Mostovoy and Secretary, Department of Social Services (Social services second review)
[2016] AATA 323
•20 May 2016
Mostovoy and Secretary, Department of Social Services (Social services second review) [2016] AATA 323 (20 May 2016)
Division
GENERAL DIVISION
File Number
2015/2048
Re
Roman Mostovoy
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member J F Toohey
Date 20 May 2016 Place Sydney The Tribunal affirms the decision under review.
.......................[sgd].................................................
Senior Member J F Toohey
CATCHWORDS
SOCIAL SECURITY – disability support pension – whether applicant overpaid – whether applicant failed to declare income - whether gambling receipts income – exempt lump sum – whether any special reason applicant should be not treated as a member of a couple – whether debt should be waived – whether special circumstances – decision under review affirmed
LEGISLATION
Administrative Appeals Tribunal Act 1975
Social Security Act 1991
CASES
Beadle and Director-General of Social Security (1984) 6 ALD 1
Cao v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2014] FCA 52
Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693
Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Groth and Secretary, Department of Social Security [1995] FCA 1708
Holt and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 143
Kazmierczak and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 1084
Nassimi and Secretary, Department of Social Services [2015] AATA 423
Re Predrag (Peter) Ivovic and Director-General of Social Services [1981] AATA 57
Secretary, Department of Social Security v Coralie Hales [1998] FCA 219
Secretary, Department of Social Security v Brian and Faye Mclaughlin [1996] AATA 447Strauss and Secretary, Department of Family and Community Services [2005] AATA 608
REASONS FOR DECISION
Senior Member J F Toohey
20 May 2016
Mr Roman Mostovoy has been paid disability support pension (DSP) at the single rate since November 2002. The Secretary says he was overpaid $42,220.49 in the period from 10 March 2008 to 29 October 2013 (the relevant period) and must repay that amount.
The Secretary says the overpayment to Mr Mostovoy arose because, during the relevant period:
(i)he was married, and a member of a couple, and not entitled to the single rate at which he was paid; and
(ii)he failed to declare income by way of deposits into his account at the Star Casino in Sydney (the Casino).
On 13 April 2015 the Social Security Appeals Tribunal (SSAT), (now the Social Services and Child Support Division of the Administrative Appeals Tribunal) affirmed Centrelink’s decision that Mr Mostovoy had been overpaid DSP and decided there was no reason he should not be required to repay the resulting debt in full.
Mr Mostovoy seeks review of the SSAT’s decision. He does not dispute that he was married for much of the relevant period, but he says he should not be treated as a member of a couple for the purposes of the Social Security Act 1991 (the Act). In respect of the deposits into his account at the Casino, Mr Mostovoy says most comprised funds he held on behalf of others and, in any event, none should be considered “income” for the purposes of the Act.
THE ISSUES
I have to decide whether Mr Mostovoy has been overpaid DSP. In answering this question, I have to determine:
(i)whether there is a special reason why he should not be treated as a member of a couple during the relevant period; and
(ii)whether, by reason of undeclared income in the form of deposits into his account at the Casino, he was paid at a higher rate than he was entitled to.
If I find that Mr Mostovoy received more in DSP than he was entitled to, the amount of the overpayment is a debt to the Commonwealth: s 1223 of the Act. If I find that Mr Mostovoy was overpaid, I will have to determine whether there is any reason he should not have to repay all of the resulting debt.
SUMMARY OF DECISION
For the reasons that follow:
(i)I am satisfied that Mr Mostovoy had the benefit of pooling his resources with his former wife throughout their marriage. I am not satisfied there is a “special reason” why he should not be treated as a member of a couple from the date of his marriage until he and his wife separated on 2 July 2010;
(ii)I am satisfied that the deposits into Mr Mostovoy’s account at the Casino belonged to him;
(iii)I am satisfied that the deposits into his account were income for the purposes of the Act;
(iv)I find that, as Mr Mostovoy received more in DSP than he was entitled to, he has a debt to the Commonwealth in the amount of the overpayment;
(v)I am not satisfied there is any reason Mr Mostovoy should not be required to repay the amount of the overpayment in full.
INFORMATION BEFORE THE TRIBUNAL
Mr Mostovoy has made extensive written submissions and gave oral evidence to the Tribunal. Written and oral evidence was also given by: his niece, Margaret Gegelova; his nephew, Eduard Smulakovsky; and Ms Gegelova’s former husband, Andre Kasimir.
The Tribunal has before it a large bundle of documents provided by the Secretary in accordance with s 37 of the Administrative Appeals Tribunal Act 1975. It includes records from the Casino of gambling activity by Mr Mostovoy and his witnesses, documents submitted to the Department of Immigration in support of an application by Mr Mostovoy’s former wife for a spouse visa, records of Mr Mostovoy’s bank accounts, written statements from his witnesses, and written statements submitted by Mr Mostovoy from others who did not give oral evidence.
Was Mr Mostovoy a member of a couple during the relevant period?
A person who is a member of a couple is paid at a lesser rate than if he or she were single, the rationale being that a couple can pool resources and live more cheaply than if each were single. If a person is a member of a couple, the income and assets of his or her partner are taken into account in determining his or her entitlement to payment.
By s 24 of the Act, the Secretary (and so the Tribunal) may determine that a person is not to be treated as a member of a couple for the purposes of the Act if satisfied there is a special reason in the particular case.
Mr Mostovoy married Olga Sheptitskaya on 10 March 2008. They divorced on 7 October 2011. He acknowledges that, from the date of his marriage, he was a member of a couple within the meaning of subsection 4(2) of the Act.
When these proceedings commenced, Mr Mostovoy and the Secretary were at odds about the date on which he ceased to be a member of a couple. The Secretary accepted that Mr Mostovoy and Ms Sheptitskaya had to be separated for at least 12 months in order to be granted a divorce. The Secretary accepted that, on that basis, the marriage ended on 6 October 2010 and Mr Mostovoy was no longer a member of a couple from that date.
Mr Mostovoy maintains that he and Ms Sheptitskaya separated on 2 July 2010. He relies on his application for dissolution of marriage filed with the Family Court in July 2010 which identified 2 July 2010 as the date of separation.
The calculation of Mr Mostovoy’s entitlement to DSP is complex and depends on variables including how any income earned by him or his wife is attributed to each of them. Depending on how much, if any, income Mr Mostovoy earned during the relevant period, the calculation may be more favourable to him if he is found to have separated later rather than earlier. As I understand it, the Secretary is willing to accept the more favourable date. However, Mr Mostovoy maintains that he separated on 2 July 2010. I am satisfied that he ceased to be a member of a couple on that date.
Is there a special reason why Mr Mostovoy should not be treated as a member of a couple during the relevant period?
The Act does not define “special reason” for the purposes of subsection 24(2) but, in exercising the discretion, it is important to bear in mind the policy underlying the lower rate at which a person who is a member of a couple is paid. Decisions of the Tribunal and the Federal Court have consistently looked to see whether, for some reason, a person who is a member of a couple is unable to benefit financially from the relationship.
In Holt and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 143, the Tribunal identified the question as being whether, for practical reasons, a member of a couple could not reasonably be expected to enjoy the benefit of pooling of resources that usually occurs in marital relationship.
In Kazmierczak and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 1084, the Federal Court agreed, and said the case law confirms that:
… there is a particular focus under the Act on the practical ability of the resources of the partner being available for pooling with the resources of the person holding the pension.
…
It stands to reason that if for some legal or other practical reason the partner member of the couple cannot be treated as sharing income and assets then there is ground for exercising the discretion under s 24 so as not to treat the holder of the pension as a member of a couple who is capable of sharing resources.
As I understand his submissions, Mr Mostovoy maintains he should not be treated as a member of a couple because he never received DSP at the partnered rate, and because Ms Sheptitskaya was a full-time student and did not receive Centrelink benefits herself and nor did she receive any other income.
Mr Mostovoy gave inconsistent evidence about whether Ms Sheptitskaya was employed while they were a couple but little turns on this in the end. The information before the Tribunal overwhelmingly supports the conclusion that they had the ability to pool their resources throughout their relationship, and did so in fact.
Mr Mostovoy and Ms Sheptitskaya met when she visited Australia for business in June 2001. They married during her third visit, in 2008. He gave evidence that she brought substantial funds with her. At the time of their marriage, he was living in a Department of Housing property. Department policy precluded Ms Sheptitskaya from living in the property with him. They rented a property in Bexley, where the rent was approximately $330 a week, and Mr Mostovoy continued to pay $200 a fortnight rent on his own property. Giving evidence, he acknowledged that he and Ms Sheptitskaya combined their resources in order to pay the rent and, when he did not have sufficient money to meet that or other expenses, she paid from her own funds.
In a statutory declaration to the Department of Immigration in April 2010 concerning his relationship with Ms Sheptitskaya, Mr Mostovoy stated:
Olga and I lived together in a rented house Bexley North, and we are committed to each other. We both understand the importance of the commitments and responsibilities of the family. We own some joint assets (furniture, TV, laptop and a motor vehicle – Toyota Echo Rego APF51Y). We also have some joint liabilities such as rent and other bills. We plan our finances together and use our joint bank account to pay expenses.
In a statutory declaration submitted to the Department of Immigration in support of her application for a spouse visa, Ms Sheptitskaya stated that she and Mr Mostovoy married in March 2008. She stated:
… we keep on living together renting the same house at Bexley North, which Roman had found for as two years ago. We bought some furniture together (bed, sofa, big dinner table, TV and some other things) and we put a lot of effort into making that house a real home. We bought support car (Toyota plate number APF51Y) and a laptop together. We are jointly responsible for living expenses, such as rent, water and electricity bills, phone bills, groceries etc. We have a joint savings account and a Visa debit account with ANZ. We plan our budget together and make sure it works.
According to a letter from Ms Sheptitskaya’s migration agent to the Department of Immigration on 31 March 2008, while living together before they married, she and Mr Mostovoy “supported each other by financially sharing household and living expenses, including rent, utilities, Internet/cable, TV and groceries”.
In February 2008, Mr Mostovoy and Ms Sheptitskaya opened a joint bank account. Bank statements show that deposits totalling approximately $27,000, and withdrawals totalling nearly $25,000, were made in the three months to the end of May 2008. In July 2008, their migration agent advised the Department of Immigration that their expenses exceeded their income and “[i]n order to survive they are required to dip into their savings”.
I am satisfied that Mr Mostovoy had the benefit of pooling his resources with Ms Sheptitskaya throughout their marriage. I can see no other basis on which to find a “special reason” why he should not be treated as a member of a couple from the date of his marriage until 2 July 2010.
As Mr Mostovoy was a member of a couple from 10 March 2008 to 2 July 2010, he was not entitled to the single rate of DSP during that time.
Did Mr Mostovoy receive income that he failed to declare: the amounts in dispute
Mr Mostovoy has a member’s account at the Casino, linked to which is a Funds on Deposit (FOD) account, a facility available to members for storing funds. Records produced by the Casino show that, between 2 April 2009 and 31 October 2012, the following deposits totalling $97,000 were made into his FOD account:
2 April 2009 $5,000 (1)
3 March 2010 $8,000 (3)
4 March 2010 $8,000 (3)
16 March 2010 $8,000 (4)
17 March 2010 $8,000 (4)
30 March 2010 $3,000 (1)
2 April 2010 $3,000 (1)
29 February 2012 $5,000 (2)
23 October 2012 $40,000 (2)
26 October 2012 $5,000 (2)
28 October 2012 $5,000 (2)
31 October 2012 $5,000 (2)
Mr Mostovoy did not declare any of these deposits to Centrelink. He acknowledges that those marked (1) were his own winnings but maintains they should not be considered “income”. He claims the remaining amounts represent winning tickets and chips that he agreed to keep secure in his account for others:
(i)those marked (2) were winnings by Ms Gegelova;
(ii)those marked (3) were winnings by Mr Smulakovsky;
(iii)those marked (4) were winnings by Mr Kasimir
The Secretary contends that Mr Mostovoy has failed to provide an adequate explanation for the deposits, that the Tribunal should find those funds are his, and that they are properly characterised as income for the purposes of the Act.
Mr Mostovoy’s St George bank account also shows unexplained cash deposits totalling $60,000 between April 2008 in November 2013, none of which he declared to Centrelink but which were not taken into account in raising the present debt. For present purposes, they are not relevant.
Evidence of Graeme Stevens
Graeme Stevens, Regulatory Affairs Manager at the Casino, gave evidence that, other than persons who are not permitted to enter the premises for various reasons, any person over the age of 18 who can produce acceptable photo identification may be granted a member’s account. A member is issued with a loyalty membership card linked to his or her account. Members accrue points towards rewards such as free credit, food and drinks when they have their play recorded by a supervisor at a table, or by inserting their membership card into an electronic gaming or slot machine. They can choose not to use their cards but will not accrue reward points. Depending on the “tier” of membership, additional privileges such as access to restricted gaming lounges may be available.
Mr Stevens gave evidence that an FOD account is an optional facility for storing funds and entitles a patron to reward points. Anyone can deposit money into a member’s account using cash, gaming chips or cheque. A deposit slip is printed and must be signed by the person making the deposit. Unless a member has given written authorisation, only the account holder can withdraw funds from the account.
The Casino maintains a range of reports and records of individual members’ activity based on use of their cards. Records relating to Mr Mostovoy’s gambling activity have been produced to the Tribunal by the Casino. According to Mr Stevens, the records show “a very high level of gaming activity” against Mr Mostovoy’s membership card. Between August 2007 and January 2014, there was a “Total In” of $4,405,293.43 and “Total Out” of $4,027,275.39, representing the “turnover” of funds and a total loss of nearly $400,000.
Mr Stevens gave evidence that membership cards clearly state that the Casino does not tolerate patrons using others’ cards. The reasons are so that points are attributed according to a member’s activity and to counter illegal or undesirable activity. Although Mr Mostovoy claimed in evidence that he knows, and abides by, the rules, that is evidently not so.
I have no reason to doubt Mr Steven’s evidence.
The evidence of Mr Mostovoy and his witnesses
Mr Mostovoy’s evidence was unsatisfactory in many respects. For example, he gave inconsistent evidence about matters such as the source of the money he used to gamble at the Casino. Whereas he told the SSAT he borrowed money and returned it; he denied before this Tribunal that he was ever given money for that purpose; when pressed, he claimed that both were true. Further, a number of his claims were at odds with Casino records. His evidence is considered further below.
Mr Mostovoy’s witnesses were not impressive. Mr Smulakovsky and Mr Kasimir in particular were vague, much of their evidence was implausible, and neither could recall matters that they might be expected to remember if true.
Mr Mostovoy’s evidence
Giving evidence before the Tribunal, Mr Mostovoy claimed that some of the gaming activity recorded by the Casino against his membership card was by others who did not have their own membership cards. While that might be plausible in some cases, he conceded that Ms Gegelova, Mr Smulakovsky and Mr Kasimir, each of whom claimed to have used his card and deposited funds in question into his account, had their own membership cards. He claimed, however, that none had access to the Sovereign Room where he played.
In a letter to the Tribunal on 13 May 2015, Mr Mostovoy stated that monies used for gambling were “bona fide loans” from relatives, friends, and visitors from overseas, and most of the deposits into his account came from “unexpected winning receipts, prize vouchers, promotion winnings” belonging to them. He stated that this arrangement enabled his guests to enjoy his privileges and his ratings and allowed his “casino points” to increase. He acknowledged that he had his own “winnings, jackpots, multiple promotion prizes … that [he] used towards gambling, so there was a turnover of winnings and various types of rewards point”. He maintained he never took cash into the Casino with the intention of depositing it into his account and any winnings “were gambled away and never used for [his] own benefit”.
In support of his claims, Mr Mostovoy submitted two documents sent to him by the Casino in response to his request for information for these proceedings. The documents he produced were different from copies of the same documents held by the Casino.
The first document purports to be a “Daily Analysis of Selected Patrons” report showing gambling activity against Ms Gegelova’s membership card from 1 June 2006 to 30 December 2013. It purports to show a win by her of $51,584 on 23 October 2012 which Mr Mostovoy claims explains the deposit of $40,000 into his account on that date. The other document purports to be a copy of a letter from the Casino to Mr Mostovoy dated 1 May 2014.
Mr Stevens confirmed that the copies of both documents held by the Casino are different from those produced by Mr Mostovoy. In relation to the first, Casino records for Ms Gegelova show a win of $1584.60 on 23 October 2012. The Casino copy of the second document includes a table with columns for amounts lost by Mr Mostovoy which refers to “attached ‘Funds on Deposit detail Report’ and “Patron Payout history – Lifetime’ documents”. That column and the attached documents do not appear in the copy submitted by Mr Mostovoy.
Mr Mostovoy was unable to explain the discrepancies in the documents. I accept Mr Stevens’ evidence that the Casino copies show what was sent to Mr Mostovoy. The only plausible explanation for the discrepancies is that the copies submitted by Mr Mostovoy have been altered so as to support his claims.
Evidence was given by Mr Mostovoy and his witnesses that they would frequently lend each other amounts up to about $100 so they could keep gambling, and always repaid each other shortly afterwards. I accept that evidence but it is quite different from the amounts presently in question.
Ms Gegelova’s evidence
Ms Gegelova gave evidence that she won approximately $51,000 on 23 October 2012. Mr Mostovoy gave evidence that she won using her own card and deposited $40,000 into his account. Ms Gegelova could not remember if she was using her own card or Mr Mostovoy’s. When asked if she could explain why Casino records showed no record of that win, Ms Gegelova claimed she had not used her own card. She claimed it was convenient to deposit money into Mr Mostovoy’s account so that she could have ready access to cash. She claimed she did not know that she could have opened her own account. I find that claim implausible given that, Casino records show that she too spent a good deal of time at the Casino over many years and could be expected to know she could have had her own account..
Other evidence given by Ms Gegelova was inconsistent. For example, in a statutory declaration in May 2015 she referred to one amount only, of $40,000 deposited into Mr Mostovoy’s account in October 2012. In a statutory declaration in August 2015 she claimed to have made three further deposits to explain those in question ion these proceedings. She could not satisfactorily explain why she had mentioned only one in her first statutory declaration.
Ms Gegelova claimed that Casino records are unreliable and referred to a win of $20,000 in chips and tokens that she had in February 2006. The Casino has been unable to locate records to support her claim. Mr Stevens gave evidence that records of “promotional wins” are only kept for seven years and no record is available of Ms Gegelova’s win. I accept she had that win but the absence of records does nothing, in my view, to undermine the reliability of the records produced by the Casino to the Tribunal.
Evidence of Mr Smulakovsky and Mr Kasimir
Mr Smulakovsky gave evidence that he has been to the Casino once or twice a week since it opened. He would deposit his winnings into Mr Mostovoy’s account and draw on them when he needed to. He claimed he won $8,000 on 3 March 2010 and $6,000 on 4 March 2010 which he deposited into his account. It was notable that Mr Smulakovsky could remember few details of winnings or dates except on these particular occasions and in relation to the amounts in dispute in these proceedings. He claimed he was “absolutely sure” about them and remembered them because each was “a major win”.
Mr Kasimir gave evidence that he has been to the Casino once or twice each week since 2006. His memory was also poor except for the amounts in question. IN a statutory declaration on 6 August 2015, he claimed he visited the VIP Room at the Casino on 16 March 2007 as Mr Mostovoy’s guest and won $6,000 which he did not feel safe taking home with him cash. He asked Mr Mostovoy to hold the money in his account. He went back the next day and withdrew the full amount and then deposited his winnings of $4,000 from that day into Mr Mostovoy’s account.
Mr Kasimir claimed he “never thought about” having his own account. I do not accept that claim. He had been to the Casino regularly for over ten years and could be expected to know its rules and how members’ accounts operate. There was no reason for him not to have his own account.
I note that the amounts referred to in Mr Kasimir’s statutory declaration differ from those in the Casino’s records. Mr Kasimir gave evidence that he was not sure of these dates until Mr Mostovoy showed him the records provided by the Casino and he then remembered “well”.
I did not find Mr Smulakovsky or Mr Kasimir an impressive witness. I do not accept their claims in respect of the amounts currently in question.
FINDINGS
I am not satisfied that funds said to have been deposited by others into Mr Mostovoy’s account belonged to them. I am not satisfied they are anything other than as shown on the Casino records, that is, his own winnings.
Were Mr Mostovoy’s winnings “income”?
For the purposes of the Act, “income” in relation to a person is defined in subsection 8 (1) to mean:
(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;
By subsections (4), (5) and (8), certain amounts are excluded from the meaning of income for the purposes of the Act. None of the exclusions is relevant in this case.
“Income amount” means valuable consideration, or personal earnings, or moneys, or profits, whether of a capital nature or not: subsection 8(1). By subsection 8(2), an income amount earned, derived or received is a reference to:
(a)an income amount earned, derived or received by any means; and
(b)an income amount earned, derived or received from any source (whether within or outside Australia).
Section 1072 provides:
A reference in this Act to a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.
“Ordinary income” means income that is not maintenance income or an exempt lump sum: subsection 8(1).
The Act makes clear that “income” for the purposes of social security law is to be given a wide meaning. In Nassimi and Secretary, Department of Social Services [2015] AATA 423 at [9], Deputy President Tamberlin observed:
In Read v Commonwealth [1988] HCA 26 at [3] the High Court noted that the definition of “income” in the Act is in the widest terms to ensure that public expenditure is directed to those who stand in actual need of the periodic support which income-related pensions provide”. The purpose of the definition is to ensure that it brings within its net as wide a range of categories and sources of income as possible: see Frederick George Rose v Secretary, Department of Social Security [1990] FCA 52 at [12]
Bona fide loans have been found not to be income: Secretary, Department of Social Security v Brian and Faye Mclaughlin [1996] AATA 447. However, in Cao v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2014] FCA 52, Wigney J found that cash receipts, said to be from family members in the nature of loans or cash advances, were income. In any event, I am not satisfied, on the information before me, that any of the amounts said by Mr Mostovoy to have been given him by others were in fact bona fides loans.
I am not satisfied that Mr Mostovoy has provided a satisfactory explanation for the amounts in question. I am satisfied they were monies received for his own use or benefit. I am satisfied that they are properly characterised as “income” for the purposes of calculating his entitlement to DSP.
Exempt lump sums
For the purposes of subsection 8(1) (the meaning of “ordinary income”), an amount received by a person is an exempt lump sum if, among other things, it is an amount, or class of amounts, that the Secretary has determined to be an exempt lump sum: subsection 8(11). A note to subsection 8(11) states, by way of examples:
Some examples of the kinds of lump sums that the Secretary may determine to be exempt lump sums include a lottery win or other windfall, a legacy or bequest, or a gift--if it is a one-off gift.
Given the evidence, including his own, about the frequency of Mr Mostovoy’s gambling, the amounts in question could not be considered “windfalls” or “one-off” amounts. But, in any event, the Secretary has not determined that gambling receipts in general, and Mr Mostovoy’s in particular, are exempt lump sums for the purposes of subsection 8(1). The Tribunal has no power to make that declaration itself unless the power to do so has been delegated to the original decision maker or the reviewing decision maker: Strauss and Secretary, Department of Family and Community Services [2005] AATA 608. There is nothing to suggest that power has been delegated and, consequently, Mr Mostovoy’s gambling receipts are not exempt lump sums.
Deposits acknowledged by Mr Mostovoy to be his
Mr Mostovoy concedes that deposits totalling $11,000 on 2 April 2009, 30 March 2010 and 2 April 2010 were his winnings but he contends they are not “income” for the purposes of the Act because they were “fully lost” within 24 hours, he did not take them out of the casino and had no benefit from them.
I reject that argument. Whether proceeds of gambling are income for the purposes of the Act is not determined by whether a person subsequently loses them. If that were so, then any loss of income, whether from failed business ventures, unwise investments, or even gifts, should not be counted as “income”.
Is there any reason Mr Mostovoy should not be required to repay the debt?
If a person obtains the benefit of the social security payment that he or she was not entitled to for any reason, the amount of the payment is a debt due to the Commonwealth: subsection 1223(1) of the Act.
In some circumstances, a person may not be required to repay some or all of a debt.
Can the debt be written off?
A debt may be written off if: the debtor has no capacity to repay; if the debt is irrecoverable at law; if the debtor’s whereabouts are unknown; or if recovery is not cost effective: s 1236. The Secretary submits, and I am satisfied, that none of these applies in Mr Mostovoy’s case.
A person is taken to have capacity to repay a debt unless it would cause severe financial hardship: Guide to Social Security Law (the Guide) at 6.7.3.10. The Guide represents government policy and should be applied by the Tribunal unless there is good reason not to do so: Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634. Mr Mostovoy receives DSP and lives in stable public housing accommodation. He has household expenses and a number of debts. I accept he is in some financial difficulty, but I am not satisfied that repaying his debt to Centrelink would cause him severe financial hardship.
None of the other circumstances in which a debt may be written off applies in Mr Mostovoy’s case. It follows that there is no ground for writing off his debt, whether temporarily or permanently.
Must the debt be waived?
A debt must be waived where it is wholly attributable to administrative error and the debtor received the payment in good faith: s 1237A.
Mr Mostovoy maintains he was overpaid due to administrative error by Centrelink because he advised Centrelink in February 2008 of his intention to marry Ms Sheptitskaya. Centrelink has no record of this conversation. In the absence of a Centrelink record or some other credible evidence, I am not satisfied that Mr Mostovoy notified Centrelink of his marriage.
There is nothing to suggest that the overpayment was in any other way attributable to administrative error. It follows that there is no requirement that the debt be waived.
Should the discretion to waive the debt be exercised?
Section 1237AAD provides that 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.
It may be argued that, in failing to notify Centrelink of his income from gambling, Mr Mostovoy failed to comply with the requirement in the Act that he notify Centrelink of any change in his circumstances, including changes in his income. While I am not satisfied that he was advised by a Centrelink officer that he was not required to notify Centrelink of his winnings, I accept the possibility that Mr Mostovoy misunderstood or misinterpreted something he was told in the course of the 2007 investigation (see below at [82]). I am therefore not satisfied, on the information before me, that he had the necessary intent to knowingly fail to declare income.
The meaning of the expression “special circumstances” for the purposes of the Act has been considered by the Tribunal and the courts on many occasions. The concept is broad and a “constellation of factors”, including financial circumstances, may fall within it: Secretary, Department of Social Security v Coralie Hales [1998] FCA 219. It is “by its very nature incapable of precise or exhaustive definition” and contemplates circumstances that are “unusual, uncommon or exceptional”: Beadle and Director-General of Social Security (1984) 6 ALD 1. There must be something about the circumstances that distinguish an applicant’s case from others’ and take it “out of the usual or ordinary case”: Groth and Secretary, Department of Social Security [1995] FCA 1708.
In Re Predrag (Peter) Ivovic and Director-General of Social Services [1981] AATA 57, the Tribunal considered “special circumstances” by reference to whether strict enforcement of liability would be “unjust, unreasonable or otherwise inappropriate”.
For the discretion in s 1237AAD to be exercised, there must be special circumstances that make it desirable to waive.
In Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693, Deputy President Forgie said:
“[S]pecial 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.
There being no injustice or unfairness to the applicant that was not “visited, or potentially visited, upon all other recipients of social security payments”, the Tribunal was not satisfied it was desirable to waive the debt under s 1237AAD.
Mr Mostovoy contends that the following special circumstances apply in his case:
(i)he was advised by Centrelink in 2007 that winnings from gambling are not “income” and that he was not required to disclose them;
(ii)he did not profit from his gambling activity or gamble professionally;
(iii)his gambling was a form of relief and was not relied on to fund any aspect of his life;
(iv)his gambling addiction is the result of mental health issues;
(v)he is experiencing severe financial hardship;
(vi)he has a long term disability and suffers from chronic illnesses, and his health has deteriorated as a result of this protracted dispute with Centrelink;
(vii)he gambles his winnings away within several days and it would be impractical for him to be reporting winnings to Centrelink all the time.
I am not satisfied that any of these, either alone or in combination, amount to “special circumstances” by reason of which any of Mr Mostovoy’s debt should be waived.
In relation to advice from Centrelink concerning winnings from gambling, Mr Mostovoy claims that he was advised by a senior manager at Centrelink in 2007 that winnings from gambling are not considered income and are “exempt from declaration”. Documents produced by the Secretary show that, on 18 May 2007, Centrelink wrote to Mr Mostovoy advising that his DSP had been suspended because information obtained from Gaming Authority records and other sources had “established that moneys and assets in your possession may preclude you from Centrelink payments”. There is limited information before the Tribunal about the investigation but I accept that, at its conclusion, Mr Mostovoy’s payment was reinstated.
Whatever the circumstances that led to Mr Mostovoy’s DSP being reinstatement, I do not accept that he was advised by a Centrelink officer that he was not required to declare any winnings from gambling. The Secretary says, and I accept, that there is no record of such conversation. As set out above (at [75]), I accept the possibility that Mr Mostovoy misunderstood something he was told in the course of that investigation but, even if that is so, I am not satisfied it would amount to special circumstances for present purposes.
Mr Mostovoy acknowledges that he is required to notify Centrelink of changes in his circumstances, including changes in his income. He claims he made “multiple queries on how to declare winnings and whether I still need to declare winnings even though they were fully lost within 24 hours”. He claims “Centrelink was ambiguous and has not provided me with any clear guidelines”. Centrelink says, and I accept, that searches have failed to show any record of these queries.
Whether or not Mr Mostovoy profited from his gambling, or used it to fund living expenses, or “gambled professionally”, is not to the point. Nor is it a “special circumstance” that he lost his winnings (as Casino records indicate he did); rather, this is the nature of gambling itself.
Mr Mostovoy has submitted reports from his treating psychologist, Natalya Meylakh, his general practitioner, Dr Mark Vic, and psychiatrist, Dr Phillip Wiren. They state that he has a long history of bipolar disorder and depression. Ms Meylakh states that, “with psychological intervention and medication, he managed to stabilise his condition and was admitting of being relatively functional in recent years” but his condition has deteriorated “since Centrelink’s demands” and, if they are not resolved, “his symptoms will be severely exacerbated”.
Dr Wiren states that it is “quite common for patients [with bipolar disorder] to gamble irresponsibly when they are experiencing manic episodes” and it would seem unreasonable to penalise Mr Mostovoy for “what is in effect and (sic) integral part of his illness”.
I accept that Mr Mostovoy has a history of mental illness, and I accept that the stress of his dispute with Centrelink may be exacerbating his condition, but I am not persuaded that his condition is a special circumstance. In particular, I am not persuaded, on the information before me, that his regular gambling over many years is related to experiencing manic episodes.
As set out above, I accept that Mr Mostovoy may be facing difficult financial circumstances, but I am not satisfied that he is experiencing severe financial hardship.
Taking all of these matters into account, I am not satisfied that there are any special circumstances by reason of which any of Mr Mostovoy’s debt should be waived.
CONCLUSION
For these reasons, I affirm the decision under review.
I certify that the preceding 92 (ninety -two) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey ................................[sgd]........................................
Associate
Dated 20 May 2016
Date(s) of hearing 11 and 12 February 2016 Applicant In person Solicitors for the Respondent Mr R White and Ms B Rayment- Mills Oakley
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