Kenneth Musgrove as Joint Administrator, Trustee and Beneficiary of the Estate of the late Helen Musgrove and Secretary, Department of Social Services (Social services second review)

[2022] AATA 208

Kenneth Musgrove as Joint Administrator, Trustee and Beneficiary of the Estate of the late Helen Musgrove and Secretary, Department of Social Services (Social services second review) [2022] AATA 208 (11 February 2022)

Division:GENERAL DIVISION

File Number:          2020/2894

Re:Kenneth Musgrove as Joint Administrator, Trustee and Beneficiary of the   Estate of the late Helen Musgrove

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Senior Member A Poljak

Date:11 February 2022

Place:Sydney

The decision under review is affirmed.

...................................[sgd].....................................

Senior Member A Poljak

CATCHWORDS

SOCIAL SECURITY – age pension – where age pension continued to be paid after death – debt raised – whether the debt was correctly raised and if so, who, if anyone, has a debt to the Commonwealth – whether all or part of the debt may be waived or written off – decision under review affirmed

LEGISLATION

Social Security (Administration) Act 1999 (Cth) s 66A

Social Security Act 1991(Cth) ss 1223, 1236, 1237A, 1237AAD

CASES

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

Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162

Secretary, Department of Family and Community Services and Jonauskas [2001] AATA 72

Secretary, Department of Social Services and Cannon [2015] AATA 1028

Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126

REASONS FOR DECISION

Senior Member A Poljak

11 February 2022

1. Ms Helen Musgrove (Ms Musgrove) was granted aged pension (AP) on 22 October 2006. Ms Musgrove’s AP was paid into a Commonwealth Bank of Australia savings account, of which she was the sole account holder (Commonwealth savings account).

2. On 24 July 2015, Ms Musgrove made a will (Will), in which she appointed her son, Andrew Lau, and her friend, Catherine Nolan, as executors and testamentary trustees (Executors). Ms Musgrove gave the residue of her estate in four equal portions to Kenneth Robert Musgrove; Walter Musgrove; Brandon Lau; and Bailey Lau (the Beneficiaries), noting that Brandon Lau and Bailey Lau only take their respective quarter share of the residue of the Estate when they attain the age of 21.

3. On 27 September 2015, Ms Musgrove passed away, however Services Australia (the Agency) was not notified by the Executors, the Beneficiaries, the next-of-kin, or otherwise. As such, AP continued to be paid to Ms Musgrove from 1 October 2015 to 22 November 2017 (debt period).

4. On 1 December 2017, the Agency became aware of Ms Musgrove’s death and decided to raise a debt of $49,178.44 for the debt period.

5. Andrew Lau and Catherine Nolan renounced probate of the Will on 30 October 2018 and 24 October 2018 respectively. On 11 February 2019, the Supreme Court of Victoria granted Letters of Administration to Kenneth Robert Musgrove and Walter Musgrove (Administrators).

6. On 13 December 2019, an Authorised Review Officer (ARO) of the Agency affirmed the original decision made on 30 January 2018.

7. On 29 April 2020, the Social Services & Child Support Division of this Tribunal (SSCSD) affirmed the decision of the ARO that the Estate of the late Helen Musgrove had a debt of $49,178.44 for overpayment of AP during the debt period. This is the decision under review in these proceedings.

   Issues

8. The issues for consideration in these proceedings are:

   (a)whether the debt was correctly raised and if so, who, if anyone, has a debt to the Commonwealth for the overpayment of AP during the debt period, and if so,

   (b)whether all or part of the debt may be waived or written off.

   Was the Debt Properly Raised?

9. A debt in relation to a social security payment arises by operation of subsection 1223(1) of the Social Security Act 1991 (Cth) (the Act), which relevantly provides (now and during the debt period):

   1223 Debt arising from lack of qualification, overpayment etc.

   (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.

   …

   (1AB) Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:

   (a) the payment was made to the person by mistake as a result of a computer error or an administrative error;

   (b) the person for whose benefit the payment was intended to be made was not qualified to receive the payment;

   (c) the payment was not payable;

   (d) the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation;

   (e) the payment was made in purported compliance with a direction or authority given by the person who was entitled to obtain the benefit of the payment but the direction or authority had been revoked or withdrawn before the payment was made;

   (f) the payment was intended to be made for the benefit of someone else who died before the payment was made.

10. Subsection 1223(1AB) of the Act is a non-exhaustive list of circumstances in which a person is taken not to have been entitled to obtain the benefit of a payment. A person who obtains a benefit in any of the prescribed circumstances has a debt which arises when he or she obtains that benefit. Subsections 1223(1AB)(c), 1223(1AB)(d) and/or 1223(1AB)(f) of the Act relevantly apply in this case.

11. There is no dispute that AP continued to be paid to Ms Musgrove during the debt period despite her death on 27 September 2015.

12. The AP was paid into the Commonwealth savings account for the benefit of Ms Musgrove. Failing notification of Ms Musgrove’s death, AP payments continued to be paid to Ms Musgrove for her benefit during the debt period. As Ms Musgrove died before the payments were made, she was not entitled to obtain the benefit pursuant to subsection 1223(1AB)(f) of the Act, giving rise to the debt.

13. On 27 September 2015, the Commonwealth savings account, as a chose in action, devolved to the Executors. Choses in action which are unassignable include the rights to certain statutory benefits such as those payable under the Act. AP payments deposited into the Commonwealth savings account since Ms Musgrove’s death became estate assets of which the Executors had the power to deal with in all such manners as pertain to the office of executor.

14. The applicant contends that the estate of Ms Musgrove is not indebted to the respondent and asserts that the respondent should be looking at parties other than the applicant to recover the debt. More specifically, that an Administrator or other beneficiary has obtained the benefit of any of the monies paid and amounts credited to the Commonwealth savings account after the date of Ms Musgrove’s death.

15. The applicant contends that Andrew Lau, one of the Executors named in the Will, had the benefit of the AP payments made into the Commonwealth savings account after Ms Musgrove’s death. The applicant has filed numerus submissions and evidence in support the contention that Mr Lau withdrew funds from the Commonwealth savings account for his own benefit during the debt period.

16. I do not make any findings about the alleged use or misappropriation of funds by Mr Lau out of the Commonwealth savings account during the debt period, particularly since Mr Lau was not present at hearing to respond to allegations put by the applicant. In any event, what happened to the AP payments after they were paid into the Commonwealth savings account is immaterial to the question at hand.

17. Having regard to the terms of the Will, the Beneficiaries were to obtain the residue of Ms Musgrove’s estate and as such they would have “benefitted” from the AP deposits. I understand that there was no administration or proper administration of the estate by the Executors, however, the nature of the administration of the estate is not a matter that I need to consider for the purposes of whether a debt has arisen. Whatever may have occurred to the funds once they were received into the Commonwealth savings account is not a matter relevant for determination under section 1223 of the Act.

18. For these reasons, I am satisfied that the debt raised by the Agency on 30 January 2018 in the sum of $49,178.44 for the debt period was properly raised in accordance with subsection 1223(1) of the Act, and is a debt owed to the Commonwealth. The Agency’s calculation of the quantum of the debt is true and correct, and apparently uncontested.

    Can the Debt Be Waived or Written Off?

19. Section 1236 of the Act sets out circumstances in which a debt may be written off. There is no evidence that the applicant’s debt is irrecoverable at law or that the applicant has no capacity to repay the debt.

20. Subsection 1237A(1) of the Act provides:

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

21. For the debt to be waived under section 1237A of the Act, it must be found that the debt was caused solely by administrative error; see Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126 at [35].

22. The Executors, as the representatives of Ms Musgrove’s estate, had an obligation to report her death to the Agency in accordance with subsection 66A(2) of the Social Security (Administration) Act 1999 (Cth) (Administration Act). There was no administrative error by the Commonwealth because the debt arose due to the executors, the beneficiaries, and the next-of-kin’s failure to notify the Agency of Ms Musgrove’s death on 27 September 2015.

23. As such, the debt cannot be waived under section 1237A of the Act.

24. Section 1237AAD of the Act provides:

    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.

25. There are three elements in section 1237AAD of the Act that must be satisfied before the discretion to waive in section 1237AAD can be exercised.

26. Firstly, as already stated, the applicant failed to comply with its reporting obligation in subsection 66A(2) of the Administration Act, for the purpose of section 1237AAD(a)(ii) of the Act.

27. In Secretary, Department of Social Services and Cannon [2015] AATA 1028, Deputy President Constance observed at [17] that, “[a]s a matter general principle, ignorance of the law is no excuse for a person’s failure to comply with it”. It was also said in Secretary, Department of Family and Community Services and Jonauskas [2001] AATA 72 that the onus to meet reporting obligations is on the social security recipient.

28. The term “special circumstances” is not defined in the Act. What may amount to special circumstances has been considered in a number of cases in the Federal Court and in the Tribunal. It has been generally accepted by this Tribunal that special circumstances are those that are unusual, uncommon or exceptional, making the case markedly different from the usual run of cases.

29. In Beadle v Director-General of Social Security (1985) 60 ALR 225, the Full Court did not think it possible to lay down precise limits or rules to circumscribe the discretion of the decision maker when considering whether special circumstances exist. Rather, the Court said that what constitutes special circumstances in any particular case is a matter for the Departmental head having regard to the purpose for which the power is given. However, because no precise limits or rules can be set, whether or not a particular kind of circumstance could (not should) be considered special is not merely a matter for the administrative decision maker.

30. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J considered the observations in Beadle at first instance that special circumstances are those that are “unusual, uncommon or exceptional”. His Honour opined at [33] that it:

    … was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised.

31. In Hogan v Secretary, Department of Employment, Education and WorkplaceRelations [2011] AATA 162 at [82] it was held that in determining whether “special circumstances” exist the Tribunal has “a broad discretion to respond to a wide variety of circumstances”.

32. There is no evidence to establish special circumstances in this case. The circumstances are not “special” in the sense of subsection 1237AAD(b) of the Act. There is no harsh or unfair outcome produced in expecting the repayment of this overpayment of AP nor has evidence been provided that the AP debt should not be repaid on the ground of financial hardship. There is no evidence before the Tribunal that Ms Musgrove died leaving insufficient assets in her estate to cover the debt nor is there sufficient evidence establishing that the beneficiaries of the estate, as named in the Will, have insufficient financial means to repay the debt.

33. There is no evidence to support the proposition that it would be more appropriate to waive the debt compared to writing it off. Subsection 1237AAD(c) of the Act is not satisfied.

    Decision

34. The decision under review is affirmed.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak

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Associate

Dated: 11 February 2022

Date of hearing:	9 June 2021
Counsel for the Applicant:	S McMillan
Solicitors for the Applicant:	K Musgrove, Martin Musgrove Lawyers
Solicitors for the Respondent:	S Thompson, Services Australia