Meehan; Secretary, Department of Social Services and (Social services second review)
[2022] AATA 4182
•7 December 2022
Meehan; Secretary, Department of Social Services and (Social services second review) [2022] AATA 4182 (7 December 2022)
Division:GENERAL DIVISION
File Number(s): 2021/5595 & 2021/5596
Re:Secretary, Department of Social Services
APPLICANT
AndSusan Meehan & John Meehan
RESPONDENTS
Decision
Tribunal:Deputy President B W Rayment OAM KC
Date:7 December 2022
Place:Sydney
The decision dated 7 July 2021 of the Social Services and Child Support Division of the Tribunal is affirmed.
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Deputy President B W Rayment OAM KC
Catchwords
SOCIAL SECURITY – age pension – appeal by the Secretary of the Department of Social Services – whether there are special circumstances that make it desirable to waive recovery of debt – failure to notify of additional property asset – decision to waive debt affirmed
Legislation
Social Security Act 1991 (Cth)
Cases
Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541
Secretary, Department of Social Security v Hales [1998] FCA 219; (1998) 82 FCR 154
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; (2007) AAR 436
Ryde v Department of Family & Community Services [2005] FCA 866
REASONS FOR DECISION
Deputy President B W Rayment OAM KC
7 December 2022
The Secretary appeals from the decision of AAT1 to the General Division of the Tribunal.
For the reasons which follow, I have decided to dismiss the appeal.
The decision of AAT1 was that the debt of two elderly pensioners should be waived in full under s 1237AAD of the Social Security Act 1991. That provision provides that:
1237AAD Waiver in special circumstances
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.
Note 1: Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.
Note 2: This section has effect subject to section 1237AAE in relation to an assurance of support debt.
AAT1 found that paragraph (a) of the section did not apply, and as will appear, I agree.
AAT1 found that paragraph (b) applied, and that paragraph (c) did apply and exercised discretion, standing in the shoes of the Secretary to waive the debt in full.
Legal submissions were made by both parties about the meaning of the expression ‘special circumstances’ used in s 1237AAD(b). It is convenient to discuss the expression first.
The expression has often been examined in the Federal Court and in the Tribunal. There must be something that distinguishes the case from the ordinary or usual case. As Kiefel J said in Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541 it would 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. Each case must be considered on its merits. A great variety of circumstances might occur, raising considerations of individual hardship, need, fairness, reasonableness and whatever else may move an administrator to decide one way or the other. That emphasizes that the provision is intended to be applied flexibly. As to financial hardship, it is neither necessary nor alone sufficient, as in effect decided by French J in Secretary, Department of Social Security v Hales [1998] FCA 219; (1998) 82 FCR 154 (‘Hales’). The exclusion of financial hardship alone does not mandate its inclusion in the range of matters constituting special circumstances. The case need not be exceptional, although such a case could produce exceptional circumstances. See generally Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; (2007) AAR 436 and Branson J in Ryde v Department of Family & Community Services [2005] FCA 866.
The circumstances of the case
All of the findings of fact made by AAT1 are correct in my opinion, having heard the evidence of Mr and Mrs Meehan. Each of them gave evidence which I accept which supports those findings of fact.
In 2017 they were living in a unit in Campbell Street which they owned free of mortgage, but the strata fees of which they found to be expensive. They decided to move to another unit, because they found that the strata fees were a third of what they were paying in Campbell Street. Their children were not living with them. Mr Meehan is now 79 and Mrs Meehan is now 75. They thought that it would not be difficult to sell the Campbell Street property.
They did not rent out Campbell Street because they thought it would delay the sale of the property, and because they thought that the income would affect their pensions. Rather, they left it vacant, and as it turned out, it was unoccupied for more than two years. Despite the fact that they reduced the price on three or four occasions, spent money on its restyling, and paid the expenses of some four real estate agents in succession, they could not sell it at all, in what appears on the evidence to have been a falling market. They borrowed the whole purchase price of their new unit, giving the credit union a mortgage over both properties. At the same time, they were paying $3000 a month in interest to the credit union.
So they sold the new property they were living in in Campbell Street, and found that the agency raised a debt of $22,100 against each of them. Over the whole of the period, AAT1 calculated that instead of the amount of pension they received (some $40,000 each) they were entitled only to $18,000 each. That was because they had failed to notify the Secretary that they had an asset (Campbell Street) in addition to their then residential address. They did not know the effect upon their pension of owning another asset, which they regarded as a liability rather than an asset. They did not imagine that Campbell Street would remain unsold for years, but instead expected that it would be sold quickly, as their house had been.
The effect on their pension alone would have led them not to do what they chose to do in 2017. The further loss of some $120,000, which exhausted Mr Meehan’s superannuation, would have made their decision unthinkable.
As they lived through these events, it became a nightmare for them. They had outgoings on the attempts to sell Campbell Street, monthly outgoings of $3,000 to the credit union. They ceased to be able to continue to pay for private health insurance and to make charitable gifts which they made regularly in 2017.
Neither of these elderly pensioners was in good health. They had family concerns. Their only daughter had sadly died from cancer at the age of 27. One of their two sons now lives with them again and he is ill with post-traumatic stress disorder. They have tried to keep the debt problem from him so as not to disturb him.
It is clear that the debt would never have been incurred if they had known the real risks associated with their 2017 decision. Nor would the superannuation of Mr Meehan have been lost, or the other financial consequences that have flowed to them.
If the fateful decision of 2017 had not been made, the $22,000 debt owed by both of them would not be due at all, and the expenditure of the Commonwealth would have been the same.
In all those circumstances, it seems to me that special circumstances exist. The facts are very unusual. The prospect of now paying back $22,000 each into the future by reduction from their pension will add to their misfortune and their emotional distress.
I agree with the finding of AAT1 to the effect that their failure to notify the Secretary of the additional asset they held was unintentional and unknowing of their liability and that waiver is appropriate rather than writing off because writing off still leaves the debt payable in the future, and that the discretion conferred by s 1237AAD should be exercised in their favour. This is a case where the reasons for exercising discretion in favour of Mr and Mrs Meehan are to be found in the facts establishing special circumstances (see French J in Hales at 162). The appeal is therefore dismissed and the decision made by AAT1 is affirmed.
I certify that the preceding 18 (eighteen) paragraphs are a true copy of the reasons for the decision herein of Deputy President B W Rayment OAM KC
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Associate
Dated: 7 December 2022
Date(s) of hearing: 1 November 2022 Solicitors for the Applicant: Mr I Turton, Illawarra Legal Centre Solicitors for the Respondent: Mr M Gauci, Hunt & Hunt Lawyers
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