"VAR" and "VAT" v Secretary to the Department of Family and Community Services

[2003] AATA 926

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION AAT [2003] 926

ADMINISTRATIVE APPEALS TRIBUNAL        N° V2003/616

N° V2003/617

GENERAL ADMINISTRATIVE  DIVISION

Re:"VAR" AND "VAT"

Applicants

And:SECRETARY TO THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       M.J. Carstairs, Member

Date:             18 August 2003

Place:            Melbourne

Decision:For reasons given orally at the hearing, the Tribunal affirms the decision under review.

(sgd) M.J. Carstairs

Member

SOCIAL SECURITY ‑ assets ‑ financial hardship provisions ‑ whether equitable estoppel 

Social Security Act 1991 s11, 1230

Galaxidis v Galaxidis [2001] NSWSC 1123

Giumelli and Another v Giumelli (1999) 196 CLR 101

ReFollone and Secretary, Department of Social Security (1987) 11 ALD 477

Re Kidner v Secretary, Department of Social Security (1993) 31 ALD 63

Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225

Repatriation Commission v Hall (1988) 15 ALD 84

Riches v Hogben [1985] 2 QdR 292

REASONS FOR DECISION

18 August 2003  M.J. Carstairs, Member

1.      This is an application by VAR and VAT (the applicants) for review of a decision made by the Social Security Appeals Tribunal (the SSAT) on 24 April 2003.

2. At the hearing the applicants were unrepresented. Ms K. Navarro, a Centrelink advocate, represented the respondent. The hearing was conducted in private. The Tribunal amended the order under s35(2) of the Administrative Appeals Tribunal Act 1975 (the AAT Act) dated 7 July 2003 to extend to the applicants' names.

3. The Tribunal had before it the documents lodged under s37 of the AAT Act as well as a Statement of Facts and Contentions lodged by the respondent on 12 August 2003.

BACKGROUND

4.      The applicants received age pension until June 2002, when their pensions were cancelled on the basis that their combined assets were in excess of the limit at which any entitlement to age pension ceased.  In 1989 VAT purchased a residential property (the property) next door to the principal place of residence.  The gross rental income of the property in 2002 was $12,636.  In 2002 the Australian Valuation Office valued the property at $550,000.  A letter dated 16 June 2003 advised the applicants that their age pensions were to be cancelled.

5.      The applicants lodged a claim for consideration under the hardship provisions.  These provisions allow Centrelink to consider the question of whether it can disregard some or all of an applicant's assets in calculating a rate of payment of pension.

EVIDENCE

6.      In an undated letter, forwarded with the claim for consideration under the hardship provisions on 22 November 2002, VAT stated that she owed $172,000 to her children.  She said that she had promised them when she had to go out to work when they were young, that if they helped her by looking after themselves more than they had previously, they would receive a share of the house.  She said that that she felt guilty that she had so little time to spend with her children.  She stated that she had always told her children that the family home belonged to them as well as her husband and herself.  The applicants later sold the original family home and bought the principal residence.  VAT had intended to give the children their share of the proceeds from the sale of the original family home, but was advised by her mother to wait and see whether the children’s marriages were stable.  She stated that when she bought the property she was using the children’s money, represented by their promised interest in the family home, which had been sold.  Therefore, she said, the property did not in fact belong to her, although only her name is on the title.

7.      In oral evidence VAT said that when she had made the promise to the children, they were approximately twelve and eight years of age respectively.  The family was living in a rented house at the time.  However, with the benefit of two wages they were able to buy a house in 1972.  At that time the applicants made wills in similar terms, the children being the beneficiaries of their respective estates.  VAT said that she told the children that the applicants would buy a house for all of us..  When they sold the house later the children had married and it had been her intention to give them their share of the proceeds at that time, but her mother warned her to wait.  She did so, and invested the money.  The principal place of residence was purchased around 1982.

8.      VAT said that the decision to cancel their pensions has caused the applicants distress.  They are in ill‑health and her husband has said that he will leave her.

9.      VAT's will dated 18 January 1972 provided for the trustee to sell, call in and convert such parts of her estate that did not already consist of money and directed her Trustee to stand possessed of the moneys arising from such sale, calling in and conversion upon trust:

…to invest the same in any modes of investment … and to stand possessed of such investments and all other (if any)... my unsold and unconverted real and personal estate … upon trust for my children as tenants in common in equal shares … to pay out of the income derived from the investment of my estate … such amounts as my Trustee shall consider adequate towards the maintenance education and well‑being of my children…

10.      A file note of discussions between a Centrelink officer and VAT dated 16 December 2002 (T10) records that VAT confirmed that the children did not contribute to the purchase, upkeep or improvement of the property.  She confirmed that the children derived no share of the rent from it, did not bear any of the related expenses and did not have any use or enjoyment of it.  No formal agreement concerning their share is in existence.  VAT confirmed this in oral evidence.

CONSIDERATION OF THE ISSUES

11. The sole issue before the Tribunal was whether the hardship provisions apply to the applicants. These are provided for in s1129 of the Social Security Act 1991 (the Act). Section 1129(1) of the Act provides:

1129(1) [Conditions of access] If:

(a)      either:

(i)a social security pension is not payable to a person because of the application of an assets test; or

…; and

(b)       either:

(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or

(ii)the Secretary determines that the application of those sections to the person should, for the purposes of this section, be disregarded; and

(c)       the person, or the person's partner, has an unrealisable asset; and

(d)the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and

(e)the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;

the Secretary must determine that this section applies to the person.

12. Section 11 of the Act defines an unrealisable asset:

11(12) [Circumstances where asset is unrealisable] An asset of a person is an unrealisable asset if:

(a)       the person cannot sell or realise the asset; and

(b)       the person cannot use the asset as a security for borrowing.

11(13) [Additional circumstances where asset is unrealisable] For the purposes of the application of this Act to a social security pension (other than a pension PP (single)), an asset of a person is also an unrealisable asset if:

(a)       the person could not reasonably be expected to sell or realise the asset; and

(b)the person could not reasonably be expected to use the asset as a security for borrowing.

13.     The applicants submitted that they have acted in ignorance and should not be penalised.  They are concerned about how they will manage with only the rent from the property upon which to live.

14.     The respondent submitted that age pension is calculated in accordance with Module A of Pension Rate Calculator A at the end of s1064 of the Act.  A member of a couple is affected by the operation of points 1064-A2 and 1064-A3 set out in Module A.  Pensions are subject to both an income test (set out at Module E) and an assets test (set out at Module G) and that the amount of pension payable is the lesser of the amounts worked out under the tests.

15.     Ms Navarro submitted that for a part pension to be payable under the assets test a couple's combined assets must be less than $447,500.  VAT is the sole owner of the property (T9).  The value of that property at the relevant time was $550,000 (T15 p134).

16.     Ms Navarro, submitted that VAT's promise to her children was essentially a family arrangement, with no intention to create a  binding agreement.  She relied on Re Follone and Secretary, Department of Social Security (1987) 11 ALD 477, In which the Tribunal stated:

…

Although it might not be necessary for the applicants to show that agreements had been made between them and their children with the intention to create legal relations, it was necessary for them to establish that there had been agreements which went beyond the expectations and understandings typically part and parcel of family relationships.

…

17.     She submitted that there is no legally recognisable beneficial interest or constructive trust in respect of the property, such that it would be unconscionable for VAT to assert unfettered beneficial interest in the property.  Ms Navarro submitted that at best there is a family arrangement based on mutual trust, ie, an arrangement not intended to affect their legal relations (Re Kidner v Secretary, Department of Social Security (1993) 31 ALD 63 at 70). Ms Navarro submitted that there is no express trust, as there was no written contract or agreement to transfer the property. Section 53 of the Property Law Act 1958 (Vic) requires that all dispositions of land must be recorded in writing.  The respondent's Statement of Facts and Contentions stated that for a common intention constructive trust to exist the following elements must be satisfied: the intention about beneficial ownership of the property inferred as a matter of fact from the words or conduct of the parties; that there is action to their detriment on the basis of the common intention as to the beneficial ownership of the property; and it must be a fraud for VAT to assert that the two children did not have the beneficial interest in the property.  Ms Navarro submitted that there was no evidence that VAR and the two children have acted to their detriment on the assumption that the property was to be theirs.

18. Ms Navarro submitted that there is no impediment to the sale of the property, and the property cannot be disregarded under the financial hardship provisions of s1129 of the Act.

19.     The Tribunal reached its decision taking into account the oral and written evidence and the submissions at the hearing.  Numerous decisions of the Tribunal have dealt with this issue of interests in land in the absence of writing.

20.     As the Federal Court stated in Re Kidner at 74:

…

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.     As set out in Galaxidis v Galaxidis [2001] NSWSC 1123 the kind of equity that the applicants are asserting is a proprietary estoppel. This question is explored by the High Court in Giumelli and Another v Giumelli (1999) 196 CLR 101. If the equity is established, the plaintiff may become entitled to positive equitable relief, rather than relief which merely prevents the defendants from insisting upon their strict legal rights as landowners. The relief obtained by a successful plaintiff will not, however, necessarily give rise to a property interest. And as the High Court said in Giumelli, care must be taken in using a label such as constructive trust, even though the remedy, depending on the facts, may be an order for conveyance of the property.

22.     The equitable doctrine identifies three ingredients, namely encouraged assumption, reliance and unconscionability.  It is clear from the cases that the doctrine is available to assist a plaintiff where a promise or representation has been made that falls short of a contractual promise.  In Riches v Hogben [1985] 2 QdR 292 at 301, in a passage approved by the High Court in Guimelli, McPherson J noted:

…It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise…

23.     It is evidence of reliance by the children that is absent in this case.  The Tribunal accepts the respondent's submission that the promise to the children is essentially a family arrangement and there is no binding agreement.  The children have not acted to their detriment on the basis of the promise, and there is no reason that the applicants cannot assert unfettered ownership of the property. 

24.     In regard to whether the property can be treated as an unrealisable asset under the hardship provisions, the Tribunal was not satisfied that the asset is unrealisable.  VAT has made no attempt to sell it, and there is no basis for the assertion that she cannot sell the property.  In view of her evidence that the nature of the agreement was that when the property is sold the children would take their share, there is no bar to the sale.  The Tribunal was not satisfied, without direct evidence on the point, that the asset could not be used as security for a loan, given that the applicants own the principal residence outright and receive rental income from the property.  The applicants have produced no evidence that they have made any attempt to negotiate with any financial institution for a loan.

25.     In any event, the section requires that a person satisfy the Secretary that they would be in financial hardship unless the provisions are applied to them.  The Tribunal does not accept that people who have rental income of $12,636 per annum are in severe financial hardship, particularly when they are satisfied with achieving that amount of rental income, even though the evidence was that the commercial rental value was double that amount.  On the question of severe financial hardship, the Tribunal notes that, although the term is not defined in the Act, in Repatriation Commission v Hall (1988) 15 ALD 84 the Federal Court of Australia held that the term does not require proof of destitution, but must be read in the context of the particular circumstances. In Re Lumsden and Secretary, Department of Social Security (1986) 10 ALN 225 the Tribunal held that the term is a clear direction by the legislature that the section is only applicable when the requisite severity of financial hardship is present.  That severity is absent in this case.

26.     For these reasons the Tribunal decides that the applicants do not satisfy s1229(1)(c) and s1229(1)(e) of the Act.

DECISION

27.     For reasons given orally at the hearing the decision under review is affirmed.

I certify that the twenty‑seven [27] preceding paragraphs are a true copy of the reasons for the decision of:

M.J. Carstairs, Member

(sgd)       Olympia Sarrinikolaou

Clerk

Date of hearing:  18 August 2003

Date of decision:  18 August 2003
Advocate for applicants:              Self-represented
Advocate for respondent:            Ms K. Navarro, Centrelink