Fry and Secretary, Department of Education, Employment and Workplace Relations

[2009] AATA 232

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 232

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/2085

GENERAL ADMINISTRATIVE DIVISION		)
Re		STEPHEN FRY

Applicant

And SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Mrs Josephine Kelly, Senior Member

Date7 April 2009

PlaceSydney

Decision

1. The decision to raise and recover family tax benefit (FTB) rent assistance debt of $7,207.04 for the period 18 December 2002 to 13 June 2005 is set aside and the matter is remitted for reconsideration in accordance with the direction that a debt be raised and recovered for rent assistance paid in relation to FTB during the period 18 December 2002 to 13 June 2005.

2. The decision to raise and recover the newstart allowance rent assistance debt of $1,991.13 is affirmed.   

......................[sgd]........................

Senior Member
  Mrs Josephine Kelly

CATCHWORDS

SOCIAL SECURITY – Rent assistance – Family tax benefit (FTB) – Newstart allowance – Debt raised – Whether eligible for rent assistance – Whether applicant liable to pay rent or paid rent on the premises – Applicant argued contributed to company funds and he paid and was liable to pay rent – Held company paid and liable to pay rent - Decision to raise and recover FTB debt set aside and remitted for reconsideration – Decision to raise and recover newstart allowance debt affirmed.

A New Tax System (Family Assistance) Act 1999, cl 38C(e) of Schedule 1, Part 5, Div 2B

A New Tax System (Family Assistance) (Administration) Act 1999, s 71, 95, 101

Administrative Appeals Tribunal Act 1975, s 37

Social Security Act 1991, ss 23, 1070C, 1223, 1236, 1237AAD

REASONS FOR DECISION

7 April 2009 Mrs Josephine Kelly, Senior Member      

INTRODUCTION

1.      Mr Stephen Fry lives in Unit 6 of premises at Collaroy, New South Wales in respect of which he received rent assistance payments from Centrelink from 17 December 2002 until 13 June 2005.  He seeks the review of the decision made on 31 January 2007 by the Social Security Appeals Tribunal (SSAT) to affirm two decisions of a Centrelink Authorised Review Officer to raise and recover debts for:

(1) Family tax benefit (FTB) rent assistance of $7,207.04 for the period 18 December 2002 to 13 June 2005 (T15) (the FTB rent assistance debt).  Mr Fry was notified of this in a letter dated 8 December 2005; and    

(2) Newstart allowance rent assistance of $1,991.13 for the period 17 December 2002 to 27 January 2004 (the newstart allowance rent assistance debt).   This debt has been recovered.

2.      The FTB rent assistance debt arose because it was determined that the lessee of the relevant premises was a company, Infinite Potential Technology Pty Limited (IPT), not Mr Fry. There were two components of this debt, a lump sum payment of $3,502.52 made in March 2004 for the period 18 December 2002 to 8 March 2004, and the sum $3,704.52 paid during  the period from 9 March 2004 to 13 June 2005.  As of 1 August 2008 the outstanding balance of this debt was $4,680.16.

3.      During the course of the hearing, there seemed to be uncertainty about the correct amount of the FTB debt.  On 11 July 2008 Mr Bullock, the Legal Services Officer representing the Secretary, Department Of Education, Employment and Workplace Relations (the Secretary), wrote to the Tribunal and stated that "it seems" that the amount of $1,991.13 had been included in the FTB debt of $7,207.04, "and as the amount has been fully recovered from Mr Fry, urgent instructions will be sought to refund the full amount of this debt to Mr Fry".  No further advice on this matter was received.  I understand the remarks to mean that the $1,991.13 has been included in the FTB rent assistance debt as well as the amount of rent assistance paid in relation to FTB.   

4.       There being uncertainty about the correct amount of the FTB rent assistance debt, I have considered the matter in terms of the principle in question and have determined for the reasons that follow that a debt was properly raised; however I am not in a position to affirm the decision because the amount may be incorrect.  Therefore, I set aside that decision and remit it for reconsideration in accordance with the direction that a debt be raised and recovered for rent assistance paid in relation to FTB during the period 18 December 2002 to 13 June 2005.

5.      For the reasons that follow, I affirm the decision to raise and recover the newstart rent assistance debt.

ISSUE

6.      The issue in this case is whether Mr Fry paid, or was liable to pay, the rent on the premises where he lived during the debt periods, or whether IPT paid, or was liable to pay, the rent.

LAW

7.      Under the Social Security Act 1991 (the Act) a person may receive rent assistance if they receive a social security payment. Newstart allowance is such a payment. One of the criteria that has to be satisfied in order to receive rent assistance is that the person pays or is liable to pay the rent in respect of a period in respect of premises (s 1070C(c) of the Act).

8. A debt is owed to the Commonwealth if a social security payment is made and the person who obtains the benefit was not entitled to obtain that benefit (s 1223 of the Act).

9. A person may also receive rent assistance if they receive FTB Part A and satisfy certain criteria. The only criterion in contention is what is currently clause 38C(e) of Schedule 1 of the A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act) which provides:

(e)  the individual pays, or is liable to pay, rent (other than Government rent).

10. Section 71 of the A New Tax System (Family Assistance) (Administration) Act 1999 (the FA Administration Act) similarly provides that if an amount of FTB is paid to a person and that person is not entitled to the assistance in respect of the period, or the amount is greater than that to which the person is entitled, the amount is a debt to the Commonwealth.

MR FRY’S CASE

11.     Mr Fry represented himself at the hearing. His case was that he had funded IPT using his credit cards and therefore had paid his share of the rent personally.  Further, he was liable for the rent because he had a sub-lease from IPT for the premises.

CONSIDERATION

12. I have taken into account the voluminous documents provided pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 and the further material provided by Mr Fry, and on behalf of the Secretary, and Mr Fry's oral evidence.

13.     The SSAT referred to Mr Fry's leasing of another unit, Unit 4, in the same building as the unit the subject of these proceedings, Unit 6.  The only relevance of that tenancy is that Mr Fry lived in Unit 4 until about September 2002 when he moved into Unit 6, which is consistent with his evidence that IPT rented the subject premises and used them as business premises for a year or so before he moved there. It was not in dispute that Unit 6  was leased by IPT.   

14.     As I understood Mr Fry's evidence, IPT's business related to the provision of computer equipment.  The IPT company report dated 22 February 2005 showed that the company was registered in 1994, that Mr Fry has been a director and secretary from the outset, and the only director since February 2001. There were two shareholders at the date of the report, Mr Trevor Fry, Mr Fry's father, and Mr Fry, each holding one share.  I infer from this and other evidence that, in effect, IPT was Mr Fry's company.

15.     It is apparent, from the evidence, that Mr Fry has had personal difficulties from 2002.  He was in a relationship with his daughter's mother from 1998.  Their daughter was born on 30 October 1999 and resided with her mother.  Mr Fry and the mother lived together from about June 2000 to February 2001. Family Court contact orders were made on 23 July 2001, final consent orders relating to residency and contact were made on 15 October 2002.  Further Family Court proceedings occurred in December 2004.  Mr Fry was legally represented.  The transcript of part of the proceedings was in evidence and is of some relevance.  As of that date he had the use of a motor vehicle although he did not own it.  Mr Fry said he was still the director of IPT but no longer a shareholder, was looking to start a job, and was studying part-time.

16.     In a report dated 13 April 2006 Dr McCririck, general practitioner, stated that Mr Fry has suffered from a clinical depression necessitating medical and psychiatric treatment over the last few years, as well as lumbar spinal pain over some years which causes him much inconvenience, and some infections over the last few years.

17.     Mr Fry's immediate response to the advice of debt was to state that he had funded the company via his credit cards in excess of $49,000 during "this period" and that he had shown the decision-maker invoices of legitimate company expenses approximately equal to or greater than turnover. He also stated that he was being sued for in excess of $80,000.

18.     Among the material Mr Fry provided to this Tribunal was a letter from the landlord of Unit 6 dated 7 April 2008 in which he stated that in September 2002 he gave permission for IPT to sublet part of the premises to Mr Fry.  A letter from the landlord's wife dated 9 July 2008 was also in evidence.  She confirmed that Mr Fry had been subletting Unit 6 for his personal use from 1 September 2002 to the present and that from that date he had been paying personal rent, often in the form of cash from month to month, as well as part payments by cheque.  However this evidence conflicts with her evidence to the SSAT that the lease was between IPT and her husband and that the arrangement had not changed and that the rent was paid by company cheque or cash. The landlord and his wife did not give oral evidence and were not required for cross-examination. There was no lease document between IPT and the landlord before the Tribunal.

19.     Mr Fry also provided to the Tribunal a three year tenancy agreement dated 1 September 2002 between IPT, as landlord, and Mr Fry as tenant (the sub-lease), and tax invoices from IPT to himself for periods 1 September 2002 to 30 June 2003, and 1 July 2003 to 30 June 2004, 1 July 2004 to 30 June 2005 and 1 July 2005 to 30 June 2006 for amounts calculated on a weekly rental payment of $235, that is approximately $940 a month. According to Mr Fry the total rent paid between 1 September 2002 and 30 June 2006 was $46,843.21. None of these critical documents had been provided to the SSAT or to Centrelink. That suggests to me that they were of recent origin and I give little weight to them. In his applications for family tax benefit for the 2002-2003 and 2003-2004 financial years dated 9 March 2004, Mr Fry asserted that he paid $1,385 per month to his landlord. That does not accord with the figures presented in the tax invoices from IPT.

20.     Email correspondence between Mr Fry and Credit Corp in October and November 2006 showed debts to Westpac - Virgin Mastercards of approximately $56,000.  Two further documents from Credit Corp dated 10 July 2008 stated that Mr Fry had credit card debts to Westpac Banking Corporation totalling approximately $63,200. 

21.     In response to a Centrelink inquiry dated 22 February 2005, Westpac advised that no account was held by Mr Fry.  However, in April 2005 Westpac advised that IPT held an account which had been opened in May 2000 and provided statements for that entire period of nearly five years.  The statements show regular internet withdrawals of $1,385, sometimes showing the name of the landlord, and on other occasions no name is given but the amount is the same. There are also cheques drawn for that amount.     

22.     Those statement show substantial credits and debits for most months.  However, precisely what activity those transactions represent is not apparent on the evidence.

23.     Mr Fry held an account with the National Australia Bank . Those records show unexplained credits and internet banking transactions from May 2003 to July 2004. This is the account into which Mr Fry’s Centrelink benefits appear to have been paid.

24.     Mr Fry provided invoices and some credit card payment slips variously dated in the years 2000, 2001, 2002,  2003, and 2004 to support his argument that he had paid IPT’s bills using his credit cards.  He also provided a credit card statement from Westpac with a due date of 28 August 2003 which I understood he relied on to show payments to some computer related companies and also that he owed a substantial amount to that bank.

25.     I conclude that the finances of Mr Fry and IPT were completely entangled.      He has not filed a personal tax return since 1992, and IPT has not lodged tax returns since  1998.   On 20 May 2008 I directed Mr Fry to advise the Tribunal of a time frame within which he expected to have tax returns prepared for the 2002/03, 2003/04 and 2004/05 financial years. Mr Fry told the Tribunal he was seeking to have an accountant assist him to prepare tax returns for IPT and for him personally.   I adjourned this matter three times between then and August 2008 to allow Mr Fry to provide further information, including the tax returns.  However, Mr Fry was not able to have that task done, perhaps because of his financial circumstances. He has had ample opportunity to clarify his financial circumstances.

26.     Taking into account all the material before me, I am not persuaded that Mr Fry was paying the rent in respect of Unit 6.  The Westpac bank records persuade me that IPT was paying the rent.  Those records also persuade me that IPT was carrying on business activities of some kind which generated income, as well as incurring costs, contrary to Mr Fry's evidence to the Family Court that he had not been attending to IPT's business for a number of years.   

27.     In the absence of proper accounting records, I do not accept Mr Fry's evidence about the existence of a loan account representing his loans to IPT.  No bank account or accounting records evidencing such an account were before me.  It seems to be a term that Mr Fry has used to apply to the loans he says he made to IPT. 

28.      I accept that Mr Fry lived in Unit 6 from some time before December 2002 until the present, with the consent of the landlord. However, given the contradictory evidence of his landlord's wife in the SSAT and before me, I am not satisfied that Mr Fry was liable to pay the rent. Rather, I find that IPT was liable.   

29.     It follows that Mr Fry was not qualified to receive rent allowance for Unit 6 as part of FTB payments and newstart allowance and therefore he has debts to the Commonwealth in respect of those payments.     

NON-RECOVERY OF DEBTS

30. Section 1236 of the Act and section 95 of the FA Administration Act provide for the possibility of writing off (delaying recovery) of a debt for a period. A debt can be written off under s 1236(1C) of the Act for a period if recovery by means of deductions from the debtor’s social security payments would cause “severe financial hardship”. Section 95(4) of the FA Administration Act is of similar effect. I am satisfied that Mr Fry has the capacity to repay the debts via withholdings from his fortnightly Centrelink entitlements. The newstart allowance rent assistance debt has already been recovered in that way.

31. I do not consider that there are special circumstances other than financial hardship alone which warrant waiver of all or part of the Newstart allowance debt under s 1237AAD of the Act or s 101 of the FA Administration Act. In coming to this view I have taken into account Mr Fry’s personal circumstances, including his family law dispute and problems and his medical conditions.

DECISION

32.     There being uncertainty about the correct amount of the FTB rent assistance debt, I considered the matter in terms of the principle in question and have determined that a debt was properly raised; however I am not in a position to affirm the decision because the amount may be incorrect.  Therefore, I set aside that decision and remit it for reconsideration in accordance with the direction that a debt be raised and recovered for rent assistance paid in relation to FTB during the period 18 December 2002 to 13 June 2005.

33.     I affirm the decision to raise and recover the newstart rental assistance debt of $1,991.13.

I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Mrs Josephine Kelly, Senior Member.

Signed: ……[sgd]……..…….

Steven Mulipola, Associate

Date of hearing:  8 April; 19 & 28 May; 10 July; and 2 August 2008

Date of final submissions:  2 August 2008

Date of decision:  7 April 2009

Representative for the Applicant:             Self-represented

Representative for the Respondent:       Centrelink Legal Services and Procurement