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

[2021] AATA 4475

MacLeod and Secretary, Department of Social Services (Social services second review) [2021] AATA 4475 (2 December 2021)

Division:GENERAL DIVISION

File Number:          2019/7519

Re:Rosemary MacLeod

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Senior Member A Poljak

Date:2 December 2021

Place:Sydney

The decision under review is set aside and in substitution I find that:

(a) the portion of the debt from 4 September 2017 to 3 September 2018 is waived under section 1237A of the Social Security Act 1991 (Cth); and

(b) the remainder of the debt is to be recovered.

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

Senior Member A Poljak

Catchwords

SOCIAL SECURITY – age pension – overpaid amount of $49,896.19 – whether all or part of the debt may be written-off or waived – where Secretary conceded that debt from 4 September 2017 to 3 September 2018 was due to sole administrative error – whether remaining debt is attributable solely to administrative error  – whether special circumstances exist that make it desirable to waive the debt – decision under review set aside and substituted

LEGISLATION

Social Security (Administration) Act 1999 (Cth) ss 66A, 68

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

CASES

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

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

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

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

REASONS FOR DECISION

Senior Member A Poljak

2 December 2021

1. On 16 March 2011, Rosemary MacLeod, the applicant, claimed age pension (AP). In her claim, she stated, amongst other things, that she and her husband Mr MacLeod lived in a home they owned. The applicant completed an Income and Assets form and declared that she and her partner did not receive income from any income stream products; did not have any money invested and did not receive any income from investments; and did not receive any payments from other sources. The applicant provided, amongst other documents, a letter from OnePath Insurance regarding Woolworths funds transferred to Mr MacLeod on 24 January 2011, 24 February 2011, and 24 March 2011.

2. The applicant was granted AP with effect from 10 April 2011.

3. On 4 September 2017, the applicant provided Services Australia (the Agency) with an Income and Assets Update form and noted that she and her husband had income from One Path Woolworths GSC Package. The applicant stated, “you already have details from when I applied for Age Pension”.

4. On 21 September 2018, Mr MacLeod claimed disability support pension (DSP), and supplied supporting documents, including a list of benefits from OnePath income protection. The last payment from OnePath was received on 14 December 2018. During the period 10 April 2011 to 3 September 2018 (relevant period), the applicant failed to declare her husband’s ongoing and increasing income protection payments.

5. On 20 March 2019, the Agency reviewed the applicant’s entitlement taking into account income from OnePath income protection and raised a debt in the amount of $49,896.19 (original decision).

6. On 1 April 2019, the applicant sought review of the decision and on 31 May 2019, an Authorised Review Officer (ARO) of the Agency reviewed and affirmed the original decision.

7. The decision under review in these proceedings is the decision of the Social Services and Child Support Division of the Tribunal (SSCSD) made on 31 October 2019. In its decision, the SSCSD set aside the decision made by the ARO on 31 May 2019 to raise and recover an AP debt of $49,896.19 for the relevant period. The matter was remitted for reconsideration in accordance with the following directions:

   1.the Applicant was overpaid age pension in the period 10 April 2011 to 3 September 2018;

   2.the amount of the overpayment is to be recalculated taking into account the monthly income protection payments received by Mr MacLeod as stated at paragraph 10;

   3.the overpayment amount in excess of $49,896.19 is to be waived in accordance with section 1237AAD of the Social Security Act 1991 (the Act); and

   4.the overpaid amount of $49,896.19 is to be recovered.

8. On 19 November 2019, the decision of the SSCSD was implemented. The total amount payable had been amended to $59,668.26. However, $9,772.07 of the debt was waived pursuant to section 1237AAD of the Act, reducing the debt to $49,896.19.

9. On 19 September 2020, the question of jurisdiction was considered, and it was determined:

   The Tribunal is satisfied that pursuant to s 179(2)(d) of the Social Security (Administration) Act 1999 (Cth) it has jurisdiction to review the directions or recommendations made by the Social Services and Child Support Division of the Administrative Appeals Tribunal (SSCSD) in its decision dated 31 October 2019.

   It is noted that the parties have agreed that the only issue in dispute on review is the fourth direction made by the SSCSD. The direction states, “The overpaid amount of $49,896.19 is to be recovered”.

   Issues

10. The issue to be decided in this application is whether all or part of the $49,896.19 debt may be written-off or waived.

    Consideration

11. The Secretary concedes that from 4 September 2017 to 3 September 2018, the debt arose due to sole administrative error, pursuant to section 1237A of the Act. The Secretary contends that the remainder is a recoverable debt.

    Can the Debt Be Waived or Written Off?

12. Section 1236 of the Act sets out circumstances in which a debt may be written off. There is no evidence that the applicant’s debt is irrecoverable at law or that she has no capacity to repay the debt given that her whereabouts are known. The applicant is currently repaying the debt at a rate of $20 per fortnight withheld from her AP, which is unlikely to cause the applicant severe financial hardship.

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

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

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

15. In the relevant period, the debt arose due to the applicant’s failure to declare her husband’s ongoing and increasing income protection payments. This is despite the applicant receiving numerous notices under section 68 of the Social Security (Administration) Act 1999 (Cth) (Administration Act) advising her to inform the Agency if her circumstances changed. Further, the applicant had an obligation to report the true state of her financial affairs in accordance with section 66A(2) of the Administration Act. Specifically, the applicant was sent a grant letter dated 7 April 2011, which expressly stated that the combined annual income used for calculating her regular AP payment was $5,570.64. The applicant ought reasonably to have known that the income stated in the Agency’s records was grossly understated. The applicant was also sent notices dated 7 April 2011 and 10 April 2012 informing her about her reporting obligation under section 68 of the Administration Act with respect to her AP. The notices relevantly required the applicant to tell the Agency within 14 days of any relevant changes. In her case, the relevant change was the regular increase of her husband’s income protection payments.

16. The applicant claims that when she first applied for AP, she attended Centrelink with Mr MacLeod and provided a copy of a statement from RMB Compensation dated 10 January 2011 and a OnePath statement dated 18 January 2011. The statements reveal that Mr MacLeod received a lump sum payment and provided particulars about three payments Mr MacLeod received in early 2011. These statements are in evidence and appear to have been considered when assessing the applicant’s eligibility for the AP, which was subsequently granted.

17. The applicant also contends that at that time, she was advised that her husband’s OnePath income protection payments would not affect her AP. This assertion is unsubstantiated as there is no record of the conversation on Centrelink’s file.

18. It is accepted that the applicant received AP in good faith. However, the applicant contributed to the debt by omitting to declare her husband’s income protection payments in the Income and Assets form. She further contributed to the overpayment by failing to comply with the section 68 notices. The applicant failed on nine occasions to notify the Agency of an increase in the rate of OnePath income protection payments.

19. The Agency was entitled to assume that the applicant would comply with her reporting obligations, especially given that it is an offence to fail to comply with a notice given under section 68 of the Administration Act. Additionally, the applicant failed to comply with section 66A(2) during the relevant period. As such, the debt during this period has not arisen due to the Department’s sole administrative error and therefore cannot be waived under section 1237A of the Act.

20. It is accepted that in the period 4 September 2017 to 3 September 2018, the debt arose due to sole administrative error.

21. Section 1237AAD of the Act provides:

    The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

    (a)  the debt did not result wholly or partly from the debtor or another person knowingly:

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

    (ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and

    (b)  there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

    (c)  it is more appropriate to waive than to write off the debt or part of the debt.

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

23. It does not appear to be in dispute that the applicant did not knowingly provide incorrect information to the Agency.

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

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

26. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J considered the observations in Beadle at first instance that special

    circumstances are those that are “unusual, uncommon or exceptional.” His Honour opined at [33] that it:

    … was not the intention of Parliament to confine the exercise of the discretion to

    an exceptional case. There is less risk of overstatement if the words ‘unusual’ or

    ‘uncommon’ are emphasised.

27. In Hogan v Secretary, Department of Employment, Education and Workplace

    Relations [2011] AATA 162 at [82] it was held that in determining whether “special circumstances” exist the Tribunal has “a broad discretion to respond to a wide variety of circumstances”.

28. The applicant has filed medical evidence with respect to herself and her husband, which can be considered when deciding whether there are special circumstances.

29. In reports dated 17 February 2020, Dr Sherrell stated that the applicant suffered from anxiety/depression, significant financial stress, and a heart condition since 1994. Dr Sherrell reports that Mr MacLeod suffers from ongoing and long-term medical conditions including significant osteoarthritis in his right knee and lower back pain.

30. The applicant and her husband’s state of health is not in itself, enough to constitute special circumstances. The evidence in relation to the functional impact on her and her husband arising from their medical conditions is not unusual, uncommon or exceptional for someone who had been in receipt of AP since 10 April 2011 and DSP since 21 September 2018. The applicant’s unfortunate circumstances are not “special” in the sense of section 1237AAD(b) of the Act.

31. The applicant contends that her husband suffers from ongoing and long-term medical conditions incurring a high cost. At hearing, the applicant explained that she had maintained private health insurance to assist with Mr MacLeod’s ongoing medical costs, however, they are still required to pay some out of pocket expenses. She explained that they could both not see required medical specialists because of the cost. The applicant said specialist fees cost between $400 to $500. The applicant provided numerous receipts and invoices for medical treatment expenses and contends that she is unable to pay for Mr MacLeod’s ongoing medical expenses due to the AP debt recovery. She also stated that Mr MacLeod needed ongoing physiotherapy to maintain his mobility.

32. On 22 May 2020, Dr Sherrell reported that Mr MacLeod’s ongoing medical conditions cause him financial stress and stated that “I am unable to give an estimate of the costs that may be involved in his continued care, I would expect them to be in the tens of thousands of dollars.” Dr Sherrell further reported that Mr MacLeod will require knee surgery with total knee replacement, long term physiotherapy and ongoing specialist review.

33. They had recently borrowed money from their stepson and had received an advance of $1000 from Mr MacLeod’s DSP to pay out of pocket expenses for a recent surgery of Mr MacLeod. He had a total right hip replacement and advised at hearing that knee replacement surgeries were scheduled. At hearing, the applicant advised that she had previously discussed borrowing money from her children to cover costs of Mr MacLeod’s future scheduled surgeries and that they sometimes lived off an overdraft. The applicant said she was unable to receive an advance of her AP due to the outstanding debt.

34. It is plain on the evidence that Mr MacLeod requires surgery in the future and has ongoing medical costs. However, I note that Mr MacLeod has already been compensated for his injuries and received, in addition to periodic payments, a lump sum payment of $293,602 in January 2011. They live in an unencumbered home and have no credit card debt or personal loans.

35. The applicant and Mr MacLeod’s combined income from social security payments is $1,555.50 per fortnight. The applicant contends that they pay $140 per fortnight for physiotherapy and $250 per fortnight for health insurance, which are items not considered to be an essential living expense. There is $1,165.50 remaining each fortnight. Their private health insurance may cover the costs associated with the knee replacement and other medical expenses. This should significantly reduce the out-of-pocket expenses for future surgeries if the need for surgery arises and they continue to pay for private cover.

36. Considering the applicant and her husband’s medical and financial circumstances there is little to suggest that her situation is unusual or uncommon when compared to other social security recipients in similar situations. I am not satisfied that the applicant’s debt should not be repaid based on “severe financial hardship”. 

37. For these reasons, I find that there are no special circumstances that would make it desirable for the applicant’s debt to be waived. There is no harsh or unfair outcome produced in expecting the applicant to repay this overpayment of AP.  The applicant can repay her debt through deductions from her AP, and the deduction amount can be negotiated with the Agency’s Debt Management Team if needed. The applicant is currently repaying her debt at a rate of $20 per fortnight deducted from her AP. These are reasonable deductions.

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

    Decision

39. The decision under review is set aside and in substitution I find that:

    (a) the portion of the debt from 4 September 2017 to 3 September 2018 is waived under section 1237A of the Act; and

    (b) the remainder of the debt is to be recovered.

I certify that the preceding 39 (thirty-nine) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak

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

Associate

Dated: 2 December 2021

Date of hearing:	3 May 2021
Solicitors for the Applicant:	Mr I Turton, Illawarra Legal Centre
Solicitors for the Respondent:	Dr S Thompson, Services Australia