Pais and Secretary, Department of Employment and Workplace Relations

[2006] AATA 269

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 269

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2005/578

GENERAL ADMINISTRATIVE DIVISION

Re:         DAVID PAIS

Applicant

And:       SECRETARY,

DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal:       Regina Perton, Member

Date:             23 March 2006

Place:            Melbourne

Decision:The Tribunal affirms the decision under review.

Regina Perton

Member

SOCIAL SECURITY – Newstart allowance – failing to declare employment - debt to Commonwealth – conviction – bankruptcy – write-off of debt - waiver of debt – special circumstances – decision affirmed 

Bankruptcy Act 1966 s 153(1)

Social Security Act 1991 ss 1236, 1237, 1237AAD, 1347, 1350

REASONS FOR DECISION

23 March 2006  Regina Perton, Member

1.      David Pais received Newstart Allowance (NSA) between 15 December 1994 and 12 February 1997 (the relevant period).  His NSA was cancelled from 13 February 1997 as he failed to lodge a claim form for payment.  There had been previous such failures to lodge forms and fresh claims for NSA.  Mr Pais worked for part of the relevant period but did not declare all of that employment.  On 1 July 1997, Mr Pais lodged a fresh claim for NSA.  In that claim, he indicated that he had worked for a company from 10 June 1994 to 27 June 1997.  Centrelink, which administers NSA for the Department of Employment and Workplace Relations, obtained further information from Mr Pais and his former employer about his earnings.  On 24 October 1997, Centrelink determined that Mr Pais had received $7,245.41 in NSA to which he was not entitled.  Therefore, he owed a debt to the Commonwealth in that amount.

2.      On 24 September 1998, Mr Paid pleaded guilty to and was convicted of 8 counts of knowingly obtain payment of a social security payment which was not payable at all contrary to sections 1347 and 1350 of the Social Security Act 1991.   

3.      Mr Pais was declared bankrupt on 18 September 2000.  He was discharged from bankruptcy on 19 September 2003. 

4.      On 17 August 2004, Mr Pais sought review of the decision to impose the debt.  He was assisted by a community financial counsellor, Phil Grinter.  Mr Grinter, in a submission to Centrelink dated 16 August 2004, indicated that Mr Pais has an acquired brain injury as the result of a workplace accident in 1993 as well as poor literacy skills.  Mr Grinter sought waiver of Mr Pais’s debt on the basis of special circumstances.   On 8 September 2004, the original decision maker confirmed his decision but varied the amount to $7190.85.  On 18 November 2004, an authorised review officer (ARO) affirmed this decision. On 20 May 2005, the Social Security Appeals Tribunal (SSAT) affirmed the ARO’s decision.   

5.      An application for review was lodged with the Tribunal on 27 June 2005.  The issues for the Tribunal are whether the debt survived following Mr Pais’s bankruptcy, and if so, whether the debt can be written off or waived on the basis of his special circumstances.

EVIDENCE

6.      In submissions to the ARO, the SSAT and the Tribunal, Mr Grinter indicated that Mr Pais’s acquired brain injury had not been diagnosed at the time he was overpaid NSA nor at the time he pleaded guilty to the charges of fraudulently receiving social security payments.  Mr Grinter stated that tests in June 2002 rated Mr Pais’s reading levels as the equivalent of a Grade 2 student.  He expressed concern about the legal advice available to Mr Pais when he pleaded guilty to the charges.  Mr Grinter stated that Mr Pais is now unable to work because of his injuries and lack of literacy.  Mr Pais is the sole carer of two daughters, whose non-custodial parent is erratic in paying Child Support.  Mr Pais and his daughters rely on social security benefits.  Mr Grinter amplified his written comments at the hearing and described his interactions with and impressions of Mr Pais.  He submitted that Mr Pais had not knowingly made false claims or false statements or failed to comply with the legislation.   He referred to notes of an interview in December 1997 between Mr Pais and an officer from Centrelink’s Prosecution Unit (T37), in which the officer indicated that it was her view that Mr Pais had not knowingly misrepresented his circumstances.  

7.      Mr Pais gave evidence by telephone.  He said that it was the accountant completing his tax returns who advised him that he had failed to declare income to Centrelink and should do so.  Mr Pais subsequently attended a Centrelink office.  This led to an interview, further investigations and subsequent prosecution and conviction.  Mr Pais said that he pleaded guilty because he had been told by the accountant and others that he had done the wrong thing.  He said that he had been preoccupied during the relevant period with personal matters and had not worried about issues concerning Centrelink.   After his daughter was born, he wanted to get his life in order and had voluntarily admitted to Centrelink his failure to declare what he now realised was income.   

8.      Mr Pais said that he had not realised the money he received working for his brother’s paving company was classified as income.   He said that this work was casual, at his brother’s request.  It was sometimes for an hour or two, at other times all day.  He could not remember how much he earned.  He said that his brother paid him cash.  Mr Pais said that he did not consider working for his brother to be employment, as he was doing work for a relative rather than an employer.

9.      Mr Zita referred Mr Pais to forms he had filled out during the relevant period in which he ticked boxes saying that he had not received income or been employed in the immediate period preceding the claim.  Mr Pais could not remember who helped him to fill out forms for Centrelink or why particular boxes were ticked.  He said that he had difficulty reading forms.  He now seeks out assistance to do so. 

10.     Mr Pais described his experiences during the relevant period and his life now.  He cares for his two daughters, who are both at primary school, as a single parent.  Things are difficult financially.   He said that he did not deliberately go out of his way to cheat Centrelink.  He repeated that he had pleaded guilty to the charges because he had been informed that he had done the wrong thing.

CONSIDERATION OF THE ISSUES

11.     There is no dispute that Mr Pais was overpaid $7190.85 in NSA during the relevant period.  The Tribunal is therefore satisfied that Mr Pais owes a debt of $7190.85 to the Commonwealth. 

12. The Tribunal notes that Mr Pais was declared bankrupt after the imposition of the debt and was discharged from bankruptcy on 19 September 2003. Section 153 of the Bankruptcy Act 1966 (the Bankruptcy Act) concerns the effect of discharge of bankruptcy. It states:

153(1) Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally.

….

(2) The discharge of a bankrupt from a bankruptcy does not:

….

(b) release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud;….

….

13.     Based on the oral and documentary evidence before the Tribunal, the Tribunal is satisfied that Mr Pais was aware that he was not entitled to NSA while working full‑time.  It follows that his discharge from bankruptcy does not release him from the debt incurred by means of fraud or a fraudulent breach of trust to which he… was a party or a debt of which he… has obtained forbearance by fraud. The Tribunal is satisfied that the debt to the Commonwealth is one which survives Mr Pais’s bankruptcy.

14.     Section 1236 of the Social Security Act 1991 (the Act) provides for a write‑off of the debt in certain limited circumstances: namely if it is irrecoverable at law; the debtor has no capacity to repay the debt; the debtor’s whereabouts are unknown or it is not cost effective for the Commonwealth to take action to recover the debt. Section1236(1C) of the Act states that where a debt is recoverable by means of deductions from a 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.  Mr Pais is currently receiving social security benefits including parenting payments.  Deductions of $20.00 per fortnight are being made from his social security benefit.  The Tribunal accepts that it is difficult to manage financially on a limited income but there is no evidence that recovery of the debt by ongoing deductions will result in severe financial hardship.  Therefore, the Tribunal is not satisfied that it is appropriate to write‑off the debt.

15. Section 1237 of the Act and the sections immediately following it set out the circumstances in which the debt may be waived. Unless a debt arises solely out of an administrative error by the respondent resulting in an overpayment (s1237A(1)), or a debt is less than $200 and is not recoverable from social security benefits and the cost of retrieval outweighs the debt (s 1237AAA), or in certain other limited circumstances (also not applicable to the applicant), there is no discretion to waive a debt, unless s 1237AAD applies.

16. Section 1237AAD of the Act provides for waiver of the debt in certain other circumstances:

1237AAD.  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.

17.     Whether a debt ought to be waived due to special circumstances first requires the Secretary to be satisfied that the debt did not arise as the result of the debtor knowingly making a false statement or failing or omitting to comply with a provision of the Act.  In this case, Mr Pais has been convicted of knowingly receiving social security benefits to which he was not entitled.  Mr Grinter submitted that Mr Pais had not knowingly made false statements or knowingly failed to comply with the Act.  However, it was Mr Pais himself who decided to approach Centrelink to tell the agency that he had received income to which he was not entitled.  He subsequently pleaded guilty to breaches of the Act and was convicted. The Tribunal accepts that Mr Pais was affected by an undiagnosed acquired brain injury during the relevant period and that his poor literacy skills contributed to the situation.  However, it also notes that Mr Pais acknowledged that he had not declared his employment or income during the relevant period thus receiving payments beyond his entitlement.  It was his decision to come forward to advise Centrelink of his breach.  He pleaded guilty to the offences, thereby acknowledging that he had made false statements. The Tribunal finds that Mr Pais does not meet the criteria set out in s 1237AAD(a) of the Act. Therefore, the Tribunal is unable to find that there are special circumstances as s 1237AAD(a) is a precursor that must be met before the special circumstances provisions can be invoked.

18.     The Tribunal finds that Mr Pais owes a debt of $7190.85 to the Commonwealth.  

DECISION

19.     The Tribunal affirms the decision under review. 

I certify that the nineteen [19] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

(sgd)       Catherine Lake

Clerk

Dates of hearing:  10 March 2006

Date of decision:  23 March 2006
Advocate for the applicant:         Mr P Grinter, Financial Counsellor
Advocate for the respondent:       Mr W Zita, Centrelink Legal Services