Colalillo and Secretary, Department of Education, Employment and Workplace Relations
[2010] AATA 838
•28 October 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 838
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/2855
GENERAL ADMINISTRATIVE DIVISION ) Re Carmine Colalillo Applicant
And
Secretary, Department of Education, Employment and Workplace Relations
Respondent
DECISION
Tribunal Senior Member A K Britton Date28 October 2010
PlaceSydney
Decision The decision under review is affirmed.
....................[SGD]..................
Senior Member
CATCHWORDS
SOCIAL SECURITY - Newstart allowance - overpayment – debt recovery
Social Security Act 1991 (Cth) – ss 68, 100, 1223, 1236, 1237AAD
REASONS FOR DECISION
28 October 2010 Senior Member A K Britton 1. Mr Carmine Colalillo seeks review of a decision made by the Social Security Appeals Tribunal that he has a debt to the Commonwealth in the sum of $15,552.37, of which half should be waived on account of “special circumstances”. The debt arose as a result of the alleged overpayment of Newstart Allowance during a period Mr Colalillo was also receiving weekly compensation payments under the Workers Compensation Act 1987 (NSW). Mr Colalillo asserts that the debt is attributable to Centrelink error and must therefore be waived. He claims that he fully disclosed the payments to Centrelink. In the alternative, he contends that all of the debt should be waived because of “special circumstances” and/or because he has no capacity to repay the debt.
2. In a letter dated 16 February 2010, Centrelink notified Mr Colalillo that he had been overpaid Newstart allowance throughout the period 5 December 2008 to 19 January 2010 as he had also been receiving compensation payments throughout that period. In addition, Centrelink informed Mr Colalillo that as a consequence of that overpayment, a debt of $15,552.37 had been raised which it was required to recover.
3. In reviewing the decision made by the SSAT, the issues to be determined include:
(i) Whether the debt raised against Mr Colalillo was properly raised and correctly calculated;
(ii) If so, when did the period of the debt commence?
4. If I am satisfied that a debt has arisen for which Mr Colalillo is liable, it will be necessary to decide whether it must or should be waived or written-off because of:
(i)Administrative error on the part of Centrelink (s 1237A of the Social Security Act 1991 (Cth) (“the Act”)); and/or
(ii) Special circumstances (s 1237AAD of the Act).
(iii) Incapacity to pay (s 1236(1) of the Act).
Was the debt properly raised and calculated?
5. Mr Colalillo commenced receiving Newstart allowance in February 2007. Throughout the period 5 December 2008 to 19 January 2010, he received Newstart allowance and, in addition, periodical workers compensation payments.
6. Section 1173(1) of the Act provides that if a person is in receipt of a "compensation-affected payment" — which includes the Newstart allowance — and, at the time also received a “periodical compensation payment”, the daily rate of Newstart allowance payable is reduced by the amount of the person’s daily “periodical compensation payment”. The workers compensation payments received by Mr Colalillo throughout this period constitute a “periodical compensation payment” (s 17 of the Act). As Mr Colalillo’s daily rate of “periodical compensation payment” exceeded the daily rate of Newstart allowance, the latter is reduced to Nil by the operation of s 1173(2).
7. Where, as in this case, a Newstart allowance payment is made and 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: s 1223(1) of the Act. For the purposes of s 1223 the reason the debt arose is irrelevant. As Mr Colalillo was not entitled to receive Newstart allowance throughout the period 5 December 2008 to 19 January 2010, any allowance paid to him for that period constitutes a debt due to the Commonwealth.
When did Newstart allowance payable at the reduced rate?
8. There is a conflict in the evidence about when Mr Colalillo first informed Centrelink that he was receiving workers compensation payments. This is relevant to the issue of when his Newstart allowance should have been reduced to Nil. Section 100(1) of the Administration Act provides:
Automatic rate reduction--recipient not complying with subsection 68(2) notice
(1) Subject to subsection (2), if:
(a) a person who is receiving a social security payment is given a notice under subsection 68(2); and
(b) the notice requires the person to inform the Department of the occurrence of an event or change of circumstances within a specified period (the notification period ); and
(c) the event or change of circumstances occurs; and
(d) the person does not inform the Department of the occurrence of the event or change of circumstances within the notification period in accordance with the notice; and
(e) because of the occurrence of the event or change of circumstances, the rate of the social security payment is to be reduced;
the social security payment becomes payable to the person at the reduced rate on the day on which the event or change of circumstances occurs.
9. Section 68(1) of the Act gives the Secretary the power to issue notices to social security recipients to require the person to, among other things: inform Centrelink if a specified event or change of circumstances occurs, or, if they become aware that a specified event or change of circumstances is likely to occur.
10. Mr Colalillo testified that he first notified Centrelink that he would be receiving workers compensation payments during a visit to the Auburn Centrelink office in February 2009 when he spoke with “Dominic”, and provided all relevant paperwork. He is “pretty sure” that the visit occurred on 19 February 2009.
11. The Secretary contends that Mr Colalillo first notified Centrelink that he was receiving workers’ compensation payments on 8 April 2009. Centrelink’s records reveal that in an application for payment form lodged with Centrelink’s Auburn office on that day, in answer to the question, “Did any change of circumstance happen to you in the period Saturday 17 January 2009 to Friday 10 April 2009?” Mr Colalillo wrote “Yes... Receive (compo)”.
12. Mr Colalillo was unable to recall when he was first learnt that his claim for weekly workers compensation was accepted by the Insurer or when payments commenced. The documents provided by the parties did not disclose when these events occurred. With the consent of the parties, the Tribunal contacted the Insurer in the course of these proceedings and was advised that Mr Colalillo was contacted by phone on 24 March 2009 and told that his claim had been provisionally accepted, and the following day was paid weekly compensation payments backdated to 5 December 2008. Mr Colalillo was unable to account for the apparent discrepancy between his claim of having informed Centrelink in February 2009 and the information provided by the Insurer which, together with his own evidence, indicates that he was not aware that his claim for compensation had been accepted until 24 March 2009.
13. Prior to receiving workers compensation payments in March 2009, Mr Colalillo had received a succession of notices, advising that he “… must tell Centrelink within seven days if you have received compensation or become aware that you will receive compensation”. A notice to that effect was sent by Centrelink on 30 January 2009.
14. In my view, it is more probable than not that Mr Colalillo is mistaken about when he first advised Centrelink that he would be receiving workers compensation. His account of notifying “Dominic” at the Auburn office in February 2009 is unsupported and inconsistent with other evidence. The best evidence is that Mr Colalillo became aware that he would be receiving workers’ compensation payments on 24 March 2009 and passed this information on to Centrelink 13 days later. Accordingly, as he did not inform Centrelink of his “change of circumstances” within the seven days notification period prescribed by the 30 January 2009 notice (and earlier notices), by the operation of s 100(1) of the Administration Act, the Newstart allowance became payable to him at the reduced rate, i.e. Nil, at the date the change of circumstances occurred, i.e. 5 December 2008.
15. The commencement date for the purpose of calculating the debt owed by Mr Colalillo is therefore the date his Newstart allowance was reduced to Nil. The period of the debt concluded on the day the Newstart allowance stopped, 19 January 2010. Throughout that period, he received $15,552.37 in Newstart allowance. Mr Colalillo was not entitled to receive that payment. It follows that this amount is a debt due to the Commonwealth.
Must the debt be waived?
16. Section 1237A(1) of the Act provides that the decision-maker 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 the payment, or payments, that gave rise to that proportion of the debt, in good faith. Section 1237A(1) is subject to s 1237A(1A):
(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.
17. As noted, the debt was not raised until February 2010. As this was more than six weeks from the first payment the caused that debt (i.e. 25 March 2009) and more than six weeks from the end of the notification period (i.e. 2 April 2009), s 1237(1A) is satisfied. Accordingly, the debt must be waived providing both elements of s 1237A(1) are met, namely:
(i) The debt or a proportion of the debt is attributable solely to an administrative error made by the Commonwealth.
(ii) Mr Colalillo received in good faith the payment or payments that gave rise to the debt.
18. Attributable solely to an administrative error by the Commonwealth: Mr Colalillo contends that Centrelink was squarely on notice that he was receiving workers’ compensation payments following his meeting with “Dominic” in the Auburn Centrelink office. He further claims that after giving written notice to Centrelink on 8 April 2009 that he was receiving workers compensation payments (via an Application for Payment form) he completed and lodged a “Module C form” (a questionnaire required by Centrelink to be lodged by social security recipients in receipt of compensation or damages). He contends that at no time did he attempt to withhold information from Centrelink, and that the suggestion that he did, is at odds with his later actions in providing all documents about his workers’ compensation payments when he made a claim for carer’s allowance in early 2010.
19. The Secretary contends that Mr Colalillo was required to disclose not only that he was, or would be, receiving compensation but details of the payments received. The Secretary argues that there is no evidence to support Mr Colalillo’s claim that he lodged a Module C form before February 2010. The Secretary also points out that throughout the period of the debt Mr Colalillo regularly received notices stating that his fortnightly income was assumed to be close to Nil and that social security law defined “income” to include “most compensation payments” (see correspondence addressed to Mr Colalillo from Centrelink, from 26 September 2008 to 25 January 2010, T32). Mr Colalillo claimed that it was not his practice to read the “fine print”.
20. Centrelink in my opinion responsible was in part for the overpayment of Newstart allowance. It was on notice from early April 2009 that Mr Colalillo was receiving workers compensation and yet failed to make any enquiries until he provided with additional information, in early 2010. However, even if Mr Colalillo’s evidence is taken at its highest — that is, his claim about lodging the Module C form in April 2009, not attempting to withhold information from Centrelink and not reading the fine print, is accepted as true — I could not be satisfied that all or part of the debt, is attributable solely to Centrelink’s administrative error. Mr Colalillo took no action after being notified via the letters referred to [19] above that in calculating his Newstart rate it was assumed that his “income” was about Nil and that, “income” was defined to include compensation payments. Even if accepted that as claimed, Mr Colalillo was unaware of the apparent error because he did not read the letters, his failure to do so nonetheless contributed in part to the overpayment.
21. Given my finding that the overpayment of Newstart Allowance was not attributable solely to an administrative error made by the Commonwealth, the power to waive the debt under s 1237A cannot be exercised. As a consequence, it is not necessary to consider whether Mr Colalillo received in good faith the Newstart payments that gave rise to the debt.
Should the debt be written off?
22. Section 1236 gives the Secretary the power to write off debt in certain circumstances. It provides:
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.
…
(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor's social security payment; or
…
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
…
(3) Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.
23. There is no evidence — and nor is it suggested — that the criteria set out in pars (a), (c) or (d) of s 1236(1) apply. Paragraph (b) will apply if established Mr Colalillo has no capacity to repay the debt.
24. Mr Colalillo estimates that he has debts totalling over $400,000. He apparently has no assets and lives with his mother. He receives fortnightly workers compensation payments of $716.
25. Mr Colalillo is eligible to receive Carers allowance. Centrelink is currently withholding $101.36 from Mr Colalillo’s fortnightly Carers allowance for the purpose of recovering the debt. To date three repayments have been made.
26. By the operation of s 1236(1C) Mr Colalillo will be treated as having a capacity to repay the debt “unless recovery by those means [listed in s 1236 (1C) would result in him being in severe financial hardship”. The Tribunal (differently constituted) has previously characterised “severe financial hardship” as involving something more than mere financial difficulties: see Re Stubbs and Secretary, Department of Families and Community Services [2003] AATA 729. I have no doubt that the combination of indebtedness, no assets and a meagre income, means that Mr Colalillo is in a difficult financial position. He mentioned in these proceedings that he was recently forced to request assistance on behalf of his mother (who is also a social security recipient) from a charitable organisation.
27. Mr Colalillo receives weekly compensation payments of about $100 more than the current Newstart rate. I am not satisfied that recovering the debt by means of withholding his Carer allowance would result in Mr Colalillo being in “severe financial hardship”. For that reason, I am not satisfied that Mr Colalillo “has no capacity to repay the debt” within the meaning of the Act. Accordingly, the power to write-off the debt cannot be exercised.
Should the debt be waived under s 1237 AAD?
28. Section 1237AAD provides that the decision-maker may waive the debt in special circumstances. It provides:
Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
29. Making a false statement or a false representation: The power to waive the debt under s 1237AAD cannot be exercised if the debt arose wholly or partly from the debtor or another person knowingly making a false statement or a false representation.
30. Centrelink pointed out that in each of the four application for payment forms lodged by Mr Colalillo after notifying Centrelink in April 2009 that he was receiving compensation, he answered “No” to the question:
“Did any change of circumstance happen to you in the period Saturday 11 April to Friday 03 July 2009?”
31. Mr Colalillo testified that by answering “no” he had meant to convey that his circumstances had not changed since the period immediately preceding that covered by the form, that that is, 17 January 2009 to Friday 10 April 2009. In the form covering that period, he disclosed that he had been receiving workers compensation.
32. In my view, Mr Colalillo did not make a false statement or a false representation by answering “no” in the four forms lodged after April 2009. The reference to “any change of circumstances” could not, in my opinion, be interpreted to be a reference to the circumstances that existed at some indeterminate past date. Rather a fair reading of the question suggests that it is a reference to the circumstances that existed in the period immediately preceding the period the subject of the application form. Even if I am wrong, and the answer given constitutes a false statement or representation, I am not satisfied that it was made “knowingly”.
33. Failing or omitting to comply with a provision of the Act: The Secretary has not suggested that Mr Colalillo failed or omitted to comply with a provision of the Act.
34. More appropriate to write off debt: The power to waive the debt under s 1237AAD can only be exercised if it is more appropriate to waive rather than write off the debt: s 1237AAD(c). For the reasons set out above the debt cannot be waived. The issue as to whether waiver is the more appropriate decision does not therefore arise.
35. Special circumstances: I must be satisfied that “special circumstances” exist before exercising the power to waive the debt. As noted, the SSAT was satisfied that special circumstances existed and decided to waive half the debt. The Secretary submits that special circumstances are established and that the Tribunal should likewise exercise the power to waive half the debt. Not surprisingly, Mr Colalillo agrees that special circumstances exist. However he contends that the more appropriate decision is to waive all of the debt.
36. The term “special circumstances” has been the subject of exhaustive consideration by the AAT and the Federal Court. The Federal Court has declined to adopt a prescriptive formula about the meaning of the term. (See, for example, French J in Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531 at 535; Re Beadle and Director-General of Social Security [1984] AATA 176). Nonetheless, the Court has emphasised that the term denotes a requirement that there be “something which distinguishes [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545. This, however, is not to be interpreted as a requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”: per Hill J in Secretary Department of Social Security v Hodgson (1992) 37 FCR 32 at 42. There is no requirement that the circumstances be unique to the individual — 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: per Katzmann J in Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441.
37. In Secretary to the Department of Family & Community Services v Allan [2001] FCA 1160, Heerey J observed at [1] that the “basic policy” underlying those provisions which suspend social security benefits due to the receipt of compensation for loss of earnings is to avoid "double dipping" — that is, “people should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source”.
38. Mr Colalillo testified that he has a number of ongoing health problems including high blood pressure and a work-related knee complaint which, he says, has impeded his attempts to find employment. In my view, Mr Colalillo’s significant level of indebtedness, the recent loss of his family, home business and his poor health, taken together, constitute special circumstances. While there can be no argument that the special circumstances exist, in my view his circumstances are not of such a nature as to warrant the power to waive all of the debt. The preferable decision in my view is that made by the SSAT — i.e. to waive half the debt.
39. For the reasons given, I have decided to affirm the decision made by the SSAT.
I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.
Signed: ..................................[SGD].............................
Associate to Senior Member BrittonDate of Hearing: 25 October 2010
Date of Decision: 28 October 2010
The applicant was self-represented.
Solicitor for the Respondent: Centrelink Advocacy Branch
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