daughter-in-law, and the mortgage was paid out from the proceeds of sale. Mr Stanbouli was born on 10 June 1928.
Issues
2. The question in the proceedings is whether there has been a disposal of assets, which raises the following issues:
· Whether Mr Stanbouli disposed of an asset when he transferred Young Street to his daughter-in-law in 2004;
· Whether payments to Magney and related creditors in 2004 represented a disposal of an asset; and
· The status of alleged payments to various family members following the transfer of Young Street.
· Whether repayment of business overdrafts to the NAB and other debts of Morspan Pty Limited in 2002 funded by Mr Stanbouli’s loan from Magney was a disposal of an asset.
Background to the Decision
3. On 8 April 2004, Mrs Stanbouli telephoned Centrelink to check why both pensions had reduced. She was advised that it was because there was in increase in the value of the investment property, Young Street, by $120,000 (T6).
4. On 22 April 2004 a transaction summary from Magney was sent to Centrelink. It was addressed to Mr Stanbouli “and shows $273000 principle opened 08/05/02 Said at i/v 21/04/04 he was Guarantor for Son who borrowed money for a business that’s gone bad?” (T8)
5. In May and June 2004, other documents were apparently provided to Centrelink by Mr Stanbouli relating to Magney’s taking possession of Young Street (T7), (T12), (T13), and the repayment of that mortgage and associated costs (T10 and T15). An extract from an anonymous Commonwealth Visa Gold account (T16) shows that on 9 March 2004 $20,000 was withdrawn. On the same day $20,000 was deposited at an ANZ bank (T17), which is reflected in a $20,000 payment that day to Magney (T18).
6. Mr and Mrs Stanbouli wrote a letter to Centrelink dated “15 July 2004” although all pages of it and documents apparently accompanying it are stamped: “Centrelink 18 June 2004 Redfern” (T22) (“the July letter”). The letter stated that Young Street was mortgaged in 1999 to the National Australia Bank. The mortgage was for $240,000. The loan was taken out to secure an overdraft for their eldest son’s business. Two sons, Abraham and John, owned a panel beating business. The documents sent with that letter included a letter from Mr Stanbouli’s solicitors stating that the sale of Young Street had occurred on 20 May 2004, that the proceeds of sale were $211,083.19 ,being the balance of the purchase price, and confirming that the Magney loan had been fully repaid.
7. Also sent to Centrelink at the same time were handwritten notes stating that loans had made been made to Mr Stanbouli which he had repaid (“the family loans”). They were from:
John Stanbouli (son) $25,000 (T24)
Peter Stanbouli (son) $30,000 (T25)
George Istanbouli (nephew) $15,000 (T27)
Elie Stanbouli (son) $50,000 (T28)
Mounir Stanbouli (brother) $10,000 (T29)
$130,000
8. Apart from the notes from Peter and Mounir Stanbouli, each note stated that the repayment occurred after the sale of the property.
9. Another handwritten note from Mr Elie Stanbouli stated that he and his wife owe Mr Stanbouli $80,000 which “would be re-imbursed back to my father and mother in due course as we are able to do so” (T26).
10. On 2 July 2004, Centrelink sent Mr and Mrs Stanbouli a letter informing them that the Age and Wife Pension had been cancelled because the value of their combined assets was higher than the allowable limit under the assets test. The value of the combined assets was assessed as $498,916 comprising $288,916 for repayment to Magney Mortgages and other creditors and $130,000 gifted to family members in addition to $80,000 which Elie Stanbouli owed (T34/76).
Documentary Evidence of Financial Matters
11. It is necessary to understand Mr Stanbouli’s financial dealings related to Young Street from 1999. The following material is not disputed.
12. There was a mortgage over Young Street with Westpac which was discharged on 3 February 1999 (Exhibit R5). A property search in the same exhibit shows that It had been taken out in 1995.
13. In February 1999, Morspan Pty Limited (“Morspan”) entered into two agreements with the National Australia Bank (“the NAB”) for business mortgage overdraft facilities. One was for $50,000 (Exhibit A3) and the other was for $190,000, a total of $240,000 (Exhibits A4 and A5). Mr Stanbouli became a guarantor, together with Mr Abraham Stanbouli and Mr Anis Abouhaidar. Mr Stanbouli also mortgaged Young Street as security (Exhibit R3, Bundle 1). Exhibit A5 includes signed documents relating to the guarantees, totalling $240,000. They are dated around 20 February 1999. Mr Abraham Stanbouli gave evidence about Morspan and the panel beating businesses he ran with Mr Abouhaidar, which is set out later in this decision.
2002
14. Exhibit R3, Bundle 1, contains documents establishing the following. Mr Stanbouli borrowed $273,000 from Magney on 8 May 2002 which was secured by a mortgage over Young Street. The loan was an interest only loan for business or investment purposes. The mortgage to the NAB was paid out in the sum of $255,446.37. A copy of the discharge of the NAB mortgage is contained in Exhibit R5. The total amount borrowed was paid as follows:
NAB discharge of mortgage: $255,446.37
Matraville Smash Repairs (Aust) Pty Ltd $7,545.50
J S Pinto & Co (solicitors) $991.90
Magney & Rhodes (solicitors) $2,306.57
Magney Mortgages Ltd $4,509.66 (2 cheques) Oz Commercial $2,200.00
$273,000.00
15. That exhibit included a letter from Magney & Rhodes to JS Pinto & Co enclosing a Westpac Periodical Payment Authority for their “client” to be filled out and provided on settlement. A partially filled out copy of that form shows an account number and account name, Matraville Smash Repairs (Aust) Pty Ltd, which was signed by “A Stanbouli”.
16. On 1 November 2005, Mr N G Singleton wrote to Centrelink (Exhibit R2). He was the official liquidator appointed to Morspan pursuant to an order of the Supreme Court on 17 December 2002. Mr Singleton wrote that he had not been provided with the books and records of the company and was unaware of any debt to Mr Stanbouli. The letter also contains the following information. Mr Abraham Stanbouli was a director and secretary of Morspan Pty Limited. Mr John Stanbouli was also a director. According to ASIC records, both were appointed on 4 July 2000. Mr Abraham Stanbouli’s address was Young Street. The directors had advised Mr Singleton that the company owned a smash repair business that was sold in early 2000, with all creditors paid from the proceeds of the sale and a refinance of the directors’ property. Mr Singleton estimated Morspan’s financial position as:
Total Book Value Assets:$53,301.62
Total Estimated Value Assets:$2,073.15
Total liabilities: $56,750.92
Estimated Deficiency $54,677.77
17. The only banking facility Mr Singleton found Morspan had after investigation, was an account with Westpac that had a $2,073.15 balance, which he has realised. An amount of $6,235.64 was outstanding to St George Bank for the hire purchase of a communication system.
18. The documents in Exhibit R3, Bundle 2, establish that during November 2002 when the default arose, Mr Abraham Stanbouli sent Magney a cheque which “bounced” and advised that he would pay cash for the arrears and later advised he had an emergency and could not come in.
19. On 12 January 2004, as a consequence of defaulting under the mortgage contract, Magney filed a Default Statement of Claim in the New South Wales Supreme Court seeking judgment for possession of Young St in order to exercise its power of sale (T12/41-48). The Statement of Claim alleges that the mortgage was executed on 8 May 2002 and that the contract under which the funds were advanced was for the sum of $273,000. The claim was for outstanding interest in the sum of $24,283.46. Magney entered into possession of Young Street on 16 April 2004.
Transfer of Young Street in 2004
20. The documents in Exhibit R3 Bundle 3 show that before the planned auction of Young Street by Magney, there was an exchange of contracts between Mr Stanbouli and an unidentified person, and a request to Magney to prepare a discharge of mortgage (letter from John Orford & Associates dated 5 May 2004 to Magney Mortgages). As of 14 May 2004, the mortgage had been discharged (letter from Horton Rhodes solicitors to Magney dated 18 May 2004). The contract for sale from Mr Stanbouli to Kleoniki Stanbouli was not in evidence. Kleoniki Stanbouli is Mr Stanbouli’s daughter-in-law. She is married to his son Ellie.,
21. The documents in Exhibit R4 include a copy of the transfer of Young Street to Kleoniki Stanbouli dated 20 May 2004 which states “The transferor acknowledges receipt of the consideration of $500,000”. The current market of the property on 3 May 2004 was $500,000 (State Property Inspections report in Exhibit R4).
22. The proceeds of “sale” were distributed as follows:
$276,967.49 to repay Magney Mortgages (T15, page 51, cheques 1 and 2)
$8,470.07 to Horton Rhodes, Solicitors (see T15 page 51, cheques 3, 4 and 6)
$3,479.25 to Magney & Rhodes (see T15 page 51, cheque 5)$288,916.81 Total
23. There are cheque references on the Settlement Instructions in Exhibit R4. Those instructions show that the NAB was the lender to Kleoniki Stanbouli. The total amount of funds received from NAB was $288,916.81, the amount distributed as set out above. There was no cheque to Mr Stanbouli. The letter from John Orford and Solicitors to Mr Stanbouli dated 8 June 2004 stated that the “proceeds of sale amounted to $211,083.19, being the balance of the purchase price.” It did not refer to the payment of that or any other amount to Mr Stanbouli. It confirmed that the Magney loan had been fully paid out on settlement and thanked Mr Stanbouli for his instructions.
Other Evidence
24. There were two days of hearing in this matter. On the first occasion, Mr and Mrs Stanbouli represented themselves, although their son Mr Abraham Stanbouli, was their spokesman. On the resumed hearing, Mr Hodges, solicitor, appeared for them.
25. Exhibit A1 is a “Loan Agreement” between Morspan, the borrower, and Mr Joseph Stanbouli, the lender. The loan for $270,000 was “for the sole purpose of helping the company with cash flow as its debtors which mainly consist of insurance companies are delaying payment of invoices”. The funds were to be made available to Morspan on 5 April 2002 and deposited into its “bank accounts to help boost its financial position and provide the necessary capital to keep trading whilst payment of the insurance invoices are been made”. It specified repayment of $4000 per month for 10 years “unless early repayments are made”. Abraham and John Stanbouli signed the document “For and on behalf of Morspan P/L” in their capacities as Managing Director and Director respectively.
26. Exhibit A2 is a record of interview between Mr Stanbouli and a Centrelink Financial Information Service Officer dated 29 March 2005. The reason for the interview was to “discuss gifted assets and options.” It states that Mr Stanbouli said that the $288,916 was repaid to Magney as a result of his son’s company being unable to meet its financial obligations. The mortgage had been taken out on Young Street to extinguish a bank overdraft owed by his son’s company which Mr Stanbouli had guaranteed, “As such, it is your contention that the amount of $288,916 represented a loan or investment in the company funded by a loan.” The document explains that if an investment is made into a company which is wound up due to business failure, the investment would cease to be assessed as an asset by Centrelink and would not be a deprived asset. “You would need to provide evidence that a genuine investment was made in return for equity in the company”.
27. Both Exhibits A1 and A2 were tendered on the first day of the hearing.
Abraham Stanbouli
28. Abraham Stanbouli gave evidence about Morspan and the businesses he was involved in. He said that there were three directors of the company – himself, his brother John, and partner Anis Abouhaidar. Morspan traded as Matraville Smash Repairs. In 1999 Morspan had two smash repair shops. Mr Abhouhaiar looked after the business in Matraville and he looked after one at Hillsdale. He talked about the overdraft taken out in 1999 and said that it stayed around $240,000. He said when the 2002 loan was taken out with Magney for $273,000, the overdraft was paid out. They were seeking a lower interest rate. He said that his father had no security for the loan to Morspan in 2002 for the $273,000 – either from the company or from his sons.
29. He said that in the latter part of 1999 they had problems with the NRMA which resulted in a cash flow problem. Mr Abouhaidar left the company in mid-2000. He had no liability for Morspan’s debt. He tried to fight NRMA in 2000. He continued to trade, relying on other companies to survive. He still had NRMA work but it was slow paying. He said he “got funds from Dad” which “prolonged things”.
30. He closed the Hillsdale business in late 2001 and consolidated the Matraville business which had always had tow trucks. Things were getting too hard and he got fed up. He decided to take over the towing side of the business under the company and left the smash repairs side to his young brother, Peter, and a partner Colin, who took over in August 2003. He said that the sale was for $120,000, although “we” only received half from Colin. Peter did not pay. That partnership was short-lived. John Stanbouli also left when the money was not coming in. He kept trading but a policy on types of tow trucks that might be used meant he could only use a couple of trucks in his fleet. Another smash repairer who had bigger trucks put them under his banner and they kept trading. Late in 2003 he had an outstanding workers compensation premium and the insurance company obtained a winding up order for the company. He said that his only liability was to his father.
31. He said that his agreement with his father was that he would pay him $4,000 a month, from which his father would repay the loan and have some left over for his use, for example to go overseas. He said: “Dad did it to help us out; had things gone to plan, things would have been alright for him”.
32. During the period of the Magney loan, he kept falling behind as there was a quiet period in the workshop, and could not make payments for a number of months. His brother Elie was living in Young Street. He had a daughter and pregnant wife. When Magney took possession, Elie was not living at Young Street for a month until he organised finance.
33. Abraham said that Mr Stanbouli’s newphew, George, is a social worker who used to be at Centrelink. He was a “Person Permitted to Enquire” to Centrelink (T19 received 4 June 2004).
34. In cross-examination, Abraham Stanbouli said that no-one had contacted Centrelink to see how the financial arrangements would affect pensions. He said: “No. We left things too long, went into panic mode”. He also said that he had composed Exhibit A1, the 2002 Loan Agreement between himself, John and his father. He said: “our financial adviser said maybe you should draw something up”. His father did not take any action to get his money back and did not consult a solicitor to his knowledge.
35. When asked whether he and John had taken any action to pay back Mr Stanbouli, he said that when he was doing well, he and his partner took out investments overseas. He has received no return yet. He has had to refinance his house three times and was only able to because the price has gone up so much in the last few years. He has a mortgage of $800,000.
36. He said that Elie borrowed $400,000 to purchase Young Street, which was the maximum he could borrow. He said that he paid $20,000 deposit in cash and has been paying his parents some money each week. He is a panel beater in Alexandria and drives a tow truck on commission for which he would be paid cash.
Mr Stanbouli and Mrs Stanbouli
37. Mr and Mrs Stanbouli gave evidence. Sometimes one spoke and sometimes the other, and sometimes after a discussion. Mr Stanbouli said Elie is paying him $300 – after his wife told him $250 per week. She says it depends on his situation, as he has a wife and two children.
38. In cross-examination they said that Elie had been paying ever since the pensions were cancelled. They do not know the total and do not know whether he has kept a record. “We are confident in our son, we trust him”. “He probably has a record of that, he will probably tell us”. They are using that money to live. They have no other income. When questioned about a balance of $711 in a Commonwealth key card account in June last year, they said: “If there was, we spent it”. Their account book starts 1 July 2004. They said that their household contents were valued at $2,000, a Toyota Camry at $1,000, and that in April a Lazer was stolen. They received an insurance payout of $9,000 for something in 1999.
39. They were also cross-examined about the family loans. In relation to the $25,000 loan from John, Mr Stanbouli said that John gave it to him for renovating at home, Bourke Street, and Young Street. They have remodelled the kitchen, including tiling and installed an air conditioner because of his health. At Young St they have renovated the kitchen, tiled the floor, done plumbing work here or there and cemented the driveway and renovated the bathroom including tiling the floor. The work was done at Young St more than 4 or 5 years ago. They hired professionals.
40. When asked if he had documents showing the cost of improvements and the loan to John, Mr Stanbouli said: “I am illiterate person, I don’t have experience of keeping records”. And later: “I am illiterate person, you have to understand this”. When asked whether he had any legal advice or financial advice about the loans he said that it was a family arrangement and that traditionally such matters are not put on paper. He said: “I don’t know how to lie, I have a very clean record”.
41. Mr Kenny, who appeared for Centrelink stated without objection that he had spoken to Mr Orford, the solicitor who acted on the 2004 transfer of Young Street for both Stanbouli families, and he had not received or disbursed the $211,083.19 “proceeds of sale”.
The case for Mr and Mrs Stanbouli
42. During the first hearing, the matters relied on were the loan to Morspan and the repayment by Mr Stanbouli of the family loans. Mr Hodges who appeared on the second day of the hearing and provided written and oral submissions, put two alternative arguments. The first was that Mr Stanbouli borrowed funds from Magney in 2002 and loaned them to Morspan who used them to pay out the NAB debt. Morspan owed a debt to Mr Stanbouli that has been extinguished by the liquidation. There was no disposal of an asset.
43. The second was that Mr Stanbouli borrowed from Magney to pay the NAB pursuant to his obligation as a guarantor. The discharge of a mortgage for consideration is not a deprivation of an asset.
44. Mr Hodges made no submission about the family loans or the debt of Elie and Kleoniki Stanbouli.
The Case for the Secretary, Department of Family and Community Services (“the Department”)
45. The following propositions were put on behalf of the Department. The first proposition was that in May 2004 Mr Stanbouli disposed of $288,916 (payments to the NAB and various associated payments as set out above) and $130,000 in gifts to relatives. Another proposition was put that $273,000 (less the $10,000 gifting allowance) was disposed of on 8 May 2002 when it was said Mr Stanbouli “honoured” his guarantee to the NAB. Then, in May 2004 there was a disposal of $181,083.19 (the “proceeds of sale” which were not received) which should be reduced by the gifting allowance of $10,000 plus the $20,000 paid to Magney in March, which was assumed to be from Elie.
Consideration
46. The relevant provisions of the Social Security Ac, 1991 (“the Act”)are:
Effect of charge or encumbrance on value of assets
1121(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.
Note: this section does not apply to an asset to which section 1121A (primary production assets) applies.
1121(2) Subsection (1) does not apply to a charge or encumbrance over an asset of a person to the extent that:
(a) the charge or encumbrance is a collateral security; or
(b) the charge or encumbrance was given for the benefit of a person other than the person or the person's partner.
1123(1) For the purposes of this Act, a person disposes of assets of the person if:
(a) the person engages in a course of conduct that directly or indirectly:
(i) destroys all or some of the person’s assets; or
(ii) disposes of all or some of the person’s assests; or
(iii) diminishes the value of all or some of the person’s asseys; and
(b) one of the following subparagraphs is satisfied:
(i) the person receives no consideration in money or money’s worth for the destruction, disposal or diminution;
(ii) the person receives inadequate consideration in money or money’s worth for the destruction, disposal or diminution;
(iii) The Secretary is satisfied that the person’s purpose, or the dominant purpose, in engaging in that course of conduct was to obtain a social security advantage…..
47. Although the family loans, Elie and Kleoniki’s debt of $80,000 and the $20,000 paid to Magney in March 2004 were not relied upon in the submissions made by Mr Hodges on behalf of Mr and Mrs Stanbouli, it is appropriate that I address those matters as the first two were relied upon at the time of the primary decision, before the SSAT, and were addressed by the Respondent.
48. I find that the Settlement Instructions in Exhibit R4 establish that Kleoniki Stanbouli borrowed only $288,916.81 from the NAB and that all those funds were paid out as set out above. Young Street was valued at $500,000 when transferred which is reflected in the consideration set out in the transfer. I find that Mr Stanbouli received only $288,916 which was fully expended to discharge the mortgage and associated costs. It follows that I do not accept that he repaid the family loans as alleged as he did not have the funds from which those payments were said to be made. Further, the total of the alleged family loans ($130,000) and the alleged debt from Elie and Kleoniki ($80,000) is $210,000, almost exactly the amount of the “proceeds of sale” of $211,083.19, which he did not receive. There is no corroborative documentary evidence to support the family loans or how those funds were spent, or the debt. I find that the Stanbouli family did panic when the cancellation issue arose as Abraham Stanbouli said. The documents asserting the family loans to Mr and Mrs Stanbouli and the debt of Elie and Kleonaki were created to make up the difference between the funds actually borrowed and the consideration shown on the transfer. I do not accept that the family loans had ever been made.
49. The debt Elie and Kleoniki Stanbouli claimed to owe to Mr Stanbouli was for $80,000. It was not stated to relate to the purchase of Young Street, however, I infer that was intended. If there had been an agreement that they owed Mr Stanbouli a debt for the purchase of the house, it would have been a debt of $211,083.19. I find that there was no agreement that Elie and/or Kleoniki Stanbouli pay Mr Stanbouli the $211,083.19 or any part of it. There was oral evidence that Elie Stanbouli was paying various sums to Mr and Mrs Stanbouli as he could afford it in relation to the alleged $80,000 debt, however no collaborative documentation was provided. He may assist his parents from time to time as he can afford it,,since the pensions were cancelled, however any such assistance is not in payment of a debt.
50. There was a payment of $20,000 to Magney in March 2004 which Mr Abraham Stanbouli said was paid by Elie. However, I am not satisfied that the source of that payment was Elie and/or Kleoniki Stanbouli. The documents in evidence relating to that set out above do not disclose the relevant account holders. The documents are extracts from complete documents. I infer that that payment reduced the outstanding interest at that date and therefore the repayment to Magney in May 2004 of $276,967.49 was $20,000 less than it would have been without that payment. It would be double-counting to reduce the disposal of asset in relation to the “proceeds of sale” asset by that amount.
51. For the above reasons I find that in May 2004 Young Street was transferred for consideration of $288,916.81 to Kleoniki Stanbouli and was valued at $500,000.
52. Mr Stanbouli disposed of an asset to the value of $211,083.19 on 20 May 2004 pursuant to s 1123(1)(a)(ii) of the Act as he received inadequate consideration for that asset pursuant to s 1123(1)(b)(ii) of the Act.
53. The more difficult question is whether there has been a disposal of an asset to the extent of $288,916.81, or part thereof, as well.
54. I find that Mr Stanbouli assisted Mr Abraham Stanbouli with his business in 1999 when he became a guarantor and mortgaged Young Street to the NAB,, and continued to assist him and John Stanbouli in May 2002 when he took out the loan from Magney and again mortgaged Young Street. Those loan funds were applied principally to pay out the NAB mortgage.
55. I do not accept that the alleged Loan Agreement (Exhibit A1) was brought into existence at the time Mr Stanbouli entered into the loan with Magney. Mr Singleton, the liquidator was unaware of any such debt. It is not listed in his Report to Creditors.It was not disclosed to Centrelink or the SSAT. The first time it was produced was when it was tendered at the first day of hearing in this Tribunal. I infer that it was created in response to the interview with the Centrelink Financial Information Service in March 2005, when that officer explained that an investment in a company which was wound up due to business failure would cease to be assessed as an asset by Centrelink (Exhibit A2).
56. There is also no evidence that Mr Stanbouli ever received any payments pursuant to the alleged loan agreement. I find that Morspan’s business was in difficulty from 1999 onwards. By the time Mr Stanbouli took out the Magney loan in May 2002, the NAB debt had increased from $240,000 to $255,446.37. Business did not improve, and Morspan was placed into liquidation in December 2002. This finding is also supported by Mr Abraham Stanbouli’s evidence about the business activities, although the dates he gave were inaccurate. I infer that the payments due under the Magney loan were made from the Westpac account of Matraville Smash Repairs (Aust) Pty Ltd for which Mr Abraham Stanbouli was a signatory. He also sent Magney the cheque that “bounced” in November 2002. He was servicing the loan to the extent he was able to. Mr Stanbouli had nothing to do with the payment of the loan after it had been taken out until Magney sought possession of Young Street in 2004.
57. I find that there was no agreement between Morspan and Mr Stanbouli to repay him. Therefore, I do not accept Mr Hodges’ submission that there was a loan which was extinguished when Morspan was wound up.
58. Mr Hodges’s second proposition was that Mr Stanbouli’s payment was made pursuant to his obligations under the guarantee given to the NAB in 1999. There is no documentary or other evidence to support that proposition. Mr Hodges did not address Mr Abraham Stanbouli’s evidence that the Magney loan was taken out because they wanted a lower interest rate than what they were paying to the NAB for the overdraft facility. He did not say that the NAB had required repayment or had called upon the guarantee his father had given. I find that Mr Stanbouli took out the Magney loan in a refinancing exercise for the purpose of his sons’ business and was not as a result of his obligations under the guarantee or the mortgage.
59. I find that in 1999 Mr Stanbouli encumbered Young Street to the extent of $240,000 for the benefit of Morspan and pursuant to s 1121(2)(b), that encumbrance did not reduce the value of Young Street.
60. In 2002, Mr Stanbouli encumbered Young Street again to the extent of $273,000 for the benefit of Morspan, because the funds borrowed were used to pay Morspan’s debts. This did not reduce the value of Young Street, pursuant to s 1121(2)(b).
61. I find that in 2004, when Mr Stanbouli transferred Young Street, he disposed of $288,916.81 when he paid the various amounts to Magney and associated costs without consideration. Accordingly, he disposed of an asset of $288,916.81 in May 2004 pursuant to s 1123(1)(a)(ii) of the Act because he received no consideration pursuant to s 1123(1)(b)(i) of the Act.
62. Having made those findings, it is appropriate to make the following comments. I accept that Mr Stanbouli is illiterate. Whether he was told or understood what he was signing at various times and the possible consequences I do not know. I also do not know who initiated the signing of the various family loan documents and the alleged loan to Elie and Kleoniki. I find that the Stanbouli family is a close-knit family who co-operate to their mutual advantage. The assistance Mr Stanbouli provided to his sons in 1999 and 2002 and the transfer of the property to Kleoniki for less than its value are examples of that co-operation. Unfortunately, Mr and Mrs Stanbouli sought no advice about the consequences of the arrangements made for their pension rights.
Decision
63. For the above reasons, I set aside the decision under review and remit the matter for reconsideration in accordance with the findings set out in this decision.
I certify that the 63 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member, Mrs Josephine Kelly
Signed: Miss Sacha Keady
AssociateDate/s of Hearing 6 July and 4 November 2005
Date of Decision 1 February 2006
Solicitor for the Applicant Stephen Hodges Solicitor
Advocate for the Respondent Centrelink Legal Services
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