Fugler and Secretary, Department of Family and Community Services

[2006] AATA 161

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 161

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2005/395

GENERAL ADMINISTRATIVE DIVISION		)
Re		ROY FUGLER

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Dr KS Levy, Member

Date24 February 2006 

PlaceBrisbane

Decision

The Tribunal varies the decision under review and decides that:

(a)       The amount of debt 1 for the period 9 July 1998 to 20 August 1998 is affirmed;

(b)       The part of debt 1 from 3 September 1998 to 31 December 2002 is affirmed;

(c)       That the amount of debt 2 which pertained to the period 1 January 2003 to 23 March 2004 is waived; and

(d)       The determination in (c) above be referred to Centrelink for recalculation and adjustment of the total amount of debt 2.  The amount which should be regarded as outstanding as a debt due to the Commonwealth should take account of the recalculation as determined above together with payments already made to date to distinguish debt 2. 

..….[Sgd]…..
  KS Levy
  Member

CATCHWORDS

SOCIAL SECURITY – age pension payments – over payment – waiver of debt under special circumstances – debt not solely due to administrative error -  – decision varied.

Social Security Act 1991 s1223, 1237

Sekhon v Secretary, Department Family and Community Services [2003] FCAFC 190; (2003) 76 ALD 105
Cymerman and Secretary, Department of Family and Community Service [2003] AATA 1354,
Secretary, Department of Education, Employment, Training and Youth Affairs v Barry Prince (1997) 50 ALD 186
Jazazievska v Secretary, Department of Family and Community Service [2000] FCA 1484
Re Beadle and Direction-General of Social Security (1984) 6 ALD 1
Daly and Secretary, Department of Family and Community Services [2005] AATA 740
Dranichnikov v Centrelink (2003) 75 ALD 134
Groth v Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

24 February 2006 Dr KS Levy, Member

Introduction

2. By application dated 23 June 2005, the applicant sought a review under section 29(1) of the Administrative Appeals Tribunal Act 1975, from a decision of the Social Security Appeals Tribunal (the “SSAT”) of 30 May 2005.  That decision affirmed previous decisions made and reviewed by Centrelink dated 21 August 1998 and 8 September 2004 in respect of two debts of the applicant, the SSAT making a slight modification to one of the debts (debt 2). 

3.        The decisions of the SSAT dated 30 May 2005 were as follows:

(a)In respect of debt 1, to raise and recover a debt in the amount of $994.80 in respect of overpayment of age pension for the period 9 July 1998 to 20 August 1998; and

(b)In respect of debt 2, to raise and recover a debt in the amount of $7,888.86 in respect of age pension payments made for the period 3 September 1998 to 23 March 2004. 

4.        The first debt has been fully repaid.  The second debt has been partially paid off (approximately $1,500) and is being extinguished by way of regular deductions from the applicant’s pension.

5.         This matter was heard in the Administrative Appeals Tribunal (the “Tribunal”) on 12 December 2005 at Ballina, New South Wales.  Mr Fugler was represented by Mr Keith Graham.  The Secretary, Department of Family and Community Services (the “respondent”) was represented by its advocate Mr James Howard. 

6. The applicant was not present at the hearing owing to ill-health. His wife, Mrs Joan Mamet-Fugler attended and gave sworn evidence. There were no other witnesses. The only documentary evidence admitted were the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the T documents).  These were marked as Exhibit 1. 

7.        The applicant resists refund of the overpayment on the basis of it being due solely to administrative error of the respondent, or in the alternative, that there are special circumstances which justify a waiver of the debt.

Issues

8.        The issues in this matter are :

(a)Whether Mr Fugler received age pension in excess of his entitlement;

(b)If overpaid, whether the excess is a debt due to the Commonwealth; and

(c)Whether all or part of any debt due to the Commonwealth by the applicant should be recovered. 

The Evidence

9.        The applicant, Mr Roy Fugler, is presently 84 years of age and is in poor health.  His wife, Mrs Joan Mamet-Fugler, is aged 58.  They married on 4 July 1998 which commenced a more regular reporting obligation for Mr Fugler as his new wife owned a farm and worked part-time.  He was therefore obliged to report to Centrelink the amounts she earned as it had an effect on his entitlement to age pension. 

10.      It is also pertinent to the facts of this case that Mr Fugler and Mrs Mamet-Fugler attended the Centrelink office in Casino prior to their marriage to enquire as to the consequences of their marriage on Mr Fugler’s age pension.  They were provided with forms and information and told that their marriage would have an effect on his pension and that they should submit the relevant forms after their marriage.  After their marriage on 4 July 1998, they returned the forms as requested to Centrelink which were received on 20 July 1998. This was marginally outside the 14 day period required to advise Centrelink of any change to Mr Fugler’s circumstances. 

11.      At the time of their marriage, it is also relevant that Mr Fugler had no assets, having previously given most of what he owned to his children.  Mrs Mamet-Fugler owned a farm.  They have since resettled on another property which is a hobby farm for Mrs Mamet-Fugler.

§  Debt 1

12.      In relation to debt 1, on 20 August 1998, Mrs Mamet-Fugler’s income was updated to record an annual income of $28,206.54 (T9, folio 50).  At that date, there was no income from the hobby farm.  On the same date, Mr Fugler was advised by letter of the income which now affected his age pension and that he should advise Centrelink within 14 days of any change to those circumstances (T9, Folio 49-52). A decision was also made on that date to raise an overpayment of $994.80.  This decision was advised to Mr Fugler by letter dated 21 August 1998 and that the overpayment related to period 9 July 1998 to 20 August 1998 (T10, Folio 53). 

13.      The applicant requested a review of that decision on 3 September 1998.  Following that request, additional information was requested about Mrs Mamet-Fugler’s 1997/1998 income tax return and following receipt of that return and updating of income records, in September and November 1998, the request for review of the decision was determined on 29 January 1999.  On that date a letter was forwarded to the applicant affirming the original decision. 

14.      That debt was then paid in full. 

§  Debt 2

15.      Centrelink wrote to the applicant on 16 March 1999 and 30 April 1999 about his then entitlement to age pension and indicating the recorded total annual income which affected his age pension.  Centrelink then sought an update of Mrs Mamet-Fugler’s income by forwarding an income and assets form for completion by the applicant.  That letter was dated 5 July 1999.  The applicant responded on 26 July 1999 indicating that her income was $506.92 per week or $26,359 per annum and in addition, that she received $77 per week from the hobby farm.  While Centrelink confirmed in writing on the same date that the total income was $26,444.80, together with the standard reminder to advise Centrelink within 14 days of any change in circumstances or any correction to the Centrelink’s official records, Centrelink in fact, only noted their records with the amount of the annual income and did not record the amount received per week from the hobby farm activities.  This had the effect of increasing the amount paid to Mr Fugler, notwithstanding that he had advised Centrelink of the amounts received by his wife.

16.      A further income and assets form was requested on 5 July 2000 and returned by the applicant on 1 August 2000.  Records were updated and the standard letter issued by Centrelink.  On 21 July 2000 Mr Fugler also attended an appointment with Centrelink to discuss his age pension and also provided further information (T34, Folio 102).  Shortly afterwards on 1 August 2000, Mr Fugler lodged Mrs Mamet-Fugler’s 1998/99 income tax return showing a loss of $5,390.00 from the hobby farm.  This was also noted in Centrelink records and the standard letter issued.

17.      On 19 September 2000, Mr Fugler advised Centrelink by telephone that his bank balance at Westpac was $3,396 and this was due to the sale of NRMA shares.  Centrelink records were updated (T37, Folio 106). 

18.      There was then a period of some three and a half years where there was no contact either from Centrelink, or to Centrelink by Mr Fugler.  It was not until 10 February 2004 after a data match of the ATO records with Centrelink’s records highlighted that the ATO records showed Mrs Mamet-Fugler’s income as being $34,002, compared with the Centrelink record of $28,770. 

19.      Following subsequent correspondence with Mrs Mamet-Fugler and her employer, Boral Timbers, in March 2004, a decision was made on 20 May 2004 to raise and recover a debt of $7,699.96 for the period 3 September 1998 to 23 March 2004.  The cause of the overpayment was said to be Mr Fugler’s failing to advise Centrelink of his wife’s income from employment with Boral Timbers.

20.      On 19 October 2004, Mrs Mamet-Fugler advised Centrelink that they did not update Centrelink of their financial circumstances as they believed everything was in order given that Centrelink had not sent further review forms to them (T47, Folio 159-160).

21.      On 3 November 2004, Centrelink wrote to Boral Timbers requesting income details of the applicant’s wife from 1 September 1998 to 5 December 2001 (T53, Folios 197-198).  Information was received from the employer covering the period 1 September 1998 to 3 November 2004 (see T54, Folios 199 – 219).  The amount of debt to be recovered was then amended on 18 November 2004.

22.      On appeal to the SSAT, it was noted that the original decision-maker had calculated debt 2 using 1998/1999 taxable income from 2 August 1999 rather than for the period 3 September 1998 to 30 June 1999 in accordance with the applicable tax year.  With that amendment, debt 2 was re-calculated to reflect an amount of $7,888.86 for the period 3 September 1998 to 23 March 2004.  The applicant was advised of this change on 4 July 2005.

23.      At the hearing, Mrs Mamet-Fugler advised that her husband was not present at the hearing because his physical and mental state had deteriorated.  She indicated that an appointment had been made for him to consult a geriatrician - that appointment will not occur until January 2006. 

24.      She also stated that for some time, the applicant had been confused and had a memory loss.  Initially after their marriage, they both had largely continued the independent lives they had previously led, with both owning their own cars and both maintained separate bank accounts.  In other words, they lived relatively independent lives although they lived under the one roof.  Mrs Mamet-Fugler stated that she now has Power of Attorney to deal with her husband’s affairs. 

25.      Under cross-examination from the respondent’s advocate, Mrs Mamet-Fugler stated that the applicant often would confuse dates and that this had “started some years ago”.  She referred to his behaviour when he has had a memory loss and said that he “easily covers it up and laughs it off when he has forgotten things”.

26.      The applicant’s wife indicated that while his health had been monitored by his General Practitioner, his physical health had been good although his mental health had been declining.  His General Practitioner has now accepted that he is not functioning well and should be referred to a geriatrician. 

27.      She acknowledged under cross-examination that her husband should have read the letters from Centrelink but that at one stage they had six letters from Centrelink in ten days and he did not take any notice of them.  Mrs Fugler also seemed confused at this point of her evidence.   She also thought that Centrelink did checks with her employer and knew what she earned.  Consequently,  she thought “they knew everything” and that she did not see a need to inform Centrelink.

28.       Mrs Mamet-Fugler indicated her salary with Boral Timbers was fairly constant and only changed by about 3% per year.  She acknowledged her assets were 242 acres of land where she also owns a cottage and about 50 cows.  She owes about $75,000 - $77,000 on her house. 

Findings of Fact

29.      The Tribunal made the following findings of fact:

(a)Mr Fugler and Mrs Mamet-Fugler advised Centrelink of their impending marriage shortly before they married on 4 July 1998;

(b)The facts as detailed in the evidence are accepted. 

(c)None of the facts were contradicted, including the period of approximately three and a half years during which there was almost no contact between Centrelink and the applicant.  

(d)Letters were sent from Centrelink to Mr Fugler as follows:

(i)In relation to debt 1 – on 21 August 1998, 14 September 1998, 18 September 1998, 26 October 1998, 25 November 1998 and 29 January 1999; and

(ii)In relation to debt 2 – on 16 March 1999, 30 April 1999, 5 July 1999, 5 July 2000, 14 July 2000, 10 February 2004, , 4 July 2005.  In addition, the review by the authorised review officer was communicated to the applicant on 5 January 2005.

(e)In relation to debt 1, Mr Fugler clearly managed his own affairs during the period of this debt and seemed completely lucid and was functioning effectively.

(f)In relation to debt 2, between late 2000 and 10 February 2004, when Centrelink advised Mr Fugler that according to ATO records, Mrs Mamet-Fugler’s income was higher than that recorded by Centrelink.  This is also the period during which there was no contact between Centrelink and Mr Fugler. 

(g)The applicant’s dementia became such during the period late 2000 to 10 February 2004, that he was not longer sufficiently lucid and competent to manage his own affairs.  It is determined that he is to be regarded as suffering that dementia from 1 January 2003. 

Consideration

30.      I have carefully considered all of the evidence presented by the applicant’s wife and his solicitor, as well as by the respondent in relation to the issues to be determined by the Tribunal in this case. 

§  The debts

31. The relevant statutory provision of the Act in relation to the debts from 1 July 2001 is section 1223(1) of the Social Security Act 1991. This section provides as follows:

“Sect 1223  - Debts arising from lack of qualification, overpayment etc. [see Note 6]

1223(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.”

32.      It has been accepted by the parties that the amounts determined by the SSAT are debts owing to the Commonwealth by the applicant.  Therefore the Tribunal determines that the debts accepted are debts which are due to the Commonwealth and which have arisen under the above section.  That is, Mr Fugler did receive payments of age pension which were not payable to him under the Act.  Therefore, I determine issues 1 and 2 in the affirmative. 

§  Should the Debts be Recovered

33. In this case, it was submitted that waiver is applicable to the applicant’s circumstances, and that reliance can be placed upon section 1237A which is concerned with the situation where a debt could be said to be “attributable solely to an administrative error”. Alternatively, reliance can be placed on section 1237AAD, where it is not attributable to administrative error alone, but where there are “special circumstances” involved.

34. Section 1237A(1) provides as follows:

“Sect 1237A- Waiver of debt arising from error

Administrative error

1237A(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).”

35. In applying section 1237A(1), it must be shown that there was a debt due solely to administrative error on behalf of Centrelink and that the amount to which there was no legal entitlement was received in good faith. Whether the circumstances of the debts could be said to be “…attributable solely to an administrative error made by the Commonwealth”. Reference is had to Sekhon v Secretary, Department Family and Community Services [2003] FCAFC 190; (2003) 76 ALD 105, where Selway J said (page 113):

“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.” 

§Debt 1

36.      The applicant referred the Tribunal to Cymerman and Secretary, Department of Family and Community Service [2003] AATA 1354, and in particular to paragraph 28 of that decision which refers to the statutory requirement of section 1237A.

37.      The respondent acknowledged that there had been administrative error by Centrelink but argues that the debt was not received “in good faith”.  It was not suggested that the amount received was due to dishonesty or any deliberate intention to defraud the Commonwealth.  The respondent in its submissions, relied on Secretary, Department of Education, Employment, Training and Youth Affairs v Barry Prince (1997) 50 ALD 186 where it was said “…if a person knows or has reason to believe that he or she is not entitled to a payment received – i.e. is not entitled to use the monies received as his or her own …”. The respondent also argued that the applicant “turned a ‘blind eye’ to circumstances which would have alerted him to the possibility that he was being overpaid” (Jazazievska v Secretary, Department of Family and Community Service [2000] FCA 1484).

38.      There was no evidence of cognitive or other impairment at this stage. Mr Fugler dealt with Centrelink before his marriage and also appeared to competently interact with Centrelink throughout the whole period to which debt 1 relates. 

39.      Therefore, based on the evidence provided, the Tribunal is not satisfied that the error which led to the debts is solely attributable to Centrelink’s error in respect of debt 1 and/or that the applicant did not know or have reason to believe that he was not entitled to use the monies received. 

§Debt 2

40.      The applicant’s solicitor argued that the applicant had informed Centrelink honestly to the best of his ability.  The applicant was said to have acted in good faith with respect to advising of the $77 administrative error which was caused by Centrelink and resulted in a part of the overpayment which arose in the 1998/99 financial year.

41.      It was not denied that there was no request made by Centrelink for further information between late 2000 and February 2004, and it was implied that there was nothing to put the applicant on notice that something was wrong.  The applicant’s wife stated that she did not believe there was anything they needed to tell Centrelink as they did checks with her employer, Boral Timbers, and that they seemed to know all relevant matters about her income.

42.      I accept that that may have seemed logical to Mrs Mamet-Fugler as she undoubtedly had some difficulty coming to terms with the administration associated with Centrelink’s regulation of Mr Fugler’s age pension.  She also acknowledged in cross-examination that she should have read the letters from Centrelink.  Also, there is evidence that there were a number of incidents when Mr Fugler did not advise Centrelink of his wife’s increase in income over that period.

43. Therefore, it cannot be said that the debt was due solely to administrative error of Centrelink. Consequently, debt 2 cannot be waived on the authority of section 1237A(1).

§Waiver due to Special Circumstances

44. Section 1237AAD of the Act provides:

“Sect 1237AAD - Waiver in special circumstances

The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a)       the debt did not result wholly or partly from the debtor or another person knowingly:

(i)        making a false statement or a false representation; or

(ii)failing or omitting to comply with a provision of this Act 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.”

45. In relation to the requirement of section 1237AAD(a), the Tribunal finds that the applicant and his wife were truthful and that in their minds, they did not knowingly make false statements or false representations and neither did they knowingly fail or omit to comply with a Statutory Provision of the Act.

46.      In determining this appeal, I am required to ask the question – Are there “special circumstances”?  It was submitted that the starting point in determining this question was Re Beadle and Direction-General of Social Security (1984) 6 ALD 1 at page 3 where the Administrative Appeals Tribunal held that:

“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition … this is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”

47.      The applicant also referred to Cymerman’s case (supra) at paragraphs 33 and 36 in support of the applicant’s case.  The applicant’s solicitor also referred to Daly and Secretary, Department of Family and Community Services [2005] AATA 740 (see paragraphs 33 and 37), and particularly he referred the Tribunal to paragraph 43 of that decision where I said that “special circumstances” will be determined after considering the following factors:

“(a)an acceptable explanation of the circumstances to justify acceptance of the facts;

(b)the applicant should not have taken any action that might be seen to disadvantage the respondent or to avoid compliance with the law ;

(c)the merits of the applicant must be properly weighed; the period of time over which the circumstances were in existence will be relevant;

(e)expressions of good faith by the applicant will be important e.g. willingness to repay a debt determined by a lawful authority.”

48.      The respondent argued that even though no notice was provided from Centrelink for over three years, that the applicant was on notice that he should have advised Centrelink and the applicant’s wife acknowledged this.  The respondent also emphasised that special circumstances must not relate to the financial position of the applicant. 

49.      The respondent also referred the Tribunal to Dranichnikov v Centrelink (2003) 75 ALD 134 at 148 where the Full Federal Court considered the meaning of the term “special circumstances” and stated:

“Other cases which have considered analogous words such as ‘special reasons’ has tended to conclude, albeit in different contexts, that what is required will be circumstances which distinguish the case under consideration from the usual case.  There will be a requirement that the circumstances are such that takes the case out of the ordinary…”

50.      In that case, the Tribunal notes that the Court also said:

“To some extent, the question whether there were special circumstances must depend on how it came about that the error occurred.”

51.      In that case also, the Court said that special circumstances must take account of a situation which is unusual or exceptional in terms of amount, degree of intensity, or other factors.  Those circumstances may relate to personal circumstances, health issues, financial position and any other relevant factor. 

52.      In considering “special circumstances”, in light of all of the circumstances of a case, it is important also to ensure to avoid unfairness.  Keifel J in Groth v Department of Social Security (1995) 40 ALD 541 said that “special circumstances …would require something to distinguish … the case from others, to take it out of the usual or ordinary case.  … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary”.     In a similar way, French J emphasised that “special circumstances” should “…enable a flexible response to the wide range of situations which could give rise to hardship or unfairness…” 

53.      I have concluded that there are a number of factors which could be regarded in this case as amounting to “special circumstances”.  The applicant and his wife who were married in 1998 continued to live independent lives to some degree throughout the period of the debts to which this appeal relates.  They continued to maintain their own cars and separate bank accounts.  Mr Fugler accepted responsibility for advising Centrelink of his wife’s income and did so for a considerable period.  It is apparent that this continued at least until August 2000.  There was then no further contact to or from Centrelink until early 2004.

54.      However, despite raising and recovering a debt in 1999, which was fully repaid, and despite advice of changes to income in July 2000, together with an appointment with a Centrelink officer on 21 July 2000, no follow up was made by Centrelink for three and a half years (approximately).

55.      While the obligation was clearly on Mr Fugler to advise changes to Centrelink, and while Centrelink was entitled to only seek review information periodically, in this case, Mrs Mamet-Fugler was not responsible for the applicant’s actions at that stage and for most of the period of debt 2.  However, she has indicated that she now has Power of Attorney to deal with her husband’s affairs.  She also seemed confused about some detail of managing the affairs of her husband. 

56.      But significantly there was undisputed evidence that the applicant has now been referred to a geriatrician and that he has an appointment with that specialist in January 2006.  He is now 84 years old and there is increasing evidence of a deterioration of his mental ability.  There has been progressive evidence of cognitive impairment due to ageing.  There was evidence presented of dementia although it is not known if it has other perceptual or sensory motor functional impairment. 

57.      I accept that the applicant was lucid and competent in August 2000 but by 23 March 2004, the concluding date of debt 2, he was suffering an impairment to a degree that prevented him from managing his own business affairs in an ordered, logical and competent manner. 

58.      As Mrs Mamet-Fugler said this had “started some years ago” and that “he easily covers it up and laughs it off when he has forgotten things”.  Evidence of any precision about his condition was not presented, nor was it challenged and given his age and the pattern of reporting followed by a period of complete lack of reporting, I determine that there appears to be a progressive decline in his condition and that his competence to deal with Centrelink was affected at least by the start of 2003.  To enforce the part of the debt from the start of 2003 would therefore be unfair and unreasonable in the circumstances of the applicant and his wife.

59. I determine therefore in accordance with section 43 of the Administrative Appeals Tribunal Act 1975, that there were “special circumstances” from 1 January 2003 and specifically that:

(a)The amount of debt 1 for the period 9 July 1998 to 20 August 1998 is affirmed;

(b)The part of debt 1 from 3 September 1998 to 31 December 2002 is affirmed;

(c)That the amount of debt 2 which pertained to the period 1 January 2003 to 23 March 2004 is waived; and

(d)The determination in (c) above be referred to Centrelink for recalculation and adjustment of the total amount of debt 2.  The amount which should be regarded as outstanding as a debt due to the Commonwealth should take account of the recalculation as determined above together with payments already made to date to distinguish debt 2. 

I certify that the 59 preceding paragraphs are a true copy of the reasons for the decision herein of Dr KS Levy, Member

Signed:  Jeff Mills

Legal Research Officer

Date/s of Hearing  12 December 2005
Date of Decision  24 February 2006
For the Applicant  Mr K Graham, Solicitor
For the Respondent                  Mr J Howard, Departmental Advocate