GOLGERTH and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2010] AATA 773
•11 October 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 773
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/0789
| GENERAL ADMINISTRATIVE DIVISION | ) | ||
| Re | GLENDA GOLGERTH | ||
Applicant
| And | SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS |
Respondent
DECISION
| Tribunal | MJ Carstairs, Senior Member |
Date 11 October 2010
Place Brisbane
| Decision | The Tribunal affirms the decision under review. |
...................[Sgd]................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Age pension – Overpayment – Calculation of rate of age pension – Assets and income tests – Meaning of “financial asset” – Unpaid balance of loan is a financial asset – Debt not attributable solely to administrative error by Commonwealth – No exercise of discretion for special circumstances – Decision under review affirmed.
Social Security Act 1991 (Cth), ss 11, 1122, 1237A, 1237AAD
Social Security (Administration) Act 1999 (Cth), s 180
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Boyd and Secretary, Department of Social Security (1994) 36 ALD 331
Re Secretary, Department of Social Security and Vonhoff (1998) 54 ALD 227
Secretary, Department of Family and Community Services v Draper (2003) 79 ALD 394
Sekhonv Secretary, Department of Family and Community Services (2003) 132 FCR 126
REASONS FOR DECISION
| 11 October 2010 | MJ Carstairs, Senior Member |
Glenda Golgerth has incurred a Centrelink debt relating to her receipt of age pension, which was paid to her at a rate that took into account her husband’s small amount of earnings as a courier for the company Holja Pty Ltd (“Holja”). However her age pension rate should have been based on the deemed value of a loan owed by Holja to her husband (James Golgerth), as well as on a calculation of company profits since Holja was her husband’s company.
The relevant legislation allows the assets and income of private companies to be attributed to individuals who claim a social security payment. Anyone who applies for such a payment is means-tested, that is, assessed under income and assets tests that determine the rate at which a person will be paid pension, if at all. Where a person’s payment is affected by income and assets, Centrelink applies the test that produces the lower amount of social security payment.
It was not seriously disputed here that Centrelink should have assessed matters differently and as a result not paid Mrs Golgerth as much pension as she was paid in the debt period.
I would note in regard to the calculation of the debt amount that it has been of some concern to Mrs Golgerth that the amount has fluctuated. At the hearing, the Secretary initially presented a case suggesting that the correct debt amount was a figure higher than that affirmed by the Social Security Appeals Tribunal. However the Secretary reconsidered that issue, agreed to recalculate the debt taking into account other matters raised by Mrs Golgerth, and then issued a further determination (dated 9 September 2010) which recalculated the overall debt as being $33,852.94. However, the Secretary also confirmed in that determination that the amount of $5,685.63 had been waived correctly by the authorised review officer on 2 November 2009 under s 1237A of the Social Security Act 1991 (“the Act”). This meant that the total of the debt (as recalculated) was $28,167.31. I would simply observe that the effect of s 180 of the Social Security (Administration) Act 1999 is to make reviewable this latest decision as now varied, and the review proceeds accordingly.
ISSUES
Taking into account the recalculation of the debt by Centrelink, I am satisfied that the debt amount of $28,167.31 has been correctly arrived at. The central issue here was whether the debt should be waived in whole or in part, either under s 1237A of the Act (for administrative error) or 1237AAD (if special circumstances are established).
BACKGROUND
The most immediately evident aspect of this case is that the respondent makes no suggestion that Mrs Golgerth has been anything other than fulsome and forthcoming when providing information about Holja and about her and her husband’s financial circumstances, including that her husband had loaned money to the company. This information had to be provided when Mrs Golgerth notified Centrelink of her marriage in 2001 (Centrelink asked Mrs Golgerth about her husband’s financial circumstances in order to assess her correct rate of pension).
It is not disputed that:
§ In July 2001, Mr Golgerth provided the (correct) information to Centrelink that he was involved in a private company.[1] He also produced Holja’s financial statements, which revealed that Holja owed him $93,598.[2] It was noted that there was no written loan agreement.
§ Mr Golgerth later provided other details about Holja at Centrelink’s request including that it was incorporated in 1978; that he was the sole director; and that he and Mrs Golgerth were the only shareholders.
[1] T9 at 116.
[2] T10, and T11 at 126.
Holja was, according to the profit and loss statement for the year ended 30 June 2000,[3] running at a loss.
[3] T11 at 137.
On yet another Centrelink form provided at the time, the Golgerths advised that Mr Golgerth was employed by Holja as a courier.
Centrelink, somewhat surprisingly in view of the copious detail that had been provided, commenced paying Mrs Golgerth’s age pension taking into account Mr Golgerth’s wages (some $5,400 per annum) but failing to assess aspects of the company, including the value of the loan.
THE APPLICANT’S CASE
Mrs Golgerth stated in her written submission that:
At the time of our marriage I was aware that Michael had a private company named Holja Pty Ltd. Michael told me that he had gone to his accountant who informed him that the company had an accounting loss of $123,169.00 and a tax loss of $51,671.00 and that any income the company made could be used as offset against carried forward losses. The company was unsaleable and of no value except to Michael who had chosen to use the company as his enterprise. The reasons for this were:
1. Asset Protection. If there was an accident or claim against him in the carrying out of his duties then the claim would be against the company Holja Pty Ltd and thus Michael’s assets would be protected.
2. To apply any income the company earned firstly against carried forward losses and then Michael’s wages. The net income after payment of Michael’s income was applied to reduce the loan.[4]
[4] Exhibit A2.
Mrs Golgerth indicated that the balance of the loan from Mr Golgerth to Holja changed from year to year, peaking at $118,866 in 2002 but having reduced to $14,365 in 2007. She said that she did not consider the loan to have any monetary value, it being just an entry in Holja’s books. She observed that if her husband had failed to continue working as a courier the loan could not be repaid.
Mrs Golgerth said that she did not fail to notify any changes: there simply were no changes as all the relevant information remained the same from the time she and her husband had originally communicated it to Centrelink. Mr Black, for the respondent, contends that Centrelink sent notices to Mrs Golgerth in October 2001 that were sufficient to make her aware of the information used to calculate her age pension rate. The notices required her to contact Centrelink if those details were incorrect. Mrs Golgerth challenged Mr Black’s submission that responsibility for the ongoing errors shifted from Centrelink to her once she received those notices.
Mrs Golgerth had obtained counsel’s opinion, which she tendered at the hearing,[5] about how the loan should be considered. Having looked at the content of that advice, I would simply observe that it refers to principles that might apply in other areas of the law, but does not appreciate that the law in relation to loans as treated in the social security legislation is quite settled. It is plainly the case that the loan was a financial asset of Mr Golgerth’s and so had to be taken into account. It is of course of some relevance that this was also the way it was treated in Holja’s accounts.
[5] Exhibit A3.
There is no question that under the legislation a debt is an asset. “Asset” is defined in s11(1) of the Act as meaning “money or property”. Loans and debts are a species of property: Re Secretary, Department of Social Security and Vonhoff (1998) 54 ALD 227. The Federal Court in Secretary, Department of Family and Community Services v Draper (2003) 79 ALD 394 noted that the reference to “property” and “money” in the definition in s 11 does not involve the attribution of ownership by any particular person but rather the concept of anything that is capable of ownership. In Re Boyd and Secretary, Department of Social Security (1994) 36 ALD 331, the Tribunal noted that because the words of s 1122 of the Act refer to the value of the loan being that which “remains unpaid”, those words cannot be replaced by the words “remains recoverable”.
In that regard, Centrelink sent Mrs Golgerth a letter dated 4 October 2001,[6] which set out the income and assets upon which Centrelink was maintaining her age pension rate. That letter included her husband’s earnings as a courier, her bank account balance, returns from her allocated pension, and sundry amounts for household effects and motor vehicles. The letter further noted that Centrelink did not have any details recorded against categories that included real estate and business income nor for real estate and business assets. This document was followed by a notice dated 29 October 2001[7] setting out the rate of age pension, but also requiring that Centrelink be notified if combined financial investments were more than $10,703.
[6] T15.
[7] T16.
In addition, Mrs Golgerth was required to notify Centrelink of changes in Mr Golgerth’s earnings as a courier, and she did not always do so in a timely way.
Mrs Golgerth submitted that Centrelink’s sole responsibility for over calculating her pension rate did not cease in October 2001 but continued for some eight years. As she saw it, Centrelink remained solely responsible for the debt amount, with no input by way of contributory error on her or her husband’s part. Having provided the full and correct information, she said, they had no way of knowing that Centrelink had not taken it into account.
ADMINISTRATIVE ERROR
Mrs Golgerth’s case squarely raised the discretion to waive on grounds of sole administrative error, available under s 1237A(1) of the Act:
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.
It is true that this debt was solely caused by administrative error at the start. It ought to be acknowledged that it was administrative error to an extent one rarely sees, where Centrelink was provided with more than sufficient information to correctly determine key issues about the existence of the company and the debt owing to Mr Golgerth in order to assess Mrs Golgerth’s rate of pension.
Mrs Golgerth’s case is that all error in this matter was attributable to Centrelink not including information about Holja when calculating her rate of age pension. She said that she and her husband did not consider that he was self-employed, and that had influenced the way they interpreted matters mentioned in the Centrelink notices.
Whilst I appreciate that Mrs Golgerth misunderstood the questions about self-employment and had a particular view of the questions posed by Centrelink in the letters at T15 and T16, her failure to respond correctly to the information provided to her (in particular the questions posed in the letter at T15 as to whether there was business income and business assets) presents the turning point at which the error causing the overpayment ceased to be “solely” Centrelink’s.
It is tolerably clear that Mrs Golgerth’s debt is attributable substantially, but not solely, to administrative error of the Commonwealth—most particularly at the start of the debt period. The effect of that error was remediable had Mrs Golgerth provided the information sought by the letters at T15 and T16.
Section 1237A of the Act suggests a consideration of some proportionality, as the words require attention be given to “that proportion” of the debt that can be solely attributable to Commonwealth error. I am reasonably satisfied that Mrs Golgerth’s overall debt was attributable to her errors in not understanding the reporting requirements and her failure to appreciate that Centrelink had to take into account business assets and income. I consider that the decision reached by the authorised review officer to waive the parts of the debt up to early 2002 was a correct reflection of the proportion attributable to administrative error here.
SPECIAL CIRCUMSTANCES
It remains for me to consider whether the debt should be waived on the grounds of special circumstances. The case law acknowledges that the expression “special circumstances” is incapable of precise or exhaustive definition.[8] The discretion addresses any circumstances that distinguish a particular case from the usual, which might justify a departure from the rule by which an overpayment should be recovered from the person who received it. The discretion has also been described as one to avoid unfairness: that “something unfair, unintended or unjust had occurred ... there must be some feature out of the ordinary”.[9]
[8] Groth v Secretary, Department of Social Security (1995) 40 ALD 541.
[9] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545.
Section s 1237AAD of the Act gives the Secretary a discretion to waive the right to recover all or part of a debt if 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.
Mrs Golgerth submitted with respect to their circumstances that she and her husband were seeking to take their retirement, having each reached pension age. However, Mrs Golgerth noted that her husband has been able to obtain lighter work, more suitable to health problems he is suffering with shoulder and back pain. He requires surgery for a torn rotator cuff, which has not responded to treatment. In addition, they had trouble with the courier van and could not afford to replace it. Mr Golgerth said they would work on for a few years yet.
They gave comprehensive details of their financial situation, which includes some superannuation and a modest but yet not insignificant bank balance, having closed an annuity and deposited about $45,000 from it into a bank account. Mrs Golgerth observed that if required to repay the Centrelink debt, taking into account their assets less their mortgage, they would be left with a mere $40,000 on which to retire. She said that the Social Security Appeals Tribunal had been quite wrong to suggest that they could afford to repay this debt.
Mrs Golgerth said that since receiving the debt notice they had suffered from stress, and the whole matter has taken its toll upon their health.
As has been seen, there is no suggestion that Mrs Golgerth’s debt arose as a consequence of any knowingly wrong conduct. Mrs Golgerth provided more than sufficient information upon which Centrelink should have correctly determined her entitlements. Are there sufficient “special circumstances” that make it desirable to waive the Commonwealth’s right to recover the debt?
As mentioned above, the expression “special circumstances” requires something that distinguishes the particular case from others, something that sets it apart from the usual or ordinary case.[10]
[10]Groth v Secretary, Department of Social Security (1995) 40 ALD 541.
There are no features of this case that make the circumstances special or unusual. I accept that it is relevant to take into account that there has been significant error on Centrelink’s part that puts fully in focus questions of justice and fairness. As pointed out by Nicholson and Selway JJ in Sekhonv Secretary, Department of Family and Community Services (2003) 132 FCR 126, administrative error can be taken into account as a possible ground when considering whether “special circumstances” exist.
However, the primary consideration remains that Mrs Golgerth received money in excess of her entitlements, from the public purse.
It can be accepted that Mr and Mrs Golgerth have worked hard in order to provide for their retirement and that having to repay this debt is a hurdle for them they did not anticipate—especially having provided sufficient information at the outset to prevent this circumstance happening to them. I accept that they will not have the available level of assets that they hoped to have for their retirement. However the social security system exists to sustain those who need support. Mr and Mrs Golgerth’s financial circumstances are somewhat better than most who need to rely on social security in retirement.
It follows that in my view the present case is not one where the circumstances make it desirable to waive the Commonwealth’s right to recover the debt (as now recalculated). I affirm the decision under review dated 9 September 2010, calculating the debt at $28,167.31. This debt ought to be recovered from Mrs Golgerth.
I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of MJ Carstairs, Senior Member.
Signed: ..............................[Sgd]...........................
Mátyás Kochárdy, Associate
Date of Hearing 3 September 2010
Date of Final Submissions 16 September 2010
Date of Decision 11 October 2010
Applicant assisted by Mr J Golgerth
Counsel for the Respondent Mr M Black
Solicitor for the Respondent Sparke Helmore
0
2
0