Editors --- "Age pension: whether disposal of asset; whether an enforceable legal or equitable obligation exists" [2007] SocSecRpr 17; (2007) 9(2) Social Security Reporter, Article 4

• FINE and SECRETARY TO THE DFaCSIA
• Background
• The issues
• The law
• Discussion
• Formal Decision

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Age pension: whether disposal of asset; whether an enforceable legal or equitable obligation exists

FINE and SECRETARY TO THE DFaCSIA

(2007/1094)

Decided: 1st March 2007 by P. McDermott

Background

In 1986 Fine migrated toAustralia fromZimbabwe under the sponsorship of her son, Brian Fine. She purchased a home unit in Vaucluse, inNew South Wales, for $78,000, using monies provided by her son (in the amount of $36,072) and a mortgage with the St George Bank (in the amount of $45,000).

Between June 1986 and May 1987, Brian Fine made loan repayments on the unit which totaled $8724. In 1987, following the sale of his business, Brian Fine discharged the outstanding balance of the mortgage on the Vaucluse property ($42,961).

In early 2002, Fine decided to move toBrisbane to be closer to her other son, Dr Stephen Fine. The unit was sold and, after the payment of costs associated with the sale, Fine received $419,000.

In December 2004, Fine purchased a unit in a retirement complex inBrisbane for $259,000.

On 1 January 2005, Fine made a claim to be paid age pension.

On 30 March 2005, Fine withdrew an amount of $144,579 from her bank account and paid it to her son, Brian Fine. This amount was said to be the repayment of the monies paid by Brian Fine in relation to the Vauclause unit, including simple interest calculated at 3.5% over 18.5 years.

Centrelink determined that Fine had disposed of an asset valued at $144,579 for no or inadequate consideration, and that the value of the asset would be deemed to be included in Fine’s assets for five years (until 29 March 2010).

Centrelink’s decision was affirmed on internal review and by the SSAT. Fine applied to the AAT for a review of the decision.

The issues

The issue before the AAT was whether the payment of $144,579 by Fine to Brian Fine was the disposal of an asset for the purposes of the Social Security Act 1991 (the Act) or whether the payment was made under an enforceable legal or equitable obligation.

The law

The effect of s.1123 of the Act is that a person is taken to dispose of an asset if that person receives no consideration or inadequate consideration, so that the value of that asset will be deemed to be included in a person’s assets for the purpose of assessing that person’s entitlement to age pension for a period of five years from the date of disposal.

Discussion

Fine argued that Brian Fine had an equitable proprietary interest in the Vaucluse unit and that she had held the unit on either a constructive trust or a resulting trust in his favour. It was submitted that Brian Fine had had no intention of passing the beneficial interest in the unit to Fine, rather his intention was that he was to retain the property with his mother enjoying a right to reside in the property, free from rent, for the duration of her life.

The AAT considered that, on the evidence before it, there were fundamental obstacles to a finding that Brian Fine held an equitable proprietary interest in the unit in this case. The AAT considered that, in determining whether an equitable proprietary interest existed in this case, it was appropriate for it to have regard to events occurring before and at the time of purchase, as well as events which occurred after the sale of the unit.

The AAT observed that:

- The evidence of Fine had been that Brian Fine had made a loan to her. There was no suggestion in her evidence that Brian Fine had an interest in the unit, in fact the tenor of her evidence was that the Vaucluse unit was her property;

- At the time of the purchase of the unit, there was a risk of Brian Fine being declared bankrupt. His evidence to the AAT was that, in the event he had been made bankrupt, he would not have declared an interest in the unit on his statement of affairs. The AAT considered that an equitable interest in a property fell within the definition of ‘property’ in the Bankruptcy Act 1966(Cth) and therefore Brian Fine’s evidence that he would not have declared an interest in the unit was inconsistent with his contention that he held an equitable proprietary interest in the Vaucluse unit;

- Upon the sale of the unit, Fine took the proceeds of the sale. There was no suggestion that Brian Fine had then, or at any other time, made a claim for the proceeds of the sale;

- The evidence of Brian Fine was that he felt it necessary to ensure his mother had the security of a home of her own. The AAT concluded that this evidence demonstrated that it had always been his intention that Fine acquire the beneficial interest as well as the legal interest in the unit.

The AAT concluded that there was no trust in this case which would prevent Fine from freely dealing with the proceeds of the sale of the unit. The AAT considered that she had the full beneficial ownership of the proceeds.

In the circumstances, the AAT found that the amount of $144,579 which was paid to Brian Fine was a disposal of an asset for no consideration to which s.1123 of the Act would apply.

Formal Decision

The Tribunal affirmed the decision under review.

[S.O.]