MACFARLANE and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2010] AATA 308

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 308

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/3818

GENERAL ADMINISTRATIVE DIVISION		)
Re		DAVID MACFARLANE

Applicant

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

Respondent

DECISION

Tribunal Ms G Ettinger, Senior Member
Mr  I   Laughlin, Member

Date29 April  2010

PlaceSydney

Decision The Tribunal affirms the decision under review.

............[Sgd]...........

Ms G Ettinger     
  Senior Member

catchwords

Overpayment – Age Pension – Overpayment - Applicant did not disclose changes to his income and assets to Centrelink as required – Decision under review affirmed.

Social Security Act 1991 ss 1064, 1076(2), 1076(3), 1076(4), 1118(2), 1122, 1223, 1236(1), 1236(1A), 1237A(1), 1237AAD

Social Security (Administration) Act 1999 ss 68, 100, 192

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

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

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

Re Davy and Secretary Department of Employment and Workplace Relations (2007) 94 ALD 693

Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464

REASONS FOR DECISION

29 April 2010

Ms G Ettinger, Senior Member

Mr I Laughlin, Member

SUMMARY

1.      Mr David Macfarlane is a retired entrepreneur who was the sole director and shareholder of Mozart by Moonlight Pty Ltd. He arranged outdoor concerts for some years, and told us that the business fell on hard times after terrorist attacks in the USA and Bali, because people increasingly did not wish to congregate in large crowds. Accordingly, in 2003 Mr Macfarlane applied for an Age Pension which was granted, and was paid from 14 October 2003. The Secretary, Department of Families, Housing, Community Services and Indigenous Affairs, the Respondent in these proceedings, has held that due to a failure to report changes in his income and assets over a period of years, Mr Macfarlane accumulated a debt of $16,441.74 for the period 14 October 2003 to 19 October 2008. Mr Macfarlane’s claim before the Tribunal was that he had been eligible for Age Pension during the relevant period, and that he was under the impression he had done everything necessary with regard to disclosure. He told us however, that his skills were in the artistic world, and not with administrative matters. We preferred the case put by the Respondent, and affirmed the decision under review. Our reasons follow.

ISSUES IN DISPUTE

2.      The issues before the Tribunal are:

·     whether the applicant has a debt to the Commonwealth for overpayment of Age Pension; and if so,

·     whether “special circumstances” exist in order for the Tribunal to exercise the discretion to waive the whole or part of the debt.

RELEVANT LEGISLATION

3.      The relevant legislation in this matter is the Social Security Act 1991 (the Act) and the Social Security (Administration) Act 1999.

THE PARTIES

4.      Mr Macfarlane attended the hearing in person and represented himself. His accountant Mr J Oakroot also attended and gave evidence. The Respondent was represented by Ms G Heggen and Ms H Schuster.

5.      We noted on several occasions during the hearing that Mr Macfarlane was tentative about answering questions, and told us he could not remember whether he had done this or that, whether he had received certain correspondence from Centrelink, or contacted Centrelink in relation to a change in his financial situation at a particular time. When we pointed out to him that he needed to tell us what had occurred, to the best of his ability, and as he recalled it, he indicated that he felt unsure because Mr Oakroot was not in the room. Mr Oakroot was not in the room while Mr Macfarlane was giving his evidence because we asked Mr Oakroot at the commencement of the hearing whether he was attending as a representative for Mr Macfarlane, or whether he was at the Tribunal to give evidence. His answer was very clear, namely that he wished to give evidence. Accordingly, we asked him to wait outside the hearing room until Mr Macfarlane had given his evidence.

6.      We note for the sake of completeness also, that Mr Oakroot told us he had no involvement in Mr Macfarlane’s application for Age Pension. We needed to hear Mr Macfarlane’s evidence and answers to questions asked of him by Ms Heggen and members of the Tribunal.  We were mindful, as we must be, to afford him procedural fairness at all times.

WHETHER THE APPLICANT HAS A DEBT TO THE COMMONWEALTH FOR OVERPAYMENT OF AGE PENSION

7.      In order to decide whether Mr Macfarlane has a debt to the Commonwealth for overpayment of Age Pension, we needed to examine various aspects of how he came to be paid the benefit, and events which followed.

The Legislation

8. Section 1064 of the Act sets out how the rate of Age Pension is calculated.

9. Section 1076(2) of the Act provides:

s1076.(2) A person who has financial assets is taken, for the purposes of this Act,          to receive ordinary income on those assets in accordance with this section.

10.     Section 9 of the Act provides that:

“financial asset” means:
          (a)       a financial investment; or …

“financial investment” means:
          (a)       available money; or
          (b)       deposit money; or
          (c)       a managed investment; or
          (d)       a listed security; or
          (e)       a loan that has not been repaid in full; or
           …

11. Sections 1076(3) and 1076(4) contain the formula to calculate the deemed income from a financial asset, and section 1076(4) states that this deemed income is equally distributed throughout the year.

The Claim for Age Pension

12.     Mr Mcfarlane who was 73 years old on 16 October 2003, lodged a claim for Age Pension which he has been paid since 14 October 2003.  In order to apply for Age Pension, Mr Macfarlane filled in a form at Centrelink. He confirmed, in that form, and to us, that a Centrelink officer had assisted him with the task.

13.     On the same day, the Applicant completed an Income and Assets Form providing information to Centrelink. We have noted the following in particular.

·At Question A2 “In the last 12 months, have you stopped working for any employers? Including self-employment”, Mr Macfarlane ticked “Yes” and wrote:  “My own business but it is not operating”;

·At Question A6 “Give details of all your ... bank, building society and credit union accounts?” Mr Macfarlane wrote “ANZ …”, and gave the account balance, $707.45;

·At Question A8, “Do you (or you(and/or your partner have money on loan?”, Mr Macfarlane ticked “No” ;

·At Question A9 “Do you own any shares, …?”, Mr Macfarlane ticked “No”;

·At Question A23 “Do you (and your partner) own your home but live somewhere else?”, Mr Macfarlane ticked “Yes”, to indicate he had left his home “temporarily”, and expected to return home “1/3/04”, and indicated in his reply that the home had been “left vacant”.

14.     At Question D2 of the Form, which read: “Are you or have you … been involved in a private company?”, “Yes” was ticked, crossed through, and “No” ticked.

15.     The Applicant also signed the statement at the end of the Application Form declaring that the information he had given was correct, and that he understood there were penalties for giving incorrect or misleading information

16.     Mr Macfarlane, again with the assistance of a Centrelink officer, made a Statement which accompanied the application form for Age Pension. As relevant it follows:

I was operating a business but this has not been financially viable for nearly 2 years. I own a property at … Ashgrove which is vacant at this present time. I am living in Sydney for business purposes so I cannot currently live in the property at Ashgrove. I have to make a decision to either return to live in property [sic] or sell and purchase in Sydney (which is something I favour).Circumstances are that because of my business I am not financially able to live without borrowing huge sums of money. I will keep Centrelink abreast of any further developments.

17.     Mr Macfarlane told us in regard to the Statement above, that the writing was not his, but that he mainly agreed with what was written there. We noted that above his signature dated 16 October 2003, was a declaration: “The information in this statement has been read to me/aloud by me and to the best of my knowledge it is complete and correct.” We are satisfied then that Mr Macfarlane supplied the information documented in the Statement above, and the information given in the application form for Age Pension and the Income and Assets Form. However, because there was some controversy regarding Question D2 of the Income and Assets Form, we have dealt with it separately below.

Evidence regarding the Income and Assets Form

18.     The Income and Assets Form dated 16 October 2003 which accompanied the application for Age Pension was the subject of evidence at the Tribunal.  Question D2 asked: “Are you or have you (and/or your partner) been involved in a private company?”  It appears “Yes” had been ticked, then a wavy line put through the tick, and a tick for “No” made. We noted that Mr Macfarlane could not recall how he had completed the reply to that question.

19.     Mr Oakroot, who also gave oral evidence, told us that he had been Mr Mcfarlane’s accountant for some 30 years, but was not involved in the Age Pension claim or filling in the application form for the Age Pension. However he was most indignant because he assumed that Question D2 had been altered after the Form had been lodged. His analysis of the situation was that because the alteration which appeared on the Form had not been initialled by both Mr Macfarlane and the Centrelink officer, the Form had somehow been altered after it was lodged.

20.     Notwithstanding the submissions on behalf of Mr Macfarlane on the topic, we were satisfied that there was nothing to gain from anyone at Centrelink altering the Form, and it is more likely than not, that the Form was not altered after Mr Macfarlane had lodged it. Unfortunately the reply to Question D2 has caused problems because noone at Centrelink was alerted to a potential problem.  It seems that noone noticed either the answer given at Question D2, or Mr Macfarlane’s answer at Question 2 on the Income and Assets Form, being, “In the last 12 months, have you stopped working for any employers? Including self-employment”, where Mr Macfarlane ticked “Yes” and wrote:  “My own business but it is not operating”;

21.     Had Centrelink noticed the replies to Question 2 and D2, and had Centrelink been correctly informed that Mr Macfarlane was a director and shareholder of a company, albeit one he says was no longer operating, the follow-up forms would have been annual, and he may not have found himself with such a large debt to repay. Mr Macfarlane told us that he understood because his company had not been operating since 2002, he did not need to declare his interests in it. He said that if he had known its presence would cause problems he would have arranged to deregister it, but explained that he kept it because he wanted to keep the name. He said the company had a lot of debts, and he was concerned with paying those out personally.

22.     We say that regardless of the reply to Questions 2 and D2, Centrelink should have been alerted, and made further inquiries about Mr Macfarlane’s business interests on the basis of his Statement at T8/120 which accompanied his application form for Age Pension. We accepted Mr Macfarlane’s evidence that the Statement was prepared with the assistance of a Centrelink officer, was not in his handwriting, and may accordingly have been written on his behalf by a Centrelink officer. However we are satisfied it was written with information supplied by Mr Macfarlane, and that he accepted the contents as accurate. Of particular relevance in alerting Centrelink to Mr Macfarlane’s business situation were the opening words of the Statement:

“I was operating a business but this has not been financially viable for nearly 2 years .... I am living in Sydney for business purposes so I cannot currently live in the property at Ashgrove….”

23. Those words should have alerted Centrelink officers to explore Mr Macfarlane’s business situation further which they did not do. As is demonstrated to our satisfaction below, Mr Macfarlane omitted to inform Centrelink regularly about changes to his financial situation, and ultimately incurred a debt because he was paid Age Pension when he was not eligible for it. Therefore as discussed below, there was error on both sides, and as we discuss in the paragraphs below, this cannot therefore, pursuant to section 1237A(1) of the Act, be a case of sole administrative error (of the Commonwealth).

Centrelink’s Correspondence

24.     We return then to consider what correspondence Centrelink sent to Mr Macfarlane, and what disclosures he made. What occurred after the grant of Age Pension on 14 October 2003, was that on 21 October 2003, Centrelink wrote to Mr Macfarlane informing him of the grant of Age Pension, and notifying him of his reporting obligations under social security law. This notification included:

WHAT YOU MUST TELL US

You must tell us within 14 days ... if any of these things happen, or may happen.   You can tell us by writing to us, by phoning or you can come in and talk to us at
          any of our offices.
          This is an information notice given under the social security law.

Income
          ...
          If you receive a lump sum amount of money or one-off payment from any source.
          ...
          Assets
          If your assets other than financial investments are more than $148,125.00;

If your financial investments are more than $2,652.00 (this is $1,000 more than     the value of financial investments we have recorded for you);

If you start any new accounts;
          ...
          If your assets change substantially.

Other things you must tell us
          ...
          If you sell, rent out or dispose of the home you live in;
          If you leave your home forever or for more than 12 months;
          ...
          If you are involved in, or receive a benefit from, a private trust or private company;

If the nature of your involvement in, or the benefit you derive from, a private trust or private company changes.

Going outside Australia

If you plan to travel outside Australia, you must let us know within 14 days of        making the decision to go. Please check with us to make sure of your entitlements        during your absence. You may not be entitled to your pension or some of the         additional payments for the period you are away.

...
          Rent Assistance
          If the amount of rent you pay changes from $210.46 per week;
          ...
          If you buy a house or other residence in which you live;
          ...

25.     When asked by Ms Heggen whether he had received the letter from which we have quoted above, Mr Macfarlane replied that he was not prepared to say he did not, but if he opened it, he probably didn’t read it carefully or absorb its contents. He added: “I’m not a business man, I am a creative director.”

26.     Although Mr Macfarlane was vague about the date, we ascertained from the documents before us that he sold his home at Ashgrove, on 31 January 2004 for the sum of $586,000 (Exhibit A3). Then on 31 March 2004, he opened an ANZ Bank account with a deposit of $565,133.56.  He told us that he didn’t recall whether he notified Centrelink. He added that he was “a bit careless” and that he used the money to pay off debts, and buy an apartment in Sydney. We noted that on 8 August 2004, the Applicant purchased a one bedroom apartment in Darlinghurst, Sydney with a lock-up garage and rights nearby to use pool facilities, for the sum of $320,000.

27. We noted also that section 1118(2) of the Act (as at January 2004) provides:

s1118(2)If:
  (a)       a person sells the person’s principal home; and
  (b)       the person is likely, within 12 months, to apply the whole of   a part of the proceeds of the sale in acquiring another residence   that is to be the person’s principal home;

so much of the proceeds of the sale as the person is likely to apply   in acquiring the other residence is to be disregarded during that period for the   purposes of this Act (other than Division 1B of Part 3.10).

28.     We are satisfied fron the evidence before us that Mr Macfarlane did not inform Centrelink of the sale of his home in Queensland, and the purchase of his unit in Sydney, which he was obliged to do.

29.     We noted that Centrelink wrote to Mr Macfarlane on 13 May 2004 on another matter, but that the letter also notified him of his reporting obligations, including:

·     notifying if his financial investments were more than $2,715; or

·     if he started any new accounts or if his assets changed substantially; or

·     if he left his home forever; or

·     if he was involved in a private company; or

·     the nature of his involvement in a private company changed

30.     We noted that Mr Macfarlane informed Centrelink of the change of his accommodation details and his telephone number on 1 October 2004, but that he did not do so with regard to his financial situation.

31.     There was information before us that on 17 September 2007, Mr Macfarlane opened a new bank account with an opening deposit of $20,000, and that he entered into several other financial transactions such as term deposits over a period of time. In reply to Ms Heggen’s questions about each, and her questions regarding whether he had informed Centrelink on each occasion, Mr Macfarlane told us he was not able to recall. He admitted that he ignored the Centrelink correspondence. He also stated that: “It is quite clear I wasn’t telling you of my bank movements. I have not complied. I thought I did.”

32.     We noted that on 13 December 2007, Centrelink sent the Applicant an account statement and a further notification of his reporting obligations. The notification included:

Please check the information on this statement carefully and tell us within 14 days if any information is incorrect, missing or needs to be updated.  This request is an information notice given under social security law.

...

SAVINGS ACCOUNTS
          Savings Accounts

Saving Institution       Account type             Balance last advised  Your share
          ANZ Bank                 Cheque account        $707.00  100%
          ...

What you have to tell Centrelink

This request is an information notice given under social security law.
          This means that you must give Centrelink all the information Centrelink needs to   assess your payment.  Giving false or misleading information is a serious offence.       The information you give us may be checked under Centrelink’s data matching    programs. You must tell Centrelink within 14 days ... if any of the things listed     below happen or are likely to happen to you.  If any of these changes happen, the           amount of payment you get may change.  If you are paid too much because you   don’t tell Centrelink about any of these changes when you have to, Centrelink   may make you pay it back.  You may also have to pay a recovery fee and you    could face legal action.

...
          Sell your house/buy another home ...
          Become involved in a business, company or trust
          Change the value of your assets or financial investments by more than $1,000, gift         assets, or sell them for less than their value, get any money from ANY other source, ...
          ...
          Going outside Australia
          If you decide to leave Australia, even for a holiday or short visit, you must tell us   within 14 days of making the decision so we can check to make sure you are          eligible to receive your payment while you are away.  If you do not tell us, your payment will be stopped.

33.     On 13 June 2008, Centrelink sent the Applicant a further account statement  accompanied by his notification obligations. This included his obligation to inform Centrelink within 14 days of any changes affecting his rate of pension, including if his assets or financial investments changed by more than $1,000.   The statement also showed that the only financial investment recorded for the applicant was $707 in an ANZ Bank account. 

34.     On 11 July 2008, the Applicant opened a new term deposit account with the Commonwealth Bank in the amount of $50,000, and on 8 August 2008, he opened a new term deposit account with St George Bank in the amount of $50,000.  He did not inform Centrelink about these.

35. We noted that on 22 September 2008, Centrelink wrote to the Applicant, advising that a data check with the Australian Securities and Investments Commission had shown a possible ownership interest in a company, Mozart by Moonlight Pty Ltd. The Applicant was requested, pursuant to section 192 of the Social Security (Administration) Act 1991, to provide information with respect to the company. A data match with ASIC revealed the company was voluntarily deregistered on 18 February 2009.

36.     We noted that at T15 the Respondent assembled the copies of documents Mr Macfarlane provided. They included documents dated 2005 – 2007, including his tax returns, tax returns for Mozart by Moonlight Pty Ltd, balance sheets and other financial statements for the Company.

37.     On 9 October 2008, the Applicant completed an Income and Assets Update Form in which he  informed Centrelink of his various bank accounts including:

ANZ savings  $     250
           ANZ cash management  $38,699
           St George term deposit  $50,000
           Commonwealth term deposit  $50,000
           St George term deposit  $21,000

38.     At Question 12 of the Income and Assets Update Form  which asked: “Do you … have money on loan to another person or organisation?”, Mr Macfarlane advised that he had a loan to Mozart by Moonlight of “approximately $170,000.00 (value approx $60,000)”. At Question 40, the Applicant ticked “Yes” to being involved in a private company, and “Yes” to previously telling Centrelink about his involvement in that company. He also completed a Module PC Private Company form for Mozart by Moonlight Pty Ltd. He advised the Company was “dormant”, and that it ceased trading on 31 December 2002. He stated that the Company owed him “$170,000 approx may recover $60,000”. We noted a report of the Complex Assessment Officer dated 20 October 2008, who found that the Applicant had a loan of $111,153 to Mozart by Moonlight on 30 June 2007, and a loan of $114,154 on 30 June 2006.

39.     On 23 October 2008 the Applicant’s accountants, Chotais Chartered Accountants, provided information regarding company tax returns and financial statements for Mozart by Moonlight Pty Ltd for 2003 – 2005.

40.      On 27 October 2008, Centrelink wrote to Mr Macfarlane informing him of his Age Pension rate, and as always, the letter also included the Applicant’s reporting obligations including:

WHAT YOU HAVE TO TELL US ABOUT

You must tell us within 14 days ... if any of the things listed below happen, or may            happen.  ... This is an information notice given under social security law.

...
           If your assets change:
           If your assets other than financial investments are more than $22,386.00

If your financial investments are more than $336,114.00 (this is $1,000 more than the value of financial investments we have recorded for you)

If you start any new accounts
           If you give away assets or sell them for less than their value
           If your assets change substantially.

41.     On 6 November 2008, the Applicant provided the following response to a further request for information by Centrelink:

In 2001 and 2002, my event business Mozart by Moonlight Pty Ltd, which was responsible for open air concerts in the Royal Botanical Gardens in October and November, suffered financial loss owing to the timing of world events which took place at the same time period and just as our bookings opened.

The 9/11 Twin Towers happened as our bookings opened in 2001 and the Bali Bombings happened at a similar time in 2002.  As a consequence and understandably few people dared venture out in that time to outdoor events.

The company as a result lost heavily and I had to close the events for subsequent years to pay off debts at the end of 2002.

I was obliged to sell my Brisbane house in early 2004, the family home since       1932.  As you can imagine this was a devastating experience. My financial    security and my family history were thus gone.

Proceeds from the sale of the Brisbane residence were used to buy an apartment in Sydney in late 2004 where I have since lived. I also had to reimburse my family members, some of whom had lent me money when I was in financial peril.

I had to retire for health reasons as a result. This had never been in my plans but it had to be. I have not worked or received remuneration for my professional skills since that time.

My debts were honoured accordingly and on time, but I have however had to live in receipt of the pension since October 2003.

The only money I have received since are bequests from two friends who knew of my problems and have sadly died. (1) Mr E Kentish in mid 2005 and (2) Ms        Jackie Morrison in December 2007.

42.     Mr Macfarlane confirmed to us that he did not, until the letter of 6 November 2008, reproduced above, disclose to Centrelink the bequests from his friends. He should have done so as the events occurred of course.

43. We noted that section 68 of the Social Security (Administration) Act 1999 provides that Centrelink may require a person in receipt of a payment to notify information that is relevant to their payment. We accepted that the Respondent sent letters to Mr Macfarlane which were notices under section 68(2) of the Social Security (Administration) Act 1999 on 21 October 2003, 13 May 2004, 13 December 2007, and 13 June 2008. The letters sent to the Applicant during the period 14 October 2003 to 19 October 2008 were notices sent to him pursuant to section 68(2) of the Social Security (Administration) Act 1999, and informed him that he MUST reply with full detail in regard to any of his movements which affected his financial situation, including the sale or purchase of his homes, bank accounts, bequests and loans.

44.     We noted that in summary the Applicant’s argument was:

(a)he made Centrelink aware of his involvement in the company Mozart by Moonlight Pty Ltd when he lodged his claim for Age Pension on 16 October 2003 by way of the Statement attached to the application form;

(b)should a debt be found to exist, the whole of the debt should be waived on the basis of sole administrative error by Centrelink;

(c)Mr Macfarlane also argued that his company did not trade after 2002, and that he did not deregister it because he wanted to keep the name;

(d)Exhibit A2, accounts for Mozart by Moonlight Pty Ltd for the period 2005 – 2009 reconstructed by Mr Oakroot for Mr Macfarlane explained the situation from his point of view, particularly in relation to company loans;

(e)Both Mr Macfarlane and Mr Oakroot made  submissions regarding the loans from Mr Macfarlane shown on the reconstructed Company statements, emphasising that in their view the full value of these should not be taken into account in calculating Mr Macfarlane’s income and assets for pension purposes. The reasons given were that these were simply book entries, and that because of the debts incurred by the Company which Mr Macfarlane paid out personally, the actual amount paid out to the Applicant when the Company was wound up was $13,000. 

45.     The Respondent contended that the Applicant received Age Pension when he was not entitled to it.  Ms Heggen submitted that during the debt period, 14 October 2003 to 19 October 2008, the Applicant failed to advise Centrelink of movements in his financial situation in compliance with his obligations under social security law:

(i) of his involvement in a private company and that his involvement had changed;

(ii)       he had sold his principal home;

(iii)of changes in his financial investments including opening new          bank accounts.

46.     We noted that with respect to a “loan that has not been repaid in full”, section 1122 of the Act provides:

s1122. If a person lends an amount after 27 October 1986, the value of the assets of the person for the purposes of this Act includes so much of that amount as remains unpaid but does not include any amount payable by way of interest under the loan.

47.     Accordingly, the amounts shown as debts in Mr Macfarlane’s financial statements are loans which must be included in his assets. This is notwithstanding his submissions that he ultimately received only $13,000 when the company was wound up.

48. We find from Mr Macfarlane’s replies to questions before the Tribunal and the documentary evidence provided by Centrelink that the Applicant did not disclose all his financial information and movements in his finances to Centrelink as he was required to do. He has failed to comply with social security law and has accordingly incurred a debt to the Commonwealth pursuant to section 1223(1) which is reproduced below. Section 100 of the Social Security (Administration) Act 1999 provides for automatic rate reduction for a recipient of pension who does not comply with a section 68(2) notice.

49. Section 1223 of the Act provides:

s1223.(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.

Section 1223(1AB) of the Act provides:

(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:

…

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

50.     The amount of the debt is $16,441.74 for the period 14 October 2003 to 19 October 2008, and it is this debt as affirmed by the Social Security Appeals Tribunal which Mr Macfarlane is appealing to this Tribunal.

WHETHER THERE ARE SPECIAL CIRCUMSTANCES TO WAIVE THE WHOLE OR PART OF THE DEBT

51.     A debt must a priori be recovered unless there are “special circumstances” which prevail in order for the discretion to be exercised to either waive a part or the whole debt. Mr Macfarlane’s submissions were essentially that he is an honest person, and that he was careless in not disclosing all of his financial transactions to Centrelink because he was not aware of having to disclose certain transactions. He also argued that because Centrelink made errors, sole administrative error could apply to waive the debt. We have explored the situation below.

Whether the debt can be written off

52. Section 1236(1) and (1A) provide that the debt may be written off 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)       the debtor is not receiving a social security payment under this Act and it   is not cost effective for the Commonwealth to take action to recover the     debt.

53. We have considered the subsections (a) – (d) of section 1236(1A) of the Act, and note that the debt is not irrecoverable at law or otherwise, repayment of the debt over a period of time will not cause Mr Macfarlane severe hardship, and his whereabouts are known. We are satisfied, that Mr Macfarlane’s circumstances do not bring him within the subsections. Accordingly, the debt cannot be written off.

Whether the debt can be waived on the grounds of sole administrative error

54. Section 1237A(1) of the Act provides that the Secretary, and this Tribunal standing in his shoes, must waive the Commonwealth’s right to recover the whole or part of a debt that is attributable solely to administrative error made by the Commonwealth.

s1237A(1)      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.

55.     We are satisfied that there has been administrative error of the Commonwealth in that the Centrelink officer who assisted Mr Macfarlane with the Statement attached to his Income and Assets Form on 16 October 2003 did not inquire further when he or she wrote on behalf of Mr Macfarlane:  “I was operating a business but this has not been financially viable for nearly 2 years….” . Further, that his other answers to questions in the forms he filled in were not sufficiently scrutinised.

56.     However the debt did not occur solely because of an error of the Commonwealth. Mr Macfarlane, as a recipient of the Age Pension was obliged  to make Centrelink aware of changes to his circumstances.  He failed to disclose many of his business transactions between 2003 (when he applied for the Age Pension), and 2008, when a data match drew attention to his financial situation. We are satisifed from the evidence that he failed to disclose financial transactions such as the sale of his house, the purchase of an apartment In Sydney, bank accounts, investments of money into term deposits, a company loan, and two bequests.

57. Accordingly, the debt arose partly because Centrelink failed to make further inquiries of Mr Macfarlane when he lodged his Statement accompanying his Income and Assets Form and did not therefore send him annual questionnaires in relation to his business interests. However the Applicant’s failure to comply with his reporting obligations between 2003 and 2008 as detailed above, means that he breached social security law. We have accordingly not explored the case law in regard to good faith because the issue of sole administrative error is not applicable, and Mr Macfarlane has admitted that he was careless in reporting changes to his financial situation to Centrelink. Accordingly as it is not a case of sole administrative error, no part of the debt can be waived pursuant to section 1237A(1) because of Mr Macfarlane’s failure to disclose pursuant to social security law.

Whether “special circumstances” exist in order to waive all or part of the debt

58. Section 1237AAD of the Act provides that the debt may be waived where “special circumstances” can be found. The section provides:

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 result wholly or partly from the debtor or another person knowingly:

(i) making a false statement or false representation; or

(ii) failing or omitting to comply with a provision of this 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.

59.     The term “special circumstances” is not defined in the legislation. It has however often been considered in case law by both this Tribunal and the Federal Court. In the leading case of Re Beadle and Director-General of Social Security (1984) 6 ALD 1, this Tribunal stated as follows:

...An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional.  Whether circumstances answer any of these descriptions must depend upon the context in which they occur.  For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special...

60.      In Groth v Secretary Department of Social Security (1995) 40 ALD 541 the Federal Court stated:

...The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss...it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this 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. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied...

61.     In Angelakos v Secretary Department of Employment and Workplace Relations (2007) 100 ALD 9, the Federal Court stated as follows:

…There is less overstatement if the words “unusual” or “uncommon” are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case…

62.      In Re Davy and Secretary Department of Employment and Workplace Relations (2007) 94 ALD 693, the Tribunal stated:

…“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 does not visit any injustice for many if not all social security recipients but it 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…

63.     We are not satisfied that Mr Macfarlane has given satisfactory explanations of why he did not comply with the notices to disclose his financial situation, and changes to it as they occurred. We noted above what he told us which is that he was a creative director and not a businessman, and that he had been a bit “careless”. We find none of those are reasons which are acceptable for non-compliance with statutory duties. We are satisfied that Mr Macfarlane knowingly withheld information which led to the overpayment, and that it was only a data match in 2008 which disclosed his financial status and which led to the calculation of the overpayment.

64.     Accordingly having reviewed the case law, we noted from Beadle that in order to qualify to be “special circumstances”, a person’s circumstances are not required to be unique, but that they must have a particular quality of unusualness that permits them to be described as special. We could not be satisfied that Mr Macfarlane neglecting to tell Centrelink that he had sold his house, or invested money in term deposits or that he had received bequests was something which qualified him for consideration under “special circumstances”. He admitted he was careless; we are satisfied that Centrelink reminded Mr Macfarlane of his duties of disclosure on numerous occasions, and that it was only through a data match that his situation came to light.

65.     We were mindful from reading Re Davy and Secretary Department of Employment and Workplace Relations, and its application to this case that waiver of the debt would mean that Mr Macfarlane would have had the benefit of part of his Age Pension 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. We agree with Deputy President Forgie’s views in Re Davy in regard to the system of administration of the Social Security Act.  

66.     We have noted Mr Macfarlane has suffered some ill health in recent years. He told us he has had by-pass surgery, and takes medication for hypertension. In Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464, it was held that ill health alone is not enough to be a “special circumstance”. The Applicant is in receipt of Age Pension, he owns his own home, and has in excess of $150,000 in financial assets.  He appears to be in a better financial position than many recipients of benefits, and financial hardship does not appear to be a factor that is special in this case.

67.     When we aggregate any factors which may be taken into account as “special circumstances” in this case, we do not find that it is desirable to exercise the discretion to waive all or part of Mr Macfarlane’s debt. Accordingly section 1237AAD is not satisfied. There are no “special circumstances” that make it desirable to waive recovery of the Age Pension debt. Mr Macfarlane’s circumstances are not sufficiently special to warrant the exercise of the discretion to waive all or part of the debt under section 1237AAD of the Act.

DECISION

68.     The Tribunal affirms the decision under review.

I certify that the 68 preceding paragraphs are a true copy of the reasons for the decision herein of Ms G Ettinger, Senior Member and Mr I Laughlin, Member

Signed: ........................[Sgd]............................

Associate

Date of Hearing  15 March 2010
Date of Decision  29 April 2010

Applicant                 Self represented, accompanied by his accountant, Mr J Oakroot

RespondentMs G Heggen,

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