COX and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2011] AATA 350
•25 May 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2011] AATA 350
ADMINISTRATIVE APPEALS TRIBUNAL )
) No. 2009/0437
GENERAL ADMINISTRATIVE DIVISION ) Re ANDREW COX Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Ms N Isenberg, Senior Member Date25 May 2011
PlaceWyong
Decision
The decision under review is affirmed
.......................[sgd].......................
Ms N Isenberg
Senior Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – debt due to the Commonwealth – quantum of debt -– whether debt should be waived – “special circumstances” – decision under review is affirmed
Administrative Appeals Tribunal Act 1975 s 37
Social Security Act 1991 ss 117, 1223(1), 1224(1), 1236(1A), 1237A(1), 1237AA
Social Security (Administration) 1999 (Administration Act) ss 68, 68(2), 94(1) and 100(1)
Anderson and Department of Family and Community Services [2002] AATA 495
Angelakos and Secretary Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25
Balancio and Secretary, Department of Family and Community Services (2003) 74 ALD 204
Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435
Colaiacolo and Secretary, Department of Social Security [1985] AATA 91
Davy and Secretary Department of Employment and Workplace Relations [2007] 94 ALD 693
Secretary, Department of Family and Community Services and Temesgen (2002) 72 ALD 563
Secretary Department of Social Security v Hales [1998] FCA 219
REASONS FOR DECISION
25 May 2011 Ms N Isenberg, Senior Member DECISION UNDER REVIEW
1. A decision of the Social Security Appeals Tribunal (SSAT) made 6 January 2009, affirming the decision of a Centrelink Authorised Review Officer, to raise and recover a disability support pension debt of $45,228.40 for the period 5 July 2000 to 24 January 2006.
ISSUE BEFORE THE TRIBUNAL
2. Whether Mr Cox owes the Commonwealth a debt for overpayment of disability support pension; and if so:
(a)what is the quantum of that debt; and
(b)whether there are any grounds not to recover part or all of the debt.
BACKGROUND
3. Mr Cox, who is presently aged 66 was paid disability support pension (DSP) from 1992. On 3 December 2007 a decision was made by Centrelink to raise and recover a debt of $46,592.87, being an overpayment of DSP during the period 5 July 2000 to 7 March 2006. That decision was affirmed on internal review, although the correct debt amount was altered to $45,228.40 and the relevant period was determined to end on 24 January 2006. That decision was affirmed by the SSAT. Mr Cox now seeks review by this Tribunal.
4. On 4 October 2009 Mr Cox ceased receiving DSP and was granted age pension instead.
LEGISLATION
5. The relevant legislation in this matter is the Social SecurityAct 1991 (the Act) in particular ss 1237A and 1237AAD.
THE HEARING
6. l had before me documents lodged pursuant to s 37 of the Administrative Appeals Tribunals Act 1975 (the T-documents), which I took into evidence. Mr Cox supplied some medical evidence which is referred to below.
7. Mr Cox, who was accompanied by a friend, Mr Drayton, gave evidence and made submissions. He presented as an unwell gentleman with severe mobility problems. He was very forgetful and confused in giving much of his evidence. His reasoning was at times very hard to follow and it was very difficult keeping him focussed on the matters to hand. At times, in the course of the hearing, he appeared to be genuinely surprised about the amount of money he had received; at other times he appeared to have a very detailed recall of financial matters.
CONSIDERATION OF EVIDENCE AND FINDINGS
Is there a recoverable debt?
8. Centrelink records indicate that Mr Cox previously did not dispute the existence or calculation of the debt, but at the hearing Mr Cox said he did not think he had been overpaid DSP.
9. Mr Cox held a number of assets during the period in question which were declared to Centrelink: a rental property in Belmore, sold in December 2005; a superannuation pension; motor vehicles and personal effects.
10. Throughout the period in question Mr Cox also held money in several bank accounts that was never declared, or only partly declared, to Centrelink.
11. Mr Cox held a St George Everyday Pension Account with a balance, that varied over the period up to about $242,000. While Mr Cox had reported the existence of this account to Centrelink, it was the account into which his DSP was paid, the balance of this account was understated. For example, on 20 May 2002 Centrelink wrote to Mr Cox indicating that a balance of $800 was on record and requested that Mr Cox contact Centrelink within 14 days if that was incorrect. Mr Cox did not contact Centrelink and in fact, according to bank records, on that date, the balance of the account was $26,251.42.
12. From 31 October 2001 onwards throughout the relevant period, Mr Cox also held a St George Directsaver Account (his ‘Dragondirect account’) with a balance up to about $126,000 and consistently in excess of $100,000. Mr Cox did not report the existence of this account to Centrelink.
13. Another of Mr Cox’s St George Bank accounts was a term deposit with a balance up to about $125,000 from 1 July 2000 until April 2001, and thereafter a balance of about $14,000. From 4 December 2003 to 3 January 2006 Mr Cox also held a term deposit account with St George Bank which had an initial deposit amount of $20,000, the balance increasing to about $22,000 by the time the account was closed. Mr Cox did not declare the existence of either of these accounts to Centrelink. Mr Cox said in his evidence that he vaguely remembered a small term deposit. He seemed very surprised when his attention was directed to account balances in cross-examination.
14. In June 2007 Centrelink commenced reviewing Mr Cox’s entitlements, comparing information declared to the Australian Taxation Office (the ATO) with that provided to Centrelink. That comparison showed that Mr Cox had declared to the ATO significant amounts of interest earned which did not correlate with financial information declared to Centrelink. Following further inquiries, Centrelink became aware of the St George accounts.
15. Mr Cox’s full financial position was not reported to Centrelink, and so was not taken into account in determining his entitlement to DSP during the period 5 July 2000 to 24 January 2006. I accept Centrelink’s submission therefore that, had Mr Cox disclosed his additional finances, he would not have been paid as much DSP as he was paid. I therefore find that there has been an overpayment of DSP.
Calculation of the debt
16. Centrelink submitted, and I accept, that the money held in the St George accounts was an asset of Mr Cox, and should have been taken into account in calculating the rate of DSP payable to him, in addition to those assets already declared to Centrelink.
17. In accordance with s 117 of the Act, the rate of DSP payable to a person of Mr Cox’s circumstances is calculated by reference to Pension Rate Calculator A.
18. I was provided with information, based on Module G of Rate Calculator A in s 1064 of the Act, which sets out how a person’s assets affect the rate of a person’s payment.
19. Relying upon the Table, I accept that between 5 July 2000 and 28 June 2005, Mr Cox’s assets exceeded the relevant limit so that no DSP was payable at all. From 29 June 2005 to 24 January 2006, using the same table, only $873.48 was payable, whereas $5,046.53 was actually paid.
20. Sections 94(1) and 100(1) of the Social Security (Administration) 1999 (Administration Act) provide for an automatic retrospective cancellation or rate reduction (retrospectively) of a payment where a person fails to comply with an information notice issued under subs 68(2) of the Administration Act. In Mr Cox’s case this occurred on 5 July 2000.
21. In all, the calculations show an overpayment of $45,228.40.
22. Centrelink submitted that the amounts paid to Mr Cox from 5 July 2000 to 30 June 2001 are, pursuant to s 1224 of the Act, debts due to the Commonwealth. Section 1224 of the act, as in force during that period, provided as follows:
1224(1) If:
(a) an amount has been paid to a recipient by way of social security payment; and
(b) the amount was paid because the recipient or another person:
(i) made a false statement or a false representation; or
(ii) failed or omitted to comply with a provision of the social security law or this Act as in force immediately before 20 March 2000 or the 1947 Act;
the amount so paid is a debt due by the recipient to the Commonwealth.
23. Centrelink also submitted that Mr Cox was paid DSP during this period because he failed to comply with the requirement to report his assets, imposed by way of information notices issued pursuant to s 68 of the Administration Act.
24. Centrelink submitted that, pursuant to s 1223 of the Act, the amounts paid to Mr Cox from 1 July 2001 (at which point the applicable legislation was amended) until 28 June 2005, and amounts paid in excess of $873.48 during the period 29 June 2005 to 24 January 2006 are debts due to the Commonwealth. Section 1223 provides, in part, as follows:
(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.
25. I accept that the debt of $45,228.40 has been correctly calculated and raised, and is recoverable from Mr Cox.
Should the debt be recovered?
26. The Act makes provision in limited circumstances for debts not to be recovered.
27. Pursuant to s 1236(1A) of the Act a debt may be written-off (that is delayed recovery) in very specific circumstances, only if:
(i)the debt is irrecoverable at law; or
(ii)the debtor has no capacity to repay the debt; or
(iii)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(iv)it is not cost effective for the Commonwealth to take action to recover the debt.
28. None of these apply to Mr Cox: the debt is not irrecoverable at law, Mr Cox’s whereabouts are known, he has the capacity to repay the debt through withholdings from his age pension and it is cost effective to recover the debt.
29. A debt may be waived under s 1237A(1) providing two conditions are met:
·that the debt arose solely because of administrative error by the Commonwealth; and
·payments were received by the debtor in good faith.
Was the debt solely attributable to an administrative error by the Commonwealth?
30. Mr Cox said that Centrelink ‘should have known’ about his additional accounts; just as Centrelink had subsequently become aware of the accounts (through cross-matching with the ATO) it should have taken those monies into account in paying him DSP.
31. Mr Cox also said that he had ‘been ready to tell Centrelink’ about the accounts but had been too unwell. He said that now he only has the account that his Centrelink benefit was paid into and the Dragondirect account.
32. While it is true that if Centrelink had been more vigilant in its cross-matching with the ATO, the overpayment to Mr Cox may not have been so large. Having said that, it was clear that while receiving DSP he did not comply with the notices issued pursuant to s 68(2) of the Administration Act – which required him to report changes to his finances, including if his assets exceeded particular amounts, or if he started any new accounts. Notices were issued every several months throughout the period. Each notice was sent to Mr Cox’s address where, he agreed he lived and where he received his mail. I accept that Mr Cox received the notices informing him of his obligations to inform Centrelink of his financial position.
33. I therefore find that the debt did not arise solely from Centrelink’s error. Having come to this view, it was not necessary for me to consider if the payments were received in good faith.
waiver under section 1237AAD : “special circumstances”
34. Waiver under s 1237AAD of the Administration Act is only available if the debt did not result wholly or partly from the debtor (or another person) knowingly making a false statement or a false representation; or failing or omitting to comply with a provision of the Act, the Administration Act or the 1947 Act.
35. Therefore before considering Mr Cox’s circumstances I must be satisfied that he is not precluded from consideration.
Knowing failure to comply with provision of the Administration Act
36. Centrelink submitted that Mr Cox knowingly failed to comply with the requirement to advise of changes to his financial circumstances, in accordance with information notices issued to him pursuant to s 68 of the Administration Act, which provides in part as follows:
(1)Subsection (2) applies to a person to whom a social security payment (other than utilities allowance or seniors supplement) is being paid.
(2)The Secretary may give a person to whom this subsection applies a notice that requires the person to do any or all of the following:
(a) inform the Department if:
(i) a specified event or change of circumstances occurs; or
(ii) the person becomes aware that a specified event or change of circumstances is likely to occur;
(b)give the Department one or more statements about a matter that might affect the payment to the person of the social security payment;
(c)give the Department one or more statements about a matter that might affect the operation, or prospective operation, of Part 3B in relation to the person.
37. The meaning of ‘knowingly’ was considered by Deputy President Forgie of this Tribunal in the matter of Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435:
(48) There is nothing in s 1237AAD which suggests that the word ‘knowingly’ should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission.
(49)…Mr Callaghan has acknowledged that he had received notices under section 727 of the Act and that he had read at least one of them. I am satisfied both on the material in the T documents and on his oral evidence that he received more than one of them and that he read the first one. On the basis of the notices themselves I am satisfied that they clearly set out his obligation to advise the department should his income, or that of Mrs Callaghan, change. I am also satisfied from the notice that it quite clearly stated that income included Austudy benefits. Taking into account Mr Callaghan's knowledge of the notice and of his having read at least one of them, I find that he knew that he had an obligation to advise of a change in Mrs Callaghan's income. Therefore, when he failed to advise of the change he knowingly omitted to comply with a provision of the Act.
38. Whilst it is clear from this passage that actual (as compared to) constructive knowledge is required, the Tribunal has recognised that the presence of actual knowledge may be inferred from the circumstances where a debtor had the opportunity to gain that knowledge, and there were no obstacles preventing him acquiring that knowledge: see also Anderson and Department of Family and Community Services (2002) 68 ALD 494, Secretary, Department of Family and Community Services and Temesgen (2002) 72 ALD 563 at 564-565 and Balancio and Secretary, Department of Family and Community Services (2003) 74 ALD 204 at 209.
39. Centrelink submitted that Mr Cox received valid information notices under s 68(2) of the Administration Act, and knew of or had the opportunity to acquire the knowledge of his reporting obligations from the letters he received, which clearly set out his obligation to advise Centrelink within 14 days should his assets exceed specified limits. It was acknowledged that Mr Cox has significant health problems, however it was submitted that there was no evidence that Mr Cox did not know what his reporting obligations were or that he was incapable of complying with them.
40. On numerous occasions during the debt period Mr Cox did report some changes to his financial and other circumstances as required: for example, in September 2000 Mr Cox provided a number of updates of bank balances; in May 2001, 2002 and 2003 Mr Cox provided Centrelink with an ‘SA220’ – Income & Assets review forms in which he reported a number of updates to his finances; and on several occasions Mr Cox reported new balances of his AMP allocated pension. Centrelink records note that on two occasions – on 20 May 2002 and 1 September 2005 – Mr Cox requested that a statement showing all assets and income recorded by Centrelink be sent to him. The notices issued in response to these requests clearly show that not all of Mr Cox’s bank accounts were known by Centrelink and state “the following details represent all of the income and assets that Centrelink currently holds on your records”. The notices also required Mr Cox contact Centrelink within 14 days if any details were incorrect, but he did not do so. Centrelink file notes also record that Mr Cox attended several appointments during which his finances were discussed: 14 June 2001, 14 August 2001, 15 May 2002, 29 May 2003 and 15 September 2005.
41. Despite these regular updates, requests for statements of financial information held by Centrelink and face to face appointments at which financial matters were discussed, Mr Cox did not report the St George Bank accounts and funds held in them.
42. Since the debt has been raised, Mr Cox has given a number of different explanations for his failure to report the St George Bank accounts, and Centrelink submitted that the varying nature of these explanations support the contention that the failure to report was deliberate.
43. While file notes kept by Centrelink are not transcripts of conversations, I consider the file notes, made contemporaneously, may be taken as a generally accurate record of the content of the conversation. A file note was made by the Centrelink officer who discussed Mr Cox’s request for review:
Customer says that he was not aware that he was required to report changes in his circumstances within 14 days. He says he does not read the back of the paper as it contains football reports so he has got into the habit of not reading the back of any documents – so he was not aware that Centrelink printed information on the back of their letters, so he didn’t know of his notification obligations. When queried about this statement, he said that he may have read it years ago, “but it wasn’t interesting, it seemed like a lot of rubbish, or “he didn’t understand it”. Says it was only in the last few weeks, when a “a strong breeze blew a Centrelink letter onto the ground and it landed upside down, that he saw the printing on the back”. He further states that he has motor neurone disease, and that he had not thought he would still be on Disability Support Pension this many years later. He then said that he didn’t advise Centrelink about the unreported money in bank accounts, as he wanted to have it available to take advantage of any advances in the treatment of motor neurone disease, which may have required him to use his own funds – he “didn’t think it would be a big issue”. In an earlier conversation, Mr Cox indicated that he had always intended that his son have the money, but that his son has a drug problem, so Mr Cox has held onto the money. Mr Cox has acknowledged previously that he understands why he has been overpaid, and is not querying the amount of the overpayment. In this instance, he would like consideration given to waiver.
44. In a written statement submitted to the SSAT Mr Cox offered the following explanations:
“I did what my Mum told me to do. Put some money away for strange things that may happen and tell no-one as they will want to marry you for it.
This money came from the sale of my house…
I am told by M/s [sic] D. De Silva that M/s [sic] J.Roberts said I had $130.000 in multi [sic] accounts. This figure is very high and I believe I only had one account…
I can comply with rules and regulations, as I was a member of the Alfa Romeo car club for over 10 years…
As late as 4th August 2008 as Wyong Centrelink I asked for a copy of the rules and regulations of Centrelink.
Having a copy of a letter from Centrelink dated 29th July 2008 with me, the staff member pointed to it and said, it is all in there. I looked at the letter on the desk and thought, he is having a lend of me. Last time I saw him he was helpful and courteous to me.
Next night at home 5/6 August 2008 I am looking at the letters and my notes from Centrelink. The fan heater blows the top copy off the table and on to the floor face down. On the back is printing with the rules and regulations of Centrelink. The date of the letter is 29th July 2008.
Why did the staff member at Wyong say, turn it over, the rules are on the back. Why did Centrelink deceive me?”
45. The SSAT recorded that Mr Cox said in his oral evidence before that Tribunal:
“... his condition of motor neurone is one that has had a significant effect on his life and he had to put the money away in order to ensure that he will have sufficient funds when his health deteriorates o-r for further research into a cure. He should not be punished for his.”
46. Mr Cox told me that he had no intention of deceiving anyone and had relied upon a friend (who had died only about 12 months ago) for advice, although he did not indicate the nature of the advice upon which he had relied. He has had the same accountant for many years but he ‘only does [his] tax returns’, which I understood to mean that he does not provide financial advice. Mr Cox said he understood that he had to tell Centrelink about his assets. He also said that he did not tell Centrelink about the Dragondirect account because ‘[his] health failed him’. He explained this by saying that his health stops him attending to his affairs; some days his mobility is so poor he is unable to walk at all and because he is so deaf, is unable to discuss matters with Centrelink officers on the phone. He said that when he was in business his (office) accountant told him to ‘do things right’. He said in cross-examination that he said he wanted to put money away for his healthcare. He said that in the last couple of years his memory has become poor and he did not know why he had not told Centrelink about the accounts. He said he assumed Centrelink ‘had its methods of knowing’ about his finances.
47. At the hearing, for the first time, Mr Cox contended that someone from Centrelink had told him to keep money in the Dragondirect account. I doubt this to be the case. He said he had withdrawn money from the account to fix his house and had given his sons about $36,000. Otherwise he does not know where the money has gone.
48. Notwithstanding the various explanations he has previously given, Mr Cox agreed that he understood that he had to tell Centrelink about his assets. There is some consistency in the various accounts, namely that he kept money aside from the proceeds of sale of his investment unit, and did not report to Centrelink about it. On balance I accept that it is more likely than not that Mr Cox intentionally failed to inform Centrelink. The reasons he may not have done so are less clear.
Are there special circumstances (other than financial hardship alone) that make it desirable to waive (and it is more appropriate to waive than to write off the debt or part of the debt)?
49. Having come to the view in paragraph 48 above, it was not necessary for me to consider if there are special circumstances that make it desirable to waive the debt. However, even if I had not decided that Mr Cox knowingly failed to fully inform Centrelink of his assets, I have come to the view that his circumstances are not sufficiently unusual, uncommon or exceptional to warrant the waiver of the recovery of the debt.
50. The Act provides no guidance as to the meaning of the term “special circumstances” in that provision. In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Beadle and Director-General of Social Security (1984) 6 ALD 1) where (at 3) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances "must have a particular quality of unusualness that permits them to be described as special". See also Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9 per Besanko J at [33].
51. Evidence was given about several aspects of Mr Cox’s personal circumstances.
52. Mr Cox is in poor health. His most serious condition has, for some years, been diagnosed as motor neurone disease and/or muscular dystrophy. His previous GP, Dr Killalea, wrote of such a diagnosis dating back to 1990. More recently, in 2009 Dr Sturm, consultant neurologist, in a report tendered by Mr Cox, wrote that he did not consider Mr Cox to have motor neurone disease, but observed from MRI scans that there was evidence of previous bleeding around the spinal cord and brain, and that Mr Cox’s spinal cord was atrophied. Mr Cox said he had not seen Dr Sturm since that report, nor had he consulted any other neurologist, largely because of the expense of doing so.
53. Although Mr Cox’s cognition was not addressed in any reports, having regard to his presentation and demeanour at the hearing I had some reservations about his current capacity. I observe that he currently has a daily carer.
54. Other noteworthy observations about Mr Cox’s health are: that he wears bilateral hearing aids, which were clearly inadequate, and that, he says, he has debilitating gastric troubles.
55. His various medications – about 30 tablets a day – cost him approximately $200 to $265 per month. He said he has $18,000 in the bank, and adjusts his expenditure so as to maintain that level of ready cash. He is frugal in the use of water to keep costs down and has many buckets to collect rainwater. He has a small 2005 car.
56. I accept that Mr Cox has a serious physical disability which has a significant impact on his day to day living. However, having a disability is a pre-condition for the receipt of DSP and that ill health is not uncommon amongst those in receipt of age pension, as Mr Cox is. As such, Mr Cox’s health is not of itself a special circumstance.
57. Mr Cox said that he needed money to ‘fix’ his health. He considered he has received poor health care because he is a Centrelink beneficiary. He complained extensively about the state of public health care.
58. Financial hardship alone cannot constitute special circumstances: per s 1237AAD. Further, for financial hardship to be pertinent a person’s financial situation must be exceptional, rather than merely “straitened”. (see Re Colaiacolo and Secretary, Department of Social Security [1985] AATA 91 at [20]). Mr Cox’s current financial situation is not exceptional. His home is unencumbered. He receives age pension and continues to hold financial assets, including superannuation in excess of $100,000.
59. I accept that Mr Cox’s circumstances are unfortunate, but Mr Cox has had the benefit of Commonwealth money to which he was not entitled, and there is no injustice in requiring him to repay it. Taxpayers are entitled to expect that, in the ordinary course, money paid to Centrelink beneficiaries to which they are not entitled will be recovered: Secretary, Department of Social Security v Hales (1998) 82 FCR 154 and Davy v Secretary, Department of Employment & Workplace Relations (2007) 94 ALD 693 at 716.
DECISION
60. The decision under review is affirmed.
I certify that the 60 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member.
Signed: .....................................[sgd]........................................
Nicholas Olson, AssociateDate of Hearing 6 May 2011
Date of Decision 25 May 2011
Solicitor for the Respondent Stefanie Memmott, Centrelink Advocacy Branch
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