Hogben and Secretary, Department of Social Services (Social services second review)
[2020] AATA 985
•27 April 2020
Hogben and Secretary, Department of Social Services (Social services second review) [2020] AATA 985 (27 April 2020)
Division:GENERAL DIVISION
File Number:2018/4109
Re:Cathy HOGBEN
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Member G Hallwood
Date:27 April 2020
Place:Adelaide
The Tribunal sets aside the decision under review and substitutes the decision that:
a)Ms Hogben has a debt to the Commonwealth in the amount of $15,782.95 resulting from overpayment of Newstart allowance for the period 22 March 2011 to 23 June 2012;
b)A 10% penalty amount of $1,578.25 is to be added to that debt pursuant to section 1228B of the Social Security Act 1991; and
c)The debt is recoverable in its entirety.
.........................[sgnd]....................................
Member G Hallwood
CATCHWORDS
SOCIAL SECURITY – Debt – Whether amounts received ordinary income or child support – failure to declare income – overpayment of Newstart allowance – whether overpayment is a debt – whether debt recovery fee should be applied - should debt be written off or waived – where amounts received found to be ordinary income – where applicant knowingly failed to report income – decision under review is set aside and substituted.
LEGISLATION
A New Tax System (Family Assistance) Act 1999
Bankruptcy Act 1966
Social Security Act 1991
Social security (Administration) Act 1999Cases
Angelakos and Secretary, Department of Employment and Workplace Relations (2007) FCA 25
Beadle and Director-General Social Security (1984) 6 ALD 1
Dranichnikov v Centrelink (2003) FCAFC 133
Gagatek and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012) AATA 255
Gerhardt and Department Employment, Education & Training [1996) AATA 173
Groth and Secretary, Department of Social Security (1995) FCA 1708
Kirkbright and v Secretary, Department of Family & Community Services (2000) FCA 1876
Klein v Domus Pty Ltd (1963) 109 CLR 467
Re Callaghan and Secretary, Department of Social Security [1996] AATA 413
Salangsang and Secretary, Department of Education, Employment and Workplace Relations (2010) AATA 55
Secretary, Department of Family, Housing, and Community Services and Indigenous Affairs v Jones (2012) FCA 639
Secretary, Department of Social Security v Le-Huray (1996) FCA 1558
Secretary, Department of Social Services and Willersdorf, (Social services second review) [2016] AATA 535 (27 July 2016)
SRL and Secretary, Department of Social Security (1998) AATA 326
Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729
REASONS FOR DECISION
Member G Hallwood
27 April 2020
This application seeks to review a decision of the Social Services & Child Support Division of the Administrative Appeals Tribunal (AAT1) on 4 June 2018[1] affirming the decision of an Authorised Review Officer (ARO) of 20 February 2014[2] for the Secretary to raise and recover a debt of $15,782.95 which arose from an overpayment of Newstart Allowance (NSA) for the period 22 March 2011 to 23 July 2012, and to set aside the decision to impose a $1,578.25 debt recovery fee.
[1] T2 pp 3-9.
[2] T3 pp10-14.
THE ISSUES
The issues to be determined are:
(a)Was Ms Hogben overpaid NSA during the period 22 March 2011 to 23 July 2012?
(b)If so, is there a debt to the Commonwealth?
(c)If there is a recoverable debt is it appropriate to impose a debt recovery fee of $1,575.25 or some other amount?
(d)If so, is there any basis not to recover the debt or any part of it?
BACKGROUND
The facts outlined below are based on documentary and oral evidence provided to the Tribunal including:
·the T-Documents[3] and supplementary T-Documents;[4]
·the Secretary’s Statement of Facts, Issues and Contentions;[5] and
·a number of further pages of other documents tendered by the applicant ‘A’ documents;[6]
·further documents tendered by the respondent ‘R’ documents;[7]
·the oral testimony of Ms Hogben (the Applicant); Ms Vowles, Office Manager Peter F Burns Real Estate Pty Ltd (Peter F Burns Pty Ltd); and Mr Peter Burns, Principal of Peter F Burns Pty Ltd.
[3] Ex1.
[4] Ex2
[5] Ex R1 & Ex 3.
[6] Ex A1 – A11.
[7] Ex R1 – R9.
Ms Hogben received NSA for the period 30 January 2010 to 28 August 2012.
Following a data matching exercise, between the Department of Human Services (the Department) and the Australian Taxation Office (the ATO), and subsequent investigation by the Department it was determined on 23 March 2014 that Ms Hogben was overpaid an amount of $15,782.95 during the period 22 March 2011 to 23 July 2012.[8]
[8] T13 pp143-150.
A debt was raised to the Commonwealth for the full amount of the overpayment and an additional $1,578.25 debt recovery fee penalty was also imposed on Ms Hogben on 23 March 2014. An “account payable” letter was sent to Ms Hogben by the Department on 24 March 2014 for the full amount of $17,361.20.[9]
[9] T14 pp590-591.
On 18 December 2015 an ARO affirmed the decision to impose and recover the debt and to impose a penalty amount.
On 4 June 2018 the AAT1 affirmed the decision to raise and recover the debt of $15,782.95, and decided to set aside the penalty amount of $1,578.25.
RELEVANT LEGISLATION
The relevant law is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).
NSA is the main income support payment for people while they are unemployed and looking for work.
In order to receive NSA people must be at least 22 years of age; looking for paid work; under the income and assets test limits; and, prepared to meet mutual obligation requirements.
Section 643 of the Act requires that a person’s NSA is to be worked out using Benefit Calculator B at the end of section 1068. By following the method of calculating rate set out in 1068-A1 of the Act together with the income test using MODULE G – Income test, a person’s maximum rate of allowance is reduced by taking into account their ordinary income.
Ordinary income is defined in section 8 of the Act and relevantly subsection 8(1) provides:
“ordinary income” is defined as “income that is not maintenance income or an exempt lump sum”
Note 1: For maintenance income see section 10.
…
Note 3: For provisions affecting the amount of a person's ordinary income see sections 1072 … (ordinary income concept) …“income”, in relation to a person, means:
a)an income amount earned, derived or received by the person for the person’s own use or benefit; or
b)a periodical payment by way of gift or allowance; or
c)a periodical benefit by way of gift or allowance;
but does not include an amount that is excluded under subsection (4), (5) or (8).
“income amount” means:
a)valuable consideration; or
b)personal earnings; or
c)moneys; or
d)profits;
(whether of a capital nature or not).
Section 1072 of the Act provides the general meaning of ordinary income:
A reference in this Act to a person's ordinary income for a period is a reference to the person's gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.
Section 10 of the Act provides the definitions of maintenance and maintenance income:
In this Act, unless the contrary intention appears, the expressions … maintenance and maintenance income have the same respective meanings as in the Family Assistance Act.
Where section 10 of the Act refers to the Family AssistanceAct, this is a reference to the A New Tax System (Family Assistance) Act 1999 (the Family Assistance Act).
Subsection 3(1) of the Family Assistance Act defines maintenance and maintenance income relevantly:
"maintenance" includes child support.
"maintenance income", in relation to an individual, means:
a) child maintenance--any one or more of the following amounts:
(i)if clause 20B of Schedule 1 applies (notional assessments for child support agreements) - the amount worked out under that clause;
(ii)if clause 20C of Schedule 1 applies (lump sum payments) - the amount worked out under that clause;
a.if clause 20D of Schedule 1 applies (deemed receipt for administrative assessments privately collected) - the amount worked out under that clause;
(iii)otherwise - the amount of a payment or the value of a benefit that is received by the individual for the maintenance of an FTB child of the individual and is received from a parent or relationship parent of the child, or the former partner of a parent or relationship parent of the child; or
b) …
c) direct child maintenance - that is, the amount of a payment or the value of a benefit that is received by an FTB child of the individual for the child's own maintenance and is received from:
(i)a parent or relationship parent of the child; or
(ii)the former partner of a parent or relationship parent of the child;
but does not include disability expenses maintenance.
Section 123 of the Administration Act describes the continuing nature of social security payments until a specific event occurs.
19.Subsection 100(1) of the Administration Act provides that under certain circumstances when a social security recipient does not comply with a subsection 68(2) notice the rate of their payment will be automatically reduced.
20.Section 68(2) describes the requirements the Secretary may set out in a notice to a person receiving social security payment or holding a concession card.
21.Section 1223(1) of the Act sets out what happens if a debt arises from lack of qualification, overpayment etc.
Section 1228B imposes an additional 10% penalty for understatement etc. of income.
Section 1237AAD of the Act provides that the Secretary may waive the right to recover all or part of a debt in special circumstances. There is also a requirement that the overpayments did not result wholly or partly from the debtor or another person knowingly: making a false statement or false representation; or failing or omitting to comply with a provision of the Act.
Section 1237AAC of the Act provides at subsections (4), (5) and (6), in limited circumstances, that the Secretary may waive an amount of a debt equal to notional entitlements to parenting payment or parenting allowance (as the case requires) where those payments and allowances would have been payable but were not claimed. There is also a requirement that the overpayments did not result wholly or partly from the debtor or another person knowingly: making a false statement or false representation; or failing or omitting to comply with a provision of the Act.
CONTENTIONS
The Secretary contends that Ms Hogben was paid wages of $24,700 per annum ($950 gross per fortnight) by Peter F Burns Pty Ltd during the period 22 March 2011 to 23 July 2012 and that this income was not included in the calculation of her NSA.
The Secretary further contends that during this period as a result of payments not included in the NSA calculation, Ms Hogben was overpaid by an amount of $15,782.95.
The Secretary contends that Ms Hogben was aware of the income she was receiving and did not declare income relating to personal exertion.
Ms Hogben contends that the amount she was paid by Peter F Burns Pty Ltd was not wages but was child support from her then husband, Mr Myles Pearce, who is now deceased.
Ms Hogben also contends that she entered into bankruptcy in May 2009 and was not discharged from bankruptcy until 30 May 2012 so she should not be required to repay any debt from that period.
Ms Hogben further contends that there is a sound basis not to recover any debt either because of the special circumstances relating to the debt, or alternatively because she would have been entitled to parenting payments or combined parenting payments (PP) and NSA equal to or greater than the NSA she received.
Was Ms Hogben overpaid NSA during the period 22 March 2011 to 23 July 2012?
Ms Hogben married Mr Pearce in 1997. Mr Pearce was well known in South Australia at the time as a successful business person in the real estate sector and he sold his real estate business in 1998. Within a couple of years Ms Hogben and Mr Pearce had two children together. Ms Hogben opened a property development business, with Mr Pearce working as her second in charge. The business built to a turnover of $100 million per annum developing 200 to 300 properties a year.
Ms Hogben described a tumultuous decade following her marriage that left her bankrupt, vilified in the press and in public, and with mental health issues.
During 2004 Ms Hogben and Mr Pearce had a third child. Mr Pearce was then being successfully treated for bowel cancer.
By 2006 Ms Hogben reports Mr Pearce’s bowel cancer had returned and he wanted her to stop work in order to look after him. They started winding down their property development company selling $41.5 million of their property trying to cover $43 million of debts. Other attempts to cover their debts by selling the family home were unsuccessful and Ms Hogben described the “wheels falling off” for her and Mr Pearce.
Ms Hogben and Mr Pearce moved to Queensland and were declared bankrupt in 2008.
In 2009 Mr Pearce obtained commission-based employment with Peter F Burns Pty Ltd.
Ms Hogben was granted NSA from 30 January 2010 with payments lodged into Ms Hogben’s nominated bank account.
Ms Hogben was paid $16,862.43 in NSA throughout the period 22 March 2011 to 23 June 2012. During this period and based on the payments Ms Hogben received from Peter F Burns Pty Ltd, the Secretary contends Ms Hogben was entitled to $1,079.48.[10] Based on the Secretary’s contentions Ms Hogben was overpaid NSA in the amount of $15,782.95.
[10] T13 p 143.
The Secretary contends that Ms Hogben commenced paid employment with Peter F Burns Pty Ltd on 4 March 2011 and failed to declare that income.
Section 123 of the Administrative Act sets out that determinations continue until an event occurs:
123 Continuing effect of determinations
(1)A determination that:
a)A person’s claim for a social security payment is granted; or
b)A social security payment is payable to a person; continues in effect until;
ba) The payment is cancelled by section 38M of the 1991 Act, or subsection 42AM(4) or section 42AP of this Act; or
bb) immediately before the start of a payment suspension period for the person under section 42AL; orc)A further determination in relation to the payment under section 80, 81 or 82, subsection 95C(1) or section 124H, 124M or 124NF takes effect; or
d)The payment ceases to be payable under section 90, 91, 93, 94 or 95; or
e)The end of the day immediately before the day on which the person dies.
(2)A determination that a person is qualified for a concession card continues in effect until:
a)A further determination under subsection 77(1) or (3) or section 86 or 87 takes effect; or
b)The person ceases to be qualified under section 104 or 105.
(3)A determination of the rate of social security payment continues in effect until:
a)A further determination in relation to the payment under section 78, 79, 81A or 85A takes effect; or
b)The payment becomes payable at a lower rate under section 98, 99 or 100.
The Department provided notices issued under subsection 68(2) of the Administration Act requiring Ms Hogben to report changes in earnings and, with some notices estimated earnings.[11]
[11] Ex3 Annexure A pp 1-75.
Subsection 68(2) of the Administration Act provides that:
The Secretary may give a person to whom this subsection applies a notice that requires the person to do any or all of the following:
a)inform the Department if:
(i) a specified event or change of circumstances occurs; or
(ii) the person becomes aware that a specified event or change of circumstances is likely to occur;
b)give the Department one or more statements about a matter that might affect the payment to the person of the social security payment;
c)give the Department one or more statements about a matter that might affect the operation, or prospective operation, of Part 3B in relation to the person.
The Secretary contends that Ms Hogben failed to comply with the notices and the Department applied subsection 100(1) of the Administration Act retrospectively reducing Ms Hogben’s rate of payment.
Subsection 100(1) of the Administration Act provides for the automatic reduction of a recipient’s rate of social security payment when they do not comply with a subsection 68(2) notice:
Automatic rate reduction--recipient not complying with subsection 68(2) notice
(1)Subject to subsection (2), if:
a) a person who is receiving a social security payment is given a notice under subsection 68(2); and
b) the notice requires the person to inform the Department of the occurrence of an event or change of circumstances within a specified period (the notification period); and
c) the event or change of circumstances occurs; and
d) the person does not inform the Department of the occurrence of the event or change of circumstances within the notification period in accordance with the notice; and
e) because of the occurrence of the event or change of circumstances, the rate of the social security payment is to be reduced;
the social security payment becomes payable to the person at the reduced rate on the day on which the event or change of circumstances occurs.
Ms Hogben contends that the money paid to her by Peter F Burns Pty during the period was child support payments and not ordinary income.
The Tribunal has before it a “Letter of Employment” entered into by Peter F Burns Pty Ltd and Ms Hogben on 4 March 2011.[12] The letter of appointment is for an initial term of 30 weeks (until 30 September 2011) with a review at 25 weeks (26 August 2011) with the intension of entering into a long-term contract. The hours of work were 25 hours a week and the pay rate $19 per hour.
[12] R8.
Both Mr Burns and Ms Vowles of Peter F Burns Real Estate Pty Ltd stated in oral evidence that Ms Hogben commenced employment on 4 March 2011 and that she had negotiated an employment subsidy through Campbell Page, her job network provider. Ms Hogben’s work was with the telemarketing team at Peter F Burns Real Estate Pty Ltd and directed specifically at supporting Mr Pearce’s work. The Campbell Page “Wage subsidy agreement” provided Peter F Burns Real Estate Pty Ltd with an employment pathway fund subsidy of $2,000 on 20 June 2011 and a further $3,000 on 19 November 2011. [13] The wage subsidy agreement was signed by the employer, Peter Burns, and confirmed; “the job will be ongoing and sustainable after the wage subsidy has ceased.”[14]
[13] ST2 p2.
[14] ST2 p3.
In the statement entitled “Department of Human Services versus Hogben, Cathy Jane” and dated 15 December 2014; Ms Vowles stated:
“From my examination of the records of PEARCE [Ms Hogben] I can state that she commenced employment Peter F Burns Real Estate Proprietary Limited on 14.03. 2011 and ceased employment with the organisation on 13.07.2012.”
….
“PEARCE was employed on a part-time basis. She was paid on a fortnightly by direct deposit into a [bank named] account [BSB and Account number provided].”
….“PEARCE was employed as a Telephone Marketer and her typical duties included; contacting private landlords and home owners to make appointments for free appraisals.”[15][15] Ex 3Annexure H pp134-135.
Payroll Advice documents printed on 10 December 2014 and attached to the abovementioned document contain records of Ms Hogben’s fortnightly pay of $950 for each fortnight from payment date 23 March 2011 through to the payment date of 10 July 2012. Each pay advice describes Ms Hogben’s occupation as Sales Assistant, each is for 50 hours, and each identifies that Ms Hogben’s superannuation was paid into C&M Pearce Superannuation Fund.[16]
[16] Ex 3 Annexure H pp136-147.
Ms Hogben contends that the income she received from Peter F Burns Pty was child support payments from Mr Pearce because they had separated. In order to demonstrate that the payments were for child support payments and not wages Ms Hogben provided oral and written evidence that the final separation date from Mr Pearce was 10 December 2010 and not 2 July 2011 as contended by the Secretary. The separation dates are also of importance to Ms Hogben’s contention that she qualified for parenting payment single (PPS) during a portion of the period under consideration in this matter.
Ms Hogben put to the Tribunal that she and Mr Pearce moved back to Adelaide during 2009 to 2010. Ms Hogben describes that time; not having cars or a home, living in her mother’s house, and being so depressed she was often unable to get out of bed. Ms Hogben stated that she “resorted to alcohol and a whole lot of other self-numbing sort of things” due to her inability to cope at that time. Ms Hogben said that Mr Pearce also had quite a chronic alcohol problem. Ms Hogben describes the relationship between her and Mr Pearce at this time as being difficult and that they broke up several times in 2009 to 2010, sometimes with police involved because Mr Pearce would get physical.
Ms Hogben stated that she had separated from Mr Pearce for the final time on 10 December 2010. Ms Hogben also stated that she had met Mr Daniel Hogben in March 2011 and had become pregnant to him by April 2011.
Ms Hogben provided an “Application for Divorce” stamped 26 April 2012 that recorded her date of separation as 10 December 2010.[17] The application for divorce also detailed that Ms Hogben and Mr Pearce had not lived together; either as husband and wife, or not as husband and wife; since the date of separation, and that she had been paid child support through Peter F Burns.
[17] A2 Tab10 at question 14.
The Secretary contends Ms Hogben had asserted various dates of separation from Mr Pearce in order to gain advantage; by being entitled to a higher rate of payment or to set aside a debt. The Secretary put to the Tribunal that because of the lack of clarity around the date of separation they were entitled to rely on the current date that had been accepted for separation, 2 July 2011.
In oral evidence Ms Hogben conceded that she and Mr Pearce had separated and reunited on several occasions over the years following their business collapse but that 10 December 2010 was the date they finally separated.
An electronic record of a conversation between Ms Hogben and the Department dated 29 July 2009 describes Ms Hogben successfully seeking reconsideration of an overpayment debt because she separated from her partner on 31 October 2008 but did not tell the Department straight away in case they got back together.[18]
[18] R2 p136.
An electronic record of a conversation between Ms Hogben and the Department dated 29 May 2009 notes that Ms Hogben has separated and will no longer be required to estimate income for family tax benefits (FTB) as she will be in receipt of PPS. A confirmation conversation with Mr Pearce on the same day notes that they separated on 18 May 2009 enabling Ms Hogben to receive PPS.[19]
[19] R2 pp144-145.
An electronic record of a conversation in relation to FTB dated 1 December 2009 between Ms Hogben and the Department notes that the Department had discovered Ms Hogben had become partnered.[20]
[20] R2 p120.
An electronic record of conversation on 25 March 2010 when Ms Hogben had sought restoration of NSA it is recorded: “Customer has advised she has temporarily separated from her partner. This has been advised by partner, but at this time is not a permanent arrangement. Customer has stated that she will know by the forthcoming weekend if the separation will become more permanent.”[21]
[21] R2 p114.
There is the application for divorce document that supports what Ms Hogben now contends was her final date of separation as 10 December 2010.[22]
[22] A2 Tab10 at question 14.
An electronic record of conversation annotated on 30 November 2011 notes that Ms Hogben has lodged separation documents but they have not processed these as yet. A separation date of 8 February 2011 is noted.[23]
[23] R2 pp85-86.
A separation form (Mod S) signed by Ms Hogben and dated 17 November 2011 states that her relationship ended with Mr Pearce on 19 May 2011, that she was separated and getting divorced.[24] On 29 November 2011 an electronic record of conversation between Ms Hogben and the Department requesting an action document to provide to the SA Housing Trust for a bond application also records 19 May 2011 as the date of separation.[25]
[24] R3.
[25] R2 p70.
Following enquiries regarding the suspension of her NSA payments on 12 December 2011, Ms Hogben contacted the Department again on 13 December 2011. The electronic record of that conversation notes that Ms Hogben confirmed that she had separated from Mr Pearce on 2 July 2011 and is now in divorce stage.[26] In a further electronic record of conversation in relation to recommencing rental assistance it is also noted that she and Mr Pearce separated on 2 July 2011.[27]
[26] R2 p68.
[27] R2 pp66-67.
Ms Hogben contacted the Department on 30 September 2011 requesting urgent payment of NSA in order to buy petrol and food. The record of conversation notes that after Ms Hogben was told that the purchase of these items were not exceptional or unforeseen expenses she advised the Department that she had separated from her husband the day before – 29 September 2011.[28]
[28] R2 p79.
In Oral evidence Ms Hogben stated that in August 2011 Mr Pearce had physically assaulted her and that she had miscarried the baby fathered by Mr Hogben.
Ms Vowles in oral evidence stated that she believed Ms Hogben and Mr Pearce’s relationship probably finished up toward the end of 2011 and that was when Mr Pearce rented a property because they were separated. Ms Vowles noted that Mr Pearce had stayed with Ms Hogben for a while after she had lost the baby and that Mr Pearce did not move out until December 2011.
In oral evidence Mr Burns, in discussing the timing of the end of an initial employment arrangement with Ms Hogben, stated that Mr Pearce and Ms Hogben had split up at the end of 2011.
Given the inconsistency of separation dates used by Ms Hogben, I find that her evidence in this regard lacks both credibility and reliability.
Whatever the reason for the surfeit of separation dates provided; the question of the separation date was determined by the Department to be 2 July 2011. The Tribunal is unable to satisfy itself of any date proposed. In the absence of satisfactory evidence to the contrary the Tribunal is satisfied, on balance, with the date determined by the Department.
There is a weight of evidence that the date proposed by Ms Hogben was not the date she and Mr Pearce finally separated. The Tribunal is satisfied on the oral evidence of Ms Vowles that Ms Hogben and Mr Pearce were happily married when Ms Hogben first started at Peter F Burns in March 2011. The Tribunal is also satisfied that the separation date is only one factor in identifying the nature of the payments Ms Hogben received from Peter F Burns in this matter.
Was Ms Hogben receiving ‘ordinary income’ or ‘maintenance’ income from Peter F Burns Pty Ltd?
Section 643 of the Act requires that a person’s NSA is to be calculated using Benefit Calculator B at the end of section 1068. By following the method of calculating rate set out in 1068-A1 of the Act, together with the income test using MODULE G – Income test; a person’s maximum rate of allowance is reduced taking into account their ordinary income.
Section 8 of the Act defines “ordinary income” as income that is not maintenance income or an exempt lump sum. Subsection 3(1) of the Family Assistance Act explains - "maintenance" includes child support. Also in subsection 3(1) “Maintenance income” relevantly is the amount of a payment that is received by the individual for the maintenance of an FTB child of the individual and is received from a parent or relationship parent of the child, or the former partner of a parent or relationship parent of the child.
There is no dispute in this matter that any child support maintenance amounts paid by Mr Pearce to Ms Hogben should not be taken into account when calculating Ms Hogben’s maximum rate of allowance.
Ms Hogben has variously proposed to the Tribunal that she did not work for Peter F Burns Pty Ltd for any period of time, and that this payment structure through Peter F Burns Pty Ltd was simply a vehicle for Mr Pearce to pay her child support payments out of his commissions earnt during that time; or alternatively, that she did work for Peter F Burns for a short period of time and then received child support payments out of Mr Pearce’s commissions during the balance of the period.
It is agreed between the parties, and the Tribunal is satisfied, that Mr Pearce had an agreement with Peter F Burns that Ms Hogben’s wages would be paid out of his earnings using a debit/credit method. Under this approach Peter F Burns would pay Ms Hogben wages and other expenses and these wages and expenses would be deducted from Mr Pearce’s commissions as he earned them.
An undated letter titled “Statement for Centrelink” signed by Mr Pearce describes Ms Hogben obtaining employment at Peter F Burns and working for a short period assisting Mr Pearce with “getting some leads”. Mr Pearce states: “This stopped because as is often the case with separation we had many difficulties”. Mr Pearce goes on to state: [29]
“Very early on though we entered into a PRIVATE Child support agreement which included remuneration for the children and included from memory health insurance and the like. She was a good mother and remained a single mother for some time”.
…
“At no time, apart from the above did Cathy work for Peter F Burns…”
[29] Annexure D pp97-100.
A “Child Support Agreement” signed by Ms Hogben and Mr Pearce and dated 25 May 2011 begins:
“1. The Parties agree that GRANTLEY MYLES PATRICK PEARCE will pay child support in the amount of $2,154 (two thousand one hundred and fifty-four AU dollars) Monthly
2. Child support payments will begin in March 2011 and will be paid on the Thursday of every other week. These payments will be paid directly from GRANTLEY MYLES PATRICK PEARCE employer – Peter F Burns Real estate as it is known a Debit / Credit system operates and ultimately this money comes from the first party”
The Secretary contends that the date of this child support agreement is difficult to reconcile with other material from the same time, and that even if it is from the date purported, the existence of this agreement does not mean Ms Hogben was not also receiving wages through Peter F Burns Pty Ltd as well as receiving child support payments. The Secretary contends that Mr Pearce and Ms Hogben were seeking to minimise their tax burden and that already earned wages were later attributed to child support for tax purposes. A series of emails escribed below were provided as evidence of the Secretary’s contention in this regard.
On 20 July 2011 Ms Helen McGeorge of H&R Block wrote an email to Ms Hogben with the subject line “Myles 2011 tax return”. In the email Ms McGeorge pointed out that in going through Mr Pearce’s tax return she had discovered he would receive a better refund by adding the three children as dependents. Ms McGeorge indicated that she had decreased Mr Pearce’s income and increased his refund.[30] A responding message from Ms Hogben from the same day thanked Ms McGeorge.[31]
[30] Ex 3, Tab 13 Annexure E p118.
[31] Ex 3, Tab 13 Annexure E p 118.
On 14 May 2012 Ms Hogben wrote to Ms McGeorge in an email with the subject line “details”. The email provided name, address and banking details. It went on to confirm “I still work for Peter F Burns real estate (up until June 30th 2012) so still use the [Peter F Burns] fax…”.[32]
[32] Ex 3, Tab 13 Annexure E p116.
On 28 June 2012 Ms Hogben sent three emails to Ms McGeorge, the first related to Mr Pearce’s tax and the other two related to her own. The first email indicates that Ms Hogben is helping with Mr Pearce’s tax return and states that her income is separate and that there is a child support agreement in place.[33] The second email confirms that Ms Hogben received payments from Centrelink and from a job subsidy program with Peter F Burns. This email confirms that Mr Pearce has entered into a child support agreement and asks Ms McGeorge to look at it. Ms Hogben then goes on to say that Mr Pearce is wanting to pay her from Peter F Burns using a debit / credit system and reminding Ms McGeorge that Mr Pearce’s tax is separate.[34] The third email provides more detail and also tells Ms McGeorge that the reason for Ms Hogben’s lodgement is that it sparks the return from top up for family payments.[35]
[33] Ex 3, Tab 13 Annexure E p113.
[34] Ex 3, Tab 13 Annexure E p111.
[35] Ex 3, Tab 13 Annexure E p111.
A series of emails between 2 July 2012 and 13 July 2012 confirm the need to attribute Mr Pearce’s income to Ms Hogben as child support in order to reduce Mr Pearce’s tax bill.[36]
[36] Tab 13 Annexure E pp105-108.
On 22 October 2012 Peter Balnaves, Mr Pearce’s accountant, wrote to Mr Pearce confirming that his net income for the year ending 30 June 2012 was $143,564 and stating: “Purely for Taxation benefits we have allocated an Income Split with your former wife and contributed it as Child Support.”[37]
[37] Tab 13 Annexure E p124.
In a written submission dated 19 December 2018 Mr Burns states: [38]
“By Mid-2011, Cathy and Myles had separated. Myles listings and sales (therefore his income) had increased and although Cathy had started a relationship with another person, Myles who had three children with Cathy asked us to continue to make payments on his behalf to Cathy as his child support for the children, which we did.”
…
“Cathy was not attending the office at this stage although I understand that she was assisting Myles with joint legal matters and some listing canvassing. Myles had a separate arrangement with her as I understand it to do with the Child support, he had requested we pay on his behalf.”
…
“The final payment we made on Myles behalf was on 12th July 2012.”
[38] Annexure G p133.
A series of emails between Ms Hogben and Mr Burns from about the time of the written submission bring the date and the veracity of the written submission into some doubt.
On 28 December 2018, nine days after the written submission was dated, Ms Hogben wrote an email to Mr Burns titled “Follow up” and clearly following up a request for a letter to provide to the Tribunal. Ms Hogben states:
Just so you understand that letter would have stopped matters from progressing.
Unfortunately however because I have not received it though I need to advise the tribunal of same.
Could you please send the letter ASAP OR
Otherwise I do need to Call you as a witness early in the new year as stated (see attached).[39]
[39] Annexure G pp131-132.
Ms Hogben goes on to offer further information such as the agreement between Mr Pearce and her. Mr Burns responds on 30 December 2018 explaining that it is a tough time of year and he would try to look at it again on 31 December 2018.[40]
[40] Annexure G p131.
Ms Hogben’s response to Mr Burns on 2 January 2019 again seeks the letter for the Tribunal stating: [41]
Could I ask you to do it this week so that I can finalise it.
They [the Tribunal] have said that if I can provide then there is no need for it to continue and I won’t need to call you as a witness.
The letter will not be provided public nor to anyone else other than as stated.
It’s all prewritten etc all you need to do is put it on letterhead and sign and return…
[41] Annexure G p131.
When Mr Burns was asked whether Ms Hogben had prewritten his submission of 19 December 2018 he responded “I found that extremely offensive and she was told to stick it in her ear. That letter I wrote, I threw away her letter”.
The contemporaneous records of the debit / credit approach are hand written accounts of credits to Mr Pearce by way of commissions for property sales, and debits from his account in the form of wages for him and Ms Hogben, advances, other direct payments to him and Ms Hogben, and business expenses for flyers, telephones, membership fees and the like.[42]
[42] Annexure I pp161-164.
The contemporaneous handwritten records for the period 14 July 2011 and 21 June 2012 are in accord with Ms Hogben’s pay advice from Peter F Burns Pty Ltd during the same period.[43] During this period the records show:
· Mr Pearce received $88,066.06 comprised of wages of $29,550.00, further payments of $44,491.06, and advances of $14,025.00 (consisting of fortnightly payments commencing Thursday 8 December 2011 in an amount of $945 and reducing to $920 from 12 April 2012 until the end of the records); and
· Ms Hogben received $30,618.29 comprised of “wages” of $25,993.29, and other payments of $4,625.00.
[43] Annexure H pp136-147.
In the statement entitled “Department of Human Services versus Hogben, Cathy Jane” and dated 15 December 2014; Ms Vowles stated: [44]
“From my examination of the records of PEARCE [Ms Hogben] I can state that she commenced employment Peter F Burns Real Estate Proprietary Limited on 14.03. 2011 and ceased employment with the organisation on 13.07.2012.”
….
“PEARCE was employed on a part-time basis. She was paid on a fortnightly by direct deposit into a [bank named] account [BSB and Account number provided].”
….
“PEARCE was employed as a Telephone Marketer and her typical duties included; contacting private landlords and home owners to make appointments for free appraisals.”
[44] Annexure H pp134-135.
Payroll Advice documents printed on 10 December 2014 and attached to the abovementioned document contain records of Ms Hogben’s fortnightly pay of $950 for each fortnight from payment date 23 March 2011 through to the payment date of 10 July 2012. Each pay advice describes Ms Hogben’s occupation as Sales Assistant, each is for 50 hours, and each identifies that Ms Hogben’s superannuation was paid into C&M Pearce Superannuation Fund.[45]
[45] Annexure H pp136-147.
A Departmental record dated 29 November 2011 and annotated on 1 December 2011 states: “MOD S indicated relationship ended from 19.05.2011 however corres lodged on 21.11.11”[46] adds doubt as to the date of the private “Child Support Agreement”.
[46] T14 p235.
Ms Vowles stated in oral evidence that Ms Hogben had been in the office beyond the end of 2011 although not as regularly as before, and that while she no longer worked with the telemarketing team she was “working on her court case or something”. Ms Vowles affirmed that the payments to Ms Hogben were still wages with tax paid, superannuation paid, and group certificates. Where Mr Burns’ evidence conflicted with Ms Vowles, Mr Burns agreed that Ms Vowles’ knowledge of Ms Hogben’s employment arrangements were probably better than his due to her role as administration manager.
An unsigned document from Ms Hogben headed “Statutory deceleration” [sic] dated 19 October 2015 states:
“I was eventually accepted into a training job subsidy program and was able to offer some limited services to Peter F Burns real estate. At that time it was fully subsidised and reported via an associated government agency as to my hours and duties, I was not aware that I could not continue to claim Newstart as being a parent as well I thought that it was some parenting payment and the Centrelink system confused me. Work with Peter F Burns continued as my now ex husband was also working there and I assisted him. From my recollection it was paid via his salary and fully declared.”
Ms Vowles confirmed that Ms Hogben’s wages did not change after early December 2011 and this is confirmed by payroll advice records.
A PAYG payment summary dated 10 July 2012 from Peter F Burns and signed by Ms Vowles corroborates that Ms Hogben was paid $24,700 in wages by Peter F Burns during the period 1 July 2011 to 30 June 2012.
A document headed “Card Transactions (Accrual) 1/03/2011 to 11/11/2013” printed on 20 December 2013 shows $30,219 was paid into Ms Hogben’s account between 23 March 2011 and 10 July 2012.
Because of the volume of conflicting evidence from Ms Hogben, and the lack of corroborating evidence that was provided contemporaneously, the Tribunal is unable to rely on Ms Hogben’s contention that she was not employed but receiving child support during the period that she was paid wages by Peter F Burns.
The Tribunal is unable to rely on the “Child Support Agreement” provided by Ms Hogben, or on the divorce filing document, as other contemporary evidence brings the validity Ms Hogben’s evidence into question.
In oral evidence Ms Hogben stated:
I can categorically under oath absolutely are certain to you that I never received any money from Peter F Burns Real Estate that was not child support unless I had stated and claimed that.
….
I never received any money from Peter F Burns that was not child support.
….
I’ve always said that I worked in there [Peter F Burns] for a short period of time. I’m absolutely not denying that.
The Tribunal is unable to rely on Ms Hogben’s recollection of events. Ms Hogben’s responses were evasive and her evidence contradictory.
The Tribunal is satisfied that the contemporary employment related agreements and wage records as well as the oral evidence of Ms Vowles, which for the most part was linked to contemporary events and records, is reliable evidence. This evidence supports that Ms Hogben was employed by Peter F Burns Pty Ltd providing telemarketing services, obtaining sales leads, and providing personal assistant services for Mr Pearce from 14 March 2011 until 13 July 2012.
For these reasons the Tribunal finds Ms Hogben received an amount of wages from Peter F Burns that was not “maintenance income” and so was “ordinary income” for the purpose of calculating her entitlements. The Tribunal also finds that this income should be taken into account when calculating Ms Hogben’s maximum rate of NSA.
Failure to report income
In oral evidence Ms Hogben asserted that to any extent her wage details were not provided to Centrelink it was because she believed Campbell Page should have declared it.
The Tribunal is satisfied that notices were sent to Ms Hogben by Centrelink throughout the relevant period. These notices contained requirements and relevantly that Ms Hogben inform Centrelink within 14 days if her income or her family income had changed since previously reported. Section 72 of the Administration Act provides that a person must advise of changes within 14 days.
The Tribunal is not satisfied that Ms Hogben can abrogate reporting obligations to a third party such as Campbell Page, and notes that Ms Hogben did, on occasion, declare some income to the Department indicating that she did understand her reporting obligations and ignored them.
The Tribunal finds that Ms Hogben did not comply with the notices sent to her, including obligations under subsection 68(2) of the Administration Act, to the extent that she failed to report, or underreported her income and estimated income.
As the payments received by Ms Hogben from Peter F Burns were ordinary income and they were undeclared the Tribunal finds that the Department was correct in applying the automatic rate reduction provided for in subsection 100(1) of the Administration Act as Ms Hogben had not complied with the requirements contained in the subsection 68(2) notices and the timeframe for a response set out in section 72 of the Administration Act.
Calculation of maximum rate and overpayment
Ms Hogben provided a document headed “Calculations for argument – Centrelink tribunal Newstart Matter debt number A714”. This document asserts a different calculation of the debt amount raised by the Department through an adjustment that simply removes the “Newstart Alleged debt” and recovery fee, and by adding in a notional entitlement to parenting payment. Ms Hogben provided no argument in relation to the correct approach to calculate the maximum rate and any overpayment.
The Secretary provided details of the Department’s calculations to the Tribunal, and the Tribunal is satisfied that these calculations have been correctly calculated in accordance with section 643 of the Act, Benefit Calculator B at the end of section 1068, and by following the method of calculating rate set out in 1068-A1.[47]
[47] T13 pp135-150.
The Tribunal is satisfied that the methodology and calculation used by the Department in calculating Ms Hogben’s maximum rate of NSA is correct.
For these reasons the Tribunal finds Ms Hogben was overpaid $15,782.95 during the period 22 March 2011 to 23 July 2012.
Is there a debt to the Commonwealth?
Section 1222A of the Act provides that if an amount has been paid by way of social security payment the amount is a debt due to the Commonwealth if the amount should not have been paid.
Section 1223 relevantly provides the general rule in relation to debts arising from overpayment.
(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.
There is no dispute that social security payments were made to Ms Hogben during the period.
Section 1223(9) sets out that the general rule is also applicable to any part of a social security payment. This means that a person who is paid a higher rate of a social security payment than that to which they are entitled owes the balance as a debt due to the Commonwealth.
As Ms Hogben benefitted from NSA overpayments by $15,782.95 during the period 22 March 2011 to 23 July 2012 the Tribunal finds that this amount is a debt due to the Commonwealth by Ms Hogben and the debt is taken to arise when Ms Hogben obtained the benefit of the payment, the period from 22 March 2011 through to 23 June 2012.
If there is a recoverable debt, is it appropriate to impose a debt recovery fee of $1,575.25 or some other amount?
Section 1228B of the Act provides:
Additional 10% penalty for understatement etc. of income
(1)An amount by way of penalty is added to a debt due to the Commonwealth under this Chapter by a person in relation to a social security payment if:
a) at the time the payment was made, the person:
(i)had attained the minimum age for youth allowance as defined by section 543A; and
(ii)had not reached pension age; and
Note: For pension age see subsections 23(5A), (5B), (5C) and (5D).
b) the payment was:
(i)a social security benefit; or
… and
c) the debt arose wholly or partly because the person had:
(i)refused or failed to provide information in relation to the person's income from personal exertion; or
(ii)knowingly or recklessly provided false or misleading information in relation to the person's income from personal exertion;
when required, under a provision of the social security law, to provide information in relation to the person's income from personal exertion.
Note: For income from personal exertion see subsection 8(1).
(2)The amount added by way of penalty is an amount equal to 10% of so much of the debt as arose because the person refused or failed to provide the information or provided the false or misleading information.
(2A) To avoid doubt, the amount added by way of penalty is part of the debt.
(3)An amount worked out under subsection (2) must be rounded down to the nearest 5 cents.
(4)This section does not apply if the Secretary is satisfied that the person had a reasonable excuse for refusing or failing to provide the information.
The Secretary contends that it is appropriate to apply the 10% penalty in this matter as Ms Hogben was provided notices under subsection 68(2) of the Administration Act satisfying paragraph 1228B(1)(a); was receiving a social security benefit satisfying subparagraph 1228B(1)(b)(i); and, knowingly or recklessly provided false or misleading information in relation to her income from personal exertion.
Ms Hogben has on many occasions throughout the hearing stated that she never knowingly told the Department anything that was untrue. The Tribunal is not satisfied that this is true for reasons illustrated by the below examples.
Centrelink online data recording (ODR) from 21 March 2011, two days before receiving her first payment from Peter F Burns Pty Ltd, records that Ms Hogben contacted Centrelink to inform them of a change in earnings.[48] This appears incongruous with her contact with Centrelink on 1 April 2011.
[48] T14 p184.
On 1 April 2011 the ODR records that Ms Hogben requested urgent financial assistance and also stated that she had spent all of her money on clothes for her new employment. She stated that she would not be able to attend her new job which Ms Hogben said she was starting on Monday.[49] This statement is not in accord with Ms Hogben having commenced working for Peter F Burns Pty Ltd on 4 March 2011 and her already having received her first fortnightly wage of $855 on 23 March 2011.[50]
[49] T14 p185.
[50] Ex 3, Annexure H p136.
On 18 April 2011 the ODR records that Ms Hogben contacted Centrelink to let them know she had received a gross amount of income of $120.[51] This is evidently untrue as by then, Peter F Burns Pty Ltd payroll records indicate Ms Hogben had received two fortnightly pays each of $855 net.[52]
[51] T14 p189.
[52] Annexure H p136.
Centrelink information notices had been sent to Ms Hogben pursuant to subsection 68(2) of the Administration Act requiring her to report her earnings to Centrelink fortnightly. Ms Hogben consistently failed to declare or underdeclared income during the period.
On 1 July 2011 an ODR records Ms Hogben’s NSA suspension because she failed to report her earnings or her partner’s [Mr Pearce’s] earnings.[53] On 20 July 2011 an ODR states that Ms Hogben contacted Centrelink about the taxation reconciliation that had made the Department aware she and her partner had been earning income. Ms Hogben told the Centrelink officer that she could not confirm their earnings.[54]
[53] T14 p192.
[54] T14 p195.
On 1 September 2011 the ODR records Ms Hogben contacting Centrelink updating her and Mr Pearce’s estimated income for family assistance office assessment calculation purposes. She estimated her income for 2011/2012 from 1 September 2011 as $11,300 and Mr Pearce’s as $23,000.[55] The Tribunal is unable to reconcile this estimate with her and her husband’s actual earnings at that time. Ms Hogben had already received $10,316.51 in wages and payments for the first two months of the financial year, and Mr Pearce received $11,562 in wages and advances.[56]
[55] T14 p 200.
[56] Annexure I p164.
The Tribunal is not satisfied that Ms Hogben could be unaware on multiple occasions, as illustrated by those above, that she was telling the Department untruths.
In support of a contention that she had a “reasonable excuse” satisfying subsection 1228B(4) of the Act Ms Hogben offered that she and her family were facing very difficult circumstances during the relevant period. She explained that their life had gone from one of privilege to one of having no assets, fearing that they would have to live under a bridge, and struggling with adverse publicity resulting in their children being harassed at school. The Tribunal has some sympathy for the situation Ms Hogben was faced with.
In this matter Ms Hogben had been alerted on numerous occasions of the need to declare her income. There are records that show she was aware that the Department matched records with the Australian Taxation Office, and still Ms Hogben continued to fail to declare, under-declare, and underestimate the income she was receiving from the work she undertook with Peter F Burns Pty.
The Tribunal is satisfied that in this matter Ms Hogben does not have a “reasonable excuse” for failing to provide information and subsection 1228B(4) is not applicable.
For these reasons the Tribunal finds that an amount of 10% recovery fee should be applied to Ms Hogben’s entire debt pursuant to subsection 1228B of the Act.
Is there any basis not to recover the debt or any part of it?
Write-off
Subsection 1236(1) of the Act provides that the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise. Subsection 1236(1A) sets out:
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.
Ms Hogben has indicated that the debt is irrecoverable at law because as a bankrupt paragraph 1236(1A)(a) is enlivened.
Subsection 1236(1B) describes the limited circumstances in which a debt is taken to be irrecoverable by law:
For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
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.
Ms Hogben’s bankruptcy period commenced on 29 May 2009 and prior to her incurring the debt in this matter.
Ms Hogben’s debt in this matter relates to payments made commencing on 22 March 2011. It follows that as Ms Hogben’s debt to the Commonwealth was incurred after she became bankrupt and not before. Only debts that the debtor was subject to prior to the bankruptcy (or that are due to an obligation incurred prior to the bankruptcy) will become provable debts.[57]
[57] Bankruptcy Act 1966 s 82.
Ms Hogben made no claims in relation to the other circumstances in which a debt can be taken to be irrecoverable by law.
For these reasons the Tribunal is satisfied that Ms Hogben’s debt it is not irrecoverable at law and the criteria at paragraph 1236(1A)(a) is not met.
Paragraph 1236(1A)(b) of the Act enables the Secretary to write off a debt where the debtor has no capacity to repay that debt. Subsection 1236(1C) sets out criteria that demonstrate the debtors capacity to repay:
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.
Ms Hogben has previously demonstrated a capacity to pay off debts to the Commonwealth from social security payments.
Ms Hogben has indicated that she has been the subject of severe financial hardship. Severe financial hardship is not defined in the Act but has been visited in numerous cases.
In Stubbs and Secretary, Department of Family and Community Services [2003] AATA 729 [20] the Tribunal considered whether the applicant would suffer severe financial hardship if the debt were not waived:
"Severe financial hardship, while not implying destitution, goes beyond straitened financial circumstances and imports a need for the particular case of a person to include financial suffering of a severe or extreme nature."
While it is accepted that Ms Hogben has struggled financially, in oral evidence Ms Hogben stated that she pays rent to her mother and, when she can, she financially assists her two adult children that have left home.
The Tribunal is not satisfied that Ms Hogben’s financial suffering is of a severe or extreme nature. The Tribunal is, however, satisfied that the debt is recoverable by means described in 1236(1C). For these reasons the Tribunal is unable to find that Ms Hogben cannot repay her debts and the criterion at paragraph 1236(1A)(b) is not met.
Ms Hogben’s whereabouts are known to the Department so the Tribunal is satisfied that the criteria at paragraph 1236(1A)(c) of the Act are not met.
The Commonwealth is experienced in collecting debts large, small and in between and using a wide variety of methods. Apart from affirming that she will take this matter to the Federal Court if she fails to succeed in this matter, and also affirming that she will go bankrupt again, Ms Hogben has provided no evidence that demonstrates that it is not cost effective for the Commonwealth to take action to recover the debt. For these reasons that Tribunal is satisfied that the criteria at paragraph 1236(1A)(d) are not met.
As none of the criteria contained in 1236(1A) are met the Tribunal is unable to write off the debt in this matter on behalf of the Commonwealth.
Waiver as a result of special circumstances
Section 1237AAD of the Administration Act allows the Secretary to waive the debt under 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.
Note 1: Section 1236 allows the secretary to write off a debt on behalf of the Commonwealth.
Note 2: This section has effect subject to section 1237AAE in relation to an assurance of support debt.Ms Hogben told the Tribunal that she had declared income to Centrelink and that she believed Campbell page were providing Centrelink with her income details. Ms Hogben stated that she had never knowingly failed to declare income and that it was because there was so much going on in her life.
In considering whether Ms Hogben knowingly made a false statement or false representation, or failed or omitted to comply with the provisions requiring her to declare income, the Tribunal turns to the decision of Re Callaghan and Secretary, Department of Social Security [1996] AATA 413 [48]-[49] of Deputy President Forgie:
There is nothing in section 1237AAD which suggests that the word “knowingly” should be given any meaning other than a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting 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 or omission.
Ms Hogben had many interactions with Centrelink over the period. She had entered into an employment contract with Peter F Burns that stated her income and indicated she would be employed at least until December 2011. Ms Hogben consistently ignored her requirement to declare income to Centrelink. When Ms Hogben did declare income, after Centrelink discovered she was receiving income that she had not declared, Ms Hogben significantly understated the income she and her husband were expecting to receive over the 2011 / 2012 financial year.
The Tribunal has already indicated that Ms Hogben’s claim that the income she received from Peter F Burns Pty was child support was, as contemporary emails showed, a vehicle created by Ms Hogben’s accountant in order to reduce her husband’s tax burden. This taxation vehicle was created long after Ms Hogben was required to declare her income to Centrelink.
The Tribunal finds that Ms Hogben does not meet the requirement of 1237AAD(a) of the Act in order to meet the special circumstances waiver provisions because she knowingly made a false statement or a false representation and failed to comply with a provision of this Act or the Administration Act.
While the finding that Ms Hogben does not meet the requirements of 1237AAD(a) is enough to preclude the enlivenment of a waiver based on special circumstances, for completeness the Tribunal also considered the special circumstances contended by Ms Hogben.
The term ‘special circumstances’ is not defined in the Act, the Administration Act, or related legislation. It has been considered on many occasions by the Federal Court and the Tribunal. While, in the interests of consistency, previous decisions will help inform future decisions, every matter has its own facts and each will be determined on its own merits.
The Tribunal draws on a number of previous considerations in order to assess Ms Hogben’s circumstances. Special circumstances are circumstances that are unusual, uncommon or out of the ordinary.[58] Special circumstances provisions are “release valves”[59] such that strict application of the rules in the circumstances would create an injustice and that is unfair, unjust or an unintended outcome.[60]
[58] Groth and Secretary, Department of Social Security (1995) FCA 1708 [12]; Dranichnikov v Centrelink (2003) FCAFC 133 [33]; Angelakos and Secretary, Department of Employment and Workplace Relations (2007) FCA 25 [33].
[59] Kirkbright and v Secretary, Department of Family & Community Services (2000) FCA 1876 [28].
[60] Groth and Secretary, Department of Social Security (1995) FCA 1708 [12]; Secretary, Department of Family, Housing, and Community Services and Indigenous Affairs v Jones (2012) FCA 639 [51]; Secretary, Department of Social Security v Le-Huray (1996) FCA 1558 [21]-[23]; Salangsang and Secretary, Department of Education, Employment and Workplace Relations (2010) AATA 55 [66]; SRL and Secretary, Department of Social Security (1998) AATA 326 [55]; Klein v Domus Pty Ltd (1963) 109 CLR 467 [467],[471].
In order to be considered special circumstances the circumstances cannot be ordinary or usually expected circumstances in a particular context. In the matter of Beadle the Tribunal observed:
An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend on the context in which they occur.[61]
[61] Beadle and Director-General Social Security (1984) 6 ALD 1,3.
In two documents; the first headed “Debt number A7149119”[62] and the second headed “Statement for Centrelink” [63]; both undated although both appear to have been provided to Centrelink on 24 September 2018, Ms Hogben sets out her special circumstances as:
[62] Annexure C pp82-86.
[63] Annexure D pp87-91.
· I am currently a single mother and have 5 children
· I fled a domestic violence situation last year
· I have sole custody of my children
· Until recently I have been living in a single bedroom with my mother
· She is unfortunately very sick and recovering from cancer
· I am 45 years of age
· I have no future earning abilities and if I was to repay the debt it would not be able to be repaid based on current circumstances until I was 65 years of age (or 2038)
· I do not have any assets
· I received much negative media attention regarding this case which resulted in years of unfair prejudice.[64]
[64] Annexure C p86.
Being a single mother, with sole custody of children and with no assets is, sadly, not unusual, uncommon or out of the ordinary for social welfare recipients.
In oral evidence Ms Hogben indicated that her two eldest children were now no longer living with her and that she was living in a property with her three younger children and paying rent to her mother who owned the property.
Ms Hogben also stated in oral evidence that she is undertaking a pathways program at university in order to study legal services with a plan to become a lawyer. After the difficulties she has been through it is noteworthy that she is now building what she hopes will be a bright future for her and her family. Ms Hogben has presented to the Tribunal as a determined individual who can meet the challenge. This does not, however, fit congruently with the assertion that she has no future earning abilities and will never be able to pay off the debt. The Secretary also points out in her submission that Ms Hogben is still relatively young with decades of working life ahead of her.
There is no dispute that Ms Hogben has been subject to domestic violence, and this is a situation that nobody should have to face. It is noted that Ms Hogben has now removed herself and her children from this situation. The Tribunal is not satisfied that previous domestic violence, and domestic violence that is not in the immediate past, is enough to qualify as special circumstances that would result in the waiving of a person’s debt to the Commonwealth.
Apart from Ms Hogben’s statement that her mother is recovering, the Tribunal has no evidence before it of Ms Hogben’s mother’s illness. There is no evidence demonstrating that Ms Hogben’s mother’s illness is affecting Ms Hogben’s ability to pay off a debt.
Ms Hogben stated that she had been the subject of negative media attention and that this negative attention made it difficult for her to obtain employment. Ms Hogben also stated that she had obtained employment since the media attention. For this reason the Tribunal is not satisfied that the media attention can be considered a special circumstance that would lead to the waiving of a person’s debt to the Commonwealth.
The Tribunal is not satisfied that any of the reasons provided by Ms Hogben as special circumstances would individually qualify as special circumstances under which a debt should be written off. The Tribunal also considered whether together these circumstances may contribute to a perfect storm as described by now Deputy President Britten-Jones in Secretary, Department of Social Services and Willersdorf.[65] In Willersdorf the issue before the Tribunal was whether the situational factors that were insufficient to meet the special circumstances threshold when combined in determining whether an extension of time to lodge a tax return should be allowed. The compressed timeframe in the few months leading up to the tax return deadline was filled with tragedy and complexity in that matter resulted in what Britten-Jones DP described as a “perfect storm” and the late lodgement of her tax return was allowed for the purposes of claiming family tax benefits.
[65] Secretary, Department of Social Services and Willersdorf, (Social services second review) [2016] AATA 535 (27 July 2016).
The Tribunal is not satisfied that a perfect storm existed in Ms Hogben’s matter as even the combination of Ms Hogben’s situational difficulties cannot be found so unusual, uncommon or exceptional as to meet the threshold expected under section 1237AAD of the Act.
There is no doubt that Ms Hogben faced challenging times. There is also no doubt that the social security safety net was available for her to the extent that she qualified for payments. Ms Hogben had the benefit of the NSA payments made to her that she had no entitlement to. There is nothing in Ms Hogben’s circumstances that the Tribunal is able to interpret as special circumstances under subsection 1237AAD(b).
For the above reasons the Tribunal finds that Ms Hogben does not qualify for a waiver under special circumstances provisions in relation to her claim.
Waiver as a result of Departmental error
Section 1237A of the Act mandates that the Secretary must waive the right to recover the proportion of a debt that is attributable solely to administrative error on the part of the Department. As has been explained on numerous occasions by this Tribunal, the words "attributable solely" are to be given their natural and ordinary meaning.[66] That is to say, that where departmental error has contributed to but not solely caused the relevant debt, s1237A is not applicable.
[66] Gerhardt and Department Employment, Education & Training [1996) AATA 173, [35)- (40); Gagatek and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012) AATA 255, [32] [40].
In this instance, there is no evidence that the debt was caused by any error on the part of the Department. The debt was caused solely by the failure of Ms Hogben to declare to the Department her income from Peter F Burns Pty Ltd. For these reasons the Tribunal so finds that the debt is unable to be waived under section 1237A.
Waiver as a result of a notional entitlement
Subsection 1237AAC(4) of the Act sets out the conditions for a waiver where an amount of parenting allowance would have been payable had a claim been lodged:
If:
a) A debt arises from overpayments to the debtor; and
b) The Secretary is satisfied that the overpayments 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
c) The debtor or the debtor’s partner did not claim parenting allowance or parenting payment for the period (the overpayment period) when the overpayments were made; and
d) An amount of parenting allowance or parenting payment would have been payable for that period if the debtor or the debtor’s partner had lodged a claim;
the Secretary must waive the right to recover the debt to the extent set out in subsection (5).
The Secretary has conceded that Ms Hogben had a notional entitlement to PPS in the period 28 June 2011 to 6 February 2012 and the calculation by the Department shows that this parenting payment would have amounted to $5,325.08.
At paragraph 1237AAC(4)(b) of the Act there is a satisfaction prerequisite about knowingly making false statements and failing to comply as is required in section 1237AAD.
As discussed in the reasoning for the finding in relation to section 1237AAD of the Act, the Tribunal finds that Ms Hogben does not qualify under section 1237AAC(4) for a waiver as a result of a notional entitlement because she knowingly made a false statement or a false representation and failed to comply with a provision of this Act, the Administration Act or the 1947 Act.
For these reasons Tribunal finds that there is no reason not to recover the debts incurred by Ms Hogben.
CONCLUSION
The Tribunal is satisfied that Ms Hogben was paid NSA between 30 January 2010 and 28 August 2012 and that from 22 March 2011 to 23 July 2012 she also received ordinary income that she earned working as a telemarketer and personal assistant with Peter F Burns Pty Ltd.
The Tribunal has found that the Department sent appropriate notices to Ms Hogben requiring her to report her income within 14 days.
The Tribunal has also found that Ms Hogben did not declare or under declared this income during the period 22 March 2011 to 23 July 2012, a period when she was being paid NSA. For this reason the Tribunal found that the Department was correct in applying the automatic rate reduction provided for in subsection 100(1) of the Administration Act.
The Tribunal finds that by applying section 643 of the Act, Benefit Calculator B at the end of section 1068, and by following the method of calculating rate set out in 1068-A1 that Ms Hogben was overpaid $15,782.95 during the period 22 March 2011 and 23 July 2012.
As Ms Hogben was paid an amount that should not have been paid to her, and that she benefitted from the payment to which she was not entitled, the Tribunal finds that Ms Hogben owes the amount of overpayment as a debt to the Commonwealth.
The Tribunal is satisfied that Ms Hogben knowingly provided false or misleading information in relation to the income she derived from personal exertion and finds that the additional 10% penalty for understatement etc of income set out in section 1228B of the Act, or $1,578.25 should be added to the debt.
The Tribunal is not satisfied that any of the required criteria contained in subsection 1236(1A) are enlivened in order to write off the debt.
The Tribunal is satisfied that Ms Hogben knowingly made a false statement or a false representation and also failed to comply with a provision of the Act or Administration Act which precludes her from having her debt waived as a result of special circumstances under section 1237AAD of the Act; or having it waived as a result of departmental error under section 1237A of the Act; or having the debt waived as a result of a notional entitlement under subsection 1237AAC(4) of the Act.
The Tribunal has found no reason that Ms Hogben’s debt to the Commonwealth (debt number A7149119) totalling $17,361.20, including the debt recovery fee, should not be recovered.
DECISION
The Tribunal sets aside the decision under review and substitutes the decision that:
(i)Ms Hogben has a debt to the Commonwealth in the amount of $15,782.95 resulting from overpayment of Newstart allowance for the period 22 March 2011 to 23 June 2012;
(ii)A 10% penalty amount of $1,578.25 is to be added to that debt pursuant to section 1228B of the Social Security Act 1991; and
(iii)The debt is recoverable in its entirety.
I certify that the preceding one hundred and eighty-seven (187) paragraphs are a true copy of the reasons for the decision herein of Member G Hallwood.
..................[sgnd]...............................
Administrative Assistant Legal
Dated: 27 April 2020
Date of hearing: 15 March 2019 & 1 May 2019 Applicant:
In person Advocate for the Respondent: Ms L Odgers Solicitors for the Respondent: Department of Human Services
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