Editors --- "Disability support pension: procedural fairness and constructive trust" [2006] SocSecRpr 41; (2006) 8(3) Social Security Reporter, Article 18

• SECRETARY TO THE DFaCS v WALL
• Background
• The basis of the appeal
• Evidence to support findings
• Formal decision

---

Disability support pension: procedural fairness and constructive trust

SECRETARY TO THE DFaCS v WALL

(Federal Court of Australia)

Decided: 7th July 2006 by Emmett J.

Background

Wall received disability support pension between 1994 and 2001. In June 2001 the Department cancelled his pension and raised a debt for payment made since 1994.

The basis of the decisions was that Wall held shares in a company and the value of the shares exceeded the allowable limit. Wall later transferred his shares to his mother and reapplied for pension. This was rejected by the Department as he was still considered to be the beneficial owner of the shares.

Wall appealed the three decisions to the SSAT who affirmed each decision. Wall appealed to the AAT who set aside the decisions on the basis that there had been a constructive trust created in favour of his mother since 1988.

Wall’s father owned a rural property in NSW. When his father died the property was left to his mother. She then formed a company and the property was sold to the company. Shares were held by the three children, including Wall.

In 1987 the property was sold and, after a restructure, payments were made to the three children. The children then gifted some of the money to their mother, who then lent this money to the company.

The three children continued to own shares in the company and it was the value of the shares that lead to the Department’s decisions.

The basis of the appeal

There were three grounds of appeal:

· The AAT did not give the Department notice that it might find that a constructive trust existed between Wall and his mother and therefore the Department was not given procedural fairness.

· There was no evidence to support the findings that the shares were beneficially owned by Wall’s mother; that they were held on a constructive trust; and that they were not assets which could be considered under the assets test.

· The AAT did not consider or apply the terms of Divisions 3.18 and 3.12 of the Social Security Act 1991.

Denial of procedural fairness

The judge examined the arguments put before the SSAT and the AAT. His honour found that at the SSAT it was submitted that there was an express trust between Wall and his mother, but no mention of a constructive trust. At the AAT there was clear evidence that the solicitor acting for Wall had expressly abandoned the submission that there was a trust and instead argued that the shares had no value.

His Honour concluded that there was no assertion that there was a common intention between Wall and his mother that he would not hold a beneficial interest in the shares. Similarly there was no argument that Wall’s mother had acted to her detriment.

Consequently the Department had not been given the opportunity to explore matters relevant to these issues.

Evidence to support findings

His Honour also found that the AAT’s decision was not supported by relevant findings of fact.

His Honour outlined what would be required:

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 true owner. The object is to recompense the claimant for the detriment suffered as a consequence of reliance on the belief and expectation encouraged by the true owner. In some cases, it may be possible for the owner of property to fulfil that equitable obligation only by transfer of the interest, the expectation of which was encouraged by the owner’s conduct. On the other hand, in other cases, it will be appropriate for lesser relief to be awarded. For example, where the 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.

The task of the Tribunal would have been to examine the extent to which a court of equity would require Warwick to compensate his mother, as a term of being permitted to assert beneficial ownership of his shares. That is to say, it would be necessary to enquire whether Warwick’s conduct, in receiving $400,000 in 1988 and thereafter having no involvement with the Company, gave rise to an estoppel against his asserting beneficial ownership of the shares. It is only if a constructive trust is the only way in which equity can be done, as between Warwick and his mother, that a court would impose such a remedy. The first step, however, would be to determine whether there was an appropriate equitable remedy that fell short of the imposition of a trust (see Giumelli v Giumelli [1999] HCA 10; (1999) 196 CLR 101 at [10]) (paras 73 and 74).

His Honour concluded that:

It is impossible to determine precisely how the Tribunal reached its conclusion that there was a constructive trust in favour of Mrs Wall in respect of Warwick’s shares in the Company. It is not possible to discern whether or not there was evidence to support that conclusion, because the Tribunal simply did not address the relevant questions (para. 77).

Application of the Social Security Act

The third ground of appeal was that the AAT had not considered the trust and companies provisions of the Act. There was little dispute about this and his Honour found that these provisions would clearly need to be taken into account by the Tribunal upon any reconsideration. Although it was noted that the AAT was not asked to take these provisions into account, this failure was treated as ‘conceivably’ amounting to jurisdictional error.

Formal decision

The three decisions were remitted back to the AAT for further consideration.

[R.P.]