Fischer and Secretary, Department of Families, Housing, and Community Services
[2010] AATA 920
•18 November 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION
[2010] AATA 920
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/5247
GENERAL ADMINISTRATIVE DIVISION ) Re Jennifer Fischer Applicant
And
Secretary, Department of Families, Housing and Community Services
Respondent
DECISION
Tribunal Senior Member A K Britton Date18 November 2010
PlaceSydney
Decision The decision not to waive the debt under s 1237AAD or s 1237A of the Social Security Act 1991 (Cth) is affirmed. ...................[sgd]....................
Senior Member
CATCHWORDS
SOCIAL SECURITY – pensions – disability support pension – assets test – overpayment – debt – administrative error – special circumstances.
Social Security Act 1988 (Cth) – ss 1084A, 1237A, 1237AAD
Social Security (Administration) Act 1988 (Cth) – ss 68, 237
Acts Interpretation Act 1901 (Cth) – s 29
Shi v Migration Agents Registration Authority (2008) 235 CLR 28
Beadle v Director-General of Social Security (1985) 60 ALD 225
Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary Department of Social Security v Hodgson (1992) 37 FCR 32
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126
Fischer v Secretary, Dept of Families, Housing, Community Services and Indigenous Affairs (2010) 114 ALD 652
Re Fischer and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 586.
REASONS FOR DECISION
17 November 2010 Senior Member A K Britton 1. Ms Jennifer Fischer, the applicant in these proceedings, received a disability support pension from 2002 to 2008. In August 2008, a Centrelink Authorised Review Officer decided that Ms Fischer had been overpaid disability support pension throughout the period April 2004 to April 2008, and as a consequence owed a debt of $16,000 to the Commonwealth. On review the SSAT affirmed that decision. The AAT (differently constituted) varied that decision and reduced the debt to just over $9,000: Re Fischer and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 586. On appeal the Federal Court set aside that decision and remitted the matter to the AAT: Fischer v Secretary, Dept of Families, Housing, Community Services and Indigenous Affairs (2010) 114 ALD 652 (Fischer). The Court upheld that part of the AAT’s decision dealing with the calculation of the debt, but found that the Tribunal had misdirected itself on the application of s 1237AAD of the Social Security Act 1991 (Cth) (the Act), which gives the decision-maker the power to waive all of part of a debt where there are “special circumstances (other than financial hardship alone) that make it desirable to waive”.
2. As determined by the Tribunal and upheld by the Federal Court, the period covered by the debt is 20 June 2004 to 25 May 2007. Prior to the commencement of these proceedings, an agreement had been reached between Ms Fischer and Centrelink for repayment of the debt by way of fortnightly instalments of $100. The debt now stands at about $7000.
3. Ms Fischer was represented in these proceedings by her father, Mr Thomas Fischer. She did not attend or give evidence.
Scope of review
4. The parties agree that the issues to be determined following the remittal from the Federal Court are whether the power to waive all or part of the debt must be exercised either because of administrative error (s 1237A) or should be exercised because of special circumstances (s 1237AAD).
Debt waived on account of administrative error?
5. Mr Fischer submits that throughout the period of the debt, Centrelink failed to specifically request information from his daughter about any change to the value of shares or take steps to obtain that information by other means, despite being notified on notice that his daughter had purchased shares. He contends that this constitutes an “administrative error” attributable to Centrelink, and accordingly the debt must be waived under s 1237A of the Act.
6. Section 1237A of the Act provides:
Waiver of debt arising from error
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.
Proportion of a debt
(3) For the purposes of this section, a proportion of a debt may be 100% of the debt.
7. As the debt was not raised within six weeks of the first payment that caused the debt to arise (s 1237(1A)(a) of the Act) the power to waive all or part of the debt must be exercised if:
1. A proportion of the debt was attributable solely to an administrative error made by the Commonwealth.
2 The payment that gave rise to the debt was received by Ms Fischer in good faith.
Sole administrative error
8. In Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126, Selway J discussed (at 130) the meaning of the phrase “attributable solely” in the context of s 1237A(1) of the Act:
The ordinary or usual interpretation of the phrase 'attributable solely to' is that it refers to the single or sole cause of the relevant act or event. The word 'attributable' means 'capable of being attributed'. It involves an objective assessment of causation. The words 'a debt attributable solely to an administrative error' can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error.
9. Adopting that approach, it is necessary to ask: “is an administrative error made by the Commonwealth the only cause that objectively can be ascribed to some or all of Ms Fischer’s debt?”.
10. The Secretary submits that the overpayment made to Ms Fischer, which gave rise to the debt, was caused at least in part by her failure to notify Centrelink of the change in the value of her shares that occurred throughout the period of the debt. The Secretary contends that throughout this period, Centrelink repeatedly requested Ms Fischer to provide this information in clear and unambiguous language.
11. Mr Fischer advanced a number of arguments in support of his contention that the debt arose solely as a result of Centrelink error. I will deal with each in turn.
12. Non-receipt argument: Mr Fischer contends that there is no evidence that letters requesting his daughter to provide information about any change to her circumstances were generated or sent, let alone received. It is necessary to examine the evidence about the requests for information alleged by the Secretary to have been made by Centrelink.
13. In about 2004, Ms Fischer purchased shares in a number of companies listed on the Australian stock exchange. In April 2004, she provided Centrelink with a statement issued by the Commonwealth Bank, which listed the shares she held, an estimate of their market value ($79,843.82), and the balance of the margin loan over those shares ($47,656.94). The Secretary contends that on 31 May 2004 Centrelink wrote to Ms Fischer in the following terms:
WHAT YOU MUST TELL US
You must tell us within 14 days … if any one of these things happens, or may happen…
Income
…
if you buy or sell any shares or managed investments;
if you receive any bonus shares;
…
Assets
if your assets other than financial investments are more than $178,907.00;
if your financial investments are more than $80,843.00 (this is $1,000 more than the value of financial investments we have recorded for you);
…
if your assets change substantially.
14. The Secretary claims that Ms Fischer was sent letters in identical terms (except in respect of the period covered by the letter dated 31 May and its date) on a regular basis throughout the period covered by the reduced debt: 11 November 2004, 4 February 2005, 6 March 2006, 9 March 2006, 22 May 2006, 25 July 2006 and 27 July 2006. In addition, the Secretary claims that throughout the period, 23 October 2004 to 27 March 2007, Ms Fischer was sent 12 notices at regular intervals advising that she must report "every two weeks" if any of her circumstances had changed. The Secretary contends that all but two of those notices listed as examples of changed circumstances “Assets and Investments – buy sell, change, get any money from or receive a bonus from any shares or managed investments”. The remaining two notices — that is, those said to have been issued on 6 December 2004 and 11 April 2005 — gave "Income, Assets and Investments – financial investments change by more than $1,000" as examples of “changed circumstances”. For convenience, I will refer to the purported letters referred to in this paragraph collectively as “the letters”.
15. Neither the original nor copies of the letters were produced in evidence. The Secretary produced what he contended were “copies” of the letters sent to Ms Fischer that had been retrieved from Centrelink’s Customer Archive Retrieval (CAR) system (T7, T8, T9, T10, T11, T13, T16, T17, T18, T19, T20, T22, T24, T25, T27, T28, T29, T32, T33, T35, T36, T41, T42) (I will refer to these as “the purported notices”.) Centrelink’s Acting Director, Letters and Communications IT, Mr Peter Asquith, gave evidence about Centrelink’s CAR system and the purported notices. He explained that up until 2007, Centrelink did not retain hard copies of notices sent to customers such as the letters alleged to have been sent to Ms Fischer. It was Centrelink’s practice at that time to store the contents of each letter in the CAR system, 63 days after it had been despatched to Australia Post. He testified that it was not possible to now retrieve a copy of the actual letter in the form it would have taken when despatched to Ms Fischer. However, Mr Asquith testified that the text contained in each purported notice was identical to that contained in the corresponding letter sent to Ms Fischer. On his account, the extensive computer coding contained in the purported notices did not appear in the letters sent to Ms Fischer. He said that on the basis of his experience working in the CAR system, together with the coding references contained in each purported notice, he was “100 per cent certain” that each purported notice had been retrieved from the CAR system.
16. The Secretary also adduced evidence about Centrelink’s mail processing practices throughout the period of the debt. This was to the effect that letters such as those said to have been sent to Ms Fischer were automatically generated by Centrelink’s IT system and dispatched electronically on a daily basis, to mailing houses contracted to print and place the letters in envelopes for mailing. Evidence was also given about the monitoring systems employed by Centrelink throughout this period to ensure that the number of “letters” sent each day in electronic form to the mailing house (known as Batch Laser Advices (“BLA”)) corresponded with the number of letters printed and ultimately posted by the mailing house. Ms Vicki Selby, a Senior Liaison Officer with significant experience in Centrelink’s mail management, testified that throughout the period of a debt, if a discrepancy arose between the numbers of letter contained in a BLA and the number printed and/or prepared for postage, a non-compliance report would automatically be generated and the matter investigated. She testified that she had examined Centrelink’s records relating to each BLA in which the purported notices were contained and there were no reports of discrepancies relating to those batches. Furthermore, she claimed that her enquiries about those batches revealed that there were no reports of complaints being received from customers about not receiving mail.
17. I am satisfied from the evidence before me hat throughout the period of the debt, copies of letters sent to customers, such as those claimed to have been sent to Ms Fischer, were archived in electronic form in Centrelink’s CAR system; the purported notices were retrieved from that system; and while not identical in form, contained the same text as the letters generated to be sent to Ms Fischer. The fact that Centrelink cannot replicate exact copies of those letters does not establish, as suggested by Mr Fischer, that the letters were not generated.
18. By the combined operation of ss 237(2) and (3) of the Social Security (Administration) Act 1999 (Cth) (“the Administration Act”) and s 29 of the Acts Interpretation Act 1901 (Cth), Ms Fischer is deemed to have been “given” the letters, providing they were sent by prepaid post to her address, unless the contrary is proved. I accept the evidence adduced by the Secretary that letters corresponding to the purported notices were sent by prepaid post to Ms Fischer. It is not disputed that the address on each purported notice corresponded to Ms Fischer’s address throughout the period of the debt. There is no evidence that the notices were not received by Ms Fischer and nor is this claimed. As the statutory presumption that the letters were given to Ms Fischer is not rebutted, she is taken to have received them.
19. Onus argument: Mr Fischer submits that s 1084A of the Act and s 68 of the Administration Act “make it clear that the onus falls on Centrelink to request information about a ‘specified event in change of circumstances’. There is no onus on a DSP recipient to voluntarily supply the information.”
20. Even if Mr Fischer is correct, the issue is not whether the Act or the Administration Act imposes a duty on social security recipients to volunteer information to Centrelink about changes in their circumstances that might be relevant to the calculation of their rate of pension. Rather, the issue is whether Ms Fischer’s failure to disclose contributed to the overpayment of DSP. Ms Fischer was repeatedly requested in writing to notify Centrelink of any change in her financial circumstances, which included changes in relation to her investments, but failed to do so. In my opinion, it cannot reasonably be maintained in those circumstances that any or all of the debt was attributable “solely” to Centrelink administrative error. It was contributed to, at least in part, by Ms Fischer’s failure to provide the requested information.
21. Sole purpose argument: Mr Fischer contends that the “primary purpose” of the purported notices was to provide his daughter regular updates about her rate of DSP, not to request that she provide updates about any changes of circumstances. Even if correct, the documents also contained a request for information about any change in circumstances. Whether that request was a “secondary purpose” is in my view irrelevant.
22. Annual statement argument: Mr Fischer contends that had Centrelink requested his daughter to complete an “Income and Assets update” statement, he would have no argument as it squarely requests information about a person’s change in circumstances. The update is in the form of a questionnaire and asks specific questions about the person’s assets. Even if accepted that this was a better or more efficient way to obtain information from Ms Fischer than the notices that were sent it does not follow that all or part of the debt was attributable “solely” to Centrelink administrative error. As stated it was at least in part, contributed to by Ms Fischer’s failure to provide the requested information.
23. Other methods of obtaining information: Mr Fischer argues that having been put on notice by his daughter in April 2004 of the shares she had purchased and their value, Centrelink was obliged to monitor their value, and vary her rate of DSP in the event of any relevant change in value. Even if other methods were available to Centrelink to monitor changes to Ms Fischer’s share portfolio, of which there is no evidence, the debt was at least partly attributable to Ms Fischer’s failure to periodically update Centrelink.
24. Computer jargon argument: Mr Fischer contends that the purported notices are incomprehensible and replete with computer jargon, and therefore cannot be relied upon by the Secretary to support the contention that his daughter was requested in clear and unambiguous terms to provide information about any change to her financial circumstances. I agree that the purported notices are difficult to read because of their format. However, as explained by Mr Asquith, the letters sent to Ms Fischer were not in that format. Nor did they contain the “computer jargon” to which Mr Fischer objects. While not possible to comment on the form of letters sent, the evidence in my opinion makes clear that the content of each made it apparent that, among other things, Ms Fischer was requested to provide information about any changes to her financial circumstances.
25. Summary: To satisfy s 1237A(1), it must be established that the only cause that can be objectively ascribed to some or all of Ms Fischer’s debt is an administrative error made by Centrelink. I am satisfied that at regular intervals throughout the period of the debt, Centrelink wrote to Ms Fischer requesting that she provide information about any changes to her “financial investments”, and on 12 occasions specified that it was necessary to inform Centrelink if her “financial investments are more than $80,843.00 (this is $1,000 more than the value of financial investments we have recorded for you)”. Even if accepted that the requests could been made clearer, or that that information could have been obtained by other means, I am not persuaded that the only cause that objectively can be ascribed to Ms Fischer’s debt was an administrative error made by Centrelink. Ms Fischer’s failure to provide the requested information about her financial investments was plainly a contributing factor to her rate of DSP not being adjusted following movements in the value of her shareholdings throughout the debt period.
26. Given this finding, it is unnecessary to consider whether the second limb of s 1237A(1) is satisfied — that is, whether Ms Fischer received the payments that gave rise to the debt in good faith. As I am not satisfied that any or all of the debt is attributable solely to an administrative error made by the Commonwealth, the power to waive all of part of the debt conferred by s 1237A cannot be exercised.
Special circumstances
27. Section s 1237AAD of the Act provides that the Secretary may waive the right to recover all or part of a debt if satisfied that “there are special circumstances (other than financial hardship alone) that make it desirable to waive [the debt]”. Mr Fischer contends that special circumstances are established and the power to waive the debt should be exercised. The Secretary disagrees.
28. The term “special circumstances” as used in the context of social security law has been the subject of detailed consideration by the Federal Court. The Court has declined to adopt a prescriptive formula about the meaning of the term (see, for example, Beadle v Director-General of Social Security (1985) 60 ALD 225; French J in Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531 (at 535)). Nonetheless, the Court has emphasised that the term “special circumstances” denotes a requirement that there be “something which distinguishes [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545. However, as Hill J emphasised in Secretary Department of Social Security v Hodgson (1992) 37 FCR 32 (at 42) the term should not be interpreted to impose a requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”.
29. In Fischer, Katzmann J endorsed the following passage from the judgement of French J in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 (at 155), in which His Honour commented on the tension between, on the one hand, the need for certainty in the application of the provision and on the other, the desirability for a flexible response to situations that may arise from time to time:
[T]he concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special...
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words...But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
30. Mr Fischer identifies the following factors as relevant to an assessment of his daughter’s circumstances in the context of s 1237AAD of the Act:
·Her vulnerability to a downturn in the share market because her shares were heavily leveraged
·Her mistaken assumption that the market would recover after the 2007 share market downturn and her subsequent decision based on this assumption to borrow $35,000 from her father
·Her misreading of the share market after the crash, which Mr Fischer contends forced her to sell most of her shares
·The fact that when she stopped receiving the DSP in 2008, the total net value of her shares was less than it was in 2004
·Not having the benefit of the increase in the value of her shares prior to September 2008 because any money received from their sale or dividend issue was either used to purchase other shares or reinvested
·Not having an income stream to support her in retirement — the reason the shares were purchased.
31. Mr Fischer argues that consistent with the following passage from the judgement of Katzmann J in Fischer at [80] taken as a whole, the above constitute “special circumstances:
If, as a result of the collapse of global markets, a pensioner’s shares were so reduced in value that once the margin loan was brought into account they were worthless to her, surely that circumstance could be considered “special” within the meaning of the section.
32. Before considering the factors relied upon by Mr Fischer, it is necessary to deal with his interpretation of Katzmann J’s judgement. Her Honour held that the Tribunal (differently constituted) had erred by apparently adopting the view that because all shareholders were affected by the global financial crisis, the adverse effect of the crisis on a pensioner could never constitute “special circumstances”. Her Honour pointed out (at [80]) that a person’s circumstances might be “special” even though they apply to more than one person or to a class of persons, provided they are not of universal application. She stated:
[Section 1237AAD] does not require the circumstances to be unique to the individual. What if the pensioner failed to declare the value of her investments because the necessary paperwork was destroyed and she was dispossessed of her home as a result of the Victorian bushfires? Thousands of people suffered similar fates. Her situation would not be unique, but it could be “special”. Although all shareholders suffered in the global financial crisis, some suffered more than others. Not all who suffered were pensioners and fewer still were in receipt of a disability support pension. If, as a result of the collapse of global markets, a pensioner’s shares were so reduced in value that once the margin loan was brought into account they were worthless to her, surely that circumstance could be considered “special” within the meaning of the section. Whether the applicant falls into this category or her circumstances are special for another reason pertaining to the impact of the global financial crisis is another question. But it is a question the Senior Member never asked herself. By excluding from consideration anyone who suffered in the global financial crisis, the Senior Member fell into error. [emphasis added]
33. As the above passage makes plain, Her Honour did not, as Mr Fischer suggests, find that his daughter’s circumstances were “special“. Rather, she held that the mere fact that her circumstances might also be experienced by others did not mean that her circumstances could not constitute “special circumstances” and thereby be excluded from consideration on this basis.
34. Mr Fischer argued that in assessing his daughter’s circumstances, it is relevant to take into account that she did not have the benefit of her shares when their “nominal” value peaked in the period before the Global Financial Crisis. He explained that this is because she elected to either participate in dividend reinvestment schemes or, where not offered, to use any dividend income to purchase additional shares. I cannot agree with the assumption on which this argument is based. Even if accepted that it was unwise to reinvest at that time, it does not follow that Ms Fischer was effectively “denied” any benefit from her shares as a consequence of not being able to use the dividend income for some other purpose. This submission seems to be one about the “fairness” of the statutory scheme, which ties the rate of DSP to, among other things, the value of the person’s assets including any shares held, and is not relevant to the assessment of Ms Fischer’s circumstances.
35. Mr Fischer produced a table that sets out the value of his daughter’s shares over the period June 2004 to June 2010 (see Attachment “A” to submissions filed by Mr Fischer on 27 August 2010). It shows that in June 2004, Ms Fischer’s shares had a market valuation of $79,843, increasing to a peak of $652,240 in December 2007, and decreasing to a low of $63,665 in June 2009. According to the Table, the shares were valued at $93,146 as at June 2010. The Table also shows that the net value of the shares for the corresponding periods (calculated by deducting the value of the margin loan) was $21,235 in June 2004, increasing to $160,168 in December 2007 and decreasing to 11,508 in June 2009. As at June 2010 their net value was $36,800.
36. There was much argument in these proceedings about whether the decline in the value of Ms Fischer’s shares was attributable solely to the purchase and sale of shares outside the period of the debt. The Secretary contended that about $60,000 of the claimed loss was attributable to shares that had been purchased after the period of the debt. Whether that was the case is in my view largely irrelevant to an assessment of whether there are special circumstances (other than financial hardship alone) that make it desirable to waive the debt. In undertaking that exercise, I must have regard to Ms Fischer’s circumstances as they now stand: Shi v Migration Agents Registration Authority (2008) 235 CLR 28. It would be inappropriate in my view to ignore factors which impact on Ms Fischer’s current circumstances because they occurred outside the period of the debt.
37. As properly conceded by Mr Fischer, the erosion in the value of the shares as a consequence of the GFC has had no immediate impact on his daughter. On his account, she did not use, and never intended to use, any income generated by the shares to meet her current living expenses. Rather, he contends the shares had been purchased to create a “nest egg” and for this reason she reinvested any income generated.
38. In determining whether there are special circumstances (other than financial hardship alone) that make it desirable to waive Ms Fischer‘s debt, it is relevant in my opinion to have regard to her capacity to repay the debt. Prior to the commencement of these proceedings, an agreement had been reached between Ms Fischer and Centrelink for repayment of the debt by way of fortnightly instalments of $100. Following repayment of $2000, the debt now stands at about $7000. Ms Fischer is in full-time employment and earns about $1400 per fortnight. She owns a house in an inner Sydney suburb, of which her father contributed about $100,000. The house is subject to a mortgage with repayments of about $2600 per month, of which Mr Fischer contributes about $900. Ms Fischer shares the house with her mother, and told the SSAT that her mother pays most of the household expenses. (There is no evidence that this arrangement had changed.) Ms Fischer has no dependants and no other debts apart from the mortgage on her house and debts to her parents. The debts to her parents are not enforced and nor is it suggested that they will be in the future. While given the level of her income and mortgage commitments, Ms Fischer will not find it easy to repay the debt, having regard to her total position, it could not in my opinion be said that she lacks the capacity to repay.
39. It goes without saying that it is not possible to say whether when Ms Fischer retires (she is now 32 years of age), or needs to call on her share holdings for income or capital, the loss sustained by her share portfolio as a result of the GFC will have been recovered. Even if assumed, as her father asserts, that recovery is unlikely, I am not satisfied that Ms Fischer’s circumstances taken as a whole could be said to constitute “special circumstances (other than financial hardship alone) that make it desirable to waive”. Ms Fischer is in full-time employment, has equity in her home and the capacity to repay the debt to Centrelink. While uncontroversial that the value of her share portfolio has diminished and may not recover, this in my view does not warrant the exercise of the discretionary power to waive the debt having regard to the totality of her circumstances. For this reason I must affirm the decision not to waive the debt under s 1237AAD.
I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.
Signed: ..............................[sgd]...........................................
Associate to Senior Member BrittonDate: of Hearing: 9 November 2010
Date of Decision: 17 November 2010
The Applicant was represented by her father, Mr T Fischer.
Solicitor for the Respondent: Blake Dawson
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