Cherry and Secretary, Department of Families, Housing, Community Services and Anor
[2010] AATA 454
•18 June 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 454
ADMINISTRATIVE APPEALS TRIBUNAL )
)No: 2009/3683
2009/3684
General Administrative Division )
Re: PETER CHERRY
Applicant
And: HELEN CHERRY
Applicant
And: SECRETARY, DEPT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
And: SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
TRIBUNAL: Senior Member Bernard J McCabe
DATE: 18 June 2010
PLACE: Brisbane
DECISION: The Tribunal affirms the decision under review.
...........[Sgd].....................................................
Senior Member
CATCHWORDS
SOCIAL SECURITY – overpayments and debt recovery – newstart allowance – age pension – whether special circumstances justify waiver of debt – designated private company – designated private trust – value of unpaid loans – disposal provisions – decision affirmed.
Bankruptcy Act 1966 (Cth), Part X
Social Security Act 1991 (Cth), ss 1122, 1123, 1237AAD
REASONS FOR DECISION
| 18 June 2010 | Senior Member Bernard J McCabe |
The Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs and the Secretary of the Department of Education, Employment and Workplace Relations (“the respondents”) decided to raise and recover debts in the amount of $68,777.89 against Mr and Mrs Cherry, the applicants in these proceedings. The respondents say Mr and Mrs Cherry received newstart allowance and age pension and related payments they were not entitled to receive. The respondents realised the applicants were being overpaid when Centrelink examined the treatment of loans made by the applicants to companies they controlled.
The application before the Tribunal commenced on the understanding that the parties accepted the only live issue was whether the social security debts should be waived pursuant to s 1237AAD of the Social Security Act 1991 (“the Act”). That question turns on whether there are any special circumstances within the meaning of the legislation that would justify a waiver of the debt. However, I gained the uncomfortable impression at the hearing – which was confirmed in written submissions provided subsequently – that the applicants remain dissatisfied with the substantive decision to raise the debts. The respondents’ representative did not engage with this issue because I was told the only question before me was that of special circumstances.
As it happens, I am satisfied the applicants cannot succeed on the substantive issue. I am also satisfied there are no special circumstances within the meaning of the legislation. I will explain my reasons below.
Should the debt have been raised against the applicants?
The applicants were small business people. Mr Cherry, a former policeman, had operated a security business and a poultry farm, amongst other ventures. He and his wife came to the Gold Coast nearly a decade ago. They decided to get into the restaurant business. It was intended to be a retirement venture conducted through a company, Digga Pty Ltd, although Coral Golf Pty Ltd as trustee for the Cherry Family Trust No 2 was also involved. It all ended badly. The assets of the business were sold by the bank and Digga Pty Ltd was forced to enter into a Deed of Arrangement. The applicants lost their home and an investment property. They both entered into arrangements under Part X of the Bankruptcy Act 1966 (Cth). The applicants say they have effectively lost the loans which they made to the company and the trust in respect of the business. These loans are the source of the problem now.
The Social Security Appeals Tribunal (“the SSAT”) found – and I have no reason to doubt – that Digga Pty Ltd and Coral Golf Pty Ltd are designated private companies under the Act. There is also no reason to doubt the Cherry Family Trust No 2 is a designated private trust. The applicants are in control of the two companies. It follows the assets of the companies and the trusts are attributed to the applicants, and must be included in their assets for the purposes of assessing their entitlement to receive many social security payments.
Section 1122 of the Act says the value of any loans that remain unpaid should be included as an asset. The applicants between them made a number of loans to the business. Those loans have never been repaid although the companies and the trust still exist. The applicants say the loans are practically unrecoverable but they have stayed on the books for tax purposes. In an attempt to deal with the issue, the applicants sought to assign the debts owed to them by Digga Pty Ltd and the trust to other family members. The SSAT concluded there was no consideration for these transfers and agreed that the disposal provisions in s 1123 applied. The effect of the disposal provisions is to continue counting the value of the asset as if it had not been transferred for a period of 5 years following the transfer. The transfer occurred on 27 June 2008. I have no reason to dispute this finding, and I accept it.
The applicants say the loans are effectively valueless. They say it makes no sense to treat them as if they are still an asset. But the loans continue to exist, and so do the debtors. The debtors were apparently kept alive and the loans kept on the books so that a taxation advantage might be obtained from the financial wreckage. That is understandable, but it also means the debts remain unpaid. The applicants have not drawn a line under their business as far as the social security law is concerned. The respondents were right to include the amount of the loans in the calculation of the applicants’ assets.
Should the debt be waived?
The decision-maker can waive all or part of a debt pursuant to s 1237AAD where it is satisfied that special circumstances exist and the other requirements of the legislation are met.
I do not understand there to be any allegation of fraud or dishonesty that would limit the discretion to waive a debt. I accept that is so.
Much has been written about the meaning of the expression “special circumstances” in s 1237AAD. The “special circumstances” requirement is usually taken to mean that there must be something unusual, uncommon or exceptional about the applicants’ position relative to other people who receive social security. It is not enough that the applicants experience financial hardship. That is true of most applicants. There must be something about their case that sets them apart from the usual run of cases before the discretion can be exercised.
I accept the applicants are in serious financial difficulty. Mr Cherry is experiencing some health problems: he has a heart condition that is exacerbated by stress. He says the heart condition makes it harder for him to get a job, although I note he is 66 years of age. He agreed he was otherwise in reasonable health. I was not provided with any other evidence of health problems affecting the couple. I was told the applicants have also provided some assistance caring for their granddaughter following the separation of her parents. They are not financially responsible for the child.
I am unable to identify any other evidence that suggests the applicants experience special circumstances within the meaning of that expression in s 1237AAD. They are experiencing hardship, to be sure, but that is not the test.
Conclusion
The decision under review is affirmed.
I certify that the 13 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.
Signed: ..........................[Sgd].................................................
Patrick MacDonald, Associate
Date of Hearing 7 December 2009
Date of Decision 18 June 2010
Applicants Self-represented
Solicitor for the Respondents Mr B Hamilton
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