LEO FRANCIS HEARN and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 168

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 168

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          N° 2008/3082

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		LEO FRANCIS HEARN

Applicant

And

SECRETARY,

DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr C. Ermert, Member

Date16 March 2009

PlaceMelbourne

Decision

The Tribunal sets aside the decision of the Social Security Appeals Tribunal of 29 May 2008 and in substitution decides that:

1.      Mr Hearn owes debts to the Commonwealth for the periods from 11 September 2001 to 19 August 2002 and from 11 May 2006 to 27 April 2007; and

2.      There are no circumstances in this case to allow the Secretary to waive or write off all or part of those debts.

The matter is remitted to the Secretary for a re-determination of the amounts of the debts.

(sgd) Mr C. Ermert

Member

SOCIAL SECURITY – receipt of age pension – partner suffers work injury and receives payments in compensation – is there a debt to the Commonwealth - compensation or salary – required to notify of change in partner’s payments – no record of notification – can Secretary waive or write off debt – decision set aside in part and remitted for re-determination of the debt.

Social Security Act 1991 ss 17, 1064, 1174, 1174(1), 1174(3), 1207A, 1236, 1236(1A), 1236(1A)(a), 1236(1B), 1236(1C), 1237A, 1237AAD, 1237AAD(a), 1237AAD(c)

Social Security (Administration) Act 1999 s 100(1)

Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114

Re Stubbs and Secretary, Department of Families and Community Services [2003] AATA 729

REASONS FOR DECISION

16 March 2009  Mr C. Ermert, Member

INTRODUCTION

1.      Mr Leo Hearn, the applicant in this case, was in receipt of mature age allowance from February 1995 at the single rate.  In April 1999 Mr Hearn advised Centrelink, the agent for the respondent (the Secretary), that he was married to Eileen Hearn who was earning $20,800 per year.  On 3 December 1999 Mr Hearn was transferred to an age pension as he had turned 65 years of age.  The rate of pension he was paid was based on a combined income of $26,691.77. 

2.      On 28 August 2001 Mrs Hearn had a fall at work and sustained injuries.  From 11 September 2001 she received compensation payments for her injuries from QBE insurance company (QBE).  In August 2002 Mrs Hearn received advice from QBE that her payments were to cease as from 19 August 2002.  On 15 August 2002 Mr and Mrs Hearn went to the Fountain Gate office of Centrelink.  Mr Hearn advised the agency staff of the cessation of Mrs Hearn’s payments.  Acting on that advice, Centrelink increased the rate of Mr Hearn’s age pension from 20 August 2002.  About two days later Mrs Hearn received advice that QBE’s cessation of payments was a mistake and that her payments would, in fact, continue.  Mr Hearn’s evidence is that he provided this information to Centrelink before 19 August 2002 although there is no record within Centrelink of this advice. 

3.      Mr Hearn subsequently noticed on his bank statements for September, October and November 2002 that his pension payments had increased.  On one day in each of those months he and Mrs Hearn went to the Centrelink office to query the level of his pension, but on each occasion he was told that the payments were correct.  Centrelink have no record of these visits and continued to pay Mr Hearn’s pension at the increased rate. 

4.      QBE continued to provide payments for Mrs Hearn until 27 April 2007.  On 22 November 2007 QBE informed Centrelink of the weekly compensation amounts paid to Mrs Hearn from 11 September 2001 to 27 April 2007.  On the same day Centrelink made a decision that Mr Hearn had been overpaid $20,019.92 in age pension between 11 September 2001 and 27 April 2007 (the period in question).  Centrelink sent a letter to Mr Hearn informing him that as a result of the overpayment he had incurred a debt of $20,019.92.

5.      Mr Hearn sought a review of the decision by a Centrelink Authorised Review Officer (ARO).  The ARO affirmed the decision on 18 February 2008.  Mr Hearn then sought a review of the decision by Social Security Appeals Tribunal (SSAT).  The SSAT affirmed the Centrelink decision on 29 May 2008.  This matter is an application for review of the SSAT decision.

THE HEARING

6. At the hearing Mr Hearn represented himself. The respondent was represented by Ms Kayren Paul, a Centrelink advocate. I had before me the documents lodged by the respondent pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (the T-documents).

THE ISSUE

7.      The issue before the tribunal is whether Mr Hearn owes a debt to the Commonwealth.  I will consider the elements of the issue in the following sequence:

·     Is there a debt to the Commonwealth?

·     Can the debt be waived?

·     Can the debt be written off?

·     Are there special circumstances that would allow all or part of the debt to be waived?

IS THERE A DEBT TO THE COMMONWEALTH?

8.      The law that applies to the present matter is contained in the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999 (the Administration Act).

9. Section 1064 of the Act contains the relevant provisions concerning the calculation of age pension. Section 1174 of the Act deals with the effect of periodic compensation payments to a person on the rate of their partner’s compensation affected payment.

10.     The first issue to be determined is whether the payments received by Mrs Hearn over the period in question are compensation as defined by the relevant legislation.  Mr Hearn submitted that, for the period in question, Mrs Hearn was not receiving compensation but continued to receive salary from her employer.  His evidence was that QBE made payments to Mrs Hearn’s employer who paid Mrs Hearn in the form of a continuation of her salary.  For the respondent Ms Paul submitted:

… part of the reason for the overpayment in that first part of the debt period is because Centrelink were treating the amount notified as ordinary income which is applied under a different test to compensation … If a person is on a Centrelink payment and their partner is receiving compensation it’s a different type of income test to when a person’s partner is receiving ordinary income … (Transcript page 36).

Ms Paul also submitted that there is no evidence that either Mr or Mrs Hearn told Centrelink that Mrs Hearn’s payments were compensation payments.

11.     The definition of compensation is contained in section 17 of the Act, which provides:

Compensation

(2) Subject to subsection (2B), for the purposes of this Act, compensation means:

(a)a payment of damages; or

(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d)any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

12.     The definition of scheme is contained in section 1207A of the Act which provides:

"scheme" means:

(a)any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; or

(b)any scheme, plan, proposal, action, course of action or course of conduct, whether there are 2 or more parties or only one party involved.

13. On the reading of the plain words of the Act and applying a general knowledge of the circumstances, I am satisfied that QBE, Mrs Hearn’s employer and Mrs Hearn had an agreement or arrangement for QBE to make payments to the employer who made payments to Mrs Hearn in respect of lost earnings resulting from her workplace injury. Accordingly, I am satisfied that the payments received by Mrs Hearn over the period in question were compensation as defined in section 17 of the Act and as applied in section 1174 of the Act. This means that, under the provisions of section 1174(1) of the Act, the payments received by Mrs Hearn must be included in calculating Mr Hearn’s pension entitlement in accordance with section 1174(3) of the Act, which states:

1174(3) For the purposes of subsection (1):

(a)The amount that would, apart from this section, be the amount of the partner’s ordinary income in relation to the day or days referred to in paragraph (1)(e) is to be increased by the excess amount; and

(b)The increased amount is to be taken to be the amount of the partner’s ordinary income in relation to that day or those days, as the case may be.

14. The provisions for the creation of a debt are contained in subsection 100(1) of the Administration Act which states:

100.(1) Subject to subsection (2), if:

(a)a person who is receiving a social security payment is given a notice under subsection 68(2)l and

(b)the notice requires the person to inform the Department of the occurrence of an event or change of circumstances within a specified period (the notification period); and

(c)the event or change of circumstances occurs; and

(d)the person does not inform the Department of the occurrence of the event or change of circumstances within the notification period in accordance with the notice; and

(e)because of the occurrence of the event or change of circumstances, the rate of the social security payment is to be reduced;

the social security payment becomes payable to the person at the reduced rate on the day on which the event or change of circumstances occurs.

15.     In this case the following facts are not in dispute.  At all relevant times Mr Hearn was receiving a social security payment in the form of an age pension.  From 21 December 2000 Mr Hearn’s pension was calculated on a combined annual income of $26,691.77.  On 28 August 2001 Mrs Hearn had a fall at work and from 11 September 2001 she received payments in compensation for her injuries.  On 15 August 2002 Mr Hearn advised Centrelink that his wife’s payments were to cease from 19 August 2002.  On the same day Centrelink issued a notice that Mr Hearn’s pension was being calculated on a combined annual income of $380.64, indicating that Centrelink was not recording an income for Mrs Hearn.  Approximately two days later, Mr Hearn learned that his wife’s payments would not cease after all.  From 20 August 2002 until 27 April 2007 Mr Hearn received the full rate of age pension payable to a member of a couple.  There is also no dispute that Mr Hearn was notified by the various letters sent to him by Centrelink of the requirement to advise Centrelink of any changes in circumstances and Mr Hearn’s evidence was that he was aware of that requirement. 

16.     The period in question in this case is 11 September 2001 to 27 April 2007.  I will consider the period in two time segments, 11 September 2001 to 20 August 2002 (the first period), and from 20 August 2002 to 27 April 2007 (the second period). 

17.     During the first period Mr Hearn was receiving an age pension.  Although Mrs Hearn was receiving compensation payments Centrelink was calculating Mr Hearn’s pension payments on the basis that Mrs Hearn was still receiving salary.  Ms Paul submitted that there was no evidence that either Mr or Mrs Hearn notified Centrelink that Mrs Hearn’s payments were compensation and no longer salary.  Mr Hearn’s evidence on this matter was that he did not consider the payments as compensation until Mrs Hearn later received a lump sum.  I accept that Mr Hearn did not advise Centrelink of Mrs Hearn’s compensation payments within the notification period, as he considered them to be salary payments until November 2007, when the payments were converted into and paid out as a lump sum.

18.     From the evidence, I find that Mr Hearn did not inform Centrelink that Mrs Hearn’s payments were compensation payments.  As Mr Hearn’s pension payments should have been set at a reduced rate, allowing for Mrs Hearn’s receipt of compensation as distinct from salary, I accept Ms Paul’s submission that a debt was incurred during this first time period and I find accordingly.

19.     The second period was triggered when Mrs Hearn was advised by QBE that her payments were to cease.  On 15 August 2002 Mr Hearn advised Centrelink of this fact and on the same day Cenrelink issued a notice to Mr Hearn informing him that his rate of pension was being calculated on a combined annual income of $380.64, that is, on the basis that Mrs Hearn’s earnings had ceased.  The notice also informed Mr Hearn of his obligation to notify Centrelink within 7 days if he or his partner received any compensation. 

20.     It eventuated that QBE did not stop the payments.  Mr Hearn contends that on or before 19 August 2002 and on three subsequent occasions he informed Centrelink of this change however that information was not recorded by Centrelink.  The pension continued to be paid at the full rate and was not reduced as a result of the payments being received by Mrs Hearn.  In November 2007 QBE notified Centrelink of the payment of the lump sum to Mrs Hearn and as a result Centrelink adjusted Mr Hearn’s pension payments from 27 April 2007.  At the same time Centrelink advised Mr Hearn of a debt owing to the Commonwealth.

21.     Ms Paul submitted that there was no record of Mr Hearn advising Centrelink of the continuation of Mrs Hearn’s payments, as he was required to do by the Centrelink notice dated 15 August 2002.  She submitted that there was no record of Mr Hearn going to Centrelink on or before 19 August 2002.  Ms Paul also submitted that there was no record that Mr and Mrs Hearn went to Centrelink in September, October and November 2002, to advise Centrelink that Mrs Hearn’s payments from QBE had not ceased.  In addition, she submitted that several letters had been sent to Mr Hearn, showing the combined income being used to calculate Mr Hearn’s rate of pension, that Mr Hearn had read those letters and was aware of the information relating to the combined income but had not informed Centrelink of the income error.  Ms Paul contended that by not informing Centrelink of Mrs Hearn’s payments, Mr Hearn contributed to the error and the debt.

22.     Mr and Mrs Hearn gave evidence in regard to a visit to Centrelink on or before 19 August 2002.  Mr Hearn’s evidence was that:

“… In two days we got the notice to say that compensation would continue. We went back down with the forms … but instead of that being changed and altered by the staff at Centrelink that was allowed to go through even though when we went back and told them …” (Transcript page 8)

… well I’m not sure of the date but it was before the 19^th of August because we went back to notify them that we didn’t need the forms and we told them straight away that the payments would continue … (but your evidence is that you went back on some day before the 19^th?… so  to advise Centrelink at Fountain Gate that Mrs Hearn’s payments were going to continue?) … that is exactly right” (Transcript page 27).

23.Mrs Hearn said:

“I just told them that I’d been advised that my payment was going to cease … And she just said well I can give you some forms, go home and fill them out … They (QBE) rang me to say that my pay wasn’t going to cease … so then I went back and took the forms back and she said, don’t worry about that, that’s all right … I just spoke to them at the desk, yes, to reception and lined up, gave it to the girl and said, look, my pay is not ceasing, it is continuing and she tore the forms up and said, all right, don’t worry about it … I went straight back to Centrelink and said, look, my wage is continuing, it’s not stopping … I just took in the – took in the forms and said who I was and that my wage was continuing … I just said who I was and that my wage was continuing on with QBE, my pay would continue … No, no, I don’t think she recorded anything.” (Transcript pages 30-32).

24.     Although there are no Centrelink records of the visit, I am satisfied from the detailed evidence given by Mr and Mrs Hearn that they did go to Centrelink on or before 19 August 2002 and informed the staff that Mrs Hearn’s payments would not cease after all.  Accordingly, I find that Mr Hearn did inform Centrelink of the continuation of Mrs Hearn’s payments and that he did comply with the Centrelink notice of 15 August 2002. 

25.     I also accept the evidence of Mr and Mrs Hearn in regard to their visits to Centrelink in September, October and November 2002 to enquire about the unexpectedly high level of Mr Hearn’s pension.  In regard to the September and October 2002 visits, when asked if the staff showed him the information on the computer screen, Mr Hearn said “No, I just showed them the bank statement.  They took a copy of the bank statement and they said they’ll follow it up and with that that was the end, virtually a very quick interview” (Transcript page 33).  However, I also note Mr Hearn’s oral evidence, when asked whether, on those visits to Centrelink, he mentioned that Mrs Hearn was back on compensation payments, he answered “I don’t believe that I did, no” (Transcript page 34).  While I find it somewhat surprising that Centrelink staff did not appear to make enquiries about Mrs Hearn’s payments during these three visits, particularly as a result of receiving a copy of Mr Hearn’s relevant bank statement, I accept Mr Hearn’s evidence that on these occasions he did not actually inform Centrelink that Mrs Hearn’s payments had not ceased.  

26.     After considering the evidence, I find that by 19 August 2002 Mr Hearn had informed Centrelink that Mrs Hearn’s payments had not ceased, as previously advised, and were continuing.  I find that the provision of this information meets the requirement for notification contained in the notice issued by Centrelink on 15 August 2002.  Although Mr Hearn’s evidence was that he had not directly informed Centrelink of his wife’s continuing compensation during his subsequent visits in September, October and November 2002, this does not negate my finding that by 19 August 2002 Mr Hearn had complied with his obligations from the Centrelink notice of 15 August 2002.  No further notices requiring information from Mr Hearn were issued by Centrelink until 11 May 2006.  As a result, I find that Mr Hearn’s situation of compliance lasted from 19 August 2002 to 11 May 2006.  Accordingly, I find that there is no debt owing to the Commonwealth by Mr Hearn for this period.  

27.     On 11 May 2006 Centrelink issued a notice to Mr Hearn informing him, amongst other things, of his obligation to notify Centrelink within 7 days if he or his partner received compensation.  A similar notice was issued by Centrelink on 26 May 2006.  In his evidence Mr Hearn agreed that he read these notices and was aware of the obligations contained in them.  Nevertheless, Mr Hearn gave no evidence that he provided any information to Centrelink as a result of receiving these notices. 

28. By not informing Centrelink of the error of the combined income shown in that notice, Mr Hearn contributed to the creation of the overpayment and the debt to the Commonwealth. As a consequence, for the period from 11 May 2006 to 27 April 2007, I find that Mr Hearn did not inform Centrelink that Mrs Hearn’s payments had not ceased as required by the provisions of section 100 (1) of the Administration Act. As a result, Mr Hearn’s pension payments were not reduced, giving rise to an overpayment between 11 May 2006 and 27 April 2007 and a debt to the Commonwealth.

29.     I find that Mr Hearn incurred debts to the Commonwealth from 11 September 2001 to 19 August 2002 and from 11 May 2006 to 27 April 2007 but not from 20 August 2002 to 10 May 2006.

Must the Debts be Waived?

30.Section 1237A of the Act relevantly provides:

… 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 portion of the debt …

31.     The first element to be considered is whether the debt is attributable solely to an administrative error made by the Commonwealth.  For the first part of the debt, incurred between 11 September 2001 and 19 August 2002, I have already found that Mr Hearn did not inform Centrelink that Mrs Hearn’s was receiving compensation payments, as distinct from salary.  This omission of Mr Hearn’s directly contributed to the incorrect amount of pension being paid to Mr Hearn.  Therefore, I find that the first part of the debt is not attributable solely to an administrative error made by the Commonwealth.

32. For the period from 20 August 2002 to 11 May 2006 I have already found that Mr Hearn complied with the information provisions of the Act and as a consequence there is no debt to the Commonwealth for that period.

33. For the period from 11 May 2006 to 27 April 2007 I have found that Mr Hearn did not inform Centrelink that Mrs Hearn was receiving payments, as required by the provisions of section 100 (1) of the Administration Act. This omission by Mr Hearn directly contributed to the incorrect amount of pension paid to Mr Hearn for the period. Therefore, I find that the debt incurred over this period is not attributable solely to an administrative error made by the Commonwealth.

34. Accordingly I find that the provisions of section 1237A of the Act are not met and that the Secretary is not obliged by the section to waive the right to recover the debts.

Can the Debts be written off?

35. Section 1236 of the Act provides that:

1236(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.

1236(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.

36.Section 1236(1B) contains a number of provisions relating to whether a debt is irrecoverable at law. None of the provisions apply in this case. Accordingly, subsection 1236(1A)(a) of the Act does not apply.

37.Section 1236(1C) of the Act deals with the debtor’s capacity to repay the debt. It states that:

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)….

(c)….

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.

38.     In ReStubbs and Secretary Department of Families and Community Services [2003] AATA 729 the Tribunal said at paragraph 20:

“… 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 … “

39. In this case Ms Paul submitted that Mr Hearn has the capacity to repay the debt via instalments at a fortnightly rate that is subject to negotiation and that it is inappropriate to write off the debt under section 1236 of the Act. Mr Hearn made no submissions on this issue. There is no evidence before me that Mr Hearn would suffer severe financial hardship if the debt continued to be repaid via deductions from his pension payments. I find that Mr Hearn has the capacity to repay the debt.

40. The other provisions of 1236(1A) of the Act do not apply in this case. Accordingly, I find that there are no provisions in this section of the Act that allow the Secretary to write off the debt for a period or otherwise.

Can the Debts be waived on the Grounds of Special Circumstances?

41. Section 1237AAD of the Act provides for the possibility of waiving all or part of the debt on the grounds of special circumstances as follows:

1237AAD.      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 arise 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.

42.     In this case there is no evidence that Mr Hearn knowingly made a false statement or representation or that he knowingly failed to comply with a provision of this Act.  The respondent made no submissions on this issue.  I find that the provisions of subsection 1237AAD(a) do not apply in this case.

43.     The term special circumstances as applied in this section of the Act has been extensively considered in case law. A recent decision of this Tribunal, which considered and applied the previous relevant judgements of the Federal Court, is Re Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114. In her decision Deputy President Forgie stated at paragraph 80:

“… “special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances … that make it desirable to waive”. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it … He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement … The system of administration of the Social Security Act … did not lead to any injustice or unfairness on Mr Davy that is not visited, or potentially visited, upon all other recipients of social security payments under the Act. Therefore I am not satisfied that there are special circumstances that make it desirable to waive the debt under s 1237AAD of the Act.”

…

44.     In this case Mr Hearn has also had the benefit of the money in circumstances in which, during the periods I have defined, he was not entitled to it.  As Deputy President Forgie found in Davy, I find that there is no injustice visited on Mr Hearn and I am not satisfied that there are special circumstances that make it desirable to waive the debt under section 1237AAD of the Act.

45.     No evidence was presented and no submissions were made in regard to whether it is more appropriate to waive than to write off the debts.  I find that the provisions of subsection 1237AAD(c) do not apply.

46. As none of the provisions of section 1237AAD of the Act are met in this case, the Secretary may not waive the right to recovery of the debts.

Amount of the Debts

47.     There was no dispute between the parties in regard to the calculation of the amounts of the debt involved and hence I accept that the method of calculation is correct.  Nevertheless, my findings alter the periods over which the debts were incurred and as a result the matter must now be remitted to Centrelink for a re-determination of the amounts involved.

Decision

48.     The Tribunal sets aside the decision of the SSAT of 29 May 2008 and in substitution decides that:

(a)Mr Hearn owes debts to the Commonwealth for the periods from 11 September 2001 to 19 August 2002 and 11 May 2006 to 27 April 2007; and

(b)There are no circumstances in this case to allow the Secretary to waive or write off all or part of those debts.

The matter is remitted to the Secretary for a re-determination of the amounts of the debts.

I certify that the forty eight [48] preceding paragraphs are a true copy of the reasons for the decision herein of:

Mr C. Ermert, Member

(sgd) Mara Putnis
  Clerk

Date of Hearing:  8 December 2008

Date of Decision:  16 March 2009

Advocate for the applicant:                 Mr Leo Hearn, self represented

Advocate for the respondent:             Ms Kayren Paul, Centrelink Legal Services