Secretary, Department of Family and Community Services v Wall

STATUTORY SCHEME FOR DETERMINATION OF PENSIONS 11 The Social Security (Administration) Act 1999 (Cth) ('the Administration Act') provides for the provision of benefits under the Entitlement Act. Section 11 relevantly provides that a person who wants to be granted a disability support pension must make a claim in accordance with the Administration Act. Under s 16 of the Administration Act, a person makes a claim by lodging a written claim or making a claim in a manner approved by the Secretary. 12 Under s 36(1) of the Administration Act, the Secretary must determine a claim by either granting or rejecting it. Section 37 requires the Secretary to determine that a claim is to be granted if satisfied:

• that the claimant is qualified for it; and
• that the pension is payable. It is common ground that, at all relevant times, Warwick was qualified for a disability support pension. The issue is what amount, if any, was payable to Warwick by way of pension. 13 Section 117(a) of the Entitlement Act provides that a person's disability support pension rate is worked out using Pension Rate Calculator A. Pension Rate Calculator A, which is at the end of s 1064, provides that the rate of pension is an annual rate determined according to the method set out in Module A of Pension Rate Calculator A. One of the steps in that method involves working out a reduction for assets. That involves working out the value of the person's assets and the person's assets value limit. Then a comparison is made to determine whether the value of the person's assets exceeds the person's assets value limit. If it does, a reduction for assets is calculated. The reduction for assets is then deducted from the maximum payment rate giving the assets reduced rate. A similar series of steps provides for the calculation of the income reduced rate. The rate of pension payable is the lower of the income reduced rate and the assets reduced rate. 14 The initial step in that process, and the critical one for present purposes, is determining the value of a person's assets. Section 11 of the Administration Act provides that asset means property or money. While s 11 provides for the meaning of value where an asset is owned jointly or in common with another person, there is no other definition of 'value'. Accordingly, the value of a person's assets will be the value of any property of the person, as that phrase would be understood as a matter of ordinary English. 15 Thus, in order to determine how much, if anything, was payable by way of disability support pension to Warwick after he made a claim, it is necessary to identify any property of his and to attribute a value to that property. There is no dispute that, at relevant times, Warwick had property, in the form of his shares in the Company. The question is what the nature of his interest in those shares was and what the value of that interest was. If his interest was a bare legal estate, its value was nil. On the other hand, if his interest included beneficial ownership, the value was considerable. 16 Section 80 of the Administration Act relevantly provides that, if the Secretary is satisfied that a social security payment is being, or has been, paid to a person to whom the payment is not, or was not, payable, the Secretary is to determine that the payment is to be cancelled or suspended. Section 1223 of the Entitlement Act relevantly provides that, if an amount has been paid to a person by way of social security payment and the amount was not payable to the recipient, the amount so paid is a debt due to the Commonwealth.

THE RESTRUCTURE OF THE COMPANY 17 The material before the Tribunal makes it difficult to draw firm conclusions about the restructure of the Company that took place in 1988. Although there were assertions, by those involved in the restructure, as to what the object of the restructure was, there is very little contemporary material to explain precisely what happened. However, it is desirable to say something more about the restructure. 18 In January 1988, the Company received advice from Peat Marwick Hungerfords ('the Tax Advisers'). The advice pointed out that, since, at that time, there was no further use for the Company, ideally it would be liquidated and the capital profit distributed to each of the shareholders. The distribution would take the form of a liquidator's distribution, which would be free of tax. However, the Tax Advisers pointed out that such a course was not necessarily desirable at that time, since it would involve forfeiture of the Company's accumulated primary production tax losses. 19 It would be preferable, therefore, that the cash that was surplus to the requirements of the shareholders be invested through the Company and the income thus sheltered from tax by the accumulated tax losses. The Tax Advisers suggested that, if that strategy were to be pursued, the income earned by the Company would ideally be distributed to the shareholders each year by way of loans, structured in such a manner as not to trigger any income tax liability for the individual shareholder, nor any fringe benefits tax liability for the Company. 20 The Tax Advisers also pointed out that the effect of recent amendments to the tax legislation was to enable the Commissioner of Taxation to deem loans made by a company from capital profits to be dividends and thus assessable in the hands of the recipient shareholders. The Tax Advisers therefore outlined three possible courses of action aimed at removing all of the cash from the Company and then lending back to the Company amounts surplus to the private requirements of each shareholder. Income arising from the amounts lent back and invested by the Company could then be distributed to shareholders each year, free of tax, by way of partial repayment of the loans. 21 On 3 February 1988, the Company established three wholly owned subsidiaries, being:

• Gerede Holdings Pty Limited ('Gerede')
• Fontas Holdings Pty Limited ('Fontas') and · Irthing Holdings Pty Limited ('Irthing')

A note of 3 March 1988 stated that an agreement had been reached that the three wholly owned subsidiaries were intended to separate the business activities for the three shareholders of the Company. Each shareholder was to take responsibility for management of one company. 22 The Company subscribed for one million $1 shares in each of the three subsidiaries at a premium of 8 cents. Thus, each subsidiary received $1,080,000 as share capital. Fontas lent the whole of its share capital of $1,080,000 to Warwick. Warwick applied $580,000 of that sum to discharge a loan account owing by him to the Company. He also made a gift of $100,000 to his mother. That left him with cash of $400,000 in his hands. Irthing lent its share capital of $1,080,000 to Helen, who applied $303,000 in discharge of her loan account owing to the Company. Helen made a gift of $300,000 to her mother, leaving cash in her hands of $477,000. Gerede advanced its share capital to Philip who applied $401,000 in discharge of his loan account owing to the Company and made a gift of $100,000 to his mother. That left cash in the sum of $579,000 in his hands. 23 Thus, Mrs Wall received gifts totalling $500,000 from her children. Of that sum, Mrs Wall lent $460,000 to the Company. Since the purpose of the restructure was to enable advantage to be taken of the Company's accumulated tax losses, an inference can be drawn that she lent the money free of interest. Thereafter, she received payments from the Company, which were applied in satisfaction of her loan until it was repaid. After the loan was repaid, the Company continued to make payments to Mrs Wall, which were treated as advances by the Company. 24 It appears that the restructure that actually took place followed the recommendation of the Tax Advisers, but did not adopt the recommendation in its entirety. Thus, each of the three shareholders retained part of the money received by way of loan from the respective subsidiaries associated with them. Instead of the three children taking advantage of the tax losses in the manner proposed by the Tax Advisers, it appears that a decision was taken that Mrs Wall would have the advantage of the tax losses, since she was the only one who made loans to the Company in the manner suggested by the Tax Advisers. 25 Fontas was deregistered in 1992 and Irthing was deregistered in 1996. In 2003, Gerede and the Company were liquidated. However, on 6 March 2003, before the commencement of the liquidation of the Company, Warwick transferred his shares in the Company to his mother. No consideration was paid for the transfer, but stamp duty was paid on the transfer on the basis that the shares had a value of $686,747. The material before the Tribunal included a letter from JMA Legal to Warwick enclosing the final accounts of the liquidator of the Company and Gerede. The letter noted that no loan accounts had been forgiven and that shareholder loans were repaid and distributed in accordance with shareholders' directions. Since, at the time of the liquidation of the Company, Warwick had ceased to be a shareholder, he received no distribution.

GROUNDS OF APPEAL 26 The Secretary impugns all three decisions of the Tribunal, on the following bases:

• The Tribunal did not give the Secretary notice that it would find or may find that Warwick's shares in the Company were beneficially owned by his mother and otherwise held on trust by Warwick for his mother, and thereby failed to afford the Secretary procedural fairness;
• There was no evidence or other probative material capable of supporting the finding by the Tribunal that the shares in the Company held by Warwick:
  • were beneficially owned by his mother;
  • were held on constructive trust for this mother;
  • were not property with a value in his hands capable of being converted into an assessable basis for reducing his entitlement to a social security pension;
  • were not assets the value of which is to be taken into account for the purposes of the assets test in s 1064 of the Entitlement Act. In addition, in relation to the review of the decision to refuse Warwick's application for a new disability support pension, the Secretary says that the Tribunal erred in failing to consider and apply the terms of Divisions 3.18 and 3.12 of the Entitlement Act. Those provisions deem certain assets to be the property of a person for the purposes of the Entitlement Act.

DENIAL OF PROCEDURAL FAIRNESS 27 Warwick now contends that the material before the Tribunal justified a finding that, following the restructure in 1988, he and his mother operated on the assumption that Mrs Wall was the owner of the Company and that her three children ceased to have any interest in the shares that remained registered in their names. He asserts that that assumption gave rise to a proprietary estoppel, relevantly binding him, because Mrs Wall acted to her detriment on the basis of that assumption and it would be unconscionable for him to resile from the assumption. Warwick says that the only way of doing equity, as regards his mother, would be for him to be held to the assumption, namely, that he ceased to have any beneficial interest in his shares upon receipt of the payment of $400,000 in 1988. Accordingly, so the contention goes, the shares had no value in his hands for the purposes of determining whether a pension was payable to him. 28 For Mrs Wall to acquire an interest in Warwick's shares, by the operation of the doctrine of proprietary estoppel, it would be necessary to establish the following matters: (a) an expectation or belief by Mrs Wall, created and encouraged by Warwick, that Mrs Wall was to be regarded as the beneficial owner of the shares in the Company held by Warwick, (b) knowledge by Warwick of Mrs Wall's expectation or belief, (c) some conduct on the part of Mrs Wall, to her detriment, in reliance upon that expectation or belief, encouraged by some conduct of Warwick's or lack of conduct on his part.

In those circumstances, it may be unconscionable for Warwick to rely on his ownership of the shares to defeat his mother's expectation and belief (see Dinyarrak Investments Pty Ltd v Amoco Australia Ltd (1982) 45 ALR 214 and Repatriation Commission v Tsourounakis [2004] FCAFC 332). 29 That may be what was contemplated by the Tribunal in its finding that a constructive trust was created in favour of Mrs Wall when Warwick received the payment of $400,000 out of the proceeds of the sale of Appletrees by the Company. However, it is difficult to see how that case was advanced before the Tribunal. Indeed, the Secretary complains that any reliance upon a trust by Warwick was expressly abandoned in the course of the proceeding before the Tribunal. 30 Warwick contends, however, that it should have been apparent to the Secretary's representatives, from the submissions made on behalf of Warwick to the Social Security Appeals Tribunal, and from the material proffered to the Tribunal on behalf of Warwick, which would only have been relevant to support a constructive trust, that some kind of trust was being relied upon. Reference was made to parts of the transcript of the hearing before the Tribunal and to documents before the Tribunal. Accordingly, it is necessary to say something about the submissions to the Social Security Appeals Tribunal and about the conduct of the proceeding before the Tribunal.

WARWICK'S SUBMISSION TO THE SOCIAL SECURITY APPEALS TRIBUNAL 31 On 3 May 2002, Tavoularis & Company, solicitors ('Tavoularis'), made a submission to the Social Security Appeals Tribunal on behalf of Warwick, in connection with the review by that tribunal of the decision to cancel Warwick's disability support pension. Tavoularis began by pointing out that the conclusion that the asset value of Warwick's shareholding in the Company was in excess of $1,000,000 was fundamental to the cancellation. They asserted that the issue before the Social Security Appeals Tribunal should be whether, on Warwick's receipt of a payment attributable to the sale proceeds of Appletrees, an express trust was created by Warwick in favour of his mother in respect of his shares in the Company. The submission asserted that such a trust was created and continued to subsist. Therefore, Warwick's shares were not an asset to be taken into account in assessing his eligibility for a disability support pension. 32 Later, the submission asserted that, from Warwick's point of view, given the restructure in 1988, the shareholding in the Company was of no value to him, nor of any continuing relevance or importance to him. The submission then asserted that Mrs Wall had used the structure of the Company entirely for her own investment purposes for a period after the restructure and that Warwick, at no stage, had any control, influence or interest in Mrs Wall's retirement planning and investments. The submission said that the Company was in the process of being liquidated and that it was unlikely that there would be any distribution to Warwick, because Mrs Wall had the beneficial interest in any monies to be distributed. 33 Tavoularis then asserted that the facts and circumstances supported the existence of two separate trusts. The first was that the Company held Appletrees upon an implied trust for Mrs Wall, and that she had no intention, as the sole owner of Appletrees, to relinquish her absolute beneficial entitlement to the property in favour of her three children. The submission asserted that that trust subsisted until Appletrees was sold and that, on completion of the sale, Mrs Wall's control over, and beneficial entitlement to, the net proceeds of the Sale remained. 34 That assertion, of course, was completely untenable. The only possible purpose for the transfer of Appletrees to the Company was to ensure that Mrs Wall divested herself of beneficial ownership of the property, so that it would not form part of her estate for the purposes of assessment of death or estate duties in the event of her death. Her infant children were the beneficial owners of all of the issued capital of the Company. There is no evidence as to the consideration paid by the Company for the acquisition of Appletrees, but there must be a presumption that Mrs Wall divested herself of beneficial ownership of Appletrees. In any event, the Tribunal found no such trust. 35 The second trust asserted by Tavoularis was an express trust in respect of Warwick's shares. The submission began with acceptance of the fact that Warwick had beneficial ownership of his shares in the Company from its incorporation and that, on ceasing to be an infant, he became the registered owner of his shares. However, the submission asserted that an express trust was created by Warwick in favour of his mother in respect of the shares when the net proceeds of the sale of Appletrees were distributed in the restructure. 36 Tavoularis asserted that, in the circumstances surrounding the distribution of the proceeds of sale, a court would be satisfied that there was the necessary intention on Warwick's behalf to create a trust in favour of his mother in respect of his shares in the Company. Following distribution of the proceeds of sale, the Company was a shell. On professional advice, steps were taken whereby Mrs Wall distributed money to each of her children, each of whom was free to go his or her own way. The children made provision for Mrs Wall by their gifts and by allowing her to use the Company as her investment vehicle, carrying the ability to utilise its tax losses. 37 The submission argued that, since it was the intention of Warwick and Mrs Wall that Warwick would retain his shareholding in the Company to allow Mrs Wall to use the Company as an investment vehicle and to allow future profits in the Company to be offset against accumulated losses, an express trust was created consistent with those intentions. The submission asserted that the trust, while not manifested in writing, was evidenced by the conduct of all parties and that the subsequent independent dealings of Warwick and Mrs Wall constituted evidence of a consistent and continual separation of affairs, from which the continuing existence of such a trust could be inferred. The submission asserted that the parties' conduct after 1988 evidenced a declaration of trust inter vivos of the shares, which was enforceable by Mrs Wall against Warwick and that Warwick was obliged, by the existence of the trust, to transfer his shares to his mother upon request. 38 An ancillary submission was made by Tavoularis on 19 June 2002. The ancillary submission asserted that, when Appletrees was sold, the net proceeds were distributed with the clear intention that each of Mrs Wall and her children would thereafter operate independently of each other: the net equity in the Company was distributed to the shareholders, who made provision for their mother at that time. From the point of view of the shareholders, the sale of Appletrees and the disposition of the net proceeds of sale signalled the cessation of a beneficial involvement in the Company and a reduction to zero of the value of their shares. By the children accepting that the Company could thereafter be used by Mrs Wall for her exclusive advantage and benefit, the beneficial interest in the shareholdings of the children was effectively transferred to Mrs Wall. Thus, so the ancillary submission asserted, an express trust was thereby created by the shareholders, albeit without the parties appreciating the legal effect. It was sufficient, so it was said, that future arrangements for Mrs Wall's use of the Company were intended, understood and have subsequently transpired. 39 The ancillary submission then went on to endeavour to explain contemporaneous material that was inconsistent with the existence of such an express trust. For example, the returns to the Australian Securities & Investments Commission ('ASIC') and its predecessor did not reflect the existence of a trust in respect of Warwick's shareholding. Rather, the returns described Warwick as beneficial owner. It was said that the Company's accountants never acted for Warwick and had not previously had reason to consider whether his beneficial interest in the shares had been divested. Accordingly, so it was said, the Company's returns to ASIC did not establish that Warwick retained the beneficial interest in the shares, notwithstanding that the returns said so in express terms. 40 The trust in respect of the shares in the Company thus asserted was an express trust. Such a trust has not been suggested subsequently, presumably because it would have been inconsistent with the stated object of utilising the accumulated tax losses of the Company as deductions from future income. It is very significant that none of the submissions by Tavoularis asserted a constructive trust arising from the application of the doctrine of proprietary estoppel, by reason of Mrs Wall having subsequently acted to her detriment in reliance upon a belief that she was the beneficial owner of the shares held by Warwick.

WARWICK'S SUBMISSIONS TO THE TRIBUNAL 41 In the proceeding before the Tribunal, Warwick was represented by Mr Brian Daly, a retired solicitor. Mr Daly made a written submission to the Tribunal dated 16 November 2004. That submission relevantly said that the true position was that Warwick and his brother and sister disposed of Appletrees in 1988. It said that Warwick's only asset at that time was the shareholding and that was virtually worth nothing. Mr Daly asserted that the solicitor who had acted on the sale of Appletrees left New South Wales and took up practice in Queensland. He said that the solicitor did not finalise the sale of Appletrees, in that he left thousands of shares still in Warwick's name, even though they were worth very little, having been transferred to his mother. 42 Mr Daly also said that Philip had signed certain Company forms after the restructure in 1988, saying that Warwick retained hundreds of thousands of shares in Appletrees and which placed a value on them of some hundreds of thousands of dollars. Mr Daly asserted that that was untrue and that Philip had wrongfully included Warwick's shareholding. Mr Daly said that, when Warwick's pension was stopped and when he discovered the errors of the accountant in 2002, he and his brother arranged for the Company to be wound-up. Mr Daly pointed out that Warwick had had no monies whatsoever from the Company since the mid 1990s and did not receive any funds when the Company was wound-up, as he had received his full third of the value of his interest in the Company when Appletrees was sold. He said that Philip, Helen and Mrs Wall all contributed to the cost of the winding-up, since Warwick had no funds whatsoever. Mr Daly went on to say that he had advised Warwick that he may have a claim at law against the solicitors or the accountants for their negligence. No particulars of the claim were given. 43 Mr Daly's submission of 16 November 2004 formulated the questions for the Tribunal as follows: (1) Did Warwick have thousands of shares in the Company and did the Social Securities Appeal Tribunal wrongfully accept the value put on the shareholding by the accountants or typist. (2) Did the shareholdings have a value of thousands of dollars? (3) Did Warwick dispose of assets in accordance with the provisions of the Entitlement Act? (4) Is the sum of $88,000 due back to the Department by Warwick? It is significant that Mr Daly made no mention of a trust. 44 The Secretary's Statement of Facts and Contentions, lodged with the Tribunal, observed that it was not disputed that Warwick was the legal owner of 8,445 shares, representing one third of the total capital in the Company. The Statement said that the issue was, first, how those shares are to be valued and, secondly, whether Warwick was the beneficial owner of the shares. The Statement referred to Warwick's argument before the Social Security Appeals Tribunal that there was a trust in favour of his mother in existence at all times and said that the Secretary contended that there was no evidence for the existence of such a trust. The Statement referred to a conclusion of the Social Security Appeals Tribunal that 'no implied trust arose by reason of the actions of Mrs Wall in transferring Appletrees to the Company in 1962'. The Secretary agreed with that conclusion. It is significant that at that point no mention was made of a trust in respect of the shares.

ABANDONMENT OF THE TRUST SUBMISSION 45 The Tribunal hearing was conducted by telephone. The participants in the telephone conference included Mr Daly. 46 At an early stage in the hearing, the Tribunal referred to Warwick's shareholding and said that it understood that his case was that his shareholding was worth nothing or, alternatively, that he held his shares on trust for his mother. That observation reflects the Secretary's Statement of Facts and Contentions. 47 However, the following exchange then took place: Mr Daly: 'Yes, we say that they were worth very little.' Tribunal: 'I understand that but it seems to me the real question is did the shares have a value really and if they did was Mr Wall holding them no[sic] trust for his mother.' Mr Daly: 'I discount the trust business, quite frankly.' Tribunal: 'So you don't really argue that there's a trust at all?' Mr Daly: 'No, I don't.' Tribunal: 'You say they just had no value?' Mr Daly: 'Well, they had no value or little value?' Tribunal: 'Okay, because I think they've been valued by Centrelink of something in the order of $900,000 odd.' Mr Daly: 'That is right.' Tribunal: 'And there's another one by the State Stamp Duties Office of $680,000 or something.' Mr Daly: 'Yes.' Tribunal: 'So there have been valuations which have been taken up by Centrelink in essence of the Company's assets. It seems to me then that the critical question is do these shares have any value?' Mr Daly: 'That's the real point of the matter.' I have emphasised the critical statements made by Mr Daly. 48 After a further brief exchange, Mr Daly said that he wanted to tender his submission of 16 November 2004. The submission was marked by the Tribunal as an exhibit, although nothing further was said about it. 49 Later in the hearing, the following exchanges took place concerning the issues before the Tribunal: Tribunal: 'Right. So it comes down again to what the value of Mr Wall's shares were when he transferred them to his mother?' Mr Daly: 'That's right.' Tribunal: 'Now, you're saying they had no value?' Mr Daly: 'I'm saying that they had no value as far as he was concerned.' … Tribunal: 'So the issue, Mr Daly is if Mr Warwick Wall transferred shares to her that those shares had a value at the time of the transfer?' Mr Daly: 'Or did they have a value as at that time, that's the vital question.' Tribunal: 'That's exactly right and prime facie, by the fact that on liquidation,… something in the order of, it looks like $2 million odd was paid out, that looks as though the company did have assets.' Mr Daly: 'Did any of that go to Warwick Wall?' Tribunal: 'No, I am not saying it did but that's not the issue. The issue as you've just said is whether his shares had a value when he transferred them to his mother. So that's where we are. So is it the case, Mr Daly that you accept that the company did have assets?' Mr Daly: 'I accept the company had assets.' Tribunal: 'And their value is really summed up by that document… which I've just referred to [the Share Transfer stamped at a value of $680,000]. Mr Daly: 'No I don't accept that for one moment.' Tribunal: 'You don't accept that. I think I've read out to you all the figures and it looks as though we're looking at something like $2,103,954.' Mr Daly: 'I don't accept that figure. I remind you that Warwick Wall had nothing to do with any of these figures.' Tribunal: 'Mr Daly, I understand that but the question is, did they have value at the time he transferred them? On these documents it looks as though they did. The next question you would say is that they had no value to him.' Mr Daly: 'First and foremost, when the Stamp Duties Office assessed the value, were they assessing it as at 1987 or were they assessing it as at the year 2003 or 4?' Tribunal: 'Well, Mr Daly, it looks, I think that as I understand stamp duty practice, it's as of the date of the transaction and this transaction was 6 March 2003.' Mr Daly: 'As to whether that was dated back to 1987 or as to whether it was in the year 2005.' Tribunal: 'Well, Mr Daly, I think at this stage, on the face of it, it seems to me that that was a valuation as of 6 March 2003 and that seems to be supported by the amounts of money that appear in the distribution on the liquidation.' Mr Daly: 'And who prepared the distribution documents?' Tribunal: 'JMA Legal. So can I just say, this seems to me they seem to be the crucial document. Mr Larkham, are they the crucial documents?' Mr Daly: 'Yes but we have various other crucial documents also.' Tribunal: 'I understand that but I am just saying at this stage, I think we've sort of worked out from the Department's point of view…' Mr Daly: 'They had that value.' Tribunal: 'That's the Department's argument' 50 Warwick draws particular attention to the statements, emphasised in the above extract, that the question was whether the shares 'had no value to [Warwick]' and that the shares 'had no value so far as [Warwick] was concerned'. He says that those exchanges demonstrate a recognition by the Tribunal that, although the shares might have had some intrinsic value, they had no value to Warwick, because he held them on trust for his mother. 51 However, the subsequent exchange in the above extract makes it clear that that was not the argument being advanced by Mr Daly. Mr Daly raised the question of whether the stamp duty on the transfer from Warwick to his mother had been assessed as at the date of the transfer or as at 1987, when Appletrees was sold and Warwick received a payment from the proceeds of sale. 52 It is not easy to comprehend just what argument Mr Daly was advancing. It may be that he was intending to say that stamp duty was being assessed on the value of the shares as at 1987, at a time when the shares had a value to Warwick. If that were so, the stamp duty valuation as at the date of transfer was irrelevant. That argument, of course, is completely without substance. Clearly, stamp duty was assessed on the value of the shares at the time of transfer. Duty was paid on the basis that the shares had a value of $686,747. The Tribunal observed that that value was supported by the documentation relating to the liquidation of the Company. 53 Mr Daly's response that someone else prepared the liquidation documents could be taken as an indication by him that the liquidation documents and the assessment of stamp duty on the transfer involved some misapprehension or mistake. The misapprehension or mistake was that those responsible for the preparation of the documents did not realise that Warwick had divested himself of beneficial ownership of the shares. 54 Nevertheless, it is impossible to find in the exchanges a contention on behalf of Warwick that Warwick's conduct in the intervening years was such as to give rise to a proprietary estoppel, the only remedy for which was the declaration of a constructive trust. The Tribunal's response does not indicate that the Tribunal understood that such a contention was being advanced. It would be unfair to suggest that the Secretary's representatives should have perceived that such an argument was being advanced. It is quite apparent that Mr Daly had no comprehension of any such argument. 55 It is simply not possible to discern, from the exchanges to which I have referred, a contention by Mr Daly of the existence of an express trust. A fortiori, it is impossible to discern any contention by Mr Daly, on behalf of Warwick, that there was a different type of trust relationship, namely a constructive trust arising from some form of proprietary estoppel, as found by the Tribunal. At no time did any of the submissions made by Tavoularis or Mr Daly advert to such a proposition.

THE MATERIAL PROFERRED TO THE TRIBUNAL 56 The Tribunal received a number of exhibits. Exhibit D1 consisted of two volumes of material in relation to the Secretary's decision to cancel the pension. Exhibit D2 consisted of one volume of material in relation to the Secretary's decision to recover the debt due to the Commonwealth. Exhibit D3 consisted of material relating to the Secretary's decision to refuse a further pension. All of that material was tendered as being the material before the Social Security Appeals Tribunal. Since Mr Daly expressly eschewed reliance on the trust that had been advanced before the Social Security Appeals Tribunal, no inference could be drawn, from the contents of the material that had been before the Social Security Appeals Tribunal, that some different trust was being advanced before the Tribunal. 57 Exhibit D4 was described as being, in the majority, copies of materials received under summons. It is by no means clear who was responsible for the tender of D4. Exhibit D4 consisted of 23 documents of varying dates from November 1987 down to February 2005. 58 Counsel for Warwick drew the Court's attention to the following documents in Exhibit D4:

• T1 is a letter of 9 June 1999 from Joanne Crossing, an accountant who performed work for the Company. The letter refers to a meeting with Philip in relation to the Company. Mrs Crossing said that there were a number of issues she had been considering, the most important of which was the security of Mrs Wall's investments and income. She referred to the fact that the shareholders of the Company were Philip, Warwick and Helen, who were effectively the beneficial owners of Mrs Wall's investments. Mrs Crossing said that should one of the children die, the shares would be considered assets of his or her estate.
• T6 is letter dated 9 July 2001 from Mrs Crossing to Warwick. Mrs Crossing said that she planned to meet with the Company's solicitor to review his file because Mrs Wall's effective ownership of the Company is not documented in the formal records and reports of the Company. The letter said that, when the Company had been formed, Mrs Wall had effectively passed the legal ownership to her children to avoid death duties but that she was regarded as the beneficial owner of the Appletrees property. Mrs Crossing observed that it 'seems almost ironic' that if Mrs Wall's beneficial ownership of the Company is not recognised, she could have been eligible for the aged pension from 1980, but that she received no benefits as she knew her assets were too high.
• T7 is a statement of 22 January 2002 by Godfrey Pembroke, financial consultant. Mr Pembroke said that he has been Mrs Wall's financial adviser for eight years and that it was explained to him by Mrs Wall and her solicitor at a meeting in 1994 that the Company's assets belonged solely for the benefit of Mrs Wall. Mr Pembroke said that he advised Mrs Wall not to apply for an aged pension, given that the Company's assets belonged to her and that ownership would exclude her from an entitlement to a pension.
• T15 is a letter of 30 June 2003 from Robert Locke, solicitor, to Warwick. Mr Locke referred to a meeting on 3 February 1999 with Mrs Crossing and other members of the family to discuss issues concerning Gerede Holdings Pty Ltd. Mr Locke said that he subsequently engaged other solicitors to help him in the process of winding-up unnecessary company structures. Mr Locke said that he had been informed by JMA Legal, who were acting in connection with the liquidation, that Warwick would not participate in any distributions of any funds from the liquidation of the Company. The letter made certain statements concerning Mr Locke's belief as to the way in which the affairs of the Company had been conducted. · T16 is a letter of 30 June 2003 from Mrs Crossing to Warwick. Mrs Crossing said that she was aware that Warwick had not taken an active part in the management nor had any beneficial interest in the Company since the sale of Appletrees in 1998.

59 Having regard to the circumstances in which the above material was admitted before the Tribunal, the content of the material is entirely equivocal in terms of the inference sought to be drawn on behalf of Warwick, that a constructive trust was being advanced before the Tribunal. In the light of the unequivocal statement by Mr Daly that there was no trust, it is unrealistic to suggest that the admission of that material as evidence before the Tribunal should have alerted the Secretary to a case such as that now espoused by Warwick, and as was apparently found by the Tribunal.

THE ORAL EVIDENCE BEFORE THE TRIBUNAL 60 Counsel for Warwick also draws attention to evidence given to the Tribunal by Mrs Wall and by Philip. An affidavit by Mrs Wall asserted that Warwick had nothing further to do with the Company following the sale of Appletrees in 1987. Mrs Wall said that she believed that Warwick had received his share of the Company assets. She said that Philip signed tax returns and dealt with other business prepared by Mrs Crossing. Mrs Wall said that she believed that Mrs Crossing had stated that the alleged shareholding by Warwick as shown in the annual returns to ASIC was an initial oversight that was simply repeated. Mrs Wall said that Warwick had not been involved in any business or dealings in relation to the Company. 61 Philip swore an affidavit in which he said that, following the sale of Appletrees in 1987, the remaining assets, after repayment of bank loans, shareholder loans and other accounts, were distributed to the shareholders, namely Philip, Helen, Warwick and Mrs Wall. He said that Warwick had absolutely no further involvement in the Company, which has since been liquidated. He said that Philip, Warwick, Helen and Mrs Wall had received no proceeds since the liquidation and will not, since there are none to be had. 62 The following exchanges took place in the course of oral evidence given by Philip: Mr Daly: 'Mr [Philip] Wall, the situation was as I understand it that Warwick, you and your sister agreed to bow out of Appletrees taking one third each.' Philip Wall: 'Yes.' … Mr Daly: 'Was Mr Warwick Wall ever paid any money in 1987?' Philip Wall: 'Yes.' Mr Daly: 'Was he paid his full one share of the value of Appletrees?' Philip Wall: 'Yes, minus what we gave to mum… he took his entire entitlement, like we all did.' Tribunal: 'Mr Daly, please don't lead. Can I ask some questions if you don't mind? Mr Wall, so in 1987 you sold Appletrees and so you can tell me how much you got for it?' Philip Wall: '5.2' … Tribunal: 'So what happened to the 5.2 million?' Philip Wall: 'Creditors.' Tribunal: 'How much was divided into the people who were part of the family, or anybody else who had a beneficial interest?' Philip Wall: 'Well, it was 2.2 million left I think after we paid everything. It was about 2.2 from memory.' Tribunal: 'How many people were involved?' Philip Wall: 'Four.' Tribunal: 'So your mother and the three children?' Philip Wall: 'Yes.' Tribunal: 'So the shares kept going but the only value they ever had was the value of the sale of the property in 1988, is that what you are saying?' Philip Wall: 'True.' Tribunal: 'So in '88 who got money out of it, everybody?' Philip Wall: 'All of us, yes, Warwick, Philip, Helen and Mrs Wall.' Tribunal: 'Was it in equal shares?' Philip Wall: 'No, not exactly equal because there was a little bit more owing on loan accounts to some - so it was all balanced out that everyone - it was all squared up, yes.' … Mr Daly: 'It was 2.1 million divided up amongst the four of you totally extinguished any money in Appletrees.' Philip Wall: 'Yes.' Mr Daly: 'Did Appletrees have any other assets?' Philip Wall: 'Only the unit that mum is living in now which was transferred to her then.' Tribunal: 'What, in 1988?' Philip Wall: 'Yes.' Mr Daly: 'It was transferred to her in 1988 wasn't it?' Philip Wall: 'Yes it was.' Mr Daly: 'In 1988 Appletrees had no money, no business except a company structure.' Philip Wall: 'Ceased trading, yes. Obviously it ceased trading, the property was sold, that was the main thing.' 63 Those exchanges do not take the matter further. Philip and Mr Daly were drawing attention to the fact that the three children received cash from the proceeds of the sale of Appletrees. However, the contemporaneous material makes it unequivocally clear that the cash was received by way of loan. There was no suggestion in the evidence that the character of the payment was ever intended to be otherwise than a loan. Neither Philip nor Mr Daly suggested that the loans were not intended to be repaid. In any event, there is no suggestion, in the exchanges, that the payment involved any detriment to Mrs Wall. Indeed, a part of the money received by Warwick, and by his brother and sister, was given to their mother. 64 At a later stage in the hearing, there was an exchange in which a reference was made to submissions made to the Social Security Appeals Tribunal by Tavoularis. Counsel for Warwick suggested that that indicated that those submissions were still to be regarded as the case being mounted on his behalf. However, on any reasonable view of the exchange, it is clear that the reference to the submission was only for the purposes of identifying a document that was attached to the submission. That document was a letter from Mrs Crossing explaining how Warwick came to be described as the beneficial owner of shares in the Company in the return lodged with ASIC. 65 The context is made clear by the observation of the Tribunal, referring to a division of the proceeds of the sale of Appletrees that 'went into companies notionally'. The Tribunal observed that it is a question for the Tribunal to try to follow that through and see what happened, in terms of the value of the assets at the time. The Tribunal said that it was a question of whether there were loans to the children and whether those loans have actually ever been repaid. Thus, there was no suggestion by the Tribunal that the possibility of the existence of a trust, as outlined by Tavoularis, was being examined. In any event, there was no mention of a constructive trust by Tavoularis. 66 Mrs Crossing also gave oral evidence and was cross-examined by the Secretary's representative who said to Mrs Crossing that Warwick had argued that he received distributions from the Company in 1988 and received nothing after that and had got everything he could out of the Company at that stage. Mrs Crossing agreed that that is what the submissions have been. Mrs Crossing was then asked whether, if that is correct, the balance sheets should have reflected that. Mrs Crossing's response was that, once Appletrees had been sold, the only money in Appletrees would have been 'the residences that were earmarked for Mrs Wall'. When asked whether it was suggested that the financial statements should not be relied on, Mrs Crossing said that Warwick really should probably have never been part of the Company from the time Appletrees was sold. She said that Warwick was only left as a shareholder so that his mother had the benefit of the tax losses. That answer, of course, is totally inconsistent with the notion that he was anything other than the beneficial owner of the shares.

CONCLUSION ON PROCEDURAL FAIRNESS 67 At no time in the course of the hearing before the Tribunal was there any assertion on the part of Mr Daly that there was a common intention on the part of Warwick and his mother that Warwick would no longer have any beneficial interest in his shares in the Company. Mr Daly's express abandonment of the notion of a trust is in stark contrast to the absence of any formal contention by Mr Daly that Warwick had divested himself of beneficial ownership of the shares in 1988, in exchange for a loan by a wholly owned subsidiary of the Company. 68 Unless the arrangements put in place in 1988 were a sham, the clear intention was that there was to be no change in the beneficial ownership of the shares, since that could have prejudiced the availability of the accumulated tax losses. The proposal outlined by the Tax Advisers was that it would be preferable if all the surplus funds were invested in the equity of the new subsidiary companies and then lent to the shareholders for their immediate use, with the balance being lent back to the Company for investment and repayment of the shareholders' existing loans. The advice referred expressly to the question of whether loans funded out of share capital could be regarded as loans funded by profits of the subsidiaries. 69 It is by no means clear just what Mr Daly's contentions were. They did not entail any contention that Mrs Wall had acted to her detriment, in some way, in reliance upon a common understanding or intention that the shares in the Company would be beneficially owned by her with effect from the restructure in 1988. In all the circumstances, it cannot be said that the Secretary was afforded an opportunity to explore matters that would be relevant to the question of a common intention or understanding giving rise to a proprietary estoppel, the only appropriate remedy for which would be the declaration of a constructive trust in respect of the shares. Nor was the Secretary afforded the opportunity of making submission in relation to such a case.

NO EVIDENCE TO SUPPORT TRIBUNAL'S CONCLUSION 70 In view of the conclusion that I have reached concerning the denial of procedural fairness, it is not strictly necessary to deal with the second ground. However, since it has been argued, it is desirable to say something about the ground. 71 The Secretary does not rely on any error of law on the part of the Tribunal in concluding that there was a constructive trust in favour of Mrs Wall in respect of Warwick's shares. The Secretary accepts that the conclusion that the shares were not property with a value in his hands, capable of being converted into an assessable basis for reducing his entitlement to a social security benefit, was essentially a finding of fact. However, the Secretary impugns the conclusion on the basis that, as a finding of fact, it was not supported by evidence or any probative material. 72 The Secretary contends, in essence, that the evidence would not support the findings necessary to establish a proprietary estoppel binding on Warwick. While the evidence leaves a great deal to be desired as admissible evidence in a suit in equity between Warwick and his mother, it may be that there was material before the Tribunal that was capable of supporting a finding that Mrs Wall acted to her detriment in some fashion in reliance upon some assumption made in 1988. A real difficulty with the Tribunal's conclusions is that the Tribunal's reasoning was not directed to finding the facts necessary for establishing a proprietary estoppel, giving rise to a constructive trust. 73 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. 74 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) 196 CLR 101 at [10]). 75 The difficulty with the Tribunal's reasons is that it simply did not direct attention to findings necessary to establish that a remedy of constructive trust was appropriate in the circumstances. Although these matters were not the subject of any submission to the Tribunal on the hearing of this proceeding, counsel for Warwick suggested that Mrs Wall acted to her detriment in:

• lending money, interest free, to the Company, · refraining from applying for an aged pension under the Entitlements Act.

However, the Tribunal did not attempt to quantify any such detriment. 76 In addition, it would be necessary to examine the extent to which Mrs Wall obtained a benefit by reason of the tax losses of the Company being carried forward so as to be set off against income derived from investments made with money lent, interest free, by her to the Company. A further matter for enquiry may be the extent to which Fontas, a wholly owned subsidiary of the Company, forwent its claim against Warwick for the loan of $1,080,000 made to him in 1988. Of course, that may not have been a detriment to Mrs Wall, unless it is assumed that she was the beneficial owner of the shares. 77 Those enquiries were not undertaken by the Tribunal. 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. Those considerations, of course, reinforce the conclusion that the possibility of a constructive trust was not adequately ventilated to enable the Secretary to meet such a case.

APPLICATION OF DIVISIONS 3.18 AND 3.12 OF THE SOCIAL SECURITY ACT 78 The question of Divisions 3.18 and 3.12 is relevant only to the decision to refuse to grant a new pension. Having regard to the conclusion that I have reached concerning the denial of procedural fairness, it is not strictly necessary to deal with this question. Nevertheless, since it has been argued, I shall say something about the question. It may be a matter that would need to be considered by the Tribunal upon any further consideration of the matters in question. 79 Section 1207Q(1) of the Entitlement Act provides that, for the purposes of Division 3.18, a company is a controlled private company in relation to an individual if the company is a designated private company and the individual passes the control test. Under s 1207Q(2)(a), an individual passes the control test in relation to a company if the aggregate of the direct voting interests held by the individual and the direct voting interests held by associates of the individual is 50 per cent or more. Under s 1207C(1), a relative of an individual is an associate of the individual for the purposes of determining whether a company is a controlled private company in relation to that individual. Clearly, Mrs Wall was a relative of Warwick. Accordingly, shares held by her are to be taken into account in determining whether or not Warwick passes the control test in relation to the Company. 80 Section 1207X(1) provides that, for the purposes of Division 3.18, if a company is a controlled private company in relation to an individual:

• the individual is an attributable stakeholder of the Company, unless the Secretary otherwise determines, · the individual's asset attribution percentage is 100 per cent, or such lower percentage as the Secretary determines.

Thus there are two questions upon which the Secretary may exercise a discretion in favour of an individual. The first is to determine that the individual is not an attributable stakeholder. The second is to determine, even if the individual is an attributable stakeholder, that a lower percentage than 100 per cent is to be the asset attribution percentage of that individual. 81 The pivotal provision, for present purposes, is s 1208E(1). Under that provision, if an individual is an attributable stakeholder of a company and the company owns a particular asset, there is to be included in the value of the individual's assets an amount equal to the individual's asset attribution percentage of the value of that asset. At the time when Warwick applied for a further pension, the Company owned substantial assets. Unless the Secretary exercised the discretions in his favour, an amount equal to 100 per cent of the Company's assets would have to be included in the value of Warwick's assets for the purposes of the Entitlement Act. Further, under s 1208M, if an individual ceases to be an attributable stakeholder of a company after 1 January 2002 and, immediately before the cessation, the company owned a particular asset, the provisions are to have effect as if the individual had disposed of an asset and the amount of the disposition was equal to the individual's asset attribution percentage of the value of the company's asset. 82 Section 1123(1) of the Entitlement Act provides that, for the purposes of the Act, a person disposes of assets if the person engages in a course of conduct that disposes of some of the person's assets and the person receives no consideration in money or money's worth for the disposal. Under s 1126AA(2), if the amount of the relevant disposal exceeds $10,000, then the amount of the relevant disposal is to be included in the value of the person's assets for the period of five years starting on the day on which the relevant disposal took place. The effect of those provisions, assuming the Secretary did not exercise the relevant discretions in Warwick's favour, would be that Warwick would continue to be treated, for the purposes of the Entitlement Act, as if he was the owner of the assets of the Company for a period of five years after the disposition. 83 Clearly, the operation of those provisions would need to be taken into account by the Tribunal upon any reconsideration. It may be significant that the Tribunal was not in fact asked to take them into account in the present case. While the failure to do so may conceivably constitute jurisdictional error, the Tribunal could not be criticised in any way for failing to have regard to those provisions in circumstances where it was not asked to have regard to them. 84 Upon a reconsideration, it is common ground that the Tribunal would be in a position to exercise the discretions of the Secretary. There may well be cogent reasons why the discretions would be exercised in favour of Warwick if the question arises before the Tribunal. However, that is not a matter presently before the Court.

CONCLUSION 85 There was a denial of procedural fairness to the Secretary. It is common ground that the denial of procedural fairness was an error of law within s 44 of the Tribunal Act. Accordingly, the three decisions of the Tribunal should be set aside. The whole matter, involving the review of all three decisions, should be remitted to the Tribunal for further consideration and decision according to law. 86 The Secretary, quite properly, does not ask for an order for costs. Accordingly, I will make no order as to the costs of the appeal.

I certify that the preceding eighty-six (86) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

Solicitor for the Applicant: Australian Government Solicitor

Solicitor for the Respondent: Legal Aid Commission of New South Wales