Morcos and Secretary, Department of Education, Science and Training

[2007] AATA 1079

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1079

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No V 200600596

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		PAUL MORCOS

Applicant

And

SECRETARY,

DEPARTMENT OF EDUCATION, SCIENCE AND TRAINING  

Respondent

DECISION

Tribunal Egon Fice, Member   

Date22 February 2007

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

(sgd) Egon Fice

Member

SOCIAL SECURITY ‑ Austudy payments – deferral of studies – overpayment – debt due to the Commonwealth – administrative error – waiver – special circumstances – debt write off

Social Security Act 1991 s 1236, 1237A, 1237AAD

Ryde v Secretary, Department of Family and Community Services [2005] FCA 886

REASONS FOR DECISION

22 February 2007 Egon Fice, Member

1.      Mr P. Morcos commenced a Bachelor of Arts/Bachelor of Teaching degree at the University of Melbourne in January 2003.  He applied to Centrelink for Austudy payments, which he received.  Centrelink is the service delivery agency for the Secretary to the Department of Education, Science and Training (the Secretary).

2.      Although Mr Morcos was enrolled for full time study at Melbourne University in semesters one and two in 2004, due to illness, he sought and was granted leave from study in semester two.  Although Mr Morcos did not undertake any study in semester two of 2004, he continued to receive Austudy payments.  Centrelink decided that Mr Morcos had been receiving Austudy payments to which he was not entitled.  It raised a debt of $2,798.25 against Mr Morcos.  Mr Morcos sought an internal review of the decision by an Authorised Review Officer (ARO).  The ARO determined that the period during which Mr Morcos was not entitled to Austudy payments should be extended, resulting in a debt of $4,969.90. 

3.      Mr Morcos sought a review of the ARO decision by the Social Security Appeals Tribunal (SSAT).  On 9 June 2006 the SSAT set aside the decision of the ARO, finding that there was a recoverable debt but that the debt period should be reduced.  This resulted in the debt being recalculated at $2,821.  Mr Morcos now seeks a review of the SSAT decision.

4.      The parties agree that Mr Morcos received Austudy payments during the second semester of 2004 to which he was not entitled.  Therefore, the issues in this matter are:

(a)whether Austudy payments continued to be made to Mr Morcos in 2004 due to an administrative error by Centrelink;

(b)whether there are special circumstances that make it desirable to waive the debt; and

(c)whether the debt should be written off.

RELEVANT FACTS

5.      Mr Morcos commenced studying at Melbourne University in the first semester of 2003.  He was enrolled as a full-time student.  He was entitled to and received Austudy payments.  He also worked on a casual basis as a salesperson for Sunglass Hut.

6.      Sometime prior to August 2004, Mr Morcos became aware that he needed to have surgery for a double hernia.  For that reason, he sought and was granted leave from his studies in semester two of 2004.  According to Mr Morcos, this was arranged in about June or July 2004. 

7.      Mr Morcos underwent surgery for a bilateral open inguinal hernia repair on 2 August 2004. 

8.      Although he did not study at all in semester two of 2004, he continued to receive the Austudy payments.  Although there is some dispute about this, Mr Morcos said that when he decided to proceed with the hernia operation, he attended the Centrelink office and informed the Customer Service Officer (CSO) at the counter that he had deferred his studies for the second semester of 2004.  He said he was told that he would be transferred over to Newstart Allowance (NA) and that he would be notified about that decision in due course. 

9.      On 25 August 2004 Centrelink sent Mr Morcos a letter asking him to attend the Springvale office for an interview about his continuing entitlement to Austudy.  An appointment was made for 22 September 2004 at 8.30am.

10.     Mr Morcos contacted Centrelink by telephone on 7 September 2004 and he asked the CSO for an interview appointment later in the day due to his studies.  Centrelink agreed to that request and sent a letter on 7 September 2004 to Mr Morcos changing the appointment date to 17 September 2004 at 3.15pm.

11.     Mr Morcos did not attend the interview on 17 September 2004.  Centrelink wrote to him on that day informing him that his Austudy payments had been suspended because of his failure to attend the interview.  Mr Morcos attended an interview with a CSO on 8 October 2004.  At that interview he completed a Statement of Details form which included details of his current studies.

12.     Centrelink sent a letter to Melbourne University on 20 October 2005 seeking details of Mr Morcos’ enrolments for 2004 and 2005.  The university replied that Mr Morcos studied full time in semester one of 2004 but was granted leave in semester two between 26 July 2004 and 31 December 2004.  In November 2005 Centrelink decided that Mr Morcos had been overpaid Austudy and raised a debt against him.

ADMINISTRATIVE ERROR

13.     The parties agreed that Mr Morcos was not entitled to receive Austudy payments throughout the second semester of 2004.  However, Mr Morcos submitted that payments made to him for the second semester of 2004 were made by reason of Centrelink’s administrative error.  His evidence was that he went into a Centrelink office and told a CSO that he intended to defer his studies for the second semester.  According to Mr Morcos, he was told that his allowance would be switched over to a more applicable allowance, that being, he thought, NA.  Despite that, Centrelink continued to pay him Austudy and he had no reason to question those payments.

14. Section 1237A(1) of the Social Security Act 1991 (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.

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).

Section 1237A(1A) does not apply to Mr Morcos’ case as the debt was not raised within a period of six weeks from the first payment that caused the debt.

15.     The problem for Mr Morcos is that the documentary evidence does not support his claim that he notified Centrelink that he had deferred his studies in the second semester of 2004.  This is so even though he said that when he spoke to the CSO in about June or July of 2004, the CSO made entries in his computer file regarding his intention to defer his studies because of his medical condition.  In evidence, Mr Morcos said that the CSO asked for his name and date of birth and he then commenced typing on the computer before him.  However, Centrelink has no record of any entry being made in June or July, or at any other time, regarding information given by Mr Morcos about his medical condition and his intention to defer his studies. 

16.     Furthermore, the documentary evidence discloses that on 25 August 2004 Centrelink sent a letter to Mr Morcos which stated that Centrelink needed to talk to him about his continuing entitlement to Austudy.  The letter stated that an appointment had been made for Mr Morcos to be interviewed by a CSO on 22 September 2004 at 8.30am.  Although Mr Morcos initially said that he did not receive this letter or any subsequent correspondence regarding the request to attend an interview with a Centrelink Officer regarding his Austudy payments, he subsequently said that if he did receive those letters, he did not look at them or did not pay particular attention to them due to his medical problems.  However, the events which followed that letter point to the fact that Mr Morcos did indeed receive the correspondence and was aware of Centrelink’s requirements.  A Centrelink file note made on 7 September 2004 by a Centrelink Officer states that Mr Morcos contacted Centrelink on that day with a general enquiry regarding Austudy.  The file note also states at Cust request to later time in day due to study.  I understand that note to mean that Mr Morcos requested a later time in the day for his scheduled interview of 22 September 2004 due to the fact that he would be otherwise occupied with his studies.

17.     On 7 September 2004 Centrelink sent Mr Morcos a letter in the same terms as the letter of 25 August 2004 except that the interview date had been changed to 17 September 2004 at 3.15pm.  That seems to follow from Mr Morcos’ request for a time later in the day for an interview. 

18.     Mr Morcos does not dispute the fact that he did not attend Centrelink on 17 September 2004.  On that day, because Mr Morcos failed to attend the interview, Centrelink wrote to him stating that his Austudy had been suspended because he did not attend the interview as arranged.  Again, Mr Morcos said in evidence that he did not recall receiving that letter and believes that he subsequently received a telephone call from Centrelink when another time for the interview was arranged. 

19.     Mr Morcos admits that he attended an interview on 8 October 2004 and that he was asked to, and did, complete a Statement of Details setting out the particulars of his current study.  One of the questions on that form asked whether the customer was studying on a full time basis and Mr Morcos has ticked the box beside that question.  Mr Morcos set out the details of the institution where he was studying and the course details.  When asked how many subjects are you undertaking this semester/term? he wrote: 4 subjects.  There are also questions on that form which deal with ceasing studies and Mr Morcos left those sections blank.  He signed and dated the form underneath a Customer Declaration, where he declared that the information was correct and that he undertook to notify Centrelink of any change to this information or any change to his circumstances within 14 days of a change occurring.

20.     Mr Morcos’ explanation for providing incorrect information on the Statement of Details form was that he thought that it referred to the first semester of study.  He said he must have misinterpreted the questions.  I do not accept that to be the case.  It is very clear that the questions on the form related to his current study position and the current semester as at October 2004.  If Mr Morcos was being forthright about his circumstances at that date, he would have clearly completed the section dealing with ceasing studies due to his medical condition.  It is inconceivable that a person who is studying for a tertiary qualification would misunderstand the very clear nature of the questions set out in the Statement of Details. 

21. Having regard to the evidence before me in respect of this point, I am of the view that the overpayment of Austudy is not attributable solely to an administrative error made by the Commonwealth. Also, I am not satisfied that Mr Morcos received Austudy payments in the later half of 2004 in good faith. The evidence points to the fact that Mr Morcos was aware that he was receiving Austudy payments to which he was not entitled because of his deferral in the second semester of 2004. It follows that the Secretary cannot waive Mr Morcos’ debt pursuant to s 1237A of the Act.

WAIVER IN SPECIAL CIRCUMSTANCES

22. 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 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.

23. The difficulty that I see in applying this section to Mr Morcos is that he cannot satisfy s 1237AAD(a)(i) of the Act. There can be no question that the details provided by Mr Morcos in the Statement of Details form contained false statements or false representations. Given that Mr Morcos’ Austudy payments were suspended prior to the interview at which he made those statements or representations, and Austudy payments then continued at a time when he was not entitled to them, that satisfies the requirement that the debt arose wholly or partly from the false statements or false representations he made. Furthermore, the evidence I have referred to above satisfies me that Mr Morcos made those statements knowingly. Therefore, Mr Morcos cannot avail himself of the waiver provisions set out in s 1237AAD.

24.     Even if I am wrong about that, Mr Morcos is required to show that there are special circumstances (other than financial hardship alone) that make it desirable to waive the debt.  Mr Morcos submitted that he was in extreme pain before his hernia operation and for a period of time afterwards and he said that he was not capable of doing anything other than to look after himself.  He also claims he suffered from depression or at least general anxiety after the operation and that his medical condition should be taken into account.  Mr Morcos also submitted that his depression was contributed to by the fact that he lost his father in 2002 and his brother in 2003.  His mother was also seriously ill and had heart surgery.

25.     There are a number of Federal Court decisions which have dealt with the meaning of the term special circumstances and these opinions were summarised by Branson J in Ryde v Secretary, Department of Family and Community Services [2005] FCA 886 where she said, at para 26:

While, as French J pointed out in Hales, the evident purpose of s 1237AAD is to enable a flexible response to the wide range of circumstances which could give rise to hardship or unfairness, the statutory requirement for “special circumstances” discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness to which French J referred must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.

26. While I accept that Mr Morcos may have been suffering from some depression or general anxiety as a consequence of events which culminated in his hernia operation, that does not, in my opinion constitute hardship or unfairness which would justify departure from the general rule. My view is that Mr Morcos was obliged, and was quite capable of informing Centrelink of the true position regarding his studies for the latter half of 2004, and he failed to do so. Therefore, in my view, it is not appropriate for the Secretary to waive all or part of Mr Morcos’ debt pursuant to s 1237AAD.

DEBT WRITE OFF

27. Section 1236(1) of the Act provides that the Secretary may, on behalf of the Commonwealth, decide to write off a debt for a stated period or otherwise. The Secretary can decide to write off a debt 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)it is not cost effective for the Commonwealth to take action to recover the debt. (s 1236(1A)).

28.     Mr Morcos submitted that he had no capacity to repay the debt.  He produced documents which disclosed that he had debts totalling approximately $10,700 at the end of December 2006.  There was no evidence that Mr Morcos had any savings or that he had any assets other than a 1993 Nissan Skyline motor vehicle which he said was valued at approximately $12,000. 

29.     Although Mr Morcos advised Centrelink on 29 August 2006 that he was in full time employment, and that he did not wish to restore the NA which he had been receiving, at the hearing he said that he worked for Sunglass Hut on a casual basis, receiving an average net weekly income of $272.90.  Mr Morcos also indicated that he had engaged in some other casual employment but was not able to say how much he had earned.  Mr Morcos said he intended to resume full time studies again this year although he would continue to work one or two shifts per week with Sunglass Hut.  Mr Morcos lives with his mother but does not pay rent.  He sometimes buys food and helps with living expenses.  He expects to continue living in his mother’s house for the foreseeable future. 

30.     Given Mr Morcos’ relatively low expected earnings in the near future, at least until he completes his university studies, he was asked why he did not renew his application for NA.  Mr Morcos said that he would only be entitled to a relatively small sum and that it was not worth the effort.

31.     Although it appears that Mr Morcos has a limited capacity to repay the debt owed to the Commonwealth, in my view it is not possible to say that he has no capacity to repay the debt.  Much depends on how much casual work Mr Morcos chooses to do while completing his studies. 

CONCLUSION

32.     It is my opinion that Mr Morcos’ debt due to the Commonwealth cannot be waived for the reason that it was attributable solely to an administrative error by Centrelink.  Further, waiver on the grounds of special circumstances does not apply to Mr Morcos because of the false statement or false representations made knowingly by him which resulted, at least in part, to the debt arising.  In any event, Mr Morcos has not demonstrated that there are special circumstances that make it desirable to waive the debt.  I am also of the view that the Secretary cannot write off the debt due to Mr Morcos’ claimed incapacity to repay it.  The evidence discloses that there is some capacity, even though limited, to repay the debt.  Therefore, it is my opinion that the decision of the SSAT made on 9 June 2006 was correct and it should be affirmed.

I certify that the thirty‑two [32] preceding paragraphs are a true copy of the reasons for the decision herein of

Mr Egon Fice, Member

Signed: Olympia Sarrinikolaou

Clerk

Date of Hearing  11 January 2007
Date of Decision  22 February 2007
Advocate for the Applicant          Self‑represented
Advocate for the Respondent       Mr T. Noonan, Centrelink Legal Services Branch