Parker; Secretary, Department of Families, Community Services and Indigenous Affairs and
[2007] AATA 1834
•4 October 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1834
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/3216
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS Applicant
And
MARIE PARKER
Respondent
DECISION
Tribunal Mr John Handley, Senior Member Date4 October 2007
PlaceMelbourne
Decision The decision of the Social Security Appeals Tribunal made on 13 June 2007 is set aside and in substitution IT IS DECIDED –
(i) The respondent has been overpaid Family Tax Benefit;
(ii) The amount of the overpayment is remitted to the applicant for recalculation for the reasons contained in this decision;
(iii) The quantum of the overpayment when recalculated is a debt and the respondent is liable for repayment; and
(iv) The debt is not provable in bankruptcy.
(Sgd) John Handley
Senior Member
SOCIAL SECURITY – Family Tax Benefit – failure to declare shared care – respondent entered bankruptcy voluntarily – payments of FTB continued at 100 per cent – reconciliation by Secretary pursuant to s 105 of A New Tax System (Family Assistance) (Administration) Act 1999 – respondent not subject to a debt at date of bankruptcy or incurred an obligation during bankruptcy – whole of debt not provable in bankruptcy – write off not applicable – errors by Centrelink not solely the cause of the overpayment – failure to respond to recipient notices – waiver not applicable – decision set aside
Bankruptcy Act 1966 (Cth) s 82 (1)
Social Security Act 1999 (Cth) s 1223 (1)
A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) s 70, s 71, s 71(2), s 95, s 95(3), s 95(3)(c), s 96, s 97(1), s 97(2), s 97(3), s 98, s 99, s 100, s 101 and s 105
Re Secretary, Department of Families, Community Services and Indigenous Affairs and Pollock [2006] AATA 635
Re Secretary, Department of Family and Community Services and Tough (2002) 71 ALD 458
Pledger and Secretary, Department of Family and Community Services [2002] FCA 1576
REASONS FOR DECISION
4 October 2007 Mr John Handley, Senior Member 1. The applicant Secretary applies to review a decision made by the Social Security Appeals Tribunal (SSAT) on 13 June 2007. The SSAT then decided that decisions previously made by Centrelink raising an overpayment of benefits and a consequent imposition of a debt were to be affirmed, but otherwise decided that only part of the debt was repayable by Ms Parker. That latter decision was made by reason of Ms Parker having entered into bankruptcy prior to the debt having been raised. The relevance of her bankruptcy will be discussed later in these reasons.
2. Ms Parker is the mother of four children however this application concerns payment of Family Tax Benefit (FTB) only with respect to the two older children, Sarah Jane Parker, born on 10 September 2001 and Kylah Jessica Parker, born 30 August 2002. Ms Parker has been in receipt of FTB since the birth of Sarah, the oldest child. The father of those children is Rodney Paul Maloney (Maloney) who instituted proceedings in the Magistrates’ Court at Shepparton in 2004. Joint Consent Orders were entered into by Maloney and Ms Parker on 23 April 2004. She and Maloney agreed to have joint responsibility for the long term care, welfare and development of both children. The joint Order also permitted specified periods of access by Maloney to the children.
3. Ms Parker voluntary entered bankruptcy on 21 December 2004. She did so upon advice that she received. She previously gave an undertaken as a guarantor for a friend with respect to a $25,000 loan. Her friend defaulted on that loan and the lending authority sought recovery of monies from her as the guarantor. She was unable to meet that liability and accordingly applied for bankruptcy. She is not due for discharge until 20 December 2007.
4. Centrelink made a primary decision on 22 December 2006 to raise and recover overpayments with respect to the 2005 financial year in the sum of $1923.34, for the 2006 financial year in the sum of $1557.37 and for the period 1 July 2006 to 25 December 2006 in the sum of $608.34. A total sum of $4089.05 has been raised against Ms Parker because it has been alleged that she did not notify Centrelink of the shared care arrangement between herself and Maloney which has been calculated at 83/17 per cent. Centrelink has calculated the amount that would have otherwise been payable had that disclosure been made and determined that had she been paid at all relevant times at 83 per cent of the FTB rate, the sum of $4089.05 would not have been paid. Centrelink seeks to recover that sum. Withholdings had been made from FTB payments but the withholdings ceased shortly after 6 August 2007 upon an undertaking given by Mr de Uray on behalf of Centrelink at a Stay hearing where it was then learnt that Ms Parker (was, and still is), in a perilous financial situation.
5. It would appear that the authorized review officer (ARO) was not aware that Ms Parker was a bankrupt at the time the decision under review was made. The bankruptcy was not referred to all in the reasons for that decision. The SSAT became aware of it and decided that FTB payments in excess of 83 per cent paid between 1 July 2004 and 20 December 2004 (the day before the entry into bankruptcy) were a recoverable debt against Ms Parker. It also decided that payments made during the period of bankruptcy, that is, between 21 December 2004 and 25 December 2006, are beyond the ambit of ss 70 and 71 of the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act) and the amount of the overpayment during the latter period is only provable through a claim made to the Official Receiver. This appeal is principally concerned with the decisions made by the SSAT, in effect impeding the opportunity of the Secretary to recover all of the monies overpaid.
marie joyce parker
6. Ms Parker acknowledged that at all relevant times she received recipient notifications from Centrelink. Attached to a Statement of Facts and Contentions lodged by Mr de Uray prior to the hearing, was a bundle of the notices covering the period May 2003 to June 2004. All of the notices were addressed to the residential address as notified by Ms Parker to Centrelink and which coincided with a list of her changes in residential address found at page 74 of the T‑documents. She acknowledged receiving the notices and also admitted that there were occasions that she did not read them. She did say that she was aware of her notification obligations. Typically, the notices required her to notify changes in her circumstances and specifically notified that she was obliged to tell us if the level of shared care you provide changes.
7. Ms Parker said that she did notify Centrelink at its office in Seymour of the shared care arrangements with Maloney on a date that she could not recall but during a time when she was living in Alexandra. By reference to the list of addresses found at page 74, that notification would have occurred before 6 November 2003. She said that she travelled to the Centrelink office in Seymour with her parents to attend an appointment that had been arranged for her. She said she could not recall why she had an appointment but did recall that she spoke with a female officer on a one to one basis, at a table or desk, in the Centrelink office behind the front counter. She said that she discussed the access arrangements with Maloney and was advised that it was likely that there would be a reduction in the rate of FTB paid to her which was estimated to be in the vicinity of $40.00 per fortnight. She said that following that appointment she did not notice any reduction in the rate of payments being made to her. She acknowledged that she did receive bank statements from time to time but she did not look at them. She said it was her practice to check her bank balance from time to time by internet access that she had to her bank account and if funds were in credit, monies were spent on day to day necessities. She said she could not recall the rate of FTB being paid before the interview at Seymour nor could she recall the rate being paid after that appointment.
jacqueline gaye parker and vernon ross parker
8. Mr and Mrs Parker are the parents of Ms Parker, the respondent in these proceedings. They both gave evidence that they traveled to Seymour with Ms Parker on the occasion of an appointment she had with an officer of Centrelink. They could not recall the date of the appointment but both recalled that Ms Parker was living in Alexandra at that time. They both said that they did not attend the appointment with her but waited outside the Centrelink office. They both said they could not recall whether there was any discussion after the appointment about the reasons for the attendance or the discussions that had taken place.
findings of fact
9. Having regard to the evidence heard in these proceedings and to the documents lodged, I am satisfied and find as follows:
(i)Ms Parker is the mother of Sarah Jane Parker and Kylah Jessica Parker and who has at all relevant times – at least from a date shortly after the birth of Sarah – been entitled to and has been paid FTB.
(ii)At all relevant times Centrelink did forward recipient notices which were properly addressed which Ms Parker did receive. Those notices obliged her to notify Centrelink of changed circumstances, one of which was specifically recorded as notification of changes in shared care.
(iii)On a date unknown but before 6 November 2003, Ms Parker did attend the Centrelink office at Seymour. That attendance was corroborated independently of her by both of her parents. I am satisfied that Ms Parker and her parents are witnesses of truth. Whilst Ms Parker and her parents did not know the reason for the appointment at the Seymour office it would appear from a Memorandum found at page 42 of the T‑documents that she was then under investigation as to whether she was in a married‑like relationship with Maloney. Ms Parker said that she then discussed with a Centrelink officer at Seymour that she and Maloney were not living together but were sharing the care of Sarah and Kylah. As a result of volunteering that information, she was advised by the officer that it was likely that the rate of FTB would be reduced by approximately $40.00 per fortnight. (Maloney then lived in Numurkah and had access to the children, by agreement with Ms Parker).
(iv)Ms Parker was not aware whether the rate of FTB was reduced after the date of that interview. However, it would appear from a document lodged by Mr de Uray which was annexed to his Statement of Facts and Contentions (additional document 2 received as Exhibit R3) that the rate of FTB paid (described in the document as old Fn rate and new Fn rate) were identical. That is to say, the rate of FTB that was actually paid was calculated as if the children were not in shared care. However, when those figures are compared against the calculations undertaken by Centrelink as if it had been aware of the shared care arrangements, the amount actually paid exceeds the amount that should have been paid had there been a reduction reflecting the 17 per cent of care undertaken by Maloney. I am therefore satisfied that following the interview at Seymour there was no change in the rate of FTB being paid until Centrelink decided on 22 December 2006 (T12, p36) that FTB had been paid at a rate greater than that to which Ms Parker had been entitled.
(v)I am satisfied that payments of FTB beyond 83 per cent constitute an overpayment and the amount calculated as the overpayment, namely $4089.05, is a debt.
(vi)The relevant decisions were initially made by Centrelink in December 2006 and affirmed by an ARO on 1 March 2007. Ms Parker voluntary entered into bankruptcy on 21 December 2004. She continues to receive FTB payments. She remains bankrupt and will not be discharged until 20 December 2007.
the legislation
10. Section 71 (2) of the Administration Act provides that if an amount of FTB has been paid to a person and the amount paid is greater than the amount that should have been paid, the difference between those amounts is a debt due to the Commonwealth. In the present case, for the reasons discussed above, the difference between the amount actually received and the amount that should have been paid, is the debt that has been calculated by Centrelink.
11. Section 95 of the Administration Act concerns the authority of the Secretary to write-off a debt but only in the circumstances recorded. None of those circumstances apply to Ms Parker namely, that the debt is irrecoverable, that the debtor has no capacity to repay, that the debtors whereabouts are unknown and it is not cost effective to the Commonwealth to recover the debt. With respect to the circumstance of a debt being irrecoverable at law, a number of circumstances are recorded at s 95 (3). Bankruptcy is referred to at s 95 (3) (c) as a circumstance where a debt may not be recoverable at law but only in the circumstance where the debtor is discharged from bankruptcy and the debt was incurred before the bankruptcy and it was not incurred by fraud. For reasons referred to above that circumstance has no application to these proceedings.
12. Section 96 of the Administration Act refers to circumstances where a debt may be waived. Section 97(1) provides that a debt may be waived if it arose from error attributable solely to an administrative error made by the Commonwealth but only in the circumstances found at s97 (2) or (3). Section 97(2) provides that the proportion of the debt attributable to administrative error must be waived if it was received in good faith and severe financial hardship would be suffered if it is not waived. Section 97(3) also refers to receipt of the proportion of the debt attributable to administrative error. Ms Parker would suffer financial hardship if the debt were not waived but I cannot find that those payments were received in good faith when she continued to receive benefits at a rate to which she was not entitled and where she either did know or should have known that she was being paid at a rate more than that to which she was entitled. That is to say, Ms Parker expended monies received on day to day necessities by reference to the balance of her account from time to time. It would appear that she turned a blind eye to ascertaining whether in fact the rate that was being paid was the correct amount having regard to the advice that she received at the Seymour interview. In those circumstances the payments were not received in good faith (refer discussion of the concept of good faith by Weinberg J in Pledger and Secretary, Department of Family and Community Services [2002] FCA 1576 at paragraphs 54 – 59).
13. Sections 98, 99 and 100 have no application with respect to the waiver provisions under the Administration Act. However, s 101 permits the Secretary to waive the debt or part of the debt if it did not result wholly or partly from the debtor knowingly making a false statement or false representation or failing to comply with a provision of the family assistance law and there are special circumstances that make it desirable to waive and it is more appropriate to waive than write‑off the debt or part of the debt.
14. With respect to this section, I am satisfied that whilst Ms Parker did not make a false statement or a false representation, she did not comply with a provision of the family assistance law because she failed to notify Centrelink at least after the Seymour interview that payments continued to be made at the full rate. Whilst she did then notify of the shared care arrangements, her recipient notification obligations were continuing, indeed she continued to receive notices advising her that she was obliged to notify of shared care arrangements. (The shared care was existing before the Magistrates’ Court Orders at 87/13). Ms Parker in the circumstances should have notified Centrelink that it was making payments at the full FTB rate when in fact that rate should have been reduced by reason of the arrangement for shared care which was existing and which was confirmed by the Consent Orders made at the Shepparton Magistrates’ Court in April 2004. The notices received after the Seymour interview should have put Ms Parker on notice of her continuing obligations to Centrelink. She was aware of reporting conditions, as evident by the frequency of notification of changes of address. The failure to comply with her notifications occurred on each (fortnightly) occasion that a notice was received and from which she did not act.
15. Because I am satisfied that there was a failure to comply with a provision of the family assistance law, special circumstances other than financial hardship alone, cannot be considered. That is, all parts of s 101 must be satisfied. Indeed even if there were special circumstances, the legislation prohibits consideration of circumstances referable to financial hardship, which principally was the basis upon which the special circumstances were raised during the hearing. I cannot consider those circumstances because of the conjunctive language of s 101, but I will return to them later with respect to recovery by the Secretary of the amount of the debt presently outstanding.
bankrupcy
16. In this application the Secretary contends that the amount overpaid constituting the debt is not provable in bankruptcy.
17. Section 82 (1) of the Bankruptcy Act 1966 (the Bankruptcy Act) provides as follows:
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
18. The Secretary also contends that the amount overpaid, the debt, arose by reason of a reconciliation undertaken by the Secretary pursuant to s 105 of the Administration Act whereby on the Secretary’s own motion, the decision to make payments at a certain rate were reviewed. As a consequence of that review, an overpayment was found and the debt was raised. The entitlement to review decisions by the initiative of the Secretary is unique to the Administration Act.
19. Unlike s 1223 (1) of the Social Security Act 1999 where a debt is taken to arise when a person obtains the benefit of a payment to which they were not entitled, s 105 of the Administration Act gives the Secretary the power to make a decision creating a debt irrespective of when the payment was made which gave rise to the debt. In the present case the calculation of the debt occurred in December 2006 and was affirmed by the ARO in March 2007. Relevantly the debt arose by the process of calculating the overpayment and the debt was then found to exist. Whether it be December 2006 or March 2007, relevantly, it was on an occasion after Ms Parker entered into bankruptcy. Put another way, Ms Parker was not subject to that debt at the date of the commencement of her bankruptcy, nor did she become subject to that debt before the discharge of bankruptcy by reason of an obligation which she incurred before the date of the bankruptcy.
20. Section 105 of the Administration Act and s 82 of the Bankruptcy Act was discussed in some detail by Deputy President Purvis in Re Secretary, Department of Families, Community Services and Indigenous Affairs and Pollock [2006] AATA 635 (Pollock) where Deputy President Purvis at par 40 recorded as follows:
The Tribunal is satisfied that a section 105 reconciliation is necessary before a debt can be said to have arisen. There is not an obligation imposed upon a recipient under the family assistance law until the reconciliation exercise is carried out and the result reveals that the recipient is a person not entitled to an amount previously paid, which amount then constitutes a debt owing to the Commonwealth (sections 71(2) and 71C of the Administration Act).
21. In reaching his decision reliance was made on another decision of the Tribunal namely, Re Secretary, Department of Family and Community Services and Tough (2002) 71 ALD 458 (Tough) where at par 40 of that decision the Tribunal decided that a decision under s 105 can be substituted for a previous decision thereby affecting the rate of FTB paid after the date of the original decision. At par 41 in Tough it was decided:
In using his power under s 105 to review a determination that Mrs Tough was not entitled to FTB, it is proper for the Secretary to consider her eligibility and to do so in light of facts that had happened up to the date of his decision if those facts affected her eligibility on or after 1 July 2001.
22. I respectfully agree with and acknowledge the methodology and analysis contained in Pollock at pars 22 and 23 which are reproduced as follows:
22. Nor is there a contingent debt, for there may have been an underpayment in which event Centrelink would be liable to make payment to the recipient. There is not prior to ascertainment of an amount being owed any existing obligation out of which a liability to pay an amount will or could arise in the future (see Community Development Pty Limited v Engwirda Construction Co (1969) 120 CLR 455 at 459). Factors, it is said, which determine whether a debt is provable in a bankruptcy for present purposes as detailed in Health Insurance Commission v Trustee in Bankruptcy of the Estate of Ioakim Alekozoglou [2003] FCA 848 at para 50, are:
• A debt need not be due and payable at the date of bankruptcy to be provable in the bankruptcy, but there must be an obligation upon which the debt is founded, being an obligation which was incurred before the time of bankruptcy: Jones as Trustee of the Bankrupt Estate of Graham v Deputy Commissioner of Taxation (1998) 157 ALR 349 at 354;
• For a debt to be "contingent", "there must be an obligation upon which the contingency can operate", being an obligation which "must exist as at the date of bankruptcy": Lyford v Carey (1985) 3 ACLC 515 at 518;
• Where discretion is required to be exercised in a way which impacts on or is relevant to a debt there is no obligation to pay until the discretion is exercised: Lyford (supra) at 519.
• For a debt to be provable in bankruptcy there must be: "... existing circumstances which (give) rise to a contingent debt or liability, and which would crystallise by the happening of some future event": Gaffney v Commissioner of Taxation (1998) 81 FCR 574 at 578;
• A contingent liability within section 82 of the Bankruptcy Act can include a potential liability arising from an obligation: Lofthouse v Commissioner of Taxation (2001) 164 FLR 106; and
• "The questions for determination must be decided by reference to the language of the relevant statutes, rather than by resort to consequences which ... would appear to produce injustice ...": Re Kavich; Kavich v Official Trustee in Bankruptcy (1995) 58 FCR 82 at 86-87.
23. Further as was stated in Alekozoglou (supra) at para 51 "an obligation must be a recognisable one created by law and must not be some amorphous vulnerability to a possible debt". There must be an existing obligation owed by the recipient at the time of the bankruptcy even be it quantification is to occur at a later date.
23. Accordingly Ms Parker’s debt has arisen only on the occasion of the making of a decision under s 105. That occurred after commencement of bankruptcy. Prior to the date of bankruptcy, there was no debt or liability which was then present or having a future likelihood which was certain or contingent by reason of an incurred obligation. She had no liability for the debt until such time as the reconciliation was initiated and completed by the Secretary under s 105. Accordingly, the debt that has been raised following the s 105 exercise is not a debt which is provable in bankruptcy.
24. The decision of the SSAT insofar as it distinguished liability for payment for the period before and after the commencement of bankruptcy is set aside. In substitution for that part of the decision it is decided that the whole of the debt (subject to the following) is not provable in bankruptcy. The remaining parts of the SSAT decision under review by these proceedings are otherwise affirmed.
25. It was learnt during the hearing that Maloney had not been exercising his rights of access pursuant to the Magistrates’ Court Order and accordingly there has not been a consistent 83/17 per cent division of shared care.
26. Prior to December 2006 (being within the period during which the debt in this case was calculated), Ms Parker said there were a number of occasions where access was not exercised by Maloney pursuant to the terms of the Order at the Magistrates’ Court or at all.
27. Ms Parker said that there were two or three occasions before Christmas 2006 where Maloney did not exercise any access to both children. She said that there were about five occasions where he had access to Kylah only and two or three occasions when he had access to Sarah only.
28. I accept the truth of this evidence and accordingly the amount calculated as overpaid should be recalculated to take account of those occasions where access was not exercised. Payment of FTB on the basis of 83/17 per cent would be inappropriate on those occasions. That is to say, there should be a greater percentage allocated to Ms Parker in respect of those occasions and a reduction in the percentage against Maloney.
29. Accordingly the amount assessed as having been overpaid as determined by the SSAT should be varied and that part of the decision under review is remitted to the Secretary for recalculation.
recommendation
30. Ms Parker presently is in a perilous financial situation and I despair at her future prospect of ever becoming free of debt.
31. She has been threatened with eviction from her present accommodation and is in arrears of rental payments. She has four children under six years of age. One attends school, one appears to be refusing school and one is an asthmatic. She is in debt to the school for fees and uniforms. She lives a considerable distance from the school, her home is not connected by public transport and frequently she does not have sufficient monies to pay for petrol to collect the children in her car. On those occasions she calls on the services of her parents. Ms Parker’s partner works at the Tatura Abattoir but by reason of reduced stock because of the rural drought, his work and consequent income is irregular. His employment is not regarded as being secure. Maintenance is paid by Maloney for the children Sarah and Kylah but it appears that such payments will be reduced because of insecurity in his employment.
32. Ms Parker is also considerably in debt to Radio Rentals where she entered into arrangement for the provision of a washing machine and other white goods. She has a debt to the ABC Childminding Centre in excess of $1000 because Centrelink did not directly debit the fees from FTB payments contrary to her knowledge or understanding. Ms Parker is also presently overdrawn on her bank account. She does not enjoy good health and as was observed at the hearing, she is suffering obvious distress and anxiety. She refuses to attend a doctor because she is embarrassed to discuss her stress which she associates with her relationship with Centrelink. She has been dependent upon St Vincent De Paul and her parents. Her relationship with her current partner is insecure with frequent episodes of disharmony associated with mounting debts.
33. In the event that there is an attempt presently by Centrelink to recover amounts overpaid, I recommend that every consideration be given to treating Ms Parker with a degree of sympathy and recognition that on the evidence heard in these proceedings she has no capacity to make repayments. Accordingly I would recommend that repayment, if at all, be considered at a future date after her financial circumstances are re‑examined when it can be reasonably determined that she has a capacity to make payments.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of:
Mr John Handley, Senior MemberSigned: Grace Carney, Personal Assistant
Date of Hearing 17 September 2007
Date of Decision 4 October 2007
Solicitor for the Applicant Self Represented
Departmental Advocate Mr T de Uray
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