McCudden and Secretary, Department of Family and Community Services

[2005] AATA 21

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 21

ADMINISTRATIVE APPEALS TRIBUNAL

GENEARAL ADMINISTRATIVE DIVISION            N2003/1844

Re: Darren McCudden

Susan McCudden

Applicants

And:Secretary, Department of Family and Community Services

Respondent

DECISION

Tribunal:       P.J. Lindsay, Senior Member

Date:             11 January 2005

Place:            Sydney

Decision:      The decision under review is set aside. In lieu, the Tribunal decides   that the right to recover part of Susan McCudden’s debt is waived. The              part of the debt waived is the sum of $916.07, leaving a recoverable                    debt of $1,832.14. The debt owed by Darren McCudden is waived in                  full.

. . . . . . . . . . . . . . . . . . . . . . . .

P. J. Lindsay, Senior Member

©        Commonwealth of Australia          (2005)

CATCHWORDS

Social Security – disability support pension – fluctuations in partner’s income  leading to overpayment – debt due – waiver of debt due to special circumstances  considered – right to recover part of debt waived – decision set aside.

Social Security Act 1991 ss.1237A, 1237AAD

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

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

REASONS FOR DECISION

P.J. Lindsay, Senior Member

1.      This is an application for review of a decision made on 28 October 2003 by the Social Security Appeals Tribunal (SSAT) affirming a decision by a Centrelink authorised review officer that Mr McCudden owed a debt of $208.81 and Mrs McCudden owed $2,768.27.

2.      At the hearing, the tribunal was informed that the respondent had waived Mr McCudden’s debt of $208.81 relating to parenting payment, thus the evidence and submissions were confined to Mrs McCudden’s debt. 

background

3. Mrs McCudden is 28. She lives with Mr McCudden and their three young children in Taree. Mrs McCudden was granted disability support pension on 19 September 1996. Mrs McCudden’s debt was raised on the basis that Mr McCudden’s employment income was not properly assessed in determining the amount of pension paid to her. Mrs McCudden suffers from pelvic inflammatory disease and is illiterate. Her husband gave evidence at the hearing and also acted as her representative. The tribunal also had before it the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T documents) and the exhibits tendered at the hearing.

4.      On 15 May 2003 debts were raised of $6,028.04 against Mrs McCudden and $3,215.29 against Mr McCudden on the basis that Mr McCudden’s income was not properly assessed in their respective social security payments. On 27 May 2003 the debt amounts were revised to $4,645.86 for Mrs McCudden and $2,718.03 for Mr McCudden.  The authorised review officer affirmed the decisions to raise the debts. However, the authorised review officer’s decision on 20 June 2003 was that the debts had been incorrectly calculated. The recalculated debts totalled $2,768.27 for Mrs McCudden and $208.81 for Mr McCudden. The SSAT affirmed that decision and it is that decision which is under review.

5.      On 29 April 2004 Member Webb directed the respondent to recalculate any overpayments made to Mrs McCudden relating to disability support pension and family tax benefit (a matter which was not before me at the hearing) and to provide those recalculations to the applicants and the tribunal. At a further directions hearing on 16 June 2004, Member Webb directed the respondent to take into account certain information provided by Mr McCudden and to recalculate the overpayment debts as necessary. There was a further directions hearing held on 22 July 2004. By that time, Mr McCudden had met with the relevant Centrelink officer, and errors and discrepancies were identified and he was informed that the debt recalculations would be varied. Mr McCudden complained at the directions hearing that Centrelink had attempted to recalculate the debt amounts on several occasions but still could not get it right. Mr McCudden said he could not work through the recalculations without having Centrelink’s detailed working papers. In the event, Member Webb directed the respondent was directed to file and serve detailed working papers in relation to the debt recalculation.

6.      It was agreed that there were five separate periods when overpayments were made. The recalculations carried out in April 2004 reduced Mrs McCudden’s debt to $2,474.01. But the subsequent recalculation carried out in July 2004, by a different authorised review officer, increased her debt to $2,748.21.

evidence

7.      In summary, the most recent recalculation and the debts relevant to the respective periods are as follows (exhibit R2):

Period	Debt
1	8 May 1998 – 1 April 1999	$nil
2	15 March 2000 – 10 April 2001	$1,909.37
3	11 April 2001 – 3 July 2001	$172.43
4	15 August 2001 – 18 December 2001	$811.08
5	19 December 2001 – 19 June 2002	($144.67 underpaid)
Total	$2,748.21

8.      The tribunal accepted in evidence from Mr McCudden, a detailed and well-prepared summary and analysis of his understanding of the relevant periods of work and calculation of the debt for those periods (exhibit A1).

9.      It is not necessary to consider the evidence in relation to period one because the respondent now agrees that Mrs McCudden has no debt in relation to that period. As for period 2 (15 March 2000 to 10 April 2001), Mr McCudden was working for BHP. In evidence, he said his wife would have informed Centrelink in March 2000 as to his average gross wage received from BHP. The annual figure of $27,456 was provided to Centrelink. A weekly estimate of $535.10 was noted. He also worked some overtime until the end of that financial year. He said that a number of adjustments were made to Mrs McCudden’s disability support pension to reflect adjustments in yearly estimates of income that were being provided to Centrelink. Later he was stood down by BHP and was unemployed from 11 April 2001. Nevertheless, Mr McCudden accepted that during this period neither he nor his wife notified Centrelink of all changes in his income and his income as recorded by Centrelink was less than what he actually earnt. Mr McCudden accepted that his wife had a debt for this period in the amount of $1,448.14 and not $1,909.37 as calculated by Centrelink (based on Mr McCudden’s understanding of the so called low entitlements/high entitlements data provided by Centrelink, as discussed later in these reasons). As well, he said he thought that there was an amnesty introduced at the time and that it should also be taken into account that he overestimated his income at that time by around $3,000.  

10.     As to period 3 it seems Mr McCudden considers the amount owing should be approximately $13.00 less than that stated.

11.     For period 4, there is a dispute by Mr McCudden based on the confusion as to whether the so called low or high entitlements should be taken into account for the debt calculation.

12.     As to period 5, Mr McCudden claims that it has not been properly explained why an underpayment of benefits of $510.00 was adjusted to an underpayment of only $144.67.

13.     Mr McCudden’s relevant employment history is as follows:

·BHP Steel from 22 January 1999 to 12 April 2001

·Skilled Engineering  from 3 May 1999 to 19 November 1999

·Metroll  from 24 April 2001 to 6 March 2002.

14.     The amount of the debt raised against Mrs McCudden has been the subject of some considerable controversy in this matter. On 15 May 2003 Centrelink raised a debt of $6,028.04 against Mrs McCudden. The debt amount was revised on 27 May 2003 to $4,645.86. An authorised review officer had several phone calls with Mr McCudden and a face-to-face interview. Mr McCudden gave Centrelink a written record of events. The upshot was that an authorised review officer informed Mrs McCudden on 23 June 2003 that the debt of $4,645.86 may not be wholly correct and the debt was to be recalculated (T77). As a consequence of the recalculation, Mrs McCudden’s debt was reduced to $2,768.27.

15.     Mr McCudden gave evidence but Mrs McCudden did not because, as he explained, she is illiterate. He told the tribunal about the efforts he has made to understand the basis for Centrelink’s raising debts against his wife and their amounts. He referred to being provided with explanatory material including Debt Reports and spreadsheets of calculations of his wife’s entitlements.

16.     After hearing Mr McCudden’s evidence I am satisfied that the Entitlement Calculation spreadsheets and Debt Reports that Centrelink furnished in response to the tribunal’s directions referred to in par 5 above, have led to his confusion in attempting to satisfy himself that a debt for the correct amount has been raised. In the circumstances of this case, this necessity to satisfy himself of the true amount of the debt has been fuelled by Centrelink’s revision, by several recalculations, of the amount due from $6,028.04 down to the current amount due of $2,748.21. This reduction has taken place as Mr McCudden has been able to produce evidence of errors in his employer’s records of his salary and dates of his employment and also raise queries that have led Centrelink to use different methods for calculating debts. For example, on 28 May 2003, as a consequence of a discussion between Mr McCudden and an authorised review officer regarding his employment by Metroll, the officer “ …immediately recalculated the overpayments using the fortnightly breakdowns” after initially having calculated the figures on an annual basis (T76). Subsequently, on 23 June 2003 an authorised review officer took this employment information into account because “periods during which Mr McCudden worked have not been represented accurately in the calculation of the debt.” (T77)

17.     The respondent’s Entitlement Calculation spreadsheets and the Debt Reports cover the same or similar periods. Unfortunately, the two sets of date do not coincide exactly with the periods reviewed. Therefore the figures on the Entitlement calculation sheets cannot be traced to the figures in the Debt Reports. Whilst the figures in the Entitlement Calculation spreadsheet may have been properly apportioned and carried across to the Debt Reports, it is not clear and there are no calculations to show how it has been done. These discrepancies have led Mr McCudden to a great deal of confusion and a possible misconstruing of the figures in his efforts to make sense of them and understand how the debt was calculated. I can appreciate the trouble he has been put to and the confusion he has faced because the calculations presented in this manner for similar periods do not include proper cross referencing. Without further details of apportionment, it is simply not possible for someone in Mr McCudden’s position to make sense of the data relied on by Centrelink. I am not satisfied that he has received a sufficiently coherent explanation of the calculation of the exact amount of the debt. Indeed at the hearing the response from Centrelink’s representative was that “ ... there may be some further investigations that Centrelink can do”. It was noted that the debt calculations have been recalculated independently by two authorised review officers since the applicants’ appeal began. The representative added that the debt calculation documents “ … are first and foremost for Centrelink purposes and it is not necessary for the Centrelink customer to be able to understand each and every figure in those debt calculation documents and what those figures refer to.”  From Mr McCudden’s perspective, the many changes in the calculation of the debt, referred to in pars 4 to 6 above, have understandably eroded his confidence and he rightly needs to be satisfied that the debt is now correctly calculated.

18.     I should add that I do not believe Centrelink has acted in bad faith in the way they have attempted to answer Mr McCudden’s concerns. I note also that, at times, Mr McCudden’s communications with Centrelink found in the T documents have employed unnecessarily belligerent language. That said, my impression of the material in the T documents and Mr McCudden’s evidence is that when he raises what Centrelink considers to be fresh concerns, it is done in an attempt to figure out the information previously received from Centrelink. Within reason he is quite entitled, to try to understand the factual basis of the officers’ calculations and decisions, and if he cannot, then to ask for assistance.

19.     I have examined the records and after considerable deliberation I am satisfied that the Entitled amounts in the Debt Report, are the so called low entitlement amounts (using Mr McCudden’s terms) which are in fact the Fortnightly Rate Payable amounts as set out at the bottom of the Entitlement Calculations.  The Entitlement Calculation sheets show Mrs McCudden’s entitlement to receive fortnightly Rate Payable amounts after adjustments for the income test (ie taking into account the amount of her husband’s income) were deducted from her Max Rate Total, which was her initial maximum pension entitlement. Mr McCudden thought Centrelink had the option of using the so called high entitlements rather than the so called low entitlements but due to the confusing lay out of the spreadsheets he may not have appreciated that the so called low entitlements reflects the impact of his income on the rate of the so called high entitlement amounts.  The Entitlement and Debt records attached to Mr McCudden’s Period 4 calculations largely (exhibit A1) relate to the same period start dates and it can be seen in the Entitlement Calculations sheet that from the first column for the date of effect of 15.8.2001, the fortnightly rate payable of $135.20, is the amount of Mrs McCudden’s entitlement for that period. That amount has been carried over to the Debt Report for the period commencing 15.8.2001 as her Entitled total. As she was actually Paid the amount of $185.35, she was therefore Overpaid the amount of $50.15 for that period.

consideration and findings

20.     As noted above the respondent has waived the debt due by Mr McCudden because notice of the debt was not given to him. In the respondent’s submission there was an overpayment of disability support pension to Mrs McCudden in the sum of $2,748.21 for the period 8 May 1998 to 30 June 2002 because her husband under-declared his income from both BHP and Metroll during the relevant period. The respondent contends that Mr and Mrs McCudden did not advise Centrelink of variations in Mr McCudden’s income from BHP during the relevant period, being 17 March 2000 to 12 April 2001.

21.     It was further submitted that Mr McCudden failed to advise of increases in earnings within the 14 day time period in accordance with the Social Security Act 1991 (the Act). Therefore his declared earnings were less than his actual earnings. This resulted in an overpayment of parenting payment to him and an overpayment of disability support pension to Mrs McCudden.

22.     I find that Mr McCudden has not demonstrated any further significant error in the most recent debt calculation arrived at by Centrelink. As he has accepted certain amounts as owing, on the material before me I find Mr McCudden has not shown that the debt amounts in par 7 above are incorrect. I find therefore that Mrs McCudden was overpaid disability support pension in the sum of $2,748.21 and owes that amount as a debt due to the Commonwealth.

23.     Section 1237A of the Act provides that the respondent must waive the debts in certain circumstances.  It reads:

1237A(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.

Note:   Subsection (1) does not allow waiver of a part of a debt that was    caused partly by administrative error and partly by one or more other           factors (such as error by the debtor).

24.     It was submitted for the respondent that the word “sole” should be given its ordinary meaning. Further, the respondent submitted there was no administrative error on the part of Centrelink in relation to raising and recovering the debts of parenting payments and disability support pension. The only error arose in relation to the necessity to re-calculate the relevant debt due to a miscalculation of the specific amounts of the debts. Therefore it was argued the debt did not arise solely from administrative error, nor were the excess payments received in good faith and consequently the debt could not be waived under section 1237A(1).

25.     I find that it is not appropriate in the circumstances to waive the debt under s.  1237A(1) as the debt arose because of under disclosure of Mr McCudden’s true income by his wife. The amount of the debt has been varied as a result of recalculations following miscalculations and error disclosed by Mr McCudden’s employer. The overpayment is therefore not solely attributable to administrative error.

26.     Section 1237AAD of the Act gives the respondent a discretion to waive the right to recover all or part of a debt where the respondent is satisfied that there are special circumstances other than financial hardship alone that make waiver desirable.  But waiver is not available under s.1237AAD where the debtor or another person knowingly made a false statement or representation or failed to comply with the Act.  The section reads:

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.

27.     Centrelink informed the tribunal that there was no submission that Mrs McCudden acted in bad faith and thus could not meet the requirements in par (a) of s.1237AAD. Rather, Centrelink’s submission was that there were no special circumstances other than financial hardship alone that make it desirable to waive the debt and therefore the requirements of par (b) were not met.  It was submitted that the applicants’ circumstances were not unusual, exceptional or uncommon. The SSAT concluded that recovery of the debt would not be unjust or unreasonable. The respondent therefore submitted that there was nothing in the circumstances that fitted the description of being special, so as to permit waiver of the debt under s.1237AAD.

28.     Whether circumstances are special will depend on the circumstances of a particular case but they “must have a particular quality of unusualness that permits them to be described as special” (Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3). Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 (at 545) has said of the expression special circumstances that:

… it would require something to distinguish [an applicant’s] case from others, to take it out of the usual or ordinary 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.

29.     Mr McCudden gave evidence of the disadvantage his family faces. It arises not just because they are unemployed and dependent on social security, but also that these circumstances have induced them to purchase a house in an area that they could afford. However, his evidence was that they have found it to be an extremely violent neighbourhood, totally unsuitable for raising their three young children. His evidence was that his family has been subjected to the threat of home invasion, theft, assault and their children to possible molestation, as has been the fate of a neighbour’s child. They see no option but to leave the area and rent out their house.  The effect of dealing with and questioning this social security debt has also created a lot of stress on the McCudden family.

30.     Mr McCudden submitted that he is unable to have confidence in the many revisions that have taken place of the various debt amounts raised against him and his wife, even by senior review officers. He noted, for example, that the revised debt amount in the Period 5 recalculation had taken away a large portion of a credit for an underpayment of social security that had withstood previous revisions. His lack of confidence stems from being unable to understand or properly check the calculation from the material he has been given. I pause to add that there is no suggestion that Mr McCudden’s inability is due to a lack of comprehension, rather it results from the form and manner of presentation of the material. It is also clear that had Mr McCudden simply accepted the initial debt raised and not questioned it as he has done, he and his wife would have been liable for a combined debt of more than $9,000.00. His questioning, objections and persistence have led to the reduction of his debt to $208 (which has been waived) and his wife’s debt to $2,748.21. I accept that the process he has had to follow from the time the original debt was raised until now, has been frustrating and difficult. I note his perception of the treatment by Centrelink of his concerns as being negative towards him but equally note that his attitude may in part have contributed to difficulties in communication. He still feels confused by the records provided by Centrelink to verify their workings and the fact that the debt amount keeps changing. It is for these reasons that I also am not completely satisfied that Centrelink has correctly calculated the debt especially as the latest authorised review officers ($2,474.01 and $2,748.21) are $274.20 apart, not a small sum for the McCuddens.

31.     I am mindful that the debt has arisen because of understatement of income, which is not disputed by the applicants. However, Mr McCudden maintains his wife was led to believe that she was giving the right information and I have no reason to reject that submission. Mr McCudden submitted that had he initially been provided with the current debt calculations, the matter probably would have been resolved at that time, instead it has been dragged on since May 2003.

32.     Taking account of the evidence as well as the parties’ submissions and noting all the circumstances referred to above, including the family’s straightened financial circumstances, their threatened living conditions, the continually altered debt amounts, the confusing records supporting the calculations, the lack of confidence in the Centrelink calculations, the effect of their dealings with Centrelink on their marriage and children, I find that there are special circumstances.  Further, I consider this is an appropriate case in which to exercise my discretion in s.1237AAD. I consider those special circumstances make it desirable to waive the debt in part, specifically, ⅓ of the debt should be waived. The debt recoverable from Mrs McCudden should be reduced to $1,832.14. Further, I am satisfied that Mrs McCudden has no capacity in the foreseeable future, as an illiterate person in receipt of disability pension, of being able to repay the amount. It is more appropriate that the sum of $916.07 be waived, not merely written off.

33.     The decision under review should be set aside. The right to recover part of the debt owed by Susan McCudden is waived. The amount waived is $916.07, leaving a recoverable debt of $1,832.14. The debt owed by Darren McCudden is waived in full.

I certify that the preceding 33 paragraphs are a true copy of the decision and reasons for decision herein of P.J. Lindsay, Senior Member:

Signed:         

............................................................................

(Associate)

Hearing  3 November 2004
Decision  11 January 2005
Applicant  In person

Respondent’s representative                     Centrelink