Murray (Estate of MJ Beaton) and Secretary, Department of Families, Community Services and Indigenous Affairs
[2007] AATA 1286
•2 May 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1286
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V 200600088
GENERAL ADMINISTRATIVE DIVISION ) Re CAROLYNN MURRAY
as Executor of the Estate ofMURRAY J BEATON (deceased)
Applicant
And
SECRETARY,
DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Regina Perton Date2 May 2007
PlaceMelbourne
Decision The Tribunal affirms the decision under review. (sgd) Regina Perton
Member
SOCIAL SECURITY - social security beneficiary unaware of asset - paid more than entitled to as a result – insurance policy taken out by another without beneficiary’s knowledge - debt incurred - part debt repaid prior to death – debt on estate for balance - whether special circumstances to waive debt – decision affirmed.
Social Security Act 1991 ss 1223(1), 1237AAD
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Beadle v Director-General of Social Security (1985) 60 ALR 225
Re Groth and Department of Social Security (1995) 37 ALD 797
Department of Social Security v Hales (1998) 82 FCR 154
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Edwards and Secretary, Department of Employment & Workplace Relations [2007] AATA 16
Re Strang and Secretary, Department of Employment & Workplace Relations [2006] AATA 51
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
REASONS FOR DECISION
2 May 2007 Regina Perton 1. The late Murray John Walter Beaton died on 23 April 2005. Centrelink, which delivers services for the Department of Families, Community Services and Indigenous Affairs, paid him the age pension from 25 June 1998 until his death. When he had applied for the age pension, Mr Beaton provided what he believed to be the correct information about his assets. Mr Beaton either did not know or had forgotten that his late wife had taken out an insurance policy in his name. The increasing value of the policy, coupled with his already declared assets, led to Mr Beaton being overpaid age pension by $25,018.94 between 25 June 1998 and 2 June 2004. Centrelink became aware of the policy on 1 April 2004. Mr Beaton was informed on 12 July 2004 that a debt of $25,018.94 had been raised to recover the overpayment. Mr Beaton repaid part of the debt prior to his death.
2. On 23 May 2005 Centrelink informed the executors of Mr Beaton’s estate that there was an outstanding debt of $13,198.04. The solicitor acting for the executors, Mr Oldham, sought review of the decision to raise and recover the debt. An authorised review officer of Centrelink affirmed the decision concerning the debt on 9 August 2005. Mr Oldham then sought review of the decision by the Social Security Appeals Tribunal (the SSAT). On 3 January 2006, the SSAT affirmed the decision. The applicant, one of the executors of Mr Beaton’s estate, now seeks review of the SSAT decision in this Tribunal.
3. The issues before the Tribunal are:
·Did Mr Beaton owe a debt to the Commonwealth of $25,018.94?
·Does his estate now have a debt of $13,198.04?
·Should the debts, in part or in whole, be waived due to special circumstances?
Is there a debt to the Commonwealth?
4. When he applied for the age pension Mr Beaton was a widower. Prior to retirement Mr Beaton was self-employed. His late wife, who died in October 1997, managed their financial affairs. She had taken out an insurance policy in Mr Beaton’s name through MLC Insurance. That policy matured on 10 October 1995 with a value of $45,951.41. MLC wrote to Mr Beaton about the policy maturation twice in late 1995; but Mr Beaton either was unaware of, or had forgotten about, the letters. He did not declare the policy as one of his assets in his claim for age pension, which was lodged through an investment adviser on 25 June 1998.
5. There was no further correspondence from MLC Insurance to Mr Beaton about the policy until November 2003 when an internal MLC Audit identified the mature policy and wrote to Mr Beaton about it and its increased value. Acting on the advice of the financial advisor who now managed his financial affairs, Mr Beaton lodged the proceeds of the policy in a complying annuity in March 2004. In April 2004, Centrelink was informed of the existence of the policy. The final maturity value of the policy on 3 March 2004 was $63,667.34.
6. On 22 June 2004, Centrelink reassessed Mr Beaton’s entitlements from the date of his claim including deemed income from the MLC investment. On 9 July 2004, Centrelink determined that Mr Beaton had been paid overpaid age pension and a debt of $25,018.94 to recover the overpayment.
7. Section 1223(1) of the Social Security Act 1991 (the Act) allows the Commonwealth to raise a debt if a person is paid more in social security payments than their entitlement. The Tribunal is satisfied that Mr Beaton was overpaid age pension for almost six years. The amount of the overpayment has not been challenged.
8. Mr Beaton repaid $10,000 in a lump sum in August 2004 and then made further payments, which varied from time to time, by withholdings from his pension.
9. After Mr Beaton’s death, Centrelink wrote to the executors of his estate seeking the amount still outstanding, namely $13,198.04. The Tribunal is satisfied that the estate owes a debt of $13,198.04 to the Commonwealth.
Should the debt be waived?
10. Section 1237A of the Act provides that where a debt has arisen solely due to administrative error by Centrelink, the debt can be waived. The parties agree, and the Tribunal concurs, that this is not a consideration in this matter.
11. Section 1237AAD of the Act provides for waiver of the debt 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 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.
12. There is no evidence to suggest that the debt arose because Mr Beaton or any other person on his behalf knowingly made a false statement or false representation or knowingly failed or omitted to comply with the Act. The Tribunal is satisfied that the requirements of s 1237AAD(a) have been met.
13. Written evidence before the Tribunal, which was not disputed by Centrelink, indicated that the late Mrs Beaton had always managed the family’s financial affairs including the payment of bills, banking and insurance matters. Mr Beaton applied for the age pension after his wife’s death. An investment adviser lodged the form with Centrelink based on the information that Mr Beaton provided. Mr Beaton either did not know, or did not remember, that he had the MLC policy, which had matured in 1995, until late 2003.
14. MLC wrote to Mr Beaton on 11 November 2003 stating that it was holding an MLC Superannuation policy in his name which had matured on 10 October 1995. On 24 February 2004, MLC wrote to Kim Joyce, Mr Beaton’s financial advisor, following a telephone call from him. In the letter MLC stated that:
We wish to confirm this policy matured on 10 October 1995 and the original maturity paperwork was forwarded to Mr Beaton on 17 September 1995. A follow up letter was then forwarded to Mr Beaton on 22 October 1995.
A recent audit or our records indicated the maturity proceeds were still outstanding on this policy and therefore new maturity paperwork was forwarded to Mr Beaton on 11 November 2003.
We wish to confirm there has been no further correspondence to Mr Beaton after the maturity date of 10 October 1995…
15. In a letter dated 29 March 2004, Mr Joyce confirmed what he had earlier told Centrelink in a telephone call about what had happened with the MLC policy. In seeking to explain why Mr Beaton did not know about the policy until late 2003, Mr Joyce stated:
…
Prior to 1995 Murray’s wife, Lorna Beaton, was diagnosed with terminal cancer and her health deteriorated in the two years leading up to her death in 1997. Mr Beaton has stated that all financial matters were handled by Mrs Beaton and he had no knowledge of the funds in the MLC Superannuation fund and has no recollection of receiving any of the initial correspondence from MLC Lifetime Ltd. Therefore, at no stage has Mr Beaton intentionally tried to mislead Centrelink of his total financial investments since commencement of age pension benefits.
Mr Beaton has invested $60,000 of the final maturity value being $63,667.54 (as at 3rd March 2004) into a complying term Annuity, details listed below in the portfolio summary of his investments.
16. Mr Joyce provided a summary of Mr Beaton’s investments as at 17 March 2004. The investments included bank term deposits, managed investments and annuities totalling $138,945.00 plus a small amount in household effects and an old vehicle. Centrelink sought further information on the value of the policy at various points of time from MLC; and then undertook a computerised calculation of the impact on Mr Beaton’s age pension on a fortnightly basis since 1998.
17. On 25 November 2005, Mr Joyce wrote to Mr Oldham expressing the opinion that the lack of correspondence from MLC to Mr Beaton since 1995 contributed to Mr Beaton’s lack of awareness of the existence of the policy.
18. In a statutory declaration dated 5 October 2005, Carolynn Joy Murray, one of three children of the late Mr Beaton (who are all his executors), confirmed that her father left money management and correspondence to her mother. She stated that he rarely read any mail; often to her mother’s frustration. Ms Murray stated that her mother had established a series of insurance policies for the benefit of various family members and had ensured that the payments were made punctually. Ms Murray stated that she had been executor of her mother’s estate and after her death in October 1997, had searched through her mother’s records but did not discover the existence of the MLC policy in her father’s name. Ms Murray recalled that her father told her and her siblings about his surprise at receiving a letter from MLC advising him of the policy and its value. She indicated that he had initially thought it was an error as there had been no contact about it from MLC for some 8 years. Ms Murray expressed the view that had her father been aware of the money, he would have sought his investment advisor’s assistance and would have paid the money into a complying annuity thereby retaining his pension entitlements.
19. On 23 June 2006, Mr Barry Height of Gold Financial Pty Ltd wrote to Ms Murray expressing an opinion about the circumstances in which Mr Beaton had found himself. He stated that if Mr Beaton had approached him in 1998 with the asset and income details set out by Centrelink once the MLC policy had been brought to its attention, he would have advised him to place the money into a complying annuity with the ability to be able to gift any excess that would lift him above his assessed limit in asset. Mr Height believed that if Mr Beaton had done so, his pension entitlements would not have been affected. He also stated that the same result would have arisen if Mr Beaton had elected to assign the income from the annuity into a trust fund for the benefit of his many infant or school-aged grandchildren. Mr Height stated that he has from time to time become aware of people overlooking assets, savings and insurance policies which are sometimes misplaced. He commented that it is also not an infrequent experience that one party in the marriage handles the majority of the financial records. He stated that it is extremely uncommon for a body such as MLC to have held onto an insurance policy between 1995 and 2003 without making contact with the owner and establishing his intentions.
20. The term special circumstances is not defined in the legislation. Mr Ian Fehring of counsel, representing the applicant, raised a number of factors that he believed constituted special circumstances. These included the inability of Mr Beaton to put the proceeds of the policy into an annuity, which would not have diminished his entitlement to age pension with the consequent avoidance of a debt to the Commonwealth, as well as the unusually lengthy delay of some 8 years between letters from MLC concerning the matured policy. Mr Fehring commented that financial hardship was not a major factor, due in part to the difficulty in defining how an estate could show financial hardship. Mr Fehring cited the Tribunal decision of Strang v Secretary, Department of Employment & Workplace Relations [2006] AATA 51 as providing a useful summary of what constitutes special circumstances. Mr Fehring discussed the definition of special circumstances in Beadle v Director-General of Social Security (1985) 60 ALR 285 and Re Beadle and Director-General of Social Security (1984) 6 ALD 1, which was cited by the respondent in its Statement of Facts and Contentions. He submitted that the definition of special circumstances as having to be unusual, uncommon or exceptional was no longer appropriate.
21. Mr Paul Mentor, representing the respondent, pointed to the finding by the SSAT that the beneficiaries of the estate could not be described as being in financial hardship and therefore could not meet the requirements of s1237AAD(b). He agreed with Mr Fehring that the financial circumstances of the beneficiaries are irrelevant in this matter. Mr Mentor submitted that Mr Beaton at the time of the grant of his pension and when asked to repay the debt could not be described as being in financial hardship. Mr Beaton had the capacity to repay the debt immediately, had he chosen to do so. Mr Mentor submitted that the plain English reading of the words other than financial hardship alone suggests that there must be other circumstances as well as financial hardship. Mr Mentor suggested that the argument as to how a financial planner might have structured Mr Beaton’s finances had he been aware of the asset was irrelevant. He also submitted that Mr Beaton should not be entitled to the benefit of two parallel entitlements at the one time and cited ReGroth and Department of Social Security (1995) ALD 797 as providing an appropriate precedent.
22. Mr Mentor submitted that we do not know what would have happened with the moneys received under the MLC policy had it been redeemed in 1995. It was therefore only a possibility that the money would have been put into an annuity. Mr Mentor suggested that it is not desirable to waive the debt on public policy grounds as public moneys had been paid out; and as a general rule, the person receiving the payments should not end up financially better off by keeping the additional amount to which he was not entitled. Mr Mentor submitted that Mr Beaton had the advantage of the cash proceeds of the policy and should not concurrently retain a pension of a higher order than that to which he was entitled.
23. In disagreeing with Mr Mentor’s submissions and the SSAT’s findings, Mr Fehring cited Department of Social Security v Hales (1998) 82 FCR 154 in which French J rejected the Department’s submission that there cannot be special circumstances unless there is financial hardship. His Honour said:
On this point and as a matter of construing this section by reference to the ordinary meaning of its words, the Secretary's submission that there cannot be special circumstances for the purpose of s 1237AAD(b) unless there is also financial hardship is not accepted. The Explanatory Memorandum does not undercut this conclusion. There it is said that the new special circumstances provision can only be used where the debt arose because of an innocent mistake by a social security recipient. Secondly, it is said that financial hardship of itself is not a sufficient reason to waive the debt. This is in substance a restatement of the ordinary meaning of the provision.
The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
24. There are now many authorities on the meaning of special circumstances. Recent cases have reinforced the view taken in Hales. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J considered the term in the context of s 1237AAD of the Act. Besanko J refers extensively to Ryde v Secretary, Department of Family and Community Services [2005] FCA 866, where Branson J held that the use of the term special circumstances in the legislation demonstrated an intention to proscribe waiver in ordinary cases. Branson J went on to state that the hardship or unfairness should be sufficient to justify departure from the general rule in the particular case.
25. In Angelakos, Besanko J states (at paragraph 33):
…I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances…It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case … there must be something that distinguishes the case from the ordinary or usual case…
26. In the Tribunal’s experience, it is not unusual for social security beneficiaries to innocently underestimate the value of their assets or to accrue a debt for overpayment of pension due to tardiness or lack of disclosure by a third party. Most of the beneficiaries involved have emphasized that had they been aware of the asset or the underestimate of its value, they would have reordered their affairs so as to avoid or minimise the debt. The Tribunal accepts that Mr Beaton was unaware of the policy and that he would have taken action to claim the moneys due to him had he been known of its existence. However, the Tribunal notes that MLC notified him twice in late 1995, at his correct address, of the policy’s maturity. Obviously, neither the executors nor the Tribunal are in a position to know why Mr Beaton was not aware of those letters. While it was indeed a lengthy period between letters from MLC, the Tribunal is not satisfied that the situation that Mr Beaton found himself in is vastly different from other social security recipients who have incurred debts due to lack of awareness of the actual value of their assets or who have been disadvantaged due to the actions or inactions of third parties.
27. The Tribunal is satisfied that waiver of a debt in special circumstances can take place even if there is not financial hardship. However, the Tribunal is not satisfied that the circumstances in this case constitute special circumstances. Hence, the waiver provisions of s 1237AAD of the Act do not apply.
28. The Tribunal finds that Mr Beaton’s estate owes a debt to the Commonwealth of $13,198.04.
DECISION
29. The Tribunal affirms the decision under review.
I certify that the twenty-nine [29] preceding paragraphs are a true copy of the reasons for the decision of:
Regina Perton, Member
(sgd) Ursula Noyé
Clerk
Dates of hearing: 15 November 2006
Date of decision: 2 May 2007
Counsel for applicant: Mr I. Fehring
Solicitor for applicant:: Mr B. Lester Oldham
Advocate for respondent: Mr P. Mentor
Solicitor for respondent: Sparke Helmore
2
8
0