Ogden and Secretary, Department of Social Services (Social services second review)

[2020] AATA 1727

Ogden and Secretary, Department of Social Services (Social services second review) [2020] AATA 1727 (15 June 2020)

Division:GENERAL DIVISION

File Number(s):      2019/0462

Re:Lauraine Ogden

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal: Mr S Evans, Member

Date:15 June 2020

Place:Sydney

The decision under review, being the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal dated 30 November 2018, is affirmed.

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Mr S Evans, Member

CATCHWORDS

SOCIAL SECURITY – age pension – debt – overpayment of benefits – value of assets – account-based pension – annuity – whether debt can be written off – whether debt can be waived – whether debt arose solely due to administrative error – whether special circumstances exist – decision under review affirmed

LEGISLATION

Social Security Act 1991 (Cth) ss 1064, 1223, 1234B, 1236, 1237A, 1237AAD

Social Security (Administration) Act 1999 (Cth) s 68

CASES

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Secretary, Department of Social Security v Hales (1998) 51 ALD 695

REASONS FOR DECISION

Mr S Evans, Member

15 June 2020

1. This is a review of a decision by the Secretary of the Department of Social Services to recover a $38,529.56 age pension debt from Lauraine Ogden. Ms Ogden contends that she declared all her assets at the time she applied for the pension and she should not have to repay the debt. Furthermore, she submits that she is now frail, 86 years old and needs money to repair her house. The Secretary contends that Ms Ogden owes the debt and that it should be repaid, as there are no special circumstances which make it appropriate for the debt to be waived.

   INTRODUCTION

2. Lauraine Ogden (“the Applicant”) seeks a review of the decision of the Social Services and Child Support Division (“AAT1”) of the Administrative Appeals Tribunal (“the Tribunal”) which on 30 November 2018 set aside a decision by an Authorised Review Officer (“ARO”) of the Department of Social Services (“the Respondent” also known as “Centrelink”) of 31 May 2017.

3. The original decision of the ARO was to raise and recover an age pension debt of $49,152.02 for the period 10 August 2001 to 8 January 2013 (“the relevant period”).  The AAT1 recalculated the debt to $38,529.56 and the Respondent accepts the AAT1 decision.

4. The matter was heard on 2 April 2020 with both parties appearing by telephone. Ms Ogden was represented by her friend David Peters.

5. The Tribunal has documentation before it which includes the section 37 Tribunal documents and the totality of the evidence has been taken into consideration. Unless otherwise stated, the findings of fact which follow are based on the evidence of Ms Ogden.

6. For the reasons which follow, the decision under review will be affirmed.  

   BACKGROUND

7. On 20 April 2017 Ms Ogden was sent an account payable by Centrelink for the amount of $49,152.02. The Respondent determined that she had received $99,243.31 in age pension payments during the relevant period and that she was only entitled to $50,091.29. On 19 May 2017 Ms Ogden sought review of the decision that she had a debt owing.

8. On 31 May 2017 Ms Ogden was sent a letter from the ARO at Centrelink affirming the decision under review. On 21 August 2018 Ms Ogden appealed the decision of the ARO to the AAT1.

9. On 30 November 2018 the AAT1 set aside the decision of the ARO. In substitution, it decided that Ms Ogden’s debt be recalculated with the debt incurred from 13 January 2009 to 24 February 2009 waived and the remaining debt be recovered with the valuation of the debt based on a lesser income amount.

10. Consistent with the decision of the AAT1, the Respondent recalculated the debt at $38,529.56 for the relevant period and notified Ms Ogden on 11 January 2019. On 25 January 2019 she appealed the decision of the AAT1 to the General Division of the Tribunal.

    ISSUES

11. The issues to be considered are whether the AAT1 decision dated 30 November 2018 was the correct and preferable decision, and specifically:

    (a)whether Ms Ogden was overpaid age pension during the relevant period due to the value of her assets and income; and if so

    (b)whether there are any grounds for waiving all or part of the debt.

    RELEVANT LEGISLATION

12. The legislative provisions relevant to this application are:

    ·Social Security Act 1991 (Cth) (“the Act”);

    ·Social Security (Administration) Act 1999 (Cth) (“the Administration Act”);

13. The rates at which age pension is payable is determined using the Pension Rate Calculator A at the end of section 1064 of the Act. The maximum basic rate payable varies depending upon a person’s circumstances including their income and assets. Where a person is not a member of a couple, their income and assets are to be taken into account when assessing their rate of payments.

14. In determining a person’s rate of payment, both the income test and the assets test are applied with the lessor of the two rates applying.

15. Section 1234B provides that there is no time limit on recovery of a debt or overpayment.

16. Even if a debt is owed, the Secretary may waive the right to recover or may write off all or part of the debt in certain circumstances.

    Debt not recoverable

17. Section 1236 of the Act specifies the requirements in order for the Secretary to write off debts. It relevantly states:

    (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 debtor has no capacity to repay the debt; or

    (c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

    (d)it is not cost effective for the Commonwealth to take action to recover the debt.

    …

    Administrative error

18. Section 1237A of the Act provides for waiver of a debt or portion of a debt that is attributable solely to administrative error. Relevantly, subsection 1237A(1) states:

    (1)       Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

    Special circumstances

19. Section 1237AAD of the Act provides for waiver of all or part of a debt due to special circumstances. It provides in part:

    (1) 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.

    Ms Ogden’s contentions

20. It is submitted on behalf of Ms Ogden that there was a “real bias against her” in the Respondent’s decision to raise a debt. In summary, Ms Ogden’s claim is as follows.

21. Firstly, her financial affairs at the time of her pension application were being entirely managed by her financial adviser, Lyle Davis. Mr Davis was very thorough and Ms Ogden acted in good faith by relying on Mr Davis to inform Centrelink of any information relevant to her age pension.. If Centrelink did or does not have information or records of receiving documents relevant to her pension, the most credible explanation is that they were lost or not recorded by Centrelink, as opposed to not being provided by Mr Davis.

22. Because of Ms Ogden’s personal circumstances, it is appropriate to waive her pension debt. Specifically, Ms Ogden is elderly, lost part of one arm in a childhood accident, suffers from ill health and recently had an operation which has almost rendered her bed ridden. She walks with a walking frame and had to surrender her driver’s license. Further, Ms Ogden lives alone and her property requires substantial repairs. Her house is large and consequently gets cold in the winter meaning she has substantial heating bills. 

23. Finally, the age of the debts means that Ms Ogden is being required to provide evidence relating to issues that are outside the “statute of limitations”.

    FACTS AND EVIDENCE

    Age pension application rejected

24. Ms Ogden had an application for age pension rejected by the Respondent on 13 March 2000 as the value of her assets was above the allowable limit, being assessed at $312,166.66 with an annual income of $15.

    Successful age pension application

25. On 15 June 2001 Ms Ogden submitted another application for age pension. In this application she declared a Westpac cheque account with a balance of $5,359 and a Westpac term deposit of $159,928. She also provided documentation relating to a quote for a Challenger Life long-term fixed income stream based on an investment of $50,000 over 19 years. She stated that she had no payments from an annuity, an allocated annuity or allocated pension but indicated that she may do by writing “but possibly in the future” on the age pension application.

26. On 19 June 2001 the Respondent issued a letter advising Ms Ogden that she had been granted age pension and would be paid $245.05 per fortnight based on her combined asset value of $195,288.  The letter also set out her notification obligations.

    MLC Navigator Pension purchased

27. On 10 August 2001 Ms Ogden purchased an account-based pension for $100,000 (“the MLC Navigator Pension”) but did not inform the Respondent of the commencement of this financial investment. Consequently, the MLC Navigator Pension was not taken into account when assessing her rate of age pension.

28. On 16 June 2002 the Respondent issued a letter to Ms Ogden stating that her rate of age pension of $214.60 per fortnight was based on her combined asset value of $216,287.

29. On 17 July 2002 Ms Ogden lodged a Pensioner Review form with Centrelink which included changes to her bank balances, the value of her motor vehicle and the value of her household contents. There were no changes to her real estate or income stream. Upon receipt of this form, a Centrelink officer noted a discrepancy in her assets involving the reduction in balance of her Westpac Cash Management account by $83,622 within 12 months and subsequently issued a letter requesting details as to how she disbursed the money.  

30. On the same day a letter was issued advising Ms Ogden that her rate of age pension was $418.85 per fortnight based on her annual income of $3,584.68 and listing her notification obligations.

    Challenger Life Annuity

31. On 5 August 2002 Ms Ogden responded to the letter regarding the discrepancy in her assets indicating that she had purchased an annuity for $50,000 (“the Challenger Life Annuity”) and spent $30,000 on house renovations.

32. On 29 June 2006 Centrelink received a completed income and assets update review form from Ms Ogden with the only changes being to her real estate details. A letter was issued noting the restoration of her age pension from 7 June 2006 with her rate of payment being $487.05 per fortnight based on our annual income of $4150.49. The letter again listed her notification obligations. 

33. On 11 August 2006 Centrelink received the Module R real estate form from Ms Ogden. On 16 March 2007 Ms Ogden contacted the Respondent regarding her real estate and as a result such details were updated by the departmental officer.

34. One 24 April 2007 Centrelink issued a letter with an account statement about her age pension. It included information about her income and assets being assessed by Centrelink. It made reference to the Challenger Life Annuity Ms Ogden had purchased but no reference to her MLC Navigator Pension. The statement required her to notify Centrelink if the information held by Centrelink had changed.

35. In July, October and December 2007 and March, June, September and December 2008 Centrelink issued account statements with letters to Ms Ogden that contained the same asset values. They also alerted Ms Ogden to her notification obligations.

36. On 10 October 2007 Ms Ogden contacted Centrelink about obtaining a new pensioner concession card. On 16 November 2008 Centrelink issued a letter advising Ms Ogden that her rate of age pension was $560.05 per fortnight based on her annual income of $4098.49 and listing her notification obligations.

37. On 24 November 2008 Centrelink wrote to Ms Ogden advising that information received from the Australian Taxation Office suggested that she had received income from Challenger Life No 2 Limited and Norwich Union Navigator Ltd in the previous financial year and that she was required to provide documentation to confirm her income details.

38. On 11 December 2008 a follow-up letter was posted to Ms Ogden which referred to a telephone conversation made that same day requesting that she provide a statement for her MLC Navigator Pension. On 31 December 2008 the Respondent sought information from Challenger Life No 2 Limited regarding Ms Ogden’s financial investments. This information was received from Aviva Australia Limited on 12 January 2009 and consisted of nine Centrelink pension schedules for Ms Ogden’s investment in the MLC Navigator Pension with account balances between $90,220 and $112,711 during the debt period.

    MLC Navigator Pension statement provided to Centrelink

39. On 13 January 2009 Ms Ogden attended Lithgow Centrelink office and provided a “Navigator Statement” in response to a request from the Respondent. In error Centrelink did not record the Ms Ogden’s MLC Navigator Pension at that time.

40. On 24 February 2009 the Respondent issued another pension statement to Ms Ogden listing all her assets. It listed the Westpac cash management account balance as being $40,000 however the MLC Navigator Pension account was not listed.

41. In June and December 2009 and January 2012 similar letters were sent to Ms Ogden that failed to make reference to her MLC Navigator Pension but reminded her of her notification obligations.

42. On 8 September 2009 the Respondent issued a letter advising Ms Ogden that her rate of age pension was $671.90 per fortnight based on her combined assets of $126,475 and an annual income of $1773.69. She was again reminded of her notification obligations.

43. On 2 October 2012 Ms Ogden was asked by Centrelink to provide a Centrelink schedule from her MLC Superannuation Fund. A copy of the requested document was provided on 2 November 2012.

44. On 22 November 2012 the Respondent issued a letter advising Ms Ogden that her rate of age pension was $711.99 per fortnight based on annual income of $7103.79. She was again reminded of her notification obligations.

    Debt raised

45. Centrelink commenced investigating Ms Ogden’s entitlement to age pension in March 2017. A departmental officer noted a Centrelink pension schedule for the MLC Navigator Pension account was on Ms Ogden’s file and that she had been provided it on 12 January 2009. The officer identified administrative error from 12 January 2009 onwards with a possible debt of $34,092.96 for the period 10 August 2001 to 11 January 2009. The debt amount was increased to $49,152.02 following a decision by the Respondent to extend the debt period from 10 August 2001 to 8 January 2013.

46. As mentioned, on appeal to the AAT1 the debt amount was recalculated to $38,529.56.

    Ms Ogden’s evidence

47. In oral evidence at the hearing, Ms Ogden confirmed that the January 2001 application for age pension was completed by her financial adviser Lyle Davis. She said Mr Davis was retired and 80 years old at the time, but he still did some work to help people, including her. She said Mr Davis completed all the paperwork for her application and related issues and assured her that he had done everything properly.

48. She remembers investing in the MLC Navigator Pension, but she was under the impression that Mr Davis would have contacted Centrelink about the investment. Ms Ogden said that Mr Davis would produce the paperwork for her to sign and she relied on him to do whatever needed to be done to manage her pension. She thought everything was set up correctly and she never noticed that any of the letters sent to her by Centrelink did not contain any reference to the MLC Navigator Pension.

49. Mrs Ogden confirmed that she intended to purchase the pension plans at the time she applied for and was granted the age pension.  

50. Ms Ogden said that whilst she did have issues with her post at times, she accepted that she would have received the letters from Centrelink outlining her reporting obligations.   

    CONSIDERATION AND FINDINGS 

51. Ms Ogden first purchased the MLC Navigator Pension in August 2001 but did not declare it until 13 January 2009 when she attended the Lithgow Centrelink office and provided the MLC Navigator Pension statement.  Consequently, she was paid age pension without taking into account the value of assets in her MLC Navigator Pension.

52. In error the MLC Navigator Pension statement was not recorded on her file and she continued to be paid an age pension at the same rate. The following month, on 24 February 2009, Centrelink sent Ms Ogden an age pension statement which listed all her assets. However, it did not list the MLC Navigator Pension she had notified Centrelink of the month prior. Similar correspondence which did not list the MLC Navigator Pension as an asset was sent to Ms Ogden by Centrelink on 16 June 2009, 29 December 2009 and 24 January 2012.

53. Before the Tribunal are documents which confirm Ms Ogden was regularly, and on many occasions, informed of the assets and income which were taken into consideration when calculating her age pension. Typical amongst these is a Centrelink statement dated 24 April 2007 setting out all the information Centrelink held about her assets and income. It listed the Challenger Life Annuity but contained no reference to the MLC Navigator Pension.

54. The Tribunal is satisfied that Ms Ogden did not meet her obligations to inform the Respondent about her assets and income whilst in receipt of age pension. She contends that Mr Davis would have done this on her behalf but there is no evidence to support this contention beyond Ms Ogden’s assertions that she expected him to do so and he had a record of being very thorough. 

55. The arguments put on behalf of Ms Ogden regarding notification become more difficult to sustain over the course of the relevant period.  Ms Ogden contends that Mr Davis would have taken care of the notifications to Centrelink, but she herself notified Centrelink of the purchase of the Challenger Life Annuity on 5 August 2002. She submits that she did not think to check if Centrelink had been notified of the MLC Navigator Pension at the time she notified Centrelink of the Challenger Life Annuity. It is further contended that she was not required to list the MLC Navigator Pension on the income and assets update provided in June 2006.

56. The evidence indicates that not long after being granted age pension, Ms Ogden was managing her own financial affairs. The Tribunal finds that she did so in a manner which consistently did not mention the MLC Navigator Pension up until she was asked to do so by Centrelink in 2009. This occurred not because Ms Ogden had notified Centrelink of its existence, but because the Centrelink had received information from Aviva Australia Limited.

57. During the debt period Ms Ogden received notices under section 68 of the Administration Act informing her of the obligation to notify Centrelink of any change in her assets or income. Some of these notices also listed her assets on which her rate of pension was calculated. The MLC Navigator Pension was conspicuously absent from the list of recorded assets and she had an obligation to inform the Respondent.

58. It is appropriate at this point to consider the issue of the time that has passed since the relevant period, which was raised on Ms Ogden’s behalf. It is submitted on behalf of Ms Ogden that the relevant period extends so far back that she was required to supply documents which were outside the “statute of limitations”. The Respondent notes that section 1234B of the Act states that there is no such time limit and debt recovery actions may be commenced at any time.

1. It is also the case that the nature of the debt, the circumstances under which it arose, and the evidence of Ms Ogden do not lead the Tribunal to conclude that evidence of material consideration is absent or may have been retrievable had the matter been examined earlier.  Ms Ogden herself has not indicated that any such documentation exists. 

   Was Ms Ogden overpaid age pension and does she owe a debt?

2. The rates at which individuals are paid age pension is determined using the Pension Rate Calculator A at the end of section 1064 of the Act. Under this rate calculator, the income test is known as “the ordinary income test” and is set out in Module E at the end of section 1064. The “assets test” is set out in Module G which is also at the end of section 1064.

3. The amount of age pension depends on factors such as marital status, income and assets. Where a person is not a member of a couple, their income and assets are to be taken into account when assessing their rate of payment. Ultimately, it may affect the amount of age pension that is payable to the person.

4. If a person is not entitled to the social security benefit they have obtained, the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment: section 1223(1) of the Act.

5. The issue of the quantum of the debt was considered in detail by the AAT1 and there is no dispute about the value of the debt as recalculated. I note that the debt relating to the period between Ms Ogden reporting the MLC Navigator Pension in January 2009 and the pension statement being sent the following month has been waived.

6. The Tribunal is satisfied that Ms Ogden was overpaid age pension and owes a debt of $38,529.56.

   Can any or all of the debt be waived?

7. Under the Act, debts may be written off under section 1236 or waived under sections 1237A or 1237AAD in certain circumstances.

8. French J observed in Secretary,Department of Social Security v Hales (1998) 51 ALD 695 at 695-696 as follows:

   From time to time in the administration of social security benefits overpayments occur. Sometimes these are the result of innocent non-compliance with the requirements of the law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place. The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arises. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth.

   [Emphasis added]

9. I am satisfied that Ms Ogden’s debts cannot be written off under section 1236 as none of the preconditioning criteria set out in subsection 1236(1A) are satisfied. The debts are recoverable at law. She has some capacity to repay the debt, albeit one which is limited by her current financial circumstances. Her whereabouts are known, and it is cost effective for the Commonwealth to recover the debt.

10. Waiver of the debts under section 1237A only arises in respect of “the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt”.

11. The Respondent accepts that the failure of the Centrelink to record Ms Ogden’s MLC Navigator Pension in January 2009 was an administrative error. As mentioned, the debt for the period 13 January 2009 to 24 February 2009 has been waived pursuant to section 1237A of the Act.

12. The sole remaining issue is whether any part of the debt for which Ms Ogden is liable may be waived on the grounds of special circumstances under section 1237AAD. This section allows debts to be waived provided the applicant did not knowingly fail to comply with a provision of the Act. It is accepted by the Respondent that whilst Ms Ogden failed to comply with numerous information notices issued under section 68 of the Administration Act, she did not knowingly mislead or provide incorrect information to the Centrelink.

13. The term special circumstances are not defined in the Act but has been extensively considered in case law. In Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114, Deputy President Forgie noted at [80] the relevance of an individual’s personal circumstances and the consideration of the general administration of the social security system when considering “special circumstances”.

14. Subsection 1237AAD(b) of the Act makes it clear that there must be more than financial hardship alone for special circumstances to exist.

15. Ms Ogden is currently in receipt of age pension in the amount of $933.40 per fortnight with $15 being deducted fortnightly to repay her age pension debt. The outstanding balance of the debt was $29,486.86.  She has total assets valued at $178,443 excluding her home and an annual income of $3,008.06.

16. The Secretary submits that Ms Ogden has the capacity to repay the debt. There is no evidence of financial suffering of a severe or extreme nature given the value of her financial assets.

17. Ms Ogden is 86 years old and has submitted pictures of her house which indicate it is in need of repair. She has also provided a quotation for some of the work which estimates the cost of some of these repairs to be $41,400. Her house, it is submitted, also requires treatment for termites.

18. Ms Ogden indicated in a 2018 Statement of Financial Circumstances that she owns her property and has outgoings that do not exceed her income until the cost of looking after her animals is taken into consideration. She estimated caring for her animals was costing $550 per week. It is also submitted that Ms Ogden is suffering from a number of health conditions and is frail because of her age and requires a walking frame.

19. The Respondent submits that to apply special circumstances in Ms Ogden’s case in order for her to complete repairs would be equivalent to asking the Commonwealth to subsidise repairs to a dwelling. Ms Ogden was provided an opportunity at the hearing to explain how much difference not having $15 per fortnight withheld from her age pension payments would make to her housing repair schedule but she was unable to do so. I accept that Ms Ogden has repairs that need to be done to her home, but they do not meet the requirement for special circumstances.

20. I also accept that Ms Ogden suffers from health conditions but the impact on her capacity or finances are not unusual for individuals of her age and do not constitute special circumstances.

21. Taken separately or together, the circumstances detailed by Ms Ogden do not render her case out of the ordinary and it is not desirable to waive any or all of the debt for which she is liable.

    CONCLUSION

22. Ms Ogden was overpaid age pension because she did not declare a significant asset. During the relevant period she was sent many notices which, if they had been complied with, would have avoided the debt or stopped it from accumulating further.

23. A modest withholding is being made to Ms Ogden’s fortnightly pension. She still has savings, assets and receives other income. There are no grounds to write off or waive the debt. Having received money to which she was not entitled she now owes a debt to the Commonwealth that must be repaid.

    DECISION

24. For the reasons stated above, the decision under review is affirmed.

I certify that the preceding 82 (eighty -two) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member

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Associate

Dated: 15 June 2020

Date(s) of hearing:	2 April 2020
Advocate for the Applicant:	Mr D Peters
Solicitors for the Respondent:	Services Australia