Garbutt and Secretary, Department of Education, Employment and Workplace Relations
[2011] AATA 538
•4 August 2011
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION
[2011] AATA 538
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/3148
GENERAL ADMINISTRATIVE DIVISION ) Re Mark GARBUTT Applicant
And
Secretary, Department of Education, Employment and Workplace Relations
Respondent
DECISION
Tribunal Mr R P Handley, Deputy President Date4 August 2011
PlaceSydney
Decision The Tribunal sets aside the decision under review and remits the matter to the Respondent for reconsideration in accordance with the following directions:
(1) the five debts that are the subject of the decision under review were not incurred by means of fraud and the exception contained in s 153(2)(b) of the Bankruptcy Act 1966 does not apply in Mr Garbutt’s case;
(2) penalties should not have been applied in respect of the third, fourth and fifth debts pursuant to s 1228B of the Social Security Act 1991;
(3) the discretion in s 1237AAD of the Social Security Act 1991 should not be exercised to waive the remainder of the five debts not affected by Mr Garbutt’s bankruptcy.
.......................[sgd]...................
Mr R P Handley
Deputy President
CATCHWORDS
SOCIAL SECURITY – newstart allowance – overpayment – debt raised – special circumstances – bankruptcy – whether debts incurred by means of fraud – penalties – waiver – decision under review set aside
RELEVANT ACTS
Social Security Act 1991 (Cth): ss1228B, 1237AAD
Bankruptcy Act 1996 (Cth): s 153
Criminal Code Act 1995 (Cth): s 135.2
CITATIONS
Re Civitareale and Secretary, Department of Family and Community Services & Anor (1999) 57 ALD 451; (1999) 29 AAR 505; [1999] AATA 486
Re Dobson; Department of Family and Community Services [2000] AATA 41
Commonwealth Director of Public Prosecutions v Acevedo [2009] NSWSC 653
Poniatowska v Director of Public Prosecutions (Commonwealth) [2010] SASCFC 19; (2010) 107 SASR 578; (2010) 271 ALR 610; (2010) 240 FLR 466
Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435
Angelakos v Secretary, Department of Employment (2007) 100 ALD 9; (2007) 44 AAR 436; [2007] FCA 25
OTHER AUTHORITIES
Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Bill 1999 Explanatory Memorandum, 24 November 1999
REASONS FOR DECISION
4 August 2011 Mr R P Handley, Deputy President 1.The Applicant, Mr Garbutt has applied to the Tribunal for review of a decision of the Social Security Appeals Tribunal (the SSAT) to affirm a decision of the Secretary of the Department of Education, Employment and Workplace Relations (the Respondent) to raise and recover five separate overpayment debts incurred by Mr Garbutt between October 2003 and February 2008 in relation to the payment of newstart allowance.
BACKGROUND
2.Mr Garbutt was born in 1970 and is aged 40. He attended high school in Port Kembla, leaving in Year 8 to start work. He has had a variety of low‑skilled jobs including labouring, working as a crane chaser, driving a forklift and a front-end loader, and as a funeral attendant. Mr Garbutt was married to Karen for 10 years and they have three sons aged 16, 15 and 10. Mr Garbutt and his wife separated some years ago and the children live with their mother. Mr Garbutt and Karen remain in frequent contact and Mr Garbutt sees their children on a regular basis.
3.Mr Garbutt suffers from an intellectual impairment and has difficulty reading and understanding written documents. In the past, he often relied on his wife to assist him in filling in forms, including Centrelink forms.
4.Mr Garbutt was out of work at times and claimed newstart allowance. Between 2003 and 2008, as a result of under-declaring his income, he was overpaid newstart allowance at various times and Centrelink raised debts against him in respect of five separate periods. Centrelink has recovered or seeks to recover those debts which, in the case of the third, fourth and fifth debts, include a 10% penalty (described as a recovery fee) applied pursuant to s 1228B of the Social Security Act 1991 (the Act). The debts raised are as follows:
·Debt 1: $1,587.54 in respect of the period 28 October 2003 to 16 February 2004;
·Debt 2: $7,864.72 in respect of the period 17 February 2004 to 17 January 2005;
·Debt 3: $2,053.43 in respect of the period 21 December 2005 to 29 August 2006, comprising a debt of $1,866.78 and a recovery fee of $186.65;
·Debt 4: $3,152.45 in respect of the period 30 August 2006 to 30 January 2007, comprising a debt of $2,865.90 and a recovery fee of $286.55;
·Debt 5: $2,689.50 in respect of the period 1 November 2007 to 6 February 2008, comprising a debt of $2,445.00 and a recovery fee of $244.50.
5.The Applicant does not dispute these debts but contends that they cannot or should not be recovered. However, the Applicant does dispute the application and recovery of a penalty in respect of the third, fourth and fifth debts.
6.Mr Garbutt was notified of the decisions to raise and recover each of the five debts after it had been incurred. These decisions were affirmed on 29 January 2010 after a review by an Authorised Review Officer and by the SSAT on 24 June 2010. On 28 July 2010, the Applicant applied to the Tribunal for a further review. The SSAT’s decision focused on the raising and recovery of the debts and, in particular, on whether, pursuant to s 1237AAD of the Act, there were grounds for waiver of the debts because of special circumstances.
7.Mr Garbutt has suffered a number of work-related accidents, including receiving an electric shock, head injuries and an injury to his right foot as a result of a spider bite which led, ultimately, to the amputation of his right leg below the knee in April 2009. He also suffers from high blood pressure, insulin dependent diabetes, and chronic kidney disease which, in the event of likely further deterioration, will require dialysis.
8.The SSAT did not refer to the effect on the Commonwealth’s right to recover the debts of Mr Garbutt being declared bankrupt on 10 December 2007 and to his being discharged from bankruptcy on 11 December 2010. When a person becomes bankrupt, a debt due to the Commonwealth arising from the overpayment of a social security benefit becomes a provable debt, meaning the Commonwealth has a right to prove in the bankruptcy. When a person is discharged from bankruptcy, the person is released from each of their debts unless, as the Respondent contends in Mr Garbutt’s case, the debts were incurred by fraud. Section 153 of the Bankruptcy Act 1966 provides relevantly:
Effect of discharge
(1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally.
Note: …
(2) The discharge of a bankrupt from a bankruptcy does not:
…
(b) release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud; or
…
9.The Respondent contends that Mr Garbutt’s bankruptcy is not relevant to the first debt because the debt had been recovered at the time Mr Garbutt became bankrupt on 10 December 2007. The Respondent contends that the second, third, fourth and fifth debts are affected by the bankruptcy except, in the case of the second debt, as to $637.41 which had already been recovered when Mr Garbutt was declared bankrupt, and, in the case of the fifth debt, as to $1,670.00 raised as a result of overpayments made after Mr Garbutt was declared bankrupt. The Respondent contends that each debt or part of debt affected by the bankruptcy was incurred by means of fraud and as a result, pursuant to s 153(2)(b) of the Bankruptcy Act, the Applicant was not released from those debts upon discharge from bankruptcy.
10.On 30 May 2011, in Wollongong Local Court, Mr Garbutt was convicted of two offences under s 135.2(1) of the Criminal Code set out in the Schedule to the Criminal Code Act 1995 (Cth) in respect of the fourth and fifth debts. Section 135.2(1) states:
135.2 Obtaining financial advantage
(1) A person is guilty of an offence if:
(a) the person engages in conduct; and
(aa) as a result of that conduct, the person obtains a financial advantage for himself or herself from another person; and
(ab) the person knows or believes that he or she is not eligible to receive that financial advantage; and
(b) the other person is a Commonwealth entity.
Penalty: Imprisonment for 12 months.
11.In giving his reasons for convicting Mr Garbutt, Magistrate Stoddard noted that Mr Garbutt has a disability in relation to his mental functioning and “is not a sophisticated person”. His Honour found that Mr Garbutt needed assistance in filling out Centrelink forms and was unable to make sense of some of the forms on his own. However, the Magistrate said:
In my view the evidence clearly establishes that Mr Garbutt, despite his intellectual problems, knew what was required of Centrelink, he had to tell them when he was working and how much income he was receiving, despite his difficulty with language and his literacy skills, despite having some assistance either from his wife or from Centrelink officers from time to time, he knew and indeed he told the psychologist that, that he had to give information to Centrelink about income that he was receiving and he did indeed receive income for those periods. … So he knew what his obligation was and he under declared the income.
Issues
12.It is clear from the background to this matter that there are three separate issues for the Tribunal to determine:
First, what is the effect of Mr Garbutt’s bankruptcy on his debts? In particular, was Mr Garbutt released from repayment of some of the debts – namely, part of the second debt, the whole of the third and fourth debts and part of the fifth debt – on his being discharged from bankruptcy as the Applicant contends? Alternatively, were those debts incurred as a result of fraud, as contended by the Respondent, so that Mr Garbutt’s being discharged from bankruptcy did not release him from repayment of the debts?
Second, whether, pursuant to s 1228B of the Act, a 10% penalty should have been applied to the third, fourth and fifth debts.
Third, whether, pursuant to s 1237AAD of the Act, all or part of the debts should be waived. The special circumstances relied on by Mr Garbutt are his health and financial problems.
(1) What is the effect of Mr Garbutt’s bankruptcy on the debts?
13.As noted above, the first debt and $637.41 of the second debt had been repaid at the time Mr Garbutt was declared bankrupt and are not, therefore, affected. Further, $1,670 of the fifth debt was raised as a result of overpayments made after Mr Garbutt was declared bankrupt and is also not affected. The question in relation to the remainder of the second debt, the whole of the third and fourth debts and the remainder of the fifth debt is whether they were incurred by means of fraud.
14.In Re Civitareale and Secretary, Department of Family and Community Services & Anor (1999) 57 ALD 451 (Civitareale), at 471 [95], Deputy President Forgie referred to the meaning attributed to ‘fraud’ in Osborne’s Law Dictionary, 7th ed, Roger Bird, 1983:
In general, fraud is obtaining of a material advantage by unfair or wrongful means; it involves moral obliquity. It must be proved to sustain the common law action of deceit. Fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false.
15.The Deputy President also noted, at [97]:
97. The word "fraud" has also been considered in R v Sinclair[1968] 3 All ER 241 where James J said at 246 that:
To cheat and defraud is to act with deliberate dishonesty to the prejudice of another's proprietary right.
The test is a subjective, and not an objective, test: at 246.
16.Civitareale, like this matter, involved a failure to disclose income to enable the Department to assess the applicant’s entitlement to social security benefits, and the effect of a subsequent declaration of bankruptcy on the resulting debts. The test Deputy President Forgie applied was whether the applicant “acted with deliberate dishonesty” in failing to notify the Department of income support payments received from a union fund. (The decision in Civitareale was followed in Re Dobson; Department of Family and Community Services [2000] AATA 41.)
17.Ms Sant, for the Applicant, noted that the offences for which Mr Garbutt was convicted do not involve fraud. The Explanatory Memorandum for the Criminal Code Amendment (Theft, Fraud, Bribery and Related Offences) Bill 1999 (Cth), which inserted Part 7.3 of the Criminal Code, introduced a range of offences including several fraud offences and other lesser offences which do not require proof of dishonesty. The Explanatory Memorandum states at p64:
191. Proposed section 135.2 supplements the protection provided by proposed section 135.1 [general dishonesty] with yet another lesser offence. This covers those who obtain a financial advantage for themselves or someone else from a Commonwealth entity knowing they are not eligible to receive that financial advantage. While the offence will often overlap with more serious theft and fraud offences, it provides an alternative with a lower penalty where it is difficult to establish dishonesty. The maximum penalty reflects this – it is 12 months imprisonment. The proposed offence is similar to sections 1347 and 1348 of the Social Security Act 1991 and recognises a general provision of that nature is likely to be useful in relation to many different types of Commonwealth payments, whether it be welfare, bounties or grants.
18.It is clear from the Explanatory Memorandum and the context in which s 135.2 appears in the Criminal Code that dishonesty is not a requirement of the offence. In Commonwealth Director of Public Prosecutions v Acevedo [2009] NSWSC 653, at [15], Davies J set out the components of the s 135.2 offence, including reference to the required ‘fault elements’ that are set out in s 5:
15 The offence created by s 135.2 can be analysed in terms of the provisions in s 4.1 and Div 5 of the Code (s 5.6) in this way:
(a) that the Defendant engaged in conduct (physical element = conduct; fault element = intention) (s 5.6(1))
(aa) that as a result of that conduct, the Defendant obtained a financial advantage (physical element = result; fault element = recklessness) (s 5.6(2))
(ab) that the Defendant knows or believes that she is not eligible to receive that financial advantage (physical element = circumstance; fault element = knowledge or belief)
(b) that the other person is a Commonwealth entity (absolute liability: s.135.2(1A))
19.The application of s 135.2 was also discussed in Poniatowska v Director of Public Prosecutions (Commonwealth) [2010] SASCFC 19, where a majority of the South Australian Supreme Court (Doyle CJ and Duggan J, Sulan J dissenting), following the well-established principle “that there can be no criminal liability for an omission unless the alleged conduct constitutes a failure to perform a legal obligation” (at [13]), concluded (at [38]):
In summary, we are of the view that s 135.2 does not define any duty or obligation relevant to an offence committed by way of an omission. The DPP does not rely on any notice issued to the appellant for the purpose of establishing such a duty; nor was it suggested that the duty was to be found elsewhere in the Administration Act. The approach of the Administration Act is to provide for the issuing of notices by the department requiring information and to impose a penalty punishable by imprisonment for a failure to comply with such notices. The Administration Act does not create a separate “stand alone” obligation.
The parties informed me that this decision is on appeal to the High Court. However, Ms Sant submitted that it follows that an omission cannot be relied upon to establish a s 135.2 offence, let alone a fraud.
20.In my view, it is clear enough that Mr Garbutt’s convictions under s 135.2 of the Criminal Code do not of themselves establish that the two debts in question – the fourth and fifth debts – were incurred by means of fraud. Fraud is not a component of the offence and there was no finding of dishonesty made by Magistrate Stoddard. The question then follows whether the evidence is otherwise sufficient to establish fraud.
Mr Garbutt’s Evidence
21.As the parties recognise, each of the five debts in question were raised in respect of a composite of fortnightly overpayments of benefit as a result of Mr Garbutt under-declaring his income from casual earnings. Mr Garbutt’s evidence is that after he separated from his wife some 10 years ago, she continued to help him filling out forms, including Centrelink forms, during the periods in question. He trusted her to do the right thing and went along with whatever she did. She would complete the forms based on what he told her of the hours that he had worked, sometimes with the assistance of his payslips, or sometimes from information she obtained from her girlfriends whose partners worked with Mr Garbutt. Sometimes he would sign the form after she had filled it in. At other times, his wife put a scribbled signature on the form. Sometimes he would take the forms in to the Centrelink office; at other times, if he was working, his wife would take them in.
22.Mr Garbutt often did not have his payslips at the time of filling out the forms. When he worked casually for Oz Tech Security, his payslips were kept in the office for him to collect and if, as was commonly the case, he did not so because he was away working at various sites, the office would send him the last three to six payslips which they had been holding for him, through the post. When he was working for Insight Security someone from the office would come round with payslips to some of the sites, but Mr Garbutt often did not see him and, in the same way, he would be sent the last few undelivered payslips through the post.
23.Mr Garbutt did not work regular shifts as a security guard. His work hours varied and sometimes he was called upon to work at very short notice, including working a double shift. He said his payslips had very little meaning for him – they were just pieces of paper with figures on them. Usually, his supervisor or someone in the office completed time sheets for him at the end of each week. He was not given a copy. Mr Garbutt said he did not know how much he would actually be paid and how long it would take his employer to pay the money into his bank account. He would often check the balance in his account at an ATM before handing in his Centrelink forms and, if there was very little in his account, he thought he had not been paid.
24.Mr Garbutt said there were times when he had to fill in the Centrelink forms by himself. He did not like to admit that he could not really do so because he is not able to read and understand Centrelink letters or forms. He knew he had to tick various boxes and if he had a form that his wife had helped him complete, he would use this as a template for filling out a form by himself. Mr Garbutt said he was aware he had to declare his income to Centrelink fortnightly. He was not really concerned if he was not sure that the information he was providing to Centrelink was accurate because he would often provide Centrelink with his employers’ contact details so that they could check with the employers what he had been paid. On one occasion, he was told by his employer that Centrelink had phoned and asked various questions about his employment. Centrelink was always taking money out of his account and he thought they would work out what he was entitled to and if necessary make adjustments to what he was receiving for later periods. Mr Garbutt said he was never told that he could be prosecuted if he filled out the forms incorrectly.
25.Mr Garbutt remembered one occasion before he obtained his security licence (in late 2005) when a Centrelink officer had helped to complete a Centrelink form. This just happened on the one occasion and he did not see this Centrelink officer again and nobody else offered to help him complete any forms.
26.Mr Garbutt was asked about specific fortnightly Centrelink forms (‘Application for Payment Forms’ for newstart allowance) completed for or by him during the relevant periods. Centrelink was able to provide copies of forms for some of the debt periods only, a record of others having only been kept in electronic form. For those in electronic form, it was not possible to check with Mr Garbutt whether he had personally completed or signed the form. Mr Garbutt was questioned about a number of the forms of which copies had been kept. In some instances, he was uncertain whether it was his handwriting on the form; in other instances, he said the form had not been completed in his handwriting or had not been signed by him. Unsurprisingly, given the length of time that has elapsed since the forms were completed, he had very little or no recollection of the particulars detailed on the forms.
27.In my view, it is unnecessary to undertake a detailed review of all the forms submitted during the relevant periods. Mr Garbutt’s evidence is that either he or his wife filled in the forms and I am satisfied from the Respondent’s submissions, relying on the file records produced in evidence, that the income details recorded on the forms were often inaccurate. Given that Mr Garbutt was a casual employee, did not work regular shifts, was often called upon to work at short notice, and did not always have access to his pay slips, even if these were meaningful to him, I accept that it was a difficult task for him to be accurate in completing details of his income in particular fortnights. Mr Garbutt acknowledged that he was aware of his obligation to tell Centrelink of his earnings in these fortnights, but thought that if the details he provided were incorrect this would be sorted out by Centrelink who could adjust his newstart allowance payments to reflect any error.
The Psychologist’s Reports
28.The Tribunal was provided with reports from Esme Nasser, clinical psychologist, dated 24 September 2009 and 4 December 2009, and a transcript of Ms Nasser’s evidence at the Local Court hearing on 26 July 2010. In her report dated 24 September 2009, Ms Nasser said Mr Garbutt told her of various head injuries he had received during his life time, and of leaving school part way through Year 8. She administered the ‘Wechsler Adult Intelligence Scale’ which revealed Mr Garbutt’s intellectual functioning as being “in the borderline range (5th percentile)”:
Verbal comprehension skills (7th percentile), perceptual organisation skills (4th percentile), working memory (9th percentile), and processing speed (3rd percentile) did not differ significantly from each other.
29.Ms Nasser stated:
For the most part, Mr Garbutt delegated the task of filling out Centrelink forms to his wife, although at times he followed a format that he learned from her. The reason he delegated the task to his wife was because he found it difficult to read …
30.In her report dated 4 December 2009, Ms Nasser reported on a further assessment of Mr Garbutt using the ‘Wide Range Achievement Test – 4’ to assess his performance in reading, spelling, sentence comprehension and math computation:
Overall, his performance was extremely poor. His word reading was functioning at the 0.4 percentile. His sentence comprehension was functioning at the 0.5 percentile. His spelling was functioning at the 1st percentile and his math computation was functioning at the 7th percentile. Although his performance on math computation was poor his performance in word reading, sentence comprehension, and spelling was extremely impaired.
31.Ms Nasser concluded:
It is quite conceivable that in an effort to fill out Centrelink Forms, Mr Garbutt simply followed a format he learned from his wife, whom he designated responsible for filling out forms of any nature. His reading is so impaired it indicates, as he states, that he was dependent on his wife to accurately fill out the Centrelink Forms. On the basis of the current assessment Mr Garbutt would not be able to reliably fill out forms of any nature.
32.In oral evidence at the Local Court hearing on 26 July 2010, Ms Nasser said (transcript 26 July 2010, p 91):
In conclusion with regard to Mr Garbutt’s ability to understand and fill out forms on his own, I concluded that he is not capable of doing that and understanding the forms, understanding what he is writing on them.
33.And further (transcript 26 July 2010, p 96):
My assessment indicates that he would not be able to read and understand the contents of these forms and fill them out correctly or adequately on his own.
34.Finally, she commented (transcript 26 July 2010, p 104):
… Mr Garbutt didn’t clearly have insight into the level of his disability, he knew he had difficulties with things but he had no idea how intellectually disabled he was.
The Tribunal’s assessment on the first issue
35.I am satisfied from Mr Garbutt’s evidence and Ms Nasser’s reports that because of his intellectual impairment, Mr Garbutt was incapable of understanding and completing the Centrelink ‘Application for Payment Forms’ for newstart allowance. File notes made by Centrelink on 28 April 2004 state:
Customer needs some assistance with declaring his income. Please give the customer some INCOME RECORDS – customer does [sic] is not aware of the correct way to declare his income. I have explained this to him, but please check that he is declaring it correctly. PLS Issue him with some INCOME RECORDS to assist him.
36.A later annotation to this record notes that an Income Record form and a brochure on casual earnings were provided to Mr Garbutt. No further assistance appears to have been provided. Presumably, because of Mr Garbutt’s difficulties with reading and comprehension, the form and brochure are likely to have been of little assistance.
37.I am not satisfied that there is evidence to support a finding that Mr Garbutt acted with deliberate dishonesty in under-declaring his earnings to Centrelink. He was aware of his obligation to supply details of his earnings to Centrelink, but for him to provide accurate information of his earnings was beyond his capabilities as a result of his intellectual impairment. He therefore tried to include information on the forms about his casual employment during the relevant period and assumed that if the information about his earnings was incorrect, Centrelink, having checked this information, would take this into account in adjusting his future payments. He did not understand there would be other consequences for not correctly declaring his earnings.
38.I therefore conclude that the debts were not incurred by means of fraud and the exception contained in s 153(2)(b) of the Bankruptcy Act does not apply in Mr Garbutt’s case. Thus, when Mr Garbutt was discharged from bankruptcy on 11 December 2010, he was released from all Commonwealth debts provable in the bankruptcy. As stated above, this means that he was discharged from that part of the second debt that had not been recovered at the time he was declared bankrupt, the whole of the third and fourth debts, and that part of the fifth debt that relates to the period before he was declared bankrupt on 10 December 2007.
39.The remaining debt in issue, therefore, is the whole of the first debt of $1,587.54; and $637.41 of the second debt which amount had already been recovered at the time Mr Garbutt was declared bankrupt; and $1,670.00 of the fifth debt raised as a result of overpayments made after Mr Garbutt was declared bankrupt - a total of $3,894.95.
(2) Should a 10% penalty have been applied to the third, fourth and fifth debts?
40.Section 1228B (which took effect on 1 July 2006) relevantly provides for the application of a 10% penalty if amongst other things:
(1) …
(c) the debt arose wholly or partly because the person had:
(i) refused or failed to provide information in relation to the person's income from personal exertion; or
(ii) knowingly or recklessly provided false or misleading information in relation to the person's income from personal exertion;
when required, under a provision of the social security law, to provide information in relation to the person's income from personal exertion.
41.However, s 1228B(4) states that the section does not apply “if the Secretary is satisfied that the person had a reasonable excuse for refusing or failing to provide the information”.
42.In my view, the evidence discussed above from which I was satisfied that as a result of Mr Garbutt’s intellectual impairment, he was incapable of understanding the Centrelink forms for newstart allowance, establishes a reasonable excuse for his failing to provide the correct information about his earnings. Penalties should not, therefore, have been applied in respect of the third, fourth and fifth debts. I have already decided that because of his bankruptcy Mr Garbutt was discharged from the third and fourth debts and part of the fifth debt. Setting aside the penalties for the third and fourth debts will now have no effect on the overall debt recoverable. However, the remaining recoverable part of the fifth debt, $1,670.00, must now be reduced by $244.50, the penalty applied incorrectly in respect of the fifth debt. The total recoverable fifth debt is therefore $1,425.50.
43.Since the hearing, at my request, the Respondent has supplied the Tribunal with further information about the amount of the debts outstanding as at 18 July 2011. I understand from this information that withholdings currently being made from Mr Garbutt’s disability support pension are going towards the repayment of the second debt and that of this debt ($7,864.72) $4,764.87 remains outstanding, meaning that $3,099.85 has been repaid. Since only $637.41 is recoverable as a result of Mr Garbutt’s bankruptcy, the remaining $2,462.44 which the Respondent recovered incorrectly could be put towards repayment of other debts. This, of course, exceeds the $1,425.50 which may be recovered in respect of the fifth debt. If I am correct in my calculations, this means the whole of the first debt, and the recoverable parts of the second and fifth debts have all been recovered, leaving an excess recovered in respect of these debts of $1,036.94.
44.I understand that Mr Garbutt also has a further debt, raised on 2 July 2010, of $4883.55, which is not the subject of Mr Garbutt’s present application before the Tribunal. Of this debt, $3,431.55 is outstanding, as a result of withholdings of $132 per fortnight currently being made from Mr Garbutt’s disability support pension. I assume that the additional $1,036.94 excess recovered in respect of the five debts referred to above would ordinarily be put towards the repayment of this debt.
(3) Should all or part of the debts be waived?
45.Section 1237AAD of the Act states:
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, 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.
46. Section 1237AAD provides a discretion to waive the whole or part of a debt if certain requirements are met. The first requirement, paragraph (a) of s 1237AAD, is that the debt did not result from the debtor or another person ‘knowingly’ making a false statement or representation or failing or omitting to comply with a provision of the social security legislation. ‘Knowingly’ requires that there be actual knowledge: Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435 at 443.
47. The second requirement, paragraph (b), is that there are special circumstances other than financial hardship alone that make it desirable to waive the debt. In Angelakos v Secretary, Department of Employment [2007] FCA 25; (2007) 100 ALD 9, at 17 [33], Besanko J, having reviewed the relevant authorities in which the meaning of the words ‘special circumstances’ was discussed, emphasised the need for flexibility in determining what constitutes special circumstances, but said that the test would be overstated if the word ‘exceptional’ is emphasised. He said:
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.
48.The third requirement of s 1237AAD, paragraph (c), is that it is more appropriate to waive than to write off the debt or part of the debt. Section 1236 of the Act permits a debt to be written off only if the debt is irrecoverable at law, the debtor has no capacity to repay the debt, the debtor’s whereabouts are unknown, or if the debtor is not receiving a social security payment and it is not cost effective for the Commonwealth to take action to recover the debt.
49.Dealing with the first requirement, the Respondent submits that because Mr Garbutt reported his income on numerous occasions during the periods in question, it is open to the Tribunal to find that he knew he had an obligation to report his income. I have referred above to Magistrate Stoddart’s finding that despite Mr Garbutt’s intellectual impairment, his difficulty with language and his literacy skills, he knew he had to tell Centrelink that he was working and how much income he was receiving.
50.However, did Mr Garbutt ‘knowingly’ make a false statement or representation or fail or omit to comply with the relevant provisions? I stated, above, that I was not satisfied that Mr Garbutt acted with deliberate dishonesty in under-declaring his earnings to Centrelink. The overpayments occurred because it was beyond his intellectual capability to provide accurate information about his earnings. Thus, having provided information about his casual employment during the relevant period, including contact details for his employers, Mr Garbutt assumed that if the information was incorrect, Centrelink would ascertain this from checking the information provided by him and adjust his future entitlements accordingly. Accordingly, I am not satisfied that he knowingly made a false statement or representation or failed or omitted to comply with a provision of the social security legislation. He did not have ‘actual knowledge’ in the sense of understanding the effect of his actions.
51.I am also not satisfied from the evidence that Karen Garbutt knowingly made a false statement or representation or failed or omitted to comply with the relevant provisions of the Act in completing the forms for Mr Garbutt. While it could be inferred that Ms Garbutt may have done so, the evidence is, in my view, insufficient to establish this.
52.With regard to the second requirement of s 1237AAD, that there be special circumstances, the circumstances relied upon by the Applicant are Mr Garbutt’s health and financial problems. Mr Garbutt suffers from a number of serious health problems. As stated above, the injury to his right foot led to the amputation of his leg below the knee in April 2009 as a result of which he now has a prosthesis. The Tribunal has been provided with relevant documentation setting out the history of treatment up to and including the amputation on 7 April 2009 and following. At the hearing, Mr Garbutt said that while initially he had recurrent infections in his stump, he has not had these for the past six months. However, his stump still swells when he wears the prosthesis. In his statement he said that when he goes out wearing his prosthesis, his stumps gets hot and starts to pulse and ache. By the time he gets home, “I am in agony and it takes days for the stump to recover”. His unit is also up 21 stairs, so that access is difficult. At home, he finds “it less painful and easier to just crawl around on my hands and one knee, lifting up my stump”.
53.Mr Garbutt is also suffering from chronic kidney disease which, in the event of likely further deterioration, will require dialysis. Dr Cheng Wen, consultant nephrologist, in a letter dated 24 March 2011, states:
I reviewed Mr Garbutt today in the renal clinic at Wollongong Hospital. His chronic kidney disease has been deteriorating significantly. He has developed multiple complications including metabolic acidosis and anaemia. If it deteriorates further he may need dialysis. ...
… If he started dialysis his lifestyle will be changed significantly.
54.Mr Garbutt said he has been feeling sick and vomiting, including six times on the night before the hearing. His doctors think this is because of his kidney disease. He also has a tremor in his hands which he said may also be connected with his kidney disease. The tremor was evident during the hearing. If it does not resolve in the next few weeks, he has been advised to have a test for Parkinson’s disease. Mr Garbutt has been told that if he needs to have dialysis, this will be three times a week for about five hours a session. Currently, he takes six tablets daily and has an injection once a week.
55.Mr Garbutt also takes medication daily for high blood pressure and injects himself three times daily for his insulin dependent diabetes. He said he also feels depressed: he does not want to go anywhere, he just wants to stay at home, but he gets bored. Mr Garbutt’s general practitioner, Dr Haider Jasim, in a letter dated 5 February 2011, noted that Mr Garbutt had looked depressed in most consultations and admitted to “depressed mood, swinging moods, poor motivation, poor concentration, low confident [sic], low self esteem and lack of pleasure”.
56.With regard to Mr Garbutt’s financial situation, I note that he has not worked since May 2010. The evidence suggests that despite Mr Garbutt’s stated desire to resume working, the prospects of his being able to do so are currently poor. From information provided by Centrelink, it appears Mr Garbutt is receiving a disability support pension of $285.80 per fortnight. From this, $132.00 is being withheld to recover debts arising from his overpayments of newstart allowance, $128.80 is deducted directly for payment of his government rent, and $25.00 is deducted for arrears of rent. Thus, currently, he receives no actual payment in his bank account. Mr Garbutt is also receiving workers compensation payments of $517.36 gross per week.
57.According to Centrelink’s records, Mr Garbutt received a lump sum compensation payment of $29,770.71 in respect of payment of arrears of weekly compensation for the period 15 December 2008 to 23 June 2010. Mr Garbutt said this payment was made in late April 2011 and took into account deductions for Medicare. From this sum, Centrelink have recovered $12,122.82 from the compensation payer, with the result, according to Centrelink’s records, that Mr Garbutt would have received $17,647.89 and is not subject to a preclusion period for the payment of social security benefits.
58.Mr Garbutt said he had spent some of the money he received in purchasing another car – approximately $18,000, of which he lost $4,000 on trading in a first car that he bought which he found too difficult to drive because it was a manual. His previous car dated from 1996. I am satisfied that a reasonable car is necessary for Mr Garbutt because of the restrictions on his mobility and his need to get around. He said that he had also spent $4,500 buying another car for Karen to enable her to transport their three children around. She is repaying him for this in instalments. Mr Garbutt said apart from expenditure on cars, he bought a new washing machine for $600 and a new lounge for $600. He still has the rest of the money in his principal bank account - he thought about $11,000 - which, in my view, suggests that he received a larger compensation payment including other components of compensation. He said he also has about $600 in other bank accounts. He does not have any credit cards or debts other than those already referred to.
59.Mr Garbutt said he has voluntarily reassessed himself for child support payments, increasing these from $13 to $100 per fortnight. He spends about $50 per week on petrol and has his car serviced regularly at a cost of about $200 per service.
60.My assessment of the evidence suggests that Mr Garbutt is managing financially and is not currently in financial hardship. I do not consider his financial situation to be ‘special’ in the sense of unusual or uncommon. However, I accept that because his health problems are serious and unusual for a person of his age, his circumstances could be considered ‘special’ in the sense in which the word is used in s 1237AAD. As stated above, I am also satisfied that the evidence does not establish that either Mr Garbutt or Karen ‘knowingly’ made a false statement or a false representation or failed or omitted to comply with a provision of the legislation. Moreover, writing off the debts does not seem appropriate in the circumstances.
61.However, s 1237AAD involves the exercise of discretion and, in my view, I should take into account the fact that by virtue of his bankruptcy, Mr Garbutt has avoided having to repay the Commonwealth a total which I calculate to be $12,734.99. This comprises part of debt 2 - $7,227.31 ($7,864.72 less $637.41 recovered before the declaration of bankruptcy), debt 3 - $1,866.78, debt 4 - $2,865.90, and part of debt 5 - $775.00 ($2,445.00 less $1,670.00 overpaid after his discharge from bankruptcy). Further, taking into account the sum recovered by Centrelink, and my having set aside the penalties, a sum greater than the remainder of the five debts has already been recovered. In view of Mr Garbutt’s current financial situation, I am not satisfied that it is appropriate to waive recovery of the remainder of the five debts not affected by Mr Garbutt’s bankruptcy.
Decision
62.The Tribunal sets aside the decision under review and remits the matter to the Respondent for reconsideration in accordance with the following directions:
(1) the five debts that are the subject of the decision under review were not incurred by means of fraud and the exception contained in s 153(2)(b) of the Bankruptcy Act 1966 does not apply in Mr Garbutt’s case;
(2) penalties should not have been applied in respect of the third, fourth and fifth debts pursuant to s 1228B of the Social Security Act 1991;
(3) the discretion in s 1237AAD of the Social Security Act 1991 should not be exercised to waive the remainder of the five debts not affected by Mr Garbutt’s bankruptcy.
I certify that the 62 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R P Handley, Deputy President.
Signed:........[sgd].......................................................................
AssociateDates of Hearing 14 and 15 July 2011
Date of Decision 4 August 2011
Counsel for the Applicant K SantSolicitor for the Applicant M Pantall, Legal Aid Commission of New South Wales
Solicitor for the Respondent S Memmott
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