Cai and Secretary, Department of Social Services (Social services second review)

Cai and Secretary, Department of Social Services (Social services second review) [2020] AATA 3047 (20 August 2020)
Division:GENERAL DIVISION
File Number: 2019/8329
Re:Hua Cai
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Mr S Evans, Member
Date:20 August 2020
Place:Sydney

The decision under review is affirmed.
......[sgd]..................................................................
Mr S Evans, Member
CATCHWORDS
SOCIAL SECURITY – carer payment debt – where applicant’s assets exceed the assets value limit – failure to comply with reporting obligations – $790,000 loan – money received from family and friends – on-lent loan to son – whether the debt can be waived or written off – no sole administrative error – no special circumstances –– decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
CASES
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Re Beadle and Director-General of Social Security [1984) AATA 17
Skinner and Secretary, Department of Social Services [2015] AATA 569
SECONDARY MATERIALS
Social Security Guide
REASONS FOR DECISION
Mr S Evans, Member
20 August 2020
INTRODUCTION

The applicant, Hua Cai, was in receipt of Carer Payment (“CP”) from 19 January 2009 for the care she provides to her elderly father.
On 9 May 2019, the Department of Social Services (“the Respondent” or “Centrelink”) decided to cancel Ms Cai’s CP from 2 June 2017. On 23 July 2019, Centrelink raised a debt against Ms Cai in the amount of $46,230.15 for overpayment of CP for the period 2 June 2017 to 29 April 2019 (“the debt period”) having determined that the value of her assets meant she was not eligible to receive the full benefit during this period.
Ms Cai requested a review of these decisions and submitted that her CP was unfairly cancelled, and the debt should be waived, in part because she was acting on incorrect advice provided by the Department. On 4 September 2019, an authorised review officer (“ARO”) affirmed the cancellation of CP and the debt amount.
Ms Cai sought review of the ARO decision at the Social Services and Child Support Division of the Tribunal (“AAT1”). On 2 December 2019, the AAT1 affirmed the Department’s decision.
On 15 December 2019, Ms Cai applied to the General Division of the Tribunal for review of the AAT1 decision. The matter was heard on 19 June 2020. Ms Cai and the representative for the Respondent appeared via video conference and telephone in accordance with the COVID-19 Special Measures Practice Direction issued under section 18B of the Administrative Appeals Tribunal Act 1975 (Cth). Ms Cai was represented by her son Luke Cai. Ms Cai provided evidence by way of affirmation with the assistance of an interpreter.
For the reasons that follow, the decision under review will be affirmed.
BACKGROUND
The following facts are not in dispute.
Ms Cai had been in receipt of carer payment since January 2009 for the care that she provides her father. Relevantly, Ms Cai lives in Baulkham Hills in a house she owns (“the Baulkham Hills property”).
Ms Cai was sent notices by Centrelink setting out her reporting obligations. For example, a notice was sent on 7 November 2011 including the following text – “you must tell Centrelink within 14 days… if any of the things listed below happen to you… change the value of your assets or financial investments by more than $1000”. That notice listed Ms Cai’s assets as a $10,000 motor vehicle, $2,000 in household and personal effects and an ANZ bank account with $96.00.
Information received by Centrelink revealed a series of unexplained deposits into Ms Cai’s bank accounts from 2016. As Ms Cai had not notified Centrelink of the deposits, she was asked to complete a Verifications Schedule for the unexplained deposits. She confirmed on 4 May 2019 that the deposits were loans provided by friends and relatives to assist her son Daniel Cai (“Mr Cai”) in purchasing a property.
On 2 June 2017, Ms Cai borrowed $790,000 from Westpac Bank. The single drawdown loan was secured by a mortgage on the Baulkham Hills property. Ms Cai subsequently lent $790,000 to Mr Cai so that he could purchase a property in Castle Hill (“the Castle Hill property”) as an investment. There was no written loan contract between Ms Cai as lender and Mr Cai as borrower. It was reportedly agreed that the loan would be repaid when Mr Cai became employed. Ms Cai does not dispute this.
The Respondent contends that Ms Cai’s loan to her son is an asset which was not disclosed to the Department. The value of the asset meant that Ms Cai was ineligible to receive CP between 2 June 2017 and 29 April 2019. As a result of Ms Cai not complying with her reporting obligations, she was overpaid CP and the Respondent contends she owes a debt to the Commonwealth.
Ms Cai submits that she lent money to Mr Cai for his purchase of the Castle Hill property having been advised by Centrelink that doing so would not affect her eligibility for CP. She contends that the debt is the result of administrative error on the part of the Respondent and that her financial circumstances are such that the debt should be waived.
ISSUES
The issues to be determined are:
(a)whether Ms Cai’s loan to Daniel was an asset;
(b)whether Ms Cai was overpaid CP during the debt period; and if so
(c)whether the overpayment is a debt to the Commonwealth; and if so
(d)whether the whole or part of the debt should be written off or waived.
RELEVANT LEGISLATION AND GUIDELINES
The relevant legislation is contained in the Social Security Act 1991 (Cth) (“the Act”) and the Social Security Administration Act 1999 (Cth) (“the Administration Act”). The Guide to Social Security Law (“the Guide”) contains relevant policy.
Section 210 of the Act provides that a person’s rate of carer payment is worked out using Pension Rate Calculator A at the end of section 1064 of the Act. A person’s income and assets are taken into account in calculating the rate of carer payment. Section 1064-A1 of the Act requires that whichever of the income test or the assets test produces the lower rate of payment must be applied.
Subsection 9(1) of the Act defines a “financial asset” to include a “financial investment”. In turn, subsection 9(1) defines a “financial investment” to include a loan that has not been repaid in full.
The word “asset” for the purposes of the assets test is defined in subsection 11(1) of the Act to mean “property or money (including property or money outside Australia)”. The assets test in section 1064 of the Act does not explicitly refer to a financial asset, and there is no definition of “property” in the Act.
Section 1122 of the Act provides that:
[i]f a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.
The Administration Act sets out the statutory reporting obligations of a person in receipt of a social security payment. Section 66A stipulates a “general requirement” for a person who has made a claim for a social security payment to inform the Department of “an event or change of circumstances” that may affect their payment within 14 days. Subsection 68(2) of the Administration Act also states that the Secretary may give a written notice to a person that requires them to inform the Department if a specified event or change of circumstances occurs that may affect their payment. Section 72 of the Administration Act outlines the provisions for a notice under section 68, including that it must be in writing and must specify how the person is to give the information to the Department.
CONSIDERATION
In a statutory declaration dated 4 May 2019, Ms Cai writes that she wanted to help buy her sons houses before they finished university and house prices increased further. She writes that she visited Centrelink in Baulkham Hills where she was “told by the lady working there that if the money is borrowed, it would not affect my payment and I would not have to notify Centrelink”.
She writes that she and her sons travelled to China in early 2016 “to borrow money”. She states that private lending of money is “extremely common in China, especially between good friends or relatives”. She says that her friends sent money to her through bank transfers and others also transferred money in order to avoid Chinese government restrictions on foreign money transfers. In addition, she writes that her and her sons “brought back a large amount of the borrowed money in the form of cash, which we declared at customs”.
Relevantly, Ms Cai does not mention the loan to Mr Cai in this statement to the Respondent. She submits that she did not do so because the original enquiry of the Respondent was a request for an explanation into the bank deposits.Ms Cai maintains that she did not reference the loan because it was “not considered … to be an issue of concern”.
Ms Cai wrote to the Respondent in June 2019 seeking to clarify the value of her assets. She writes that she used the Baulkham Hills property as “security to obtain a home loan for my son’s home”. The loan she provided Daniel amounts to approximately $720,000. She explains that she borrowed $240,000 from her sister and her son borrowed $80,000 from her friend and the remainder being borrowed “from family and friends in China”.
In a letter to the Respondent dated 11 July 2019, Ms Cai further submits:
I [Ms Cai] visited the Centrelink office in Baulkham Hills back at the start of 2016 and asked the staff there whether my Centrelink payments would be affected if I use my house as security to take out the loan which my son will use to buy a house. I was informed that it would not as they told me I would only need to notify Centrelink and my payments may change would be if I was working and earning a salary or if I was earning rent from the house that exceeded the mortgage payments… Therefore… I took out the loan with the knowledge that my payments would not be affected. If I had been told that the loan would be counted as part of my assets as has been stated in the recent decision, there would have been no way I would have taken out the loan.
Ms Cai concedes that she did not comply with her obligations under subsections 66A and 68(2) of the Administration Act in so much as she did not notify the Respondent of the deposits into her bank accounts or the loan to her son.
Was the loan to Mr Cai an asset?
The CP is means tested by an income test and an assets test. The assets test applied to Ms Cai during the debt period.
Ms Cai confirmed at the hearing that she withdrew the $790,000 she had borrowed on 2 June 2017 and on-lent $790,000 to Mr Cai.
Subsection 9(1) of the Act defines a “financial asset” to include a “financial investment”. In turn, subsection 9(1) defines a “financial investment” to include a loan that has not been repaid in full.
Ms Cai told the Tribunal that Mr Cai receives $660 per week in rental income from the Castle Hill property; however, she was not clear about the amount of payment she receives from him for the loan. She told the Tribunal that Mr Cai currently only pays the interest to her and also that he pays the interest on the loan directly to Westpac. She also confirmed that Mr Cai is still studying. Ms Cai told the hearing that when he finishes studying, Mr Cai will start to repay the principal of the loan or take out a loan for himself so that she can repay her own loan.
I am satisfied that Ms Cai’s loan to Mr Cai was an asset for the purposes of the asset test defined in subsection 11(1) of the Act.
Does Ms Cai owe a debt?
Section 1064-G1 of the Act sets out how to calculate the effect of a person’s assets on their CP rate. This involves working out whether a person’s assets exceeds their assets value limit. The assets value limit for Ms Cai, as a single person who is a homeowner as at 2 June 2017 was $546,250.
Having determined that the loan was an asset, Ms Cai’s assets exceed the assets value limit from 2 June 2017.
A debt in relation to a social security payment arises by operation of subsection 1223(1) of the Act, which relevantly provides:
(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.
Subsection 1223(1AB) provides a list of circumstances in which a person is taken not to have been entitled to obtain the benefit of the payment. Relevantly paragraphs 1223(1AB)(c) and (d) provide that the person is not entitled to the benefit of a payment if “the payment was not payable” and “the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation.”
A person who obtains a benefit in any of the prescribed circumstances in subsection 1223(1AB) has a debt which arises when they obtain that benefit.
Ms Cai submits that the Respondent initially incorrectly calculated the debt period which began on 2 February 2017. The debt period on which the current debt is calculated begins on 2 June 2017. The calculations before the Tribunal do not appear to be in dispute. Having considered the calculations included in the T-documents, I am satisfied that Ms Cai owes a debt to the Commonwealth in the amount of $46,230.15 for overpayment of CP for the period of 2 June 2017 and 29 April 2019.
Having determined that Ms Cai owes a debt to the Commonwealth, I will consider if there are grounds to write off or waive the debt.
Can the debt be written off or waived?
Section 1236 of the Act provides a debt may be written off in certain circumstances.
(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.
I am satisfied that Ms Cai’s debts cannot be written off under section 1236 as none of the preconditioning criteria set out in subsection 1236(1A) are satisfied. The debts are recoverable at law. Ms Cai is currently in receipt of CP. Her whereabouts are known, and it is cost effective for the Commonwealth to recover the debt.
Can the debt be waived due to ‘sole administrative error’?
Section 1237A provides that a debt may be waived if the debt is solely attributable to administrative error.
(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.
Ms Cai contends that she was provided incorrect advice by the Respondent when she attended a Centrelink office in early 2016. Ms Cai maintains she was told by Centrelink that she was able to loan the money to her son and it would not impact her CP. It is submitted on her behalf that:
On or around early 2016, prior to taking out a mortgage on the [Baulkham Hills] Property and loaning the funds to her son [Mr Cai]… [Ms Cai] sought advice from her local Centrelink branch in Baulkham Hills to clarify if… using the [Baulkham Hills] Property as security would affect her Carers Payment in any way, and if it needed to be reported to the Department; and [t]he proposed act of loaning the Westpac Loan to Mr Cai would affect her Carers Payment in any way, and if it needed to be reported to the Department.[1]
[1] Applicant’s Statement of Facts, Issues and Contentions, dated 5 May 2020.
Though there is no record of this meeting, it is accepted by the Respondent that the meeting referred to by Ms Cai occurred.
Ms Cai has provided a number of written statements to Centrelink over the course of her appealing the decision currently under review in which she references the advice she received from Centrelink in early 2016. On close examination of these statements, it is apparent that the exact nature of that conversation, as recalled by Ms Cai, changes significantly.
As mentioned, Ms Cai provided a statutory declaration on 4 May 2019 in which she did not reference or mention the loan to Mr Cai. She writes that she visited the Centrelink office in Baulkham Hills, and having been told that many pensioners were borrowing money to buy property, she was told by Centrelink that “if the money is borrowed, it would not affect my payment”.
The following month, on 21 June 2019, she provides further detail of the conversation with Centrelink. She writes that she “had previously spoken to Centrelink officers who confirmed that using my current home … as security to obtain a home loan for my son’s home would not affect my payments”.
In Ms Cai’s statement of 11 July 2019, she references asking Centrelink staff:
…whether my Centrelink payments would be affected if I use my house as security to take out the loan which my son will use to buy a house. I was informed that it would not as they told me I would only need to notify Centrelink and my payments may change would be if I was working and earning a salary or if I was earning rent from the house that exceeded the mortgage payments.
I agree with the observation of the AAT1 who, in considering this issue, wrote at [16]:
In cases such as these, much depends on the question asked. The answer that Ms Cai says she received was correct in relation to the effect of the encumbrance on her home. It was not correct as far as it might apply to the making of a loan or gift to Mr Daniel Cai.
The conversation between Ms Cai and Centrelink was said to have taken place over a year prior to the loan being made to Mr Cai. I also place weight on the 4 May 2019 statutory declaration containing no mention or indication that the borrowed money would be on-lent to Mr Cai. Ms Cai contends that the loan was not mentioned in this statement because she sought to explain the deposits which were made into her accounts, but I do not accept this explanation given what was included in the rest of the statement and the important relationship between the loan to Mr Cai and the deposits she was seeking to provide explanation for.
These subtle but meaningful omissions and inconsistencies indicate that Ms Cai’s conversation with Centrelink was not precisely of the nature she now claims.
On balance, the evidence leads me to conclude Ms Cai sought to disclose as little information as possible to the Respondent relating to the loan she had made to Mr Cai. Consequently, I do not accept that she was provided exactly the advice by Centrelink that she now claims. For Centrelink to have advised her that she could make a loan to Mr Cai and it would not be included as an asset for the purposes of calculating eligibility for her CP is incorrect. There is also little persuasive or consistent evidence which supports this advice being provided.
In what appears to be a reference to the subsection 68(2) notice, Ms Cai submits that she was sent a:
standard facts sheet outlining her notification obligations, but it did not specifically state that a loan from the bank against the property of residence must be disclosed, or that a loan to another individual could be assessed as an asset.
Ms Cai concedes that she did not comply with her obligations under subsection 68(2) of the Administration Act and did not notify the Respondent of the deposits into her bank accounts or the loan to Daniel Cai.

As there is no evidence of administrative error by the Respondent and Ms Cai does not meet the good faith criteria in so much as she failed to comply with her reporting obligations during the debt period, I am satisfied there are no grounds to waive Ms Cai’s debt under subsection 1237A(1) of the Act.
Can the debt be waived due to ‘special circumstances'?
Section 1237AAD provides that the right to recover all or part of the debt may be waived in certain 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.
Ms Cai submits that her financial circumstances are such that she is unable to repay the debt as CP is her only source of income and she is in “severe financial strife”. During the period she was not in receipt of CP, she claims she was required to live on payments of as little as $6.49 each fortnight after deductions. In addition, she states that she owes creditors $15,000 and she is being called upon to repay the loans due to Covid-19.
She says she is a single mother with a “dependent son” and an elderly father who requires constant care. Ms Cai’s dependent son, who is reported as being 22 years of age, is currently studying and was the recipient of the loan which caused Ms Cai to exceed the allowable assets. Submissions made on behalf of Ms Cai state that Mr Cai is suffering from hair loss requiring medical attention, increased blood pressure and other health issues for which he receives medication and treatment “at a huge financial cost” which is borne by Ms Cai. Ms Cai submits that a medical specialist has confirmed that Mr Cai’s hair loss is due to the pressure of Ms Cai’s debt and actions of the Respondent.
Ms Cai is carer for her father and she herself suffers from a tear in her right shoulder. Ms Cai has provided medical records which confirm her father has a number of health conditions and has a pacemaker and suffers from osteoarthritis. She submits that he recently had a fall, which she attributed to a lack of sleep caused by the stress of Ms Cai’s debt to the Respondent.
In a statement of financial circumstances she completed in November 2019, Ms Cai lists her fortnightly income as $1056.96. She writes that she is required to see a specialist for her shoulder injury and requires an MRI scan which she cannot afford. She also details the problems she has with her car which she says is on its “last legs” and she cannot afford to get it repaired. Ms Cai writes that the car is important so that she can provide care to her father. Ms Cai also needs to make repairs on her house and replace her appliances.
The term special circumstances are not defined in the Act but has been extensively considered in case law. In Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114, Deputy President Forgie noted at [80] the relevance of an individual’s personal circumstances and the consideration of the general administration of the social security system when considering “special circumstances”.
As the Tribunal observed in Skinner and Secretary, Department of Social Services [2015] AATA 569:
[i]t is important to recognise the need to ensure the integrity of the social security system and the public interest. This means that those recipients who have received monies to which they are not entitled, are generally expected to repay those monies unless the repayment is in the specific circumstances unjust, unreasonable or inappropriate.
In the decision of Re Beadle and Director-General of Social Security [1984) AATA 176, the Tribunal determined:
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.
Paragraph 1237AAD(b) of the Act makes it clear that there must be more than financial hardship alone for special circumstances to exist. In her written submissions, Ms Cai advocates strongly for her debt to be waived under this provision and I have considered Ms Cai’s submissions closely. It is inescapable, however, that Ms Cai’s debts occurred because her assets exceeded the allowable limit. She appears to almost own her home outright. Ms Cai’s bank statements show that many tens of thousands of dollars have been provided to her by friends and family in recent years. She states that these are loans, but her financial circumstances are such that she has considerable resources and favourable financial options available to her should she choose.
Ms Cai has not demonstrated that there is anything unjust, unreasonable or inappropriate in her repaying the debt. Particularly when the debt is being repaid through a modest withholding in her CP, as it currently is.
The circumstances Ms Cai describes are not as she would prefer but in total there is nothing unusual or uncommon about them when compared to other social security recipients in similar situations. When considering the entirety of Ms Cai’s circumstances, I am satisfied that they are not special circumstances such that they would make it desirable to waive all or part of the debt.
CONCLUSION
For the reasons stated above, the Tribunal determines that Ms Cai was overpaid $46,230.15 in carer payment and that this amount represents a debt to the Commonwealth which is required to be repaid in full.
DECISION
The decision under review is affirmed.

I certify that the preceding 67 (sixty -seven) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member

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Associate
Dated: 20 August 2020

Date of hearing: 19 June 2020

Advocate for the Applicant: Mr Luke Cai, Applicant’s son

Solicitors for the Respondent: Dr Stephen Thompson, Services Australia

[2020] AATA 3047

20 August 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Procedural Fairness

Standing

Statutory Construction

Remedies

Appeal

Date of hearing:	19 June 2020
Advocate for the Applicant:	Mr Luke Cai, Applicant’s son
Solicitors for the Respondent:	Dr Stephen Thompson, Services Australia