Grindlay and Secretary, Department of Employment and Workplace Relations
[2006] AATA 749
•4 September 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 749
ADMINISTRATIVE APPEALS TRIBUNAL № V2005/863
GENERAL ADMINISTRATIVE DIVISION
Re: DONNA GRINDLAY
Applicant
And: SECRETARY,
DEPARTMENT OF EMPLOYMENT
AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal: Mr C. Ermert, Member
Date:4 September 2006
Place:Melbourne
Decision:The Tribunal affirms the decision under review.
.sgd C. Ermert
Member
SOCIAL SECURITY– parenting payment partnered – notification of husband’s earnings – overpayment – recovery of debt – bankruptcy - whether fraud – whether debt may be written off ‑ must the debt be waived – should the debt be waived – special circumstances
Social Security Act 1991
Bankruptcy Act 1966
Derry v Peek (1889) 14 App Cas 337
Director-General of Social Services v Hales (1983) 47 ALR 281
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Civitareale and Department of Family and Community Services and Civitareale [1999] AATA 486
ReDepartment of Social Security and McAvoy (1996) 44 ALD 721
Re Secretary, Department of Family and Community Services and Donna Grindlay [2005] AATA 91
Re Secretary, Department of Family and Community Services and Laurence Dobson [2000] AATA 41
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Skalkos v Smiles [2006] NSWSC 192
REASONS FOR DECISION
4 September 2006Mr C. Ermert, Member
INTRODUCTION
1. Mrs D. Grindlay was receiving Parenting Payment Partnered (PPP). The PPP was calculated, in part, on the basis of her declarations to Centrelink of her husband’s earnings. Centrelink is the service delivery agent for the Department of Families, Community Services and Indigenous Affairs and the Department of Employment and Workplace Relations. At all times Mr D. Grindlay has been casually employed by various employers with numerous changes to his wages.
2. From the commencement of the PPP to Mrs Grindlay, Centrelink has sent her numerous notices advising her that she is required to contact Centrelink within 14 days if there is an increase in her partner’s income. Mrs Grindlay says she did not understand the contents of the letters and placed them in a box. When telephoned by Centrelink staff and asked for her husband’s current income she generally responded that his income was unchanged. Mrs Grindlay recalled checking this information with her husband but could recall little else of these telephone conversations. Mrs Grindlay initiated contact with Centrelink on the occasions when the PPP was suspended pending an update on her husband’s earnings.
3. Centrelink conducted a data match with the Australian Taxation Office on 3 February 2004. The data match indicated that Mr Grindlay’s income had been in excess of that declared by Mrs Grindlay. On 16 June 2004 Centrelink decided that Mrs Grindlay had been overpaid PPP between 29 June 2001 and 12 February 2004. Centrelink raised a debt of $12,895.21 which it sought to recover from Mrs Grindlay. Mrs Grindlay sought a review of the decision. The decision was reviewed by an Authorised Review Officer (ARO) on 14 July 2004 and affirmed. On 3 August 2004 the respondent was advised that Mrs Grindlay had been declared bankrupt. The date of bankruptcy was 25 March 2002. The issues of whether the debt could be recovered from a bankrupt, and the amounts and dates involved, were subsequently reviewed by the Social Security Appeals Tribunal (SSAT) and later by this Tribunal. On 31 January 2005 this Tribunal determined that Mrs Grindlay owed a debt of $12,297.67 to the Commonwealth for overpayment of PPP between 26 March 2002 and 12 February 2004. On 15 February 2005 Mrs Grindlay declared bankruptcy for the second time with a discharge date of 16 February 2008.
4. On 24 March 2005 the respondent decided that, as the debt had been incurred through fraud, it would be recoverable upon discharge of the bankruptcy. This decision was reviewed in turn by an ARO and the SSAT and affirmed. This hearing is a review of that SSAT decision made on 29 August 2005.
5. At the hearing Mrs Grindlay was represented by Mr D. Turner of counsel, instructed by Monash-Oakleigh Legal Service. The respondent was represented by Ms H. Weston, a solicitor from Phillips Fox.
THE ISSUES
6. The issues before this Tribunal and the sequence of their determination in this case is as follows:
·Is there a debt to the Commonwealth under the provisions of section 1223(1) of the Social Security Act 1991 (the Social Security Act).
·If so, is the debt provable in the bankruptcy of Mrs Grindlay under section 82(1) of the Bankruptcy Act 1966 (the Bankruptcy Act).
·If the debt is provable, does the discharge of the bankruptcy release Mrs Grindlay from the debt under section 153 (1) of the Bankruptcy Act.
·Was the debt incurred by fraud. (If the debt was incurred by fraud, then section 153(2)(b) of the Bankruptcy Act provides that the discharge of the bankruptcy does not release Mrs Grindlay from the debt.)
·If fraud is found, can the debt be written off under section 1236(1A), or waived under section 1237A(1) or section 1237AAD of the Social Security Act. (If fraud is not found, then under section 82(1) of the Bankruptcy Act, the debt is released on the discharge of Mrs Grindlay from bankruptcy and becomes irrecoverable by law and must be written off under section 1236(1A) of the Social Security Act).
7. The standard of proof for the consideration of these issues is the balance of probabilities.
IS THERE A DEBT TO THE COMMONWEALTH?
8. Section 1223(1) of the Social Security Act provides:
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.
9. In this case there is no dispute that Mrs Grindlay has been paid in excess of her entitlement. There is also no dispute that Centrlelink has correctly calculated the amount of the overpayment.
10. I find that a payment has been made to Mrs Grindlay to which she was not entitled. Mrs Grindlay therefore owes a debt to the Commonwealth.
is the debt provable?
11. Section 82(1) of the Bankruptcy Act provides:
Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
12. On 31 January 2005 in an earlier decision (Re Secretary, Department of Family and Community Services and Donna Grindlay [2005] AATA 91) this Tribunal found that Mrs Grindlay owed a debt to the Commonwealth of $12,297.67 for overpayment of PPP between 26 March 2002 and 12 February 2004 and decided that the debt was to be recovered. This debt was not affected by Mrs Grindlay’s first bankruptcy as it was incurred after 25 March 2002 which was the date that bankruptcy was declared.
13. The date of Mrs Grindlay’s present bankruptcy is 15 February 2005. Mrs Grindlay’s debt was incurred before the date of this bankruptcy and is therefore provable in her present bankruptcy.
does the discharge of the bankruptcy release mrs grindlay from the debt?
14. The Bankruptcy Act operates to release, on discharge, bankrupts from all debts except, relevantly, those incurred by fraud. Section 153 of the Bankruptcy Act provides:
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…
(2) The discharge of a bankrupt from a bankruptcy does not:
…
(b)release the bankrupt from a debt incurred by means of fraud or 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 …
15. As a consequence, if Mrs Grindlay’s debt was not incurred by fraud she would be released from it on her discharge from bankruptcy on 16 February 2008. This would have the effect of making the debt irrecoverable by law under the provisions of section 1236(1B) of the Social Security Act. However, if the debt was incurred by fraud she would not be released from it on her discharge and the debt would remain repayable, subject to the write off and waiver provisions of sections 1237A(1) and 1237AAD of the Social Security Act.
was mrs grindlay’s debt incurred by fraud?
16. The evidence given by Mrs Grindlay was that she and her husband both attended the Fountain Gate office of Centrelink on the occasion of her first application for parenting payment. She was not asked to sign anything on this occasion nor during any subsequent dealings with Centrelink staff. Mrs Grindlay agreed that she was told that she would need to keep Centrelink informed of changes in her husband's income and place of work.
17. Mrs Grindlay stated that her husband did not share details of his income with her. She also told the Tribunal that she takes medication and that she was unable to understand basic financial matters. Mrs Grindlay did recall receiving some letters from Centrelink about her husband’s income but could not recall how often. She contacted Centrelink by telephone when she received letters advising that the payments had been cut off because of her failure to provide information. Although Mrs Grindlay could not recall the details of any particular contacts with Centrelink, she said that when asked about her husband’s income she would say only that it had not changed from the last time. She said that she had only ever provided information on her husband’s weekly earnings, not fortnightly, and that she was not able to calculate the conversion between weekly, fortnightly and annual earnings. Mrs Grindlay also believed her husband provided information to Centrelink by fax.
18. In relation to the issue of fraud, Mr Turner submitted that Mrs Grindlay had no intention to knowingly provide wrong information, or that she was reckless in providing information. Mrs Grindlay had verified the information with her husband and relayed the information he had given her to Centrelink. Mrs Grindlay also relied on the fact that her husband had said that he had faxed that information to Centrelink.
19. Mr Turner referred the Tribunal to the decision in Skalkos v Smiles [2006] NSWSC 192 in which Johnson J said at paragraph 65:
65. In SGB v The Queen (2005) HCA 80, Gummow, Hayne and Heydon JJ said at para 2:
When ‘reckless’ is used in applying the principles of the tort of negligence, the yardstick is objective rather than subjective. On the other hand, to sustain an action in 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’ [the formulation is that of Lord Herschell in Derry v Peek (1889) 14 App Cas 337 at 374]. But (3) is but an instance of (2) because, as Lord Herschell put it in Derry v Peek [at 374]:
[O]ne who makes a statement under such circumstances can have no real belief in the truth of what he states.
20. Mr Turner also referred the Tribunal to Deputy President Forgie’s decision in Civitareale and Department of Family and Community Services and Civitareale [1999] AATA 486 in which she said:
95. That finding does not lead automatically to the conclusion that the debts were incurred by means of a fraud. Mr Walsh referred to the meaning of "fraud" given in Osborne's Law Dictionary (7th edition; Roger Bird, 1983):
In general, fraud is obtaining a (sic) 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. To obtain damages for deceit it must be proved that the defendant intended that the plaintiff should act on the fraudulent misrepresentation, that he did act on it, and suffered damage in consequence.
…
97. The word "fraud" has also been considered in R v Sinclair [1968] 3 All ER 241 where James J said that:
To cheat and defraud is to act with deliberate dishonesty to the prejudice of another's proprietary right." (page 246)
The test is a subjective, and not an objective, test (page 246).
21. Mr Turner submitted that it cannot be established that there was any intention by Mrs Grindlay to knowingly provide wrong information, or that she was reckless in providing information. She did not understand that the PPP are affected by the weekly pay rates. He submitted that Mrs Grindlay, when asked by Centrelink officers about her husband’s earnings, verified the information with her husband and relayed the information he had given her to Centrelink. Mr Turner submitted that Mrs Grindlay also relied on the fact that her husband had said that he had faxed through that information to Centrelink. Mrs Grindlay did not make any statements which could be regarded as reckless, because each time she was asked to provide information she checked with her husband. As her husband had advised her that there had been no change it could not be said that Mrs Grindlay had no real belief in what she said.
22. Mr Turner also raised the issue of Mrs Grindlay’s medical condition as being relevant in classifying Mrs Grindlay’s conduct as non-fraudulent. He referred the Tribunal to the decision in Secretary, Department of Family and Community Services and Dobson [2000] AATA 41. That case involved a respondent who was receiving Newstart Allowance and who did not provide fortnightly details of his earnings. In that decision a medical practitioner described the respondent as:
9. having been plagued with illness over a number of years, ischaemic heart disease, hypertension, depression together with shoulder and back injuries. He had a bout of severe depression in 1996 and in the same year underwent angioplasty requiring 4 stints. He was also diagnosed with diabetes at this time.
10. [The doctor] said he did not expect Mr Dobson to function properly at work, was sick every second day and would have needed an enormous effort to conduct his personal life.
In paragraph 31 the Tribunal found:
From all the evidence, in particular that of the medical and emotional condition of the respondent at the relevant time, the Tribunal is not able to find that the omission to notify accurately was a deliberate dishonesty nor was any false misrepresentation made either knowingly or recklessly by the respondent. It is the subjective decision of the Tribunal that the failure to notify cannot be characterised as fraud pursuant to subsection 153(2) of the Bankruptcy Act.
23. Mr Turner submitted that Mrs Grindlay was and is suffering from a medical and emotional condition which leaves her chronically unable to fully understand or appreciate the subtlety of questions asked of her. Mrs Grindlay’s medical situation is described in the following letters:
·from Ms R Steer, Psychologist, dated 23 August 2005 (T97) in which Ms Steer states:
…
I have assessed this lady using the Clinical Analysis Questionnaire (CAQ) as well as additional checklists for depression and anxiety levels.
The checklists confirm that Donna’s anxiety levels are in the extreme range. She also reports symptoms suggesting clinical depression in the moderate range.
…
These clinical factors, accompanied by other personality predispositions, such as her tendency to be somewhat insecure and very controlled by others, would account for very high stress levels and difficulty with concentration and memory. They would also affect her ability to think clearly and reasonably and her general mental alertness, which would impact on her problem solving capacity.
…
·from Dr K Eastaugh, general practitioner, dated 6 June 2005 (T94), 1 August 2005 (T96) and 10 October 2005 (T98), all of which list the medications prescribed for Mrs Grindlay. In T98 Dr Eastaugh states:
The above lady was on Zoloft and Xanax from the 1st of July 2001 to 12th February 2004 and is still currently taking this medication. It does have an impact on her memory as far as to read and understand letters and it does have a large impact on communicating on telephone conversations to provide information to Centrelink. …
24. On the basis of her medical condition Mr Turner submitted that Mrs Grindlay has not behaved with conscious intent to defraud.
25. In regard to the information actually provided by Mrs Grindlay to Centrelink, Mr Turner submitted that the information always related to weekly earnings. Mrs Grindlay only knew of her husband’s earnings on a weekly basis and she did not have the ability to convert those figures to fortnightly or annual amounts. Mr Turner also referred to a payroll report relating to Mr Grindlay (T43), in which there are a number of entries showing a gross weekly payment of $568.13. He went on to compare these figures with the payment of $658 gross per fortnight, provided by Mrs Grindlay to Centrelink on 6 August 2002 (T20) and 9 April 2003 (T29). He submitted that it is entirely plausible that Mrs Grindlay inadvertently, due to the affect of the medications, transposed the figures when talking to Centrelink staff on the telephone. Centrelink staff may also have mistakenly assumed that the weekly earnings figures provided by Mrs Grindlay were in fact fortnightly earnings.
26. In his submissions Mr Turner also questioned the value of the Centrelink staff’s file notes of the telephone conversations between Mrs Grindlay and Centrelink. He submitted they are not evidence of the truth of their contents as they have not been tested. He went on to say that there is no way of knowing how any of the questions were put to Mrs Grindlay; for example, whether Mrs Grindlay was asked about her husband’s weekly or fortnightly earnings.
27. Mr Turner summarised his submissions by saying:
It is our submission that Mrs Grindlay's medical, emotional and psychological condition goes directly to rebut any inference or any presumption that she was knowingly fraudulent or reckless in providing information without bothering to check it. She was asked whether she understood the letters. She said she didn't. She was asked whether she showed the letters to her husband. She said she didn't. Whenever she received a letter, she asked her husband whether his income was the same. (Transcript page 27)
28. In her response Ms Weston accepted that in this case there was no intentional fraud committed by Mrs Grindlay. Ms Weston referred the Tribunal to the decisions in Civitareale and Dobson, stating that each of these decisions has accepted the definition of fraud given in the decision of Derry v Peek (1889) 14 App Cas 337. That decision stated that fraud is proven when it is shown that a false representation has been made knowingly, without belief in its truth, or recklessly, careless whether it is true or false. In this case Ms Weston relied on the last of these situations that the false representation has been made recklessly, careless whether it is true or false.
29. Ms Weston submitted that Mrs Grindlay has received at least 15 notices advising her of her obligations to advise Centrelink of her husband's income. Ms Weston also referred to the file record of a telephone conversation on 2 April 2002 (T12) in which Mrs Grindlay was advised that she had to provide her husband’s income. Ms Weston submitted that it cannot be said that Mrs Grindlay was not aware of her obligation to provide this information.
30. Ms Weston questioned the plausibility of Centrelink staff mistakenly recording Mr Grindlay’s earnings as $658 per fortnight rather than $568 per week. Ms Weston submitted that such an occurrence would mean that:
…that information was mistakenly put down by separate Centrelink officers at separate times, but it just happened to be the same amount, and in my submission, I would ask the Tribunal to reject that logic. (Transcript page 29)
31. On the issue of the probative value of the file records of telephone conversation Ms Weston rejected the submission that they were a “rehashed reconstructions of events” and submitted that they are:
contemporaneous notes made at the time … they are the best evidence being evidence of what occurred at the actual time, particularly in light that the applicant has stated that she cannot recollect what happened at that time, … we rely on the content of those contemporaneous records…(Transcript page 28-9)
32. On the issue of the effect of Mrs Grindlay’s medical condition on her responses to Centrelink, Ms Weston differentiated this case from Dobson by submitting that the mental condition in each case was different. Ms Weston submitted that the mental condition has to act on the applicant's mind so that compliance can not be expected. In this case Ms Weston submitted that the applicant did understand her obligations and that she did telephone Centrelink and did provide information.
33. Ms Weston summarised her submissions by saying:
It can't be said that she didn't know - she was so impaired by her mental condition that she didn't know what she was doing. The standard of proof in this application is the balance of probabilities, and in my submission it is more probable than not that the applicant gave incorrect information and she did that carelessly. And in my submission her evidence supported that her actions were careless in providing this information. In close, my final submission is that the applicant was reckless and careless in providing her information and the SSAT decision should be affirmed.
34. In considering the general issue of the information provided by Mrs Grindlay, I accept the respondent’s submission that Mrs Grindlay was aware that, for her to continue to receive the parenting payment, she was required to provide information relating to her husband’s earnings. I note the affirmative answer given in evidence by Mrs Grindlay to the question:
Now, subsequently, when you started receiving the parenting payments, were you informed that you would need to keep the department up to date with changes in your husband's income, place of work?‑‑‑Yes.
The connection between her husband’s earnings and the payment of her benefit was clearly demonstrated and understood by Mrs Grindlay on the occasions when the benefit was not paid. On each occasion Mrs Grindlay initiated telephone calls to Centrelink during which she was told of the requirement for information on her husband’s earnings, which she then provided in order to re-institute the payments.
35. In regard to whether Mrs Grindlay was reckless in not providing the correct information, I note her oral evidence in which she stated that, although she did not understand the letters she received from Centrelink she did not refer them to her husband for his help. In answer to my question as to why she did not show the letters to her husband Mrs Grindlay said:
I just never thought of doing that. I can't remember my - I would just read the letter and then just put it - sort of just look at it and then just put it in the box. I never showed him (Transcript page 19).
36. Mrs Grindlay acknowledged that she did not understand the contents of the letters from Centrelink and yet she did not refer the letters to someone else to assist her in her understanding. In earlier evidence Mrs Grindlay had said that she relied on her husband for information about the amount of his earnings. Had she referred the letters to her husband she would have connected the statement of the requirement from Centrelink with the source of the correct information on earnings.
37. In considering the effect of her medical condition and her medication on her ability to understand Centrelink requirements to communicate effectively with Centrelink, I note that Mrs Grindlay appeared to have no difficulty in communicating with Centrelink officers on the occasions when the payments did not take place. In my opinion those occasions would have been even more stressful than the more routine communications. Further, Centrelink requires responses to the letters within 14 days and hence there should be no additional stress imposed by the need for an immediate, rather than a considered reply. I can see no sound evidence that Mrs Grindlay was so impaired that she did not understand that she had an obligation to provide correct information to Centrelink or that she was so impaired that it was not reasonable for her to have had her husband check the correctness of the information supplied to Centrelink.
38. From the above I subjectively consider that Mrs Grindlay was reckless in not taking reasonable steps to provide correct information regarding her husband’s earnings to Centrelink. As a consequence, I find that Mrs Grindlay’s failure to provide the correct information on her husband’s earnings is as a result of fraud, as defined in part in the decision of Derry v Peek.
subsequent issues
39. As I have found that the debt was incurred by means of fraud, section 153(2)(b) of the Bankruptcy Act provides that the discharge of the bankruptcy does not release Mrs Grindlay from the debt. I must therefore consider next whether the debt may be written off under section 1236(1A) of the Social Security Act, whether the debt must be waived under section 1237A(1) and whether the debt should be waived under section 1237AAD.
may the debt be written off under section 1236(1A)?
40. Section1236(1A) of the Social Security Act relevantly provides:
The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a)the debt is irrecoverable at law, or
(b)the debtor has no capacity to repay the debt, or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor, or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
41. Section 1236(1B) of the Social Security Act relevantly provides:
For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
…
(c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud:
42. I have already found that the debt was incurred by fraud. Consequently, the debt is not irrecoverable at law under section 1236(1B) of the Social Security Act and therefore section 1236(1A)(a) is not satisfied.
43. In regard to the capacity to repay the debt I note that Mrs Grindlay is currently a declared bankrupt and that she will not be discharged until 16 February 2008. The debt can not be recovered until after that date. It is not possible to predict what her capacity to repay the debt will be at that time and this issue could be raised in application by Mrs Grindlay after her discharge. As at the date of the hearing of this matter I am unable to find that Mrs Grindlay does not have the capacity to repay the debt.
44. The other provisions of the section have not been raised by either party.
45. Unless one of the provisions of section 1236(1A) apply, the Secretary, and by extension the Tribunal, does not have the discretion to write off the debt. In this case I find that none of the provisions are satisfied and therefore the Secretary may not write off this debt.
must the debt be waived under section 1237A(1)?
46. Relevantly section 1237A(1) of the Social Security Act provides that:
…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...
47. On this issue Mr Turner submitted that:
there is administrative error solely of the department's doing, because they have failed consistently to clarify with her what her obligations were. The information they have obtained and which is recorded in the diary notes is patently inaccurate, and doesn't accord at all with his actual income or the income that she says he had advised her he was earning. (Transcript page 28)
48. In considering this submission I note that there was no evidence of failure to clarify with Mrs Grindlay her obligations. There was some evidence to indicate that Mrs Grindlay may not have understood the information which was provided to her. However, there is no dispute that information regarding Mrs Grindlay’s obligations was provided, at least by way of the letters sent to her. There was no evidence to indicate that the information provided in the letters was not clear. There is evidence that Centrelink initially recorded some inaccurate information regarding Mr Grindlay’s earnings. However, that was adjusted from the later information provided by Mrs Grindlay. The initial inaccuracies did not give rise to the debt.
49. In her response on this issue, Ms Weston submitted that it could not be said that Centrelink is solely at fault since it had sent 15 letters to the applicant. Further, Mrs Grindlay admitted in her evidence that she sometimes didn't read the letters and would put them in a box. Nor did she ask for help to understand them.
50. It is not in dispute that Mrs Grindlay did provide incorrect information in regard to her husband’s earnings. From the evidence I find that Mrs Grindlay contributed to the debt by her actions in providing incorrect information to Centrelink and therefore the debt under consideration can not be attributed solely to administrative error on the part of the Commonwealth.
should the debt be waived under section 1237AAD?
51. Section1237AAD of the Social Security Act provides:
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.
knowingly making false statements or representations
52. Neither party made representations on the application of section 1327AAD(a) of the Social Security Act. I found earlier that the debt was attributable to fraud on the part of Mrs Grindlay, as a result of recklessness in that she did not take appropriate actions to understand and comply with her obligations. This did not imply that Mrs Grindlay knowingly made false statements or false representations. Her evidence was that she provided the information provided by her husband and that she had no reason not to believe it to be true. Therefore, I find no evidence that the debt resulted from Mrs Grindlay knowingly making a false statement or representation. On the same basis I find no evidence that Mrs Grindlay knowingly failed or omitted to comply with a provision of this or the 1947 Social Security Acts.
are there special circumstances?
53. Mr Turner made the following submission in regard to special circumstances in this case:
We say that there are special circumstances here. Those special circumstances are - they are not the usual, run of the mill matters. They are a case of a woman with limited education. She is in a situation which she finds difficult to cope with. Her medical adviser says she has memory problems. She is unable to read and understand because of the drug difficulties. The psychologist says she has stress related issues, personal panic anxiety and panic disorder, obsessive compulsive tendencies, history of major surgery, and a check list of the analysis that was taken show that her anxiety levels are in an extreme range.
Reports suggest clinical depression in a moderate range. In some cases, the highest being anxious depression, which is extreme. We would say that, in circumstances when she is in need her payments have been cut off and she rings up the department to find out why and has asked for clarification. When she received letters asking her for change of circumstances she is not able to think clearly or reasonably. She is unable to solve problems. We say that all these matters are - or give rise to special circumstances, which in our submission suggest that it will be reasonable and appropriate for the department to waive the debt. (Transcript pages 26 and 27).
54. In response, Ms Weston referred the Tribunal to the earlier Tribunal decision in this matter. In that hearing the Tribunal accepted that the applicant had mental problems, yet could not say that they were so unusual, uncommon and exceptional as to attract those provisions. In paragraph 26 he said:
In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the Tribunal held that the special circumstances, referred to in s 1237AAD(b) of the Act, must be unusual, uncommon or exceptional. The Tribunal accepts that the respondent has medical conditions that cause anxiety and stress, and that she is taking prescribed medication. The Tribunal also takes into account the respondent’s financial situation and that during the relevant period her husband worked for a number of employers and she had the care of a young child. The Tribunal notes that the respondent’s husband has been in employment and earns an amount that, when combined with the respondent’s family tax benefit, results in a combined income in excess of the allowance rate for a married couple that is solely reliant on social security.
On balance the Tribunal is satisfied that, although the respondent’s overall situation may have been difficult, the circumstances in this case are not unusual, uncommon or exceptional, and do not constitute special circumstances (other than financial hardship alone). Therefore, the waiver provisions of s 1237AAD of the Act do not apply
55. I am also guided by Ryde v Secretary, Department of Family and Community Services [2005] FCA 866 in which Branson J stated:
24 The intended effect of s 1237AAD has been considered by French J in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 (‘Hales’) at 162 where his Honour observed:
The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special. …
…
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. …’
…
26. …. While, as French J pointed out in Hales, the evident purpose of s 1237AAD is to enable a flexible response to the wide range of circumstances which could give rise to hardship or unfairness, the statutory requirement for ‘special circumstances’ discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness to which French J referred must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.
56. In considering the general rule to be applied I had regard to Director-General of Social Services v Hales (1983) 47 ALR 281 at 322-323, where Shepherd J said:
There is not to be found in the Tribunal’s reasons any indication that it did put into the scales the consideration that the respondent had, for whatever reason, received public moneys to which she was not lawfully entitled. To me, notwithstanding considerations of hardship, which there are in this and many other cases, that must always be a paramount consideration.
57. The circumstances in this case have not materially altered from those at the time of the previous Tribunal hearing and I have no reason not to apply the same reasoning and reach the same conclusion. Having regard to the above, I find that none of the circumstances claimed as special circumstances are sufficient to justify departure from the general rule. I do not consider them to be special circumstances in the terms of s 1237AAD(b) of the Social Security Act.
is it more appropriate to waive?
58. The final issue to be determined under section 1237AAD of the Social Security Act is that contained in sub-paragraph (c): whether it is more appropriate to waive than to write off the debt or part of the debt. The decision in Re Department of Social Security and McAvoy (1996) 44 ALD 721 considered a number of circumstances in which it could be more appropriate to waive than to write off the debt or part of the debt, thereby releasing the applicant from liability for repayment of the debt. Those circumstances were:
·Where strict enforcement of the liability might be unjust, unreasonable or otherwise inappropriate;
·Where the quantum of the debt might have a crushing effect if immediate repayment were required; and
·Where the repayment over a long period might cause extreme burden;
59. The same decision included arguments against waiver, such as:
·The interest of the community in the recovery of public moneys, and
·The capacity of the applicant to repay in future.
60. I have seen no evidence in this case that the strict enforcement of the liability would be unjust, unreasonable or inappropriate. The size of the debt is considerable. However, repayment will not be sought until Mrs Grindlay’s discharge from her present bankruptcy. Repayment arrangements will be a matter for Centrelink at that time, as will the capacity of the applicant to repay the debt in the future. I find that the interest of the community in the recovery of public moneys is not overturned at this stage by the circumstances of the applicant. Hence, I find that in this case it is not more appropriate to waive than to write off the debt.
61. After considering all the elements of s 1237AAD I find that none of them have been satisfied. Accordingly, I find that the there are no grounds on which the debt should be waived.
DECISION
62. I find that a debt of $12,297.67 is owed to the Commonwealth by Mrs Grindlay and that the debt was incurred by means of fraud. As the debt is provable in the bankruptcy of Mrs Grindlay, the discharge of the bankruptcy will not release Mrs Grindlay from the debt. In addition I find that there no are no grounds for the debt to be written off or waived under the provisions of the Social Security Act.
63. The Tribunal affirms the reviewable decision of the SSAT dated 29 August 2005.
I certify that the sixty–three [63] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr C. Ermert, Member
(sgd) Ursula Noyé
ClerkDate of Hearing: 4 July 2006
Date of Decision: 4 September 2006
Counsel for the applicant: Mr D. Turner
Solicitor for the applicant Monash-Oakleigh Legal Service
Solicitor for the respondent: Ms H. Weston
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