TERENCE CARPENTER and SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2006] AATA 344
•10 March 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION
ADMINISTRATIVE APPEALS TRIBUNAL )
) No A2005/293
GENERAL ADMINISTRATIVE DIVISION ) Re TERENCE CARPENTER Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr S. Webb, Member Date10 March 2006
PlaceCanberra
Decision The decision under review is affirmed.
..............................................
Mr S. Webb, Member
CATCHWORDS
SOCIAL SECURITY - Age Pension - disposal of asset to family members for inadequate consideration - no constructive trust - decision under review affirmed
Social Security Act 1991 ss 9, 1064, 1064-A2, 1077, 1081, 1082, 1123, 1124, 1126AC
Olsson v Dyson (1969) 120 CLR 365 at 368
Repatriation Commission v Tsourounakis [2004] FCAFC 332
Muschinski v Dodds (1985) 160 CLR 583 at 614
Re Bonnici and Secretary, Department of Family and Community Services [2004] AATA 658
Baumgartner v Baumgartner (1987) 164 CLR 137
Kidner v Secretary, Department of Social Security (1993) 31 ALD 63
Kintominas v Secretary, Department of Social Security (1991) 23 ALD 572
Frendo v Secretary, Department of Social Security (1987) 77 ALR 682
REASONS FOR DECISION
10 March 2006 Mr S. Webb, Member 1. By this application Terence Carpenter is seeking relief from a decision of the Respondent Secretary to reduce his Age Pension in consequence of his wife transferring ownership of a house to her two sons from a previous marriage for an amount that was below the market value of the asset. That decision was affirmed by the Social Security Appeals Tribunal.
2. The matter came on for hearing before me in Canberra. Mr Carpenter and his wife, Geraldine Carpenter, gave oral evidence and presented their case without representation. Mr John Kenny, Centrelink Legal Services, represented the Respondent. Materials were tendered and labelled for identification during the hearing.
factual context
3. The material facts are not in dispute, as follows:
(a)Mrs Carpenter has two sons, Grant and Mark, by her first husband, Mr Ray Edwards.
(b)Mr Edwards died intestate on 14 August 1980. The family home at that time, 62 Diamantina Crescent, Kaleen, passed into the sole proprietorship of Mrs Edwards, as she then was, by survivorship (T30 folio 89). The proceeds of Mr Edwards’ estate also passed to Mrs Edwards.
(c)On 21 August 1984 the property at 62 Diamantina Crescent was transferred into the joint ownership of Mrs Edwards and Mr Carpenter. The parties were recorded as tenants in common in equal shares, and a mortgage to the Civic Cooperative Permanent Building Society Limited was registered (T30 folio 89).
(d)On 6 October 1984 Mrs Edwards, as she then was, married Mr Carpenter. They resided in the house at 62 Diamantina Crescent.
(e)In 1995 Mr and Mrs Carpenter purchased a property at Candelo, where they lived from December 1996. The family home was placed on the market. The two sons remained living in the family home.
(f)In March 1997 the property at 62 Diamantina Crescent was sold for $210,000. The proceeds of sale were used to construct a house on the property at Candelo and to purchase a property at 10 Dethridge Street, Higgins. The Higgins property was purchased for $90,000 and Mrs Carpenter was registered as the sole proprietor (T5 folio 33). The two sons, then age 21 and 22, lived in the Higgins property. They did not pay rent but paid all outgoings.
(g)On 6 February 2004 Mr Carpenter lodged a claim for Age Pension (T3). He turned 65 on 11 April 2004. In his Age Pension claim form Mr Carpenter stated the value of the Higgins property was $200,000 (T4 folio 30) and the rate of his pension was assessed on that basis.
(h)On 8 February 2005 the property at 10 Dethridge Street, Higgins was valued for the St George Bank by HTW Valuers (Canberra) Pty Ltd. The market value of the property was recorded as $250,000 (T32 folios 94-96).
(i)On or about 23 March 2005 Mrs Carpenter transferred ownership of the Higgins property to her sons for a consideration of $100,000 (T13).
4. On 7 April 2005 Mrs Carpenter informed Centrelink of changes in her assets following the disposal of the Higgins property (T10 folio 39) and Mr and Mrs Carpenter’s assets and income were reassessed. It was determined that Mrs Carpenter had deprived herself of $140,000 and that deprived amount was a financial asset in relation to which an amount of deemed income was calculated. In consequence Mr Carpenter’s Age Pension was reduced on 21 April 2005 (T11 folio 40).
5. Mr Carpenter requested review of that determination and the matter was subsequently reviewed and affirmed (T16 and T19). Mr Carpenter pursued the matter to the Social Security Appeals Tribunal without success (T2) and it is in relation to that decision this application was made.
issues and legislation
6. The rate of a person’s Age Pension is to be worked out using the Pension Rate Calculator A at s 1064 of the Social Security Act 1991 (“the Act”). For rate calculation purposes, the resources of members of a couple are pooled and shared on an equal basis (s 1064-A2). Income and assets tests are applied. If a person disposes of an asset for less than the value of the asset in money, the difference between the value of the asset and the amount of money received is the ‘disposal amount’ of the asset (ss 1123 and 1124). Half of the amount by which the disposal amount exceeds the $10,000 annual disposal limit is to be included in the assets of each partner for the period of 5 years from the date of the disposal (s 1126AC). Those included amounts, in combination, are ‘deprived assets’ and are taken to be ‘financial assets’ (s 9). Pensioners are taken to earn ordinary income on their financial assets. The amount of income is to be worked out in relation to the deeming threshold (ss 1077, 1081 and 1082).
7. An asset that is held, in whole or in part, by a pensioner in trust for another person is not an asset in their possession for rate calculation purposes.
8. Mr Carpenter has asserted that the Higgins property previously owned by his wife was always intended for her two sons as “part of their inheritance from their father”. In his submission the property was, in effect, held in trust by Mrs Carpenter, for her sons. Thus it can be seen that the issue for the Tribunal to determine is whether Mrs Carpenter was holding an asset in trust for her sons following Mr Edwards’ death.
9. There was no written arrangement or formal trust established by Mrs Edwards with either her first husband or with Mr Carpenter. It is necessary to determine whether the informal discussions and understandings between Mrs Carpenter and her present or former husband, which were not committed to writing, establish an equitable right or obligation or a constructive trust over a part of her assets in favour of her sons.
consideration and findings
10. Making this decision I have carefully considered all of the materials placed before me, the submissions made by the parties, the relevant caselaw and legislation.
11. I am satisfied that at no point did Mrs Carpenter declare a trust in her dealings with Mr Carpenter. No basis to impose a constructive trust is made out. There was no equitable obligation on Mrs Carpenter to dispose of any part of her assets following the death of her first husband to her sons, as she did in 2005. There was no equitable right or beneficial interest over the property at 10 Dethridge Street Higgins in her sons.
12. The difficulty facing Mr and Mrs Carpenter is, as Barwick CJ said in Olsson v Dyson (1969) 120 CLR 365 at 368 “A gift of a thing assignable at law is imperfect if it is not effective as a legal assignment”. In the same case Kitto J said at CLR 375:
“…the rule is well established… that words which express an intention of making a gift by transfer of property cannot properly be construed as a declaration of trust, great though the temptation may be to find a way of giving effect to the general intention of benefaction.”
13. I am satisfied that Mrs Carpenter’s informal discussions with Mr Carpenter concerning the provision to her sons of an “inheritance” from their father did not establish a constructive trust or other equitable obligation over any part of her assets. The determinative features of a constructive trust were discussed by the Full Federal Court in Repatriation Commission v Tsourounakis [2004] FCAFC 332 (see also Muschinski v Dodds (1985) 160 CLR 583 at 614, for example).
14. Simply, on the facts, there is nothing in Mr and Mrs Carpenter’s dealings with her sons in these matters that is sufficient to impose a trust over any part of her assets or that would amount to unconscionable conduct warranting the imposition of a constructive trust. There is no legally binding promise involved in the arrangements between Mr and Mrs Carpenter and Mrs Carptenter’s sons in relation to the property at 10 Dethridge Street Higgins prior to the transfer to them of that property in March 2005.
15. Mr Edwards died intestate. Mrs Carpenter’s evidence was that she and her first husband did not form any agreement concerning any provision in favour of his sons in the event of his death. The family home, which Mrs Carpenter owned jointly with her first husband, passed into her sole possession on his death. Mr Edwards’ estate was executed by the Public Trustee and passed to Mrs Carpenter without any provision in favour of her sons. It follows that no trust was imposed and no equitable obligation was established at that time. It was open to Mrs Carpenter to dispose of or manage her assets as she pleased.
16. Mr and Mrs Carpenter gave evidence that they discussed and agreed arrangements whereby her assets, and assets that were accumulated jointly after their marriage in 1984, would ultimately, on their death, pass to her sons. Those arrangements were formalised in wills that were made in 1984 (which are not in evidence). There is no evidence that Mr and Mrs Carpenter made any agreement or intended at that time to transfer any part of their assets to Grant or Mark prior to death. It follows that the discussions between Mr and Mrs Carpenter in or about 1984 do not impose a trust or equitable obligation over Mrs Carpenter’s assets. Her intentions at that time were given effect by the wills that were made.
17. In Mr Carpenter’s submission the arrangements he and Mrs Carpenter agreed and implemented in 1997 clearly express their intention to transfer a proportion of their assets to Grant and Mark, to the extent that a trust or equitable obligation was established. I do not agree. On Mr and Mrs Carpenter’s evidence, which I accept as true, he and Mrs Carpenter agreed with Mark and Grant that the family home at 62 Diamantina Crescent would be sold and another property purchased in which the boys could live, rent free, on the basis that they paid all the outgoings, such as rates. Their evidence was that the Higgins property would “ultimately” or “eventually” pass to Mark and Grant, but no timetable for any such transfer was agreed nor were the terms of any such transfer established. No arrangements were formalised and nothing concerning the transfer of property was committed to writing. In my opinion the vague and loose intentions Mrs Carpenter expressed in 1997 do not impose, in relation to the Higgins property, any equitable obligation on her nor vest any equitable right in her sons. Nor are her stated intentions a declaration of trust.
18. The plain facts are that in 1997, following the sale of 62 Diamantina Crescent Kaleen, Mrs Carpenter purchased a new property at 10 Dethridge Street Higgins for $90,000, of which she was the sole proprietor. Mark and Grant were then aged 21 and 22. If Mr and Mrs Carpenter had intended to give the property to her sons at that time, it would have been a simple matter to purchase the property in their names. That did not occur. Their stated intention at the time was that “the property would be theirs ultimately”, that “it would eventually be passed to Grant and Mark as their ‘inheritance’ from their deceased father’s estate” (Exhibit A2). No terms or timetable for that ultimate transfer were decided or committed to writing.
19. Are there grounds to impose a constructive trust? I am satisfied that there are not. From 1997 Mark and Grant resided in the Higgins property. They paid all of the outgoings, such as rates and insurance, and they paid no rent. I accept that they maintained the property. Nonetheless, those arrangements do not give rise to the sons having a lien or a proprietary interest in the Higgins property. The arrangement may fairly be characterised as one of quid pro quo, the sons paid expenses in the form of outgoings to maintain the property and Mrs Carpenter did not charge them rent. I am sure that arrangements of a similar character would be familiar to many parents attempting to support and assist their children. While such supportive actions of a parent to assist her children are worthy and laudable, they are not effectual in terms of the purported assignment of rights to property. This case is to be distinguished from Re Bonnici and Secretary, Department of Family and Community Services [2004] AATA 658 in which a constructive trust was found to exist following the pooling of resources by family members to purchase a house for Mrs Bonnici in her name. No such pooling has occurred in this matter.
20. The question is whether the sons acted to their detriment on the assumption that they had a beneficial ownership of the property (see Baumgartner v Baumgartner (1987) 164 CLR 137). As the Federal Court stated in Kidner v Secretary, Department of Social Security (1993) 31 ALD 63
“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 and 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 a 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.”
21. There is scant evidence that Mrs Carpenter’s sons expended significant time or resources improving the property or that its value was increased by their efforts. I am not persuaded that a beneficial interest was promised or that such interest arose as a consequence of the maintenance of the property by the sons. In all the circumstances I am satisfied that it would not have been unconscionable for Mrs Carpenter to assert unfettered beneficial ownership of the property at any time prior to its transfer by contract to the sons (see also Kintominas v Secretary, Department of Social Security (1991) 23 ALD 572, which is distinguished).
22. Mrs Carpenter gave evidence that her sons painted the house and landscaped the garden. However, I am satisfied that such activities are within the terms of the arrangement that was struck in 1997 in lieu of rent and are to be distinguished from activities of a different character concerning the development or extension of the asset on the basis of a prior promise or belief that an interest would be obtained, which may give rise to an equitable interest in the property. This is not a case in which an interest in the property obtained by the operation of the doctrine of proprietary estoppel.
23. As the evidence reveals, ultimately Mrs Carpenter obtained legal advice and contracted to transfer the Higgins property to her sons in March 2005 for a consideration of $100,000. It was explained that that amount comprised the purchase price of $90,000 and $10,000 for related costs. As I understand it there is no disputation that the property at the date of transfer was properly valued at $250,000. It follows that Mrs Carpenter disposed of the property for $150,000 less than its then present monetary value.
24. Was the consideration Mrs Carpenter received adequate? In Mr Carpenter’s submission the consideration was simply the original purchase price of the property plus related costs. In Frendo v Secretary, Department of Social Security (1987) 77 ALR 682 Woodward J discussed similar provisions of the social security legislation then in force and applied the meaning of ‘consideration’ that is recognised by the law of contracts, highlighting the underlying concept of a bargain in the meaning of that term. That decision has been followed in subsequent Tribunal cases and I see no reason to depart from it here. The adequacy of a consideration is to be assessed in relation to the value of the promise to which it relates (see Halsbury’s Laws of Australia Volume 6 paragraph 110-635). In this case the value of the property was $250,000 at the time it was transferred for a consideration of $100,000. It can be seen that the value of the consideration was $150,000 less than the value of the property at that time (the disposal amount). It was, therefore, inadequate and I so find.
25. It follows that Mr and Mrs Carpenter each have a deprived asset to the value of $70,000, being the $150,000 disposal amount less the permitted disposal threshold of $10,000, with the $140,000 balance being equally divided. It is unfortunate for Mr and Mrs Carpenter, who I accept were trying to do their best for Mrs Carpenter’s sons, that the deprived asset is a financial asset in relation to which an amount of deemed ordinary income will apply for the purposes of the rate calculation income test.
26. In conclusion, the decision under review is affirmed.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member
Signed: .....................................................................................
AssociateDate of Hearing 27 February 2006
Date of Decision 10 March 2006
Representative for the Applicant Self-represented
Representative for the Respondent John Kenny
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