Hales and Department of Social Services (Social services second review)

Hales and Secretary, Department of Social Services (Social services second review) [2017] AATA 1101 (18 July 2017)
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL               )
  )     No: 2015/6009 & 2015/6010
GENERAL DIVISION  )
Re: Lizbeth Hales
Applicant

&
Kerry Hales
Applicant
Respondent
CORRIGENDUM
TRIBUNAL:               Ms Anna Burke, Member
DATE:   14 August 2017
PLACE:                     Melbourne

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:

Paragraph [37] of the decision is to be altered to read; For the reasons given above, the Tribunal varies the decision to the effect that Mrs Hales owes a debt to the Commonwealth in the amount of $86,141.45 and Mr Hales owes a debt to the Commonwealth in the amount of $82,620.19. The reviewable decision is otherwise affirmed in that Mrs Hales was overpaid carer payment for the period 8 March 2000 to 10 February 2015 and Mr Hales was overpaid age pension for the period 8 March 2000 to 24 February 2015, which are legally recoverable debts that cannot be written off or waived.

...................................................................
Member
Administrative Appeals Tribunal
ADMINISTRATIVE APPEALS TRIBUNAL               )
  )     No: 2015/6009 & 2015/6010
GENERAL DIVISION  )
Re: Lizbeth Hales
Applicant

&
Kerry Hales
Applicant
CORRIGENDUM
TRIBUNAL:               Ms Anna Burke, Member
DATE:   24 July 2017
PLACE:                     Melbourne

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:

The figure listed on the cover page and final paragraph (37) of $86,620.19 is to be amended to $82,620.19.

...................................................................
Member
Administrative Appeals Tribunal
18 July 2017
ADMINISTRATIVE APPEALS TRIBUNAL               )
  )     No: 2015/6009 & 2015/6010
GENERAL DIVISION  )
Re: Lizbeth Hales
Applicant

&
Kerry Hales
Applicant
And: Secretary, Department of Social Services
Respondent
CORRIGENDUM
TRIBUNAL:               Ms Anna Burke, Member
DATE:   19 July 2017
PLACE:                     Melbourne

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975, to alter the text of the decision in this application as follows:

Paragraph 8 is to be altered to read “At the hearing the applicants accepted the respondent’s most recent valuation which was completed by MVS National, a qualified valuer, on 10 June 2016”.

..................................................................
Member
Hales and Secretary, Department of Social Services (Social services second review) [2017] AATA 1101 (18 July 2017)
Division:GENERAL DIVISION
File Number(s): 2015/6009
Re:Lizbeth Hales
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

File Number(s): 2015/6010
Re:Kerry Hales
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION

Tribunal:Ms Anna Burke, Member
Date:18 July 2017
Place:Melbourne

The Tribunal varies the decision to the effect that Mrs Hales owes a debt to the Commonwealth in the amount of $86,141.45 and Mr Hales owes a debt to the Commonwealth in the amount of $86,620.19.
.......................................................................
Ms Anna Burke, Member
SOCIAL SECURITY – debt repayment – partner allowance debt – age pension debt – carer payment debt – newstart allowance debt - partner’s assets - whether the applicants received social security payments in excess of their entitlements - whether all or some of the debts raised should be waived - whether special circumstances justify waiving debt – no special circumstances found – debt varied based on recalculation of asset value
LEGISLATION
Social Security Act 1991; ss 1236, 1237A, 1237AAD,
CASES
Re Callaghan and Secretary Department of Social Security [1996] 45 ALD 435
Re Anderson and Secretary, Department of Families and Community Services [2002] 69 ALD 494
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Groth and Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541

REASONS FOR DECISION
Ms Anna Burke, Member
18 July 2017
Introduction

Mrs Lizbeth Hales and Mr Kerry Hales are seeking a second tier review of a determination of Centrelink to raise and recover a debt of partner allowance and carer’s payment in the amount of $101,477.27 in respect of Mrs Hales and to raise and recover a debt of newstart allowance and age pension in the amount of $99,129.10 in respect of Mr Hales. The debts accrued as a result of overpayment during the period 28 July 1999 to 24 March 2015 (the relevant period). Centrelink is the service provider for the Department of Social Services.
Mr and Mrs Hales own their own home in Avondale Heights. In 1995 Mr Hales and his business partner sold their real estate business and the Hales lived off the proceeds of the sale until applying for Centrelink benefits in 1999. Mr Hales commenced receiving newstart allowance on 28 July 1999 and was transferred to the age pension on 8 March 2000. Mrs Hales commenced receiving partner allowance on 28 July 1999 and was transferred to carer payments on 6 December 2000.
In 1993 Mrs Hales and her sister inherited their family home in Sunshine. In 1994 Mrs Hales purchased her sister’s share of the property as it holds immense sentimental value. She had no intention of selling the property or deriving a return on the investment.
Mrs Hales failed to declare ownership of the property when she applied for partner allowance in 1999 with the then Department of Human Services, now the Department of Social Services. Centrelink became aware of Mrs Hales’ ownership when a data match occurred between Centrelink and the titles office in 2015.
A Centrelink Customer Response form completed by Bendigo Bank on 20 May 2015 indicated that Mr and Mrs Hales had numerous bank accounts with Bendigo Bank. They had also purchased a Bendigo Financial Solutions Allocated Pension product from IOOF Investment Management Limited (IOOF). Mr and Mrs Hales had purchased the IOOF product on advice from Bendigo Bank on the basis that it would allow them to claim a full age pension from the Commonwealth.
On 31 March 2015 Centrelink made a decision to raise and recover a debt against Mrs Hales in the amount of $101,788.31 for overpayments in carer payment during the relevant period due to the value of the asset. On 31 March 2015 Centrelink made a decision to raise and recover a debt against Mr Hales in the amount of $99,851.23 for overpayments in age pension during the relevant period due to the value of Mrs Hales’ assets.
Mr and Mrs Hales do not dispute that they have a debt to Centrelink. The issue in contention is the quantum of that debt and the ability of the respondent to waive part of the amount owed in accordance with section 1237AAD of the Social Security Act 1991 (the Act).
Background
Prior to the hearing on 18 April 2017 before the Administrative Appeals Tribunal the major contention between the parties had been the valuation of Mrs Hales’ property in Sunshine. At the hearing the respondent accepted the applicant’s most recent valuation which was completed by MVS National, a qualified valuer, on 10 June 2016. This valuation resulted in a recalculation which significantly reduced the amount of the outstanding debt owed by Mr and Mrs Hales.
At the hearing the primary issue in dispute was whether the IOOF product was an exempt financial instrument for the purposes of the assets test in accordance with section 9B of the Act.
Subsequent to the hearing Mr and Mrs Hales advised via their representative they no longer press the submission that these assets are exempt from the assets test. The Tribunal is therefore not required to consider this issue.
Issues
The Tribunal needs to consider the following relevant issues:
·whether the debt incurred by Mr and Mrs Hales can be written off in accordance with section 1236 of the Act.
·whether the debt incurred by Mr and Mrs Hales can be waivered in part or whole in accordance with section 1237A of the Act on account of it resulting solely from an administrative error by the Commonwealth.
·whether the debt incurred by Mr and Mrs Hales can be waivered in part or whole in accordance with section 1237AAD of the Act on the basis of special circumstances, other than financial hardship alone and the debt was not incurred due to them knowingly providing false information or knowingly failing to comply with a provision of the social security law.
Legislative Framework
Section 1236 of the Act confers a discretion on the Secretary to write off a 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.
…
Section 1237A provides that the Secretary must waive the right to collect a debt if it is attributable solely to an administrative 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.
…
Section 1237AAD confers a discretion on the Secretary to waive all or part of the debt 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.
Consideration
The Tribunal standing in the shoes of the Secretary as the original decision maker has the discretion to waive all or part of Mr and Mrs Hales’ debt. For the discretion to be exercised all three conditions in paragraphs (a), (b) and (c) of section 1237AAD must be satisfied.
At the hearing counsel for Mr and Mrs Hales requested further mediation and the respondent argued the hearing should continue as all matters had been canvased over a long period of time. Both parties have subsequently provided further written submissions and the Tribunal is making a determination based on the hearing and subsequent submissions.
Mr and Mrs Hales submit that the criteria as set out in section 1237AAD of the Act are satisfied. The respondent does not concur and contends that there are no special circumstances which warrant the exercise of the waiver discretion.
Writing off of the debt - section 1236
The parties agree it is not appropriate to write off the debt in accordance with section 1236 of the Act. The Tribunal concurs with this view as Mr and Mrs Hales do not satisfy any of the criteria of this section.
Waiver of part of the debt arising from error - section 1237A
Based on the evidence, the Tribunal finds that the debt did not result solely from an administrative error by Centrelink but as a result of Mr and Mrs Hales failing to advise Centrelink of an asset in accordance with section 68(2) of the Administration Act, throughout the relevant period. In such circumstances, the debt cannot be waived under section 1237A(1) of the Act.
Waiver of part of the debt due to special circumstances - section 1237AAD
Knowingly
In order to waive part or all of the debt under this section the Tribunal must be satisfied that Mr and Mrs Hales did not knowingly make a false representation to Centrelink or fail to comply with the relevant legislative provisions. The term ‘knowingly’ has not been defined in the Act, however its meaning has been considered extensively by the Tribunal in similar circumstances.
In Callaghan and Secretary Department of Social Security [1996] 45 ALD 435 Deputy President Forgie said: “there is nothing in section 1237AAD which suggests that the word knowingly should be given any meaning other than that a person has actual knowledge rather than constructive knowledge that he or she is making a false statement or representation that he or she is failing or admitting to comply with a provision of the Act. The actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act of omission.”
The Tribunal found that Mr and Mrs Hales’ debts did not arise because they knowingly made false statements or declarations. The Tribunal found that neither applicant deliberately acted dishonestly or with any intention to mislead Centrelink.
However, the Tribunal did find that Mr and Mrs Hales had received appropriate advice from Centrelink explaining their obligation to declare all held assets. The respondent provided evidence that Centrelink had sent periodic letters to the applicants informing them of the requirement to disclose their assets and income from as early as April 2000.
In Anderson and Secretary, Department of Families and Community Services [2002] 69 ALD 494 the Tribunal stated:”... It is open to the Tribunal to infer that the applicant has actual knowledge of his obligations under the act where there are opportunities for that knowledge to be gained when there are no obstacles to him acquiring knowledge. In this case, the applicant has had the opportunity to gain an understanding of his obligations under the Act to the provision of advice letters to him from the respondent. The tribunal is not aware of any obstacles that would prevent Mr Anderson from understanding those letters and gaining that knowledge.”
Based on the reasoning in Anderson the Tribunal finds that there was sufficient opportunity for Mr and Mrs Hales to gain knowledge of their obligation to declare their assets to Centrelink and they therefore would have had some degree of actual knowledge of this obligation.
Additionally, whilst Mrs Hales contends that her parents’ home was not viewed by her as an asset, it is hard to reconcile this statement with her actions of acquiring the property from her sister, leading the Tribunal to conclude Mrs Hales understood the monetary value of the property. This coupled with Mr Hales’ background in real estate leads the Tribunal to infer that Mr and Mrs Hales understood the property in Sunshine to be an asset which they did not advise Centrelink of.
However, on overall balance, the Tribunal finds that Mr and Mrs Hales were not dishonest in their dealings with Centrelink. Although they did have opportunity to become aware of their obligations and may be said to have had some knowledge of them, this falls short of making a finding that they knowingly made a false statement or failed to comply with the relevant legislation. Paragraph (a) of s 1237AAD is therefore satisfied.
Special circumstances
The expression “special circumstances” has not been defined in the Act. However, the meaning of the term has been considered extensively by the Federal Court and the Tribunal.
In Ryde v Secretary Department of Family and Community Services [2005] FCA 886 Branson J said: ‘the evident purpose of section 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.”
The Tribunal accepts the submission of counsel that Mr and Mrs Hales are hard-working, law-abiding, taxpaying, churchgoing citizens, living by family values of honesty, integrity and respect. The Tribunal also understands the extraordinary stress and significant impact the raising of the Centrelink debt has had on their lives, leading to ill health and depression. However these factors do not give rise to hardship or unfairness sufficient to justify waiving Mr and Mrs Hales’ Centrelink debt.
In Groth v Secretary Department of Social Security [1995] FCA 1708 Kiefel J considered the meaning of the expression ‘special circumstances’. Her Honour said: “…for present purposes it is sufficient to observe that it requires something to distinguish Mr Groth’s case from others, to take it out of the usual ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow if one to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
The Tribunal accepts counsel’s contention that Mr and Mrs Hales had received poor financial advice, resulting in the purchase of a financial instrument which was not asset test exempt in accordance with section 9B of the Act. However, this situation could not be described as unusual or uncommon to the extent that it would be distinguished from the usual ordinary cases to justify waiving Mr and Mrs Hales’ Centrelink debt.
In summary, it has been held that for circumstances to constitute “special circumstances” they must be circumstances which are “unusual, uncommon or exceptional,” “markedly different from the usual run of cases”, “special” or “out of the ordinary” and they include “events which would render the strict application of the rule in question unfair or inappropriate.” The Tribunal did not find Mr and Mrs Hales’ situation constituted special circumstances as considered in numerous decisions before the Federal Court and the Tribunal.
Waiving the debt more appropriate than writing off the debt
The Tribunal concurs with the parties who agree that it is not appropriate to write off the debt and therefore paragraph (c) of section 1237AAD is satisfied.
CONCLUSION
The Tribunal finds that the debt owed by Mr and Mrs Hales should not be written off, nor should it be waived on account of it arising solely from an administrative error by Centrelink. The Tribunal is also not satisfied that Mr and Mrs Hales meet all the conditions in section 1237AAD of the Act and is therefore unable to waive all or part of the debt they owe to Centrelink on account of special circumstances.
The Tribunal has accepted the most recent valuation provided by Mr and Mrs Hales from MVS National, qualified valuer, for the property in Sunshine. The Tribunal also accepts the further submission of the respondent dated 15 May 2017 which provides revised debt figures based on this valuation, totalling $86,141.45 for Mrs Hales and $82,620,19 for Mr Hales and finds the outstanding debts to be in these amounts.
DECISION
For the reasons given above, the Tribunal varies the decision to the effect that Mrs Hales owes a debt to the Commonwealth in the amount of $86,141.45 and Mr Hales owes a debt to the Commonwealth in the amount of $86,620.19. The reviewable decision is otherwise affirmed in that Mrs Hales was overpaid carer payment and Mr Hales was overpaid age pension for the period 28 July 1999 to 24 March 2015, which is a legally recoverable debt that cannot be written off or waived.

38.

39. I certify that the preceding 37 (thirty-seven) paragraphs are a true copy of the reasons for the decision herein of Ms Anna Burke, Member

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Associate
Dated 18 July 2017

Date of hearing: 18 April 2017

Date final submissions received: 15 May 2017

Counsel for the Applicant: Mr Nicholas Wallwork

Solicitors of the Respondent: Sparke Helmore
Mr J Lessing

[2017] AATA 1101

14 August 2017

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Appeal

Judicial Review

Jurisdiction

Natural Justice

Procedural Fairness

Statutory Construction

Date of hearing:	18 April 2017
Date final submissions received:	15 May 2017
Counsel for the Applicant:	Mr Nicholas Wallwork
Solicitors of the Respondent:	Sparke Helmore Mr J Lessing