GUISEPPE AND CARMELA MONGELLI and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 366

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 366

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/1537

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		GUISEPPE AND CARMELA MONGELLI

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Dr Gordon Hughes, Member

Date20 May 2009

PlaceMelbourne

Decision The decision under review is affirmed.

[sgd] Gordon Hughes

Member

SOCIAL SECURITY - overpayment of mature age allowance and age pension – failure to disclose property – failure to disclose gifting – ability to waive debt – ability to write off debt

Social Security Act 1991 s55, s660XFA, s1123, s1124, s1125A, s1223, s1224 (repealed), s1236, s1237A, s1237AAD

Social Security (Administration) Act 1999

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

Beadle v Director-General of Social Security (1985) 60 ALR 225

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Secretary, Department of Social Security v Hales (1998) 82 FCR 154

Ryde v Secretary, Department of Family and Community Services [2005] FCA 866

REASONS FOR DECISION

20 May 2009   Dr Gordon Hughes, Member

1.      The principal issue before the Tribunal was whether a debt due to the Commonwealth should be waived or written off in whole or in part. 

2.      The debt arose out of overpayment of the mature age allowance and aged pension to the applicants between 24 February 1994 and 24 July 2007.  The overpayment was largely a consequence of the fact that a holiday home jointly owned by the applicants had not been taken into account when determining the value of the applicants' assets.  The respondent asserted that the applicants had failed to disclose the existence of the property, whereas the applicants claimed that the existence of the property had been known or should have been known to the respondent throughout the period under review. 

3.      The fact that the applicants owned the property in question, and that it had not been taken into account when determining the value of the applicants' assets, was not in contention. 

4.      The debt was also attributable, but to a substantially lesser extent, to the non‑disclosure of the gifting, within five years of the commencement of pension payments, of another property owned by the applicants.  The fact that the gifting occurred was also not in contention.

5.      On 19 February 2008, the Social Security Appeals Tribunal (the SSAT) determined that the applicants had recoverable debts in respect of the period under review.  For the reasons set out below, the decision under appeal is affirmed by the Tribunal. 

BACKGROUND

6.      The applicant Guiseppe Mongelli claimed the mature age pension on 24 February 1994 and the applicant Carmela Mongelli claimed the age pension on the same day. 

7.      Handwritten notes made by a Centrelink delegate to assess the claim, dated 24 February 1994, make reference to the existence of an investment property at 80 Illawarra Crescent, Dandenong but to no other real estate.

8.      A Real Estate Details form signed by the applicants on 1 March 1994 declares the existence of Rented House & Holiday House but the details make reference only to the Illawarra Crescent property.

9.      It was not disputed by the applicants that they jointly owned at this time, in addition to the Illawarra Crescent property, a holiday home in Government Road, Rye, and that they continued to do so throughout the period under review.

10.     The applicants asserted that they had previously provided details of the Rye property to the respondent when completing an earlier pension application.  The earlier application had been incorrectly filled out and hence the application on 24 February 1994 was a resubmission.

11.     The respondent asserted that there was no record on the Centrelink file of documents relating to the Rye property.

12.     On 17 March 1994 the respondent wrote to Mr Mongelli, confirming the commencement of his mature age allowance and advising him that he must notify Centrelink within 14 days if, inter alia, his combined assets exceeded $161,000.  A similar letter was sent to Mrs Mongelli on the same day, confirming the commencement of her age pension and requiring her to advise Centrelink within 14 days if their combined assets exceeded $161,000. 

13.     Both letters were posted to the residential address provided by the applicants, 7 Topaz Court, Mulgrave.  It was not disputed that the applicants resided at that address throughout the period under review. 

14.     The respondent provided examples of similar letters being sent on 2 August 1996 (referring to combined assets in excess of $172,040), 11 December 1998 (referring to combined assets in excess of $128,414) and 15 April 1999 (referring to combined assets in excess of $127,914).  There may have been other such letters but no evidence was provided to this effect.

15.     The applicants claimed not to have received these letters.

16.     On 7 April 2003 the respondent, according to its records, wrote to Mr Mongelli at his residential address and requested him to complete an enclosed Real Estate Update form on behalf of himself and Mrs Mongelli.  The respondent's records indicate that the form was returned on 23 April 2003 and that no mention was made of the Rye property.  The applicants have no recollection of completing a form at that time.  The respondent was unable to produce a copy of the form, surmising that it would have been culled in accordance with the Destruction Schedule of the Archive Act 1983, and its record of lodgement appears on a page headed This is a duplicate DOC – Please treat the information in this DOC with care. 

17.     On 20 June 2007 the respondent wrote to Mrs Mongelli advising that it was conducting an income and assets review and that updated information was required from her and Mr Mongelli.  The completed form, signed by the applicants and dated 29 June 2007, declared the existence of her Rye property and placed a value on it of $200,000.  The Illawarra Crescent property had been sold on 24 January 2001. 

18.     The applicants were subsequently advised that as a consequence of the updated information, which now included reference to the Rye property, it was apparent that an overpayment had occurred in respect of their age pension entitlements. 

19.     On 7 November 2007, each of the applicants was informed of a decision by an Authorised Review Officer of Centrelink that their respective debts for the period initially reviewed, 1 July 2000 to 24 July 2007, was $44,837.42.  This was calculated on the basis that each had received the age pension totalling $69,958.42 during that period when, due to the level of their assets, only $25,121 should have been payable in each case. 

20.     A Pension Claim form signed by the applicants and dated 24 February 1994 contains the answer no in response to the question, Have you given away, or sold for less than their value, any assets or property in the last five years?  This response ignored or overlooked the fact that the applicants had gifted a 50 per cent interest in their property at Illawarra Crescent to their two children, the Transfer of Land being dated 6 December 1993 and subsequently registered on 3 June 1994. 

21.     On 10 January 2008, Centrelink advised the applicants that the review of their overpayments had been extended so as to embrace the period from 24 March 1994.  The review included an application of gifting rules to the applicants' residence at Topaz Court in the mistaken belief that, within 5 years prior to being granted their respective benefits, the applicants had gifted a 50 per cent interest in their residence to their children.  As a consequence, the debt payable by Mr Mongelli was increased by $11,876.82 to $56,714.24, and the debt payable by Mrs Mongelli was increased by $12,022.22 to $56,859.64. 

22.     The application of the gifting rules to the residence at Topaz Court was clearly an error.  In fact, the applicants had gifted a 50 per cent interest in their investment property at Illawarra Crescent to their two children, not a 50 per cent interest in their residence at Topaz Court. 

23.     On 19 February 2008, the SSAT determined that the quantum of the debts should be recalculated so as to take into account, inter alia, the fact that there had been no transfer of any interest in 7 Topaz Court but that there had been a transfer of a 50 per cent interest in Illawarra Crescent. 

24.     The respondent informed the Tribunal that, taking the determination of the SSAT into account, Mr Mongelli's debt had been recalculated at $50,752.14 and Mrs Mongelli's debt had been recalculated at $50,777.54.  

DISCUSSION

Gifting of Illawarra Road property

25.     In relation to the issue regarding the undisclosed disposal of a 50 per cent interest in the Illawarra Road property, the relevant provisions of the Social Security Act 1991 (the Act) as at February 1994 are as follows: 

1123  Disposal of assets

(1)For the purposes of this Act, a person disposes of assets of the person if:

(a)the person engages in a course of conduct that directly or indirectly:

…

(ii)     disposes of all or some of the person’s assets; …

and

(b)one of the following subparagraphs is satisfied:

(i)the person receives no consideration in money or money’s worth for the destruction, disposal or diminution; …

1124    Amount of disposition

If a person disposes of assets, the amount of the disposition is:

(a)if the person receives no consideration for the destruction, disposal or diminution—an amount equal to:

…

(ii)     the value of the assets that are disposed of; …

1125A  Disposal of assets in pre‑pension years—members of couples

(1)Subject to subsections (2), (3), (4) and (5), if:

(a)a person has disposed of an asset; and

(b)the person is a member of a couple when the person or the person’s partner claims a pension, benefit or payment of a kind referred to in subsection 11(10A); and

(c)the person disposed of the asset:

(i)     during a pre‑pension year of the person; or

(ii)     if the person has not claimed a pension, benefit or payment of a kind referred to in subsection 11(10A) but the person’s partner has claimed such a pension, benefit or payment—during a pre‑pension year of the person’s partner; and

(d)the amount of that disposition, or the sum of that amount and the amounts (if any) of other dispositions of assets previously made by the person or the person’s partner during that pre‑pension year, exceeds the disposal limit;

then, for the purposes of determining whether a pension, benefit or  payment is payable to the person:

(e)there is to be included in the value of the person’s assets for the period of 5 years that starts on the day on which the disposition took place:

(i)     50% of the amount by which the sum of the amount of the first‑mentioned disposition and of the amounts (if any) of other dispositions of assets previously made by the person or the person’s partner during that pre‑pension year exceeds the disposal limit; or

(ii)     50% of the amount of the first‑mentioned disposition;

whichever is the lesser amount; and

(f)there is to be included in the value of the assets of the person’s partner for the period of 5 years that starts on the day on which the disposition took place:

(i)     50% of the amount by which the sum of the amount of the first‑mentioned disposition and of the amounts (if any) of other dispositions of assets previously made by the person or the person’s partner during that pre‑pension year exceeds the disposal limit; or

(ii)     50% of the amount of the first‑mentioned disposition;

whichever is the lesser amount.

26. It was not disputed that the applicants had agreed to dispose of a 50 per cent interest in the Illawarra Road property on 6 December 1993. No monetary consideration was provided in respect of the disposal. Accordingly, the transaction amounted to a disposal of assets for the purposes of section 1123 of the Act. There can be no doubt that the applicants incorrectly denied the gifting of the 50 per cent interest in the Illawarra Road property when completing the Pension Claim form on 24 February 1994. The Tribunal does not find it necessary to speculate as to whether this inaccuracy was intentional or otherwise because, either way, the ultimate effect was to contribute further to the over calculation of the applicants' respective entitlements. For the purposes of section 1124 of the Act, the amount of disposition is deemed to be the value of the assets disposed and, pursuant to section 1125A(1)(e), that amount must be included in the value of the applicants' assets for a period of 5 years following the date of disposition.

NON-DISCLOSURE OF RYE PROPERTY

27.     In relation to the alleged non-disclosure of the existence of the Rye property, the relevant legislation is contained in the Act and the Social Security (Administration) Act1999.

28. Sections 660XFA and 55 of the Act provide that the rate of mature age allowance and age pension is determined in accordance with the rate calculator contained in section 1064 of that Act. The Rye property is clearly an asset to be taken into account for the purposes of the rate calculator, as was the Illawarra Crescent property for the reasons stated above. It is therefore uncontentious that the applicants received an overpayment of their pensions between 1994 and 2007. This overpayment is liable to be classifiable as a debt if section 1224 of the Act (as it was prior to 1 July 2001) applies:

1224(1)If:

(a)an amount has been paid to a recipient by way of social security payments …; and

(b)the amount was paid because the recipient or another person:

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

(ii)failed or omitted to comply with a provision of this Act …;

the amount so paid as a debt due by the recipient to the Commonwealth.

In respect of the period subsequent to 1 July 2001, section 1223 of the Social Security Act is applicable:

1223(1)Subject to this section, if:

(a)a Social Security payment is made; and

(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;

the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.

29. In determining whether there is a recoverable debt, therefore, it is necessary to consider (in respect of the period prior to 1 July 2001) whether the overpayment was attributable to a false statement or false representation by the applicants; and (in respect of the period from 1 July 2001) whether the overpayment was one in which the applicant was not entitled for any reason. The Tribunal regards as inescapable the conclusion that the overpayment was attributable to the incorrect completion of documentation by or on behalf of the applicants and hence the requirements of section 1224 (in respect of the period prior to 1 July 2001) and section 1223 (in respect of the period from 1 July 2001) are satisfied.

30.     Martin Mongelli, the applicants' son, told the Tribunal he was convinced that in or about 1994 his father had provided Centrelink with a copy of the title to the Rye property.  He was not personally involved but he was aware that his sister, Maria, had accompanied his father to the bank in order to retrieve the title and he understood his father had proceeded on his own to Centrelink in order to hand the title over.  This was prior to the pension application in February 1994.  In relation to the correspondence regularly sent by Centrelink to the applicants, and specifically the letters dated 17 March 1994, 2 August 1996, 11 December 1998 and 15 April 1999, Martin Mongelli said he was convinced it had not been received because his parents would show him or his sister all formal correspondence received.  He could not recall seeing any such correspondence from Centrelink between 1994 and 2007.  Martin Mongelli was unaware of a letter having been received from Centrelink dated 7 April 2003 enclosing a Real Estate Update form and questioned the accuracy of a Centrelink record which indicated that the form had been lodged on 23 April 2003.  To the best of Martin Mongelli's recollection, Centrelink had not enquired about the Rye property between 1994 and 2007 and, following receipt of the correspondence from Centrelink enclosing the Income and Assets Update form on 3 July 2007, the family had had no hesitation in disclosing the existence of the Rye property. 

31.     Maria Mongelli told the Tribunal that, according to her recollection, she assisted her father in completing the initial pension application in 1994, in the course of which the Rye property had been disclosed.  Two weeks later, the family accountant informed them that the form had been filled out incorrectly because they had included the family home in their list of assets.  She assisted her father in completing a fresh application in February 2004 and could not explain why the Rye property was not mentioned on that document.  She said she assumed Centrelink was aware of the property because of the previous disclosure and she assumed Centrelink had retained a copy of the title.  She speculated that she may only have made reference to the Illawarra Crescent property because it was the only asset producing an income.  Like her brother, Maria Mongelli was not able to state with any certainty that the correspondence from Centrelink dated 17 March 1994, 2 August 1996, 11 December 1998 and 15 April 1999 had not been received, but she thought it likely that her parents would have shown any such correspondence to her.  Again like her brother, Maria Mongelli could not recall completing a Real Estate Update form in April 2003. 

32.     The applicant Guiseppe Mongelli told the Tribunal that he recalled providing a copy of the mortgage documentation for the Rye property to Centrelink in 1994.  He did not recall receiving the correspondence from Centrelink dated 17 March 1994, 2 August 1996, 11 December 1998 or 15 April 1999.  Whilst it was his practice to throw out correspondence which he regarded as unimportant, and whilst he did not keep a specific file of Centrelink correspondence, he was confident he had not received these specific letters.  He was confident that his wife had also not received any such letters.  If he received letters which he did not understand, he would generally pass them onto his children for interpretation, but he admitted there was some correspondence he would just throw away.  He was certain he had not received the Real Estate Update form in April 2003 and was not aware of any other difficulties with postal deliveries at his residence.

33.     Based on the above evidence, the Tribunal is satisfied that the Real Estate Details form signed by the applicants on 1 March 1994 failed to disclose the existence of the Rye property and that this omission, whether intentional or not, had the effect of misleading the respondent and causing the applicants' pension entitlements to be over calculated. 

34.     The Tribunal cannot be satisfied that prior notification had been given by the applicants of the existence of the Rye property when an earlier, incorrect application had been completed.  Even though it accepts that the applicants genuinely hold this belief, ultimately, in the Tribunal's opinion, nothing turns on the point because Centrelink was entitled to rely upon the claim form as submitted rather than being expected to draw speculative conclusions from documentation previously submitted and superseded. 

35.     The Tribunal is further of the view that, in all probability, the applicants received the correspondence which the respondent claims was sent on 2 August 1996, 11 December 1994 and 15 April 1999; even though, again, the applicants may genuinely believe that this was not the case – the most likely scenario is that the applicants failed to appreciate the significance of the correspondence and discarded it. 

36. For the above reasons, the Tribunal concludes that the requirements of section 1224(1) of the Act have been made out in respect of the period prior to 1 July 2001, and the requirements of section 1223(1) have been made out in respect of the subsequent period.

ABILITY TO WAIVE DEBT

37.     Given the Tribunal's findings on the facts, the question then arises as to whether there are grounds upon which the debt can or should be waived or written off.  In this regard, the relevant provisions of the Act are as follows:

1237AWaiver of debt arising from error

Administrative error

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

Note:Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).

(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.

1237AADWaiver 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.

38.     The Tribunal does not consider there are grounds for invoking section 1237A of the Act.  Under no interpretation of the facts could the debt be said to be attributable solely to an administrative error made by the Commonwealth.  Given the Tribunal's conclusion that the respondent was inevitably misled by the incorrect completion of the Real Estate Details form and the Pension Claim form completed by or on behalf of the applicants in 1994, and given the applicants' failure to respond to the queries raised by the respondent in correspondence dated 2 August 1996, 11 December 1998 and 15 April 1999, the applicants must, on any analysis, accept a majority of, if not total, responsibility for the error.  In view of this finding, it is not necessary for the Tribunal to decide whether the payments were received by the applicants in good faith. 

39.     The Tribunal also considers that no grounds exist for the exercise by the Secretary of the right of wavier under section 1237AAD.  In order to avail itself of this remedy, the applicants would need to demonstrate that their circumstances were unusual, uncommon or exceptional, in a way which is different from the usual run of cases: Re Beadle and Director-General of Social Security (1984) 6 ALD 1. Financial hardship alone does not constitute special circumstances. 

40.     The Tribunal is mindful of the decision by Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 in which the Federal Court of Australia considered section 1237AAD of the Act and reviewed the relevant authorities, particularly the analyses of the expression unusual, uncommon or exceptional in Re Beadle.  His Honour observed:

… the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. 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. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.

41.     It is also pertinent to observe that the Full Court of the Federal Court in Beadle v Director-General of Social Security (1985) 60 ALR 225 did not endorse the view expressed by the Tribunal in Re Beadle that circumstances are special only if they are unusual, uncommon or exceptional.  In Secretary, Department of Social Security v Hales (1998) 82 FCR 154, French J preferred the view (at 162) that:

… 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.

In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866, Branson J emphasised that the requirement for special circumstances disclosed an intention to proscribe waiver in ordinary cases, being hardship or unfairness sufficient to justify departure from the general rule in the particular case.

42.     Unquestionably, an adverse finding by this Tribunal will cause immense disappointment and a not insignificant degree of financial detriment to the applicants.  They will no doubt consider it grossly unfair that they are required to repay a substantial sum at an elderly age in circumstances where they have not appreciated, or not fully appreciated, the extent of their potential liability to do so.  This, however, is to be expected in the case of any individuals who have been overpaid for a protracted period.  These do not constitute the special circumstances to which section 1237AAD applies.  In any event, the point is moot because, as concluded above, the Tribunal does not accept that the applicants are blameless in relation to the creation of the debt and hence the circumstances fail to satisfy the requirements of section 1237AAD (a) and (b). 

ABILITY TO WRITE OFF DEBT

43.     Specifically on the question of whether the debt can or should be written off, relevant provisions of the Act are as follows:

1236Secretary may write off debt

(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

(1A)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.

(1B)For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:

(a)the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or

(aa) the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or

(b)there is no proof of the debt capable of sustaining legal proceedings for its recovery; or

(c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or

(d)the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.

(1C)For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:

(a)deductions from the debtor’s social security payment; or

(b)deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or

(c)setting off under section 84A of that Act;

the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.

(2)      A decision made under subsection (1) takes effect:

(a)if no day is specified in the decision—on the day on which the decision is made; or

(b)if a day is specified in the decision—on the day so specified (whether that day is before, after or on the day on which the decision is made).

(3)Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.

44.     The Tribunal does not consider the applicants are entitled to the benefit of section 1236.  There is no evidence that the debt would be irrecoverable at law.  The applicants clearly have assets in the form of real estate and, whilst not necessarily financially well off, could not be said to be confronting severe financial hardship in the terms of section 1236(1C) of the Act. 

45.     For the above reasons, the Tribunal affirms the decision under review. 

I certify that the forty-five (45) preceding paragraphs are
a true copy of the reasons for the decision herein of
Dr Gordon Hughes, Member

[sgd]: Leah Berardi
  Clerk

Dates of Hearing  27 February 2009 
Date of Decision  20 May 2009
Representatives for the Applicant       Mr Martin Mongelli and Ms Maria Mongelli 
Representative for the Respondent     Mr T De Uray, Centrelink Legal Services