Conti and Secretary, Department of Family and Community Services

[2004] AATA 101

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 101

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No W2003/101

GENERAL ADMINISTRATIVE DIVISION		)
Re		CARMELA CONTI

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Associate Professor G A Barton, Member

Date4 February 2004

PlacePerth

Decision The decision of the Social Security Appeals Tribunal, dated 4 February 2003, is affirmed.

..............(sgd G Barton)..................

Member

CATCHWORDS

SOCIAL SECURITY – overpayment of disability support pension payments giving rise to a debt due to the Commonwealth – whether all or part of the debt must or should be waived – whether applicant received overpayments in good faith – whether there are special circumstances that make it desirable to waive the debt or part of the debt – whether debt may or should be written off.

Social Security Act 1991, ss 1223; 1224; 1237(1); 1237A(1), (1A), (3); 1237AAD(b); 1236(1), (1A)

Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] 1565 FCA; (1997) 50 ALD 186

Secretary, Department of Social Security v Hales [1998] 219 FCA; (1998) 82 FCR 154

Re Stephen Maurice White and Secretary, Department of Family and Community Services [2002] AATA 462

REASONS FOR DECISION

4 February 2004 Associate Professor G A Barton, Member         

1.      The applicant in this matter is Mrs Carmela Conti.  She was involved in a motor accident in 1970.  Since then she has periodically claimed disability support depending on the level of her income.  On 1 December 2000 she lodged a claim with the respondent for a Disability Support Pension (‘DSP’) under the Social Security Act 1991 (‘the Act’).  The respondent completed the assessment of the applicant’s claim in March 2001 and granted her a DSP backdated to 1 June 2000.  On 20 June 2002 the respondent decided to raise and recover a DSP debt of $5301.87 (‘the DSP debt’) from the applicant for the period 21 February 2001 to 3 January 2002.  This decision was confirmed by an authorised review officer on 14 November 2002 and, on review, by the Social Security Appeals Tribunal on 4 February 2003.  The applicant did not dispute that the DSP debt arose and the only issue before the Tribunal was whether it should be waived.

2. The Tribunal had before it documents T1 – T12 (‘the T documents’) lodged by the respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 and a copy of the respondent’s statement of facts and contentions.  Mr Chris Ward was the respondent’s advocate.  The applicant who testified before the Tribunal was unrepresented.  She tendered the following documentary exhibits:  A1, a copy of an information notice from the respondent informing her that her DSP had been cancelled; A2, a copy of a letter from the respondent of 28 June 2002 informing the applicant that she would not be prosecuted but that she is still required to pay the DSP debt; A3, a copy of a Centrelink record of the applicant’s request for an appointment on 13 July 2001 to return her individual tax return and A4, a copy of a Centrelink ‘payment now due’ notice of 26 July 2002 for the DSP debt.  At the hearing on 16 September 2003 the applicant complained that she had not had sufficient time to consider the respondent’s statement of facts and contentions.  The Tribunal informed her that she was at liberty to make a written response by 24 September 2003.  This was received on 26 September 2003 together with a copy of a Centrelink letter of 29 August 2000 advising the applicant of her appointment to talk to a Customer Service Officer on 8 September 2000; a list of the applicant’s wages from 6 July 2000 to 1 March 2001 together with a letter to ‘Ian’ in complex assessment of 9 March 2001 asking whether he received the list and inviting him to ring the applicant should he require further information; a further undated letter to ‘Ian’ from the applicant asking whether her assessment was complete or whether further information was required; an extract from a telephone account showing a service charge on 8 March and 9 March in relation to the facsimile number handwritten on one of the letters to Ian and a duplicate bank statement showing a deposit of $4509 by the respondent on 29 March 2001 to the applicant’s account.  The respondent tendered document R1, a copy of a Centrelink record showing that the applicant had lodged certain tax returns on 10 September 2001.

3.      The applicant is in a business partnership with her husband styled ‘R and CA Conti’ (‘the partnership’).  The partnership was formed on 1 July 1975 (T6).  The business is principally that of building and plumbing.  The partnership assets include shares in four vacant blocks of land and 11 of the 33 issued units in the GHS Unit Trust (‘the trust’) (T6).  Conti Enterprises Pty Ltd is the trustee of the trust (T7).  The main business of the trust is scaffold hire (T7).  The applicant’s husband holds one of three issued shares in Conti Enterprises Pty Ltd (T12).  The trust income tax return for 1999/2000 contains a statement of distribution of an amount of $47,288 to the partnership (T7).  The trust profit and loss appropriation for the year ended 30 June 2000 shows an actual distribution to the partnership of $47,722.49 (T7) (‘the trust distribution’).  The DSP debt was raised by the respondent on the basis that this distribution was made on 21 February 2001.  This was not disputed by the applicant.  The DSP debt was raised against the applicant because the trust distribution was not maintained against the applicant’s DSP for the period 21 February 2001 to 3 January 2002.  The reasons for this omission are to be found in the circumstances surrounding the applicant’s claim for, and grant of, DSP.

4.      The applicant testified at length to the health problems that plagued her and her family while she was being assessed for DSP and in the months following her grant of DSP.  She underwent a number of painful surgical procedures associated with the injuries she sustained in the motor accident.  There was a number of deaths and serious illnesses in her family.  These events made it difficult for her to cope with her domestic and business duties and, relevantly, to attend to the respondent’s requirements concerning her DSP.  Not surprisingly she could not recall many of the factual details of her DSP application but insisted that she had always done, directly or through her accountants, what could reasonably be required of her to keep the respondent informed of her financial circumstances.  She explained that the same accountant had handled the affairs of the partnership and trust but, at the time of her DSP application, a different accountant was appointed for the trust.  There was little rapport between the applicant and the new accountant which had compromised her ability to remain fully aware of her financial affairs and to communicate them to the respondent.  The Tribunal makes the following material findings of fact in relation to the applicant’s DSP.

5.      The applicant, at her request, was sent a claim form for DSP by the respondent on or about 14 September 2000.  The information documents accompanying the form explained that events or changes in circumstances that effect a claim, such as an increase or decrease in receipts of income, should be reported to the respondent within 14 days of their occurrence either personally or by letter or telephone (T5, T12).  The applicant was notified by the respondent that an appointment had been made for her to attend an interview on 29 September 2000 (T12).  She was advised that she was to provide the details of all her assets, income and investments (T12).

6.      The claim form was lodged on 1 December 2000.  The claim was incomplete.  It did not reflect the applicant’s direct interests in real estate – she holds a share in two properties not connected with the partnership (T6) - and it did not include the 1999/2000 income tax returns for the trust and the partnership (T12).  On 5 December 2000 the applicant was requested to provide the missing information within 14 days (T12).  The information in relation to real estate was provided by the applicant on 21 December 2000 and the applicant was again reminded to provide full tax returns.  The new accountant for the trust, Mr William James, faxed further information to the respondent on 12 March 2001.  His facsimile message refers to the 11 units in the trust held by the partnership.  The attached copy of the balance sheet of the trust as at 30 June 2000 shows beneficiary entitlements of $227,580.83 but does not disclose any resolution to make distributions to beneficiaries (T6).

7.      The applicant’s assessment for DSP was completed on 19 March 2001 based on the 1998/1999 income tax returns for the trust and partnership (T12).  A letter from Mr James to the applicant of 11 July 2000 (which was received by the respondent on 1 December 2000) advises that the accounting share of profit from the trust for the year ended 30 June 1999 to the partnership was $7,655.96.  The relevant income tax return reflects a distribution to the partnership of $6307 (T6).

8.      The applicant was granted DSP on 19 March 2001 from 1 June 2000.  The applicant was advised by the respondent of the possibility of an overpayment of DSP if the 1999/2000 income tax returns for the trust and the partnership showed an increase in the applicant’s income (T12).

9. The trust income tax return for 1999/2000 was completed in February 2001. In June 2001 the applicant, after discussions with Mr John Scolaro, the accountant for the partnership, became aware that her level of income was such that she was receiving DSP at a rate greater than that to which she was entitled under the Act.

10.     On 11 July 2001 the applicant made an appointment to see a representative of the respondent on 13 July 2001 to lodge her individual income tax return – the partnership return was still in preparation (A3).

11.     The 1999/2000 income tax returns for the trust and partnership were received by the respondent on 10 September 2001 (R1).  The assessment of these documents by the respondent was finalised on 4 January 2002 resulting in the cancellation of the applicant’s DSP (T12, A1).

12. It was not disputed and the Tribunal finds that the DSP debt is a debt due to the Commonwealth pursuant to the provisions of s 1223(1) of the Act. The issue to be determined by the Tribunal is whether the DSP debt should be waived. Sections 1223 and 1224 of the Act authorise the respondent to recover payments that exceed a person’s entitlement under the Act.

13. Section 1237(1) of the Act provides that the respondent may waive the Commonwealth’s right to recover the whole or part of a debt from a debtor only in the circumstances described in s 1237A, s 1237AA, s 1237AAA, s 1237AAB, s 1237AAC or s 1237AAD. Sections 1237A and 1237AAD are relevant to this matter.

14. Section 1237A(1) provides that the respondent 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. By s 1237A(1A) the operation of s 1237(1) is made subject to the condition that the debt is not raised within a period of 6 weeks from the first payment that caused the debt or, 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. Section 1237A(3) provides that a proportion of a debt may be 100% of the debt.

15. Section 1237A(1A) refers to the debt and not to a proportion of the debt. The first payment that caused the DSP debt occurred in February or March 2001 after the trust distribution on 21 February 2001 whereas the DSP debt was raised in 2002. So in this instance s 1239(1A) does not exclude the operation of s 1237A(1).

16.     The applicant began to receive overpayments of DSP after 21 February 2001 because the trust distribution materially effected the rate at which DSP was payable to her.  The fact and amount of the trust distribution were communicated to the respondent when the 1999/2000 income tax returns for the trust and partnership were received by the respondent on 10 September 2001.  There was then a delay before the respondent finalised the assessment of these documents on 4 January 2002.  The respondent’s representative conceded at the hearing that administrative delay amounted to administrative error.  It is not necessary for the Tribunal to consider whether this concession was correctly made because even if a proportion of the DSP debt that arose after 10 September 2001 was solely attributable to administrative delay it cannot be said the applicant received the relevant payments in good faith because by June 2001 she had become aware of the fact that her income was greater than she had previously thought it to be.  She knew, from past experience, that this would effect her rate of entitlement.  She therefore had reason to know that she was not entitled to use the overpayments as her own; Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] 1565 FCA; (1997) 50 ALD 186 at 189. So the Tribunal finds that s 1237A(1) of the Act did not operate to compel the respondent to waive the right to recover any proportion of the DSP debt.

17. Section 1237AAD of the Act creates a discretion in the respondent to waive the right to recover all or part of the DSP debt if the respondent is satisfied as to certain matters which include the existence of special circumstances (other than financial hardship alone) that make it desirable to waive. In Secretary, Department of Social Security v Hales [1998] 219 FCA; (1998) 82 FCR 154, the Federal Court of Australia (French J) said in relation to s 1237AAD(b) of the Act (at 162):

“The 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. But as a matter of grammar and ordinary logic, the exclusion of financial hardship alone as a special circumstance does not mandate its inclusion in the range of matters constituting such circumstances for the purpose of enlivening the Secretary's discretion.

…

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. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. 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.”

18. There was no evidence of real financial hardship in this matter and at no stage did the applicant contend to the contrary. The Tribunal has given careful consideration to the question of whether there is anything else in the evidence or documents before it that would make recovery of the DSP debt unfair, unreasonable or inappropriate and which would warrant the exercise of the discretionary power under s 1237AAD to waive the Commonwealth’s right to recover it; Re Stephen Maurice White and Secretary, Department of Family and Community Services [2002] AATA 462, at paragraph 34. The Tribunal paid particular attention to the calamitous events that engulfed the applicant and her family at the time her DSP application was being processed by the respondent. The Tribunal was acutely aware of the applicant’s painful medical condition. These matters were emphasised by the applicant in her evidence, the main thrust of which was that she was forced by circumstances to rely on her accountants who would have provided the relevant information had the respondent’s representative requested it from them as she invited him to do. The Tribunal took account of the delay that occurred in raising the DSP debt once the respondent was apprised of the relevant financial details.

19.     The Tribunal also took account of the following counterbalancing circumstances.  The respondent accommodated the applicant by granting her DSP on the basis of financial and income tax records from an earlier year cautioning her that overpayments may arise.  It was not clear from the evidence that the relevant documents were available on request from the applicant’s accountants before they were lodged with the respondent on 10 September 2001.  The applicant’s financial affairs are not straight forward and some of the delay in raising the DSP debt is explained by the complex assessment that preceded it.  At the time of the hearing the outstanding balance of the DSP debt was $4354.32 because the respondent was recovering it by a deduction from the applicant’s fortnightly DSP payments.  The applciant’s DSP payments were suspended at her request on 15 May 2003.

20. Looking at all the circumstances surrounding the DSP debt, there is no circumstance, or combination of circumstances, among them that would engender a sense of injustice or hardship if the respondent were to seek to recover all or part of the debt. So the Tribunal finds, for the purpose of s 1237AAD(b) of the Act, that there are no special circumstances that make it desirable to waive the debt or part of the debt. In the light of this finding it is unnecessary for the Tribunal to consider whether the requirements of s 1237AAD(a) and (c) are satisfied in this matter.

21. There remains the question whether the DSP debt should be written off pursuant to s 1236(1) of the Act. Although DSP payments to the applicant have been suspended, none of the requirements for a write off in paragraphs (a) – (d) of s 1236(1A) is satisfied on the evidence before the Tribunal. So the DSP debt cannot be written off under s 1236(1) of the Act.

22.     For the above reasons the Tribunal affirms the decision under review.

I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Associate Professor G A Barton, Member

Signed:         ..............(sgd V Wong)...............................
  Associate

Date/s of Hearing  16 September 2003
Date of Decision  4 February 2004
Counsel for the Applicant         In person
Counsel for the Respondent     Mr C Ward
Solicitor for the Respondent    The Service Recovery Team, Centrelink