Mroz and Secretary, Department of Employment and Workplace Relations
[2006] AATA 274
•24 March 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 274
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2005/627
GENERAL ADMINISTRATIVE DIVISION )
Re PAUL MROZ Applicant
And
SECRETARY, DEPARTMENT
OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Mr RG Kenny, Member Date24 March 2006
PlaceBrisbane
Decision The Tribunal affirms the decision under review. ............[Sgd]........
RG Kenny
Member
CATCHWORDS
Social Security – newstart allowance - loan to private company not declared to Centrelink – loan included as asset of applicant for asset test - overpayment of newstart allowance - debt due to Commonwealth – no basis to write off debt – no basis for waiver of debt – no sole administrative error by Commonwealth – absence of special circumstances to justify waiver
Social Security Act 1991 ss 643, 1222, 1223, 1237A, 1237AAD
Re Boyd and Secretary Department of Social Security (1994) 36 ALD 331
Re O’Brien and Secretary Department of Social Security (2002) 70 ALD 552
Small and Secretary Department of Employment and Workplace Relations [2005] AATA 1095
Beadle v Director-General of Social Security (1985) 7 ALD 670
Director‑General of Social Services v Hangan (1982) 70 FLR 212
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Beadle and Director-General of Social Security (1984) 1 AAR 362
Ross and Secretary, Department of Family and Community Services [2005] AATA 10
Secretary, Department of Family and Community Services and Hales (1990) 82 FCR 154REASONS FOR DECISION
24 March 2006 Mr RG Kenny, Member Application
1. Paul Mroz (the applicant) received income support payments under the Social Security Act1991 (the Act) in the form of newstart allowance from 12 May 2000 until 24 March 2002. On 24 February 2005, a Centrelink officer, on behalf of the Secretary, Department of Employment and Workplace Relations (the respondent), determined that he had been overpaid in relation to those payments and that the overpayment, totalling $5184.32, was a debt due to the Commonwealth. That decision was affirmed by an authorised review officer on 2 June 2005 and, in turn, by the Social Security Appeals Tribunal on 18 August 2005. On 4 October 2005, Mr Mroz sought review of that decision by the Administrative Appeals Tribunal (the Tribunal).
Hearing
2. Mr Mroz was not represented at the hearing and Ms H Wallis-Dunn appeared for the respondent. The material before the Tribunal included documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975.
Issues for Determination
3. It is not disputed by Mr Mroz that he was paid new start allowance in the periods noted above or that he was overpaid the amount determined by the respondent. Also, it is not disputed by him that this was an overpayment which is a debt due to the Commonwealth. The issue taken by Mr Mroz with the decision under review is that the debt should be waived on either of two grounds. The first ground was that the debt arose through administrative error on the part of the Commonwealth in that he had not been made aware that money which he had advanced to a private company and which was described as loans by him in company records was an asset which would be taken into account when calculating the level of the newstart allowance that he was entitled to receive. The second ground for waiver was that there were exceptional circumstances in his case that required the debt to be waived. In identifying circumstances which were special in his case, Mr Mroz referred to the long delay by the respondent in raising the debt against him, his difficult financial situation and the inability of the company to repay any of the money advanced to it by him.
Applicant’s case
4. Mr Mroz retired from a public sector position in the early 1990s and used his superannuation payment and other funds available to him to establish a fashion business in New South Wales. This was done in conjunction with his then partner and, initially, he engaged in the activity without any corporate structure. On the basis of advice from his accountant, he formed a company, Peripheral Vision Investments Co. Pty Ltd (the company), of which he and his partner were the sole directors and shareholders. The venture proved unsuccessful and the company ceased trading in early 1999 and, although still in existence, it has been dormant since that time. Mr Mroz applied for social security benefits in 1999 and again, in respect of the matter before the Tribunal, in 2000. On the advice of his accountant, the funds advanced to the company by Mr Mroz were described as “loans” by him in company records and Mr Mroz accepted that, as at the date of his claim for benefits in 2000 and for the period he received newstart allowance, the amount described in those records as being attributable to him as “loans” totalled $158,533.
5. Newstart allowance was paid to Mr Mroz from 12 May 2000 until 24 March 2002. The calculation of the level of his fortnightly payment was made without regard being had to his loans to the company. Mr Mroz was not aware that loans constituted an asset which, if taken into account, would have reduced the level of these payments. However, he said that he had made the existence of the company known to the respondent in his 1999 claim and that no particular inquiry had resulted about the company dealings. Nevertheless, he also conceded that the 1999 claim documentation included a statement that he had not made any loans to any companies. Mr Mroz said that this form had been completed by an officer of the respondent but he conceded that he had signed it. He also agreed that, in the documentation relating to the 2000 claim, he had not provided the respondent with information about the loan to the company. However, he said that, at all times, he had not been aware that the loan to the company constituted an asset which would be taken into account in calculating his social security entitlements.
6. Mr Mroz was referred to a series of letters written by the respondent to him in 2000 and 2002 which advised him about his payments. They also required him to advise the respondent about his assets and this term was explained as including any debts owed to him. Mr Mroz said that he could not recall receiving these letters although he conceded that all but one of them had been properly addressed. He was referred to another letter, dated 31 January 2001, which advised him that the rules relating to the assessment of income and assets for private companies had changed. Whilst Mr Mroz could not recall receiving that particular letter, he agreed that he became aware of the changed arrangements at about that time. He then made contact with an officer of the respondent and, for the first time, became aware that loans to the company constituted an asset for social security purposes. Mr Mroz agreed that he had been required to provide the respondent with information about the company and said that he instructed his accountant to forward that material to the respondent. He also agreed that it took more than eight months for the information to be provided by his accountant. Mr Mroz considered that this was delay for which for which he was not responsible.
7. Mr Mroz and his partner are both in employment and have a total income per fortnight in excess of $2200 and expenditure per fortnight at slightly above that level. Mr Mraoz own a house in New South Wales which is rented but which requires the mortgage repayments to be subsidized from his income. He said that he has considered putting it on the market and said that he is currently in arrears of rates in the amount of approximately $2000. He said that he and his partner borrowed $222,000 to purchase a house jointly with his partner’s parents. The house is currently on the market for $460,000. He said that, when it is sold and disbursements are made to his partner’s parents and the finance institution in relation to their loan, he was hopefrul of making a small profit. Mr Mroz is currently repaying the debt to the respondent at the rate of $50 a fortnight.
Respondent’s case
8. Ms Wallis-Dunn submitted that the debt raised in this matter had been correctly calculated on the basis of Mr Mroz’s assets which included the loan to the company taken at the face value of $158,533 as it appears in the company records. She also submitted that there was no basis for waiver on the grounds relied upon by Mr Mroz. She accepted that Mr Mroz had not been aware that the money advanced to the company by him and described as a loan in the company documents was an asset which would impact upon his social security payments. Nevertheless, she submitted that this did not change the decision to raise the debt because the respondent had relied upon information provided by Mroz in his claim forms. These were signed by him and, therein, he declared that he had no outstanding loans and that there were no debts due to him.
9. Whilst conceding that there had been delay between the cancellation of Mr Mroz’s allowance in March 2002 and the raising of the debt against him in February 2005, Ms Wallis-Dunn submitted that this was due, in large part, to the slow response by his accountant to the request for information about the company. She submitted that it was also due, in part, to the large workload with which the respondent was charged as a result of the change in policy about private companies.
10. Ms Wallis-Dunn submitted that they were no factors in this matter which took it out of the ordinary and which would justify waiver on the basis of special circumstances. She referred to Mr Mroz’s interest in two residential properties and to the capacity of Mr Mroz and his partner to meet their basic costs of living. She said that there was some prospect that the debt could be written off for a period pending the sale of Mr Mroz’s current residence but she also noted that, in the event that he was facing financial difficulty in the short-term, it was always open to him to make application to reduce the fortnightly amount by which is now repaying the debt. Ms Wallis-Dunn also submitted that the inability of the company to repay the loan was not a special circumstance to justify waiver because, to allow waiver on that basis, would be to allocate public monies to prop up unprofitable private investment activity.
Consideration
10. Mr Mroz has accepted and I am satisfied that the amount of $5,184.32 paid to him as part of his newstart allowance comprised an overpayment which constitutes a debt owed to the Commonwealth. In that regard, I have relied upon:
· section 1122 of the Act which provides that the value of a person’s assets include loans of the kind made by Mr Mroz to the company;
· authorities which support Ms Wallis-Dunn’s submission that the loan to the company should be taken at face value of $158,533 as it appears in the company records: see Re Boyd and Secretary Department of Social Security (1994) 36 ALD 331, Re O’Brien and Secretary Department of Social Security (2002) 70 ALD 552 and Small and Secretary Department of Employment and Workplace Relations [2005] AATA 1095;
· sections 643 of the Act and the benefit rate calculator at the end of section 1068 of the Act which set out the means of calculating the rate of newstart allowance; and
· subsection 1223(1) of the Act, in relation to the payments in the period to 30 June 2001, and subsection 1223(5) of the Act, in relation to the payments in the period from 1 July 2001, which provide that the incorrectly paid amount of newstart allowance constitutes a debt due to the Commonwealth.
11. A debt may be written off under section 1236 of the Act in various circumstances including, insofar as relevant in this matter, where there is no capacity to repay the debt. Mr Mroz is currently making repayments at the rate of $50 per fortnight and has the capacity to make an application to the respondent to vary this if he is unable to continue at that level. I have also noted that he has prospects of selling his residence in the near future and that he hopes to realise a profit, albeit a small one, from the sale. In those circumstances, I am satisfied that it is not appropriate to write off the debt in his case.
12. The matters relating to waiver of a debt due to sole administrative error by the Commonwealth and to the applicant’s special circumstances arise under subsection 1237A(1) and section 1237AAD, respectively.
13. A debt must be waived under sub-section 1237A(1) of the Act if it is attributable solely to an administrative error made by the Commonwealth and if the debtor received in good faith the payment or payments that gave rise to the debt. I accept the submission of Ms Wallis-Dunn that this provision will not be satisfied if there has been some contribution to the causing of the debt by the applicant: see Director‑General of Social Services v Hangan (1982) 70 FLR 212 at 215, 225 and 235. I am satisfied that Mr Mroz did contribute to the debt. He provided incorrect information to the respondent in his claim documentation in both 1999 and 2000 about the monies advanced to the company. His evidence was that he did not complete this documentation but, nevertheless, it was signed by him and the forms included a declaration that the contents of the documentation were correct. As the debts did not arise solely through administrative error by the Commonewalth, the debt may not be waived under section 1237A of the Act. That is the case, regardless of the issue of good faith.
14. A further provision for the waiver of a debt is section 1237AAD of the Act. For that to be utilised, it must be the case, amongst the other reqiuirements of the provision, that there are special circumstances other than financial hardship alone that make it desirable to waive the debt. The Act provides no guidance as to the meaning of the term “special circumstances” in that provision. In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security(1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances "must have a particular quality of unusualness that permits them to be described as special".
15. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Keifel J, after referring to the Federal Court's decision in Beadle’s case, observed (at 545) that special circumstances:
“would require something to distinguish... [the].. 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.”
16. I accept as correct Ms Wallis-Dunn’s submission that the inability of the company to repay Mr Mroz does not, in itself, amount to a special circumstance to justify waiver as public monies should not be used to mask unprofitable private investment decisions: see the comments by French J in Secretary, Department of Family and Community Services and Hales (1990) 82 FCR 154 at 155. That also applies to the significant delay in raising the debt in this matter. Mr Mroz referred to the Tribunal decision in Ross and Secretary, Department of Family and Community Services [2005] AATA 10 where a debt was waived , in part, because of the length of time that the debt had run. However, there were other reasons given by the Tribunal in that case to justify waiver: Mrs Ross was in poor health and would have been more than 90 years of age if periodic recovery continued for the entire debt. Also, the respondent had been responsible for the time involved. Those are not the circumstances of Mr Mroz who is aged 48 years and in good health. Also, I am satisfied that the delay in this case was due, in large part, to the slow response by his accountant in providing requested information about the company to the respondent. Only when that information was received could the process of assessing the overpayment be undertaken.
17. There are no factors, either individually or taken together, in this case that give it the character of unusualness or unfairness and I am satisfied that there are no special circumstances in the applicant’s case that would justify waiver of the debt under section 1237AAD of the Act.
Decision
18. The Tribunal affirms the decision under review.
I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member
Signed: Jeff Mills
Legal Research Officer
Date/s of Hearing 21 March 2006
Date of Decision 24 March 2006
The Applicant was unrepresented
For the Respondent Ms Wallis-Dunn, Departmental Advocate
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