Hogan and Secretary, Department of Family and Community Services - [2002] AATA 910

DECISION AND REASONS FOR DECISION [2002] AATA 910

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2002/438

GENERAL ADMINISTRATIVE DIVISION       )
           Re      BERNARD PATRICK HOGAN
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Mr RG Kenny, Member

Date11 October 2002
PlaceBrisbane

Decision The Tribunal affirms the decision under review.

..................…(Sgd)…......................
RG Kenny
Member
CATCHWORDS
SOCIAL SECURITY -– arrears of disability pension under the Veterans' Entitlements Act 1986 – effect on Austudy - recovery of overpayments - waiver of debt – administrative error – special circumstances

Social Security Act 1991 ss 23, 1223(5), 1237A, 1237AAD
Veterans' Entitlements Act 1986 s 205AA

Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director-General of Social Security (1984) 1 AAR 362
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Hulls (1991) 13 AAR 414

REASONS FOR DECISION

11 October 2002 Mr RG Kenny, Member

Application

Bernard Hogan (the applicant) received Austudy payments from 1 July 1998 until 23 November 1999 in relation to a course in mechanical engineering that he was undertaking at the University of Southern Queensland. On 6 November 2001, a Centrelink officer, on behalf of the Secretary, Department of Family and Community Services (the respondent), determined that the applicant had incurred a debt in relation to those payments which was due to the Commonwealth in the amount of $3,491.16. That decision was affirmed by an Authorised Review Officer on 4 February 2002 and, in turn, by the Social Security Appeals Tribunal on 16 April 2002. On 12 May 2002, the applicant sought review of that decision by the Administrative Appeals Tribunal (the Tribunal).
At the hearing, the applicant was not represented. Ms H Wallis-Dunn, Advocate from the Advocacy and Administrative Law Team, appeared for the respondent.
In evidence were the T Documents (T1 – T27) (exhibit 1) as well as the following:

Exhibit R1: a Statement of Facts and Contentions, dated 10 September 2002, from the respondent;
Exhibit A1: a statement, dated 17 September 2002, from the applicant;
Exhibit A2: a letter, dated 16 September 2002, with various attachments from the applicant;
Exhibit A3: extracts (sections 6.7.3.30 and 6.7.3.40) from the Guide to the Social Security Law (the Guide); and
Exhibit A4: a statement from the Commonwealth Bank in relation to the applicant's bank account for the period from 11 June 2002 until 31 July 2002.

Issues and Legislation

It is not disputed that, whilst he was in receipt of the Austudy payments, the applicant was eligible to receive them and, similarly, it is not disputed that, throughout the payment period, he was in receipt of a disability pension at the general rate which was payable in accordance with the Veterans' Entitlements Act 1986 (the VEA). This was treated as income received by the applicant and, therefore, impacted upon the rate of his Austudy payments.
The applicant discontinued his course of study and it was for that reason that his Austudy payments ceased in November 1999. Thereafter, the applicant continued to seek an increase in the level of the general rate of pension that he was being paid under the VEA and, ultimately, he was successful in that regard, being granted pension at the special rate, referred to as a rate pertaining to total and permanent incapacity (TPI). On being granted the increased rate of pension, the applicant became entitled under the VEA to a payment of arrears from a date which preceded the date from which he began to receive the Austudy payments.
A payments officer from the Department of Veterans' Affairs advised the applicant by letter dated 26 September 2001 that the overall arrears amount that he would receive was $50,081.28 but that this was to be adjusted to take account of an overpayment to him of Austudy payments in the period from 24 September 1998 until 20 September 2001 in the amount of $6,177.37 thereby leaving the applicant with the amount of $43,903.91. Subsequently, a Centrelink officer determined that the Centrelink adjustment had been incorrectly calculated and that the arrears payment should have been reduced by an amount of $9,668.47 which was referrable to the period from 1 July 1998 until 23 November 1999. This meant that a further amount should have been deducted from the overall arrears in the amount of $3,491.16. It was that amount which was the subject of the decision under review.
The issues for the Tribunal are whether or not there is a debt owed by the applicant to the Commonwealth in relation to his Austudy payments and, if so, whether any such debt may be waived.
Applicant's Evidence
The applicant said he had received the Austudy payments and accepted that this had been in the period from 1 July 1998 until 23 November 1999 whilst he was undertaking his course at the University of Southern Queensland. He said he was not able to continue with his course because of his health problems which were responsible for his being in receipt of the disability pension under the VEA and which were also responsible for the increase in that pension to the special rate with effect from 30 January 1997. He said that he received a total of $43,903.91 in his arrears payment under the VEA. He also accepted that the overall sum he received had to be reduced because of his receipt of the Austudy payments.
The applicant referred to exhibit A1 as indicating his present financial position. This included the manner in which the arrears sum received had been dispersed and his current monthly living costs. He said that the money had been used to pay solicitors' fees, to repair his vehicle, to repay personal loans and to purchase necessary household items. He said that, after necessary expenses each month, he was left with only a small amount of about $53 for himself.
The applicant also said he understood he was eligible to receive additional payments from Centrelink in the form of disability support payments and rent assistance. However, he said that his personal pride was such that he had not been able to bring himself to lodge a claim for these benefits because he thought that there may well be other people in the community who were more deserving of them. Nevertheless, he felt that his forbearance in not seeking these amounts was relevant in deciding whether or not he had a debt in relation to his Austudy payment.
The applicant said he had been repaying the debt by instalments of $75 per fortnight which meant that the standard level of his special rate pension was reduced from $736.50 to $661.50. He said that, with that amount of income, he was "struggling to make ends meet". He referred to exhibit A4 (Commonwealth Bank statement) for confirmation of his receipt of reduced levels of pension monies.
The applicant said he was also suffering from significant health problems and, in particular, from a generalised anxiety disorder which was the main basis for his being in receipt of the special rate of pension. The applicant submitted that the respondent had fallen into error when it had incorrectly calculated the amount by which his arrears had to be reduced and that, for that reason, he should not bear the responsibility for the error made by Centrelink's officers. He also submitted that the arrears monies he had received were not compensation but rather monies to which he was entitled because of his service in the military forces. He said that it was unfair for Centrelink to approach him two years after he had received Austudy payments and for them to request that a further payment be made by him.
He also noted that other errors had occurred in the Centrelink calculations and referred to the submission of the respondent (exhibit R1) where reference is made to the amount of $6,177.37 as being the initial adjustment in paragraph 4 of that document and to the reference to the amount of $6,177.31 in paragraph 11 of that document. He submitted that Centrelink should be accountable for its errors.
The applicant also referred to the Guide (exhibit A3) and to the description of the term administrative error in paragraph 6.7.3.30 thereof which reads:
"In general, wherever a mistake has been made in administering a payment, this will be administrative error for the purposes of section 1237A, providing the customer's conduct has not contributed to the mistake in any way."

The applicant also referred to paragraph 6.7.3.40 of the Guide in relation to what constitutes special circumstances. He noted that, in exhibit R1, the respondent had referred to the decision in Re Beadle and Director-General of Social Security (1984) 1 AAR 362 but said that reference should also be made to the Federal Court authority referred to in the Guide, that is, Secretary, Department of Social Security v Hulls (1991) 13 AAR 414. He referred to the following extract in the Guide:
"The Federal Court held that it is not possible to set out a complete list of the relevant factors to be taken into account in determining whether special circumstances exist. Each case must be considered on its own merits."

He submitted that that summary of the Hulls' case applied to him and that all the circumstances in which he found himself should be taken into account as special circumstances for the purposes of waiving the debt.
Respondent's Case
Ms Wallis-Dunn submitted that the applicant had received the Austudy payments from 1 July 1998 until 23 November 1999, that the calculation of the level of his allowance was based upon the level of disability pension that he had received at that time and that all the calculations in relation to his Austudy payments had been correctly made on the basis of those income levels.
Ms Wallis-Dunn referred to the inter-Departmental arrangements which enabled Centrelink to be aware of the payments of disability arrears to the applicant which covered the period during which his Austudy payments had been paid. This had led to the calculation of the overpayment which was made in accordance with the terms of section 205A of the VEA.
Ms Wallis-Dunn was not able to provide guidance on why it was that an error had been made in determining the level of the amount that needed to be withheld from those arrears. She also noted that a worksheet which had been utilised in calculating that amount was unclear as to whether the adjusted amount was $6,177.31 or $6,177.37. She said that, for reasons unexplained, the adjustment period had been limited to that which started on 24 September 1998 and which ended on 20 September 2001. This meant that the adjusted amount had not taken into account periods before that time when Austudy payments had been made to the applicant. She said that, throughout the period, from 1 July 1998 until 23 November 1999, the applicant's arrears of pension when calculated at the special rate precluded the payment of any Austudy payments throughout that time and this meant that the corrected adjustment amount should have been $9,668.47. Whilst conceding that an error had been made in the calculation of that adjusted amount, Ms Wallis-Dunn submitted that this did not change the decision under review. This was because no mistake had been made in relation to the calculation of the Austudy payments.
Ms Wallis-Dunn referred the Tribunal to the terms of subsection 1223(5) of the Social Security Act 1991 (the Act) as it stood at the time when Austudy payments were made. She submitted that, in accordance with that provision, the amount paid to the applicant was a debt due to the Commonwealth in the total amount of $9,668.47.
Ms Wallis-Dunn made reference to the waiver provisions of the Act. She submitted that the debt was in relation to the Austudy payments that were made and not in relation to the arrears amount. She said that there had been no administrative error made in relation to the calculation of the Austudy payment and that any error that had been made was in relation to the calculation of the sum to be withheld from the arrears payment. She submitted that, in that situation, the matter was not covered by section 1237A of the Act.
Reference was also made to the special circumstances which would justify waiver under section 1237AAD of the Act. She noted that the applicant was in financial circumstances of hardship and conceded that the Department had commenced recovery of the debt in the amount of some $75 per fortnight. Nevertheless, she noted that financial hardship alone was not sufficient to justify waiver as a special circumstance and she also noted that the applicant had resolved not to make application for further benefits from the Department because of his personal pride. She submitted that this could not be taken into account in determining special circumstances and that regard should be had to the Federal Court decision in Beadle v Director-General of Social Security (1985) 7 ALD 670 which required circumstances which were different from the usual run of cases, which were unusual or exceptional. She submitted that, in the context of social security law, it was usually the case that a person who was in receipt of assistance experienced some levels of financial difficulty and that, therefore, this was not an unusual element in this case.
Ms Wallis-Dunn conceded that the applicant was experiencing health problems and also noted that, because he was in receipt of the special rate of pension, he had available to him all of the benefits that go with that status, including free medical treatment.
Consideration
In evidence before the Tribunal were the records of Austudy payments to the applicant for the period from 1 July 1998 until 23 November 1999 (see T12 at 45-48) as well as copies of the applicant's bank account indicating receipt of the allowance in that period (see T14 at 51-70). I am satisfied that, during that period, the applicant received Austudy payments in the amount of $9,668.47. Those bank accounts also indicate that the applicant received disability pension payments from the Department of Veterans' Affairs during that period.
Austudy payments are made in accordance with the terms of the Act and comprise a social security payment as defined in section 23 of the Act. The rate of that payment is determined in accordance with the terms of section 1067L of the Act and that requires the income of a recipient to be taken into account. During the period when the Austudy payments were received by the applicant, the level of disability pension that he was receiving was not sufficiently high to preclude the Austudy payments. When the applicant was granted the special rate of pension, this had the effect of increasing the level of payments from $240.60 per fortnight to the level of $634.30 per fortnight with effect from 30 January 1997 although, thereafter, the amount gradually increased with periodic adjustments to the level of $708.50 per fortnight by 22 March 2001. I am satisfied that the level of pension payment at the special rate was sufficient to preclude Austudy payments during the periods when it was received by the applicant. The retrospective grant of the pension meant that the applicant was paid a lump sum and this was in the amount of $50,081.28 (see T9 at 34).
Of course, the applicant was not in actual receipt of the higher rate of pension during those periods when he received Austudy payments and he was unaware that there would be a retrospective lump sum payment to him. Nevertheless, the situation of receipt of those monies is provided for in section 205AA of the VEA which reads:
"Recovery of overpayment by deduction from other pension, benefit or allowance
Where:
(a)a pension or allowance (in this section called the new pension or allowance) becomes payable, or becomes payable at an increased rate, to a person under this Act from a date (in this section called the operative date), being the date on which the decision to grant the new pension or allowance, or to increase the rate of the new pension or allowance, is made (in this section called the date of the decision), or a date before or after the date of the decision;
(b)the person has been paid before, or is paid on or after, the date of the decision:
(i) a pension or allowance under this Act or under the provisions of any other Act administered by the Minister; or
(ii) a pension, benefit or allowance under the Social Security Act or the Social Security Act 1947;
(in this section called the existing pension, benefit or allowance) in respect of a period commencing on or after the operative date; and
(c)an amount, or amounts, of the existing pension, benefit or allowance has or have been paid, in respect of a period commencing on or after the operative date, that would not have been paid if the new pension or allowance had then been payable, or payable at the higher rate, as the case may be;
an amount equal to the amount, or sum of the amounts, of the existing pension, benefit or allowance paid to the person that would not have been paid to the person shall, unless the Commission takes action under paragraph 206(1)(a) or (b) in respect of that amount, be deducted, either in a lump sum or by instalments, as the Commission determines, from amounts of the new pension or allowance payable to the person."
In this case, I am satisfied that the amount of $9,668.47 would not have been paid to the applicant had he been in receipt of the higher rate of pension throughout the relevant period. It follows that, because of the terms of section 205AA of the VEA, an amount equal to that amount was to be deducted from the applicant's lump sum payment.
It is not disputed that the respondent, by administrative error, incorrectly calculated the amount to be withheld as being $6,177.37. The calculation record would suggest that this was done because the payment period was incorrectly noted as being from 24 September 1998 rather than from 1 July 1998 when the applicant actually began to receive the Austudy payments.
It is the respondent's contention that the difference between the amount that should have been withheld and that which was actually withheld is a debt due to the Commonwealth in accordance with the terms of subsection 1223(5) of the Act which, as it stood at the relevant time, reads:
"1223(5) If:
(a)an amount (the received amount) has been paid to a person by way of social security payment on or after 1 October 1997 or by way of fares allowance; and
(b)because the received amount had not been correctly calculated using the relevant rate calculator or other provision for calculating the amount, or for any other reason, the received amount is greater than the amount (the correct amount) of social security payment or fares allowance that should have been paid to the person;
the difference between the received amount and the correct amount is a debt due to the Commonwealth."
I am satisfied that, in accordance with that provision, the amount of $3,491.16 was an amount that should have been withheld and not paid to the applicant and, therefore, it constitutes a debt due by him to the Commonwealth.
A debt may be waived, in the case of administrative error, under section 1237A of the Act and, in special circumstances, under section 1237AAD. Insofar as relevant, those provisions read:
"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.
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
…
Waiver in special 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."

In relation to waiver under subsection 1237A(1) of the Act, there is no evidence before the Tribunal that would indicate that the amount of arrears paid to the applicant was received by him other than in good faith. Apart from the explanation that a reduction had been made in relation to his Austudy payment, there is no indication of the means by which that was calculated. I am satisfied that the applicant was not aware that an incorrect calculation had been made.
The waiver provision in subsection 1237A(1) has application if, in accordance with subsection 1237A(1A) of the Act, the debt was not raised within a period of six weeks from the first payment that caused the debt. The applicant was notified by the Department of Veterans' Affairs of the Centrelink adjustment in a letter dated 26 September 2001 and was advised that the monies would be paid into his account within four business days. Centrelink computer records reveal that the applicant contacted Centrelink on 1 October 2001 in relation to the amount withheld (see T10 at 35-36). A Centrelink officer then gave consideration to the amount of the debt and completed a document entitled Debt Determination and Submission (see T15 at 71-74). It is dated 6 November 2001 and records the amount of the debt as being $9,668.47.
A further Debt Determination and Submission was completed on 9 November 2001 and it recorded that the debt was to be "zeroed" because the "full amount of the debt had been raised previously" (see T16 at 77). A file note, dated 9 November 2001 (see T17 at 80), refers to the amount of $6,177.31 as having been withheld. The applicant was then notified in writing of the correctness of the withholding amount and this was done by letter dated 20 November 2001 (T19 at 83-84). The amount of the debt is not referred to in that letter. However, the letter includes the following:
"Your Centrelink record shows that you were paid Austudy from 1 July 1998 through to 23 November 1999. I have now received your bank statements from the Commonwealth Bank for this same period and they confirm that you received these payments into account number: 4459/10066828.
Due to your DVA Pension being reassessed and the new rate taking effect from 30 January 1997, you were not entitled to the Austudy payments you received from 1 July 1998 through to 23 November 1999."
On 20 December 2001, the applicant was notified, in specific terms, of the debt of $3,491.16. That latter notification also referred to the timeframe of receipt of Austudy payments in the same way as did the letter of 20 November 2001. However, an absence of reference to the additional amount of arrears in the earlier letter leaves me reasonably satisfied that the purpose of the former letter was to advise the applicant that the arrears had been correctly calculated and that any debt had been "zeroed" as noted above. On that basis, the first notification of the debt was on 20 December 2001. This was more than six weeks after the payment of arrears to the applicant.
It remains to be determined, under section 1237A(1) of the Act whether the debt can be attributed solely to administrative error. It is not disputed that section 205AA of the VEA enables a deduction to be made from the arrears paid to the applicant. This is an amount equal to the amount that the applicant should not have received. However, the debt in this case does not arise through the operation of that provision. It merely provides for the deduction to be made. Rather, the debt arises because of the incorrect amounts of Austudy payments that the applicant received and those payments were not made per medium of any administrative error by the Commonwealth at the time they were made. That being the case, section 1237A of the Act has no application in this case.
The Act provides no guidance as to the meaning of the term special circumstances in section 1237AAD. In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood "not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security(1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances "must have a particular quality of unusualness that permits them to be described as special".
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle's case, observed (at 545) that special circumstances:
"would require something to distinguish [the] case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."
In relation to waiver for special circumstances, I accept that the applicant experiences a degree of financial hardship in his day-to-day living. However, his circumstances are not straitened and that is indicated by the terms of the financial statement calculated on a monthly basis at exhibit A1. It records a residual amount of $53 after personal expenses and other necessary outgoings have been met and that includes the repayment of fortnightly amounts to Centrelink in relation to the debt recovery mechanisms that have been put in place. I also note the applicant's contention that his personal pride has prevented him from obtaining further assistance from Centrelink and I do not accept that this is a matter which can be taken into account as a special circumstance.
The applicant is in receipt of the special rate of pension because of his health problems and these were listed in a medical report completed on 9 September 2002 by his local general practitioner, Dr D Purcell. The report lists a range of conditions but provides no guidance as to the effects that those conditions have had on him. In any event, I accept the correctness of the submission by Ms Wallis-Dunn that one of the consequences of the applicant's receipt of the special rate of pension is that he is eligible to receive free medical treatment.
I am satisfied that there are no special circumstances in the applicant's case that would justify waiver of the debt under section 1237AAD of the Act.
The decision under review is affirmed.
I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member
Signed:         Sarah Oliver
  Associate
Date of Hearing  17 September 2002
Date of Decision  11 October 2002
The Applicant Appeared in Person
Solicitor for the Respondent    Ms H Wallis-Dunn, Departmental Advocate