Kuenstner and Secretary, Department of Social Services (Social services second review)

[2023] AATA 67

Kuenstner and Secretary, Department of Social Services (Social services second review) [2023] AATA 67 (30 January 2023)

Division:GENERAL DIVISION

File Number:         2022/4191

Re:Hans Kuenstner

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

Decision

Tribunal:Member P Ranson

Date:30 January 2023

Place:Brisbane

The Tribunal varies the decision under review such that repayment of the recoverable debt due to the Commonwealth by Mr Kuenstner, the balance of which is $6,655.09, is written off for a period of six months from the date of this decision to allow Mr Kuenstner time to obtain new accommodation and to rearrange his finances. The Secretary is requested to consider the health and financial circumstances of Mr Kuenstner in negotiating repayment by instalments.

…………….[sgd]……………

Member P Ranson

Catchwords

SOCIAL SECURITY – DSP and Age Pension Debt – debt raised to recover overpayments – debtor failed to disclose partner’s income – whether whole or part of debt should be waived – whether special circumstances exist to warrant a waiver of the debt – financial circumstances merit writing off – Decision varied  

Legislation
Administrative Appeals Tribunal Act 1975, ss 42C, 43
Social Security Act 1991, ss 1237A
Social Security (Administration) Act 1991, ss 95, 97

Cases

Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Secondary Materials

Department of Social Services, ‘Guides to Social Policy Law’ Social Security Guide, version 1.302 dated 3 January 2023

REASONS FOR DECISION

Member P Ranson

30 January 2023

INTRODUCTION

1. Mr Hans Kuenstner was in receipt of Disability Support Pension (DSP) from 1999 to 2004, and then the age pension from 2005 onwards. That brought with it the obligation for him to report on a regular basis the combined annual income of himself and his then wife as it changed from time to time. His former wife was also in receipt of a wife disability pension.

2. Mr Kuenstner reported his combined annual income many times to the Department of Human Services (known as Centrelink), which he believes he did correctly based on the wages his former spouse told him she was earning. Centrelink agrees he reported regularly. However, the amounts he reported were incorrect as they materially understated Mrs Kuenstner’s income. This resulted in him being overpaid his benefits.

3. In 2004, 2005 and 2006, Centrelink raised debts totalling $12,982.81, later reduced to $12,926.88, mostly for overpaid DSP and a small amount of overpaid age pension. In 2007, Mr Kuenstner pleaded guilty in the Caboolture Magistrates Court to charges of knowingly obtaining financial advantage from the Commonwealth, that is, the overpaid DSP and age pension. Subsequent repayments have reduced the amount owing to $6,655.09 (the Debt) as of February 2022. Mr Kuenstner has not made any repayments towards the recovery of these debts since April 2020.

4. Mr Kuenstner claims his former spouse had a gambling addiction and was not living with him at the time of the overpayments. He further says he relied on her to provide correct information about her earnings, which she didn’t. He refers to the overpaid benefits as ‘his ex-wife’s debt’. He also says he was suffering from post-traumatic stress syndrome (PTSD) at the time he pleaded guilty and did not appreciate the significance of his plea.

5. When a DSP recipient is overpaid a benefit, the amount of the overpayment is a debt due to the Commonwealth. The existence of these debts are not in dispute and not part of this review.

6. Mr Kuenstner said many times the balance of the debt should be waived because he is struggling financially with his sole income being the age pension. There are circumstances where a debt may be waived or written off. The issue in this case is whether there are any grounds for the balance of the debt to be waived or written off?

7. Mr Kuenstner’s circumstances do not warrant waiver however a short period of write off to allow him time to relocate and reduce his cost-of-living expenses is warranted.

8. For the following reasons, the decision under review is varied such that repayment of the recoverable debt due to the Commonwealth by Mr Kuenstner, the balance of which is $6,655.09, is written off for a period of six months from the date of this decision to allow Mr Kuenstner time to obtain new accommodation and to rearrange his finances. The Secretary is requested to consider the health and financial circumstances of Mr Kuenstner in negotiating repayment by instalments.

BACKGROUND

1. The parties in both cases are:

Applicant	Mr Hans Kuenstner (Mr Kuenstner)
Respondent	Secretary, Department of Social Services (the Secretary)

1. On 22 April 2022, the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal (AAT) affirmed a decision of the then Department of Human Services, now known as Services Australia, and found there were no grounds on which the balance of the debt for overpaid DSP and age pension, currently $6,655.09, could be either written off or waived (AAT Tier 1).

2. On 23 May 2022, Mr Kuenstner applied to the General Division of the Administrative Appeals Tribunal (AAT2) for review of the AAT1 decision. A hearing was held on 21 November 2022 and conducted by MS Teams video (the Hearing). Mr Kuenstner gave affirmed evidence and Ms Bernadette Rayment (Ms Rayment) attended the Hearing representing the Secretary.

3. The Tribunal is satisfied all reasonable steps have been taken to ensure Mr Kuenstner had possession of all the Exhibits and, further, had time to review and make post-hearing submissions because at the Hearing, Mr Kuenstner confirmed he had copies of the T Documents and the Secretary’s Statement of Facts, Issues and Contentions and he was directed to provide documentary evidence of his current cost of living. He was given until 5 December 2022 for any post-hearing submissions he wished to provide, and the Secretary had until 14 December 2022 to reply to those submissions. Both parties responded within the required time.

4. Prior to the Hearing, all parties were provided with an Exhibit List showing Exhibits 1 and 2. Exhibits 3 and 4 are the post-hearing submissions received from Mr Kuenstner and the Secretary. The following documents were admitted into evidence:

Number	Description
Case:	2022/4191
Exhibit 1	T Documents (T1 to T33) for case 2022/4191.
Exhibit 2	Secretary’s Statement of Facts, Issues and Contentions for case 2022/4191.
Exhibit 3	Applicant’s post-hearing submissions.
Exhibit 4	Respondent’s reply to the Applicant’s post-hearing submissions.

1. Apart from the application for this review, the Tribunal notes Mr Kuenstner provided no evidence or submissions in support of his case beyond the post-hearing submissions.

1. The Tribunal has considered all the material supplied to it and the oral evidence of Mr Kuenstner at the Hearing. Not all the evidence is referred to at length, or at all, in this decision record. That does not mean it has not been considered in determining the outcome. It is sometimes unnecessary to canvass all aspects, arguments, and history of a case in the decision record.

THE LAW

1. Exhibits 2 and 4 set out in detail the law which is relevant to this case with which the Tribunal concurs. As a copy of all Exhibits and their attachments were provided to Mr Kuenstner prior to the Hearing, that law will not be reproduced in detail in this decision other than to confirm the relevant legislation is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1991 (the Administration Act).

2. Exhibit 1 refers to the Social Security Guide (the Guide).[1] The Tribunal notes where a general policy exists to guide the decision maker in exercising its powers, the Tribunal:

   “will ordinarily apply that policy in reviewing the decision, unless the policy is unlawful or unless its application tends to produce an unjust decision … cogent reasons will have to be shown against its application”.[2]

   [1] See Guides to Social Policy Law, Social Security Guide, Version 1.302, released 3 January 2023.

   [2] Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, 645 (Brennan J).

3. The Tribunal considers there are no pressing reasons to depart from the policy outlined in the Guide. To the extent the Tribunal has considered policy in this case, it has not applied it inflexibly and has only considered it to the extent the Guide is consistent with the requirements as set out in the legislation as it would be an error of law for the Tribunal to state it must (emphasis added) follow what policy says concerning the scope or meaning of a provision in the Act or Regulations.

A debt can be written off or waived?

1. 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.[3]

   [3] S 1237A of the Act.

2. The only avenue for relief now available to Mr Kuenstner is for the Debt to be fully or partially written off or waived.

THE FACTS AND EVIDENCE

1. AAT1 found no administrative error on the part of the Commonwealth and confirmed the amount of the debt, which has been paid down to $6,655.09 as of 3 February 2022 and no repayments have been made since April 2020.

Write off of a Debt

1. The Guide at 6.7.3.10 provides a useful description of the term write off:

   ‘Write off stops recovery action either for a defined or an undefined period. At any time, the write off can be reversed and recovery proceedings begun where circumstances change. Unlike a waiver, write off does not extinguish the debt. The terms 'suspension' and 'deferral' of a debt refer to write off.’

2. The Secretary may write off a debt, meaning delay its recovery, for a stated period in certain circumstances.[4] The circumstances include:

   (a)The debt is not recoverable at law

   (b)The debtor has no capacity to repay the debt

   (c)The debtor’s whereabouts are unknown, or

   (d)It is not cost effective for the Commonwealth to recover the debt.

[4] Section 95 of the Administration Act.

1. Capacity to repay is discussed in the Guide at 6.7.3.10:

   ‘A debtor is taken to have capacity to repay unless recovery would result in the debtor being in severe financial hardship. The test for financial hardship is based on the debtor's individual circumstances.’

2. There is no dispute the Debt is recoverable at law. There is no suggestion the Debt cannot be recovered from deductions in Mr Kuenstner’s future entitlements to social security benefits such as the age pension he already receives. Mr Kuenstner’s whereabouts are known, and it may be cost effective for the Commonwealth to recover the debt by instalments. The question before the Tribunal is whether he has capacity to repay the debt in his current circumstances.

3. With his application to AAT1, Mr Kuenstner provided a Statement of Financial Circumstances (SoFC) dated 17 March 2022, in which he lists his cost of living (COL). During cross examination at the Hearing, Mr Kuenstner provided an update of his living expenses. The Tribunal requested documentary evidence of his cost of living as it applies now, which he did in his post-hearing submission.[5] The Tribunal has compared the information shown in the SoFC with the information provided by Mr Kuenstner during and post the hearing, see Appendix A.

   [5] Exhibit 3.

4. Appendix A reveals Mr Kuenstner had a small annual surplus in March 2022 of $1,758 and a shortfall now of $594. He has limited capacity to repay the debt based on his COL as it was in March 2022 and factoring in the increase in his rent and even ignoring the cost of Foxtel recently added in June 2022, which the Tribunal considers to be discretionary, he will soon have to find ways to reduce his COL to be able to live on the age pension being his only source of income.

5. On 16 December 2022, the Respondent’s solicitor replied on behalf of the Secretary to the post hearing submission made by Mr Kuenstner.[6] In Exhibit 4, the Secretary submits the cost-of-living expenses of Mr Kuenstner are largely unsubstantiated and so the Tribunal should not rely on the SoFC, as amended by Exhibit 3, in determining his COL exceeds his income.

   [6] Exhibit 4.

6. Exhibit 3 does substantiate some of the major expenses shown on the SoFC and the others seem reasonable for a single person who is wheelchair bound. Even if some of them are partially inflated, there is little room for a surplus from which the Debt can be repaid.

7. The Tribunal agrees with the Secretary the cost of Foxtel is discretionary and should be excluded, along with any other discretionary expenses, from the calculation of available funds.

8. Given the findings above, the Tribunal finds it is reasonable to write off the debt for a period of six months from the date of this decision because Mr Kuenstner will need all his limited resources to relocate by 3 March 2023 and time to rearrange his finances to reduce his COL to allow room for repayment of the Debt.

Waiver of a debt

1. Mr Kuenstner asserts he has no capacity to repay the debt. In his application for this review, he states:

   ‘81 years old, wheelchair, at the time former spouse committed offence she resided with a new partner, extreeme [extreme] hardship, increased rent, living expenses, transport etc, plus increased prices on gas and electricity.’

2. The Guide at 6.7.3.20 provides a useful description of the term waiver:

   ‘Waiver is a permanent bar to the future recovery of the debt. Once the debt has been waived, recovery of the debt cannot be pursued at a later date. Note: The decision to waive a debt is subject to review. If, upon review, the decision to waive the debt is set aside and substituted with a new decision, the (previously waived) debt may be recoverable.’

   And

   ‘Even where a debt has been partially or fully recovered, waiver may still be considered.’

1. Severe financial hardship may be a reason not to recover a debt. However, Mr Kuenstner receives the age pension plus a rent supplement, and the Secretary has offered to accept repayment by instalments, on a basis to be negotiated.[7] Mr Kuenstner advises he has health challenges, which is very unfortunate, and no doubt should be considered by the Secretary in negotiating repayment by instalments.

   [7] Exhibit 2, paragraph 4.12.

2. The Secretary must waive the right, meaning agree not to recover, a debt to the extent it was caused solely by administrative error by the Commonwealth.[8] Solely means the error must have been caused by the Commonwealth and by no other party.

   [8] Section 97 of the Administration Act.

3. As already discussed, the cause of the Debt was Mr Kuenstner’s error in reporting the amounts of combined annual income to The Department of Human Services. Exhibit 2 shows the Department wrote to Mr Kuenstner on multiple occasions specifying he was to report combined annual income.[9] He says he was reporting income amounts as advised by his former spouse. As the Secretary sets out in detail in Exhibit 3, those amounts were incorrect and were subsequently wrongly reported to the Department by Mr Kuenstner.[10]

   [9] Paragraphs 3.3 and 3.4.

   [10] Paragraphs 3.5 to 3.7.

4. It may be Mr Kuenstner’s former partner provided him with incorrect information about her employment earnings during the relevant years. He says he didn’t realise what he was doing when he pleaded guilty in court to defrauding the Commonwealth because he was suffering from PTSD at the time. He may well have been although he has offered no proof of that. None of that excuses Mr Kuenstner from the obligation to correctly report his combined annual income so his DSP and age pension could be correctly calculated. Whatever the cause, correct reporting did not occur.

5. The Tribunal finds there are no grounds to waive the balance of the debt in whole or part because there has been no administrative error by the Commonwealth and the errors which gave rise to the debt are solely those of Mr Kuenstner even though he says he was reporting the amounts advised to him by his former spouse.

CONCLUSION

1. Mr Kuenstner finds himself in a difficult financial position. He must soon find alternate accommodation at a much lower rate than he is currently paying to enable him to live on the age pension which will be reduced each fortnight by the deduction necessary to repay the Debt. He is also wheelchair bound which will make the tasks in front of him more difficult.

2. Centrelink seeks to have debts due to the Commonwealth repaid by no less than the standard rate, which is 15% of the benefit otherwise payable. If that was applied to Mr Kuenstner, his age pension at the current rate would reduce from $1,110 per fortnight to $944 per fortnight and the debt would be fully repaid in approximately 40 fortnights, that is, just less than two years. Such a reduction will make an already difficult financial position even more challenging for him. The Tribunal suggests Centrelink consider a repayment term of no less than five years to ease the burden of repayment.

DECISION

1. The decision under review is varied such that repayment of the recoverable debt due to the Commonwealth by Mr Kuenstner, the balance of which is $6,655.09, is written off for a period of six months from the date of this decision to allow Mr Kuenstner time to obtain new accommodation and to rearrange his finances. The Secretary is requested to consider the health and financial circumstances of Mr Kuenstner in negotiating repayment by instalments.

I certify that the preceding 41 (forty one) paragraphs are a true copy of the reasons for the decision herein of Member P Ranson.

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

Associate

Dated: 30 January 2023

Date of hearing:	21 November 2022
Date final submissions received:	16 December 2022
Applicant:	Self-Represented
Solicitor for Respondent:	Bernadette Rayment, Sparke Helmore

Appendix A – Cost of living

Expense item	March 2022	November 2022
General expenses:
Rent[11]	13,000	16,536
Water rates	600	812
Contents insurance[12]	250	0
Electricity[13]	600	684
Telephone	480	480
Gas	900	822
Medical[14]	1,800	660
Foxtel[15]	0	1,068
Transport expenses:
Public transport[16]	840	0
Hospital19	240	0
Taxis	600	600
Household expenses:
Food & hygiene	7,800	7,800
Total	27,110	29,462
Current rate of age pension[17]	28,868	28,868
Surplus/(Shortfall)	$1,758	$(594)

[11] AAT1 records rent as $300/month. The SoFC shows rent as $500/fortnight. At the hearing Mr Kuenstner said his rent had already increased to $350/fortnight negotiated to $318/fortnight now and would be $380/fortnight from 3 March 2023.

[12] Contents insurance discontinued due to unaffordability according to Mr Kuenstner.

[13] Using the amount before the one-off credit from the Queensland State Government.

[14] Now $55/month.

[15] New expense revealed in the post-hearing submission from Mr Kuenstner. Currently $20/month rising to $89/month from January 2023.

[16] Now nil.

[17] SFIC paragraph 3.41.