Chen and Secretary, Department of Social Services (Social services second review)
[2019] AATA 560
•27 March 2019
Chen and Secretary, Department of Social Services (Social services second review) [2019] AATA 560 (27 March 2019)
Division:GENERAL DIVISION
File Number(s): 2018/5153
Re:Chia Huey Chen
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
Decision
Tribunal:Chris Puplick AM, Senior Member
Date:27 March 2019
Place:Sydney
Pursuant to section 43(1)(c)(ii) of the Administrative Appeals Tribunal Act 1975 the decision under review is set aside and remitted to the Secretary with the direction that the matter of the raising of any debts against the Applicant prior to 18 May 2010 be reconsidered in line with the reasons of the Tribunal
.........................[sgd]...............................................
Chris Puplick AM, Senior Member
Catchwords
SOCIAL SECURITY – Newstart allowance – Disability Support Pension – Pensioner Education Supplement – overpayment – assets – trusts – debt due to the Commonwealth – whether recovery of debt should be written off or waived – consideration of special circumstances – decision under review set aside and remitted
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Conveyancing Act 1919 (NSW)
Data-matching Program (Assistance and Tax) Act 1990 (Cth)
Legislation Act 2003 (Cth)
Queensland Heritage Act 1992 (Qld)
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
Trustee Act 1925 (NSW)
Cases
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Beadle and Director-General of Social Security [1984] AATA 176
Chen and Secretary, Department of Social Services [2018] AATA 4672
Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114
Dean v Department of Education, Science and Training [2005] AATA 586
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441
Gerhardt v Secretary, DEET [1997] FCA 815
Groth and Secretary Department of Social Services [1995] FCA 1708
Hill and Secretary, Department of Family and Community Services [1999] AATA 909
Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162
Ivovic and Director General of Social Services [1981] AATA 57
Knight v Knight (1840) 3 Beav 148
Neuendorf and Secretary, Department of Social Services [1998] AATA 868
Oberhardt v Secretary, Department of Education, Employment and Workplace Relations [2008] FCA 1923
Re Balancio and Secretary, Department of Family and Community Services (2003) 74 ALD 204
Re Concetta Severino and Secretary, Department of Family and Community Services [2005] AATA 745
Re Perkich and Secretary, Department of Social Security (1997) 49 ALD 137
Riddell v Secretary, Department of Social Security [1993] 114 ALR 340
Secretary, Department of Social Security and Gray-Corking (1997) 11 SSR 152
Secretary, Department of Social Security v Hulls and Others [1991] 22 ALD 570
Secretary, Department of Social Security and Winters [1997] AATA 12518
Secretary, Department of Family and Community Services and Temesgen [2002] AATA 1290
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190
Ward and Secretary, Department of Family and Community Services [2000] AATA 212
Woodward and Department of Family and Community Services [2001] AATA 818
Secondary Materials
J D Heydon and M J Learning, Cases and Materials on Equity and Trusts (LexisNexis Butterworths, 8th edition, 2011)
Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination 2011 (effective 6 December 2011)
Social Security (Attribution of Assets) Principles 2001
Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017
REASONS FOR DECISION
Chris Puplick AM, Senior Member
27 March 2019
This review deals with a decision made by the Secretary, Department of Social Services (the Respondent) to raise a debt against Ms Chia-Huey Chen (the Applicant) in respect to certain welfare benefits which the Respondent claims were wrongly paid to the Applicant. The Applicant is seeking to have that claim for repayment set aside.
Caveat
At the commencement of these proceedings I read the following statement to all parties which I think appropriate to repeat here and include as part of the official record of my decision.
“This matter first came before me on 18 December 2018 and on 20 December 2018 I issued a decision regarding Ms Chen’s application for a stay of certain proceedings.
In my determination I expressed a degree of concern about the state of Ms Chen’s mental health and hence her capacity to understand fully the proceedings in the Tribunal or to give reliable evidence or to respond meaningfully to questions.[1]
[1] Chen v Secretary, Department of Social Services [2018] AATA 4672 at [2].
I repeat those concerns now.
Ms Chen herself acknowledges that she suffers from mental health problems and this is recognised and conceded by the Secretary.[2]
[2] Respondent’s Statement of Facts, Issues and Contentions at [11.30].
It was accepted by the Social Services and Child Support Division of this Tribunal when it made its determination on 29 August 2018.[3]
It was on the basis of Ms Chen suffering from a severe mental illness that she was granted the Disability Support Pension (DSP) in the first instance in 2006.[4]
The Applicant has even been the subject of an involuntary scheduling into mental health care under s. 22 of the Mental Health Act 2007 (NSW).[5]
Moreover it was a matter of sufficient concern to the Tribunal that the Respondent made an application for certain material, related primarily to this very issue, to be withheld from the Applicant because of its possibly prejudicial impact on the Applicant’s mental health. A confidentiality order under s. 35(4) of the Administrative Appeals Tribunal Act 1975 (AATA Act) was granted in response to that application.[6]
This in turn has led to the Respondent declining to provide copies of that material direct to the Applicant when she has requested it.[7]
Both the Tribunal and the Respondent have urged Ms Chen to seek independent or professional representation at this hearing but she has declined or been unable to do so.
Given the level of its concerns the Tribunal went so far as to seek advice as to whether it was within its powers to seek to appoint a guardian for Ms Chen specifically in relation to the management of this matter in the Tribunal. However it appears that the AAT Act does not grant it any power or authority to do so.
As a result, Ms Chen appears here today unrepresented.
The consequence of all this is that the Tribunal notes that, ab initio, it will find it very difficult to accept uncorroborated elements of Ms Chen’s personal testimony or evidence where that requires a significant cognitive appreciation of either what is being said or what is being stated in reply to questions.
This is a most unfortunate situation but the Tribunal has, in all the circumstances, no option but to proceed accordingly.”
[3] Chen v Secretary, Chief Executive Centrelink [29 August 2018] AAT 2018/S123944
[4] Section 37 Tribunal Documents at [1195].
[5] Ibid at [1113].
[6] Chen v Secretary, Department of Social Services [9 November 2018] AAT 2018/5153
[7] Applicant’s Submission: Miscellaneous Correspondence at [136], [148].
In the event, Ms Chen’s testimony both confirmed and qualified my concerns. Large parts of her testimony were rambling, incoherent, meaningless and indeed irrational and incomprehensible. She was highly distraught and emotional and at times unable to go on with her testimony. She made frequent references to her feeling that she was being persecuted (by Centrelink); that she wished she were dead and that her actions and those of the Respondent’s representative were controlled by “evil spirits”.
On the other hand when she was able to focus on matters of detail, such as recalling conversations with solicitors, the sale price of properties or the management of both trusts and superannuation funds, she evidenced a clear capacity to give more structured and coherent replies to some of the questions asked, although, even then, she tended to wander off into irrelevant monologues. At all times the Tribunal tried to bring her back to addressing precise questions or issues, but often, regrettably, without success.
It is on this basis that the Tribunal will seek to distinguish, as clearly as it possibly can, between those elements or parts of Ms Chen’s testimony upon which it feels it can place some reliance and those where this is not possible. Unfortunately there are far more instances of the latter than the former.
The Tribunal should also note that, although Ms Chen was unrepresented, she did have the assistance of a support person, Mr Ian Frank, a friend of hers with some acquaintance of her personal history and situation.[8] She also had the assistance, from time to time, of an interpreter in the Mandarin language.
[8] Mr Frank tendered a written statement in support of the Applicant. Tribunal Exhibit at [A10].
During the course of the hearings Ms Chen displayed behaviours which included physically punching her support person (Mr Frank) and dumping an empty wastepaper basket on his head. She needed to be warned on several occasions about her behaviour, her language and her threats of physical harm to the Respondent’s representative (which the Tribunal took as emotional outbursts rather than serious threats).
The Tribunal was faced with more than 3900 pages of written evidence provided by both parties, a great deal of which (from both) did nothing to clarify any of the relevant issues or make a contribution to the resolution of this application.
Background
Ms Chen is a person known under several different names in a variety of contexts and documents. Her names include Chia Chen; Chia-Huey Chen; Chia Huey Chen; Jasmine Chen; Jasmine Peyronneau and Huey Peyronneau. There are no suggestions of any dishonesty or fraud in her use of multiple names and the Tribunal draws no adverse inferences. The Applicant explains that she is known by different names in Taiwan (her birthplace), Australia (her place of residence) and France (where her marriage took place.)[9] Her legal name in Australia is Huey Peyronneau, as shown in the NSW Change of Name Certificate issued by the Registrar of Births, Deaths and Marriages in April 2009.[10] However, for the purposes of this decision she is referred to as Ms Chen, that being her preferred name at present.
[9] Section 37 Tribunal Documents at [987].
[10] Ibid at [209]-[210].
Ms Chen has been in receipt of three different types of payments from the Department:
·Disability Support Pension (DSP) which is paid to people over the age of 16 but under pension age at the date of claim and where the person concerned has been assessed as having the requisite degree of disability under the Impairment Tables established under the Act;
·Newstart Allowance (NSA) which is paid to people who are unemployed (being aged 22 or over but under pensionable age) with conditions attached related to their activities in searching for employment, and
·Pensioner Education Supplement (PES) paid to people with an accepted disability who are studying an approved course at an approved educational institution.
All three payments are made subject to an assets and income test under the Social Security Act 1991 (the Act).
·DSP is paid, under section 117 of the Act using a calculator set out in section 1064.
·NSA is paid under section 643 of the Act using a calculator set out in section 1068.
·There are two rates of the PES but initial eligibility is dependent upon qualification for either NSA or the DSP at first instance, see section 1061PA.
Ms Chen has been paid these allowances, for these purposes, as follows:
·DSP from 19 August 2006 to 2 March 2018;
·NSA from 11 October 1999 to 18 August 2006 (the latter being the date she moved from NSA to the DSP);
·Pensioner Education Supplement (in two tranches) from 17 January 2017 to 1 December 2017 and then from 2 December 2017 to 2 February 2018.
For the sake of the record, the Tribunal notes that Ms Chen, at various times was enrolled in 12 different TAFE courses involving some 71 different units.[11] She withdrew from 10 of them and was assessed as being “not competent” in the remaining 61. She completed none of them.
[11] Auslan (3 units); Excel (1); Barbering (7), Animal care – two courses (5 and 5); Strata Management (3); Hairdressing (2); Ceramics and Jewellery (4); Property Management – two courses (8 and 17); Design (12); MYOB (2). Tribunal Exhibit at [A2].
Relevantly, the Tribunal was informed by the Respondent that Ms Chen had first been granted the DSP on 19 August 2006 on the basis that she was suffering from some form (unspecified) of mental illness and her DSP payments continued, without interruption, until the cancellation decision of 15 March 2018 (see below).
In 2006 Ms Chen was assessed by the Department to determine her eligibility for the DSP on the basis that she had a mental illness, defined as “Personality Disorder”. The assessment was made using what was then Table 6 (Psychiatric Impairment) found in Schedule 1B of the Act then in force.[12]She was assessed on that Table with a rating of 30 points[13] which was defined as:
“Serious psychiatric illness with major impairments in several areas, such as work, interpersonal relations, judgement, thinking, or mood (eg. Depressed person avoids friends, neglects family, unable to do housework), OR some impairment in reality testing or communication (eg. speech is at times obscure, illogical or irrelevant).”[14]
[12] These Tables were replaced by the current set of Impairment Tables as set out in the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination 2011 (effective 6 December 2011).
[13] Section 37 Tribunal Documents at [1195].
[14] Social Security Act 1991 Schedule 1B: Tables for the Assessment of Work-Related Impairment for Disability Support Pension, Table 6.
The continuing manifestation of these impairments was evident throughout the proceedings of the Tribunal, especially in relation to reality testing or communication.
Ms Chen’s DSP was subject to review in 2010. The Department wrote to her on 19 March 2010, to the effect that her pension was being reviewed under the Data-matching program.[15] This programme, which involves matching Centrelink records[16] with those of certain other designated government departments,[17] was described by the Department to her in these terms:
“To make sure you are receiving the correct rate of payment, Centrelink uses information from a number of sources. One of the ways we make sure that our records are up to date, is to match Centrelink data with the Australian Taxation Office. These checks are done under the Data-matching Program (Assistance and Tax) Act 1990 and we are writing to you under section 11 of that Act.”[18]
…
“This lets us know whether people who have been receiving social security payments have been and/or are currently receiving the correct amount.”[19]
[15] Section 37 Tribunal Documents at [2455].
[16] Data-matching Program (Assistance and Tax) Act 1990.
[17] Department of Veterans’ Affairs; Department of Family and Community Services; Department of Education, Training and Youth Affairs and Australian Taxation Office.
[18] Section 37 Tribunal Documents at [2455].
[19] Section 37 Tribunal Documents at [2456].
The actual request to Ms Chen was for her to supply her Tax File Number (TFN).
On 18 May 2010 the Department advised Ms Chen that of the result of this data-matching exercise:
“You may recall that we wrote to you about a review of your Disability Support Pension on 19 March 2010. This review has now been completed and all details about your Disability Support Pension are correct.
We would like to thank you for your co-operation during this review.”[20]
[20] Ibid at [2457].
Attached to this was further information about the data-matching programme which included the following rationale about the programme: “This lets us know whether people who are paid social security payments are getting the correct amount.”[21]
[21] Idem.
This correspondence is important as it establishes that as at May 2010 the Department had checked Ms Chen’s documentation with various other agencies under the Data-matching Program (Assistance and Tax) Act 1990 and had found no reason to vary her rate of DSP.
Nevertheless:
·On 15 March 2018 a decision was made to cancel Ms Chen’s DSP as from 15 March 2018.
·On 16 March 2018 a decision was made to raise a debt against Ms Chen for overpayment of the Pensioner Education Supplement (PES) for the period 17 January 2017 to 1 December 2017.
·A further decision was made on the same day to raise a debt for overpayment of the same allowance from 2 December 2017 to 2 February 2018.
·On 19 March 2018 a decision was made to raise a debt against Ms Chen for overpayment of Newstart Allowance (NSA) for the period 11 October 1999 to 18 August 2006.
·A further decision was made on the same day to raise a debt against Ms Chen for overpayment of the DSP from 19 August 2006 to 2 March 2018.
These decisions were reviewed by an Authorised Review Officer (ARO) of the Department on 2 July 2018. In that decision the ARO confirmed the various cancellations and the raising of debts, but in relation to the latter, some of the figures were varied.
The final decision of the ARO in terms of the debts was as follows:
(i)PES debt (17.01.17 to 01.12.17) = $ 1,421,81
(ii)PES debt (02.12.17 to 02.02.18) = $ 280.80
(iii)NSA debt (11.01.99 to 18.08.06) = $ 66,020.98
(iv)DSP debt (19.08.06 to 02.03.18) = $ 256,924.56.
In total this amounted to a debt owed by Ms Chen in the sum of $324,648.15.
On 29 August 2018, the Social Services and Child Support Division of this Tribunal (AAT1) affirmed the ARO’s decision.
On 6 September 2018 Ms Chen appealed to this Tribunal against the decision of the AAT1 in respect to the cancellation of her DSP, asking for that decision to be stayed pending a full merits-based review hearing. On 20 December 2018 this Tribunal made an order in the following terms:[22]
The Tribunal grants the Applicant’s request for a stay of the decision of the Social Services and Child Support Division of the Tribunal of 29 August 2018 in respect to the cancellation of the Applicant’s Disability Support Pension (DSP). It is ordered that any DSP arrears are to be paid to the Applicant from the original cancellation date of 15 March 2018 and ongoing payments of DSP are to be paid to the Applicant from the next day on which social security benefits are paid up until the decision of the Tribunal on the substantive application comes into operation.
[22] Chen v Secretary, Department of Social Services [2018] AATA 4672.
Reasons for the cancellation of the DSP: Ms Chen’s assets
Payment of the DSP is calculated at a rate prescribed in section 1064 of the Social Security Act 1991 (the Act). It contains both an income and an assets test such that once a prescribed threshold is exceeded, an applicant is no longer eligible for the pension.
Where a person is involved in the control of, or as a beneficiary of a Trust, calculations of their pension entitlement are covered by Part 3.18 of the Act (including section 1207V which relates to control of a Trust). Specific calculations are made with reference to the provisions of the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017.
A review of Ms Chen’s eligibility, by a departmental ARO, established that she was in control (for all legal purposes) of trusts known as the Peyronneau Family Trust (PFT), dated 20 August 2008 and 4 August 2010, which in turn may or may not, have replaced a previous trust known as the Chia-Huey Chen Family Trust (CFT) which was established on 5 February 1999.
The Applicant claims that the PFT owns assets in terms of six properties in New South Wales and Queensland all of which appear to be unencumbered. The total purchase price of these properties, acquired between February 1999 and October 2017 was $872,000.
In addition Ms Chen currently holds at least 13 separate current bank accounts with seven different banks. They were opened between July 2002 and August 2017.[23] At various times she may have held or operated up to 50 such accounts.
[23] Details are provided in the Respondent’s Statement of Facts, Issues and Contentions at [6.1].
On 28 March 2018 Ms Chen established a self-managed superannuation fund (YPS Superfund Pty Ltd) of which she is the sole director, secretary and shareholder of the trustee company.[24]
[24] Section 37 Tribunal Documents at [745].
As best as she could, Ms Chen argued before the Tribunal that she was not the beneficiary of any of these Trusts; she did not have effective “control” of them; that she was not the actual “owner” of any of the properties and that the numerous bank accounts were either deposits made on behalf of third parties or accounts with zero balances.
Ms Chen makes several further claims in relation to her assets, each of which is contested by the Respondent. In the first instance she claims a substantial (unspecified) debt owed to her mother in Taiwan. There is no documentary evidence of this. Again, with no documentation she makes claims of a debt to some unspecified company in Taiwan and to a “family trust’ established there.
More significantly, she claims she has a debt of 9,600,000 French francs (in the order of $A2.6 million) to her husband (Nicholas Peyronneau) contracted in Paris on the day of their marriage in March 1995. Both the Respondent[25] and the AAT1 expressed a degree of scepticism about the validity of this claim.[26] This Tribunal shares that scepticism. The only documentation in this regard is a single page headed “Paris Agreement”.[27] It reads:
“Jasmin Chen (the wife) asked Nicolas Peyronneau to borrow from the Bank Of Paris and his parents to pay off debt of her company in Taiwan. She cannot obtain a divorce until the debt is paid. $9,600.000. As long as this money is not paid back completely she cannot get divorce papers and her company and any property under her name will belong to Nicholas Peyronneau.”
[25] Respondent’s Stay of Decision Submission at [4.13].
[26] Chen v Secretary, Chief Executive Centrelink [29 August 2018] AAT 2018/S123944, paragraph [27].
[27] Section 37 Tribunal Documents at [848].
The text is dated “Mar 24th 1995”. It appears to be signed by “Jasmin Chen” and “Nicolae Peyronnaau” and “Nicholas”.[28] The sum stated is given in dollars (“$”) although Ms Chen says that this is a reference to French Francs. There is no material before the Tribunal which relates to any of the following issues: Ms Chen’s previous marriage; her company holdings in Taiwan,[29] to whom the debt was owed or the relationship between obtaining divorce papers and discharging a company debt.
[28] The latter two names/signatures appear to be in obviously different hand writing.
[29] There is an unclear reference in Centrelink records to the effect that “Customer indicates that a family trust exists in China (sic)”. Section 37 Tribunal documents at [967]. The Tribunal presumes the creator of this record has (erroneously) taken Taiwan to be “China”.
The Tribunal discounts this “Paris Agreement” as being evidence of anything relative to these considerations.
It is also a matter of dispute as to the extent to which the Trusts referred to above are valid trusts in terms of treatment of their assets for the purposes of Social Security legislation. Were they to be so, then the deeming provisions of part 3.18 of the Act would be enlivened.
Ms Chen’s Properties
It is clear that either Ms Chen or one of Trusts with which she is associated own a considerable number of properties. As best as can be established from the material before the Tribunal, these are as follows, in order of purchase:
(i)Campbelltown, NSW, registered in the name of Chia Huey Chen[30] and purchased on February 1999 for the sum of $142,000;
(ii)Broadway (number 1), Ultimo, NSW, registered in the name of Huey Peyronneau[31] and purchased on 16 September 2005 for $98,000;
(iii)Fortitude Valley, Brisbane, QLD, registered in the name of Jasmine Chen[32] and purchased on 21 November 2005 for $260,000;
(iv)Pyrmont, NSW, registered in the name of Jasmine Chen[33] and purchased on 16 September 2008 for $95,000; and
(v)Broadway (number 2), Ultimo, NSW, registered in the name of Chia Huey Chen[34] and purchased on 11 October 2017 for $192,000.
[30] Section 37 Tribunal Documents at [3885].
[31] Ibid at [3892].
[32] Ibid at [3889].
[33] Ibid at [3896].
[34] Ibid at [3905].
Of these properties, Campbelltown and Broadway (number 1) are shown as having a caveat in favour of the YPS Superfund, while the Warner Street property is a heritage property under the Heritage Act (Qld) 1992.
A previous property at Sussex Street, Sydney, NSW, was registered in the name of Huey Peyronneau and purchased on 9 April 2009 for $85,000 and then sold to the Riverwood Sports and Recreation Club Ltd on 14 December 2018 for the sum of $ 165,000.00.[35]
[35] Ibid at [3902]-[3903].
The Tribunal notes that Mr Garry Parsons is shown in ASIC documents to be the Secretary of the Riverwood Sports and Recreation Club (holding that position since 26 March 2003).[36] It appears that this is the same Garry Parsons who is listed as a Trustee of the Peyronneau Family Trust.[37] It is important to note that in relation to all of the other five properties in question; their titles are in Ms Chen’s name only without any qualifications such as “trustee for”. This matter was noted by the AAT 1 which stated that, as a result, “it could be argued that she is the owner of all the properties in her own right.”[38]
[36] Equifax Report, extract from ASIC document taken on 13 March 2019 at page [8].
[37] Section 37 Tribunal Documents at [897].
[38] Chen v Secretary, Department of Social Services [2018] AATA 5153 at [14].
Ms Chen’s Bank Accounts
As noted above, Ms Chen, during the relevant periods for determination of her pension entitlements has held up to 51 separate bank accounts, some of which have operated for only a matter of months.
Details of all her banking transactions were placed before the Tribunal by the Respondent, having been obtained under compulsory notice pursuant to s 196 of the Social Security (Administration) Act 1999.
Ms Chen holds an account with the ANZ Bank which appears to have been used exclusively for the payment of her DSP deposits.
There are then the following accounts which appear to be in current operation and details of which were provided to Centrelink under compulsory notice:
Bank
Type of account
Number
Opened
Name
Balance*
Date**
BoQ
Saving
xxxxxx45
21.10.14
Chia Huey Chen
586
30.09.18
BoQ
Term Deposit
xxxxxx79
09.08.17
Chia Huey Chen
30,000
Current
Bankwest
Savings
xxxxxx40
03.09.14
Jasmine Chen
23,465
02.10.17
Bankwest
Term Deposit
xxxxxx-3
06.11.14
Jasmine Chen
10,000
Current. Mature*** 11/19
Suncorp
Savings
xxxxxx47
03.07.09
Jasmine Chen
1,315
19.10.18
Suncorp
Term Deposit
xxxxxx43
14.01.14
Jasmine Chen
20,000
Current as at 14.01.17
St George
Term Deposit
xxxxxx75
02.12.10
Chia Huey Chen
5,000
Current as at 30.09.17
St George
Term Deposit
xxxxxx41
19.07.11
Chia Huey Chen
10.700
Current as at 30.09.17
St George
Savings
xxxxxx04
01.11.04
Chia Huey Chen
7,950
27.08.17
NAB
Term Deposit
xxxxxx10
18.12.13
Jasmine Chen
6,000
Current. Mature 12/18
NAB
Savings
xxxxxx38
05.07.02
Jasmine Chen
2,615
25.10.18
Westpac
Term Deposit
xxxxxx44
13.10.15
Chia Huey Chen
5,000
Current. Mature 10/20
Westpac
Savings
xxxxxx64
14.03.05
Chia Huey Chen
5,220
26.10.18
(Note: * = Rounded to whole dollars only / ** = Date reported under compulsory notification to Centrelink / *** = Month/Year of maturing of term deposit. BoQ = Bank of Queensland)
Finally, it appears that transfers were made from various Australian accounts to accounts in New Zealand held by Ms Chen in the Hong Kong and Shanghai Bank, the ASB Bank and Citibank. These transfers took place in February 2012, November 2012 and August 2015 and amounted in total to $ 147,329.00.[39]
[39] Details of all of the accounts and transfers are contained in the 152 pages of spreadsheets attached to the Respondent’s Statement of Facts, Issues and Contentions and are separately referenced to the submitted Tribunal Documents at paragraph [6.1] of that Statement.
Ms Chen’s Trust arrangements
This is an area of exceptional confusion and uncertainty. At the time that the Respondent prepared her Statement of Facts, Issues and Contentions and at the time the Tribunal sat, with nearly 4000 pages of documents before it, the material available to the Tribunal did not contain full copies of the Trust Deeds which figure prominently in Ms Chen’s arguments about her financial position. As a result, the Respondent constructed a large part of their case on the basis that these Trusts may not in fact be valid trusts because they appeared to fail the “three certainties” test required to establish validity.[40] It specifically denied that the Chia-Huey and Peyronneau Family Trusts were “valid trusts with respect to the six real estate holdings during the relevant period.”[41]
[40] These are certainty of intention, certainty of subject matter and certainty of object. Knight v Knight (1840) 3 Beav 148. See J D Heydon and M J Learning, Cases and Materials on Equity and Trusts (LexisNexis Butterworth, Australia, 2011) 8th edition at [651-652].
[41] Respondent’s Statement of Facts, Issues and Contentions at [8.3].
However at lunchtime on the second day of the hearing, Ms Chen managed to produce the original Trust Deeds which appear to establish that at least two of the Trusts are valid trusts. These relate to the Chia-Huey Chen Family Trust (CFT) created on 5 February 1999[42] and the Peyronneau Family Trust (PFT) created on 20 August 2008.[43] The Tribunal concedes that there was only a cursory inspection of the Trust Deeds but that such an inspection was sufficient for both the Tribunal and the Respondent to agree that they appeared to establish the validity of both of the Trusts as created.
[42] Section 37 Tribunal Documents at [703].
[43] Ibid at [188].
The Tribunal was further initially confused by the contradictory statements in the Respondent’s own submission suggesting that the PFT document is authentic but the trust itself is not:
“As for the PFT deed dated 20 August 2008 …. its authenticity is not open to serious doubt.” (8.24)
“The PFT deed dated 20 August 2008 does not satisfy the common law “three certainties” requirements for a valid express trust…” (8.50(c)).
It is perhaps best to go back to the start of the whole process and try to resolve the status of these Trusts, and in particular their status vis-à-vis the operation of Part 3.18 of the Act.
On 5 February 1999 Ms Chen created the Chia-Huey Family Trust (CFT). It appears that Ms Chen was the sole trustee and a certain Ms Anna Sousa was the settlor.
The AAT 1 noted:
“It is not clear from the papers when the CFT was set up but it was apparently in existence on 3 February 1999, when the Campbelltown contract of sale was signed. The sale document (p. 76) has a handwritten correction striking out the name Chia Huey Chen and inserting her as trustee for the CFT. We are not sure when this correction was made, but it was not reflected in the title deed set out above. The papers do not have a complete copy of the trust deed but it appears from the available evidence (p. 588) that Miss Chen was the sole trustee of the CFT. With respect to the CFT, Miss Chen meets the control test set out in the legislation.”[44]
[44] Chen v Secretary, Department of Social Services [2018] AATA 5153 at [15].
While the papers before the AAT 1 may not have allowed it to establish when the CFT was set up, those before this Tribunal make it clear that the date was 5 February 1999 and given that the Campbelltown property sale was completed before that date, it is reasonable to assume that the handwritten correction was made after the contract was signed on 3 February 1999.
On 20 August 2008 the Peyronneau Family Trust (PFT) was set up. It names Ms Chen as Trustee and Ms Helen Jiang as settlor. A schedule attached to the document states that the trust owns the properties at Fortitude Valley, Broadway (number 1), Campbelltown and Pyrmont (see above).[45]
[45] Section 37 Tribunal Documents at [223].
There is some suggestion, derived from a copy of an income tax return for the PFT in 2016 that the PFT was a replacement for the CFT set up in 1999.[46] This may or not be the case as there are different settlors shown on the two sets of documents and the table of contents of both suggests that the terms and conditions of the two deeds are not the same. In any event, Ms Chen appears as a trustee of both.
[46] Ibid at [929].
On 4 August 2010 another trust, also called the Peyronneau Family Trust (PFT2) was established. It had Garry Parsons and Gregory Kokaev as Trustees and Ms Helen Jiang as settlor.[47]
[47] Ibid at [897]-[915].
Although the documentation is separated in the Tribunal papers, it appears that a schedule attached to this deed lists the same four properties as held by the previous PFT as now being held by PFT2 with the addition of “Any properties and assets under the name of this trust.”[48]
[48] Ibid at [702].
Importantly, although the Trustees changed between PFT and PFT2 (from Ms Chen to Mr Parsons and Mr Kakaev), no actions appears to have been taken to transfer the title deeds of any of the properties to the new Trustees. It is thus to be presumed that their ownership remains where it was at the time of purchase.
This in itself is important as section 23C(1)(c) of the Conveyancing Act (NSW) states:
(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same or by the person's will, or by the person's agent thereunto lawfully authorised in writing.
There is no evidence to demonstrate that such steps were taken, and this in turn means that in regard to those properties, even were they to be genuinely the asset of a trust, that trust would not qualify as a trust in relation to those properties under the provisions of Part 3.18 of the Act.
The Tribunal is of the opinion that the PFT2 is not merely a revision or replacement of the original PFT. It is a separate Trust although bearing the same name. In reaching this conclusion the Tribunal relies, in part, on the fact that there is no evidence that a change of trustees was affected, as required by the Trustee Act 1925 (NSW), by the giving of a notice “in writing” whereby Mr Chen notified herself of a change of trustee and of her retirement as a trustee of the original PFT.
Mr Parsons and Mr Kokaev gave evidence before AAT1. The Tribunal summarised their evidence as follows:[49]
17. Mr Parsons told us that he became a trustee to help Miss Chen about 10 years ago. He said that he had no copy of the trust deed and took no part in the affairs of the trust. In fact, he appeared uncertain about the name of the trust over which he was a trustee, but believed it was the PFT. He was not sure of his responsibilities as trustee and only had a vague knowledge of the beneficiaries of the trust who he noted were mainly charities. He had no contact with the finances of the PFT. He has signed no income tax returns, did not know whether the PFT had a bank account until recently, though he has no access to it. He holds no financial records in relation to the trust. He did not know how the income from any assets held by the trust is managed, and has never made a decision to distribute any of the trust income, nor has he ever signed a tax return. All his information about the trust comes from Miss Chen and any activities he might engage in are solely at her request.
18. Mr Kokaev gave evidence to the same effect. He became a trustee to help Miss Chen. He has had no active involvement in the affairs of the trust and has not signed any income tax returns. He has no knowledge of, or participation in, the financial affairs of the trust. The closest active involvement he has had was doing some handyman jobs on several of the properties. All his information about the trust comes from Miss Chen and any activities he might engage in are solely at her request. It appears that neither Mr Parsons nor Mr Kokaev had any involvement in the 2017 purchase of the property at Broadway (number 1), Ultimo, NSW.
[49] Chen v Secretary, Department of Social Services [2018] AATA 5153.
The AAT1 decision goes on to record that
20. In response to this evidence, Miss Chen told us that the witnesses were lying. They had full knowledge of the PFT’s activities but were afraid that they might have some responsibility for the various debts involved.
After examining all the material before it and having the benefit of both their presence and direct sworn testimony from Mr Parsons and Mr Kokaev, who were not called before this Tribunal, the AAT1 concluded:
20. We conclude from this evidence that Mr Parsons and Mr Kokaev act solely on direction from Miss Chen who has all the control of the functioning of the PFT. In our opinion, she meets the control test. However, even if Miss Chen did not formally meet the control test for the PFT, she meets the source test because she dissolved the CFT and set up the new trust on her own terms. The assets of the PFT are attributable solely to her.
21. Whether Miss Chen is regarded as the sole owner of the properties or whether they belong to either trust or to both trusts in succession, the assets are attributable to her.
This is the same conclusion which had been reached by the ARO in July 2018. The ARO had been asked to review an earlier decision seeking repayment of debts on the basis that Ms Chen had
“said the real estate that had been assessed as your asset is in fact owned by a family trust, with several other people receiving benefits from the trust.”[50]
[50] Section 37 Tribunal Documents at [833].
The ARO, after careful examination of the facts concluded that “an assessment of the family trust has determined that you are the sole controller and beneficiary of the trust.”[51]
[51] Ibid at [835].
Furthermore the ARO found that:
“You have stated that these properties are owned by family trusts and hence are not your assets, however an investigation into this matter has shown that you have formal control of all decisions involving the trust and to have received rental income from the properties in your personal bank account. You have provided the funds to purchase the properties. As there are no tax returns provided for the Family trust there are no beneficiaries apparent for the trust and the properties apart from yourself.”[52]
[52] Idem.
The status of the Trust arrangements
Given the (late) evidence presented to the Tribunal, it must disagree with the Secretary’s contention that none of the Trusts “constitute relevant trusts for the purposes of Part 3.18” of the Act.[53]
[53] Respondent’s Statement of Facts, Issues and Contentions at [8.46].
However it does agree with the Secretary that, in relation to those Trusts, Ms Chen should be attributed with 100% of those assets held by the Trusts.[54]
[54] Ibid at [9.1].
The process by which this is established is exceptionally complex. The relevant sections of the Act are set out by way of Annexure to this determination rather than included in the text as this point.
In summary, for trust income or assets to be attributed to an individual:
·The Trust must be a designated private trust.
·The Trust must be a controlled private company as far as the individual is concerned.
·The individual must be an attributable stakeholder of the Trust.
The process of determination is as follows:
1.Section 1208E(1) provides a method for establishing the “attribution percentage of the value of the asset” which is held by the trust unless the Secretary determines, in accordance with the relevant Instrument,[55] that any of the assets are excluded from such calculations.
2.The Trust(s) must then be examined to establish their status as a “designated private trust” under s 1207P. Evidence before the Tribunal allows it to determine that the Trusts in question are designated private trusts because they are not excluded by the operation of any of the other parts of s 1207P.
3.Once the Trusts are established as designated private trusts, the next issue for determination is whether or not they are “controlled private trust(s)” with specific reference to Ms Chen. Such a determination is made in accordance with s 1207V of the Act which establishes that an individual (Ms Chen) passes the control test if they satisfy any of the definitions set out in subsections (a) to (h) of s 1207V(2).
4.It is clear that in relation to the various Trusts, Ms Chen was herself a trustee; she had (at various times) the ability to appoint or remove trustees; she was eligible to (and did) receive income from the trusts; and from time to time she operated with Mr Parsons and Mr Kokaev as “associates” (defined in s. 1207C) in a “group” (defined in s 1207V(4)) responsible for managing the affairs of the Trust.[56]
5.Thus, Ms Chen satisfies the control test under most of the definition in subsections (a) to (h) of s 1207V(2) with particular reference to subsections (a), (d)(i) and (da)(i).
6.Following that determination section 1207X(2) of the Act deems Ms Chen to be an “attributable stakeholder” at the rate of 100% unless the Secretary (or the Tribunal on appeal) determines a lower percentage.
[55] In this instance the Social Security (Attribution of Assets) Principles 2001.
[56] See evidence of Parsons and Kokaev to AAT 1 Hearing at paragraphs [17] and [18]. Section 37 Tribunal Documents at [13].
The basis upon which a lower percentage may be attributed are set out in the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017.
Section 1209E of the Act provides that the Secretary may formulate principles to be complied with by him or her when making decisions under a number of sections of the Social Security Act, including section 1207X. In the Respondent’s submission to the Tribunal reference is made to the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2000.[57] However, these ceased to have effect on 1 April 2017 due to the sunsetting provisions of the Legislation Act 2003. They were replaced by the Social Security (Attributable Stakeholders and Attribution Percentages) Principles 2017 as of 1 April 2017. The relevant section of those Principles, at this stage, is section 15:
15 Application
(1) This Part applies if, but for a determination by the Secretary, the asset attribution percentage of the attributable stakeholder, in relation to the company or trust, would be 100%.
(2) The Secretary must consider the relationship between the individual and the company or trust, having regard to the circumstances mentioned in this Part.
(3) In particular, the Secretary must consider whether the effect of one or more of the circumstances mentioned in this Part, in relation to the individual and the company or trust, provides a sufficient basis on which to determine a percentage lower than 100% as the asset attribution percentage.
[57] Ibid at [3.1 (c)).
It has been established, to the Tribunal’s satisfaction, that Ms Chen was at all relevant times the effective owner of the properties which appear to held either in her name(s) of via any of the Trusts of which she was, in effect, the sole controller. She was in a positon to wind up the trusts at any time and to distribute the funds to herself had she elected to do so.[58] She derived income from the properties and was in a position to buy and sell them at her sole discretion. There are no proven liabilities against which her assets should be discounted or offset.
[58] Ibid variously at [706-714]; [902-911].
Is there a debt?
The establishment and recovery of debts where over-payments or incorrect payments are made is provided for in s. 1223 of the Act, the relevant sections of which are:
(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.
(1AB) Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:
………..
(b) the person for whose benefit the payment was intended to be made was not qualified to receive the payment;
(c) the payment was not payable;
(d) the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation;
…………….
The Secretary contends that Ms Chen is caught by the general provisions of s. 1223(1) and specifically by the provisions of s 1223 (1AB)(d).[59]
[59] Respondent’s Statement of Facts, Issues and Contentions at [10.2] and [10.3].
The Tribunal agrees with that contention on the basis that Ms Chen owes a debt to the Commonwealth, because she was not entitled to payment due to her assets and income. In that respect it finds the debt more soundly grounded in s 1223(1AB)(b). It accepts that there was a breach of s 1223(1AB)(d), to the extent that there was a contravention of the social security law in terms of a failure to report assets and income however it believes (see below) that any false statements or misrepresentations by Ms Chen were as a result of her “state of mind” rather than attempted or calculated deception.
Was the debt assessed correctly?
The AAT1 undertook a comprehensive analysis of the assets limits for both Newstart Allowance and the DSP during the relevant periods and combined this with the data relied upon by the ARO in making the initial determination. The Tribunal has reviewed these calculations and can find nothing which would suggest that they are, in any material respect, inaccurate. The minor recalculation made by the AAT1 to the ARO’s valuation of one of the properties shows the degree of scrutiny it applied to this task.[60]
[60] Both sets of calculations are attached as Annexures.
The Tribunal accepts that Ms Chen calls into question some of the property values and asserts that they are encumbered by mortgages or other debts to entities in Taiwan. There is no reliable documentary evidence to support these suggestions.
The Tribunal is satisfied that the correct calculations of the extent of over-payment have been made.
Must the debt be repaid?
It is necessary for the Tribunal, having concluded that Ms Chen has a debt to the Commonwealth to examine the proposition that this debt should be written off or waived under the relevant provisions of the Act.
Write off: Practical reasons
Section 1236 of the Act provides that debts may be written off, primarily where it appears that such a debt is, in effect, irrecoverable for one reason or another.
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.
The Tribunal believes, as a matter of practice, recovery of any debt would be exceptionally difficult. It would be likely to involve the forced sale of some property to discharge the debt and would, almost certainly involve further complex and costly legal procedures. However there is no probative evidence before the Tribunal to suggest that recovery is completely impossible and there is no reason for the Tribunal to recommend to the Secretary that the powers available under s 1236 should not be enlivened.
Waiver: Administrative error
Section 1237A of the Social Security Act deals with debts being waived where the sole reason that they arose was administrative error on the part of the Department.
1237A Waiver of debt arising from error
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.
(1A) Subsection (1) only applies if:
(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or
(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later.
There are several elements to this section:
·there must be error on the part of the Department
·that error must be the sole cause of the debt arising
·the debtor must have received the payment in good faith.
The Tribunal is concerned about the events of March to May 2010 when the Department undertook a data-matching exercise to determine whether or not Ms Chen was in receipt of the correct payment and, having undertaken that exercise, determined that she was.
The properties which formed the basis of the subsequent calculation of assets leading to the cancellation of Ms Chen’s DSP had all been purchased at that time with the exception of the second Broadway property. They were all registered and presumably the Department had access to that information. The Department obviously had Ms Chen’s TFN[61] and access to all/any records of hers with the Australian Taxation Office through which they could have made various further data-matches.
[61] They wrote thanking her for her co-operation with their request for its provision, see paragraph 19 (above).
It seems to the Tribunal that, if the Department had access to that information and failed to act upon it, then there was administrative error on its part. If, on the other hand, it did not have that information, given that it was available to it, then again, there was administrative error.
The Tribunal believes that there was an administrative error in the calculation of Ms Chen’s pension entitlements in 2010 and that this error persisted until the cancellation decision in 2018.
That then leads to a consideration of whether or not any such error was the sole cause of the overpayment. Any such error has to be the single factor at play.[62] If the error is contributed to by any other participant, including the debtor, then the section is not enlivened.
[62] Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190 at [35]
In Ward and Secretary, Department of Family and Community Services[63] the Tribunal held:
“This means that the Secretary's duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth's administrative error. It makes no difference that those other errors or factors are minor. If those other errors or factors follow as a result of the Commonwealth's administrative error (i.e. they are incidental to the Commonwealth's error), then it may be that the debt is attributable solely to the Commonwealth's administrative error.”
[63] Ward and Secretary, Department of Family and Community Services [2000] AATA 212 at [47]. See also Gerhardt v Secretary, DEET [1997] FCA 815.
The question thus becomes, did Ms Chen contribute to the error?
The Secretary would contend that the answer is in the affirmative because Ms Chen failed, on repeated occasions to report to the Department her change(s) in financial circumstances. There is no disputing that Ms Chen was notified on numerous occasions, as part of the standard correspondence between pension recipients and the Department that they have this obligation.[64]
[64] See Social Security (Administration) Act 1999 s 68(2).
Ms Chen would assert that she was in fact not obliged to make any such reports. She bases her argument on the wording which appears on her Pensioner Concession Card (PCC). That states:
“About your card: Your Pensioner Concession Card for non-pensioners is not income tested, so you do not need to tell us about changes to your income or financial circumstances for this card. This card is automatically issued to you when you are eligible and is valid for 2 years.”
The key words here are “for this card”. This statement on the PCC is limited in application to matters and concessions which derive from the holding of the card itself.
However, the Tribunal can well understand that this is not necessarily entirely clear to all PCC card-holders who may well take Ms Chen’s view that this statement provides them with some form of blanket exemption from reporting changes in all or any of their income or financial circumstances.
It is perhaps a matter worthy of further consideration by the Department to avoid any possibility of confusion.
Clearly Ms Chen had an obligation to report changes in her financial and income positon and failed to do so. She thus contributed to the error which occurred.
Although not in exactly the same words, the concept of the “good faith” of the debtor in receiving the payment will be addressed when dealing with the “knowingly” element in s 1237AAD discussed below.
Special circumstances
Section 1237AAD of the Act provides the circumstances in which the Tribunal may waive the right to recover all or part of a debt:
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
(a) 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.
As with s 1237A there a number of elements to this provision:
·was the overpayment the result of a person knowingly making a false statement or knowingly failing to meet their obligations under the Act;
·are there such “special circumstances” (other than solely financial hardship) which justify a waiver, and
·is a waiver more appropriate than a complete or partial write off?
As with other terms such as “public interest”, “good character”, “fit and proper person”, it is unfortunate that there is no definition in the relevant legislation of the precise meaning of “special circumstances”. Once again the Tribunal must rely upon judicial guidance in the matter and once again there is ample authority.
Judicial authority recognises that the term is “by its very nature incapable of precise or exhaustive definition”[65] but that it requires something to distinguish it from other cases in a way “to take it out of the usual or ordinary case”.[66]
[65] Beadle and Director-General of Social Security [1984] AATA 176 at [12].
[66] Groth and Secretary Department of Social Services [1995] FCA 1708 at [12].
Furthermore, the recovery of debt must be regarded as the “dominant principle”[67] upon which public authorities must act while still requiring “a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system.”[68]
[67] Ivovic and Director General of Social Services [1981] AATA 57 at [45].
[68] Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114 at [80].
That having been said, each case is different, and “each particular case must be considered in its merits.”[69] This may be to such an extent that “the particular facts of a case might make them – or the amount of them – a special circumstance.”[70]
[69] Riddell v Secretary, Department of Social Security [1993] 114 ALR 340 at [347].
[70] Secretary, Department of Social Security v Hulls and Others [1991] 22 ALD 570 at [580].
The Secretary in her Submission and her representative at the hearing invited the Tribunal to make a positive finding to the effect that Ms Chen “knowingly” sought to mislead the Department as to her circumstances. The Secretary framed her submission[71] as follows:
[71] Respondent’s Statement of Facts, Issues and Contentions.
11.15In Callaghan and Secretary, Department of Social Security [1996] AATA 413 the Tribunal held that “knowingly” in this context means:
… actual knowledge, rather than constructive knowledge... to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time to events surrounding the false statement or the act or omission.
11.16The Secretary contends that in view of Ms Chen’s extensive non-compliance with her obligation to inform the Department from time to time of her true financial circumstances, she “knowingly omitted” to comply with that obligation within the meaning of section 1237AAD(a)(ii) of the Social Security Act.
11.17There was no need for Ms Chen to make a positive misrepresentation. Her debts arose as a result of her omissions to report her true financial circumstances over four and a half years in accordance with her statutory obligation to report those circumstances.
11.18Section 68(2) of the Administration Act allows the Department to give a person who receives a social security payment a notice that requires them to provide the Department with information about a matter that might affect their payment. Ms Chen did not report her true financial state of affairs during the relevant period.
11.19In Secretary, Department of Family and Community Services and Jonauskas 2001] AATA 72 the Tribunal observed that that the onus to meet obligations defined in the Department’s correspondence is on the recipient of the correspondence.
11.20In Love and Secretary, Department of Social Services [2016] AATA 8 at [57], Deputy President McDermott observed that there is a distinction between naivety about a person’s obligation to disclose and knowingly failing to do so. In Ms Chen’s case, her failure to report was not due to naivety or a mental health condition. She was a sophisticated manager of an extensive property portfolio, she studied full-time at TAFE NSW, she established and manages her own superannuation fund, and she has managed 53 bank accounts including three overseas accounts.
The Tribunal however does not believe that the Secretary acknowledges sufficiently the nature and extent of Ms Chen’s mental health problems nor her disconnection with reality in many instances. In passing, the Secretary dismisses the extent of her incapacities by stating merely, “there is some evidence of her mental health condition.”[72]
[72] Respondent’s Statement of Facts, Issues and Contentions at [11.30].
There is more than just “some” evidence. In the Tribunal documents there are a number of medical reports, details of a proposed mental health plan and references to Mr Chen being scheduled under NSW mental health legislation.[73]
[73] Section 37 Tribunal Documents at [481], [792], [925], [1110], [825], [1113].
Indeed, it may well be that as stated in another case before the Tribunal in relation to this specific issue:
“The health of Ms Severino is undoubtedly the most significant fact to consider.”[74]
[74] Re Concetta Severino and Secretary, Department of Family and Community Services [2005] AATA 745 at [31].
The state of an applicant’s mental health in relation to this very issue has been considered on a number of occasions by this Tribunal.
In Perkich the Tribunal took note of the inter-relationship between changes in social security payments and the applicant’s mental health where changes took place or were proposed “at a time when his physical and mental health and his social circumstances have been precarious.”[75]
[75] Re Perkich and Secretary, Department of Social Security (1997) 49 ALD 137 at [62].
In Balancio the Tribunal took note of the fact that:
“… Ms Balancio had been diagnosed with major depressive disorder, which would in the tribunal’s view have affected her capacity to fully understand the obligations required of her.”[76]
[76] Re Balancio and Secretary, Department of Family and Community Services (2003) 74 ALD 204 at [33].
In Woodward[77] the Tribunal found that the applicant who was suffering from emotional and psychological trauma at the time of overpayments of social security benefits had been impaired to the extent she was unable to manager her affairs. The Tribunal accepted that during the period the applicant was distraught and disorganised, severely depressed and in a state of considerable distress.
[77] Woodward and Department of Family and Community Services [2001] AATA 818.
In Temesgen[78] the Tribunal found “special circumstances” to apply because of the “respondent’s prevailing state of mental and emotional distress at the time the debt was incurred” thereby reducing the respondent’s ability to understand his obligations and responsibilities under the Act.
[78] Secretary, Department of Family and Community Services and Temesgen [2002] AATA 1290 at [24].
In Hill [79] The Tribunal noted that, at the relevant time, the applicant was being treated for “severe depression”. The Tribunal accepted the medical opinion evidence that the applicant was “capable of rational decision making although his cognitive functioning is impaired by his medication and his depression and that [the applicant] has trouble thinking rationally” and “exhibits confusion and difficulty with decision-making”. In its conclusion that “special circumstances” applied, the Tribunal accepted that the applicant was “not capable of great feats of rational thought and has impaired cognitive functions”.
[79] Hill and Secretary, Department of Family and Community Services [1999] AATA 909 at [11] and [23].
In Winters[80] the Tribunal concluded that there were “special circumstances” operating in the life of the applicant at the time overpayments of social security were made. The Tribunal concluded that the impacts of her psychiatric state (depression, schizophrenia) on her actions to act impulsively, panic and depression, were “special”.
[80] Secretary, Department of Social Security and Winters [1997] AATA 12518.
There was lengthy consideration of these issues by the Tribunal in Dean v Department of Education, Science and Training[81] in which it stated:
[55] The Tribunal has made a finding, based on the expert medical opinion evidence, that Mr Dean’s ability to make rational decisions around the time he completed his ABSTUDY Claim Form (April 2000) had been impaired. Accordingly, the Tribunal concludes that Mr Dean’s statement of knowledge at the time he completed the ABSTUDY Claim Form in April 2000 — as well as the events surrounding the statement, or the act or omission, do not represent a situation whereby he “knowingly” made a false statement, or act and omission.
[56] The application of Callaghan’s case requires Mr Dean to have “actual knowledge” that he was making a false statement. However, because of his medical condition and its impact upon him in making rational decisions in April 2000, the Tribunal concludes that Mr Dean could only have had “constructive knowledge” rather than “actual knowledge”, that he was making a false statement or representation or that he was failing or omitting to comply with a provision of the Act.
[57] The Tribunal considers that there are facts within Mr Dean’s circumstances that warrant the description of “special circumstances”:
(a) based on the expert medical opinion of Dr Nyst, a genuine viral medical condition suffered by Mr Dean impaired his ability to make rational decisions at the time he completed his ABSTUDY Claim Form in April 2000. Further factual support of the impact of this medical condition is evident in the general confusion and whole series of mistakes made by Mr Dean in completing his Claim Form [see paragraph 49(c)];
[81] Dean v Department of Education, Science and Training [2005] AATA 586.
After giving due consideration to these authorities and on the basis of the evidence presented at the hearing, together with close observation of Ms Chen and her behaviour, the Tribunal declines to make the finding urged upon it by the Secretary.
It does not believe that Ms Chen sought, deliberately, to mislead or deceive or that she “knowingly” made false or misleading representations. The Tribunal recognises that it was her “state of mind”[82] in relation to receipt of her pension payments and the obligations attached to them that caused her behaviour (non-reporting) and that her state of mind (not some external, objective test) is what should be taken into account.
[82] Neuendorf and Secretary, Department of Social Services [1998] AATA 868 at [31].
The question then becomes one of determining whether “special circumstances” exist as a result of Ms Chen’s mental health condition(s).
The Tribunal must consider what French J (as he then was) said in Secretary, Department of Social Security v Hales to the effect that
[t]he concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special...
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words…But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.[83]
[83] Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at [155D].
This does not deny that in determining whether “special circumstances” exist the Tribunal has “a broad discretion to respond to a wide variety of circumstances”[84] nor to recognise that it “was not the intention of Parliament to confine the exercise of the discretion to an exceptional case.”[85] Indeed the court has warned the Tribunal that if it were to adopt too narrow a definition that “To do so is impermissibly to fetter a broadly expressed discretion”.[86]
[84] Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162 at [82]
[85] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 at [33].
[86] Oberhardt v Secretary, Department of Education, Employment and Workplace Relations [2008] FCA 1923 at [59].
On the other hand, in Davy and Secretary Department of Employment and Workplace Relations Deputy President Forgie stated
...”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.[87]
[87] Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114 at [80].
An important distinction between what is “special” and what is of more general, although not universal application, was set out in Fischer by Katzmann J:
But it is the circumstances that must be special, not the individual’s experience of them. Circumstances might be special though they apply to more than one person or to a class of persons, provided they are not of universal application. The section does not require the circumstances to be unique to the individual. What if the pensioner failed to declare the value of her investments because the necessary paperwork was destroyed and she was dispossessed of her home as a result of the Victorian bushfires. Thousands of people suffered similar fates. Her situation would not be unique, but it could be “special”. Although all shareholders suffered in the global financial crisis, some suffered more than others. Not all who suffered were pensioners and fewer still were in receipt of a disability support pension. If, as a result of the collapse of global markets, a pensioner’s shares were so reduced in value that once the margin loan was brought into account they were worthless to her, surely that circumstance could be considered “special” within the meaning of the section.[88]
[88] Fischer v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA at [80].
Ms Chen is in receipt of the DSP because she suffers from problems with her mental health which have caused her a degree of impairment.
In Bunge, the Tribunal stated:
“Hence in the matter currently before the Tribunal we find there are no ‘special circumstances’ in the relevant sense. What is ‘special’ about the circumstances of Mr Bunge is that he is suffering from and will suffer permanently from a disability. That is the circumstance which makes him eligible for an Invalid Pension. It is not a circumstance so ‘special’ as to confer on him entitlements greater than others similarly qualified by such disabilities.”[89]
[89] Bunge v Secretary, Department of Social Security [1990] AATA 486 at [25].
Despite any sympathies which the Tribunal might have for any person who suffers from significant mental illness or who finds themselves in a position of serous debt due to their inability to manage their own affairs properly, the Tribunal cannot find, as a matter of law that Ms Chen' circumstances are sufficient to establish that there are such “special circumstances” as would justify the waiver of her debt to the Commonwealth.
Considerations
The Tribunal however reiterates its serious concern about the determination made by the Respondent on 18 May 2010 in advising Ms Chen that as a result of this data-matching exercise: “This review has now been completed and all details about your Disability Support Pension are correct.”
Ms Chen’s debt for the PES is calculated from 17 January 2017 and so would not be affected by this advice from the Department.
However the Newstart debt of some $66,020 runs from 11 October 1999 to 18 August 2006 and thus entirely predates the advice from the Department.
The DSP debt commences on 19 August 2006 and runs until the cancellation date to 2 March 2018. It was then extended beyond that date by order of this Tribunal in December 2018. That would potentially incur further debt to the Commonwealth from that date through no fault of the Applicant’s. Backdating to August 2006, the period between then and May 2010 is then some 46 month, or approximately one-third of the total period for which over-payment is being reclaimed. Given that the total amount in question is some $256,924 that one-third would amount to something in the order of $85,641. An exact figure cannot be calculated by the Tribunal without detailed reference to all the changes in the DSP rate over a period of 12 years.
However the total sum in question, that is payments made prior to May 2010, at which time the Department advised that “all details about your Disability Support Pension are correct” would possibly be in the order of some $150,000 (depending on the lower rate of DSP payments at various times).
Customers of Centrelink are entitled to rely upon assurances provided by that organisation to the effect that their rate of payment, following a review and data-matching exercise is correct and to thereafter conduct and organise their affairs accordingly. They are also entitled to assume that the exercise in question has been thorough and that all material facts were taken into consideration.
This of course does not relieve any customer of the need for continuing compliance with legal requirements such as reporting of changed financial circumstances. It does however establish something of a base from which to look forward.
The Tribunal has no doubt that, as from 18 May 2010 the Applicant owed a debt to the Commonwealth in accordance with the analysis above and that the calculations related to that period were, in all material details, correct.
DECISION
Pursuant to section 43(1)(c)(ii) of the Administrative Appeals Tribunal Act 1975 the decision under review is set aside and remitted to the Secretary with the direction that the matter of the raising of any debts against the Applicant prior to 18 May 2010 be reconsidered in line with the reasons of the Tribunal.
While acknowledging the potential impact of giving effect to the paragraph above, the Tribunal draws to the attention of the Secretary to the concluding paragraph of the decision by the AAT1 which it endorses strongly, namely, “We are, however, concerned about how the recovery process might affect Miss Chen’s mental health. While we do not suggest that it should not occur, we point out the need for some care in the process.”[90]
[90] Chen v Secretary, Chief Executive Centrelink [29 August 2018] AAT 2018/S123944, paragraph [36].
I certify that the preceding 140 (one hundred and forty) paragraphs are a true copy of the reasons for the decision herein of Chris Puplick AM, Senior Member
..........................[sgd]..............................................
Associate
Dated: 27 March 2019
Date(s) of hearing: 7 and 8 March 2019 Applicant: In person Solicitors for the Respondent: Dr S Thompson, Department of Human Services ANNEXURE 1
EXTRACTS FROM SOCIAL SECURITY ACT 1991
1208E Attribution of assets
(1) For the purposes of this Act, if:
(a) an individual is an attributable stakeholder of a company or trust at a particular time on or after 1 January 2002; and
(b) at that time, the company or trust owns a particular asset (whether alone or jointly or in common with another entity or entities); and
(c) if, at that time, that asset had been owned by the individual instead of by the company or trust, the value of the asset would not be required to be disregarded by any express provision of this Act; and
(d) at that time, the asset is not an excluded asset (see subsection (2));
there is to be included in the value of the individual‘s assets an amount equal to the individual‘s asset attribution percentage of the value of the asset referred to in paragraph (b).
Excluded assets
(2) The Secretary may, by writing, determine that, for the purposes of the application of subsection (1) to a specified individual and a particular company or trust, a specified asset is an excluded asset .
(3) A determination under subsection (2) has effect accordingly.
(4) In making a determination under subsection (2), the Secretary must comply with any relevant decision-making principles.
1207P Designated private trusts
(1) For the purposes of this Part, a trust is a designated private trust unless:
(a) all of the following conditions are satisfied:
(i) the trust is a fixed trust;
(ii) the units in the trust are held by 50 or more persons;
(iii) the trust was not created, continued in existence or operated under a scheme that was entered into or carried out for the sole or dominant purpose of enabling any individual or individuals to avoid the application of this Part and/or Division 11A of Part IIIB of the Veterans’ Entitlements Act; or
(b) the trust is a complying superannuation fund (see subsection (3)); or
(c) the trust is an excluded trust (see subsection (4)).
1207V Controlled private trusts
(1) For the purposes of this Part, a trust is a controlled private trust in relation to an individual if the trust is a designated private trust and:
(a) the individual passes the control test set out in subsection (2); or
…
(2) For the purposes of this section, the individual passes the control test in relation to a trust if:
(a) the individual, or an associate of the individual (other than an associate covered by paragraph 1207C(1)(j)), is the trustee, or any of the trustees, of the trust; or
(b) a group in relation to the individual was able to remove or appoint the trustee, or any of the trustees, of the trust; or
(c) a group in relation to the individual was able to vary the trust deed or to veto the decisions of the trustee; or
(ca) it could reasonably be expected that the trustee of the trust would make an application of the corpus or income of the trust to the individual if the individual could not meet his or her reasonable costs of living (within the meaning of subsection 19C(5)); or
(d) the aggregate of:
(i) the beneficial interests in the corpus or income of the trust held by the individual (whether directly or indirectly); and
(ii) the beneficial interests in the corpus or income of the trust held by associates of the individual (whether directly or indirectly);
is 50% or more; or
(da) either or both of the following apply:
(i) the individual is eligible to receive an application of the corpus or income of the trust;
(ii) one or more of the individual’s associates are eligible to receive an application of the corpus or income of the trust;
and the aggregate number of entities covered by subparagraphs (i) and (ii) is 50% or more of the total number of entities eligible to receive an application of the corpus or income of the trust; or
(e) a group in relation to the individual had the power (by means of the exercise by the group of any power of appointment or revocation or otherwise) to obtain, with or without the consent of any other entity, the beneficial enjoyment of the corpus or income of the trust; or
(f) a group in relation to the individual was able in any manner whatsoever, whether directly or indirectly, to control the application of the corpus or income of the trust; or
(g) a group in relation to the individual was capable under a scheme of gaining the enjoyment or the control referred to in paragraph (e) or (f); or
(h) a trustee of the trust was accustomed or under an obligation (whether formally or informally) or might reasonably be expected to act in accordance with the directions, instructions or wishes of a group in relation to the individual.
…
Group
(4) A reference in this section to a group in relation to an individual is a reference to:
(a) the individual acting alone; or
(b) an associate of the individual acting alone; or
(c) the individual and one or more associates of the individual acting together; or
1207C Associates
(1) For the purposes of this Part, in determining:
…
(c) whether a trust is a controlled private trust in relation to an individual; or
…
the following are associates of an individual:
…
(f) an entity who, in matters relating to the trust or company:
(i) acts, or is accustomed to act; or
(ii) under a contract or an arrangement or understanding (whether formal or informal), is intended or expected to act;
in accordance with the directions, instructions or wishes of:
(iii) the individual; or
1207X Attributable stakeholder, asset attribution percentage and income attribution percentage
…
(1) For the purposes of this Part, if:
(a) a trust is a controlled private trust in relation to an individual; and
(b) the trust is not a concessional primary production trust in relation to the individual (see section 1208U);
then:
(c) the individual is an attributable stakeholder of the trust unless the Secretary otherwise determines; and
(d) if the individual is an attributable stakeholder of the trust—the individual’s asset attribution percentage in relation to the trust is:
(i) 100%; or
(ii) if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage; and
(e) if the individual is an attributable stakeholder of the trust—the individual’s income attribution percentage in relation to the trust is:
(i) 100%; or
(ii) if the Secretary determines a lower percentage in relation to the individual and the trust—that lower percentage.
ANNEXURE 2
CALCULATIONS MADE BY ARO IN RELATION TO PROPERTY VALUES/ASSET
ANNEXURE 3
AAT1 CALCULATIONS OF ASSETS LIMITS FOR NEWSTART ALLOWANCE AND DISABILITY SUPPORT PENSION
The asset limits for Newstart allowance in the relevant periods were:
DATE Single homeowner Single non-homeowner
1/7/1999 $127,750 $219,250 1/7/2000 $133,250 $228,750 1/7/2001 $141,000 $242,000 1/7/2002 $145,250 $249,750 1/7/2003 $149,500 $257,500 1/7/2004 $153,000 $263,500 1/7/2005 $157,000 $270,500 1/7/2006 $161,500 $278,500
The asset limits for Disability Support Pension in the relevant periods were:
DATE Single homeowner Single non-homeowner 1/7/2006
$161,500 – $330,000
$278,500 – $447,000
1/7/2007 $166,750 – $343,750 $287,750 – $464,750 20/9/2007 $166,750 – $529,250 $287,750 – $650,250 1/7/2008 $171,750 – $540,250 $296,250 – $664,750 1/7/2009 $178,000 – $562,000 $307,000 – $691,000 20/9/2009 $178,000 – $626,000 $307,000 – $755,000 1/7/2010 $181,750 – $649,250 $313,250 – $780,750 1/7/2011 $186,750 – $673,000 $321,750 – $808,000 1/7/2012 $192,500 – $707,750 $332,000 – $847,250 1/7/2013 $196,750 – $735,750 $339,250 – $878,250 1/7/2014 $202,000 – $764,000 $348,500 – $910,500 1/7/2015 $205,500 – $779,000 $354,500 – $928,000 1/7/2016 $209,000 – $791,750 $360,500 – $943,250 1/1/2017 $250,000 – $542,500 $450,000 – $742,500 1/7/2017 $253,750 – $550,000 $456,750 – $753,000
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