Joseski and Secretary, Department of Social Services (Social services second review)
[2021] AATA 3412
•24 September 2021
Joseski and Secretary, Department of Social Services (Social services second review) [2021] AATA 3412 (24 September 2021)
Division:GENERAL DIVISION
File Number(s): 2020/2123
Re:Mr Steven Joseski
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:24 September 2021
Place:Sydney
The reviewable decision, being the decision dated 2 April 2020 by the AAT1, is set aside and remitted to the Secretary with an order that the entire debt be written off.
.....................................[sgd]...................................
Emeritus Professor P A Fairall, Senior Member
CATCHWORDS
SOCIAL SECURITY – carer payment – carer allowance – whether applicant obtained the benefit of these payments when not entitled to – whether applicant has a debt to the Commonwealth – serious mental illness – capacity to repay the debt – whether debt should be written off – whether debt solely attributable to administrative error – whether debt should be waived due to special circumstances – decision set aside and remitted
LEGISLATION
Social Security Act 1991 (Cth)
Social Security (Administration) Act 1999 (Cth)
CASES
Chen and Secretary, Department of Social Services (Social services second review) [2019] AATA 560
Pledger v Secretary, Department of Family & Community Services [2002] FCA 1576
Secretary, Department of Family and Community Services v Sekhon [2003] FCA 76
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Skinner and Secretary, Department of Social Services [2015] AATA 569South Western Sydney Area Health Service v Joseski [2007] NSWSC 351
SECONDARY MATERIALS
Social Security Guide
REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
24 September 2021
INTRODUCTION
The applicant applied for review of a decision by the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) dated 2 April 2020. In that decision, it was stated that the applicant has three debts to the Commonwealth amounting to $59,687.43. The Tribunal found that there was a debt owing to the Commonwealth on the basis that the applicant was not entitled to receive any of the payments that made up the debt, that there were no grounds for writing off the debt, and that the debt could not be cancelled by reason of ‘special circumstances’.[1]
[1] T2/3-4.
THE TRIBUNAL HEARING
The Tribunal heard the matter on 20 August 2021. The applicant was not legally represented. Given the amount involved and the applicant’s psychiatric condition, this was unfortunate. In Chen and Secretary, Department of Social Services (Social services second review) [2019] AATA 560, Senior Member Puplick AO considered the difficulties of conducting a fair hearing where the applicant is affected by a serious mental illness. The concerns expressed by the learned senior member apply with equal force in this case.
The applicant was however most ably assisted by a health care worker, Ms ANG. She told the Tribunal that she was employed by an agency contracted to the NIDS to assist the applicant with daily activities, managing his affairs, including appointments with doctors and psychiatrists. Ms ANG said that she is a psychology student. She gave evidence as to the care which she provides and her general impressions of the applicant’s level of impairment. Given her present lack of professional qualifications, her evidence was admitted as that of a layperson.
BACKGROUND
The applicant was born in 1969. He suffers from chronic schizophrenia, a psychiatric illness characterised by delusions, hallucinations, disorganised speech and behaviour, and other symptoms that cause social or occupational dysfunction.[2] Depending on the severity of symptoms, it may be a devastating and debilitating illness. The applicant has received Disability Support Pension (DSP) since 1999. He is known to the mental health services in his area.[3] Although the Tribunal does not have the applicant’s full medical history, there is little doubt that his psychiatric condition is serious and of long standing. The applicant informed the Tribunal that he had been recently approved under the National Disability Insurance Scheme (NDIS). He said that he had been approved for supported accommodation.
[2] American Psychiatric Association, Fact Sheet, Schizophrenia, DSM5
[3] ST7/744-5.
Ms ANG told the Tribunal that the applicant has been hospitalised for psychiatric treatment on several occasions over the past twenty years. There are some traces of it in the public record. For example, he was a voluntary patient in the Mental Health Unit of the Liverpool Public Hospital in 1999 when he was assaulted by a fellow patient. He suffered physical and psychological injury and recovered damages.[4]
[4] South Western Sydney Area Health Service v Joseski [2007] NSWSC 351.
The applicant also has a well-documented inability to manage his financial affairs, as noted by AAT1.[5] On 20 April 2015, the applicant was admitted to bankruptcy. He was discharged from bankruptcy on 21 April 2018.[6]
[5] AAT1, [14]: T2/5.
[6] T14/117. The applicant states in his Personal Statement that he was discharged on 21 April 2020 but this appears to be incorrect. Nothing turns on it: T15/118.
The applicant was previously married, but sometime around 2007 or 2008, he and his wife separated. She left the family residence and went to stay with her mother, a few streets away. He continued to reside in the family home with their three children, aged two, five, and twelve. His mother came to the house and helped with supervision, cooking meals, and washing clothes. Although she had left the home, his separated wife also helped out occasionally.[7]
[7] ST7/744.
When the applicant and his wife separated, a heavy load fell on the applicant’s son, to whom I shall refer in these reasons as MINA. He helped his father in the morning with some supervision due to his cognitive and memory problems. He laid out his clothes and arrived an hour late for school every day.[8] He also provided care for his father after dinner time.
[8] ST7/744-5.
CARER ALLOWANCE AND CARER PAYMENT
The legislation concerning carer allowance and carer payment is contained in the Social Security Act 1991 (the Act).
1.2.5.50 Carer Allowance (CA)
CA is a payment to a person who provides care and attention on a daily basis at home to a person with a disability or medical condition. CA (child) may be paid to carers of dependent children with disability or medical condition aged under 16 years of age and where the income test requirements are met, while CA (adult) provides a payment in respect of a person who is aged 16 years or over, whose disability or medical condition substantially impairs his or her capacity to perform activities of daily living.
In September 2008, MINA contacted Centrelink to see whether he was entitled to some allowance.[9] Centrelink arranged for a social worker to interview the father and son.[10] The social worker concluded that MINA did provide some care, although the applicant’s mother was the primary carer. She said she would explore what other services might be of assistance. She provided MINA with information about the young carer’s program run by Anglicare and offered to make various referrals to other support groups for the applicant.[11] On 28 October 2008, Centrelink approved a carer’s allowance (CA) from September 2008.[12] MINA was 12 years old.
[9] ST7/728, 731, 732.
[10] ST7/728.
[11] ST7/744.
[12] ST/746.
The Secretary also appointed the applicant to act as MINA’s payment and correspondence nominee.[13] A payment nominee is a person, other than the social security recipient, to whom the whole or part of the recipient's payment can be made under the direction of the Secretary.[14] A correspondence nominee is authorised to receive and respond to correspondence relating to the principal, and is required to update Centrelink on any changes that may affect the principal’s entitlements, or their own capacity to act as nominee.
[13] On 8 October 2008: ST1/697.
[14] Social Security Guide, 1.1.N.80 Nominee.
1.2.5.20 Carer Payment (CP)
CP is an income support payment for people who are unable to support themselves through substantial paid employment due to the demands of their caring role.
CP may be paid where a carer (1.1.C.40) provides constant care (1.1.C.310) for:
a.a person who has a physical, intellectual or psychiatric disability, OR
b.a disabled adult who has a dependent child in their care. If the dependent child is aged 6 years or over, a person must qualify for and receive CA for that child, OR
c.a child with severe disability (1.1.S.133) or a severe medical condition (1.1.S.130), OR
d.2 or more children, with disability or medical condition, OR
e.a disabled adult and 1 or more children each with disability or medical condition, OR
f.a child with severe disability or severe medical condition on a short-term or episodic basis, OR
g.a profoundly disabled child or a disabled child (saved pre 1 July 2009).
h.CP may also be paid where parents are exchanging care of 2 or more children each with severe disability or severe medical condition or disability or medical condition, under a parenting plan.
On 20 April 2015, the applicant was admitted to bankruptcy. Three weeks later, MINA dropped out of high school.[15] It is not unlikely that these events are linked.
[15] On 16 May 2015: ST7/761.
MINA had been receiving a CA throughout, and on 12 June 2014, he applied for CP.[16] On 17 June 2014, Centrelink spoke with both son and father together. They attended an appointment with a social worker on 14 July 2014. The report prepared for Centrelink stated:
It is Social Workers opinion that [MINA] provides a high level of continuous care to his father Steven Joseski who suffers from a significant mental health condition which often deteriorated and requires professional intervention. [MINA] has agreed to have the nominee arrangement removed and is requesting this future payments go to [his own account]. Several at home or part time study options were explored with [MINA] due to his young age so that he may be able to compete in the workforce in the future. It was acknowledged and accepted by [MINA] that his role as a full time carer is very important to him and acted on by choice. Therefore, SW is recommending payment of Carer Payment.[17]
[16] ST7/756.
[17] T7/767.
On 14 July 2014, the Centrelink file-note records: ‘Under 18 Carer assessment now complete. See other docs. Pls note to change–payment destination. Remove nominee.’[18]
[18] ST7/766.
The applicant was not removed as a correspondence nominee. Only the payment nominee arrangement was cancelled.[19] MINA had just turned 18. He provided Centrelink with his bank account details. It appears that he had just opened a new bank account.
[19] ST4/714.
On 17 July 2014, the applicant contacted Centrelink and advised that MINA was in severe financial hardship and asked Centrelink to process the payment as quickly as possible. A Centrelink officer phoned back and left a message for the applicant saying: ‘I still require proof of bank account in the customer’s name and bank balance. I have also spoken to customer [MINA] and advised’.[20]
[20] ST7/768.
On 21 July 2014, a file note states that MINA contacted Centrelink regarding general enquiry re Carer Allowance. It was ‘confined’ [sic] that ‘no longer payment nominee only nominee’.[21]
[21] ST1/700, 701.
The Tribunal cannot find any file note as to why the applicant was kept on the file as a correspondence nominee. Indeed, on 14 September 2014, a file note records that MINA ‘asked for their mail to be sent to their Australian address’.[22]
[22] ST7/771.
MINA seems to have taken his reporting obligations seriously. On 11 September 2014, he contacted Centrelink to discuss portability and change of accommodation details.[23] He was planning a week-long trip to Indonesia. He travelled overseas from 30 May 2015 and returned to Australia on 5 September 2015. He had a week in Fiji in December 2015 and duly informed Centrelink.[24] In 2016 he gained some work,[25] and after a temporary interruption to care payment he was reinstated in February 2017.[26] In March 2017 he advised he was no longer working.[27] On 18 August 2017, he advised a change of address.[28] He was no longer living with his father. On 21 August 2017 he reported for the previous fortnight.[29]
[23] ST7/770.
[24] ST7/787.
[25] ST7/798.
[26] ST7/812.
[27] ST7/813.
[28] ST7/815.
[29] ST7/816.
MINA did not give evidence to the Tribunal, but in light of his later statements to Centrelink that he was unaware of the nominee arrangements it is entirely possible that he did not appreciate the distinction between a payment and correspondence nominee. It is indeed likely, in light of subsequent events, that he did not know that his father was, had been, and continued to be, his correspondence nominee.
After 2014, it is hard to see any ongoing need for the applicant to be MINA’s correspondence nominee. Moreover, the applicant was still under bankruptcy. He was not discharged until 21 April 2018.
THE SWITCH
On 14 August 2017, Centrelink payments intended for MINA were redirected to an account controlled by the applicant. [30] MINA’s Centrelink entitlements were paid from 21 August 2017 until 3 September 2019, when payment was cancelled. The subject debt was incurred over this period.
[30] See letter dated 18 December 2020 from the CBA.
Who changed the account details? The Respondent states that the identity of the person who made the change is not certain. It appears that the redirection was made online. [31]
[31] ST6/722, 725.
Whether it was made online or by telephone, I am satisfied that it should not have occurred. To the extent that it was facilitated by the online processes provided by Centrelink, it was a serious administrative error.
Dr Thompson, for the Respondent, notes that it is not clear from the computer-generated print out of the redirection order whether this critical change in bank details was made by MINA or the applicant. There is no evidence to support a finding that MINA changed the account details to an account which he did not have access to and did not control.
The theory that the applicant changed the account details online is also problematic. I note that on 18 August 2017, after the account details had been switched, the applicant received a letter welcoming him to Centrelink Letters Online. On 22 August 2017, the applicant registered for self-service and was granted a PIN.[32]
[32] T19/275.
If the applicant was not registered for self-service until 22 August, it is hard to see how he could have processed the change online. This means that the request was made in person or by telephone to Centrelink. There is no record of that conversation.
If he made this request by telephone, and Centrelink acceded to it, this was a serious administrative error. Centrelink was not authorised to make payments to an account that was not controlled by MINA, unless he agreed to it.
Not only were regular payments paid to the applicant’s account, but there were a number of advance payments. Under Centrelink rules is it possible to receive a certain number of advance payments in a year. Advance payments are then set off against future payments.
Starting in 2014, the applicant made multiple advance payment claims, for both DSP and CP. Although many of the claims appear on MINA’s Centrelink file (provided in the Supplementary T-docs), I am satisfied that MINA did not make any of these claims.
There were a few claims for advance payments of DSP in 2015 and 2016, but in 2017-2019 his claims for both DSP and CP accelerated. The applicant’s desperation is recorded in the Centrelink file notes. On a number of occasions, he called six or seven times a day to ask for advance payments. He was nearly always refused.
On 22 August 2017, the applicant applied for and received a CP advance of $1,258.20. As a matter of fact, MINA was not entitled to receive this advance payment at all, because as he later admitted, he was not providing care from May 2017. Nevertheless, the payment was intended for MINA, not for the applicant. The applicant was not a payment nominee. He was not entitled to receive the advance payment. He should not have been paid. The applicant was not authorised to switch accounts from an account controlled by MINA to one that was exclusively controlled by the applicant. He was not a payment nominee.
It seems that in 2018 the applicant lost complete control of his finances. He had a propensity for online shopping and gambling. Obsessive purchasing and hoarding are symptomatic of schizophrenia, and there is some evidence that he suffered from this tendency, frequently buying things that were not needed, and being chided by the children for doing so. His situation became more desperate. He approached pay day lenders and bought items on credit. He contacted Centrelink on several occasions to ask for advances. Some were granted but most requests were refused. It appears that some of these interactions were made as the correspondence nominee, whether he identified himself as such or impersonated MINA is not clear.
I note that during this period he was working at Hoxton Industries. The details of his modest earnings are set out later in these reasons: see para [107].
In 2016 and in 2018, MINA’s carer’s payments were temporarily suspended, and the applicant went to great lengths to have them reinstated.[33] In both cases, he was able to do so because he was a correspondence nominee. On 23 November 2018, an officer queried why MINA wasn’t addressing the issue himself, and the applicant said that he was doing voluntary work.[34] On 25 November 2018, the applicant attended in person with necessary paperwork and said that MINA did not like attending the office. He contacted the office again on 28 November 2018. On 4 December 2018 he reiterated that MINA didn’t like attending the office. On 5 December 2018, payments were restored.[35]
[33] ST7/806, 860.
[34] ST7/860.
[35] ST7/866.
MINA told Centrelink in September 2019 that he stopped providing care to his father in May 2017, having found full-time employment. He told Centrelink that he did not know that payments were still being made to his father, the applicant. He assumed his payment had stopped because of his full-time employment. There appears not to have been any direct communication between Centrelink and MINA about the diversion of CP payments from his account in August to his father’s account. Presumably this was because the correspondence nominee arrangement was still in place.
Dr Thompson contended that the monies paid to the applicant were a debt and had to be repaid. As noted above, MINA told Centrelink that he did not provide care to his father after May 2017. If that is accepted, then the applicant was well aware that any payment made by Centrelink for care after May 2017 was paid in error and would need to be repaid.
Dr Thompson said that the applicant was aware of what he was doing, knew right from wrong, and had not acted in good faith. He relied upon the applicant’s evidence to the Tribunal. He also relied upon written statements made by the applicant in which he acknowledged his wrongdoing.
In light of the applicant’s obvious distress and confusion at the hearing, Dr Thompson sought to reassure him that he would not be left without sufficient funds or bankrupted by Centrelink. At worst, he would be required to repay the debt piecemeal, in affordable bits. Dr Thompson accepted that given the applicant’s age and pension status it was unlikely that the debt would be repaid in his lifetime.
IS THERE A DEBT?
The applicant was not entitled to receive any of payments made after 16 May 2017 intended for MINA. Section 1223 provides:
(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.
The applicant was not entitled to obtain the benefit of the payments. The sum of $59,687.43 is a debt owed by the applicant to the Commonwealth that must be repaid unless there are grounds for writing off the debt under section 1236; or compulsory waiver under s 1237A for sole administrative error, or discretionary waiver under s 1237AAD by reason of ‘special circumstances’. I propose to consider the issue of writing off the debt under section 1236 last.
SOLE ADMINISTRATIVE ERROR - SECTION 1237A
Under subsection 1237A(1) of the Act, 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.
Was there an administrative error?
The substantial cause of the overpayments was that Centrelink redirected payments from MINA’s account to the applicant’s account. This should never have happened. This redirection seems to have occurred without any scrutiny by Centrelink.
Centrelink is not authorised to pay a person’s social security entitlements to a third person without legal authorisation, or the former’s consent. In the absence of express authorisation, Centrelink is neither required nor authorised to redirect social security payments from the principal to a third party, unless the person entitled to receive the payments has consented to the redirection.
This is also set out in paragraph 8.4.3 of the Social Security Policy, which states:
Although, under the Act, the Secretary may direct that a payment be made to another party, this would normally only occur with the consent of the recipient.
Generally, a recipient MUST agree before any payments can be paid to a third party. If the recipient does not have the legal capacity to agree (e.g. because of mental disability), the Secretary may direct payments be made to a third party, provided it is in the best interests of the recipient. This is usually done by appointing a nominee (1.1.N.80), using the relevant form.
The appointment by the Secretary of a payment nominee is one way that a principal may manifest consent. (Where a nominee is appointed under Part 3A of the Administration Act, the social security beneficiary is referred to as the ‘principal’. MINA is therefore the principle.) There are statutory requirements for such an appointment.
If the correspondence nominee and the payment nominee are the same person, then a direction to pay the principle’s entitlements to an account which the nominee controls is perfectly acceptable. Indeed, under subsection 123F(3): ‘An amount that is to be paid to the payment nominee of a person must be paid to the credit of a bank account nominated and maintained by the nominee’.
Broadly speaking, any act that may be done by a benefit recipient under, or for the purposes of, the social security law (other than an act for the purposes of Division 2 or 3) may be done by the benefit recipient's correspondence nominee.[36] The Respondent notes that this authority extends to changing bank account details, noting that the Agency (Centrelink) says as much on its website.[37]
[36] Subsection 123H(1). This broad power is subject to section 123S.
[37] See RSFIC, 10.11-10.12.
The Centrelink website provides: ‘Correspondence nominees may also be able to change the bank account where your Centrelink payment goes. They’ll be able to do this if you don't have a payment nominee arrangement with another person’.[38]
[38] Services Australia, Someone to deal with us on your behalf (28 June 2021) <Someone to deal with us on your behalf - Services Australia>.
This statement is too broad. It suggests that a correspondence nominee can change the destination account without restriction. A payment nominee may switch the destination account between accounts controlled by the nominee, or for that matter, by the principal. A correspondence nominee who is not a payment nominee may also change the destination account, as long as the new account is controlled by the principal.
I also note the provisions in section 123L relating to the giving of notices to a payment nominee to account for monies received.
(1) The Secretary may give the payment nominee of a benefit recipient a notice that requires the nominee to give the Department a statement giving particulars of the disposal by the nominee of money paid under the social security law to the nominee on behalf of the benefit recipient.
Naturally enough, there is no equivalent provision relating to the correspondence nominee simpliciter. That is because it is not expected that the correspondence nominee will be in receipt of the principal’s entitlements under social security law, unless they are also a payment nominee. Where the correspondence nominee is not the payment nominee, there is no lawful justification for redirecting the principal’s payments to an account which is not maintained by the principal.
The rights and duties of a correspondence nominee as set out in Part 3A do not include the authority to divert funds away from the principal’s account to a personal account to which the principal has no access. If Centrelink accedes to such a request, without obtaining the consent of the principal, this will rank as a serious failure of administration. This must be so whether or not the redirection is facilitated by an online self-service arrangement. A redirection of funds between the principal’s accounts is one thing, a transfer of funds to the account of a third party, quite another.
The applicant’s appointment as nominee
The Administration Act stipulates certain formalities that must be satisfied to appoint a nominee. The appointment is made by the Secretary, and there is a legislative requirement that the principal, in this case, MINA, is aware of the arrangement and agrees to it.
Section 123D(2) of the Administration Act provides:
(2)The Secretary must not appoint a nominee for a person (the proposed principal) under section 123B or 123C except:
(a) with the written consent of the person to be appointed; and
(b) after taking into consideration the wishes (if any) of the proposed principal regarding the making of such an appointment.
(3) The Secretary must cause a copy of an appointment under section 123B or 123C to be given to:
(a) the nominee; and
(b) the principal.
Dr Thompson, for Centrelink, asserts that the validity or appropriateness of the nominee appointment is not relevant to these proceedings. With respect, I consider that the applicant’s appointment as MINA’s nominee was a major factor contributing to the overpayments. It is by no means clear that the applicant had the capacity to ‘consent’ to his appointment as nominee; and uncertain whether the Secretary took MINA’s ‘wishes’ into account in making the appointment.
Having observed the applicant during the hearing, I am satisfied that his appointment as nominee is highly problematic. Clearly, the applicant suffers from a chronic psychiatric illness which is extremely disabling and affects his thought processes. This was manifest at the hearing itself. There are many file notes made by Centrelink officers indicating an awareness of his affliction. I am not satisfied that in 2008 the applicant had sufficient mental capacity to consent to these arrangements. His appointment as payment or correspondence nominee was at the very least problematic.
MINA was barely 12 when his father was appointed as his nominee. In 2019, MINA told Centrelink he was not aware of the arrangement.[39] He did not know that his father was his nominee. If so, then clearly his ‘wishes’ were not taken into account.
[39] ST7/893.
The Tribunal does not have a copy of the appointment under s 123B. There is however a file copy of the letter sent to the applicant at the time.[40] It is headed ‘Your Nominee Arrangement’ and states: ‘You have been appointed as a correspondence and payment nominee for [MINA]. This arrangement will remain in place until it is cancelled.’
[40] ST1/697.
The applicant was advised ‘to keep records of the payments you receive and the money you spend on his/her behalf, as these arrangements will be reviewed from time to time.’
While the letter of appointment as nominee reminds the applicant to keep records on the basis that the arrangements would be reviewed from time to time, there is nothing to suggest that the arrangement put in place in 2008 was subject to any review by Centrelink.[41]
[41] ST7/697.
As correspondence nominee, it was the applicant’s responsibility to inform Centrelink of any change of circumstance affecting his son’s entitlement to receive the CA. The letter states: ‘You must tell us within 14 days (28 days if residing outside Australia) of any change in your circumstances which affects or is likely to affect your ability to continue acting as [MINA’s] nominee. This includes such things as a change in your address.’
The decision by Centrelink to appoint the applicant as MINA’s nominee is perplexing. It was well known that the applicant suffered from chronic and disabling schizophrenia. Centrelink had assessed MINA and the applicant as part of the process of approving MINA to receive a CA. A report had been provided by a social worker. His appointment as nominee to receive his 12 year old son’s money and communicate with Centrelink, when he self-evidently lacked the capacity to manage his own financial affairs, is reminiscent of a story by Joseph Heller or, perhaps, Lewis Carrol.
In a report prepared for the NDIS, the author notes that the applicant has a diagnosis of chronic schizophrenia and traumatic brain injury.[42] A few aspects of the report stand out. The reporter judged that his ‘communication abilities speech production, vocabulary, listening, conversation and nonverbal communication skills’ were in the extremely low range.[43] His ability to perform ‘basic academic skills such as reading, writing, mathematics as well as functional skills such as telling time, understanding money and calendar use’ were also in the extremely low range.[44] In terms of money and economic life, the report notes:
[The Applicant] is able to make minor purchases when he goes out using a card. He is able to take money out from an ATM. [He] assists the family by helping to pay the bills. From his family, [he] receives coaching and assistance around budgeting his own money, and how to use his money more responsibly. This coaching and assistance is provided every second day. [He] is currently on a disability support pension and receives family assistance funding. He gets advice from his kids around managing his banking. How he should save and how he should spend. Where he should invest his money.
[42] Mr Rex Chan, physiotherapist, dated 3 November 2019: T8/44.
[43] T8/52.
[44] T8/53.
There is also a reference in the Report to his gambling and on-line shopping habits and the negative impact this has on his relationships with his children.[45]
[The applicant] reports having an addition [sic] with online shopping. He feels a rush when he is online shopping and will buy 4-5 items without thinking about needing them. When [the applicant] has bought the items, [he] reports he can get into arguments with his children as they try to help him understand why he does not need the items he has bought.
[The applicant] smokes 2 packets of cigarettes a day. He does not intend to quit smoking as smoking helps to calm his thoughts and emotions.
[The applicant] has a tendency to spend his money at the local pub on gambling and does not realise the effect this has on his family.
He would benefit from attending a support group to manage this gambling habit.[46]
[45] T8/62.
[46] T8/63.
In a medical letter filed late by the applicant on 7 September 2021, the applicant’s psychologist notes that the applicant presented with issues concerning:
interpersonal difficulties and poor environmental conditions, compounded by positive and negative symptoms relating to schizophrenia, and early life complex. These stressors had resulted in Mr Joseski experiencing a depressed mood state, anxiety, and poor emotion control.
The Secretary does not dispute that the applicant suffers from acute schizophrenia, or that it is in his case a long standing illness. This much is clearly apparent from various medical reports and file notes made by Centrelink officers. For example, a 2019 medical report indicated that the applicant suffers from schizophrenia and head injury causing brain damage in 1989. He required a mental health plan for anxiety/depression, schizophrenia, and obsessive compulsive disorder and gambling.[47]
[47] Dr Sayeed Khan: Patient Summary Report, 15 November 2019: see T10/93
The inappropriate appointment of the applicant as a nominee for his son, coupled with a lack of oversight by the Agency following the appointment, set the stage for a monumental disaster in financial management. I note with concern that at some point the applicant was also appointed as nominee for his parents Hristina and Jose. As recently as 5 April 2019 he was continuing to act as nominee for both of them.[48]
[48] See T19/596, 598.
The correspondence nominee appointment was in place until Centrelink cancelled it in 2019 for suspected fraud. On 3 September 2019, MINA told Centrelink that he had not been providing care since May 2017.
Dr Thompson drew my attention to some recent work of the Australian Law Reform Commission (the Commission) regarding the legislative provisions relating to the appointment of nominees in Part 3A of the Administration Act.[49] The Commission was concerned that the provisions are open to abuse, specifically in relation to circumstances where the principal is a vulnerable person.[50] One of the issues highlighted by the Commission is the lack of an effective review process. The criticisms made by the Commission are borne out by the facts of the present case. For example, the applicant did not receive any notice from Centrelink when he became bankrupt on 20 April 2015. The provisions relating to nominee appointments in the Administration Act do not refer to this situation, but his appointment as nominee should have been terminated at that time. The Commission’s concerns about the nominee arrangement, especially in cases involving a nominee with serious mental health problems, are borne out by the facts of this case.
[49] Elder Abuse (ALRC, DP 83), Sites of greatest risk, [10.11] < Family Violence And Commonwealth Laws—Improving Legal Frameworks (ALRC Report 117) / 9. Social Security—Crisis Payment, Methods Of Payment And Overpayment/Nominee Arrangements < the debt solely attributable to the administrative error made by the Commonwealth?
Even assuming that the Commonwealth erred in appointing the applicant as a nominee, or wrongly redirecting funds to his account, can it be said that the overpayment is solely attributable to these errors?
MINA provided continuous care to his father (apart from a few minor absences when he travelled overseas in 2015) until 16 May 2017, when he moved out of the home. He was working more than 25 hours, and therefore no longer eligible to receive CP.[51] The debt would not have been raised had MINA informed Centrelink in May 2017 that he was no longer providing care. In fact, MINA continued to receive payments until August 2017, when payments to his account ceased. MINA’s failure to notify Centrelink in a timely manner that he was no longer providing care was causally relevant, even if it not the substantial cause of the debt. Moreover, the applicant was under an obligation to inform Centrelink of any change of circumstances, and he ought to have advised Centrelink in May 2017 that he was no longer receiving any care from his son. Had either of these communications occurred, the debt would not have arisen.
[51] ST2/702.
I note that in Secretary, Department of Family and Community Services v Sekhon [2003] FCA 76 at para 52, Wilcox J states:
‘However, it seems to me, the tribunal failed to consider the significance of the inclusion, in s 1237A(1), of the word “solely”. For the subsection to have effect, the “proportion” of the debt — in this case, it is common ground, that would be the whole of it — must be “attributable solely” to administrative error. It is not enough that, in the absence of administrative error, the debt would not have arisen. Administrative error must be the sole cause, not merely one of multiple causes.’
I therefore find that the debts are not solely attributable to an administrative error by the Commonwealth.
Good faith
This analysis makes it perhaps unnecessary to consider the difficult question of whether it can be said that the applicant received the payments in good faith.
The good faith standard (with its origins in the law relating to trusts and fiduciary duties) is not well adapted to situations when the subject has a serious mental illness.
Dr Thompson approached the problem as a question of knowing right from wrong. The applicant’s written expressions of remorse and requests for forgiveness suggested that he was aware that what he was doing was wrong.
The applicant’s response to many of the questions posed to him in relation to receiving of payments in good faith were either that he could not remember or that he did not know. For example:
DR THOMPSON: I will just get it, Senior Member. One moment. It is ST 7, 8893. Now, according to this file note, Mr Joseski, and this is important, it is a record of a phone conversation that a Centrelink officer had with Filip Joseski on 3 September 2019. You will see that date on page 893 and Filip informed Centrelink that he had ceased providing care to you…on 16 May 2017. Do you agree with that, Mr Joseski?
MR JOSESKI: I wasn't there so I don't know.
DR THOMPSON: Do you agree that your son, [MINA], stopped providing care for you on 16 May 2017?
MR JOSESKI: I can't recall.[52]
[52] Transcript of Proceedings (20 August 2021) 15-16.
In Pledger v Secretary, Department of Family & Community Services [2002] FCA 1576 at [59] Justice Weinberg referred to Secretary to the Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127 and Haggerty v Secretary to the Department of Education, Employment, Training and Youth Affairs (2000) 31 AAR 529 and concluded:
‘What seems to emerge from these authorities is that whether a payment has been received in good faith can only be determined after a careful consideration of the actual state of mind of the recipient of that payment. In that sense the test is entirely subjective, and not objective ... It should be noted, in this regard, that wilful blindness is itself a state of mind’
I am satisfied that the applicant knew that he was not entitled to receive these payments. He knew that MINA had moved out and was not providing care after May 2017.
I am satisfied that the applicant knew that it was wrong to receive his son’s carer payments. There is compelling evidence that he impersonated his son in many of the telephone calls he made to Centrelink. When asked about such calls individually, he invariably said ‘I don’t remember’.
But for the fact that he suffers from a chronic psychiatric illness, I would have no difficulty in finding that he was not acting in good faith. In the absence of psychiatric evidence, I am reluctant to make such a finding. His disordered perceptions and muddled thought processes make any such finding problematic. Given the view that I have taken on sole attribution, it is not necessary to do so.
SPECIAL CIRCUMSTANCES WAIVER: S1237AAD
Section 1237AAD provides for waiver in special circumstances.
1237AAD Waiver in special circumstances
The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)The debt did not result wholly or partly from the debtor or another person knowingly:
(i)making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b)there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c)it is more appropriate to waive than to write off the debt or part of the debt.
I note that the Tribunal at first review (AAT1) commented that:
14. The documents available to me give a full description of Mr Joseski’s condition: chronic schizophrenia and traumatic brain injury. His inability to manage his financial affairs is well documented. His Centrelink records show a constant stream of requests for advance payments, both for his own pension as well as for the payments involved in the debts. Mr Joseski can give no account of the reason for his actions in transferring his son’s payments to his account and Mr Prasad told me that, in his opinion, Mr Joseski might not have known that what he did was wrong...[53]
18. Had these debts, which arise from [the applicant’s] mental and physical problems, been related to his disability support pension, I would find it easier to come to the conclusion that it would be unjust to ask him to repay them. In the present case, [the applicant] has diverted money payable to another person and used it for his own purposes. His circumstances are, therefore, not special within the intent of the legislation. He must repay his debts by withholdings from his ongoing pension.[54]
[53] AAT1, [14]: T2/5.
[54] T2/5.
Referring to this passage, the Respondent contends: ‘Mr Joseski’s medical conditions, although considerable, are not enough to constitute special circumstances.[55] The evidence in relation to those conditions is not unusual, uncommon or exceptional for someone in [the applicant’s] circumstances receiving DSP and NDIS.’[56]
[55] Social Security Guide, Part 4.13.4.20 Factors to consider when determining special circumstance provisions.
[56] RSFIC: 10.52.
In Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 155D French J (as he then was) noted that there was a tension on the one hand between the need for certainty in the application of the provision and on the other the desirability for a flexible response to situations that may arise from time to time. His Honour stated:
[t]he concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it. The express exclusion of financial hardship alone as a special circumstance is an indicator that it would otherwise be included. This gives some measure of the range of circumstances which will qualify as special...
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words…But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
The case does present some unusual and extraordinary aspects. First, the approval by Centrelink of MINA to receive a CA when he barely 12 years old; second, the granting of substantial nominee powers to the applicant at the same time; third, the lack of any meaningful review by Centrelink of the manner in which the applicant performed his duties as a nominee, despite institutional awareness as evidenced by multiple file notes, that he suffered from chronic schizophrenia; fourth, the continuation of his role as nominee while he was bankrupt; fifth, the inappropriate continuation of the correspondence nomineeship after MINA reached 18; and finally, and most critically, the payment of Centrelink benefits to an account controlled by the applicant, when he was clearly not entitled to receive them. Centrelink had information that the account to which MINA’s money was redirected was 100% controlled by the applicant.[57]
[57] T19/383, 430.
While the first and second of these aspects may perhaps be justified by abject necessity, the last elements suggest a serious failure of administration. Centrelink is not simply a payment agency. It has important oversight responsibilities. I note the important principles of administration identified in section 8 of the Administration Act which refers to ‘the special needs of disadvantaged groups in the community’. Unfortunately, by that standard, this case does not fare well.
I am satisfied that these circumstances, taken together, amount to ‘special circumstances’ within the meaning of section 1237AAD.
However, in order to waive part or all of the debt, the Tribunal must be satisfied that the applicant or MINA knowingly failed to communicate that he was no longer providing care.
I accept that MINA failed to communicate in May 2017 that he was no longer providing care. I am not satisfied that he did so knowingly. He said that he assumed that his payments had ceased because he was no longer eligible to receive them. There is no evidence to suggest that MINA acted knowingly or intended to mislead Centrelink. Given the history of his relationship with Centrelink, which had been mediated, however unsatisfactorily, by the applicant, his father, since 2008, and the deteriorating relationship between them, I do not think it would be appropriate to make any such finding.
Dr Thompson says that the applicant failed to comply with his reporting obligations and failed to discharge his obligations as correspondence nominee and therefore can be taken to have knowingly failed or omitted to comply with a provision of the relevant legislation.
Given my earlier finding that the applicant knew that it was wrong to receive his son’s CP payments, and that he impersonated his son in many of the telephone calls he made to Centrelink, a finding that he knowingly failed to comply with his reporting obligations is perhaps inevitable. The issue is not whether he acted in good faith, but whether he ‘knowingly’ failed to advise Centrelink of the changed circumstances with regard to MINA. I find that the applicant knowingly failed to comply with his reporting obligations.
My conclusion is that it is not appropriate to waive the debt by reason of section 1237AAD.
Had I reached a different conclusion, I would have to consider whether ‘it is more appropriate to waive than to write off the debt or part of the debt.’ Under the circumstances I do not need to consider this issue.
SHOULD THE DEBT BE WRITTEN OFF?
Section 1236 of the Act provides, in part:
Secretary may write off debt
(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a)the debt is irrecoverable at law; or
(b)the debtor has no capacity to repay the debt; or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
(1B) For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:
(b) there is no proof of the debt capable of sustaining legal proceedings for its recovery; or
(c) the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or
(d) the debtor has died leaving no estate or insufficient funds in the debtor's estate to repay the debt.
(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:
(a) deductions from the debtor's social security payment; or
(b) deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or
(c) setting off under section 84A of that Act;
the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
(2) A decision made under subsection (1) takes effect:
(a) if no day is specified in the decision--on the day on which the decision is made; or
(b) if a day is specified in the decision--on the day so specified (whether that day is before, after or on the day on which the decision is made).
(3)Nothing in this section prevents anything being done at any time to recover a debt that has been written off under this section.
Section 1236 provides that the Secretary may write off a debt if and only if the debt is irrecoverable at law; or the debtor has no capacity to repay the debt; or the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or it is not cost effective for the Commonwealth to take action to recover the debt.
The only element that might apply to the present situation is that the applicant has no capacity to repay the debt. A debtor is taken to have capacity to repay the debt if it is recoverable by deductions from the debtor's social security payment ‘unless recovery by those means would result in the debtor being in severe financial hardship’.
The AAT1 noted that:
17. According to his Statement of Financial Circumstances, Mr Joseski is dependent on his disability support pension and family tax benefit. His income is $1,110 per fortnight. His outgoings are estimated to be $2,366, about twice his income. He said that he had other debts amounting to $29,700. On the evidence available to me, I cannot reconcile his finances.
I take the final sentence to mean simply that the applicant was in a parlous state because his liabilities far outweighed his capacity to service his existing debts.
Section 19C of the Act has a test for ‘severe financial hardship’ in relation to waiving the qualifying or preclusion periods for certain payments and pensions. For example, a single person claiming DSP is taken to be in severe financial hardship if the value of the person's liquid assets (within the meaning of subsection 14A(1)) is less than the fortnightly amount at the maximum payment rate of DSP.
Although this provision does not apply for present purposes, it is clear that the value of the applicant’s liquid assets, given his current indebtedness, is well below the fortnightly amount at the maximum rate of payment for DSP and family tax benefit.
The Respondent refers to Skinner and Secretary, Department of Social Services [2015] AATA 569, where the Tribunal stated, at [29]:
29. The term "severe financial hardship" is not defined in the Act. However, it has been the subject of considerable Tribunal comment in a number of cases which the Respondent has conveniently summarised as follows.
30. In Re Lumsden and Secretary Department of Social Security [1986] AATA 228 the Tribunal took the view that for this term to be satisfied a person’s entire financial position would need to be materially less than the current rate of pension.
31. Further, in Re Stubbs and Secretary Department of Families and Community Services [2003] AATA 729 the Tribunal stated that:
... 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...
Finally, in L v Department of Social Security [1995] AATA 159; (1995) 38 ALD 176 stated in part as follows:
In summary, I consider that matters relating to the personal financial hardship of the individual are always relevant in any decision as to write off under subsection 1236(1). Retrospective considerations may occasionally be relevant. The essential inquiry will always be whether recovery is a feasible proposition, bearing in mind the financial means and obligations of the individual concerned. Will recovery cause such personal hardship as to run contrary to the beneficial nature of the legislation?
It appears that between January and June 2018 the applicant worked in supported employment at Hoxton Industries.[58] His hours of work are recorded in his Centrelink Statements for DSP for 9 April 2018 and 13 June 2018,[59] with the hours worked in the right hand column.
[58] Hoxton Industries, NDIS Disability Employment Supports, < T8/63.
[59] T19/382, 429.
29 May 2018 to 11 Jun 2018 HOXTON INDUSTRIES $35.33 7
15 May 2018 to 28 May 2018 HOXTON INDUSTRIES $164.85 35
1 May 2018 to 14 May 2018 HOXTON INDUSTRIES $169.56 36
17 Apr 2018 to 30 Apr 2018 HOXTON INDUSTRIES $131.88 28
3 Apr 2018 to 16 Apr 2018 HOXTON INDUSTRIES $138.95 29
20 Mar 2018 to 2 Apr 2018 HOXTON INDUSTRIES $105.98 22
6 Mar 2018 to 19 Mar 2018 HOXTON INDUSTRIES $176.63 37
20 Feb 2018 to 5 Mar 2018 HOXTON INDUSTRIES $176.63 37
23 Jan 2018 to 5 Feb 2018 HOXTON INDUSTRIES $188.99 37
I am satisfied that in the circumstances of the present case, the applicant experiences great personal hardship. The applicant lives with his two children and his new grandchild. I consider that this is a case where recovery will cause such personal hardship as to run contrary to the beneficial nature of the legislation. I have already noted that section 8 of the Social Security (Administration) Act 1991 (Cth) (‘the Administration Act’), identifies ‘the special needs of disadvantaged groups in the community’ as an important principle of administration. Any further deduction from his Centrelink payments will be extremely burdensome. I am satisfied that he has no capacity to repay the debt.
It is important to note that a debt that is written off is not extinguished and may be recovered at a later date. In light of the history of this matter, as explored earlier in these reasons, the Tribunal would prefer to cancel or waive the debt outright, but that outcome is not permitted under the relevant statutory provisions, for the reasons given above.
Given the present circumstances of the applicant, it is hard to imagine circumstances in which steps might reasonably be taken to recover the debt. Requiring the applicant to repay this money would add to the desperation of his existence and may contribute to a further deterioration of his mental health. The disabling psychiatric illness suffered by the applicant should evoke considerable sympathy both for the applicant, and for his family, and especially for his son MINA, who has carried a heavy burden over the years.
I am satisfied that the applicant suffers severe financial hardship and has no capacity to repay this debt. I am satisfied that he suffers an extreme mental health disability. It is extremely unlikely that the applicant will ever be in a position to clear this debt.
I therefore consider that the correct and preferable decision is that the debt be written off. I do not propose to state any period.
DECISION
The reviewable decision, being the decision dated 2 April 2020 by the AAT1, is set aside and remitted to the Secretary with an order that the entire debt be written off.
I certify that the preceding 113 (one hundred and thirteen) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member
....................................[sgd]....................................
Associate
Dated: 24 September 2021
Date(s) of hearing: 20 August 2021 Date final submissions received: 7 September 2021 Applicant: Self-Represented Solicitors for the Respondent: Dr Stephen Thompson, Sparke Helmore Lawyers
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