Daly and Secretary, Department of Employment and Workplace Relations
[2007] AATA 1881
•19 October 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1881
ADMINISTRATIVE APPEALS TRIBUNAL )
) Q200600889
GENERAL ADMINISTRATIVE DIVISION ) Q200600890 Re ANTHONY and MARIA DALY Applicants
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Dr KS Levy, RFD, Senior Member Date19 October 2007
PlaceBrisbane
Decision
The decision under review is set aside and the matter referred back to Centrelink for re-calculation of the debts for the periods identified for which the applicant did not satisfy the severe hardship rules.
..............................................
Senior Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – financial hardship rules – Centrelink raised debt – unrealisable asset – decision set aside
SOCIAL SECURITY – newstart allowance – financial hardship rules – Centrelink raised debt – unrealisable asset – decision set aside
Administrative Appeals Tribunal Act 1975 (Cth) s 37
Social Security Act 1991 (Cth) ss 11, 1129, 1131, 1132, 1223, 1236, 1237, 1237A, 1237AAD
Social Security and Repatriation (Budget Measures and Assets Test) Bill 1984
Acts Interpretation Act 1901 (Cth) s 15ABRepatriation Commission v Hall (1988) 15 ALD 84
Beadle v Director-General of Social Security (1985) 7 ALD 670
Dranichnikov v Centrelink (2003) 75 ALD 134
Maher and Secretary, Department of Family and Community Services (2001) 67 ALD 231REASONS FOR DECISION
19 October 2007 Dr KS Levy, RFD, Senior Member Introduction
1. The applicants in this matter are Mr Anthony Daly and his wife Mrs Maria Daly. They had a farm, which had been unprofitable due to drought for a long period. Mr Daly had been in receipt of disability support pension and Mrs Daly was receiving a newstart allowance. Their property was sold in July 2004 and Mr Daly did not report the sale and receipt of deposit monies, in the first instance. It was reported seven months later in February 2005.
2. On 9 June 2006 and 13 June 2006, Centrelink made a determination to raise debts and recover those debts from Mr and Mrs Daly, respectively, as follows:
(i)Mr Daly - $6,519.96 for period 12 September 2004 to 22 May 2005
(ii)Mrs Daly - $6,131.79 for period 12 September 2004 to 21 June 2005
3. The applicants sought review of these decisions. An Authorised Review Officer (ARO) reconsidered the matter and determined on 29 September 2006 that as the information about the sale of the Daly’s assets had been available to Centrelink from 3 February 2005, that recovery of the debt after that date should not be pursued. The ARO determined that the debt in relation to Mr Daly should therefore be waived for the period 3 February 2005 to 22 May 2005; and in respect of Mrs Daly, her debt should be waived for the period 3 February 2005 to 21 June 2005.
4. This reduced the amount recoverable against Mr Daly from $6,519.96 to $3,728.03. It also reduced the obligation to repay a debt by Mrs Daly from $6,131.79 to $3,277.34.
5. The respondent’s advocate informed the Tribunal that it now sought to extend the debt retrospectively to 11 July 2004. The debt periods are therefore claimed by the respondent to be 11 July 2004 to 2 February 2005, in respect of each of the applicants.
6. The origin of these debts was that Mr and Mrs Daly were granted a special rate of social security payment during the period under review under the financial hardship rules. Essentially, these are granted where an applicant has less than $10,000 in available cash. When the applicants sold their property, and failed to advise Centrelink, the respondent argues that there was then no entitlement to the special rate of social security payments from the 11 July 2004.
7. The matter was reviewed also by the Social Security Appeals Tribunal which affirmed the original decision as varied by the ARO.
8. Mr Daly represented himself and Mrs Daly at the hearing. The respondent was represented by its advocate Mr Ben Avery.
Issues
9. The issues for determination by the Tribunal are:
(i)Whether Mr and Mrs Daly failed to qualify for “severe financial hardship” from 12 September 2004 (or some earlier date); and if so
(ii)Whether Mr and Mrs Daly were overpaid disability support pension and newstart allowance respectively; and if so
(iii)Whether the overpayments are a debt due to the Commonwealth; and if so
(iv)Whether the debts should be recovered.
Evidence
10. The Tribunal admitted the following documents into evidence:
·Exhibit 1 The T documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975
·Exhibit 2 Copies of Centrelink file notes shown sequentially (2 batches)
·Exhibit 3 Financial information of Mr and Mrs Daly
·Exhibit 4 Letter from Rigby Lawyers concerning the sale of “Bularka”
11. Mr Daly provided medical certificates at the hearing for both himself and Mrs Daly. Mrs Daly was unavailable to attend the hearing.
·Mr Daly
12. Mr Daly gave sworn evidence. He explained the difficulty he had in managing his property during the long period of drought. He and Mrs Daly had been granted social security benefits under the special hardship provisions. He stated that their property was in the business of fattening and selling cattle, although he had made no income for approximately 14 years. He had developed his property and built 19 dams between 1990 and 2004. He had water rights to pump water on his property.
13. Mr Daly stated his wife had breast cancer and had to have a breast removed. She still suffered health problems as did Mr Daly. He had endeavoured to sell his property and after having one interested buyer, that sale fell through. He then had interest from a buyer in NSW who agreed to buy the property for $820,000. A deposit of $82,000 was paid and this was released to Mr Daly on 11 July 2004. While the sale was delayed for some time, owing to some delay in ability to settle of behalf of the purchaser, as well as a family dispute about the sale of the property on the applicant’s side, Mr Daly nevertheless used much of the purchase monies to buy a 4 wheel drive vehicle. He explained that his previous car was completely unreliable and that he had to drive his wife from Rathdowney to hospital on the outer northern suburbs of Brisbane.
14. He had agreed to allow the purchaser to take possession of the property prior to settlement. During this period also, his former wife from whom he separated in 1972, and his two sons from that former marriage, attempted to prevent settlement and made certain claims against the property. Mr Daly had intended leaving 51% of his Estate to his children and 49% to his present wife. However, the claims made by his sons elongated the process of settlement because of threatened litigation.
15. Mr Daly’s evidence was that after signing the contract of sale and before settlement, he and his wife moved to Clontarf and had mail redirected from Rathdowney to a Post Office box at Woody Point. During this period he was concerned about cancer treatment for his wife as well as a threat that the current purchaser would pull out of the sale if he could not proceed. Consequently, he agreed to grant possession to the purchaser for most of the period between signing the contract and settlement. He subsequently settled the claims by his sons and the sale completed on 23 May 2005.
16. Other transactions which affected the applicants’ entitlements to social security benefits over that period may be summarised as follows:
(i)11 July 2004 – deposit of $82,000 was received by Mr and Mrs Daly.
(ii)21 July 2004 – Mr Daly paid approximately $67,000 for a car
(iii)12 September 2004 – the applicants sold farm machinery and received $60,000 (including GST)
(iv)2 November 2004 – the applicants spent $10,192.59 for the purchase of a caravan for Mr and Mrs Daly to live in after vacating their farm in favour of the purchaser (Folio 283)
(v)23 May 2005 – contract was settled and balance of purchase monies of $714,776.03 was paid (T35, fol 228)
17. In order to finalise the contract, Mr Daly had agreed to pay $400,000 to be invested for his son Mark Daly and a further amount of $76,517.35 to be invested for his other son, Dean Daly. After the amount of $476,517.35 was paid to his sons and was deducted from the balance of purchase monies, there remained an amount of $238,259.03 payable to Mr and Mrs Daly.
18. The financial transactions are verifiable to a large degree (with the exception of the contract deposit monies received), from the bank statements (see folios 273 – 310 of the T documents). These records in summary show relevant/significant balances as follows:
(i)Bank account at Beaudesert Branch of ANZ Bank
26 August 2004
28 September 2004
Balance
Balance
$6,569.00
$7,672.85
28 September 2004 $61,151.53
Deposit $54,035.23
(Sale of Farm machinery
Inclusive of GST)$61,708.08
28 October 2004
Balance
$56,232.57
29 October 2004
Withdrawal $45,000.00
$11,232.57
2 November 2004
Withdrawal (caravan) $10,192.59
$1,000.00
…
20 May 2005
Balance
$330.60
(ii)Bank account at Redcliffe Branch of ANZ Bank
29 October 2004
Opening Balance/deposit $45,000.00 (Part Deposit Monies – repayable if contract failed; surety for legal fees - if contract is finalised.)
$45,000.00
2 November 2004
Withdrawal $37,000.00
$8,000.00
8 November 2004
….
Cheque withdrawal $4,328.00
$3,672.00
28 February 2005
Balance
$ 626.80
2 March 2005
Deposit $5,000
$ 5,626.80
…
29 April 2005
Balance
$5,243.34
(iii)Account with ANZ Bank
2 November 2004
1 January 2005
Opening Deposit $45,192.59
Balance
$45,192.59
$45,518.47
2 March 2005
Withdrawal $5,000
$40,518.47
…
1 April 2005
Balance
$40,993.70
Consideration
19. All of the documentary and oral evidence has been taken into account in arriving at a decision in this matter. The statutory and relevant case law also has been taken into account. In arriving at a decision, there was also an adjournment at the hearing for the respondent to make some further written submissions, given the complexity of some of the transactions which occurred as well as their practical effect on the applicants.
Relevant Legislation
·Social Security Act 1991
“1129 Access to financial hardship rules–pensions
1129 (1) If:
(a) either:
(i)a social security pension is not payable to a person because of the application of an assets test; or
(ii) a person's social security pension rate is determined by the application of an assets test; and
(b) either:
(i)sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or
(ii) the Secretary determines that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(c) the person, or the person's partner, has an unrealisable asset; and
(d) the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(e) the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
1131 Access to financial hardship rules–benefits
1131(1) If:
(a) a social security benefit is not payable to a person because of the application of an assets test; and
(b) the person is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and
(c) the person's partner is not receiving and is not eligible to apply for acceptable alternative Commonwealth income support; and
(d) either:
(i) sections 1108 and 1109 (disposal of income) and 1124A, 1125, 1125A, 1126, 1126AA, 1126AB, 1126AC and 1126AD (disposal of assets) do not apply to the person; or
(ii)the Secretary decides that the application of those sections to the person should, for the purposes of this section, be disregarded; and
(e) the person, or the person's partner, has an unrealisable asset; and
(f) the person lodges with the Department, in a form approved by the Secretary, a request that this section apply to the person; and
(g) the Secretary is satisfied that the person would suffer severe financial hardship if this section did not apply to the person;
the Secretary must determine that this section applies to the person.
…
1132 Application of financial hardship rules–benefits
1132(1) Value of unrealisable asset to be disregarded
1132(1) If section 1131 applies to a person, the value of:
(a) any unrealisable asset of the person; and
(b) any unrealisable asset of the person's partner;
is to be disregarded in working out whether a social security benefit is payable to the person.
……
1223 Debts arising from lack of qualification, overpayment etc.
1223(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.
1236 Secretary may write off debt
1236(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.
1236(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.
1236(1B) For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(a) the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or
(aa) the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or
(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d) the debtor has died leaving no estate or insufficient funds in the debtor's estate to repay the debt.
1236(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
(b) deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c) setting off under section 84A of that Act;
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.
…
1237 Power to waive Commonwealth's right to recover debt
Secretary's limited power to waive
1237(1) On behalf of the Commonwealth, the Secretary may waive the Commonwealth's right to recover the whole or a part of a debt from a debtor only in the circumstances described in section 1237A, 1237AA, 1237AAA, 1237AAB, 1237AAC or 1237AAD and, if the debt is an assurance of support debt, subject to section 1237AAE.
…
1237A Waiver of debt arising from error
Administrative error
1237A(1) Subject to subsection (1A), the Secretary 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.
1237AAD Waiver in special circumstances
1237AAD 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 false representation; or
(ii) failing or omitting to comply with a provision of this 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.
Findings of Fact
20. The following findings of fact are made:
(i)Mr and Mrs Daly received social security payments under the financial hardship rules for all of the period under review;
(ii)A contract of sale of the property “Bularka” was signed on 3 July 2004;
(iii)That contract of sale was not settled until 23 May 2005;
(iv)The applicants failed to notify Centrelink of the sale until 3 February 2005;
(v)The applicants received the deposit of $82,000 on 11 July 2004;
(vi)The applicants purchased a vehicle for approximately $67,000 on 21 July 2004;
(vii)The applicants sold farm machinery for $60,000 (inclusive of GST) on 12 September 2004;
(viii)Mr and Mrs Daly purchased a caravan on 2 November 2004 for $10,192.59 (Folio 283);
(ix)The applicants paid $476,517.35 to Mr Daly’s sons in settlement of their claims, leaving a balance of $238,259.03 available to Mr Daly for distribution in relation to his legal expenses and the other personal expenses;
(x)The applicants had more than $10,000 in cash available to them for discretionary spending between 11 July 2004 and 25 August 2004; and between 28 September 2004 and 1 November 2004; and
(xi)The applicants had less than $10,000 in cash available to them for discretionary spending between 26 August 2004 and 27 September 2004; and between 2 November 2004 and 2 February 2005.
Assessment of the Issues
·Issue 1 – Did Mr and Mrs Daly fail to qualify for “severe financial hardship” from 12 September 2004 (or some earlier date)?
Contract of Sale
21. Section 1129 to section 1132 deal with the entitlement to pension under the financial hardship rules. Essentially these provisions only apply to a couple such as Mr and Mrs Daly who have less than $10,000 in cash. Mr Daly, on receiving the deposit of $82,000 on 11 July 2004, was prima face, no longer in a position where he was entitled to the benefit of the hardship rules. It is apparent, that having spent approximately $67,000 of that on a vehicle, he still had more than $10,000 in the bank and therefore was still not entitled to the benefit of those provisions even after the purchase of that vehicle. The respondent has argued that the applicant could have purchased a vehicle of a lesser value in the circumstances and should therefore not be regarded as having less than $10,000, even where his bank balances so indicate. The respondent’s argument is a reasonable one and it is difficult to justify such a purchase in the applicant’s financial circumstances (at least in terms of his cash availability, although certainly not in relation to total asset value). On the face of it, it is not in the ordinary course of events, justifiable to spend over 80% of the deposit received for the property on a vehicle, and then claim extraordinary social security benefits.
22. In Mr Daly’s circumstances, however, he was granted access to hardship rules under s 1129 and 1131. Relevantly, under s 1132, the value of unrealisable assets are to be disregarded in working out the social security benefit which is payable to persons under s 1131. A question arises as to whether the deposit received for the sale of the property was an “unrealisable asset”. In ordinary circumstances, one might expect that a deposit will be held in trust until settlement. It seems unusual practice to release deposit monies before settlement. Nevertheless, in this case it was released to Mr Daly shortly after the contract was entered into. Therefore, it cannot be said that the amount of the deposit for the sale of the farm was unrealised and therefore Mr and Mrs Daly do not satisfy the hardship rules on the date of receipt of the deposit monies, that is, 11 July 2004 and for a period following that date as referred to below.
23. In relation to the balance of the purchase monies, there were most unusual circumstances in relation to the sale of the property and its completion was protracted. Mr Daly’s sons threatened litigation and lodged a caveat over the property in October 2004. From that time until the claims by the sons were settled, the contract for sale of the property was uncertain. The purchaser threatened to rescind the contract and in order to maintain the contract on foot, Mr Daly vacated the property. As a consequence, he needed alternative accommodation. He chose to purchase a caravan rather than to rent other premises. The balance of the purchase monies could therefore be regarded as “unrealisable” for the purposes of s 1132 for the period October 2004 to May 2005. That amount cannot therefore be taken into account in determining pension entitlements for the period under review.
24. The Secretary’s additional submissions dated 25 September 2007 argue that even if the Tribunal finds the applicants had less than $10,000 in liquid funds, that the applicants were not eligible for the benefit of the hardship rules as they had an asset (ie the motor vehicle) which could have been sold. From 11 July 2004 to 25 August 2004, there is evidence that the applicants had more than $10,000 in their accounts and it would appear that they incurred other expenses which reduced that balance down to $6,500 by the end of August 2004. While I accept the respondent’s argument that the applicant could have bought perhaps a cheaper vehicle, the Act does not make any prescription which places a prohibition on the use of money received. One may consider an expense of such an amount to have been imprudent, even from the point of view that the sale may not have gone through and he may have had to repay the deposit ultimately. But in the context of having to buy a caravan in which he and his wife could live so that he could be assured of the sale of his property together with some pressure about dealing with issues about his wife’s cancer, fine judgments about how much he should have spent on a second hand vehicle at that time, given all of the circumstances, is not helpful in hindsight and particularly given the lack of precise information about that period.
Other Amounts Available
25. On 28 September 2004, Mr Daly received a net amount of $54,000 (approx) from the sale of farm equipment. He certainly had more than $10,000 in the bank from that time until approximately 29 October 2004 when he withdrew $45,000 which ultimately formed part of the corpus of the fund established as a separate account for legal fees (on advice from his solicitor). The amount of $45,000 was therefore quarantined for that purpose. It was in terms of s 1132 an “unrealisable asset” as, in a technical accounting sense and on the advice of his solicitor, it was a liability either to be refunded (in the event that the purchase was not finalised) and also to be used for the payment of legal fees (whether settlement took place or not). While Mr Daly had just over $11,000 at the end of October 2004 in his account at the Beaudesert branch, on 2 November 2004 he withdrew $10,192.59 for the purchase of a caravan. That then left him with a balance of $1,000 in that account. His other account at the Redcliffe branch at that time, i.e. 2 November 2004, had $8,000 in it. Therefore, of the Beaudesert and Redcliffe branch accounts, he had a maximum of $9,000 from 2November 2004. The balance of both those accounts together did not again exceed $10,000 before settlement of his property in May 2005.
26. As a finding of fact, I would regard the applicant as having more than $10,000.00 available to him from 11 July 2004 until the week beginning 26 August 2004, but that he did not have more than $10,000.00 available to himself and Mrs Daly from 26 August 2004 until 27 September 2004. He received the deposit of approximately $54,000.00, the net proceeds from the sale of farm machinery, on 28 September 2004. He then had more than $10,000 available to him until 2 November 2004 when the account was established for the special purpose of providing for legal fees and the amount of $45,192.59 was deposited in that new account. Until that latter decision was made, I find that there was a second period when he had more than $10,000.00 available and that was from 28 September 2004 until 1 November 2004.
Determination of Issue 1
27. The Secretary argues that the applicant was entitled to spend the deposit monies as he saw fit, but that the purchase of the vehicle should have been liquidated, or at least not regarded as being an “unrealisable asset”.
28. Sections 11(12) and 11(13) of the Act provide that an unrealisable asset is one that an applicant:
- Cannot sell or realise or cannot reasonably be expected to sell or realise (s 11(12)(a) and 11(13)(a); and
- Cannot use as a security for borrowing; or cannot reasonably be expected to use as a security for borrowing (s 11(12)(b) and s 11(13)(b))
29. The applicants must also otherwise satisfy the rules as to “severe financial hardship”.
30. The respondent made further submissions on 25 September 2007 that the purpose of the financial hardship rules is clarified by the Minister’s speech when introducing the Social Security and Repatriation (Budget Measures and Assets Test) Bill 1984, where it was said, inter alia, that these rules only apply “….. where it would be unreasonable or impossible to sell or raise money on an asset, and that as a result of not exempting all or part of the assets the pensioner would have insufficient income….”.
31. However, the resort to such extreme aids is only necessary when the ordinary meaning of a section of an Act and taking cognizance of the purpose of the Act, would result in ambiguity or “…..a result that is manifestly absurd or is unreasonable”. (Section 15AB(1)(b)(ii) of Acts Interpretation Act 1901 (Cth)).
32. I am not convinced that there is any real ambiguity in the provisions dealing with financial hardship rules, although what is reasonable is a matter of judgement in each case.
33. I have carefully weighed the evidence and analysed the financial aspects in some detail. It is apparent as a backdrop to the facts here, that Mr Daly has been quite rigid and difficult to deal with at times. Mr Daly claimed some vindictiveness was directed at him by an officer of the Department and that he would be pursued further even after the ARO determined that he was entitled to some relief from the original decision. Mr Daly certainly seemed to be a stern and inflexible personality. But I also accept that Mr Daly is a witness of truth and someone in the primary production industry whose financial position has been quite precarious for many years.
34. His interpersonal difficulties aside, Mr Daly has demonstrated a willingness to take responsibility for aspects of his life in his difficult financial position, for example, in his accommodation arrangements. Living in a caravan is fairly basic in comparison to what he might have expected, given the size of his asset wealth previously. His purchase of a vehicle which, may have been higher than what would be expected in ordinary circumstances, should be considered that when he purchased it, he was seeking something reliable to drive his wife from his property some distance to the hospital to have treatment for cancer. Since that time, he tried to ensure the purchaser did not rescind the contract for the sale of his property by allowing the purchaser occupation of the property prior to settlement. This was assessed by the delay in being able to settle the contract because of legal proceedings commenced by his sons. As a result, he has used the vehicle for towing the caravan they purchased. He also sold farm machinery to facilitate his financial position.
35. In the facts presented in this case, I find that the uncertainty about settlement, given the legal action commenced which ultimately delayed settlement, must result in the property being an “unrealised asset” as defined in s 11(12) and 11(13), until such time as there was certainty that the legal action had been settled and that the purchase would be completed by the purchaser.
36. None of the actions by the applicants could be regarded as having been ‘manufactured’ so as to deprive them of income and which then made them eligible for the severe hardship rules. There was no evidence of the assets being shielded by a trust or being used as financial investments for the period under review.
37. I have also taken account of the Full Court of the Federal Court decision in Repatriation Commission v Hall (1988) 15 ALD 84 where it was said that all matters which bear upon the reasonableness of a decision to sell or realise a property should be taken into account. These include personal and social factors as well as financial and economic factors and the public or community interest as well as the interests of the claimant. It further went on to say “… It was, in our opinion, open to the Tribunal to find ‘severe financial hardship’ on the evidence before it. We do not read this expression as requiring proof of destitution” (see p 85-86).
38. Given all the circumstances, including the period of time during which these events occurred, the uncertainty as to sale for some of that period, the personal, social and other factors relevant as well as taking account of the fact that "…proof of destitution" is not necessary to establish "severe financial hardship", I find that the applicants suffered “severe financial hardship” based on his cash position as shown in the respective bank statements admitted into evidence. This determination should also be assessed at various points over the chronology of the period under review. In making that determination, there must be an acceptance that the property was an "unrealisable asset" for the periods when they had less than $10,000 in cash and that they could not sell or realise, or could not be reasonably expected to sell or realise, the property or vehicle, and that they could not use those assets as a security for borrowing, or be expected to use them as a security for borrowing.
39. Therefore, the following periods are determined in answering the question put to the Tribunal in Issue 1:
a. There was no entitlement to “severe financial hardship” rules for the periods –
i. 11 July 2004 to 25 August 2004; and
ii. 28 September 2004 to 1 November 2004; and
b. There was an entitlement to “severe financial hardship” rules for periods –
i. 26 August 2004 to 27 September 2004; and
ii. 29 October 2004 to 2 February 2005.
·Issue 2 – Were Mr and Mrs Daly overpaid Disability Support Pension and Newstart allowance (respectively) for the two periods determined above?
40. As the applicants were paid benefits under the financial hardship rules for each of the two periods determined in paragraph 39a above, they were therefore overpaid during those two periods.
·Issue 3 – Are the overpayments debts owed to the Commonwealth?
41. Section 1223(1) is outlined above. It is apparent from the wording of those provisions that the legislation is quite strict. Any overpayment received and for which a person “...was not entitled for any reason to obtain that benefit”, has a debt due to the Commonwealth. The amounts represented by overpayments for those periods are therefore debts due to the Commonwealth.
·Issue 4 – Should those debts be recovered?
42. Debts due to the Commonwealth must generally be recovered unless they can be written off or waived. A debt can only be written off where the person who received the overpayment has no capacity to repay the amount of the debt (s 1236(1A)(b)). Recovery of the overpayment by instalments and by deduction from Social Security payments is a legitimate means to recover those overpayments and the debts in this case cannot therefore be the subject write-off provisions (s1236(1C)).
43. Debts in some circumstances can be waived. Generally speaking they can only be waived where:
(a) It is shown that the debt has arisen solely because of an administrative error made by the Commonwealth; and
(b) the debtor received the overpayment in good faith (s 1237A).
44. The applicants have had the benefit of waiver of part of the overpayment by the Authorised Review Officer (ARO). This was for a period which might be viewed as being attributable to an administrative error. Given these circumstances of the applicants’ lives at that time, the ARO has also taken the view that they were received in good faith. This seems a justifiable and generous determination. However, for the period from 11 July 2004 to 2 February 2005, any overpayments for periods during which the applicants did not satisfy the financial hardship rules, were due to the failure of the applicant to notify Centrelink. While the facts indicate that the applicant can satisfy the financial hardship rules for some individual periods within the period under review, there is no evidence of any administrative error relevant to the debts identified within that period. Therefore, the debts cannot be waived for that reason.
45. Section 1237AAD also provides for waiver in special circumstances. This provision requires a demonstration that a persons financial circumstances are such that will take them into quite extraordinary circumstances, beyond financial hardship alone. (See Beadle v Director-General of Social Security (1985) 7 ALD 670; Dranichnikov v Centrelink (2003) 75 ALD 134).
46. The applicants have had unfortunate circumstances in operation of their property, and by way of family challenge to the their assets; and with the applicant and his wife both having some health difficulties. Are these to be regarded as “special circumstances” which could currently justify non-recovery of the outstanding debts?
47. This must be seen in the context that while Mr Daly had some health problems, it was his wife who needed to be taken to a hospital some distance away for radium treatment for cancer. Understandably, he wanted a reliable vehicle for that purpose. However, the vehicle was not in new condition. Also relevant in context is that Mr and Mrs Daly had allowed the purchaser of their property to take up occupation before settlement. The purchasers came from NSW and Mr Daly feared that the sale would not go through if he could not satisfy the purchaser. At the same time, he also had to deal with litigation commenced by his sons. He bought a caravan worth $10,192.59 and his 4 wheel drive vehicle was used for the purposes of towing the caravan to a site on the Redcliffe Peninsula where they now live.
48. The applicants’ net assets after settlement of the sale of the farm and paying legal and other costs, according to Mr Daly’s evidence, was $170,000. They could not afford a house and have since been required to live in their caravan. During the period between signing the contract of sale for the property and receiving the deposit, through to the ultimate settlement approximately 10 months later, there were also some living expenses. He received the amount of $60,000 gross (that is including GST) for the sale of farm equipment. The net proceeds from this were approximately $54,000. That amount was credited to their original account held at the Beaudesert Branch but $45,000 of that amount was transferred to the account they opened at the Redcliffe Branch about a month later (29 October 2004). A couple of days later (2 November 2004) almost the same amount was credited to another account in their names also held at the ANZ Bank. The applicant’s evidence was that his solicitor had advised him to place that amount aside and to ensure it was quarantined for legal fees. About 6 months later in March 2005 an amount of $5,000 was transferred out of that special account back into their account at the Redcliffe branch leaving an amount of almost $41,000 set aside for legal fees in the new special account.
49. I have noted the decision of the Full Court of the Federal Court in Beadle and Director-General of Social Security (1985) 7 ALD 670. In all of the circumstances, and having taken account of the above cases and the application of those considerations in Maher and Secretary, Department of Family and Community Services (2001) 67 ALD 231, I would have regarded the applicants as being in “special circumstances” had they not satisfied the provisions of having an “unrealisable asset” in respect of the motor vehicle purchased.
50. In the circumstances the decision under review must be set aside and the matter referred back to the Secretary for re-calculation of the debts for the periods identified for which the applicant did not satisfy the severe hardship rules ie 11 July 2004 to 25 August 2004 and 28 September 2004 to 28 October 2004.
I certify that the 50 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, RFD, Senior Member
Signed: .....................................................................................
Legal Research OfficerDate/s of Hearing 4 September 2007
Date of Decision 19 October 2007
Applicant Mr Daly himselfRespondentMr B Avery and Mr M Black, departmental advocates
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