Cziesche and Secretary, Department of Family and Community Servic Es

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [2003] AATA 1232

ADMINISTRATIVE APPEALS TRIBUNAL )

) N02/1518 & 1519

GENERAL ADMINISTRATIVE DIVISION		)
Re		MRS MARIA CZIESCHE & ESTATE OF THE LATE MR GUSTAV CZIESCHE

Applicant

And

SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal

Ms G Ettinger, Senior Member

Ms C Prime, Member

Date 8 December 2003

Place Sydney

Decision

N2002/1518 This Tribunal affirms the decision of the Secretary, Department of Family and Community Services (“the Respondent”), of 11 June 2001, to raise a debt of $8,907.01 against Mrs Maria Cziesche for Age Pension paid from 1 July 1999 to 22 May 2001, which decision was affirmed on review by an Authorised Review Officer of the Respondent on 26 July 2002, and further affirmed by review of the Social Security Appeals Tribunal dated 2 September 2002.

N2002/1519 This Tribunal affirms the decision of the Secretary, Department of Family and Community Services of 11 June 2001 to raise a debt of $5,976.96 against the Estate of the late Mr Gustav Cziesche for Age Pension paid from 1 July 1999 to 20 June 2000, a decision affirmed on review by an Authorised Review Officer of the Respondent on 26 July 2002, and further affirmed by review of the Social Security Appeals Tribunal on 2 September 2002.

[Sgd] Ms G Ettinger
Senior Member

CATCHWORDS

Social Security - age pension payments – debts raised - deemed assets/income - loan to companies may under certain circumstances be disregarded - special circumstances raised to plead waiver of debts - decisions affirmed

LEGISLATION

Social Security Act 1991 ss 8, 9, 1122, 1224, 1075, 1077, 1084

CASE LAW

Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464

Beadle v Director-General of Social Security (1984) 6 ALD 1

Fielden and Secretary, Department of Social Security (AATA 13415, 15 October 1998)

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

Re Smith and Secretary, Department of Family and Community Services (2002) 71 ALD 770

Commonwealth v Daniels (1994) 33 ALD 111

Secretary, Department of Social Security v Banks (1990) 20 ALD 19

Secretary, Department of Social Security v Ellis (1997) 46 ALD 1

Beadle v Director-General of Social Security (1985) 7 ALD 670

Director-General of Social Services v Hales (1983) 47 ALR 281

REASONS FOR DECISION

8 December 2003

Ms G Ettinger Senior Member

Ms C Prime Member

N2002/1518 -The decision under review before the Administrative Appeals Tribunal (“the Tribunal”), in this matter, was the decision of the Secretary, Department of Family and Community Services (“the Respondent”), of 11 June 2001, to raise a debt of $8,907.01 against Mrs Maria Cziesche for Age Pension paid from 1 July 1999 to 22 May 2001, which decision was affirmed on review by an Authorised Review Officer of the Respondent on 26 July 2002, and further affirmed by review of the Social Security Appeals Tribunal dated 2 September 2002.
N2002/1519 - The decision under review before the Tribunal in this matter, was the decision of the Secretary, Department of Family and Community Services of 11 June 2001 to raise a debt of $5,976.96 against the Estate of the late Mr Gustav Cziesche for Age Pension paid from 1 July 1999 to 20 June 2000, a decision affirmed on review by an Authorised Review Officer of the Respondent on 26 July 2002, and further affirmed by review of the Social Security Appeals Tribunal on 2 September 2002.
At the hearing, Mrs Cziesche was represented by Mr N O’Rourke, accountant of Jack Edward King, Chartered Accountant, and the Respondent by Ms H Schuster, advocate of the Respondent. Mrs Cziesche gave evidence in her own matter N2002/1518, and gave evidence as executor of her husband’s estate in matter N2002/1519.

ISSUES TO BE DECIDED

The issues before the Tribunal were:

whether Mrs Maria Cziesche owes a debt of $8,907.01 for Age Pension paid from 1 July 1999 to 22 May 2001; and
whether the Estate of the late Mr Gustav Cziesche owes a debt of $5,976.96 for Age Pension paid from 1 July 1999 to 20 June 2000.

In deciding this, the Tribunal had to consider:

whether the loans made by Mrs Cziesche and the late Mr Gustaf Cziesche to Glowjib Pty Ltd (“Glowjib”) and Hyena Pty Ltd (“Hyena”), companies of which they were directors, could be disregarded in the calculation of financial assets; and if not,
whether special circumstances existed pursuant to section 1237AAD of the Social Security Act 1991 (“the Act”) in order to waive recovery of all or part of the debts; or
whether the debt could be waived pursuant to section 1237A of the Act which is concerned with administrative error.

APPLICATION OF THE LAW

Section 1077 of the Social Security Act 1991 (“the Act”), gives the method of calculating the income deemed to have been received from financial assets above the “deeming threshold”.
Mr and Mrs Cziesche’s ordinary income was calculated by taking into account their “financial assets” and “deeming threshold” in the application of section 1077(3A) of the Act. At all relevant times the “deeming threshold” for Mr and Mrs Cziesche was $51,200. If the loans by Mr and Mrs Cziesche to Glowjib and Hyena are included as “financial assets”, then their combined “financial assets” were $342,738, that is above the deeming threshold at the relevant times.
Section 9 of the Act provides the definition of “financial asset” and “financial investment”:
“financial asset means:
(a) a financial investment; or
(b) a deprived asset.
financial investment means:
…
(e) a loan that has not been repaid in full;
…”
Section 1122 of the Act deals with the treatment of loans made by the person as financial assets:
“1222If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.”
If, as a result of these calculations, if a person was paid more pension than his or her entitlement, the excess amount is a debt pursuant to section 1223(1) of the Act. This debt can be raised under section 1224 of the Act if a false statement or false representation has been made:
“1224 Debts arising from recipient's contravention of Act
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 this Act or the 1947 Act;
the amount so paid is a debt due by the recipient to the Commonwealth.
Note: If the person does not pay the debt or enter into an agreement to pay the debt within a certain time, interest may become payable on the debt (see section 1229). If the person enters into an agreement to pay the debt and breaches the agreement, interest may become payable on the debt (see section 1229A).”
In the AAT case Fielden and Secretary, Department of Social Security (AATA 13415, 15 October 1998), it was held that there is no discretion available to the Secretary, nor to the Tribunal, to disregard loans for the purposes of calculating financial assets.
At the end of the debt period, the only exemption to inclusion of certain investments as financial assets, was under section 1084 of the Act, by determination, in writing, of the Minister. The Tribunal was not aware of any such determination made in regard to the financial assets of Mr and Mrs Cziesche.
By way of completeness, the Tribunal notes that subsequent to the debt period, as of 20 September 2001, section 1084(2) of the Act was inserted to permit a financial investment that is regarded as unrealisable for the purposes of the assets test hardship provisions, to be automatically exempted from inclusion in the definition of financial assets. However, this provision did not apply at the end of the period for which the debt was calculated, and hence cannot apply to the case of Mr and Mrs Cziesche.
In regard to whether a debt which has been calculated must be recovered, section 1237A of the Act provides that debts caused solely by administrative error of the Commonwealth must be waived. This section does not cover waiver of part of a debt which was attributable partly to administrative error and partly to other factors.
Section 1237AAD of the Act provides that the Secretary may waive the right to recover all or part of a debt under “special circumstances”.

EVIDENCE BEFORE THE TRIBUNAL

The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, and the following other Exhibits.

ITEM	DATE	NAME
Hyena Shredder P/L Brochure	Circa 1998	Exhibit A1
Deposit Book - Commonwealth Bank Australia	26 May 1998 – 28 April 2000	Exhibit A2
Hyena P/L A/C deposits year ended 30 June 1999 CBA Katoomba, plus Centrelink letter 4 pages	6 June 2003 12 June 2003	Exhibit A3
Hyena P/L list of deposits year ended 30 June 1999 CBA Katoomba 2559	2 September 2003	Exhibit A4
Hyena P/L Reconstructed Balance Sheets by Mr King	25 August 2003	Exhibit A5
Letter of Mr King with attachments to Centrelink	20 May 2003	Exhibit A6
Wages records - 2 pages	various	Exhibit A7
Letter of Mr King regarding rent	21 June 2000	Exhibit A8
Applicant's Statement of Facts and Contentions	12 August 2003	Exhibit A9
Summary of deposits from CBA	27 August 2003	Exhibit A10
Cash book reconciliation	April 2000	Exhibit A11
T-Documents, section 37 of the Administrative Appeals Tribunal Act 1975 T1 - T56, pp 1-194	various	Exhibit R1
Respondent's Statement of Facts and Contentions	22 August 2003	Exhibit R2

Mrs Cziesche and Mr Jack Edward King, chartered accountant, gave oral evidence before the Tribunal. Mrs Cziesche gave evidence on her own behalf, and also as executor of her husband’s estate. The Tribunal noted further that she was, at the relevant times, a director of Glowjib Pty Ltd and Hyena Pty Ltd, along with her husband.

FACTS AND CHRONOLOGY

In an application by letter of 5 October 2002 (T1), lodged with the Tribunal on 11 October 2002, the Applicant sought to have reviewed, two decisions of the Social Security Appeals Tribunal, as detailed in the paragraphs above.
The Tribunal noted that at all relevant times during the debt periods, (1 July 1999 – 22 May 2001 in relation to Mrs Cziesche, and 1 July 1999 – 20 June 2000 in relation to Mr Cziesche), the couple received the maximum rate of Age Pension at the married rate. Mr Cziesche died on 5 June 2000.
On 18 December 1995, Mr Cziesche and Mrs Cziesche received letters from Centrelink advising that they must advise within 14 days if their combined financial assets went above $252,000.Further letters were sent to Mr Cziesche (27 May 1998) and Mrs Cziesche (27 June 2000) advising that they must advise within 14 days if their combined financial assets went above $228,992.
The Tribunal noted that there was no record of advice as to the amount of financial assets given to Centrelink in respect of these requirements, either by Mr Cziesche or by Mrs Cziesche.
Through data matching with ASIC records, the Respondent became aware of Mr and Mrs Cziesche’s involvement with Glowjib and Hyena.
ASIC records for Glowjib indicated it had been registered prior to 1 July 1998, was de-registered on 3 July 1998, remained de-registered for the period of the debts, from 1 July 1999 to 22 May 2001, was subsequently re-registered. Records indicated it was registered at 21 May 2002 (T22). Originally, Mr Cziesche was a director and Mrs Cziesche was a director and the Secretary. Glowjib was de-registered on 9 June 2002. The most recent annual return was received on 21 January 2002. The financial statements for the year ending 30 June 1999 showed that Mr and Mrs Cziesche each had a loan of $49,335.00 (T18).
ASIC records for Hyena showed it was registered prior to 1 July 1998, and was registered at 21 May 2002. Originally, Mr Cziesche was a director, while Mrs Cziesche was a director and the Secretary. The most recent annual return was received on 24 January 2002. The financial statements for the year ending 30 June 1999 showed that Mrs Cziesche had a loan of $122,134.83 and Mr Cziesche had a loan of $121,934.85 (T18).
For the period of Mr Cziesche’s debt, he was paid $8,026.86 Age Pension by the Respondent. If deemed income from financial assets represented by these loans were taken into account, only $2,049.90 was payable as Age Pension, and the Tribunal was satisfied that the difference of $5,976.96 therefore arose as a debt.
For the period of Mrs Cziesche’s debt, she was paid $17,600.21 Age Pension by the Respondent. If deemed income from financial assets represented by these loans were taken into account, only $8,693 was payable to her as Age Pension, and the Tribunal was satisfied that the difference of $8,907.01 therefore arose as a debt.

APPLICANT’S SUBMISSIONS

The Applicant conceded that the amounts shown as loans to Glowjib by both Mr Cziesche and Mrs Cziesche at 30 June 1999 were accurate.
Mr O’Rourke submitted that Glowjib was a company formed exclusively to hold a single asset, Mr and Mrs Cziesche’s house. It was previously de-registered, but was re-registered in January 2002 for the purpose of selling that house. After Mr Cziesche’s death, the house was sold for $220,000. Mrs Cziesche’s evidence was that the proceeds were used to pay off the mortgage of approximately $100,000, certain associated costs and some personal debts. At the Hearing, Mrs Cziesche told the Tribunal that at her husband’s death she had $3,000 in the bank, and that she was assisted by her family from South Africa. She said that currently only $55,000 of the total realised for the house remained. (The Tribunal noted that the Social Security Appeals Tribunal recorded Mrs Cziesche as having given evidence there that $78,000 was invested by the Applicant in a pension scheme).
The financial statements for the year ending 30 June 1999, dated 2 April 2000, and showing the loans by Mr and Mrs Cziesche to Hyena, were prepared by Mountains Financial Services Pty Ltd (Mountains) (T18). A tax return for the year ending 30 June 1999 was lodged on the basis of these financial statements. The Applicant contended that these financial statements were incorrectly prepared, and incorrectly accounted for the income of Hyena. Later, Hyena’s financial statements for the year ending 30 June 2000 were prepared by Berger Piepers, Chartered Accountants.
The Applicant commissioned the firm of Jack Edward King, Chartered Accountant, (“JEK”), to re-do the financial statements for the year ending 30 June 1999 (Exhibit A5). In re-constructing the accounts as at 30 June 1999, JEK sought records available from both Mountains and Berger Piepers, and conducted an extensive search through a number of banks to identify Hyena’s transactions for that year which passed through Hyena bank accounts.
At JEK’s request, Centrelink contacted the Commonwealth Bank at Katoomba, requesting pursuant to sections 192, 194 and 196 of the Social Security (Administration) Act 1999, copies of original deposit vouchers and details in regard to a list of deposit transactions for the account of Hyena, dated between 1 July 1998 and 30 June 1999. Information was supplied in response to this request (Exhibit A10).
Records made available from Mountains were queried, and these queries produced some further information, including copies of bank statements, hand written cash reconciliation schedules, and a payroll register relevant to the year ending 30 June 1999 (Exhibit A7). The payroll register showed no entries for either Mr or Mrs Cziesche. Mrs Cziesche, under examination, said that neither she nor Mr Cziesche had ever been paid wages by Hyena, and that she and her husband did not normally use company money to pay personal expenses, because there was none available.
The records obtained from Berger Piepers indicated ledger entries for the year ending 30 June 1999 showing sums of money were transferred to shareholders loan accounts, including an amount of $180,000.
Mr Jack Edward King, under examination, stated that he was confident the re-prepared financial statements for Hyena, dated 28 August 2003, and relating to the 1999 year (Exhibit A5), were more accurate than those earlier prepared by Mountains. The Tribunal noted that the re-prepared financial statements showed no loans to either to Mr or Mrs Cziesche.
Mr King told the Tribunal that JEK’s searches were very extensive and time consuming, and that there was nothing in the information obtained justifying entries of the loans by Mr and Mrs Cziesche to Hyena. Mr King said that attempts were made to reconcile some bank transactions and journal entries, but as some substantial journal entries appeared to bear no relation to sales, and also in the absence of notations in regard to deposits, that it was not possible to make adjustments to the existing accounts. Accordingly, he had decided new accounts should be prepared.
Mr King acknowledged that he prepared the new financial statements relying on information provided by Mountains, and that there may have been relevant information which he did not receive, such as instructions to Mountains from Mr Cziesche, or documents supporting the journal entries creating the loans. He also acknowledged that JEK had no information as to whom the wages recorded in the payroll register were paid. (The Tribunal noted that Mrs Cziesche’s evidence in that regard was that her husband employed a regular casual whose labour was sought from time to time as necessary). The Tribunal noted that the re-prepared financial statements have not been lodged with the ATO.
Several versions of deposit lists for Hyena for the year ending 30 June 1999 were prepared by JEK as further information on deposits came to light from banks. The latest list was taken into evidence as Exhibit A4. These deposit lists gave no indication of any cash amount of loan passed through a bank transaction to Hyena, from either Mr or Mrs Cziesche. It was acknowledged by JEK that the identification of deposits to Hyena for that year was not complete.
Mrs Cziesche’s evidence was that she had little contact with the financial side of her husband’s business, saying that she only assisted in the administrative side of the business and entertained business visitors at the house. She said that the couple relied on their Age Pension payments for living expenses. The Applicant further contended that she had no understanding of the business of Hyena, and no accounting knowledge. She submitted that if she signed financial statements or tax returns either as a director or the Secretary of Hyena, she did so at the request of her husband without understanding the contents.
However Mrs Cziesche contended, and appeared to know, that no cash amount was loaned by herself to Hyena. She also said that she had no knowledge of any cash amount loaned by Mr Cziesche to Hyena. She was confident of this, she said, because there was no money available. She did not understand how the loan figures got into the accounts. She stated that it had not been possible for Mr Cziesche or herself to draw wages from Hyena. Hyena had never been financially successful, and was subsequently wound up on 9 June 2002 she submitted. The submission was that no monies were recovered from Hyena by the Applicant between Hyena’s incorporation on 13 March 1998, and its de-registration on 9 June 2002.
A letter from the landlord of Hyena’s factory was tendered as Exhibit A8. This letter indicated that rent and other money was owing to the landlord at 21 June 2000, (on Mr Cziesche’s death), and that on the winding up of Hyena, equipment and other items were accepted by the landlord in part payment of these debts.

The Applicant contended that there were three issues to be decided.

Applicant’s Issue 1: That the amount of financial assets of the Applicants (as defined in sections 9 and 1077 of the Act) was below the permissible limits allowed by the Act for pension recipients. This was contended to be because Hyena’s financial statements for the year ending 30 June 1999 were incorrectly prepared in that they incorrectly recorded a loan from the Cziesches during that year.
Applicant’s Issue 2: That any amount of financial assets owing to the Applicant as a result of loans made to Hyena between 13 March 1998 and 30 June 2000 should be considered to be unrealisable, and therefore be treated as an excluded asset under section 1084 and section 1084(2) of the Act. This was based on the Applicant’s contention that no monies were recovered from Hyena by the Applicant between Hyena’s incorporation on 13 March 1998 and its de-registration in 2002.
Applicant’s Issue 3: That any amount repayable by the Applicant to the Respondent should be waived by the Respondent under section 1237AAD of the Act, because the estate of the late Mr Cziesche had been wound up. The Applicant knew that any loans to Hyena would never be recovered, there was no false statement from the Applicant, and the Applicant had suffered financial and emotional loss as a result of the action for recovery commenced by Centrelink.

RESPONDENT’S CONTENTIONS

The Respondent submitted that the balance sheet statements of Hyena for the year ending 30 June 1999, as prepared by Mountains early in 2000, and which formed the basis of the tax return submitted in respect of that year, were prima facie evidence of a loan being made by both Mr and Mrs Cziesche to Hyena. The combined value of these loans was $245,269.68.
Similarly, the balance sheet statements of Glowjib for the year ending 30 June 1999, as prepared by Mountains early in 2000, and which formed the basis of the tax return submitted in respect of that company for that year, were prima facie evidence of a loan being made by both Mr and Mrs Cziesche to Glowjib. The combined value of these loans was $98,670.
These financial statements stated that Mr and Mrs Cziesche lent money to these companies, and the Tribunal, having examined the documents related to his matter, should find that it was bound to accept that this was the situation. Pursuant to section 1122 of the Act, the loans not having been repaid, their value had to be included in the assets of the couple.
The fact that Glowjib was de-registered for the period of the debts was of no consequence as the loans existed throughout this period.
Accordingly, the Respondent submitted, the Tribunal should find that the debts were correctly raised with regard to overpayment of Age Pension in relation to both Mr and Mrs Cziesche for the periods specified above. The Respondent submitted that as there were no grounds for the application of sections 1237A or 1237AAD of the Act, the Tribunal should affirm the decisions under review.

THE TRIBUNAL

The Tribunal had to take into account all the evidence, submissions, legislation and case law to make the correct and preferable decision, and decide whether the loans Mr and Mrs Cziesche made to their companies Glowjib and Hyena were financial assets which exceeded relevant thresholds, and accordingly created debts of Age Pension paid to Mr and Mrs Cziesche as claimed by the Respondent. The relevant periods were 1 July 1999 to 22 May 2001 for Mrs Cziesche and 1 July 1999 to 20 June 2000 in regard to the late Mr Cziesche. Further there was the issue of whether any of the debts could be waived in whole or in part.
The Tribunal will not here recite the situation regarding the registration, deregistration and re-registration of the companies, Glowjib and Hyena of which Mr and Mrs Cziesche were directors at the relevant times. These facts were not disputed and have been referred to in the paragraphs above, and in the decision of the Social Security Appeals Tribunal at T2/6.
The Tribunal noted from Mrs Cziesche’s evidence that Mr Cziesche had been an inventor and had invented a tyre shredder which he had built. Several units had been manufactured and sold before Mr Cziesche’s illness, commencing with a heart attack in 1995 and culminating in death in June 2000.
The Tribunal accepted that the amounts of the loans to each director shown in the accounts of Glowjib for 30 June 1999 were $49,335 each for Mr and Mrs Cziesche, and for Hyena for the financial year ending 30 June 1999, $122,134.83 in regard to Mr Cziesche and $121,934.85 in regard to Mrs Cziesche. The financial statements for the year ending 30 June 1999 were produced by Mountains, and appeared in the documents before the Tribunal. Tax returns were lodged based on these. The Tribunal noted the explanation before it made on behalf of the Applicant that the loans did not arise as a result of actual funds lent by the couple to the companies, but could have been devised as part of an accounting measure undertaken in anticipation of tax advantages, or the Tribunal understood, the companies earning profits in future years.
The Tribunal accepted that JEK made extensive investigations into the cash transactions of Hyena which may have demonstrated some inaccuracies in the originally prepared accounts. The Tribunal accepted that information on the cash transactions themselves was difficult and time consuming to obtain, has been updated several times, and may not yet be complete.
The Tribunal acknowledged the practice that a loan in financial statements need not be created by a cash transaction, and that cash transactions are only part of the information needed to assess a company’s financial position. A loan may be created be means other than a cash injection, principally by journal entry. It is not material that the loans to Hyena at issue in this case were two very large loans, one to each shareholder.
Accordingly, consideration of the deposit transactions into the Hyena bank accounts alone would not resolve the issue.
The Tribunal noted that Mrs Cziesche commissioned JEK to reconstruct the financial statements for the year ending 30 June 1999.
The Tribunal accepted that there may have been valid reasons for the creation of these loans, even though these reasons were not made available to JEK for reviewing the financial statements for the year ending 30 June 1999. Such reasons may not have been apparent in documented transactions, and may have included instructions from Mr Cziesche or Hyena to Mountains. It has been acknowledged by JEK that complete information on which the original financial statements were based may not have been supplied.
The time elapsed since the original financial statements were prepared, of nearly three years, also mitigated against the value of the re-prepared financial statements, as detail may have been lost during that time. Generally, an investigation into financial matters carried out close to the time period covered by financial statements is to be preferred to the results of an investigation carried out several years later.. Mr and Mrs Cziesche lodged the accounting and tax records as a true record of their business activities at the time, and Mrs Cziesche cannot now, because it appears more expedient, have them changed. The Tribunal noted further that the reconstructed accounts and consequent tax returns had not been lodged at the time of the Hearing.
The time at which it has been necessary to make the determinations resulting in this decision has been important. The debt period ended on 22 May 2001 for Mrs Cziesche, and on 20 June 2000 for Mr Cziesche. The time of the latest advice from Centrelink of requirement for notification if financial assets exceeded the deemed limit was 27 June 2000. At this time, the latest available financial statements for Hyena were those for the year ending 30 June 1999, prepared on 2 April 2000, by Mountains. The loans to Mr and Mrs Cziesche were still shown in the financial statements for the year ending 30 June 2000 prepared by Berger Piepers. These were the accounting periods on which Centrelink needed to rely to assess whether financial assets exceeded the deemed limit. The financial statements for later years are not relevant.
For these reasons, the Tribunal was not able to accept that the re-prepared financial statements accounts to be more accurate that those originally prepared. The Tribunal was not satisfied from the evidence and submissions that the loans to Hyena shown in the Mountains financial statements for the year ending 30 June 1999 did not exist. Accordingly, these financial assets are as calculated by the Respondent, and are above the “deeming threshold” limits determined pursuant to section 1077(3A) of the Act. Accordingly, Mr and Mrs Cziesche’s debts as raised, were correct.

whether waiver is applicable pursuant to section 1237a of the act

The Tribunal moved then to consider whether the debts could be waived pursuant to section 1237A of the Act. This section deals with the situation of sole administrative error of the Department. The Respondent acknowledged some administrative error on the part of Centrelink in not taking action to determine whether the loans still existed as at October 2000 when they were brought to its attention. However, the Respondent contended that section 1237A of the Act did not apply, because Centrelink was not solely the cause of Mr and Mrs Cziesche’s Age Pension being paid at the wrong rate.
The Tribunal found from the evidence before it that Mr and Mrs Cziesche did not inform the Respondent of the existence of Glowjib and Hyena, or the loans shown in the company financial statements for the year ending 30 June 1999. Accordingly, even if the Respondent erred in not following up earlier than it might have, the overpayments of Age Pension to Mr and Mrs Cziesche did not arise due to sole administrative error of the Respondent. Accordingly the waiver provisions of section 1237A of the Act cannot apply.

whether waiver is applicable pursuant to section 1237aad of the act

The Tribunal next considered waiver pursuant to section 1237AAD of the Act which provides that all or part of a debt may be waived if “special circumstances” can be found to warrant that.
In deciding this, the Tribunal took into account the fact that Mrs Cziesche sold her house after the death of her husband for $220,000, paid off debts, and had at the date of Hearing, according to her evidence, $55,000 remaining. The Tribunal was mindful that Mrs Cziesche’s submissions with regard to “special circumstances” were with regard to her financial difficulties, and feeling emotional and confused regarding her circumstances.
The Tribunal considered the application of “special circumstances”, which are not defined under the Act, but which have well established case law surrounding the concept. In particular the Tribunal took into account the case of Re Secretary, Department of Social Security andBolton (1989) 18 ALD 464 where Deputy President Todd had found that in relation to “special circumstances” a global approach had to be taken. The Tribunal was mindful that in Bolton (supra), a decline in the health of the applicant in that case, had not been found sufficient to constitute “special circumstances”. The Tribunal was mindful that Bolton (supra) had been decided pursuant to the 1947 Act and that at paragraph 24 Deputy President Todd had stated:
“In the various decisions which turn on this question, the Tribunal has consistently searched for circumstances which are ‘unusual, uncommon or exceptional’ to ascertain whether strict application of s 153 is ‘unjust unreasonable or otherwise inappropriate’....It appears that the useful guidelines for the exercise of the discretion set out in Re Krzywak (1988) 15 ALD 690 have been followed by the Tribunal in later decisions. The factors to be considered are thus financial hardship; legislative changes; incorrect legal advice; and ill health…”
Another leading case where the Tribunal discussed “special circumstances” as being those which are “unusual, uncommon or exceptional” was Beadle v Director-General of Social Security (1984) 6 ALD 1. There are many other cases such as Secretary, Department of Social Security v Hulls (1991) 22 ALD 570, Re Smith and Secretary, Department of Family and Community Services (2002) 71 ALD 770, Commonwealth v Daniels (1994) 33 ALD 111, Secretary, Department of Social Security v Banks (1990) 20 ALD 19 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1 where “special circumstances” have been considered.
In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court, in examining “special circumstances” within the terms of section 102(1) of the 1947 Act stated:
“It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given.”

The Full Court of the Federal Court in Beadle (supra) stated at 675:
“While we would place less emphasis on one dictionary definition of ‘special’, we are in broad agreement with the approach of the Tribunal and are in agreement with its conclusion.”

In Director-General of Social Services v Hales (1983) 47 ALR 281 at 321 Sheppard J said:
“The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances.”

The Tribunal was mindful of their Honours’ statements in Beadle (supra) and Director-General of Social Services v Hales (1983) 47 ALR 281 that financial hardship is a circumstance of almost every person who is obliged to rely on income support. The Tribunal was mindful also that in relation to section 1237AAD, the legislation specifically mandates that financial circumstances alone cannot constitute “special circumstances”. Whilst The Tribunal was sympathetic to Mrs Cziesche’s personal grief, it was not satisfied to the requisite standard that her circumstances met the tests for “special circumstances”.
Accordingly the Tribunal declined to exercise the discretion to apply the waiver of either Mr or Mrs Cziesche’s debts pursuant to section 1237AAD of the Act.

whether financial assets owing to the parties can be considered to be excluded assets pursuant to section 1084 of the act

The Tribunal also considered whether any amount of financial assets owing to the Applicant as a result of loans made to Hyena between 13 March 1998 and 30 June 2000 should be considered to be unrealisable, and therefore treated as an excluded asset under section 1084 of the Act. The Tribunal has no powers in that regard, that being a matter for determination by the Minister, and it was noted that no such determination had been made by the Minister.
Two factors are relevant in that regard. The Tribunal noted that the SSAT indicated that Centrelink had failed to make a proper referral in this matter, and that since the end of the debt period, section 1084(2) of the Act had been inserted to change the requirements for an investment to be excluded from this determination. Accordingly Centrelink may be able to assist Mrs Cziesche to follow this up with the Minister.
However this Tribunal must for the reasons given above, affirm the decisions it is reviewing.

DECISION

N2002/1518 This Tribunal affirms the decision of the Secretary, Department of Family and Community Services (“the Respondent”), of 11 June 2001, to raise a debt of $8,907.01 against Mrs Maria Cziesche for Age Pension paid from 1 July 1999 to 22 May 2001, which decision was affirmed on review by an Authorised Review Officer of the Respondent on 26 July 2002, and further affirmed by review of the Social Security Appeals Tribunal dated 2 September 2002.
N2002/1519 This Tribunal affirms the decision of the Secretary, Department of Family and Community Services of 11 June 2001 to raise a debt of $5,976.96 against the Estate of the late Mr Gustav Cziesche for Age Pension paid from 1 July 1999 to 20 June 2000, a decision affirmed on review by an Authorised Review Officer of the Respondent on 26 July 2002, and further affirmed by review of the Social Security Appeals Tribunal on 2 September 2002.

I certify that the 74 paragraphs above are a true copy of the reasons for the decision herein of Senior Member G Ettinger and Member C Prime

Signed: L Bonouvrie
Associate

Date of Hearing 2 September 2003; notification regarding final closing submissions 7 October 2003

Date of Decision  8 December 2003
Representative of the Applicant                Mr N O’Rourke (Accountant)
Respondent’s Advocate                 Ms H Schuster

[2003] AATA 1232

8 December 2003

Key Legal Topics

Areas of Law

Social Security Law

Legal Concepts

Administrative Law

Statutory Interpretation

Debt Recovery

Deemed Assets/Income