Erceg; Secretary, Department of Social Services and (Social services second review)

[2017] AATA 641

Erceg; Secretary, Department of Social Services and (Social services second review) [2017] AATA 641 (10 May 2017)

Division	GENERAL DIVISION
File Number	2016/3260
Re	Secretary, Department of Social Services
APPLICANT
And	Elizabeth Erceg
RESPONDENT

DECISION

Tribunal	Mr D. J. Morris, Member
Date	10 May 2017
Place	Perth

The Tribunal sets aside the reviewable decision and remits the matter to the Applicant with a direction that the debt period commenced on 31 December 2010 and ended on 29 October 2014.

...........[Sgd].............................................................

D. J. Morris, Member

CATCHWORDS

SOCIAL SERVICES – Newstart allowance – debt – is debt recoverable – sole administrative error not found – whether severe financial hardship – whether special circumstances – Department lost records – decision set aside and remitted to Secretary for recalculation of debt

LEGISLATION

Social Security Act 1991, ss 14A, 643, 1223(1), 1236, 1237A, 1237AAD

CASES

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; 100 ALD 9

Kulakov and Secretary, Department of Social Security [1991] AATA 668

Re Ford and Ethel Reynolds and Secretary to the Department of Social Security [1986] AATA 120

Secretary, Department of Family and Community Services and Jonauskas [2001] AATA 72

Secretary, Department of Social Security and Bolton [1989] AATA 479

Ward v Commissioner of Taxation [2016] FCAFC 132

REASONS FOR DECISION

D. J. Morris, Member

10 May 2017

BACKGROUND

1. The Respondent, Mrs Elizabeth Erceg, was granted Newstart Allowance in early 2008.  In July 2009 she visited the Department of Human Services (the Department) and advised officers that she had sold her primary residence and was in possession of a cheque of the proceeds in the amount of $327,804.50, which she showed them.  A Department note of her visit records that Mrs Erceg advised the Department that she had not banked the cheque and would notify the Department when she did so, including which account it was banked into (T3, pg 9; T21, pg 264).

2. In November 2014, Mrs Erceg contacted the Department.  It was at that time that she advised the Department that she had opened a term deposit account in 2009 and in October 2014 had purchased a new principal residence (T3, pg 9; T 21, pg 265).

3. The Respondent earned some $70,000 interest from the amount lodged in her term deposit account from October 2009 to 29 October 2014, income which was not reported to the Department (T14, pp 64-70).

4. In January 2015 the Department raised a debt in the amount of $16,133.25 for the period from 17 June 2010 to 29 October 2014 on the basis that the income she earned from her term deposit account had not been declared and the consequence was that she had been overpaid Newstart Allowance in this period. The Department advised Mrs Erceg of that debt (T21, pg 272).

5. Mrs Erceg requested a review of the decision to raise the debt.  A review was carried out by an Authorised Review Officer (ARO), an officer of the Department not involved in the original decision. On 12 March 2015 the ARO varied the decision and decided that Mrs Erceg has a debt of $25,532.03 for the period from 8 July 2009 to 29 October 2014.  The ARO found that the debt was not caused by sole administrative error and there were no special circumstances to justify the waiver of the debt (T8, pp 48-52).

6. Mrs Erceg sought a review of the ARO’s decision by the Social Services and Child Support Division of this Tribunal (AAT1). On 16 May 2016, AAT1 set aside the decision under review and instead decided that the Commonwealth’s right to recover $19,532.03 be waived, and recovery of the remaining portion of the debt of $6,000, less the amount already deducted, would be written off for six months from the date of the decision.

7. The Applicant, the Secretary of the Department of Social Services, lodged an application for review of AAT1’s decision with the General Division of the Tribunal (T1, pp 1-2).

8. The hearing was held on 16 March 2017.  The Applicant was represented by Ms Sharon Sangha.  The Respondent was represented by her brother, Mr Paul Wilkins.  Both parties made written submissions to the Tribunal.  The Respondent herself did not appear.

9. The Applicant tendered two volumes of documents lodged under section 37 of the Administrative Appeals Tribunal Act 1975 (‘T’ documents), which were admitted into evidence.

10. Ms Sangha also tendered the following documents:

    ·Secretary’s Statement of Facts, Issues and Contentions lodged with the Tribunal on 9 September 2016 with two annexures (Exhibit A1); and

    ·Secretary’s Submissions in Reply dated 11 November 2016 with 30 exhibits attached thereto (Exhibit A2).

11. Mr Wilkins, on behalf of the Respondent, lodged the following documents in support of her contentions, which were admitted into evidence:

    ·Respondent’s Statement of Facts, Issues and Contentions dated 12 October 2016 with appendices (Exhibit R1); and

    ·Response to the Applicant’s Submission in Reply, dated 2 December 2016 (Exhibit R2).

    THE LAW

12. Section 14A of the Social Security Act 1991 (the Act) provides detailed definition of what is to be considered ‘liquid assets’. Relevantly, at subsection (4) the Act states:

    (4)       If:

    (a)       a person sells the person's principal home; and

    (b) the person is likely, within 12 months, to apply the whole or part of the proceeds of the sale in acquiring another residence that is to be the person's principal home;

    so much of the proceeds of the sale as the person is likely to apply in acquiring the other residence is to be disregarded during that period for the purposes of determining the amount of the person's liquid assets.

13. Section 643 of the Act provides that the rate of a person’s Newstart Allowance is worked out using the Benefit Rate Calculator B contained in section 1068 of the Act. This Benefit Rate Calculator takes into account a person’s family circumstances, whether the person is single or partnered, and the assets and income of the person and, if applicable, the person’s partner. In plain words, Newstart Allowance is subject to an income and assets test.

14. The Act also sets out, at section 1223(1) as follows:

    (1)       Subject to this section, if:

    (a)        a social security payment is made; and

    (b)  a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;

    the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.

15. At section 1236, the Act has specific provisions giving the Secretary discretion to write off of a debt:

    (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.

    (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.

16. Section 1236(1C)(a) of the Act provides that if a debt is recoverable by means of deductions from a debtor’s social security payment, the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in severe financial hardship. The phrase “severe financial hardship” is not defined in the Act, but the purport has been considered judicially and by the Tribunal on numerous occasions.

17. Section 1237A(1) of the Act provides that debts may be waived where the debt is caused solely by administrative error:

    (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.

    Note: Subsection (1) does not allow waiver of a 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).

    (1A)      Subsection (1) only applies if:

    (a)  the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

    (b)  if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

    whichever is the later.

18. There are also provisions for all or part of a debt to be waived owing to special circumstances. Section 1237AAD provides:

    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.

19. The phrase “special circumstances” in section 1237AAD(b) is not otherwise defined in the Act but, again, this phrase has been considered judicially and by the Tribunal on many occasions.

    What happened?

20. On 30 May 2009 Mrs Erceg sold her South Perth residence for $505,000.  On the day of settlement, which was 19 June 2009, her real estate settlement agent wrote to her to advise that, after agent’s fees and other associated disbursements were made, the balance payable to her for the sale of the property was a total amount of $437,084.50.

21. In his submissions, Exhibit R1 at paragraph [9], Mr Wilkins stated:

    Total proceeds from the sale were $437K…of which $110K was retained by [the Respondent’s daughter], partly in compensation for restoration of the property and partly as a contribution to her [the daughter’s] resettlement in Queensland.

22. Mr Wilkins adverts to the circumstances at the time and states that the South Perth property was prepared for sale and the sale was organised by the Respondent’s daughter and her now husband “when Liz [the Respondent] was incapable of managing her own affairs.”  On the information available to the Tribunal, I shall interpret that the amount of $110,000 “retained” was a gift from the Respondent to her daughter.

23. Mrs Erceg visited the Innaloo office of Centrelink on 6 July 2009 and spoke to officers there.  The Department’s record of the contact relevantly reads:

    Customer contacted INNALOO on 6 July 2009 regarding General Enquiry for Newstart Allowance.  Information was obtained via Personal – In Office.  Document created by … on 6 July 2009.  Contacted at 10:39.B Receipt number 391051, has sold primary residence, brought in a settlement letter, showing a cheque for $327,804.50, which is total for sale of residence.  CUS HASN’T PUT THIS INTO A BANK A/C YET, WHEN SHE DOES SO SHE’LL CONATCT CENTRKINK OT TELL US WHICH A/C IT’S IN(bringing proof). Cus settled on 190609, but had until 030709 to move out of residence.  This is in a statement the cus made.  Cus’s money from sale of primary residence will be ASSET exempt for first 12 mths as she intnends to buy another primary residence with this money.  Cus aware that the interest from this money will affect her Benefit.

    [Spelling in original]

24. This record also notes that Mrs Erceg’s statement was “batched 060709”.

25. It would seem to the Tribunal, on the submissions of Mr Wilkins and the clear evidence of the letter from the settlement agent that the total proceeds of the sale of the South Perth home that Mrs Erceg actually received was $437,000.  The Secretary did not make submissions about this amount and instead relied on the information about the cheque amount that Mrs Erceg showed to Centrelink on 6 July 2009. 

26. As the amount Mrs Erceg received from the settlement agent was $437,000 I conclude that the cheque Mrs Erceg showed the Department officers on 6 July 2009 when she visited the Centrelink office was not in fact the cheque from the settlement agent of the proceeds of the sale but some fresh cheque, minus the $110,000 gift to her daughter.

27. The Tribunal is troubled about this in the context that, on the one hand, Mr Wilkins’ submits that, at the time of the sale of the South Perth residence, Mrs Erceg was, in his words “incapable of managing her own affairs”, and on the other hand it appears she made a substantial gift to her daughter of income that should otherwise have been declared as a part of her liquid assets. Section 14A of the Act discusses how the “total proceeds” from the sale of a principal residence should be treated. The total proceeds to Mrs Erceg in this case were, on the facts, $437,000. That the Respondent then gifted part of this amount to her daughter does not change this fact.

28. There is significant other medical evidence about the Respondent which I will refer to later, but the Tribunal accepts for the purposes of this review that the amount of money the Respondent actually received in her hand from the sale of the house was $327,804.50 and not the higher amount.  The circumstances of the gift of $110,000 are not clear, and the Tribunal did not have the opportunity to clarify this directly with the Respondent during the hearing.  However, the actual income which affected Mrs Erceg’s Newstart Allowance entitlement was the interest earned on the amount deposited in her term deposit account. 

    29.The discrepancy about the amounts may in fact have been explained if the statement that the Respondent acknowledges Mrs Erceg brought in and gave to Centrelink had been before the Tribunal, but the ARO records at T9, pg 54:

    The doc refers to a statement by Mrs Erceg to that effect.  I have been unable to locate a copy of the statement either scanned to the customer record, or on the customer paper file.  I note the doc indicates the statement was batched.

29. In any event, the Tribunal notes that, on 12 November 2014, Mrs Erceg provided to Centrelink a Commonwealth Bank statement for an account in her name with an opening balance on 8 July 2009 of $320,000 (T14, pg 64). So it appears from the facts that the actual amount the Respondent banked into her bank account (at first a cash investment account and from October 2009 a term deposit account) from the sale of her South Perth house was $320,000.  It is not evident how she expended the additional $7,804.50.

30. The ARO records that there was no further contact by Mrs Erceg with Centrelink about how the cheque she had shown to officers on 6 July 2009 of $327,804.50 had been distributed until she bought a new residence in October 2014.  The ARO had a discussion with Mrs Erceg on 4 March 2015 in which the Respondent said the principal amount wasn’t used until she bought her new house in the suburb of Camillo.

31. The ARO, after considering an objection to the debt decision from Mrs Erceg, decided that the debt should apply from the date the Respondent opened her cash investment account, 8 July 2009, and that the debt amount based on the interest income received by the Respondent between that date and 29 October 2014, when she advised of the purchase of her new Camillo residence, was $25,352.03 (T9, pg 56).

32. The basis for the ARO’s decision was that Centrelink had written to Mrs Erceg on multiple occasions reminding her of her reporting obligations in regard to receipt of Newstart Allowance.  The ARO took into account eight letters sent between 14 November 2012 and 20 August 2014 and twenty-five reporting statement letters sent between 1 July 2010 and 25 March 2014, and also her discussion with Mrs Erceg.

33. The eight letters sent to Mrs Erceg between 14 November 2012 and 20 August 2014, inter alia, reminded the Respondent that she was required to advise Centrelink, within 14 days, if her circumstances changed, including changes to her income, assets and investments.  These letters also showed the fortnightly income that was being used by the Department to assess her fortnightly payments of Newstart Allowance.  The other twenty-five reporting statement letters contained similar content and similar reminders to the Respondent.

34. From 8 July 2009 to 29 October 2014, the Respondent was paid a total of $46,364.74 in Newstart Allowance but, on the basis of her other income from financial investments, should have been paid $20,832.41.  This led to the debt of $25,532.03 (T8, pg 50).

35. Mr Wilkins’ submission on behalf of Mrs Erceg did not dispute the amounts except contested that the overpayment constitutes a debt.  He further submitted that the Tribunal should consider whether the Respondent’s circumstances are more properly the subject of a “disability benefit’’ than the Newstart Allowance.

36. In response to this specific submission, the Tribunal notes that it is confined to examining the decision under review, in this case the decision of AAT1 to vary the ARO’s decision. It is beyond the scope of this matter for the Tribunal to consider whether or not Mrs Erceg is entitled to a disability benefit. Qualification for Disability Support Pension (DSP) is by a person satisfying the relevant provisions of the Act, and the Respondent is free to test her entitlement for this benefit as she chooses by applying directly to the Department. It is not and has never been the function of the Administrative Appeals Tribunal to conclude, in examining whether an administrative decision was correct in law and, if a discretion was exercised, that the discretion has been exercised in a preferable manner, that a person may or may not be eligible for some other government income support, except to the extent of whether appropriate advice had been given to the person by officers. There was no evidence before me that, in relation to these debts, Mrs Erceg had made inquiries to Centrelink about DSP.

37. The Tribunal finds, on the facts, that there is a debt, because the Respondent was overpaid Newstart Allowance on the basis that her other income was not taken into account.  The Tribunal accepts the ARO’s calculation of the debt which was calculated with input from a subject matter expert in the Department.  The Tribunal notes that AAT1 also accepted the calculation of the debt.

38. Section 1223 of the Act provides that if a person is overpaid benefits to persons not entitled to receive them, then the amount of the overpayment is a debt due and payable to the Commonwealth. Therefore, the Tribunal finds that Mrs Erceg has incurred a debt of $25,532.03, which is recoverable.

    Should the debt be waived or written off?

39. There are specific provisions in the Act relating to the circumstances where a debt, or a portion of a debt must be waived or where there is a discretion conferred on the Secretary of the Department to waive the right to recover all or part of a debt owing to special circumstances.

40. Ms Sangha submitted that there are no grounds for writing off the debt in this case because the debt is not irrecoverable at law, Mrs Erceg has the capacity to pay, the Respondent’s whereabouts are known and it is cost-effective for the Commonwealth to take action to recover the debt.

41. Mr Wilkins submitted that there were grounds to invoke the provisions of section 1236(1A) of the Act because Mrs Erceg does not have the capacity to pay the debt, and because of her submitted documentation about her current financial circumstances.

42. AAT1 decided it was appropriate to write off (i.e. defer) the collection of the debt for six months to enable Mrs Erceg time to recover her health, reduce or pay off a separate debt she had incurred from a traffic fine (which she was repaying in instalments), and to repair the hot water system at her residence.

1. The provisions of the Act found in section 1236(1C)(a) seem, with respect, not to have been fully taken into account at the first-tier review. Those provisions make clear that the “writing off” provisions should not be deployed if a debt is recoverable by means of withholdings from the debtor’s social security payment and, by force of that section, the debtor is taken to have the capacity to repay the debt unless “severe financial hardship” would result. AAT1 seems to have overlooked this provision because it is not apparent that it considered the question of “severe financial hardship” in relation to Mrs Erceg.

   Would repayment of the debt result in severe financial hardship?

2. The term ‘severe financial hardship’ found in section 1236(1C) is not further defined in the Act. The term has however been examined by the Tribunal on many previous occasions.

   Relevantly, Deputy President Jennings, QC, considered this exact phrase in relation to the Social Security Act 1947 (repealed) in Re Ford and Ethel Reynolds and Secretary to the Department of Social Security [1986] AATA 120. He said, at paragraphs [29] and [31]:

   However the applicants must also satisfy the Tribunal that they would suffer “severe financial hardship” if s. 6AD did not apply to them. That expression is not defined. The pensions benefits and allowances which the Act provides for persons who fulfil the requirements of the Act are clearly designed (inter alia) to avoid severe financial hardship to persons who would otherwise be without adequate means of support.

   The level of pension or benefit payable to different persons in different circumstances is a recognition by Parliament of the amount which is considered to be appropriate for that purpose from time to time.

   The decision to introduce the assets test was the implementation of a policy not to subsidise the income of some persons who had sufficient resources of their own.  If those resources in fact produce an income in excess of the maximum pension payable to an aged person it will be difficult for such a person to demonstrate “severe financial hardship”.  It may be possible if his or her reasonable living expenses are unusually high for some exceptional reason.  But in the ordinary case “severe financial hardship”: is a condition that is more likely to be demonstrated by a person whose income is materially less than the current maximum pension.

3. While it is not a perfect analogy, Deputy President Jennings’ approach has a basis in logic, and I consider it a fair measure to take account of in making a general assessment of whether a person faces severe financial hardship.

4. Ms Sangha submitted that the Respondent’s financial circumstances are better than most social security recipients. Mrs Erceg deposited $320,000 into her term deposit account from the sale of her South Perth home. She received some $70,000 from this term deposit account in interest, and when she purchased her new, more modest, residence at Camillo, she was able to pay the purchase price of $270,000 outright.

5. Evidence was advanced that Mrs Erceg had used the balance of the proceeds from the sale of her previous residence on repairs for her new home and, apparently at the urging of her parents to help her with her home budgeting, she had pre-paid some utilities costs.  There were certain receipts before the Tribunal relating to expenditure on the Camillo house, including an invoice of some $14,714 dated 27 October 2014 for improvements to the kitchen, $1,600 for roller blinds and $310 for bins. I have no reason to doubt the veracity of this expenditure, but it does not account for how the other funds have been spent.

6. There was no corroborative evidence before the Tribunal about the pre-payment of certain utilities, or the amounts involved. If I accept at face value that this was urged on Mrs Erceg by family members to help her manage her household bills, and I do, the very fact of her having the financial capacity to pay these amounts ahead does not contribute to me finding that she faces “severe financial hardship”. I noted evidence advanced that the Respondent’s aged parents have provided periodic financial help to her.  That is to their credit.  However, by itself, such help from family members does not corroborate “severe financial hardship”.  There are many reasons why family members may help out one another, financially and in other ways.

7. Mr Wilkins provided an estimated fortnightly budget, including some receipts where they were available.  He estimated the Respondent’s expenditure each fortnight was some $527 and her income from Newstart Allowance each fortnight was $517.60.  In this budget he listed the money set aside for home and contents insurance as $50 per fortnight.  The Secretary said that, on the insurance notices provided by the Respondent, her annual home and contents insurance bill is $665.52.  Fortnightly, this would be a cost of $25.60.

8. In his written submission at paragraph [43], Mr Wilkins said:

   Since her Camillo property was made habitable in mid-2015, her fortnightly bank balance has averaged between $20 and $50 at the end of each payment period.  Liz has no other source of income other than the NSA (aside from minor family supplementation to cope with billing spikes).

9. The Secretary submitted that Mrs Erceg was, on this evidence, able to repay the debt because of this “surplus” of funds.

10. I note that Mr Wilkins pointed out that the rough expenditure statement he provided did not take account of unforeseen events such as appliance breakdown.  I also note that he submitted the Respondent’s Statement of Facts, Issues and Contentions on 17 October 2016 and advised that Mrs Erceg was at that time repaying a traffic fine in the amount of $20 per fortnight which she “will take a further 18 weeks to pay off”.  On this evidence, the speeding fine debt was fully discharged on 21 February 2017.

11. In the AAT1 hearing, there was discussion about the debt being recovered from Mrs Erceg in the amount of $25 per fortnight but the Secretary has since advised that a check of Department records shows that the debt was recovered from 18 February 2016 in the amount of $15 per fortnight until 21 July 2016 when the decision of AAT1 was implemented.

12. It would seem to me, on the rough fortnightly budget for Mrs Erceg that Mr Wilkins submitted, the Respondent has some $45 in additional funds free per fortnight (approximately $25 from the insurance premium over-estimation and $20 which previously was going towards paying the now discharged traffic fine debt), and would still have some $30 per fortnight available after an allotment of $15 is withheld by the Department to repay the debt.

13. I also note that Mrs Erceg owns her own residence: she does not pay rent or have a mortgage.  I accept that she has spent certain funds to repair or otherwise improve her Camillo house, but, even with this expenditure, the precise quantity of which is not clear, she does not have certain regular fixed household expenditure that many recipients of income support payments do have. 

14. In his submissions (Exhibit R1), Mr Wilkins said, at paragraph [25]:

    The reference by the Applicant in points 31 and 51 to a $70K figure is the interest earned by Liz from the term deposit in which she invested the $323K from the townhouse sale.  This was opened on 6/10/09 and closed on 5/6/15…There is no ‘secret’ about this money: as the Respondent’s point 12 indicates, it is fully accounted for in Liz’s taxable income.  Liz used this as living and medical expenses across the six year period as her capacity to work in her usual manual roles diminished.

15. It was conceded in submissions made by both parties that Mrs Erceg earned some $70,000 in interest from her cash investment account for the period, broadly, from when she sold her South Perth house and purchased her Camillo residence.

16. The Respondent contended that she properly advised the Department of the proceeds from the sale of the South Perth house and herself precipitated the debt recovery exercise by properly advising the Department when she purchased the new Camillo residence, but it is an inescapable fact that she received income of some $70,000 that she did not report to Centrelink.  Had she done so, her entitlement to Newstart Allowance would have been adjusted.

17. I find that severe financial hardship would not result from repayment of this debt. For completeness, I also find that the other provisions of section 1236(1A) of the Act do not apply in Mrs Erceg’s case.

    Do special circumstances apply?

18. Mr Wilkins contends that the Respondent was diligent in her financial management, and provided to the Tribunal evidence that she declared her interest income to the Australian Taxation Office during the relevant period.  I do not dispute that contention.

19. He contended that Centrelink officers did not put reviews in place to follow up the Respondent and, had they done so, the overpayment of Newstart Allowance would have been identified early and the debt would not have accumulated.

20. Mr Wilkins also presented the Tribunal with significant documentation of the health challenges that the Respondent has faced over the last several years. These have ranged from physical ailments to significant and traumatic bouts of mental illness. The Tribunal accepts the hospital documentation evidence he provided of her, first, voluntary and, later, involuntary hospitalisation at a facility to treat her diagnosed Schizoaffective Bipolar Disorder (BPAD).  Mr Wilkins did not contend that this condition and her other medical challenges led to the Respondent failing to report her income, but that it did affect her judgement from its first onset in mid-2008, and therefore should be considered as a special circumstance.

21. There is no doubt that Mrs Erceg has suffered significant health trauma. It is a factor that I may take into account in deciding whether special circumstances exist under section 1237AAD of the Act, but it is but factor, albeit a significant one, in the range of circumstances applicable to the Respondent.

22. As Deputy President Todd considered this very question in Secretary, Department of Social Security and Bolton [1989] AATA 479, at paragraph [25]:

    Ultimately it is not just a matter of simply taking each of the factors discussed above separately, important as it is to do so. It is essential to keep an overview of the whole matter. If it were simply a matter of feeling sympathy for a battling working man who has had more than his share of trouble I would have no difficulty in finding for the respondent in this case. But given in particular the extent of his assets, especially the Livingstone property, I cannot do so. No special circumstances exist here to justify exercising the discretion given by s.156 of the Act. The topic of special circumstances has been thoroughly analysed in the decisions of the Tribunal and of the Federal Court discussed above, and consistently with the principles therein set out I am unable to give paramountcy, as did the SSAT, to the decline in the respondent's health.

23. In Kulakov and Secretary, Department of Social Security [1991] AATA 668, the Tribunal expressly endorsed the approach taken by Deputy President Todd in Bolton and stated at [21]:

    … ill health alone cannot be held to be a special circumstance.

24. In a similar vein, Deputy President Forgie in a more recent case, Secretary, Department of Family and Community Services and Jonauskas [2001] AATA 72 said, at paragraph [79]:

    Many people who are on the Age Pension suffer ill health and have difficulties in managing their affairs because of it.  Many have some degree of difficulty in reading letters whether because of lack of English or because of problems caused by ill health.  This does not justify their being careless or reckless about the manner in which they manage their affairs.  They may seek assistance from family members although they are not obliged to.  There are avenues of assistance available to them and one of those is to telephone the Department, and now Centrelink, for assistance and guidance as to a person’s obligations.

25. Mr Wilkins said that Mrs Erceg received the Newstart Allowance payments in good faith.  He contended that she has acted responsibly and she does have special circumstances that should invoke the Secretary’s discretion to waive the debts. He said that the Department relies on pro forma letters as constituting evidence that the Respondent knowingly received these payments.

26. Ms Sangha contended that the Department does not only rely on the letters sent to Mrs Erceg by Centrelink but also the fact that she attended the Innaloo Centrelink office and had a face to face discussion with officers there, so she would have been personally aware from this discussion of her obligation to advise of the deposit of the money from the house sale, and that the funds would have a direct impact on her Newstart Allowance entitlements.

27. I remark that this approach from the Secretary is a little ingenuous.  On the one hand the Applicant relies on evidence from Centrelink records of advice from Mrs Erceg to officers of monies she had received from the sale of her house (while conceding it has lost the written statement she provided that day), and on the other hand concedes that the Department did not act on the effect these funds should have had on her rate of Newstart Allowance for some five years.

28. Besanko J, in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, warned against requiring there to be exceptional circumstances before there may be said to be special circumstances at [33]:

    I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.

29. In Ward v Commissioner of Taxation [2016] FCAFC 132, a recent Full Court decision, the Federal Court has cautioned decision-makers against taking too narrow a view of what may constitute “special circumstances” within the meaning of an Act of Parliament. Their Honours stated, in that context at [43]:

    In our opinion, the Tribunal erred in law by taking too narrow a view of what may constitute “special circumstances” within the meaning of the statute.  This may have been caused by unnecessarily considering factors in isolation before focusing on the entirety of the circumstances said by the applicant to be special.

30. As mentioned above, the ARO in considering this debt decision noted Centrelink referred in its record made on 6 July 2009 to a statement from Mrs Erceg which the ARO was unable to locate, either scanned into the Respondent’s customer record or placed on Mrs Erceg’s paper file.  The ARO further records in her note made apparently on 12 March 2015 the following (T9, pg 54):

    The term deposit of $320,000 has been coded on SVS from 8 July 2009 (term deposit), therefore the deeming rate has not been taken into account prior to this date in the ADEX.

    Multical 22 January 2014

    There is no explanation as to the end date used in this calculation.

    The debt has been calculated from 17 June 2010 on the basis of the waiver for the period 8 July 2009 to 5 October 2010, as Mrs Erceg had a 12 month asset exemption.

    This calculation does not take into account that income from the term deposit does affect the customer’s entitlement.

31. And later on in the ARO’s notes (T9, pg 55):

    DHS failed to update the customer record in relation to the liquid asset (cheque from sale of property), and Mrs Erceg failed to notify DHS how she had used the funds, or the term deposit with the Commonwealth Bank.  While there is some admin error on the part of DHS, admin error is not the sole cause of the debt.

    Consideration

32. With respect, I do not agree with the reasoning in AAT1 and I set aside that decision.

33. But, taking into account the judicial reasoning in Ward, I have decided that, in all the circumstances, there are special circumstances that are applicable to Mrs Erceg in this case which should enliven the Secretary’s discretion to vary the debt by waiving part of it. 

34. As adverted to above, I consider that the missing written statement that it is recorded Mrs Erceg provided to Centrelink on 6 July 2009 when she visited the Centrelink office to advise that she had sold her principal place of residence is of significance.  At this time, Mrs Erceg was moving in to live with a new (now former) partner, and did not – apparently – have immediate plans to purchase a new residence.  However, the content of her missing statement which presumably reflected the oral advice she gave officers about the proceeds of the sale of her South Perth house, and the fact she not only showed the officers a cheque, but that the officers noted down the amount, may have led to her reasonably comprehending that some or all of the proceeds from the sale of a principal home may not be regarded as part of her liquid assets by Centrelink if another principal home is purchased within 12 months.

35. Given there is consistent other evidence before the Tribunal of Mrs Erceg declaring her income to the ATO, I do not conclude she was trying to ‘hide’ that she had the funds.  However, like all recipients of social security benefits, the Respondent does have an obligation to report changes in her financial circumstances. I do not accept Mr Wilkins’ contentions that there was an obligation on Centrelink to review the Respondent’s situation; the obligation is with the recipient of income support. In this case, the interest income that Mrs Erceg did receive was $70,000, a not insubstantial amount.

36. The Respondent also received, as was documented before the Tribunal, many letters from Centrelink reminding her to ensure the details she had provided were accurate and current. I do not accept Mr Wilkins’ submissions that such letters should be regarded as akin to mobile phone contracts in that people who receive them should not be expected to read ‘fine print’ that is regularly printed on those letters in a pro forma way. Persons receiving social security benefits are receiving those funds from the public purse, and there is an expectation that the amount a person receives matches his or her eligibility for the entitlement, adjusted from time to time according to any income and assets test that the statute may provide. Even though I accept the medical evidence of the Respondent’s bouts of mental distress at this time, it is hard for me to conclude that the Respondent, who on the evidence is otherwise meticulous in her book-keeping habits, would not have realised that the additional income she was able to enjoy after the sale of the South Perth house would not have some effect on her rate of Newstart Allowance, or even that it might.

    Conclusion

37. However, there are a range of other specific factors relevant here, including Mrs Erceg’s personal attendance at Centrelink, Centrelink’s admitted loss of the written advice she properly provided to them on that day (which the ARO highlighted), and her conduct at the time with other government agencies which show no pattern of deception in terms of dutifully recording income. On weighing all these circumstances together, in terms of the statutory power provided in section 1237AAD for the Secretary to have discretion to waive all or part of a debt, the Tribunal finds that the special circumstances provisions of section 1237AAD of the Act are sufficiently exceptional in relation to Mrs Erceg to be satisfied as follows.

1. I am satisfied that on the facts she did not open her term deposit account, which had accompanying rules about a higher interest rate and lack of ability to withdraw without penalties, with the Commonwealth Bank until 6 October 2009. In addition, the Parliament chose to provide a discretionary ‘grace period’ of 12 months in section 14A(4) of the Act relating to how the proceeds from the sale of a person’s principal home should be considered, and I find that it is preferable in the exercise of the statutory discretion that the Respondent’s debt should be recalculated with that legislative intention in mind.

2. I find that the preferable date for the debt period to commence is 31 December 2010. This date is some fourteen days after Mrs Erceg received a Centrelink reporting statement (referred to by the ARO in her letter to the Respondent dated 12 March 2015) dated 16 December 2010, alerting her to update her reporting details. I further find that the interest income Mrs Erceg received prior to this date should not be taken into account in calculating her liquid assets for Newstart Allowance under section 1068 and other provisions of the Act. The debt should be recalculated accordingly.

   DECISION

3. The Tribunal sets aside the reviewable decision and remits the matter to the Applicant with a direction that the debt period commenced on 31 December 2010 and ended on 29 October 2014.

I certify that the preceding 83 (eighty-three) paragraphs are a true copy of the reasons for the decision herein of Mr D.J. Morris, Member

...........[Sgd].............................................................

Administrative Assistant

Dated: 10 May 2017

Date of hearing:	16 March 2017
Representative for the  Applicant:	Ms S Sangha
Solicitors for the Applicant:	Mills Oakley Lawyers
Representative for the  Respondent:	Mr P Wilkins