Ali; Secretary, Department of Social Services and (Social services second review)
[2021] AATA 4095
•9 November 2021
Ali; Secretary, Department of Social Services and (Social services second review) [2021] AATA 4095 (9 November 2021)
ReviewNumber: 2020/4124 and 2020/4126
Division:GENERAL DIVISION
File Numbers: 2020/4124 & 2020/4126
Re:Secretary, Department of Social Services
APPLICANT
AndMr Naushad Ali & Mrs Sherene Ali
RESPONDENTS
DECISION
Tribunal:Senior Member B. Pola
Date:9 November 2021
Place:Brisbane
Pursuant to section 43(1)(c)(i) of the Administrative Appeals Tribunal Act 1975 (Cth), the Tribunal sets aside the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal, dated 3 June 2020, and substitutes it with a decision that:
(a)Mr Naushad Ali (First Respondent) has a legally recoverable debt to the Commonwealth arising from the overpayment of his Disability Support Pension in an amount to be recalculated on the basis that the following deposits received by him are to be assessed as income, pursuant to section 1073 of the Social Security Act1991 (Cth):
(i)Deposit of $50,000 made on 5 July 2017;
(ii)Deposit of $800 made on 18 August 2017;
(iii)Deposit of $185,000 made on 22 August 2017;
(iv)Deposit of $75,000 made on 16 November 2017; and
(v)Deposit of $11,000 made on 20 December 2017.
(b)Mrs Sherene Ali (Second Respondent) has a legally recoverable debt to the Commonwealth in an amount to be recalculated on the basis that the above deposits received by Mr Naushad Ali are assessed as income of her partner; and
(c)Both Mr Naushad and Mrs Sherene Ali (the Respondents) recalculated debts to the Commonwealth are recoverable in full; and
(d)The matter be further remitted to the Applicant to recalculate the Respondents debts in accordance with this decision.
................[SGD]...........................
Senior Member B. Pola
Catchwords
Debt – debt raised to recover overpayments of disability support pension – overpayments arose because correct amount of self-employment income not taken into account – where third party deposited funds to debtor to supervise a construction project for no compensation – where evidence of withdrawals of project funds for debtor’s personal expenses – where lack of documentary evidence to delineate project expenses from debtor’s personal expenses – whether whole or part of debt should be written off – whether debtor had no capacity to repay the debt – whether deductions from benefits to repay the debt would cause severe financial hardship – whether whole or part of the debt should be waived – whether debt solely attributable to an administrative error on the part of the Commonwealth – whether debtor received the overpayments in good faith – whether debtor knowingly failed to comply with statutory obligations – whether special circumstances exist to warrant waiver of debt – no special circumstances – decision under review set aside
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth)Social Security (Administration) Act 1999 (Cth)
Cases
Beadle and Director-General of Social Security [1984] 6 AATA 176
Callaghan and Secretary, Department of Social Security [1996] 45 ALD 435
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114
Hill and Repatriation Commission [1996] AATA 871 (1 November 1996)
Jazazievska v Secretary Department of Family & Community Services [2000] FCA 1484
Nassimi and Secretary, Department of Social Services [2015] AATA 423
Panacci and Secretary, Department of Employment and Workplace Relations [2008] AATA 30
Read v Commonwealth [1988] HCA 26
Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] 152 ALR 127
Secretary, Department of Social Security v Hales (1998) FCA 219Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190
REASONS FOR DECISION
Senior Member B. Pola
9 November 2021
BACKGROUND
1. The Applicant in this matter is the Secretary for the Department of Social Services, and the joint Respondents are Mr Naushad Ali (2020/4124) and Mrs Sherene Ali (2020/4126). During the course of the proceedings Mr Ali represented Mrs Ali, with both applications considered jointly.
2. Mr Ali was in receipt of the Disability Support Pension (herein referred to as ‘DSP’) from 16 August 2010 to 27 February 2018 (observing during this time there were some periods of suspension and cancellation) and he was subsequently in receipt of the Age Pension from 27 February 2018 to present[1].
[1] Exhibit A2, T26, page 416.
3. Mrs Ali was in receipt of the DSP from 19 February 2009 to present (observing Mrs Ali was subject to a compensation preclusion period for the period of 20 July 2016 to 6 February 2018)[2].
[2] Exhibit A1, T26, pages 409; T29, pages 536 to 538.
4. On 22 August 2019, Services Australia (herein referred to as the ‘Agency’), raised the debts below against both Respondents on the basis that the correct amount of self-employment income was not taken into account when payments were made to them:
(i)An Age Pension debt of $27,162.12 for the period of 19 December 2016 to 8 August 2019 for Mr Ali[3]; and
(ii)A DSP debt of $16,687.98 for the period of 7 February 2018 to 8 August 2019 for Mrs Ali[4].
[3] Exhibit A2, T13, pages 206 to 207.
[4] Exhibit A1, T13, pages 206 to 208.
5. On 9 September 2019, the Respondents requested the Agency review the decisions to raise and recover debts against them both[5].
[5] Exhibit A1, T28, page 474; Exhibit A2, T28, page 463.
6. On 17 October 2019, the Agency reviewed and affirmed the earlier decision to raise and recover debts against the Respondents[6].
[6] Ibid, page 476; Exhibit A2, T28, page 465.
7. On 2 December 2019, the Respondents requested further review of the decisions to raise and recover debts against them which was undertaken by an Authorised Review Officer (herein referred to as an ‘ARO’)[7].
[7] Ibid, page 479; Exhibit A2, T28, page 474.
8. On 5 March 2020, an ARO set aside the decision to raise and recover the Age Pension debt of $27,162.12 for the period of 19 December 2016 to 8 August 2019 against Mr Ali, and in substitution decided that Mr Ali had two debts totalling $23,373.51[8]:
(i)a recoverable DSP debt of $10,486.27 for the period of 30 June 2017 to 26 February 2018; and
(ii)a recoverable Age Pension debt of $12,887.24 for the period of 27 February 2018 to 27 December 2018.
[8] Exhibit A2, T22, pages 294 to 308.
9. On 6 March 2020, an ARO set aside the decision to raise and recover a DSP debt of $16,687.98 for the period of 7 February 2018 to 8 August 2019 against Mrs Ali, and in substitution decided that Mrs Ali[9]:
(i)had a recoverable DSP debt of $13,848.24 for the period of 7 February 2018 to 27 December 2018; and
(ii)was entitled to a back payment of DSP of $457.83 for the period of 9 August 2019 to 3 October 2019.
[9] Exhibit A1, T22, page 304 to 312
10. On 26 April 2020, the Respondents applied to the Social Services and Child Support Division (herein referred to as ‘SSCSD’) of the Administrative Appeals Tribunal (herein referred to as ‘Tribunal’) for review of the ARO’s decisions dated 5 and 6 March 2020, respectively[10].
[10] Ibid, T23, pages 313 to 320; Exhibit A2, T23, pages 309 to 316.
11. On 3 June 2020, the SSCSD of the Tribunal set aside the decisions under review with respect to both Respondents and in substitution decided that:
(i)Mr Ali did not have a debt to the Commonwealth for the period of 30 June 2017 to 27 December 2018; and
(ii)Mrs Ali did not have a debt to the Commonwealth for the period of 27 February 2018 to 27 December 2018.
12. This was on the basis that the SSCSD of the Tribunal was of the view that deposits totalling $321,000 made to Mr Ali in the 2017–18 financial year should not be assessed as income in calculating Mr and Mrs Ali’s rates of pension. The Member further decided that a smaller deposit of $800 made to Mr Ali in the same financial year should be assessed as income, but that amount was too low to reduce Mr and Mrs Ali’s rates of pension[11].
[11] Ibid, T2, pages 15 to 16, paragraphs 20 to 22; Exhibit A2, T2, pages 15 to 16, paragraphs 20 to 22.
13. On 8 July 2020, the Secretary of the Department of Social Services applied to the General Division of the Tribunal for review of the decision of the SSCSD of the Tribunal, dated 3 June 2020[12].
[12] Exhibit A1 and A2, T2, pages 10 to 16.
14. In the intervening period since the Applicant applied for review to this Tribunal, both the Applicant and Respondents have filed additional submissions and evidence[13].
[13] Exhibits A3; A4; R1; R2.
15. It is noted that the Respondents are currently in receipt of the following payments[14]:
(i)Mr Ali is in receipt of the Age Pension at $718.10 per fortnight; and
(ii)Mrs Ali is in receipt of the DSP at $718.10 per fortnight.
[14] Exhibit A3, page 9, paragraph 3.40.
JURISDICTION
16. This is an application to review a decision of the SSCSD of the Tribunal, dated 3 June 2020, which set aside and substituted earlier decisions made by an ARO on 5 and 6 March 2020, respectively.
17. Section 179(1) of the Social Security (Administration) Act 1999 (herein referred to as the ‘Administration Act’), states:
179 Application for AAT second review
(1) Application may be made to the AAT for review (AAT second review) of a decision of the AAT on AAT first review made under subsection 43(1) of the AAT Act.
(2) For the purposes of subsection (1), the decision of the AAT on AAT first review is taken to be:
(a) if an AAT first review affirms a decision—that decision as affirmed; or
(b) if an AAT first review varies a decision—that decision as varied; or
(c) if an AAT first review sets a decision aside and substitutes a new decision—the new decision; or
(d) if an AAT first review sets a decision aside and sends the matter back to the Secretary for reconsideration in accordance with any directions or recommendations of the AAT—the directions or recommendations of the AAT.
18. In accordance with section 179(1) of the Administration Act, the Tribunal has jurisdiction to hear the Applicant’s application of 8 July 2020.
ISSUES
19. The decision for review by this Tribunal is the earlier decision of the SSCSD of the Tribunal, dated 3 June 2020, which set aside earlier decisions under review and in substitution decided that:
(i)Mr Ali did not have a debt to the Commonwealth for the period of 30 June 2017 to 27 December 2018; and
(ii)Mrs Ali did not have a debt to the Commonwealth for the period of 27 February 2018 to 27 December 2018.
RELEVANT LEGISLATION
Rate of Age Pension and Disability Support Pension Payments
20. The relevant legislation with respect to these provisions is the Social Security Act 1991 (Cth) (herein referred to as the ‘Act’)., The rate of an Age Pension, or DSP payment, is determined in accordance with section 1064 of the Act (subject to a recipient being permanently blind). Relevantly, Module A of this section provides an overall rate calculation process – an ordinary income test and an assets test, which affects the rate of the relevant pension payment.
21. As the Respondents in this matter are partnered, section 1064(4) of the Act requires the income and assets of the partner to be taken into account when calculating relevant ordinary income and asset tests, which also affect the rate of the relevant pension payment.
22. Section 1072 of the Act provides a general meaning for the term ‘ordinary income’:
1072 General meaning of ordinary income
A reference in this Act to a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.
Note 1: For ordinary income see subsection 8(1)…
23. Ordinary income is further defined in section 8(1) of the Act, which provides:
income, in relation to a person, means:
(a) an income amount earned, derived or received by the person for the person’s own use or benefit; or
(b) a periodical payment by way of gift or allowance; or
(c) a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).
Note 1: See also sections 1074 and 1075 (business income), Division 1B of Part 3.10 (income from financial assets (including income streams (short term) and certain income streams (long term)), Division 1C of Part 3.10 (income from income streams not covered by Division 1B of Part 3.10), section 1099F (exempt bond amount does not count as income) and section 1099K (refunded amount does not count as income).
Note 2: Where a person or a person’s partner has disposed of income, the person’s income may be taken to include the amount which has been disposed of—see sections 1106-1112.
Note 3: Income is equivalent to ordinary income plus maintenance income
24. The Tribunal observes that the Courts have taken a wide view with respect to the definition of the term ‘income’, as it is used within the Act. The Tribunal refers to their Honour Brennan J in the High Court decision of Read v Commonwealth[15]:
… The definition is exhaustive: the term "income" means what it is defined to mean; it does not mean what "income" would be understood to mean if the definition were not in the Act. The definition is couched in the widest terms, presumably to ensure that public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide. The definition is wide enough to embrace receipts of a capital nature as well as receipts of income, for "income" is defined to mean, inter alia, any moneys, valuable consideration or profits irrespective of the means by which or the source from which those moneys, etc. are received…
[Tribunal underline for emphasis]
[15] [1988] HCA 26; (1988) 167 CLR 57 (2 June 1988) at [3].
25. Relevant to the present application is section 1073 of the Act which applies to amounts received by an individual that is not income from a financial asset, or an income stream, and is not income in the form of periodic payments, ordinary income from remunerative work or an exempt lump sum. That amount is then taken to have been received as one fifty-second of that amount as ordinary income of the person during each week in the twelve months, commencing on the day on which the person becomes entitled to receive that amount. That is, the amount received is in effect apportioned evenly over a twelve-month period from the date it was received. The Tribunal refers to section 1073 of the Act:
1073 Certain amounts taken to be received over 12 months
(1)Subject to points 1067G-H5 to 1067G-H20 (inclusive), 1067L-D4 to 1067L-D16 (inclusive), 1068-G7AA to 1068-G7AR (inclusive), 1068A-E2 to 1068A-E12 (inclusive) and 1068B-D7 to 1068B-D18 (inclusive), if a person receives, whether before or after the commencement of this section, an amount that:
(a) is not income within the meaning of Division 1B or 1C of this Part; and
(b)is not:
(i) income in the form of periodic payments; or
(ii)ordinary income from remunerative work undertaken by the person; or
(iii)an exempt lump sum.
the person is, for the purposes of this Act, taken to receive one fifty-second of that amount as ordinary income of the person during each week in the 12 months commencing on the day on which the person becomes entitled to receive that amount.
(2) Subsection (1) applies to a person who has claimed one of the following allowances:
(a) newstart allowance;
(b) sickness allowance;
(c) youth allowance;
(d) widow allowance;
(e) partner allowance;
(f) mature age allowance under Part 2.12B;
even if the person:
(g) has to serve an ordinary waiting period or a liquid assets test waiting period in respect of the allowance claimed; or
(h) is subject to an income maintenance period in respect of the allowance claimed; or
(i) is subject to a seasonal work preclusion period;
during the period of 12 months referred to in subsection (1).
Debts
26. The following paragraphs outline relevant legislative provisions which apply to debts incurred resulting from a lack of qualification for a payment, or an overpayment. A debt, pursuant to subsection 1223(1) of the Act, is incurred when:
1223 Debts arising from lack of qualification, overpayment etc.
(1) Subject to this section, if:
(a) a social security payment is made; and
(b) a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
Writing off a debt
27. Section 1236 of the Act provides that the Secretary may write off debt:
1236 Secretary may write off debt
(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c) the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d) it is not cost effective for the Commonwealth to take action to recover the debt.
(1B) For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d) the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.
(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor’s social security payment; or
(b) deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c) setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
(2) A decision made under subsection (1) takes effect:
(a) if no day is specified in the decision—on the day on which the decision is made; or
(b) if a day is specified in the decision—on the day so specified (whether that day is before, after or on the day on which the decision is made).
(3) Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.
Administrative error
28. Section 1237A of the Act provides that:
(1) Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
Special circumstances
29. Section 1237AAD of the Act provides that:
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
Relevant notice
30. Section 68(2) of the Administration Act, provides the following:
(2)The Secretary may give a person to whom this subsection applies a notice that requires the person to do any or all of the following:
(a) inform the Department if:
(i) a specified event or change of circumstances occurs; or
(ii)the person becomes aware that a specified event or change of circumstances is likely to occur;
(b)give the Department one or more statements about a matter that might affect the payment to the person of the social security payment; …
31. Section 100(1) of the Administration Act provides that:
100 Automatic rate reduction—recipient not complying with subsection
68(2) notice
(1) Subject to subsection (2), if:
(a)a person who is receiving a social security payment is given a notice under subsection 68(2); and
(b) the notice requires the person to inform the Department of the occurrence of an event or change of circumstances within a specified period (the notification period); and
(c) the event or change of circumstances occurs; and
(d) the person does not inform the Department of the occurrence of the event or change of circumstances within the notification period in accordance with the notice; and
(e) because of the occurrence of the event or change of circumstances, the rate of the social security payment is to be reduced;
the social security payment becomes payable to the person at the reduced rate on the day on which the event or change of circumstances occurs.
32. Therefore, in circumstances where a person is in receipt of a social security payment and is given notice under section 68(2) of the Administration Act by the Agency, and there is a change in the person’s circumstances and the person does not inform the Agency, the social security payment becomes payable to that person at the reduced rate on the day the change of circumstance occurs.
CONSIDERATION
33. The application was heard in Brisbane on 8 September 2021. All parties appeared by telephone, with the Applicant represented by Ms Gillian Gherke of Sparke Helmore. Both Respondents in this matter were represented by Mr Ali. Whilst Mr Ali represented Mrs Ali at the hearing, both Respondents appeared as separate witnesses before the Tribunal and were independently called to give evidence.
34. The Tribunal considered oral submissions made by both the Applicant and the Respondents, along with submitted evidence as outlined in the Exhibit Register (refer to Annexure 1 of these reasons). The Tribunal requested written closing submissions, from the Applicant by 22 September 2021, from the Respondents by 6 October 2021 and any submissions in reply from the Applicant by 20 October 2021[16].
[16] Exhibit T1.
Whether the Respondents were overpaid their relevant pension payments
Contested deposits
35. The central issue for determination by the Tribunal relates to the Respondent’s receipt of the following deposits, which the Applicant has contended should be assessed as income pursuant to section 1073 of the Act[17]:
[17] Exhibit A5, page 2, paragraph 4.2.
Date Details of transaction Amount deposited 5/07/2017 Deposit Mt Gravatt $ 50,000 [18] 18/08/2017 Deposit Janean R Cater Unit 11 Painting $ 800 [19] 22/08/2017 Transfer deposit at Mt Gravatt $ 185,000 [20] 16/11/2017 Transfer deposit at Mt Gravatt $ 75,000 [21] 20/12/2017 Deposit Mt Gravatt $ 11,000 [22] Total $ 321,800 [18] Exhibit A1 and A2, T5, page 80.
[19] Ibid, page 87.
[20] Ibid.
[21] Ibid, page 97.
[22] Ibid, page 108.
36. During the course of the hearing, Mr Ali confirmed that deposits totalling $321,000 made on 5 July 2017, 22 August 2017, 16 November 2017 and 20 December 2017, respectively these deposits were made to him from an individual know as Mrs Dilruba Rahimullah (herein referred to as ‘Mrs Rahimullah’)[23].
[23] Transcript (8 September 2021), page 13, lines 10 to 45; page 14, lines 1 to 16.
37. Mrs Rahimullah deposited $321,000 in cash to Mr Ali in exchange for his assistance in coordinating the building of an extension to her home, including paying for the supply of building materials and the labour cost of tradespersons. As background to this arrangement, Mr Ali had a history of working as a landscaper and tree lopper, which he claims he ceased some time before he began receiving the DSP (from August 2010)[24].
[24] Ibid, page 29, lines 1 to 8.
38. Similar to Mr Ali’s earlier evidence to the SSCSD of the Tribunal, he stated that he had known Mrs Rahimullah’s deceased husband for many years and that he had been contacted in mid-2017 to assist her in building an extension to her home in Holland Park[25]. Mr Ali stated that he had arranged quotes for the construction of the extension, and after discussions with Mrs Rahimullah, it was agreed that it would be cheaper for Mrs Rahimullah to purchase the materials and pay individual tradespersons on a cash-in-hand basis. Mr Ali told the Tribunal that Mrs Rahimullah had agreed to transfer the required funds for the purchase of materials and the construction of the extension to her home, as well as for the arrangement of tradespersons to be paid. Mr Ali stated that he did not receive any remuneration for his assistance in coordinating the construction of the extension to Mrs Rahimullah’s home and that he supervised and paid for this construction on her behalf[26].
[25] Ibid, page 15, lines 5 to 17.
[26] Ibid, page 14, lines 34 to 47; page 15, lines 2 to 3.
39. Bank statements before the Tribunal with respect to a Westpac account in Mr Ali’s name covers the period of 5 December 2016 through 15 January 2019[27]. With respect to the outgoings in this account, it is evident that costs have been incurred for building and construction materials over time, but there is also evidence that outgoings have gone on expenditure of a personal nature.
[27] Exhibit A2, T5, pages 66 to 136.
40. The Tribunal observes that Mr Ali did not disclose the existence of this Westpac account to the Applicant on 24 January 2019, when asked by the Agency to disclose accounts held by him and his partner (Mrs Ali)[28]. The SSCSD of the Tribunal questioned the Respondent as to why he failed to disclose this account, with Mr Ali stating that it was because he had closed the account prior to completing the form (observing that the last transactions recorded in the statements before the Tribunal occurred on 15 January 2019)[29].
[28] Exhibit A1 and A2, T6, pages 138 to 155.
[29] Ibid, page 134.
41. The Tribunal is satisfied that Mr Ali had control of the relevant Westpac account. The Westpac account was in his name, and the account statements were sent to his residential address where he has resided for many years. When Mr Ali was questioned, he accepted that he had exclusive control of the account during the period of 2017 to 2019[30].
[30] Transcript (8 September 2021), page 31, lines 18 to 44.
42. The Tribunal observes the following evidence Mr Ali gave during cross-examination with respect to the arrangement he had with Mrs Rahimullah:
(i)When Mr Ali was asked whether the $321,000 of funds deposited into his Westpac account by Mrs Rahimullah went entirely towards the construction of Mrs Rahimullah extension, Mr Ali stated, “To the best of my ability and understanding, yes, it was”[31].
(ii)Mr Ali confirmed that he had contacted three builders to undertake the work for Mrs Rahimullah, but it was agreed that it would be cheaper for her to buy the materials and pay individual tradesman on a cash basis[32].
(iii)When questioned as to why there was no evidence of invoices for building materials purchased or contracts entered into for the project, Mr Ali stated that Mrs Rahimullah was in possession of these documents. Mr Ali stated that he was the project manager and not a contractor and was not going to complete a personal tax return, so there was no need for him to retain any of the receipts as part of the construction process as it was Mrs Rahimullah responsibility[33].
(iv)When Mr Ali was asked why he was not expected to keep track of expenditure of the for the extension project for Mrs Rahimullah as the project manager, he initially stated that he had kept track of expenses to the best of his ability. However, when pressed as to how he kept track of expenses, he then stated that he did not track the expenses, he just supervised the job[34].
(v)When Mr Ali was pressed as to why he would not be expected to keep accurate records of where $321,000 of funds had been spent; Mr Ali insisted that he was, “never dishonest”; that he, “did not use any of the money for my personal use” and that, “Every dollar was spent on [Mrs Rahimullah’s] project”[35].
[Tribunal insertion]
[31] Ibid, page 16, lines 24 to 31.
[32] Ibid, lines 33 to 37.
[33] Ibid, lines 39 to 47; page 17, lines 1 and 2.
[34] Ibid, page 17, lines 22 to 27.
[35] Ibid, lines 45 to 47; page 18, lines 1 to 9.
43. The Tribunal is of the view that Mr Ali’s evidence was not credible with respect to his claims that all the expenditures incurred in his Westpac account went towards the construction of Mrs Rahimullah’s extension. The Tribunal has summarised below the cumulative total of withdrawals and deposits which had passed through Mr Ali’s Westpac account during the period of 5 December 2016 to 15 January 2019:
Opening balance as at 5 December 2016
$ 59.59 [36]
Total Deposits from 5 December 2016 to 15 January 2019
$ 387,857.99 [37]
Total Withdrawals from 5 December 2016 to 15 January 2019
$ 387,917.58 [38]
Closing balance as at 15 January 2019
$ 0.00 [39]
[36] Exhibit A1 and A2, T5, page 66.
[37] Cumulative total debits at Exhibits A1 and A2, T5, pages 66, 79, 104, 123, and 132.
[38] Ibid.
[39] Exhibit A1, T5, page 134; Exhibit A2, T5, page 66.
44. It was evident to the Tribunal, upon a detailed examination of the $387,917 of withdrawals in the Westpac account of Mr Ali during the period of 5 December 2016 to 15 January 2019, that many withdrawals went towards expenditure of a personal nature (which he accepted on numerous occasions when taken to examples during cross-examination).
45. The Tribunal refers to the following examples of personal expenditure which were put to Mr Ali during the hearing:
(a)Four $10,000 withdrawals over 17 November 2021 and 20 November 2021 with the description, “Sherene Al Home Loan”[40]. When Mr Ali was questioned, he stated that he couldn’t use the funds which had been transferred to him immediately, so these amounts were transferred to his mortgage offset account for his home loan[41].
[40] Exhibits A1 and A2, T5, page 98.
[41] Transcript (8 September 2021), page 25, lines 12 to 47.
(i)During cross-examination, Mr Ali tried to explain to the Tribunal that he had a statement from ANZ (the home loan provider, which was not before the Tribunal) confirming he had withdrawn further sums of $4,500 on 13 June 2018, $7,000 on 25 June 2018, and $4,000 on 20 April 2018 (totalling $15,500), which he claims he used towards construction costs for Mrs Rahimullah[42]. The Tribunal explained to Mr Ali that this still left $24,500 unaccounted for (not withstanding that Mr Ali’s stated withdrawals from his mortgage offset with ANZ were not corroborated with (1) proof from these statements, or (2) proof of actual expenditure incurred by way of (for example) receipts).
[42] Ibid, page 26, lines 24 to 45.
(b)The following travel purchases on numerous dates with Flight Centre, which when questioned, Mr Ali accepted were in fact personal expenditure. The Tribunal outlines the following purchases which were put to the Mr Ali during the hearing:
(i)Personal travel purchase through Flight Centre Mount Gravatt on 1 October 2018 for $922.98[43];
[43] Exhibits A1 and A2, T5, page 125; Transcript (8 September 2021), page 19, lines 42 to 47; page 20, lines 1 to 6.
(ii)Personal travel purchase with Flight Centre Sunnybank on 12 October 2018 for $850.76[44];
(iii)Personal travel purchase through Flight Centre Mount Gravatt on 22 November 2017 for $1,928[45]; and
(iv)Personal travel purchase through Flight Centre Sunnybank on 5 January 2018 for $3,979[46].
(c)There are other personal expenses which appear in Mr Ali’s purchases which were accepted as such by Mr Ali during the period including:
(i)$289 for personal beauty services at Shailly Hair N Beauty on 11 August 2017[47];
(ii)$561.40 for personal car registration, and $773.32 for personal electricity expenses with Origin energy on 1 September 2017[48]; and
(iii)$340.20 and $89 for personal clothing at Adidas on 2 October 2017[49].
[44] Ibid, page 127; Transcript (8 September 2021), page 20, lines 8 to 16.
[45] Ibid, page 98; Transcript (8 September 2021), page 19, lines 26 to 33.
[46] Ibid, page 112; Transcript (8 September 2021), page 19, lines 35 to 40.
[47] Ibid, page 86; Transcript (8 September 2021), page 20, lines 14 to 27.
[48] Ibid, page 89; Transcript (8 September 2021), page 20, lines 29 to 37.
[49] Ibid, page 93; Transcript (8 September 2021), page 20, lines 42 to 46; page 21, lines 1 to 5.
46. Whilst not all examples of withdrawals from Mr Ali’s Westpac account which had descriptions suggesting it was of a personal nature were put to him during the course of the hearing, the Tribunal observes that numerous other regular purchases of a private nature were made from his Westpac account. This included the regular purchase of groceries, takeaway, foreign currency withdrawals whilst overseas, and purchases from retail outlets not associated with building and construction.
47. During the course of the hearing, Mr Ali tried to claim that, with respect to withdrawals which relate to personal expenses in his account during the period, deposits from an insurance payout (received on 10 April 2018[50]) and the proceeds from the sale of a vehicle (received on 28 September 2018[51]) covered such expenses[52]. The Tribunal has no way of knowing whether the deposits Mr Ali refers to cover all the personal expenditure he incurred during the relevant period he received deposits from Mrs Rahimullah, as there is no corroborative evidence to support these claims.
[50] Ibid, page 118.
[51] Ibid, page 125.
[52] Transcript (8 September 2021), page 23, lines 12 to 28.
48. The Tribunal does not view this contention of Mr Ali to be credible, in circumstances where he has failed to substantiate any of the expenditure incurred from the construction costs associated with Mrs Rahimullah’s renovation. The Tribunal will address the alleged loan from Mrs Rahimullah to Mr Ali in later reasons of this decision.
49. The Tribunal concurs with the Applicant’s contention that it is impossible to ascertain with any certainty the expenses which were actually incurred by Mr Ali in relation to Mrs Rahimullah’s project, distinct from his personal expenditure[53]. Mr Ali has not tendered any corroborative evidence with respect to expenditure which has been incurred for the cost of Mrs Rahimullah’s extension by way any records of expenses, or (for example) receipts.
[53] Ibid, page 45, lines 10 to 46; page 46, lines 1 to 17; Exhibit A5, pages 3 to 4, paragraph 5.5.
50. With respect to Mr Ali’s attempts to verify the expenditure he says he claims he incurred for Mrs Rahimullah’s extension, the Tribunal observes that Mr Ali:
(a)Submitted an email dated 5 July 2017 from Karl’s Construction sent to him, with a quote for the cost of Mrs Rahimullah’s extension, at $243,600. The Tribunal observes that the quote states, “We can discuss the details more if you like before signing the contract, just let me know”[54]. The Tribunal does not accept this quote as proof of expenditure actually incurred, as it is merely a cost estimate for work which ultimately did not proceed.
(b)Initially told the Agency that the cost of labour and materials spent on Mrs Rahimullah’s extension was $160,000 in a phone call on 9 September 2019. It was recorded that the he then stated that the remaining $110,000 was also spent on materials and labour, but that, “he does not have any details on where this money went and will need to further investigate”. The phone record further states that he had told the Agency that all money received ($271,000[55]) had been spent, and he received, “$0”[56]. The Tribunal observes this verbal estimate provided by Mr Ali was not supported by any records of expenditure incurred, or receipts for work undertaken (either at that time, or any time subsequently).
(c)On 12 May 2020, Mr Ali provided a valuation of Mrs Rahimullah’s property extension from Promac Construction Consultants, with Mr Ray McFarlane (Director) stating a valuation of the property to be $365,400[57]. The Tribunal does not accept this valuation of the renovation as proof of expenditure incurred for the work undertaken on Mrs Rahimullah’s’ property. This is merely a valuation of the dwelling using an estimate of costs incurred it is not the total cost of actual expenditure incurred for the renovation, as reflected through Mr Ali’s Westpac account.
[54] Exhibit A3, page 16, paragraph 4.30.
[55] The Tribunal observes this amount was arrived at through deducting the alleged $50,000 loan from Mrs Rahimullah from the total deposits received of $321,000.
[56] Exhibit A1, T28, page 474 to 475; Exhibit A2, page 492 to 493.
[57] Exhibit A3, page 8.
51. Whilst Mr Ali’s accounts do reflect withdrawals related to expenditure on building and construction costs, as stated earlier, the Tribunal has no way of delineating the expenditure incurred by Mr Ali for the construction of Mrs Rahimullah’s renovation from his own personal expenditure. Further to this point, the Tribunal observes Mr Ali’s evidence with respect to cash withdrawals in his Westpac account which were used to pay for some trades and building costs, for which there is no evidence of such expenditure. It is therefore again difficult for the Tribunal to ascertain whether those cash withdrawals were of a personal nature or related to building and construction costs for Mrs Rahimullah’s renovation. Additionally, Mr Ali gave evidence that withdrawals in his Westpac account for expenditure related to building and construction costs in early 2017 related to renovations for his own home[58].
[58] Transcript (8 September 2021), page 11, lines 5 to 43; page 17, lines 29 to 43.
52. The Tribunal agrees with the Applicant that the above aspect of this matter is analogous to the authority established in Nassimi and Secretary, Department of Social Services[59], where Deputy President Tamberlin stated the following:
… In the present case significant amounts of money were deposited to the Applicant’s bank accounts during the debt period.
The Applicant gave a number of explanations for the deposits…
… In view of the wide definition and the available evidence, the deposits in the Applicant’s bank account justify a conclusion that they were for his own use and benefit because they were under his control. It is therefore necessary to consider the evidence to determine whether it indicates that the deposits were not for his own use or benefit.
The evidence does not satisfy me that the monies in question were not for his own use or benefit. There are substantial discrepancies in the Applicant’s evidence and much of his material is uncorroborated, as outlined by the SSAT at [22] and [28] – [30] of their reasons. He did not produce any reliable independent evidence to the Respondent to substantiate his “explanations”.
At the hearing before me no additional significant evidence was produced by the Applicant to substantiate his submissions, with the exception of the sums said to have been advanced by his wife’s mother to establish her daughter when she moved to Australia, together with a payment from the inheritance and several other transfers referred to in paragraph [31] of the SSAT decision. I accept these amounts were not income for the purposes of s 8 of the Act.
As to the balance of the payments, the Applicant has not persuaded this Tribunal on the available evidence that his assertions as to the source and purpose of the deposits ought to be accepted in view of the lack of specificity and insufficiency of independent supporting evidence…
[Tribunal bold for emphasis]
[59] [2015] AATA 423 at [11] to [15].
Loan from Mrs Rahimullah to Mr Ali
53. The Tribunal heard evidence from Mr Ali that he had a verbal agreement with Mrs Rahimullah in approximately June or July 2017, following a meeting between them, for Mr Ali to assist Mrs Rahimullah with building an extension to her home. Mr Ali had tendered a signed agreement between both parties, with Mrs Rahimullah signing this agreement on 4 August 2017 and Mr Ali over a week later, on 14 August 2017[60]. The signed agreement states that Mrs Rahimullah had[61]:
…engaged Mr Naushad Ali to work as a Project Manager (Representative) for the extension of my 3- bedroom house… I further state Mr Ali is not contracted for wages. The money which I have deposited into his Westpac account the sum of $50,000 is to pay for the material and labour. I further agree to deposit the balance of $270,000 on or before December 2017 into his account. This amount will include his loan of $25,000 with interest free. Mr Ali agrees to pay me back when he sells his house at [address redacted].
[Tribunal redactions]
[60] Transcript (8 September 2021), page 15, lines 5 to 34.
[61] Exhibit A1, T15, page 246; Exhibit A2, T15, page 252.
54. The Tribunal observes the first deposit for $50,000 from Mrs Rahimullah had been deposited into Mr Ali’s Westpac account on 5 July 2017, pre-dating the signed agreement by Mrs Rahimullah on 4 August 2017 and Mr Ali on 14 August 2017. When Mr Ali was questioned on this discrepancy during the course of the hearing, he could not provide an adequate explanation as to why and stated that this amount was to pay for, “architects and other stuff”[62].
[62] Transcript (8 September 2021), page 16, lines 13 to 22.
55. With respect to the deposit on 5 July 2017, it is contended through the alleged loan agreement between Mrs Rahimullah and Mr Ali, that $25,000 of this had been loaned to Mr Ali. The Tribunal observes that with respect to the alleged loan agreement:
(i)no collateral was put down by Mr Ali;
(ii)no interest was charged on the loan; and
(iii)Mr Ali is not required to repay the principal amount until he sells his family home at some point in the future (a period which is not defined).
56. The Tribunal does not regard the $25,000 loan agreement between Mrs Rahimullah and Mr Ali to be a bona fide loan agreement and refers to relevant authority in Hill and Repatriation Commission[63], which supports such a position.
Contested Deposits – summary position of the Tribunal
[63] [1996] AATA 871 (1 November 1996) at [43]; [62] to [63].
57. The Tribunal is of the view that, given the evidence before it and for the above reasons in this decision, the contested deposits Mr Ali received in his Westpac account should be assessed as income pursuant to section 1073 of the Act, with respect to the:
(a)$50,000 deposit received on 5 July 2017;
(b)$185,000 deposit received on 22 August 2017;
(c)$75,000 deposit received on 16 November 2017; and
(d)$11,000 deposit received on 20 December 2017.
58. The Tribunal was not satisfied that the explanations put forward by Mr Ali were credible, particularly with respect to the lack of corroborative evidence regarding the expenditure he incurred for Mrs Rahimullah’s renovation. The Tribunal is of the view there are substantial discrepancies in Mr Ali’s claims, with much, if not all these claims being uncorroborated. The Tribunal is not persuaded with respect to Mr Ali’s claims that the deposits received by him from Mrs Rahimullah ought to be accepted, given the lack of independent corroborative evidence to support his claims.
Deposit from painting
59. With respect to the deposit of $800 received by Mr Ali on 18 August 2017 (with the description of “Deposit Janean R Cater Unit 11 Painting”), Mr Ali stated that this payment was actually for services provided by his brother in law, who owed Mr Ali a sum of money. Mr Ali stated that his brother had done some painting work for an individual, and in return, that individual deposited the funds from the work of Mr Ali’s brother in law directly into Mr Ali’s account to pay for the cost of flights Mr Ali had purchased for his brother in law. The Tribunal observes Mr Ali denied that he had personally provided painting services, except for Mrs Rahimullah, and that this was done in a voluntary capacity only[64].
[64] Transcript (8 September 2021), page 27, lines 25 to 47.
60. The position of the Applicant is that the $800 amount deposited into Mr Ali’s account with the accompanying ‘painting services’ description should be assessed as income, pursuant to section 1073 of the Act[65].
[65] Exhibit A3, page 19, paragraph 4.39.
61. The Tribunal is of the view that whilst Mr Ali has provided an explanation for this deposit, no corroborative evidence was tendered to support his claims. The Tribunal is of the view that the deposit of $800 received by Mr Ali on 18 August 2017 should similarly be assessed as income pursuant to section 1073 of the Act.
Evidence of Mrs Ali
62. When Mrs Ali was questioned during cross-examination, she confirmed that she[66]:
(a)Had been in receipt of the DSP from February 2009 to present, receiving $718.10 per fortnight.
(b)Had been residing at the same residential address as her husband, Mr Ali, since 2010. Whist Mrs Ali couldn’t recall the precise date they had arranged for renovations on their property, she estimated it could have been in 2016 and that she was not sure how the tradesman were paid as she had left that to Mr Ali.
(c)Was aware of the $25,000 loan from Mrs Rahimullah but did not think it was unusual for such a loan to have been made to her husband. Mrs Ali was not aware of the deposits in Mr Ali’s account and did not inspect Mr Ali’s accounts.
(d)Had a home loan which was approximately $450 per week; that her electricity is covered by her daughter who also resides in her home with Mr Ali; that she pays council rates every quarter of approximately $300 and water of approximately $360. She stated that her mobile expenses were approximately $140 per month, and her internet expenses were approximately $98 a month. Mrs Ali stated that her sons who also reside with her and Mr Ali contributes towards the cost of groceries.
(e)Was also receiving net income from family day care of approximately $260 per week.
[66] Transcript (8 September 2021), pages 38 to 42.
63. In summary, with respect to Mrs Ali’s evidence, the Tribunal did not view the evidence of Mrs Ali to alter in any way the findings it has made with respect to the contested deposits received by Mr Ali.
Whether the Respondents were overpaid their relevant pensions, and does this constitute a debt to the Commonwealth?
64. The Tribunal has found that the contested deposits received by Mr Ali from Mrs Rahimullah and the deposit from Janean R Cater, on 18 August 2017, should be assessed as income pursuant to section 1073 of the Act[67]:
[67] Exhibit A5, page 2, paragraph 4.2.
Date Details of transaction Amount deposited 5/07/2017 Deposit Mt Gravatt $ 50,000 [68] 18/08/2017 Deposit Janean R Cater Unit 11 Painting $ 800 [69] 22/08/2017 Transfer deposit at Mt Gravatt $ 185,000 [70] 16/11/2017 Transfer deposit at Mt Gravatt $ 75,000 [71] 20/12/2017 Deposit Mt Gravatt $ 11,000 [72] Total $ 321,800 [68] Exhibits A1 and A2, T5, page 80.
[69] Ibid, page 87.
[70] Ibid.
[71] Ibid, page 97.
[72] Ibid, page 108.
65. During the relevant period above, between 5 July 2017 and 20 December 2017, both Mr and Mrs Ali were in receipt of the DSP at a rate of $718.10 gross per fortnight[73]. The Tribunal observes that on 11 April 2016, Mr Ali was sent a notice from the Agency pursuant to subsection 68(2) of the Administration Act informing him that he was receiving his entitlement to the DSP, on the basis of a combined annual income of $21.58[74].
[73] Transcript (8 September 2021), page 9, lines 35 to 47; page 38, lines 24 to 28.
[74] Exhibit A1, T26, page 511; Exhibit A2, page 502.
66. The Tribunal has determined the First Respondent in this matter (Mr Ali), for the reasons outlined in this decision, should (for the purposes of section 1073 of the Act) have treated the $321,800 in contested deposits, received between 5 July 2017 and 20 December 2017, as income in circumstances where both Respondents have been notified that their entitlement to the DSP was being paid on the basis of a combined annual income of $21.58.
67. The Tribunal therefore determines that the DSP paid to both Respondents during the period of 5 July 2017 and 20 December 2017 was based on an incorrect combined annual income. The Respondents would have been entitled to a lower payment of DSP during this period due to the higher income of Mr Ali, resulting from the treatment of the contested deposits in accordance with section 1073 of the Act.
68. As outlined in earlier paragraphs of this decision, section 1223(1) of the Act states that for debts arising from overpayment (where a social security payment has been made to a person who obtains the benefit of a payment they were not entitled to), the amount of that payment is a debt due to the Commonwealth (arising from when the person obtains the benefit of the payment).
69. The Tribunal finds that the amount of DSP received by both Respondents was calculated on the incorrect combined income of Mr Ali during the period of 5 July 2017 to 20 December 2017. The subsequent overpayment of DSP to both Respondents is a debt due to the Commonwealth and is therefore legally recoverable pursuant to section 1223(1) of the Act.
Whether the over payment is recoverable in part or in full?
70. In establishing whether the Respondents’ overpaid DSP is recoverable in part or in full, the Tribunal refers to His Honour French J (as his Honour then was), in Secretary, Department of Social Security v Hales[75], where he stated:
…The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth…
[75] (1998) FCA 219 at [1].
71. As previously outlined in these reasons, there are circumstances where the recovery of outstanding debts to the Commonwealth can be either written off or waived. Relevant to the Respondent’s legally recoverable debt, the Applicant may write off or waive the debt if the requirements set out in sections 1236, 1237A or 1237AAD of the Act are met.
Write off debt (section 1236 of the Act)?
72. Section 1236 of the Act gives the Secretary the power to write off a debt for a stated period, or otherwise if one or more criteria are met pursuant to section 1236(1A) of the Act (set out in earlier reasons of this Decision).
73. The Tribunal was not presented with any corroborating evidence to suggest that the Respondents could not repay the debt through fortnightly deductions from their current social security payments. The Tribunal observes the modest financial circumstances of the Respondents, who confirmed during cross-examination at the hearing that[76]:
(a)Mr Ali was currently in receipt of the Age Pension totalling $718.10 per fortnight, with Mrs Ali in receipt of the DSP of $718.10 per fortnight, in addition to net income of $520 per fortnight from family day care (a combined fortnightly income of approximately $1,956.20).
(b)Mr and Mrs Ali’s expenses include a mortgage repayment of $450 per week, council rates of approximately $300 per quarter, water charges of approximately $360 per quarter, mobile expenses of approximately $140 per month, and internet expenses of approximately $98 per month. Additionally, Mr Ali stated that he incurred approximately $80 per fortnight in petrol, and $800 per year in car registration, and $800 per year in insurance. Evidence of Mr and Mrs Ali confirmed that their children (who reside with them) assist with expenses associated electricity, groceries and health expenses. The Tribunal estimates that the apportioned expenses, as described by both Respondents during the hearing, amount to approximately $1,270 per fortnight.
[76] Transcript (8 September 2021), page 32, lines 7 to 47; page 33 to 34; page 35, lines 1 to 20; page 41, lines 17 to 45; page 42, lines 1 to 18.
74. The Tribunal observes that based on the estimates provided by the Respondents during the hearing, there is approximately $680 in residual net income per fortnight. The Tribunal is of the view that the Respondents have the capacity to repay debts raised against them by way of modest withholdings, and there is no corroborative evidence to suggest that repayment of such debts would result in severe financial hardship. The Tribunal further notes that the Respondents would be able to negotiate with the Agency with respect to any debt repayment plans in the event their financial circumstances changed.
75. The Tribunal is satisfied that the debt is recoverable at law, that the Respondents have the capacity to repay the debts, that the whereabouts of the Respondents are known, and that there is no evidence to suggest it is not cost effective for the Commonwealth to take action to recover the debt.
76. The Tribunal finds that the Applicant’s debt to the Commonwealth cannot be written off pursuant to section 1236 of the Act.
Waiver of debt arising from Administrative error (section 1237A of the Act)?
77. Section 1237A of the Act provides that the Commonwealth must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth, if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.
78. The Tribunal refers to Sekhon v Secretary, Department of Family and Community Services[77], where the Full Federal Court observed:
The ordinary or usual interpretation of the phrase ‘attributable solely to’ is that it refers to the single or sole cause of the relevant act or event. The word ‘attributable’ means ‘capable of being attributed’. It involves an objective assessment of causation. The words ‘a debt attributable solely to an administrative error’ can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error.
[77] [2003] FCAFC 190 at [35].
79. The Tribunal observes that in order satisfy section 1237A of the Act, the Respondents must also have received, in good faith, the payments which gave rise to the debt (being their DSP payments during the relevant period).
Good Faith
80. In considering whether the Respondents received the payments in good faith, the Tribunal refers to their Honour Finn J, in Secretary, Department of Education, Employment, Training and Youth Affairs v Prince[78]:
…the burden of the formula [in ‘good faith’]…is with the state of mind of a person concerning his or her receipt of the payment: if that person knows or has reason to know that he or she is not entitled to a payment received – ie is not entitled to use the moneys received as his or her own – that person does not receive the payment in good faith. Absent such knowledge or reason to know, the receipt would be in good faith.
[78] [1997] 152 ALR 127 at [130].
81. Additionally, the Federal Court has found that a person does not act in good faith where they turn a blind eye to the circumstances which raise doubt as to the entitlement to receive a payment, with reference to their Honour Cooper J, in Jazazievska v Secretary Department of Family & Community Services[79]:
Prima facie, s 1237A(1) is concerned with actual personal receipt by the debtor of the payment or payments which give rise to the debt. The issue of good faith is, for the purpose of the section, to be determined when the debtor commences to exercise control over the payment by retaining it. It is at this time that the recipient must act with the requisite good faith. A lack of good faith does not mean that the recipient of the payment must be acting fraudulently when the payment is received and retained. It means that for whatever reason, the recipient acts without an honest belief that he or she was entitled to receive and retain the payment when he or she receives the payment and decides to exercise control over it by retaining it.
A person does not act in good faith where the person turns a blind eye to circumstances which raise doubt as to the entitlement of the person to receive and retain the payment or refuses to make reasonable inquiries where doubt exists. Although said in a different context, the observations of Lord Blackburn in Jones v Gordon (1877) 2 App Cas 616 at 629 are apposite. His Lordship said:
‘... If he was (if I may use the phrase) honestly blundering and careless, and so took a bill of exchange or a bank-note when he ought not to have taken it, still he would be entitled to recover. But if the facts and circumstances are such that the jury, or whoever has to try the question, came to the conclusion that he was not honestly blundering and careless, but that he must have had a suspicion that there was something wrong, and that he refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind - I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover - I think that is dishonesty. I think, my Lords, that that is established, not only by good sense and reason, but by the authority of the cases themselves’.
[79] [2000] FCA 1484 at [40] to [41].
82. The Tribunal refers to the decision of Panacci and Secretary, Department of Employment and Workplace Relations[80], where Senior Member Handley stated:
… An absence of good faith does not amount to fraudulent conduct on the part of the recipient of a benefit but it does mean that the recipient acts without an honestly held belief of entitlement to receive and retain the payment. The state of mind of the recipient must be examined and the test of good faith is entirely subjective.
[Tribunal underline for emphasis]
[80] [2008] AATA 30 at [25].
83. It is the Tribunal’s view that the debts raised against the Respondents arose in circumstances where the first Respondent, Mr Ali, failed to adequately substantiate his claims with respect to the $321,800 in contested deposits which he received, whilst also in receipt of the DSP. When taking a holistic view of the evidence, it is the Tribunal’s view that on balance, the Respondents knowingly made a conscious and deliberate choice not to appropriately declare their income.
84. In the present matter, the Tribunal is satisfied that the debts raised were not solely due to an administrative error on the basis that the Respondents were informed of their obligation to provide updated information to the Agency (including changes to their income) in notices sent to the Respondents pursuant to section 68(2) of the Administration Act[81].
[81] Exhibit A1, T26, page 511; Exhibit A2, page 502.
85. As the Tribunal has found that the debts were not due solely to administrative error and the DSP payments received by the Respondents during the period were not done so in good faith, the debts are therefore unable to be waived pursuant to section 1237A of the Act.
Waiver in special circumstances (section 1237AAD of the Act)?
86. As outlined in earlier paragraphs of this Decision, section 1237AAD of the Act provides:
1237AAD Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.”
87. The Tribunal refers to authority in Beadle and Director-General of Social Security[82]:
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
[Tribunal underlining for emphasis]
[82] [1984] 6 AATA 176 at [12].
88. The Tribunal also refers to Davy and Secretary Department of Employment and Workplace Relations[83]:
…“special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances ... that make it desirable to waive”. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it. Certainly, he did not know that his father was giving him his own money but the fact that he was deceived by his father does not mean that it is desirable to waive the debt. He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement. His not knowing that his father had continued to receive the money does not take him outside the expectation that all social security recipients should repay money when they receive money but are not entitled to it. The system of administration of the SS Act does not visit any injustice for many if not all social security recipients but it did not lead to any injustice or unfairness on Mr Davy that is not visited, or potentially visited, upon all other recipients of social security payments under the Act. Therefore, I am not satisfied that there are special circumstances that make it desirable to waive the debt under s 1237AAD of the Act.
[83] [2007] AATA 1114 at [80].
89. Section 1237AAD(a) of the Act requires the Secretary to waive the right to recover all or part of a debt if the Secretary is satisfied that the debt did not result wholly or partly from the Respondent knowingly making a false statement or representation, or knowingly failed to omit or comply with a provision of the Act or the Administration Act.
90. In regard to applying section 1237AAD(a) of the Act, and the term “knowingly” in the circumstances of this application, the Tribunal refers to Callaghan and Secretary, Department of Social Security[84]:
There is nothing in section 1237AAD which suggests that the word "knowingly" should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission.
[84] [1996] 45 ALD 435 at [48].
91. In the present application, it is the Tribunal’s view that the Respondents did not provide any evidence which would give rise to claims, nor was any corroborative evidence submitted to support such claims, with respect to the relevant considerations of this provision of the Act.
92. Based on the evidence before it, the Tribunal does not consider the Respondents’ circumstances are sufficiently special or unusual as to warrant the exercise of the discretion in section 1237AAD of the Act to waive the Respondents’ debt. Therefore, the Respondents’ debt cannot be waived pursuant to section 1237AAD of the Act.
Applicant’s compliance with Tribunal Stay Order (6 August 2020)
93. On 6 August 2020, the Tribunal ordered that, pursuant to section 41(2) of the Administrative Appeals Tribunal Act 1975 (Cth), the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal, dated 3 June 2020, to revoke the Respondents’ debts was to be stayed until review of this decision by the General Division of the Administrative Appeals Tribunal, or until a further order of the Tribunal.
94. Further, the Tribunal ordered that, as at 6 August 2020, any monies recovered by the Applicant were to be held pending the outcome of the review by the General Division of the Administrative Appeals Tribunal. Further. any monies recovered by the Applicant after 3 June 2020 in relation to the Respondents’ applications were to be refunded by the Applicant to the Respondents.
95. The Tribunal notes the response of the Applicant in their final closing submissions in reply with respect to the above stay order, dated 6 August 2020. The Applicant conceded they had continued to deduct withholdings from the Respondents’ pensions and upon realising this, rectified its action by pausing debt recovery and refunding the recovered amounts to the Respondents.
96. The Tribunal notes with some concern the above actions of the Applicant in this matter and presses the importance of complying with all Tribunal orders. It is appropriate that the Applicant apologised for this oversight and refunded the recovered amounts[85].
[85] See Smith and Secretary, Department of Education, Employment and Workplace Relations [2011] AATA 301 (10 May 2021) at [17].
DECISION
97. Pursuant to section 43(1)(c)(i) of the Administrative Appeals Tribunal Act 1975 (Cth), the Tribunal sets aside the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal, dated 3 June 2020, and substitutes it with a decision that:
(a)Mr Naushad Ali (First Respondent) has a legally recoverable debt to the Commonwealth arising from the overpayment of his Disability Support Pension in an amount to be recalculated on the basis that the following deposits received by him are to be assessed as income, pursuant to section 1073 of the Social Security Act1991 (Cth):
(i)Deposit of $50,000 made on 5 July 2017;
(ii)Deposit of $800 made on 18 August 2017;
(iii)Deposit of $185,000 made on 22 August 2017;
(iv)Deposit of $75,000 made on 16 November 2017; and
(v)Deposit of $11,000 made on 20 December 2017.
(b)Mrs Sherene Ali (Second Respondent) has a legally recoverable debt to the Commonwealth in an amount to be recalculated on the basis that the above deposits received by Mr Naushad Ali are assessed as income of her partner; and
(c)Both Mr Naushad and Mrs Sherene Ali (the Respondents) recalculated debts to the Commonwealth are recoverable in full; and
(d)The matter be further remitted to the Applicant to recalculate the Respondents debts in accordance with this decision.
I certify that the preceding 97 (ninety-seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member B. Pola
………[SGD].…………………
Associate
9 November 2021
Date of Hearing: 8 September 2021
Solicitors for Applicant: Ms Gillian Gehrke (by telephone) Sparke Helmore
Respondents: Mr Naushad Ali (by telephone) (representing Mrs Sherene Ali)
Mrs Sherene Ali (by telephone)
Annexure 1 – Exhibit Register
| Exhibit Number | Description of Exhibit | Party | Date of Document | Date of Receipt |
| A1 | Section 37 T Documents (Mrs Ali) (pages 1 to 594) | A | 13 August 2020 | 13 August 2020 |
| A2 | Section 37 T Documents (Mr Ali) (pages 1 to 551) | A | 13 August 2020 | 13 August 2020 |
| A3 | Applicant’s Statement of Facts, Issues and Contentions (pages 1 to 27) | A | 26 May 2021 | 26 May 2021 |
| A4 | Applicant’s Statement of Facts, Issues and Contentions – Attachments (pages 1 to 94) | A | – | 26 May 2021 |
| A5 | Applicant Closing Submissions (pages 1 to 9) | A | 22 September 2021 | 22 September 2021 |
| R1 | Respondent Written Submissions and Documentary Evidence (pages 1 to 14) | R | 2 July 2021 | 6 July 2021 |
| R2 | Respondent Written Statement (pages 1 to 2) and duplicate submissions (pages 3 to 9) | R | 22 March 2021 | 22 March 2021 |
| R3 | Respondent Closing Submissions (pages 1 to 10) and Attachments (PSD1 – PSD 4) | R | 4 October 2021 | 5 October 2021 |
| T1 | Tribunal Stay Order | T | 6 August 2021 | – |
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