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

[2018] AATA 1459

Mangini and Secretary, Department of Social Services (Social services second review) [2018] AATA 1459 (31 May 2018)

Division:GENERAL DIVISION

File Number:           2016/3647

Re:David Mangini

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Brigadier A G Warner, Member

Date:31 May 2018

Place:Perth

The decision under review is set aside. In substitution, the Tribunal exercises the special circumstances discretion in s 1237AAD of the Social Security Act 1991 (Cth) and waives recovery of the Applicant’s Newstart Allowance debt in the amount of $4,454.89.

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

Brigadier A G Warner, Member

CATCHWORDS

SOCIAL SECURITY – Newstart Allowance – whether Applicant paid in excess of correct entitlement – whether debt is recoverable – whether debt should be waived administrative error – special circumstances – whether debt should be written off – special circumstances discretion enlivened – decision under review set aside and substituted – Newstart Allowance debt waived

LEGISLATION

Social Security Act 1991 (Cth) – s 8 – s 8(11A)(a) – s 593 – s 1068 – s 1223(1) – s 1236 – s 1236(1A) – s 1237 – s 1237A – s 1237AAD – s 1237AAD(c)

CASES

Angelakos and Secretary Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25
Groth and Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Services v Hales (1998) 82 FCR 154
Read v Commonwealth of Australia (1988) 167 CLR 57; [1988] HCA 26
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Gerhardt and Secretary, Department of Employment, Education and Training [1996] AATA 173

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

SECONDARY MATERIALS

Guide to the Social Security Law – Part 4.13.1.20

REASONS FOR DECISION

Brigadier A G Warner, Member

31 May 2018

1. Mr Mangini seeks review of a decision of the Social Services & Child Support Division of the Administrative Appeals Tribunal (AAT1) dated 14 June 2016 (T3/5-11) that varied a decision of an authorised review officer (ARO) of the Department of Human Services (the Department) dated 22 March 2016 (T13/116-121).  The decision of the ARO affirmed a decision to raise and recover the overpayment of Newstart Allowance (NSA) in the amount of $4,454.89 (T11/113). The AAT1 varied the decision in that it found Mr Mangini has a recoverable Newstart Allowance debt in the amount of $4,454.89 but its recovery was written off for six months from the date of the AAT1 decision.

2. Mr Mangini attended the hearing before this Tribunal on 19 December 2017 and was self-represented. The Respondent was represented by Sparke Helmore Lawyers.

   BACKGROUND

3. During the period 25 August 2014 to 23 February 2015 (the relevant period) Mr Mangini received NSA payments totalling $8,696.93 (T11/113).

4. On 26 March 2014, Mr Mangini purchased a “Virgin Income Protection” policy from Virgin Money (the income protection policy).

5. On 28 August 2015, Mr Mangini received a payment totalling $9,000.00 (the income protection policy payment) into his nominated bank account from the income protection policy made up of the following amounts for the periods shown (T7/107):

   (a)Income protection for 25 August 2014 to 24 September 2014 - $1,500.00;

   (b)Income protection for 25 September 2014 to 24 October 2014 - $1,500.00;

   (c)Income protection for 25 October 2014 to 24 November 2014 - $1,500.00;

   (d)Income protection for 25 November 2014 to 24 December 2014 - $1,500.00;

   (e)Income protection for 25 December 2014 to 24 January 2015 - $1,500.00; and

   (f)Income protection for 25 January 2015 to 24 February 2015 - $1,500.00.

6. Mr Mangini advised the Department by letter dated 16 September 2015 (T8/108) and by telephone on 17 September 2015 (T19/138) that he had received a payment from the income protection policy.

7. On 8 October 2015, a claim officer at Virgin Money completed a compensation personal sickness and accident claim form in relation to Mr Mangini’s income protection policy. The claim officer completed the form as follows:

   ·marked “yes” at question 8 which relevantly asked “is this a personal policy purchased by the claimant?” (T10/111);

   ·marked “no” in response to question 12 namely, “does the policy contain an ‘off-set clause’ against the Australian Government Department of Human Services (i.e. a reduction in payments made under the policy because of social security payments received by the claimant)?” (T10/111);

   ·at questions 16, 17 and 18 noted that payments had been made to Mr Mangini from 25 August 2014 at a rate of $1,500.00 per month and the payments ceased on 24 February 2015 (T10/112); and

   ·at question 20 marked “no” in response to the question “have any lump sums been paid?” (T10/112).

8. On 15 December 2015, the Department advised Mr Mangini by letter that an overpayment had been made totalling $4,454.89 for the period 25 August 2014 to 23 February 2015 as his “other income” from the income protection policy was not taken into account (T11/113).

9. On 9 February 2016, Mr Mangini wrote to the Department and stated that his Virgin Money claim had “…required a very deep investigation that went on for many months”  and that he did not know that he would receive payment from the income protection policy (T12/115).

10. On 22 March 2016, the ARO found that Mr Mangini was paid in excess of his correct NSA entitlement and that Mr Mangini incurred a recoverable debt of $4,454.89. The ARO further found that the debt should not be waived or written off (T13/116-118).

11. On 23 March 2016 Virgin Money wrote to Mr Mangini in relation to the income protection policy and advised:

    A total of $9000.00 was paid to you as a lump sum amount on 28 August 2015. Please note that the benefit listing above is usually paid on a monthly basis, however given that it took almost six (6) months to review your claim for entitlements, this benefit period had already passed and thus the full six months paid to you in one transaction (T14, p122).

12. On 30 March 2016, Mr Mangini requested a review of the ARO decision.  The subsequent AAT1 decision is detailed at paragraph 1 above.

13. On 13 July 2016, Mr Mangini requested a review of the AAT1 decision, stating his reason for the application as follows:

    The decision is only partially correct that I am in severe financial hardship & can not repay the alleged debt.  The letters sent to Centrelink on the 16/09/2015, 11/04/2016 & 9/2/2016 have not been given full weight of consideration.  Due to the fact it was Centrelink’s sole responsibility & error that this incident occurred. I fulfilled my obligations to Centrelink regarding the lump sum payment, I was never at fault at any time (T2/4).

    ISSUES

14. The issues to be decided in this application are:

    (a)whether Mr Mangini was paid in excess of his correct entitlement to NSA during the period 25 August 2014 to 23 February 2015;

    (b)if so, has Mr Mangini incurred a recoverable debt; and

    (c)if so, whether that debt should be waived or written off, in part or in full.

    LEGISLATIVE AND POLICY FRAMEWORK

15. The relevant law is contained in the Social Security Act 1991 (Cth) (the Act).

16. Relevant policy advice is contained in the Guide to the Social Security Law (the Guide).   The relevant policy should be followed unless there are cogent reasons to depart from its application.

    EVIDENCE

17. The evidence before the Tribunal comprised:

    (a)the “T Documents” (T1-T19), pp 1-145;

    (b)“Supplementary T Documents” (ST1-ST3), pp 1-7;

    (c)Respondent’s Statement of Issues, Facts and Contentions (SFIC) dated 15 November 2017, including Attachment A (Exhibit R1);

    (d)Applicant’s Customer Contact Records between 1 August 2015 to 1 September 2015 and between 1 November 2015 to 1 April 2016 (Exhibit R2);

    (e)Applicant’s Centrelink Contact Records between 7 September 2015 to 26 October 2015 (Exhibit R3);

    (f)Applicant’s Customer Record Access Monitor (CRAM) report from 1 August 2015 to 1 October 2015 (Exhibit R4);

    (g)bundle of documents filed by the Applicant (Exhibits A1-A29); and

    (h)the oral evidence of the Applicant.

    CONSIDERATION

18. Section 593 of the Act provides the basic qualifications for NSA. Mr Mangini’s qualification for NSA is not in dispute (Exhibit R1, para 4.3).

19. Before the Tribunal, Mr Mangini made extensive references to the submitted documents to show his dire financial position, his many health problems, his reliance on agencies such as St Vincent de Paul, and his exceptionally difficult circumstances.  Mr Mangini’s oral evidence included the following submissions:

    ·He could not have anticipated the Virgin Money payment. He reported it as soon as possible to three people, and was told he would not have to repay his Newstart payments;

    ·He considered the Virgin Money payment as a lump sum;

    ·He described a number of family issues.  Mr Mangini felt great responsibility towards his late grandmother and tried to carry out her wishes to be buried in Albany.  His mother died during this period, and although he managed to see her at the last minute she expressed a desire to not see him again.  His relationship with his partner is strained due to his circumstances;

    ·Mr Mangini said that the AAT1 decision to grant a six month waiver was based on the expectation that he would receive a workers’ compensation payment, but that had not eventuated;

    ·Mr Mangini said that he last paid rent on 28 October 2016 and would be homeless but for the kindness of his landlord.  He said that he could not pay his bills and meet his financial obligations, and although he received some income from Uber driving, there were periods when he could not work;

    ·He told the Tribunal that he owned two vehicles, a Holden Barina and a Mitsubishi Mirage, but they were inoperable and only good for scrap; and

    ·Mr Mangini assured the Tribunal that he was an honest man, had done nothing wrong and had not at any time misled the Tribunal.

    Whether the Applicant was paid in excess of his correct entitlement to NSA during the period 25 August 2014 to 23 February 2015

20. Section 1068 of the Act provides a rate calculator to determine a person’s rate of NSA. The rate calculator provides that a person’s ordinary income, if sufficient reduces their maximum rate of NSA.

21. Section 8 of the Act defines income as:

    (a)an income amount earned, derived or received by the person for the person's own use or benefit; or

    (b)a periodical payment by way of gift or allowance; or

    (c)a periodical benefit by way of gift or allowance;

    but does not include an amount that is excluded under subsections 8(4), 8(5), 8(8). Section 8 of the Act also defines ordinary income as income that is not maintenance income or an exempt lump sum.

22. Subsection 8(11) of the Act states an amount is an “exempt lump sum” if:

    (a)the amount is not a periodic amount (within the meaning of subsection (11A)); and

    (b)the amount is not a leave payment within the meaning of points 1067G-H20, 1067L-D16 and 1068-G7AR; and

    (c)the amount is not income from remunerative work undertaken by the person; and

    (d)the amount is an amount, or class of amounts, determined by the Secretary to be an exempt lump sum.

23. The Respondent cites a lottery win or other windfall, a legacy or bequest, and a one-off gift as examples of lump sums that might be determined to be exempt lump sums (Exhibit R1, para 4.7).

24. Subsection 8(2) of the Act states a reference in this Act to an income amount earned, derived or received is a reference to an income earned, derived or received by any means and from any source whether within or outside Australia.

25. Subsection 8(11A)(a) of the Act states an amount is a periodic amount if it is:

    (a)the amount of one payment in a series of related payments, even if the payments are irregular in time and amount; or

    (b)the amount of a payment making up for arrears in such a series.

26. Relevant to the understanding of “income”, the Respondent cites the comments of Brennan J in Read v Commonwealth of Australia (1988) 167 CLR 57; [1988] HCA 26 at [3]:

    The definition is exhaustive: the term “income” means what it is defined to mean; it does not mean what “income” would be understood to mean if the definition were not in the Act. The definition is couched in the widest terms, presumably to ensure that public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide. The definition is wide enough to embrace receipts of a capital nature as well as receipts of income, for “income” is defined to mean, inter alia, any moneys, valuable consideration or profits irrespective of the means by which or the source from which those moneys, etc. are received (Exhibit R1, para 4.10).

27. The Guide provides the Tribunal with policy guidance regarding compensatory-type payments.  At 4.13.1.20 such payments are defined as follows:

    A compensation payment is assessed as ordinary unearned income if it does not fall within the SS Act section 17(2) definition of compensation and is not otherwise an exempt payment (for instance, under a section 8(11) determination).

    This may include payments which are compensatory in nature but do not contain economic loss due to personal injury.

    Examples of payments that DO NOT fall within the section 17(2) definition and should therefore be assessed as ordinary income include:

    ·DVA disability pension,

    ·compensation for unlawful dismissal,

    ·payments for a personal accident or insurance policy; an income replacement insurance policy; salary continuance payments; or sporting injury compensation, WHEN:

    othe person has made contributions towards the policy, AND

    othe policy does NOT include an offset clause, OR

    othe policy contains an offset clause but it has not been invoked.

28. The Guide in Part 4.13.1.20 also states that: “If a lump sum is received instead of periodical payments and the lump sum is calculated at a set weekly, fortnightly or monthly rate over a specific period, the payment is treated as if periodical payments were being made throughout the relevant period”.

29. The evidence is that Mr Mangini’s income protection policy does not include an offset clause and that Mr Mangini has made contributions towards the income protection policy by way of fortnightly premiums (T10/111). The Tribunal is satisfied that the income protection policy payment is not excluded from the definition of income under the Act and is ordinary income as defined by s 8 of the Act. Further, having regard to the above considerations, the Tribunal accepts the Respondent’s contention that “…the income protection policy payment should be treated as if periodical payments were being made throughout the relevant period” (Exhibit R1, para 4.17).  

30. There is no evidence or submission before the Tribunal that the debt raised in this matter has been incorrectly calculated (T17/127-128).  The quantum of the debt is not in dispute (Exhibit R1, para 4.18).

31. The Federal Court of Australia has established that money paid to individuals not entitled to it will be recovered. In Secretary, Department of Social Services v Hales (1998) 82 FCR 154 at 155, Justice French, as he then was, relevantly stated:

    The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which lead to the overpayment and the circumstances of the persons concerned.

32. The Tribunal is satisfied that the amount of $4,454.89 constitutes a legally recoverable debt pursuant to subsection 1223(1) of the Act.

    Is the debt recoverable, in part or in full?

33. The Act allows two ways for a properly raised debt of a social security payment not to be recovered; being waiver and write-off under Part 5.4 of the Act. Section 1237 of the Act gives the Secretary power to waive the Commonwealth’s right to recover the debt. Section 1236 of the Act gives the Secretary power to write off the debt (its collection deferred to a later date) for a stated period or otherwise, if one or more prerequisite in subsection 1236 (1A) of the Act has been met.

34. The Tribunal notes that Mr Mangini’s debt was raised on 15 December 2015. AAT1 granted a six month write-off. A stay order dated 6 March 2017 remains in effect until this Tribunal makes its decision.

    Should the debt be waived?

    Administrative Error

35. As stated above (see paragraph 13), Mr Mangini submits that the debt is solely Centrelink’s responsibility and error.  Mr Mangini told the Tribunal that Centrelink had a culture of bungling.

36. Section 1237A of the Act requires the Commonwealth to waive the right to recover a debt if it is attributable solely to administrative error by the Commonwealth and the person has received the payments in good faith.

37. The meaning of the word “solely” was discussed in the case of Re Gerhardt and Secretary, Department of Employment, Education and Training [1996] AATA 173, where the Tribunal stated:

    There is nothing...which indicates that any meaning should be given to “solely” other than its ordinary meaning. Applying those ordinary meanings to the sub-section mean that the Secretary must waive the right to recover the proportion of the debt that is attributable only to the Commonwealth's administrative error. The Secretary's duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth's administrative error. It makes no difference that those other errors or factors are minor. If those other errors or factors follow as a result of the Commonwealth's administrative error (i.e. they are incidental to the Commonwealth's error), then it may be that the debt is attributable solely to the Commonwealth's administrative error. Whether it is or is not attributable in that situation to the Commonwealth's administrative error will be a question of fact.

38. The Respondent’s SFIC details contact between Mr Mangini and the Department in the period 19 August 2015 to 13 January 2016 (Exhibit R1, para 4.26).  Mr Mangini submits that during the contact on 23 September 2015 the Department advised that he “…would not have to pay back the amount due to the nature of the lump sum payment and it’s [sic] circumstances” (T12/115). The Respondent refutes Mr Mangini’s submission on the basis that there is no evidence of such Departmental advice (Exhibit R1, para 4.30).  The Tribunal agrees.

39. Even if the evidence was that Mr Mangini had received incorrect information regarding repayment, which the Respondent does not concede, there is no evidence before the Tribunal that the debt resulted from sole administrative error by the Department.

40. Having regard to the relevant evidence, the Tribunal concludes that Mr Mangini’s debt was caused by him being paid in excess of his entitlements during the relevant period, as a result of Virgin Money’s delay in finalising the payment of the income protection policy. Accordingly, the debt cannot be waived under s 1237A of the Act.

    Special Circumstances

41. Section 1237AAD of the Act confers a discretion on the Secretary to waive all or part of a debt where it was not caused by an applicant knowingly making a false statement or failing to comply with the Act and if there are “special circumstances (other than financial hardship alone) that make it desirable to waive”. In addition, pursuant to subsection 1237AAD(c) of the Act, the Tribunal needs to be satisfied that it is more appropriate to waive than to write off all or part of the debt.

42. There is no evidence or submissions before the Tribunal that Mr Mangini knowingly made a false statement or failed to comply with the Act. The Tribunal relevantly notes that the AAT1 was similarly satisfied and stated in its 14 June 2016 decision:

    The tribunal was satisfied the debt did not come about because Mr Mangini knowingly misled Centrelink or knowingly failed to comply with the legislation.  The tribunal accepted Mr Mangini did not know his application for income protection would be successful and that when he received a payment he notified Centrelink about it (T3/10, para 28).

1. The Respondent notes, correctly, that “special circumstances” are not defined in the relevant legislation, and in the SFIC (Exhibit R1, para 4.35)  helpfully points to a number of frequently cited cases:

   (a)Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3, where the AAT stated:

   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.

   (b)Groth and Secretary Department of Social Security (1995) 40 ALD 541 where the Federal Court stated at 545:

   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...

   (c)Angelakos and Secretary Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25 where the Federal Court stated at [33]:

   …There is less risk of 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…

   (d)Timothy Davy and Secretary Department of Employment and Workplace Relations [2007] AATA 1114 stated at [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 SS 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…

2. The Respondent contends “…that it is not unusual or uncommon that the raising of a debt would result in financial difficulty” (Exhibit R1, para 4.39), and further that Mr Mangini “…has not advised of any special circumstances, particularly any which are unusual, uncommon or exceptional, which could be considered desirable to waive recovery of the debt under section 1237AAD of the Act” (Exhibit R1, para 4.40).

3. The Respondent notes a letter from the St Vincent de Paul Society dated 4 April 2016. The letter advises that Mr Mangini is receiving financial counselling, has fallen behind in his rent, has a number of other debts causing financial stress, and could be at risk of homelessness if evicted for rental arrears (T15/124). 

4. In considering whether Mr Mangini’s circumstances are special within the requirements of s 1237AAD of the Act, the Tribunal has careful regard to a Social Work Report dated 1 December 2017 provided by the Department (ST2). The report states that “This Social Work assessment report represents new evidence that needs to be considered with regard to debt waiver” (ST2/2).

5. The report describes Mr Mangini’s financial position as dire.  The report cites mental health, the risk of imminent homelessness, family conflict, relationship issues and grief and loss as factors supporting special circumstances.  The Tribunal notes that these issues are raised in the submitted evidence and in Mr Mangini’s evidence before the Tribunal.  The professional assessment in this report by the Department (Payment Integrity Branch – Business Integrity Division) relevantly states:

   The Guide to the Social Security Act states that ‘while a lot of circumstances that occur in isolation are not unusual, the net effect of all of the circumstances may be unusual and waiver under special circumstances may therefore be an option’. This is certainly the case for Mr Mangini.

   The impact of physical injury has dramatically changed the course of Mr Mangini’s life.  He was actively employed as a truck driver by day, complemented by night work at Coles supermarket.  His painful physical injuries, and subsequent reduction in disposable income drastically impacted on all areas of his life; including his financial wellbeing; and his mental health.  Mr Mangini has evidenced all of these medical factors.  When his medical conditions are considered in the context of significant family and relationship breakdown, it can indeed be deemed that his circumstances are special for the purpose of debt waiver under the legislation (ST2/5).

6. Having careful regard to the authorities cited by the Respondent, the totality of Mr Mangini’s circumstances and the evidence, the Tribunal finds that Mr Mangini’s circumstances are special for the purpose of debt waiver under the legislation.

7. As stated at paragraph 34 above, the AAT1 granted a six month write-off and a stay order dated 6 March 2017 remains in effect. There is no evidence before the Tribunal of improvements in Mr Mangini’s circumstances since these decisions or as a consequence of them, and similarly no evidence that his circumstances will change in the foreseeable future. The Tribunal is therefore reasonably satisfied that pursuant to s 1237AAD(c) of the Act, it is more appropriate to waive than to write off all or part of Mr Mangini’s debt.

   Should the debt be written off?

8. Section 1236 of the Act provides for the possibility of writing off (delaying recovery) of a debt for a period. As the Tribunal is satisfied that special circumstances exist sufficient to waive the recovery of Mr Mangini’s debt, this question is taken no further.

   CONCLUSION

9. The Tribunal is satisfied that Mr Mangini’s debt was not the result of sole administrative error by the Department and therefore cannot be waived on that basis. However, the Tribunal is satisfied that Mr Mangini’s circumstances are special within the meaning of s 1237AAD of the Act such as to enliven the discretion to waive the recovery of the debt. The Tribunal is further satisfied that it is more appropriate to waive than write off all or part of the debt.

   DECISION

10. It follows from the above that the Tribunal sets aside the decision under review, and in substitution exercises the special circumstances discretion pursuant to s 1237AAD of the Act to waive the recovery of Mr Mangini’s NSA debt in the amount of $4,454.89.

I certify that the preceding 52 (fifty-two) paragraphs are a true copy of the reasons for the decision herein of Brigadier A G Warner, Member

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

Associate

Dated: 31 May 2018

Date of hearing:	19 December 2017
Applicant:	In person: self-represented
Representatives for the Respondent:	Mr Ashley Burgess Ms Daphne Jones-Bolla
Solicitors for the Respondent:	Sparke Helmore Lawyers