Edwards and Secretary, Departmen of Social Services (Social services second review)
[2016] AATA 809
•14 October 2016
Edwards and Secretary, Departmen of Social Services (Social services second review) [2016] AATA 809 (14 October 2016)
Division
GENERAL DIVISION
File Number
2015/5506
Re
Ian EDWARDS
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal D. J. Morris, Member
Date 14 October 2016 Place Perth The Tribunal affirms the two original decisions: of 2 April 2015 to raise and recover a debt of $4,445.61; and of 7 April 2015 to raise and recover a debt of $21,781.37, for overpayment of age pension.
........[Sgd]................................................................
D. J. Morris, Member
CATCHWORDS
SOCIAL SERVICES – Age Pension – Debts incurred from earnings overseas – administrative error by Centrelink – overseas employment over several years – whether whether debts repayable – question of good faith – do special circumstances exist for writing off or waiving all or part of debts – decision affirmed
LEGISLATION
Acts Interpretation Act 1901 – s 29
Social Security Act 1991 – s 8 – s 68 – s 1223(1) – s 1236(1A) – s 1237A(1) – s 1237AAD
CASES
Beadle and Director-General of Social Security [1984] AATA 176
Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484
Re Secretary, Department of Family and Community Services and Trio [2002] AATA 865
Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 114SECONDARY MATERIALS
Guide to Social Security Law – 4.3.6.50
REASONS FOR DECISION
D. J. Morris, Member
14 October 2016
BACKGROUND
Mr Ian Edwards has been a recipient of an age pension since December 2006. He has for more than ten years been working abroad, first in China and more recently in Saudi Arabia, on a semi-sporadic basis. He returns home to Australia periodically, where he has family.
When he has worked, he said he has advised the Department of Social Services (the Department) of his other income and believed that his age pension has been adjusted to take account of this other income.
On 3 July 2009 his income was incorrectly coded at a zero rate by an officer at the Department from 1 July 2009.
On 10 July 2009, 2 July 2009 and 21 December 2009 the Department wrote to the Applicant setting out his financial circumstances as known to the Department, and reminded the Applicant that he was required to notify the Department if these circumstances were wrong or had changed.
On 19 May 2014, Mr Edwards told the Department that he would not be receiving any income in June, July or August 2014, and on 31 May 2014 a Department officer again coded his income at zero rate.
On 2 April 2015, a Department officer made the decision that the Applicant had been overpaid age pension in the amount of $4,445.61 (Debt A) and a letter was sent to the Applicant requesting payment of this amount on 1 May 2015.
On 7 April 2015, another decision was made that the Applicant had been overpaid age pension in the amount of $21,781.37 (Debt B) and a letter was sent to the Applicant requesting payment of this amount by 6 May 2015.
Mr Edwards requested a review of these two decisions by an Authorised Review Officer (ARO), an independent officer employed within the Department.
On 3 June 2015, the ARO affirmed the original decisions to raise the debts.
The Applicant requested a review by the Social Services and Child Support Division of this Tribunal (AAT1).
On 21 September 2015, AAT1 affirmed the decision under review to raise and recover the two debts, Debt 1 of $4,445.61 for the period 27 September 2014 to 2 January 2015 and Debt 2 of $21,781.37 for the period 1 July 2009 to 12 October 2012. AAT1 was satisfied that the debts existed and had been properly calculated and there was no proper basis under the legislative regime for them to be written off or waived.
On 21 October 2015, Mr Edwards made an application for review by the General Division of this Tribunal. That is this hearing.
MATTER BEFORE THE TRIBUNAL
A. Was the Applicant overpaid age pension in two periods, the period 1 July 2009 to 12 October 2012, and the period 27 September 2014 to 2 January 2015?
B. If so, does the Applicant owe debts to the Commonwealth?
C. If so, should all or part of those debts be written off, or waived on the grounds of special circumstances?
THE LAW
The relevant legislation in this matter is the Social Security Act 1991 (the Act).
The Act provides at section 1223(1) as follows:
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 and payable to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.
In regard to writing off a debt, the Act relevantly provides at section 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.
Section 1237A(1) of the Act provides for waiver of debts that are caused solely by administrative error:
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.
Note: Subsection (1) does not allow waiver of part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).
Section 1237AAD of the Act provides for waiver of debts in special circumstances:
Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.
The hearing took place on 13 September 2016. The Applicant was represented by his daughter, Mrs Shelley Shepherd, who gave affirmed evidence and was cross-examined by counsel for the Respondent, Ms Sharon Sangha.
The Respondent tendered documents provided under section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents). The Applicant made a written submission dated 4 April 2016 (Applicant’s submissions and evidence) in response to the Secretary’s Statement of Facts, Issues and Contentions. This material was taken into account by the Tribunal.
FACTS
For some years, the Applicant has been working in the Kingdom of Saudi Arabia, teaching English and some business units at King Fahd University of Petroleum and Minerals there.
Evidence was given by his daughter that he is employed by the university on a year by year contract basis. He lives on the university campus in accommodation arranged for him by his employer.
When the Applicant returns home to Australia, which he does at least annually, he stays with his daughter, Mrs Shepherd, or sometimes with another family member.
Mrs Shepherd said she had been given a power of attorney by her father ‘a while ago’ but she did not handle his correspondence with the Department. She said that minimal mail addressed to him comes to her residence, except for some bank statements that she disposes of, because her father can get access to his bank details on-line.
Mr Edwards said he has periodically advised the Department of variations in his income, depending on whether he had a current contract with the university (his employment was not continuous). At AAT1 his daughter, as the Applicant’s representative, gave evidence recorded in Member Petrucci’s Decision at paragraph 21:
At hearing Mrs Shepherd stated that her father knew that he had to advise Centrelink of his employment earnings. She said that her father told Centrelink of his earnings at least once per annum by attending a Centrelink office in person when he returned to Australia but that he also advised Centrelink of his employment contracts in Saudi Arabia by email. Ms [sic] Shepherd noted her father’s frustration with Centrelink not replying to his emails.
When a person in receipt of age pension has other earnings, and the person advises the Department, they are entered into the Department’s system relating to that person’s benefits, because the amount of the earnings will affect the amount of entitlement to age pension at the relevant time.
In July 2009 an officer of the Department incorrectly coded the Applicant’s earnings at ‘zero rate’. This coding error caused Debt B in the amount of $21,178.37. An officer of the Department again incorrectly coded the Applicant’s earnings at ‘zero rate’ in May 2014. This second coding error caused Debt A in the amount of $4,445.61.
The Respondent conceded at the hearing that this incorrect coding on two occasions was an administrative error made by the Department.
However the Respondent argued that, in spite of the Department making this data-entry error (which led to the amount of age pension which Mr Edwards received not being reduced at certain periods to take account of his other income from his employment at the university), the debts were still recoverable under the provisions of the Act because the Applicant had been told several times in writing of the obligation to advise of changes in his circumstances and because he had the capacity to repay the overpaid amounts.
It was not in dispute that the Applicant’s earnings are “income” for the purposes of the “income test” set out in section 8 of the Act.
A person who receives income within the meaning of the “income test” which is not exempted under the other stipulated provisions in section 8 must have that income taken into account in terms of the payment rate for age pension.
Mr Edwards was paid more age pension than he was entitled to in the two periods under review and therefore was overpaid age pension in those periods.
During the hearing, the Applicant’s representative Mrs Shepherd queried the basis on which the Department had calculated the debts. She also said that it was difficult for the Applicant to know how much money he was receiving from his Australian pension as it was electronically deposited into his bank account and the amount fluctuated with the exchange rate.
The Tribunal requested from the Respondent clarification of the method used for calculating a benefit in relation to overseas income.
After the hearing, the Respondent provided to both the Tribunal and the Applicant’s representative the following advice:
Information about the exchange rate used to assess overseas income [is] contained in the attached extract from the Social Security Guide. The Guide sets out the policy for the application of s 1100 of the Social Security Act 1991 (Cth). Relevantly, Department policy prescribes that the appropriate market exchange rate to be used to assess a recipient with overseas income, for all the paydays in a calendar month, is the CBA’s on-demand airmail buying rate, currently on the fifth working day before the first business day in that month. Unless, the Secretary determines that a different rate would be appropriate.
The rate of age pension is determined by the ‘Rate Calculator’ set out at the end of the Social Security Act 1991 s 1064. ‘Module E’ of this process contains the income test. Relevant definitions, such as that for ‘ordinary income’ are in s. 8…
The Respondent attached an extract from the Department’s Guide to Social Security Law (the Guide) headed 4.3.6.50 Arrears, Embargoes & Exchange Rates for Overseas Income.
It is not necessary to repeat here all the contents of that extract from the Guide, but I note that a recipient may request a review of the exchange rate used to assess their overseas income. An exchange rate review is only conducted where the rate the recipient actually received is shown to differ by more than 5 per cent to the rate set, and the recipient must provide documentary proof of the rate received, such as bank statements from the relevant time.
Having examined the calculations in the light of this information on the method used for calculation in such cases, and on the information in the Applicant’s file that was provided in the T documents, I have no reason to believe that the Debt A or Debt B have been wrongly calculated.
Section 1223(1) of the Act, as set out above makes clear that if a social security payment is made and the 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, and the debt is taken to arise when the person obtains the benefit, i.e. in this case, from when an overpayment is made. Section 1223 does not require a mental element on the part of the person to whom the overpayment is made.
In answer to questions A and B above, the Tribunal finds that the two debts arose in the relevant periods and are due and payable to the Commonwealth, as they were over payments of his age pension to which the Applicant was not entitled at the relevant times because of his other income.
Should all or part of the debts be written off?
Section 1236(1A) sets out the criteria the Secretary must be satisfied of before he writes off a debt. There are three criteria that are easily dispensed with as not applying in this case: the debts are not irrecoverable at law; the debtor’s whereabouts are known; and owing to the amount, it is cost-effective for the Commonwealth to take action to recover the debts.
The other criterion in section 1236(1A) is if a debtor has no capacity to repay the debt.
The Applicant stated in his Age Pension Claim Form (T142) that in November 2015 he had savings of some $125,000 at the time the debts were raised. The Respondent contended that this means Mr Edwards had the capacity to repay the debts.
The Applicant responded that when he is no longer employed in Saudi Arabia, which is likely in the next few years due to his age (the Applicant is aged 74), he will face financial hardship if he has to repay the debts. Mrs Shepherd also gave evidence that Mr Edwards had a number of health issues, Crohn’s disease and high prostate specific antigen (PSA) test results, but she did not elaborate much more on that in the hearing. She also said that, because of his age, his employment with the university was unlikely to continue for many more years.
The Tribunal must weigh these different factors in deciding whether the Secretary should have decided that the debts should be written off on the basis of capacity to repay the debts. It is not obvious to the Tribunal that any health issues Mr Edwards has are currently affecting his situation: to the contrary, he is living and working abroad and able to travel back to Australia periodically. I note that in evidence before AAT1, Mrs Shepherd said her father’s health was not too bad for someone of his age.
In the T documents (T83) there is an undated letter from Mr Edwards to the Department (which is however dated in the index as “20.01.15”) in which he says “for most of last year” (2014) his salary from the university was 10,500 Saudi riyals per month. He then advises that his salary had risen to 12,400 Saudi riyals per month.
On the exchange rate of September 2016, 10,500 Saudi riyals equates to circa Australian dollars $3,652 per month. 12,400 Saudi riyals equates to circa Australian dollars $4,313 per month.
I note Mrs Shepherd’s evidence that Mr Edwards was able to gain access to his bank statements on-line. I also note other references in the T documents where the Applicant had queried when pension payments varied (for example T42 pp 190, 191, 193), so he obviously was fully aware of payments into his bank account.
Accepting the fact that the exchange rate has fluctuated over the years since 2009, the monthly amount Mr Edwards has earned from teaching at the university is not insubstantial and the Tribunal finds it implausible that the Applicant would not have been aware, as was suggested in the hearing, that this level of other income would not affect (and indeed significantly reduce) his Australian pension payment entitlement.
I note also (T142) the Applicant advises that his accommodation in Saudi Arabia is provided rent-free. Taking into account the amount of savings declared by the Applicant and the fact that he continues to be employed abroad, I cannot correctly find, given the Applicant’s own evidence of his savings that repayment of these debts will lead to financial hardship. Therefore, I find that the debts cannot be correctly written off on this ground.
Should all or part of the debts be waived (section 1237A)?
As set out above, section 1237A of the Act sets out what the Secretary must take into account to waive a debt arising from error.
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.
The elements that must be satisfied in the Act for the Secretary to waive a debt are therefore conjunctive: the debt must be attributable solely to an administrative error and the person receiving the payment must have received it in good faith.
As conceded by the Respondent, the wrong coding of Mr Edwards’ income by the Department on two occasions was the administrative error that led to the overpayment.
In Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484, Cooper J relevantly said, about when “good faith” must be shown at [40]:
Prima facie, s 1237(1) is concerned with actual personal receipt by the debtor of the payment or payments which give rise to the debt. The issue of good faith is, for the purpose of the section, to be determined when the debtor commences to exercise control over the payment by retaining it. It is at this time that the recipient must act with the requisite good faith. A lack of good faith does not mean that the recipient of the payment must be acting fraudulently when the payment is received and retained. It means that for whatever reason, the recipient acts without an honest belief that he or she was entitled to receive and retain the payment when he or she receives the payment and decides to exercise control over it by retaining it.
His Honour went on to develop the notion of “good faith” in the context of section 1237A(1) of the Act at [41]:
A person does not act in good faith where the person turns a blind eye to circumstances which raise doubt as to the entitlement of the person to receive and retain the payment or refuses to make reasonable inquiries where doubt exists.
Therefore, simply receiving an overpayment, especially over several years, even if it arose because of an administrative error in the Department responsible for the payment, does not mean that the overpayment is not recoverable as a debt. The money must have been received in good faith, and the quantum in this particular case, coupled with the time period of the overpayment, particularly of Debt B, militates against coming to that conclusion.
Section 68 of the Act sets out the requirements of a person receiving a social security payment to inform the Department if a specified event or a change in circumstances occurs.
The Respondent contended that the Applicant was informed on three occasions in writing of the requirement to notify the Department of any incorrect information or changes to his circumstances. The Applicant contended in his submissions that this correspondence had not been received. The Applicant’s representative said that the Applicant had made various email contacts with the Department to advise of changes in circumstances. Copies of these emails had not been kept and were not available to the Tribunal.
However, the Applicant did have general knowledge of the existence of the statutory requirement, as is shown by the evidence to AAT1 about his annual visits to the Department offices when back in Perth, and by the fact that he said he had notified the Department when he had started new contracts with the university in Saudi Arabia or when he had ceased being employed, and there was evidence of this subsequent to the period these debts arose.
The Applicant’s representative gave evidence that the Department’s letters dated 10 July 2009, 2 October 2009 and 21 December 2009 had not been received by the Applicant. Even if the Tribunal were to accept that (and I note section 29 of the Acts Interpretation Act 1901 provides that service of notices by post is deemed to be affected by the time in which a letter would have been received in the ordinary course of post), Mr Edwards’ own quite correct conduct in advising the Department of other changes in his income circumstances factually show he was aware of the existing requirement to advise of changes in his financial circumstances, and had been historically so aware as a person who first began to receive age pension in 2006.
Deputy President Forgie, in Re Secretary, Department of Family and Community Services and Trio [2002] AATA 865 said as follows about the meaning of the phrase “good faith” at [38]:
Good faith must be determined by reference to the state of mind of the recipient of the payment.
Where the recipient knows that he or she is not entitled to the payment, he or she cannot have received it in good faith.
Where the recipient suspects that he or she is not entitled to the payment and has an objective basis for that suspicion, he or she cannot have received it in good faith.
Good faith is not determined by reference to the state of mind of “an imaginary recipient”. Finn J in Prince speaks of a recipient’s not receiving a payment in good faith if he or she “…has reason to know that he or she is not entitled to the payment received.”
The Applicant tendered a ‘screen shot’ of an email he advised he sent to the Department on 24 September 2014 in which he relevantly wrote:
About 6 weeks ago I sent an advice to you regarding my change in circumstances. I advised that I had secured another contract at exactly the same salary I had been receiving for the last one. I also asked you to alter my pension payments to reflect this, so you would not overpay me. Guess what? It didn’t work. You are still paying me the unemployed rate. PLEASE STOP IT!
This email demonstrates that Mr Edwards (a) understood his obligation to advise the Department of changes in his income and (b) axiomatically did know he was not entitled to be paid the maximum basic single rate of the age pension for periods when he was receiving other income from employment.
The fact that this email cannot now be located by the Department is very unfortunate, but not fundamental to the question of whether or not the debts should be waived, because this submission by the Applicant shows that he knew he was being overpaid.
I find that the correct decision was taken in regard to section 1237A of the Act.
Should the debts be waived on account of special circumstances (section 1237AAD)?
“Special circumstances” are not defined in the Act. A useful consideration of what constitutes special circumstances can be found in Beadle and Director-General of Social Security, where the Tribunal said at [12]:
An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend on the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
As Deputy President Forgie said in Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at [80]:
The “special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances … that make it desirable to waive”. That necessarily requires a consideration of a person’s individual circumstances, but also a consideration of the general administration of the social security system… [Mr Davy] has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement.
So, is the Applicant’s case “unusual, uncommon or exceptional”? Is this case “markedly different” from other cases of an overpayment? The Tribunal can find no reason to consider that it is. The Applicant in his submissions concentrated on emails that he said he had sent to the Department of which the Department had no record, but unfortunately he did not retain his own copies, so there is not corroborative evidence of them. He also concentrated on whether the Department had the right address for him at particular times, notwithstanding that Mrs Shepherd’s address was recorded on the Departmental database as his Australian address. I note in the T documents that the Department said it had asked the Applicant for other contact details overseas apart from an email address, which allegedly were not provided. But these factors, whether or not true, do not of themselves make this case unusual or uncommon, nor is the overpayment markedly different from other overpayments – except perhaps that it was not detected for several years.
At AAT1, the Applicant, through his representative, conceded that he was aware of the requirement to accurately advise the Department of his income. Mr Edwards contended in relation to Debt 1 that he requested that the payments cease in a letter dated 24 September 2014. The Department told the Tribunal it had searched its records and was unable to locate this document.
Adopting the reasoning in Re Davy, I find it is not unjust for the Applicant to repay the debts. I find that the Secretary was correct in not exercising his discretion in this case to waive all or part of the debts because of special circumstances under the Act.
CONCLUSION
I make clear that I accept the Applicant may have taken certain steps to advise the Department of overpayment. I also accept that Mr Edwards was frustrated, on more than one occasion, by what he considered a lack of response by the Department. I also accept that Debt B began to be incurred in 2009 and the overpayment was not raised with the Applicant until 2015. This delay is most regrettable.
The errors in coding by the Department were not of Mr Edwards’ making, but just because the Department made errors does not mean that a debt is not due and payable. Nor, in this case where the Applicant has substantial savings and is continuing to earn, does the delay in time it took for the Department to discover and act on the overpayment affect the liability for repayment. The Applicant received a greater rate of age pension payment when he was earning other income than he was entitled to for several years and has enjoyed the benefit of those funds. The Applicant has the capacity to repay the debts.
In making this decision, I make no reflection on Mr Edwards’ character. His current employment is a good illustration of how an individual can continue to work gainfully and productively, well into his seventh decade. That is to his significant credit. But it remains the case that there were two periods where he was overpaid a social security benefit which should have been reduced to take account of other income. In the absence of any reason otherwise which must be taken into account under the provisions of the Act, the outcome is that that debts must be repaid.
I note during the hearing that the Respondent submitted that the repayment can be done by an instalment plan settled between the Applicant and the Department.
DECISION
The Tribunal affirms the two original decisions: of 2 April 2015 to raise and recover a debt of $4,445.61; and of 7 April 2015 to raise and recover a debt of $21,781.37, for overpayment of age pension.
I certify that the preceding 75 (seventy -five) paragraphs are a true copy of the reasons for the decision herein of D. J. Morris, Member ......[Sgd]..................................................................
Administrative Assistant
Dated 14 October 2016
Date of hearing 13 September 2016 Representative for the
ApplicantMs S Shepherd Representative for the
RespondentMs S Sangha
Solicitors for the Respondent
Mills Oakley Lawyers
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