Flynn and Secretary, Department of Family and Community Services

[2003] AATA 402

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 402

ADMINISTRATIVE APPEALS TRIBUNAL      )

)     No  W2002/164

GENERAL ADMINISTRATIVE DIVISION )

Re renee flynn

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member M D Allen

Date10 April 2003

PlacePerth

ADMINISTRATIVE APPEALS TRIBUNAL   )         No W2002/164
  )  
GENERAL ADMINISTRATIVE DIVISION     )

Re:     RENEE FLYNN

Applicant

And:     SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal              Senior Member M D Allen

Date  10 April 2003

Place                   Perth

DecisionFOR the reasons given orally at the conclusion of the hearing in this matter, the decision under review is AFFIRMED.

(Sgd)         M.D. ALLEN
  ..............................
  Senior Member

CATCHWORDS

SOCIAL SECURITY – Recovery of overpayments – Whether loan shown in the books of a company had in fact been made by the Applicant – Not satisfied case for relief has been made out

Social Security Act 1991 – s1122, s1076, s1237A and s1237AAD

Secretary, Department of Social Security v Ellis 24 AAR 535

REASONS FOR DECISION

Senior Member M D Allen

1. At the conclusion of the hearing of the above matter the terms of the decision intended to be made and the reasons therefor were stated orally. After service upon the applicant of a copy of the decision that was in fact made, the applicant pursuant to Sub‑section 43(2A) of the Administrative Appeals Tribunal Act 1975 requested the Tribunal to furnish to the Respondent a statement in writing of the reasons of the Tribunal for its decision.

2.      The oral reasons for decision have been transcribed by Auscript, the Commonwealth Reporting Service.  Whereas those oral reasons may reflect the inelegance of an extempore decision, they are in fact the reasons for the said decision.

3.        The said transcript is annexed hereunto and furnished to the Respondent and to the Applicant as it is the reasons for the Tribunal's decision.

I certify that this and the preceding page are a true copy of the decision and reasons for decision herein of:

Senior Member M D Allen

Signed:         
          ....................................................................................……………………………….

Associate

Date of Hearing  10 April 2003

Date of Decision  10 April 2003

Solicitor for Applicant                   Applicant self-represented

Advocate for Respondent           Mr Ellis, Centrelink

ORAL REASONS FOR DECISION
ADMINISTRATIVE APPEALS TRIBUNAL
By MR M.D. ALLEN, Senior Member
No W2002/164
FLYNN AND SECRETARY DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
PERTH, 10 APRIL 2003  

MR ALLEN: By application made the 9th day of May 2002, the applicant sought review of a decision by a Social Security Appeals Tribunal on 23 April 2002, determining that the applicant had received over payments of Social Security benefits.  Namely, Disability Support Pension and Age Pension, commencing 13 February 1998.No cross appeal was made by the Secretary to that decision. The alleged debts arose pursuant to section 1122 of the Social Security Act, which reads:

If a person lends an amount after 27 October 1986, the value of the assets of the person, for the purposes of this Act, include so much of that amount as remains unpaid, but does not include any amount payable by way of interest under the loan.

Section 1076, then provides inter alia:

(1) This section applies to a person who is not a member of a couple. (2) A person who has financial assets is taken, for the purposes of this Act, to receive ordinary income on those assets in accordance with this section.

Financial asset is defined by subsection 1 of section 9 of the Act as meaning a financial investment, whereas financial investment is defined to include a loan that has not been repaid in full.  The respondent's case is straightforward.  In documents lodged with the Australian Tax Office by a company, Fisherman Holdings Pty Ltd, of which the applicant was a director and shareholder, and its successor Internet Sales Pty Ltd of which the applicant is also a shareholder, the balance sheets of the said companies show a loan advanced to the said companies by the applicant.

The amount of this loan, which was $15,369 in 1992, is stated to be $120,093 in the year 2000, see document T25 of the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act (1975). It is said that those loan amounts are financial assets in the hands of the applicant, and hence create deemed income pursuant to section 1076 of the Social Security Act.  The applicant for her part, denies ever having advanced moneys to the companies.  She states that at all relevant times she was in receipt of either Disability Support Pension, or Age Pension, and thus had no capital to advance.

She stated that whereas loans are shown in her name, this is a result of negligent accounting methods, adopted by the company's original accountant, a Mr King, trading as KIS, Australian Business Management Consultants Pty Ltd.  Apparently Mr King was not prepared to set out, in the accounts of the company, the named persons who advanced moneys to the said company, but simply amalgamated all advances under the name of the applicant.  This method was queried by the applicant, but Mr King assured her it was an acceptable method of preparing accounts.

When the company or companies changed accountants the error was carried forward.  At document T15, page 55, is a letter from accountants, Atherley and Associates, dated 25 January 2002.  It reads inter alia:

Our firm first attended to the taxation affairs of Internet Sales Pty Ltd, formerly Brady Drums, formerly Fisherman Holdings Pty Ltd, in 1996.  However, a balance sheet for the year ended 30 June 1994, shows an amount owing to Mrs Flynn of $39,587.  Since that time the loan has steadily increased to $120,093.  We had assumed that this loan arose through amounts loaned to the company by Mrs Flynn. However Mr W. Flynn, has advised that these amounts were loaned by himself to the company to cover trading losses and therefore, in this respect, our accounting treatment was inaccurate.  A copy of the balance sheet is attached.  We were also unaware that the loan for the construction of the factory was taken out in the name of W. Flynn, who in turn on-loaned to the company, to finance the construction of the factory.

Mr William Flynn, who is the son of the applicant, gave evidence in these proceedings.  I found his evidence to be confusing and he was unable to give a clear explanation as to where the moneys had been sourced.  He maintained that part of the loan moneys, shown as attributed to his mother, were from an advance to him by the National Australia Bank, being a home loan.  The funds from which were used to construct a factory building.  I do not accept this, as the balance sheet for the year ended 30 June 1998, see T11 page 48, clearly shows as a separate amount, sums of $83,394.99 for the 1988 tax year and $87,215 for the 1997 tax year, as, "Bank loans factory construct".

At document T7 is a copy of an employment verification report, completed by the applicant on behalf of Fisherman Holdings Pty Ltd, regarding the employment of Mr William Flynn.  It shows him employed part-time at $100.30 per week.  T8 is a similar report, signed by the applicant, for or on behalf of Brady Drums.  Again it shows Mr William Flynn, employed part-time at $100.30 per week.  In a statement made by Mr Flynn, he says:

I was previously the owner of a company called Futuristic Products Pty Ltd, trading as Brady Drums, but this business went bankrupt in 1992.  At the present moment I have no legal involvement in any business whatsoever.  My mother, who had a share in the above named company is now managing a company called "Fisherman Holdings", trading as "Brady Drums", for whom I work on a part-time basis.

See document T9. The authorised review officer, who originally considered this matter, pointed out that when in 1993, Mr Flynn claimed New Start, that is to say unemployment benefits, he declared he had no assets or loans to the company.  See document T18.  Mr Flynn has claimed that the sum of $120,000 advanced to Internet Sales Pty Ltd, was shown as an advance by his mother, due to a typing error, and it should have read W. Flynn.  At document T20, page 95, he says, continuing on to page 96:

Centrelink are saying my mother has lent the business known as Internet Sales Pty Ltd, $120,000, because the record says she has.  When they told us this I went to my accountant to find out how this mistake was made.  My previous accountant closed his business in 1995, and in the financial year '95, '96, I engaged another accountant, R.G. Kelly and Co.  Bob Kelly, investigated by looking back through what my previous accountant sent to him and found there was a typographical error, made by the previous accountant on the balance sheet.  It read "unsecured liabilities R. Flynn", when it should have read "unsecured liabilities W. Flynn".

This evidence does not accord with the applicant's evidence that the accountant deliberately amalgamated loans under her name.  Whereas I have a great deal of sympathy for the predicament in which the applicant finds herself and I believe she has been the victim of bad advice in the past I am still not satisfied given the contemporaneous documents, that the decision of the respondent is not the correct or preferable decision.  No real material was put before me on the question of waiver of the debt, and whereas the applicant is in the precarious financial circumstances, common to all welfare recipients, using the test as set out by his Honour, Carr J, in Secretary, Department of Social Security v Ellis, 24 AAR 535 at 539.

There is nothing in the circumstances of this case, nor in the personal circumstances of the applicant, that could be said to amount to special circumstances, justifying waiver of the debt. The applicant did raise the question of administrative error, and whereas she may have some other legitimate complaints against the respondent, those matters are not before me. I can find no evidence of administrative error in the present matter, such as to invoke a consideration of section 1237A in the Social Security Act. 

In particular, that section can only apply when moneys are received as a result of administrative error.  Write off does not arise, as the applicant is in receipt of a Social Security benefit.  The rate at which the debt is to be recovered is not a matter regarding which I have jurisdiction.  One can only hope the Secretary will exercise a realistic and humane attitude when assessing the amount.  For example, on 13 September 2002, for a regular payment of Age Pension which amounted to some $240 odd, there was taken from it a sum of $170.90 as debt repayment, leaving the applicant with $72.28, to cover the next fortnight's expenses. That is the sort of decision that brings the respondent into disrepute.

However, on the main matter, the decision under review, being the decision of the Social Security Appeals Tribunal of 23 April 2002, is affirmed.