Nield and Secretary, Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2002] AATA 887

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2002/432

GENERAL ADMINISTRATIVE DIVISION          )
           Re       GARRY NIELD
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Ms J Cowdroy, Member

Date4 October 2002
PlaceBrisbane

Decision The Tribunal sets aside the decision under review and substitutes its decision that there are special circumstances which warrant waiver of a debt in the sum of $1673.20.

(Sgd) J Cowdroy
Member
CATCHWORDS
SOCIAL SECURITY – disability support pension - overpayment – whether special circumstances exist to warrant the waiver of all or part of the debt

Social Security Act 1991

Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

4 October 2002 Ms J Cowdroy, Member

Background to the Application:

By decision dated 10 April 2002, the Social Security Appeals Tribunal affirmed a decision made by Centrelink on 21 January 2002 to raise and recover an overpayment of disability support pension of $1673.20 for the period 9 May 2000 to 20 November 2001.
It is not disputed that the overpayment arose when the applicant's wife was granted disability support pension. Prior to the grant to Mrs Nield, the applicant had been in receipt of disability support pension, as well as amounts for rent assistance (RA) and telephone allowance (TA). On 4 December 2001, payment was made to Mrs Nield, representing payment for the period 9 May 2000 to 20 November 2001. Part of the amount represented rent assistance and telephone allowance. The payment to Mrs Nield had the effect of making the RA and TA payments received by the applicant incorrect. He was overpaid $1,673.20 in the period 8 May 2000 to 20 November 2001.
Hearing:
The matter was heard on 2 August 2002. Mr Nield appeared and made submissions. He was accompanied by his wife. Ms T Shea appeared for the respondent. The T-documents were admitted into evidence pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. Apart from the T-documents, information was provided pertaining to the applicant's financial situation and his state of health.
The decision was made on the basis of the written material and the oral submissions of the parties.
Applicant:
Mr Nield explained that he was "angry with the system". A debt had been raised on a previous occasion and he had been careful to ensure that the situation did not arise again. Consequently, on 4 December 2001, when he became aware of the arrears payment of $2324.42 to his wife, he phoned Centrelink and asked whether his disability support pension would be affected by his wife being granted the same benefit. He was advised that the amount he had been receiving for rent assistance would be reduced and that a letter would be sent to him about this. He was not advised that the amount received that day would create an overpayment and a debt.
When he rang Centrelink the following day, he was advised that there had been an overpayment. When the basis of the debt was explained to him, he queried why his wife had been paid the full amount of arrears, and why his allowances could not have been withheld pending a decision being made as to the amount of arrears to be paid to his wife. He was informed by Centrelink - "We don't work that way".
He said that after speaking to Centrelink on 4 December 2001, he had an understanding that he had a right to spend the money. He expressed considerable frustration that a debt had arisen when he went to considerable lengths to ensure that an overpayment did not occur. The money was spent on the same day it was paid into the bank account.
The applicant also expressed his concern at the conflicting information he had received from Centrelink in relation to the extent of the debt, which had been recalculated several times. He pointed out that he had rung on three occasions on 6 December 2001, after he had been told that an overpayment had occurred, as he wanted the matter clarified. He was at a loss to understand how he could be advised on one day that the arrears of pension was correctly calculated, and the next day be told that he was overpaid.
The applicant suffers from chronic liver disease, chronic joint pain and hepatitis C. He has required psychiatric treatment and takes medication for anxiety and depression. The chronic pain is present in a number of sites, in respect of which he requires injections every three weeks. He is currently under investigation for "heart problems". He is to undergo a MRI scan on 23 August 2002.
Respondent:
Ms Shea provided detailed written submissions, which she supplemented by oral submissions. It was acknowledged that there had been an overpayment of RA and TA, through no fault on the part of the applicant. When a new claim for benefit is granted and payment is being assessed, there is no provision in the Social Security Act 1991 for the non-payment of rent assistance and telephone allowance. The letter advising Mrs Nield advising of the grant of benefit was dated 30 November 2001. It notified her that arrears would be paid into her bank account on 4 December 2001. It was conceded that the applicant contacted Centrelink on 4 December 2001 and that he was not advised of the overpayment until the following day, in response to his phone call to Centrelink.
It was also conceded that the applicant rang Centrelink on three occasions on 6 December 2001. (A document headed "schedule of phone calls and discussions with Mr GW Nield" had been provided by the respondent).
It was conceded that the overpayment amount originally conveyed to Mr Nield had been miscalculated and the new calculation arrived at an amount of $1673.20. The debt had been written off from 11 July 2002 until 22 October 2002, at which time Mrs Nield is scheduled to complete repayment of an advance made in respect to her disability support pension, which is presently being recovered at the rate of $38.50 per fortnight.
The Tribunal was referred to the legislative provisions dealing with write off and waiver. In respect to write off, one of the criteria is if a debtor has no capacity to repay the debt. However, there is another provision which states that if a debt is recoverable by means of deductions from the debtor's social security payment, then the debtor is taken to have the capacity to repay unless recovery by that means would cause the debtor severe financial hardship. It is conceded that presently the applicant does not have the capacity to repay the debt.
The appropriate course is to write off the debt for a period "sufficient to see an improvement in the applicant's medical condition post-chemotherapy and in his ability to repay" (paragraph 32 of respondent's submissions).
In regard to waiver, the relevant provisions of the Act dealing with waiver are not satisfied. Section 1237A(1) of the Act directs that in cases where a debt has arisen solely as a result of administrative error, provided the payments which constitute the debt were received in good faith, waiver must occur. In this context, it was submitted that the overpayment did not arise as a result of administrative error.
The respondent does not dispute that the debt arose because of Centrelink's action in paying TA and RA to the applicant's wife, after it had also been paid to the applicant. The overpayment occurred because during the period 9 May 2000 to 20 November 2001, Mr Nield was paid RA and TA on the basis that his partner was not in receipt of a pension. However, when Mrs Nield was paid the arrears of pension, which included amounts for RA and TA, it retrospectively had the effect that Mr Nield had not been entitled to receive RA and TA at the maximum rate.
Despite this anomaly, it was said that the debt did not arise from administrative error, as there is no discretion in the Act not to pay RA and TA to a disability support pension recipient.
Section 1237AAD permits the Secretary to waive recovery of a debt in situations where there are "special circumstances" providing the debt has not arisen from a debtor knowingly failing to comply with a provision of the Act. The respondent contends that if the Tribunal finds there are "special circumstances", it is more appropriate that the debt be written off for a period rather than to waive it.
It was acknowledged that judicial guidance as to what constitutes "special circumstances" has not attempted to lay down exhaustive criteria of the relevant factors to be taken into account. Whilst the respondent conceded that the applicant's financial circumstances are straitened, it pointed out that the Tribunal must be satisfied that there are special circumstances other than financial hardship alone. Whilst the applicant has significant health problems, this is insufficient to constitute "special circumstances", in that the medical evidence is not as substantial as that provided in the matter of Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
Consideration:
It is not in dispute that the applicant received income support to which he was not entitled. Whilst there was criticism by the applicant as to the reliability of the respondent's calculation of the debt, I find that the amount of $1673.20 is a debt due to the Commonwealth under the provisions of section 1223(5) of the Act.
There are a number of provisions which require consideration. Firstly, section 1237A(1), which relates to waiver of a debt due to administrative error. It has been contended that the decision to pay Mrs Nield RA and TA at a rate that adversely affected the applicant's entitlement to those same allowances, is not one involving administrative error. It was said that there was no ability, in calculating Mrs Nield's entitlement to pension, to have regard to the fact that the applicant had already received the maximum entitlement to those allowances. In other words, it was contended that there was nothing that the respondent could have done to prevent the debt being incurred.
What cannot be disputed however is that there was administrative error on the part of the respondent in its failure to notify of the debt on the same day that it was raised, and certainly a finding of culpable behaviour could be made in advising Mr Nield, in response to his direct query, that only his future entitlements would be affected.
It is difficult to accept that there was not some process by which this most unfortunate state of affairs, which resulted in significant financial repercussions for Mr Nield, could have been avoided. However, ultimately I accept that as Mrs Nield had a legitimate entitlement to telephone and rental allowance, the creation of the debt itself was not caused solely by administrative error.
Section 1237AAD of the Act directs that the Secretary may waive recovery of a debt if certain criteria are met. It states:
"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 reasonable 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."
Clearly, the applicant's circumstances meet (a). The term "special circumstances" has been considered by the Tribunal and other forums on numerous occasions. In this context the decision of Re Beadleand Director-General of Social Security (1984) 6 ALD 1 has been much quoted as the benchmark in respect to the interpretation of those words. In that case the Tribunal said:
"An expression such as 'special circumstances' is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."
The evidence in relation to Mr Nield's health reveals he has a multiplicity of conditions, all of which require constant monitoring and/or treatment. Additionally, he is under investigation for other health problems. The respondent contended that the report of Dr Matus dated 28 June 2002 is insufficient to make a finding of special circumstances. In respect to Dr Matus' later letter, it was contended that whilst it reveals that the applicant has low energy levels, difficulties in concentration, anxiety and depression similar to the effects of Ms Hales' medical condition (referring to Secretary, Department of Social Securityv Hales (1998) 82 FCR 154), there is insufficient information to make an assessment of the added stress of repayment on the applicant's health.
However, leaving that issue aside, the applicant's present state of health is such that it is not necessary for me to assess the added stress which repayment might impose. The evidence reveals that there is no great cause for optimism that the applicant's health will improve. I base that finding on the totality of the information contained in the reports of Dr M Matus, the applicant's treating doctor. The first is a handwritten report dated 28 June 2002 in which he refers to the likely effects of chemotherapy. The second is dated 28 July 2002 and gives a history of the applicant's numerous medical problems including chronic hepatitis C, chronic pain syndrome and epilepsy. He refers to the fact that there is no cure for any of the applicant's serious illnesses and that he will never be gainfully employed again.
Additionally, perusal of the applicant's income and his liabilities satisfies me that he is in financial hardship, recognising that financial hardship alone may not constitute "special circumstances". However, I am mindful of the statement of French J in Hales at 162:
"The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it…"
Of significance also is the fact that the applicant went to some pains to ensure that an overpayment would not occur, given that he had been required to repay previous overpayments and he was anxious to ensure that there was no repetition. In spite of his best efforts, the debt arose. The evidence supports a finding that he had a realistic belief that the family was entitled to the arrears payment in its totality, and in reliance on advice provided by the department to that effect, it was promptly spent.
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Keifel J, when discussing Beadle's case, made the observation that special circumstances:
"… would require something to distinguish Mr Groth's 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 quite unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."
To require Mr Nield to repay the debt, given that his case is "out of the usual" would in my view, fall squarely within the description of "unfair, unintended or unjust". This aspect, together with the applicant's personal circumstances, including his state of health and precarious financial situation and the unlikely potential for improvement in either of these aspects, justify a finding of "special circumstances". Those special circumstances make it desirable to waive the debt.
Finally, the write-off provisions were considered. Section 1236 of the Act relates to "write-off". It states:
"(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt for a stated period of otherwise.
(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debt 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."
Section 1236(1C) states in part that for the purposes of paragraph (1A)(b), if a debt is recoverable by means of deductions from the debtor's social security payment, the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.
The respondent contends that write off is appropriate. Mrs Nield is currently repaying an advance on her disability support pension and this debt is due to be discharged on 22 October 2002. The respondent has written off the applicant's debt until that time, presumably on the basis that to attempt to recover by means of instalments from pension would cause severe financial hardship to the applicant. It is also implicit in the respondent's submissions that it accepts that recovery in the foreseeable future would cause severe financial hardship. However, the respondent contends that the debt should be written off for a period sufficient to see an improvement in the applicant's medical condition following chemotherapy, coupled with any improvement in his ability to repay.
When considering the appropriateness of write off, the Tribunal was mindful of judicial pronouncements as to what constitutes "severe financial hardship". The applicant had provided a schedule setting out combined income and fortnightly expenses and even taking into account that some of the expenses, in particular those relating to registration of the vehicle would appear to be excessive, it is clear that there is a shortfall.
Section 1236(3) of the Act states that there is no prohibition on taking action at any time to recover a debt that has been written off.
In deciding this issue, I am mindful of the fact that the exercise of the power to write off and to waive are couched in discretionary terms. When considering waiver, one of the criteria that must be considered is whether it is more appropriate to waive than to write off. Given that the write off provisions do not preclude action being taken in the future to recover the debt, and the fact that the stress imposed on the applicant by the knowledge that the repayment regime may be reinstated, I am satisfied that it is more appropriate to waive than to write off.
Accordingly, the decision of the Social Security Appeals Tribunal is set aside and in substitution therefor the decision of the Tribunal is that special circumstances exist which warrant waiver of the whole of the debt.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of
Signed:         Sarah Oliver
  Associate
Date of Hearing  2 September 2002
Date of Decision  4 October 2002
The Applicant Appeared in Person
Solicitor for the Respondent    Ms T Shea, Departmental Advocate

[2002] AATA 887

4 October 2002

Key Legal Topics

Areas of Law

Social Security Law

Legal Concepts

Overpayment

Waiver of Debt

Special Circumstances