Carney and Department of Family and Community Services
[2000] AATA 406
•19 May 2000
DECISION AND REASONS FOR DECISION [2000] AATA 406
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2000/16
GENERAL ADMINISTRATIVE DIVISION )
Re SERENA LOUISE CARNEY
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Dr E K Christie, Member
Date19 May 2000
PlaceBrisbane
Decision The Tribunal sets aside the decision under review and in substitution therefor decides that the debt accrued over the period 3 July 1997 to 29 January 1998 be written off.
.........(Signed)..........................
DR E K CHRISTIE
MEMBER
CATCHWORDS
SOCIAL SECURITY – family allowance – overpayment – whether appropriate to waive right to recover debt by reason of administrative error or special circumstances – whether appropriate to write off debt
Social Security Act 1991: ss.1236, 1237A, 1237AAD
Re Beadle v Director-General of Social Security (1984) 6 ALD 1
Re Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re L v Secretary, Department of Social Security (1995) 21 AAR 412
REASONS FOR DECISION
19 May 2000 Dr E K Christie, Member
This is an application by Serena Carney to review a decision of the Social Security Appeals Tribunal ("the SSAT") made on 21 December 1999 to raise and recover an overpayment of family allowance in the amount of $4378.80 paid over the period 3 July 1997 to 29 January 1998. The SSAT decision affirmed a decision made by an Authorised Review Officer on 4 October 1999.
In its decision, the SSAT found that there was no factual basis to waive whole or part of the debt for either 'administrative error' or for 'special circumstances'.
At the hearing, the applicant Mrs. Carney, represented herself. The respondent was represented by Mr. P. Kanowski, a Departmental Advocate.
At the hearing, the Tribunal had in evidence before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, the 'T' documents (Exhibit 1) and the following exhibits:
Exhibit 2 – letter from Centrelink to Mrs. Carney 1 February 1997
Exhibit 3 – Income and Expenditure Statement, prepared by Mrs. Carney in May 2000
ISSUES BEFORE THE TRIBUNAL
The only issues for the Tribunal to decide was whether the overpayments of family allowance could:
be waived, in part or in full, because of 'administrative error' or 'special circumstances'; or
be "written off".
FACTS
At the hearing, Mrs. Carney acknowledged the following findings of fact made by the SSAT (T2 folio 9):
"(i) Mrs Carney was in receipt of family allowance.
(ii)On 1 July 1997 Mrs Carney lodged an estimate of combined taxable income for 1997/98 financial year of $26,987.
(iii)On 30 October 1997 Mrs Carney made an estimate of combined taxable income for 1997/98 financial year of $30,000.
(iv)During the period 3 July 1997 to 29 January 1998 the rate of family allowance was based on these estimates.
(v)Mrs Carney's actual combined taxable income for 1997/98 was $48,236."
Recovery of the overpayment is proceeding by instalments of $45.64 per fortnight deducted from Mrs. Carney's social security benefits. At the date of the hearing, the residual balance was $3,806.39.
CONTENTIONS AND SUBMISSIONS OF THE PARTIESMrs. Carney stated that she had done everything possible to keep Centrelink informed of her true income situation. For example, she had completed the Changes to Your Income and Assets form (T11, 27 June 1997) and had specified income for herself and spouse as accurately as possible. A similar form had also been completed in January 1998 (T34, 18 January 1998). In addition, Mrs. Carney had completed a form dealing with A Review of Family Payment and Childcare Assistance (T24, 24 October 1997). This form had been completed in response to a Departmental notification notice she had received (T22, 19 August 1997).
Mrs. Carney emphasised that she was totally confused as to the basis for calculation of her family allowance entitlements. Consideration of notes in forms she had completed created uncertainty as to whether entitlements were based on the (a) current financial year (b) the previous financial year, or (c) the calendar year. Consequently, this uncertainty was a major source of concern.
Mrs. Carney acknowledged that she may have been naïve in her understanding of how the debt had been created. It had never been pointed out to her that actual income related to the whole year – including periods when her combined income was low. However, she said that the lack of information provided to social security recipients by Centrelink on the process of how entitlements were calculated had not only caused uncertainty, but also the problem of overpayment.
Mrs. Carney submitted that she had not contributed to the administrative error which led to the overpayment. Whereas she had made every effort to ensure her income estimates were correct, the lack of information provided by Centrelink led to a situation in which she was never fully aware of the link between her estimate of income and the calculation of family allowance entitlement.
Mrs. Carney contended that there were "special circumstances" in her case as to the financial situation in her household (husband plus two primary school children) was exacerbated as they had to care for her husband's two teenage children (from a previous marriage). However, there was little maintenance received from her husband's former partner to care for these children to offset the financial burden.
In terms of "write off" of the debt, and her capacity to pay the debt, Mrs. Carney made the following submissions:
the total household income was $1,800 per month whereas the total expenditure was $2,345 per month (Exhibit 3). Existing debts included home mortgage ($103,000), AGC ($1,700), overdraft (about $2,300) and Visa Credit Card ($2,400). Mrs. Carney stated that her mortgage repayments were about the same as rental payments would be;
that loans had been based on the equity in their family home such that their equity had now been eroded. Also, considerable stress had occurred because a garnishee order had been suggested as a means to recover the debt;
that the home had deteriorated because of lack of maintenance. In its current state, the house would have a value less than its purchase price because of its state of disrepair;
that she was the sole breadwinner in the household. Her husband had been unemployed for seven to eight years after hand injuries had denied him further employment opportunities in the Police Service. He had been in the New South Wales Police Service for 17 years, joining at the age of 17 years. He had problems adjusting to the 'psychological dynamics' of life outside the Police Service as he had failed to find a stable job for so long and had to rely on periodic work;
that her husband may have improved prospects for employment but that would require him to have corrective surgery for an outstanding knee injury and consequent rehabilitation. However, this required an outlay of $3,000 which she did not have;
that her husband constantly sought employment and was registered with all agencies from Brisbane to Tweed Heads;
that her husband was enrolled in a six months TAFE course ("Aboriginal Welfare Certificate") which he is to complete this year. The employment prospects on completion of this course were unknown. Her husband then planned to follow up this certificate course with a degree course;
that the parish primary school her two children attended, had waived $906 arrears in tuition fees and had now agreed to accept interest only payments for current school fees; and
that the tensions created by the debt had caused large problems in the family's personal life as they struggled with the need for survival over the period of four years that it was projected would take to repay the debt.
Mr. Kanowski, the Departmental Advocate, submitted that the normal basis for calculating family payments was for the 'base tax year' to be the 'appropriate tax year'. However, in some circumstances eg. where a 'notifiable event' occurs, the income test for calculating family payments requires Centrelink to consider the 'appropriate tax year' (see Module H, section 1069 Social Security Act 1991; H-18 and H-19). A 'notifiable event' arose when Mr. Carney commenced a job. Mr. Kanowski stated that by adhering to this section of the Act and relevant points of Module H, Centrelink had correctly used the 'appropriate tax year' as the means for calculating Mrs. Carney's family payment entitlements.
Mr. Kanowski acknowledged that there was no question in issue that Mrs. Carney had deliberately set out to provide false information to Centrelink and stated that people do have difficulty in accurately forecasting income; intermittent employment was one such source of difficulty causing income estimates to be different at the start and end of a financial year. He said that the difficulty was recognised by the legislation by having a "110% leeway". Moreover, Mr. Kanowski stated that the application forms (eg T11 Folio 33) indicated that where information was incorrect the entitlement would have to be recalculated and that a repayment could arise.
Mr. Kanowski stated that Mrs. Carney was paid her entitlement based on the estimate of $30,000 she had given Centrelink. As a result, she received around $300 to $400 per fortnight (T86 Folio 94) – but was entitled to much less because this estimate proved to be incorrect. Mrs. Carney's husband's employment caused the error in her estimate of income to arise.
Mr. Kanowski contended that the debt could not be waived for "administrative error" because Mrs. Carney had contributed to the error by supplying Centrelink with an incorrect estimate of income.
Mr. Kanowski further contended that there were no circumstances in Mrs. Carney's fact situation which warranted the description of 'uncommon', 'unusual' or 'exceptional' and so represent 'special circumstances'. Nor did the Social Security Act provide for financial hardship, by itself, to be a basis for a finding of 'special circumstances'.
In terms of 'write off' of the debt, Mr. Kanowski submitted that, whilst he did not wish to be critical of the Carney family's lifestyle, the following expenses could be considered to be unreasonable – given the Carney's financial predicament:
A bank account which involved a deposit of $80 per month for children's future tertiary education. He submitted that this amount could be directed to repaying the debt.
A mobile telephone account of Mrs. Carney's.
Primary school fees paid to a parish school.
The purchase of a video camera; and
Sporting charges incurred by Mr. Carney.
Mr. Kanowski contended that the 'severe financial hardship' test was a stringent test which could not be found in Mrs. Carney's situation. However, in response to a Tribunal question as to whether write off could be applied to a specified period, Mr. Carney stated that the period should be for six months. At this stage Mr. Kanowski would have completed his TAFE course (see paragraph 13).
In reply to these issues (paragraph 19) Mrs. Carney stated that:
the mobile telephone was necessary for her personal safety in her job with Housing Queensland as she did field work which could involve dealing with 'strange people'; also, to have contact with her children at all times;
the bank account for her children's tertiary education was in reality and contingency account used for unexpected fees and charges;
with respect to the sporting charges incurred by her husband, sport was his only outlet for the frustrations in his life. Her husband would be aggressive if she tried to alter this opportunity; and
her husband had purchased the video camera following Catholic Counselling as an activity to overcome suicide attempts he had made on his life. The video camera had been purchased without her knowledge.
CONSIDERATION OF THE ISSUES
The objective of the Tribunal is to review administrative decisions, not only on their merits, but in accordance with the law at all times. The relevant legislation is the Social Security Act 1991 ("the Act").
The first question to be considered relates to the credibility of Mrs. Carney and the veracity of her account as to her dealings with Centrelink. I accept Mrs. Carney acted honestly in all her dealings with Centrelink and her account to be consistent over time.
Section 1237 of the Act provides for circumstances where a debt due by a recipient of social security to the Commonwealth, may be waived:
"SECTION 1237A – WAIVER OF DEBT ARISING FROM ERROR
1237A(1) Administrative error. 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).
SECTION 1237AAD – WAIVER IN SPECIAL CIRCUMSTANCES
1237AAD 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 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."
Section 1236 of the Act provides for circumstances where a debt due to the Commonwealth by a social security recipient may be written off. It was agreed by the Departmental Advocate that the relevant provisions in Mrs. Carney's fact situation were ss. 1236(1A)(b) and 1236(1C):
"1236 Secretary may write off debt
1236(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…
1236(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of deductions from a person's social security payment, the person is taken to have a capacity to repay the debt unless recovery by those means would cause the
person severe financial hardship."With respect to waiver on the basis of administrative error, the Tribunal finds that there is no basis to waive the debt because there has been an administrative error made by the Commonwealth. The Tribunal finds that the social security entitlements Mrs. Carney received over the period 3 July 1997 to 29 January 1998 were correctly calculated by Centrelink in accordance with the relevant statutory provision (see Section 1069 of the Act, Module 'H'; H-18, H-19). The rate of her family allowance entitlement was based on an income estimate that Mrs. Carney had provided to Centrelink, which ultimately proved to be wrong.
The next question for the Tribunal to decide is whether the debt should be waived because of the 'special circumstances' provisions of the Act.
The leading case is Re Beadle v Director-General of Social Security (1984) 6 ALD 1 where the Tribunal said at page 3:
"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."
In Groth v Secretary, Department of Social Security(1995) 40 ALD 541 (a case on "special circumstances" and s.1184 of the 1991 Act) at 545, Keifel J, after referring to the Federal Court's decision in Beadle, observed that special circumstances:
"….would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case….It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."
The Tribunal concludes that the over-payments of family allowance entitlements received by Mrs. Carney is not one unintended by the legislation nor is the effect upon her different from that which would be felt by others ie. Mrs. Carney has endured the same consequence as any other social security recipient whose projected income estimate for a financial year proves to be such that the actual income for the financial year differs from their estimate. Whilst this conclusion may seem harsh, it would be fairer to say the outcome is unfortunate. The outcome is dependent on the legislation, but the legislation provides the Tribunal no discretion from which to depart. The Tribunal makes the observation that Mrs. Carney's case, unfortunately, is not the first case before this Tribunal, where unforeseen employment creates an equivalent problem for income estimate and overpayments.
Accordingly, the Tribunal concludes that the circumstances in which the overpayment of family allowance entitlements were paid to Mrs. Carney were not sufficiently 'unusual', 'uncommon' or 'exceptional' to justify the description 'special circumstances'.
The next question for the Tribunal to decide is whether the debt should be written off on the basis that Mrs. Carney has no capacity to repay the debt and where recovery would cause the person "severe financial hardship".
In L.v Department of Social Security (1995) 38 ALD 176, the then President of the Tribunal (Mathews J) said at paragraphs 63 – 66:
"It must follow that considerations as to the financial circumstances of the debtor are not only relevant but central to any decision as to whether a debt should be written off…. For with write off, the Secretary retains the right to commence recovery proceedings at a later date if there is an improvement in the individual's financial circumstances….I understand that the respondent often recovers debts through deducting regular amounts from the individual's future income maintenance payments… However, one cannot ignore the beneficial nature of the legislation. The whole purpose of the legislation would be substantially undermined if recipients of income maintenance benefits were to have deductions made from their payments which would render them incapable of supporting themselves or their dependents….In summary, I consider that matters relating to the personal financial hardship of the individual are always relevant in any decision as to write off under subsection 1236(1)…The essential inquiry will always be whether recovery is a feasible proposition, bearing in mind the financial means and obligations of the individual concerned. Will recovery cause such personal hardship as to run contrary to the beneficial nature of the legislation? If an affirmative answer is reached to this question, then it would be appropriate to defer recovery in the manner contemplated by subsection 1236(1)."
The Tribunal concludes that with the current financial means and obligations of Mrs. Carney, recovery of the overpayments would cause such personal hardship to the family as to be contrary to the beneficial nature of the legislation because:
There is a significant (severe) negative cash flow between income and expenditure which can only be aggravated further if recovery continues;
The analysis of income and expenditure indicates that Mrs. Carney does not even have a limited capacity to repay the debt by withholdings – notwithstanding that the withholdings approximate the amount of the social security entitlement;
The future employment prospects of Mr. Carney remain uncertain -including the continuity of his casual employment. This question will become much more clear when Mr. Carney completes his post-secondary/tertiary education plans.
The Tribunal concludes that should the problems with severe negative cash flow persist then the prospects for recovery would be impractical. Mrs. Carney has no capacity to repay the debt at this time. However, recovery of the debt could be delayed as there are prospects that Mrs. Carney's financial circumstances may change over time following completion of her husband's studies. Whilst the time this situation may arise cannot be accurately specified, the prospects for improved financial circumstances for the Carney family are real. Because of this uncertainty in their financial prospects, the Tribunal concludes that it is not appropriate to specify a period for the debt to be written off.
Compassionate considerations may be appropriate given the psychological stress and turmoil which would seem to be part of the daily living of the Carney family related to the problems caused by negative cash flow.
Accordingly, the preferable decision in this matter is to write off the debt.
It is for these reasons that the decision under review will be set aside and in substitution thereto the Tribunal decides that the debt accrued over the period 3 July 1997 to 29 January 1998 be written off. Applying s.1236(2)(b) of the Social Security Act 1991 this decision takes effect on 12 May 2000.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Dr E K Christie, Member
Signed: .....................................................................................
B. Hitchcock, SecretaryDate/s of Hearing 12 May 2000
Date of Decision 19 May 2000
Applicant Mrs. Carney, herself
Respondent Mr. P. Kanowski, Departmental Advocate
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