Grindlay; Secretary, Department of Family and Community Services

[2005] AATA 91

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 91

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2004/1078

GENERAL ADMINISTRATIVE  DIVISION

Re: SECRETARY,

DEPARTMENT OF FAMILY AND

COMMUNITY SERVICES

Applicant

And:       DONNA MARIA GRINDLAY

Respondent

DECISION

Tribunal:       G.D. Friedman, Member

Date:             31 January 2005

Place:            Melbourne

Decision:The Tribunal sets aside the decision under review and substitutes a decision that the respondent owes a debt to the Commonwealth in the amount of $12,297.67 for the period 26 March 2002 to 12 February 2004 and that the debt be recovered.

(sgd) G.D. Friedman

Member

SOCIAL SECURITY ‑ recovery of debt ‑ overpayment ‑ parenting payment partnered ‑ failure to notify changes in income ‑ bankruptcy ‑ whether debt incurred after bankruptcy recoverable ‑ waiver of debt ‑ whether special circumstances exist

Bankruptcy Act 1966 ss 5, 59, 82, 115

Social Security Act 1991 ss 1068B, 1072, 1223(1), 1223(5), 1224(1), 1236, 1237A, 1237AAD

Social Security (Administration) Act 1999 s 68

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

REASONS FOR DECISION

31 January 2005  G.D. Friedman, Member

1.      This is an application by the Secretary to the Department of Family and Community Services (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 19 August 2004 in which the SSAT set aside the decision of an authorised review officer of Centrelink dated 14 July 2004 and substituted a new decision that Donna Maria Grindlay (the respondent) had been overpaid $12,895.21 in parenting payment partnered (parenting payment) for the period 29 June 2001 to 19 March 2004, but the amount could not be recovered because the respondent was bankrupt at the time the debt was raised.

2.      At the hearing of this matter on 12 January 2005 Ms K. Navarro, a Centrelink advocate, represented the applicant and the respondent represented herself.

3. The Tribunal received into evidence the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T1‑T76).

BACKGROUND

4.      The respondent was born on 18 October 1959 and received parenting payment.  On 19 June 2001 she advised Centrelink that her husband’s income was $793.96 per fortnight, based on his casual employment. The respondent’s rate of payment was calculated using this figure.  On 3 July 2000 Centrelink sent the respondent a letter advising her that her rate of pension was calculated on the basis of her partner’s annual income of $23,899.20, and that she was required to inform Centrelink of any changes in circumstances.  Similar letters were sent to the respondent from July 2000 to September 2003. 

5.      Following a data matching exercise with the Australian Taxation Office (ATO), Centrelink concluded that the respondent’s husband’s earnings had exceeded the amounts advised by the respondent.  On the basis of the income recorded by the ATO, on 16 June 2004 Centrelink calculated that the respondent had been overpaid $12,895.21 between 29 June 2001 and 12 February 2004.  Centrelink decided to raise a debt in that amount and recover the debt.  On 14 July 2004 a Centrelink authorised review officer affirmed the decision.  

6.      On 16 July 2004 the respondent sought review by the SSAT.  In August 2004 the respondent advised that she had been declared bankrupt on 25 March 2002.  The applicant re‑calculated the respondent’s liabilities as being $597.53 from 29 June 2001 (breach of notification provision) to 25 March 2002 (date of bankruptcy), and $12,297.67 from 26 March 2002 (day after bankruptcy) to 12 February 2004 (correct adjustment of respondent’s parenting payment rate).

7.      On 19 August 2004 the SSAT set aside the decision.  On 20 September 2004 the applicant lodged an application with the Tribunal for review of the SSAT decision.

8.      The issue before the Tribunal is whether a debt to the Commonwealth exists, and, if so, whether the debt should be recovered. 

EVIDENCE

9.      In oral evidence by telephone the respondent stated that she was married, with one dependant child.  She told the Tribunal that during the period she was receiving parenting payment (the relevant period) her husband had been employed as a storeman on a casual basis and received work from a number of employment agencies.  She said that she sent her husband’s payslips to Centrelink regularly and had complied with all requirements by informing Centrelink by telephone of his weekly earnings.  She said that at the time she had a young child and did not read the letters from Centrelink, so she was unaware of the figures used by Centrelink in calculating her parenting payment, or that the payments were means‑tested.

10.     The respondent explained that, to the best of her knowledge and recollection, she had provided complete information regarding her husband’s earnings to Centrelink and had acted in good faith at all times. However, she acknowledged that the information provided to Centrelink was not necessarily accurate.  She did not contest the amount of overpayment.

11.     The respondent stated that she was bankrupted in March 2002 and her husband was bankrupted in February 2004 because of mounting debts.  She said that under the terms of the bankruptcy her husband was permitted to keep a motor vehicle to enable him to travel to and from work, and that they took out a loan of $15,000 to purchase the vehicle.  She said that her husband earns about $540 per week after tax and she receives family tax benefit of about $250 per fortnight.  She stated that they are suffering financial hardship because of rental arrears, car repayments, the cost of her medication and normal household expenses.  The respondent told the Tribunal that she suffers from anxiety/panic attacks and obsessive compulsive disorder and takes prescribed medication.

12.     Under cross‑examination the respondent disagreed with the accuracy of a number of Centrelink file notes which record that the respondent informed Centrelink that her husband’s earnings were fortnightly amounts rather than weekly amounts, although she acknowledged the difficulty of remembering telephone conversations that occurred nearly three years ago. 

CONSIDERATION OF THE ISSUES

13. Parenting payment is subject to an income test and is affected when a partner’s income exceeds a threshold (s 1068B and s 1072 of the Social Security Act 1991 (the Act)). Section 68 of the Social Security (Administration) Act 1999 Act provides that a person must notify Centrelink of the correct level of gross earnings.  

14.     Ms Navarro submitted that the respondent was overpaid parenting payment for the relevant period because the information provided by the respondent regarding her husband’s actual income was incomplete and inaccurate.  Therefore, the debt to the Commonwealth could not be attributable solely to administrative error by Centrelink.  Ms Navarro also submitted that the respondent did not receive the payments in good faith because Centrelink had sent the respondent notices during the relevant period advising her that changes in circumstances must be notified to Centrelink.  She stated that there was no basis upon which the debt should be waived.

15.     In relation to bankruptcy, Ms Navarro submitted that the social security debt is divisible and that a bankrupt is liable for overpayment debts that accrue after the date of the bankruptcy. 

16.     In reaching its decision the Tribunal takes into account the oral and written evidence and the submissions made at the hearing.

17.     The Tribunal finds that the respondent received notices from Centrelink informing her of the amounts of her husband’s earnings upon which her payments were being calculated.  The Tribunal also finds that the notices stated that she was required to inform Centrelink of any changes in her circumstances.  On the respondent’s own evidence, she did not read the notices carefully.  The Tribunal accepts that notification of earnings received from casual employment may be difficult because of the irregular nature of the employment and because of differing practices among employers.  However, the Tribunal is satisfied that the information provided to Centrelink by the respondent about her husband’s earnings in the relevant period was incomplete and inaccurate.

18. The Tribunal accepts the re‑calculations made by Centrelink and finds that, under s 1223(1)(b), s 1223(5) and s 1224(1) of the Act before 1 July 2002, and s 1223(1) of the Act after 1 July 2001, the parenting payment made to the respondent during the relevant period constitutes an overpayment, of $597.53 from 29 June 2001 to 25 March 2002, and $12,297.67 from 26 March 2002 to 12 February 2004; resulting in a debt to the Commonwealth. .

19.     In respect of the impact of the respondent’s bankruptcy, the Bankruptcy Act 1966 (the Bankruptcy Act) binds the Crown in the right of the Commonwealth so as to place the Commonwealth in the same position as other creditors regarding obligations incurred before the date of bankruptcy. Under s 1223(1) of the Act an overpayment is a debt to the Commonwealth that arises when the person obtains a benefit of the payment received, so that debts accrue when payments are made as discrete debts which may be added and raised as a single debt in the absence of bankruptcy.

20. Section 5 of the Bankruptcy Act provides:

5.(1)  In this Act, unless the contrary intention appears:

…

the date of the bankruptcy, in relation to a bankrupt, means the date on which a sequestration order was made against his or her estate or, if he or she became a bankrupt by virtue of the presentation of a debtor’s petition, the date on which he or she became a bankrupt by force of section 55, 56E or 57, as the case requires.

Under this provision the date of the bankruptcy is distinct from the commencement of the bankruptcy, which is defined in s 115 of the Bankruptcy Act as:

115.(1)  If a person becomes a bankrupt on a creditor’s petition and subsection (1A) does not apply, then the bankruptcy is taken to have relation back to, and to have commenced at, the time of the commission of the earliest act of bankruptcy committed by the person within the period of 6 months immediately before the date on which the creditor’s petition was presented.

…

21. Section 82 of the Bankruptcy Act provides:

82.(1)..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. 

…

The Tribunal finds that the debts incurred after the date of the respondent’s bankruptcy (25 March 2002) are debts due to the Commonwealth under s 1223 of the Act, and are not provable under s 82 of the Bankruptcy Act. The Tribunal notes that s 59 of the Bankruptcy Act provides that an undischarged bankrupt may be bankrupted a second or subsequent time during the bankruptcy. The debt that accrued before the bankruptcy was a debt to the Commonwealth, but upon the date of the bankruptcy that debt is provable under s 82 of the Bankruptcy Act.

22.     For these reasons the Tribunal finds that the debt to the Commonwealth arising from overpayment of $597.53 from 29 June 2001 to 25 March 2002 is not recoverable, while the debt to the Commonwealth arising from overpayment of $12,297.67 from 26 March 2002 to 12 February 2004 is recoverable.

23. Section 1236 of the Act provides for a write‑off of the debt under certain circumstances. However, the Tribunal finds that the respondent has the capacity to repay the debt by deduction from ongoing social security payments, and the debt is not irrecoverable at law. Therefore, there are no grounds to write‑off the debt.

24. Section 1237A of the Act provides for waiver of a debt arising from administrative error:

1237A.(1)Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

1237A.(1A)..Subsection (1) only applies if:

(a)the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

(b)if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

whichever is the later.

In view of its findings that the debt arose because of incomplete and inaccurate information provided to Centrelink by the respondent, the Tribunal finds that the respondent’s debt to the Commonwealth was not attributable solely to administrative error by Centrelink. Therefore, the debt cannot be waived under s 1237A of the Act.

25. Section 1237AAD of the Act provides for waiver of the debt in certain other circumstances:

1237AAD  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 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.

26.     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.   

27.     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.

28.     Therefore the respondent owes a debt to the Commonwealth in the amount of $12,297.67, which cannot be written off or waived.

DECISION

29.      The Tribunal sets aside the decision under review and substitutes a decision that the respondent owes a debt to the Commonwealth in the amount of $12,297.67 for the period 26 March 2002 to 12 February 2004 and that the debt be recovered.

I certify that the twenty‑nine [29] preceding paragraphs are a true copy of the reasons for the decision of:

G.D. Friedman, Member

(sgd)       Olympia Sarrinikolaou

Clerk

Date of hearing:  12 January 2005

Date of decision:  31 January 2005
Advocate for applicant:               Ms K. Navarro, Centrelink
Advocate for respondent:            Self‑represented