Klewer and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 964

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 964

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  2008/1392

GENERAL ADMINISTRATIVE DIVISION		)
Re		LUCY KLEWER

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Ms N Isenberg, Senior Member

Date30 October 2008

PlaceSydney

Decision

The decision under review is set aside and in substitution the Tribunal decides that:

a)    the Tribunal has no power to decide to waive the rent assistance debt of $4,918.40, including amounts already recovered by Centrelink, and

b)    the Family Tax Benefit debt of $317.55 should be waived.

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

Ms N Isenberg
  Senior Member

CATCHWORDS

JURISDICTION – Social Security – undischarged bankrupt – whether undischarged bankrupt can seek waiver of social security debt – tribunal has no power to entertain application in respect of debt incurred before bankruptcy, only after – special circumstances – debt incurred after bankruptcy is waived – decision under review set aside

A New Tax System (Family Assistance) (Administration) Act 1999 – s 71(2), 101

Bankruptcy Act 1966 – s 82

Secretary, Department of Social Security v Southcott (1998) 50 ALD 162

Re Secretary, Department of Family and Community Services and Grindlay [2005] AATA 91

Re Hughes and Secretary, Department Of Families, Community Services and Indigenous Affairs (2007) 96 ALD 230

Beadle v Director-General of Social Security (1985) 7 ALD 670

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

30 October 2008  Ms N Isenberg, Senior Member            

BACKGROUND                 

1.The Applicant, Lucy Klewer, currently an undischarged bankrupt, was paid rent assistance by Centrelink.  In 1997 the Tribunal (differently constituted) found that Mrs Klewer was overpaid rent assistance, and consequently had a debt to the Commonwealth of $4,918.40.  Some of this amount was recovered by Centrelink prior to Mrs Klewer being declared bankrupt on 20 September 2005, but there was a balance of $3,114.88.  That amount was written off by Centrelink and a proof of debt lodged with her Trustee in bankruptcy.

2.A further debt of $317.55 in respect of Family Tax Benefit paid in 2004/2005 arose after Mrs Klewer’s bankruptcy and that has also been written off, but no proof of debt has been lodged.

3.Mrs Klewer seeks to have her entire debt to Centrelink waived, and the monies recovered by Centrelink prior to her bankruptcy repaid to her.

ISSUES BEFORE THE TRIBUNAL

4.The issues before the Tribunal are:

·Because Mrs Klewer is bankrupt, can the Tribunal waive the debt which arose:

obefore she became bankrupt?

oafter she became bankrupt?

·If yes, are there any grounds not to recover part or all of the debt(s)?

CAN THE TRIBUNAL WAIVE THE DEBTS?

debt arising before bankruptcy

5.It is clear from Secretary, Department of Social Security v Southcott (1998) 50 ALD 162 at 171-172 that the Tribunal has no power to decide to waive a debt incurred before Mrs Klewer was declared bankrupt:

… the secretary had no power to waive or write off the debt during the bankruptcy. Once Mr Southcott  became bankrupt, the secretary could lodge a proof of debt for the amount of overpayment, or could determine not to lodge a proof of debt in the bankruptcy. If and when MrSouthcott is released from bankruptcy, his liability for the overpayment will be discharged. The bankruptcy processes of proof of debt and release of provable debts replace the processes of waiver and write off.

6.In my view, that must necessarily preclude considering if the monies already recovered by Centrelink should be returned, it forming part of the debt to the Commonwealth.

debt arising after bankruptcy

7.Mrs Klewer did not appear to dispute the overpayment which was in respect of the 2004/2005 financial year and was raised following reconciliation against data held by the Australian Taxation Office. It is a debt due to the Commonwealth under s 71(2) of the A New Tax System (Family Assistance) (Administration) Act 1999 (“the FAA Act”).

8.Section 82 of the Bankruptcy Act1966 provides:

82  Debts provable in bankruptcy [see Table B]

(1)  Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.

…

9.The debt was incurred after the date of Mrs Klewer’s bankruptcy (20 September 2005) and is not provable under s 82 of the Bankruptcy Act 1966: ReSecretary, Department of Family and Community Services and Grindlay [2005] AATA 91. See also Re Hughes and Secretary, Department Of Families, Community Services and Indigenous Affairs (2007) 96 ALD 230.

10.Section 101 of the FAA Act provides for a debt due to the Commonwealth to be waived, either in part or in full, because of “special circumstances”.

11.Mrs Klewer gave extensive evidence, supported by medical evidence, about the debilitating conditions suffered by her son, Robert.  These include epilepsy, significant loss of vision, and speech problems.  He has significant mobility problems due to muscle weakness, scoliosis and right hip osteochondromatosis, that is, many loose bony fragments in his synovial fluid in the joint of the right hip.  He will need extensive equipment including orthotic appliances for the rest of his life.  He also needs occupational therapy and physical therapy which are not provided through the public health system.  He receives disability support pension.  Mrs Klewer is his carer.  She has one other dependent son.

12.Mrs Klewer’s own health is problematic.  She says she has 30 per cent loss of hearing in her left ear.  She had, in the weeks before the second day of hearing, been hospitalised three times with chest pains and is now receiving treatment for a cardiac complaint.

13.Mrs Klewer’s finances are limited.  Her Trustee is planning to sell the home. 

14.She has had considerable anxiety over an acrimonious marriage breakdown, divorce and child support arrangements.  She has the care, on her own, of two of her seven children.  She has been prosecuted twice (in relation to her claim for rent assistance) and the charge was finally dismissed.

15.There was no evidence that Mrs Klewer’s circumstances should be precluded from consideration by s 101(a) of the FAA Act, and I accept that there was no evidence that she intentionally or deliberately failed to comply with her obligations in respect of Family Tax Benefit. (Centrelink’s own records note “no fraud”: T54.)

16.The FAA Act provides no guidance as to the meaning of the term “special circumstances” in that provision.  In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not “possible to lay down precise limits or precise rules” for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security (1984) 6 ALD 1) where (at 3) the Tribunal had acknowledged that the term was “incapable of precise or exhaustive definition” and that, to be special, the circumstances “must have a particular quality of unusualness that permits them to be described as special”. See also Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9 per Besanko J at [33].

17.In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court's decision in Beadle’s case, observed (at 545) that special circumstances:

… would require something to distinguish. [the] case from others, to take it out of the usual or ordinary case… It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.

18.I accept that aspects of Mrs Klewer’s circumstances are sufficiently “special” that the FTB debt of $317.55 should be waived.

DECISION

19.The decision under review is set aside and in substitution the Tribunal decides that:

a)the Tribunal has no power to decide to waive the rent assistance debt of $4,918.40, including amounts already recovered by Centrelink, and

b)the Family Tax Benefit debt of $317.55 should be waived.

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member.

Signed:         .................[sgd]...............................................................
  Associate

Dates of Hearing  17 July 2008, 18 August 2008
Date of Decision  30 October 2008
Appearance for the Applicant        Self-represented

Advocate for the Respondent        Anthony Cox, Centrelink Legal Services