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

Phillips and Secretary, Department of Social Services (Social services second review) [2020] AATA 1819 (18 June 2020)
Division:GENERAL DIVISION
File Number(s): 2019/2371
Re:Trevor Phillips
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Senior Member P J Clauson
Date:18 June 2020
Date of written reasons: 18 June 2020
Place:Brisbane

The Reviewable Decision of the Social Services and Child Support Division, dated
27 March 2019, is affirmed.
....................[SGD]........................
Senior Member P J Clauson
Catchwords
SOCIAL SECURITY – Social Security Act 1991 (Cth) – Social Security Administration Act 1999 (Cth) – Commonwealth Debt – Underreported Income – Sole Administrative Error – Whether Department Erred in Raising Debt – Error not Found – Decision Affirmed
Legislation
Social Security Act 1991 (Cth)
Social Security Administration Act 1999 (Cth)
Cases
Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Davey and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577
Feneley & Secretary, Department of Family and Community Services [2003] AATA 496
Gammaldi and Secretary, Department of Social Services (Social Services Second Review) [2016] AATA 1028
Gehardt and Department, Education and Training [1996] AATA 10,941
Re Callaghan and SDSS (1996) 45 ALD 435
Secretary, Department of Social Services v Hales (1998) 82 FCR 154
Secondary Materials
The Guide to Social Security Law
REASONS FOR DECISION
Senior Member P J Clauson
18 June 2020

The Applicant, Trevor Phillips, was in receipt of the Mature Age Allowance (“MAA”) and an Aged Pension (“AGE”) from 2004 to 2011.
The Department had a requirement that persons receiving Centrelink payments were, as part of that benefit arrangement, required to report their own and their partner’s earnings each and every fortnight.
The Department issues Notices to participants in benefit programs at the commencement of their involvement with the program and from time to time thereafter regarding such obligations.
The Applicant was sent a Notice on 10 December 2003 which stated that he was required to advise the Department of any changes in his or his partner’s, Patricia Phillips’s, income and those responsibilities were outlined in the following terms of how to carry out the reporting requirements:
You must report your and your partner’s earnings for the whole Centrelink Reporting Period, including the first and last day. Your Centrelink reporting period can be different from the period on your payslip. Use ‘Your earnings worksheets to help you record and work out how much you earn in a Centrelink Reporting Period. You can also find help in the booklet ‘Reporting your Earnings: What you Need to Know’. If you get paid any allowance from your work (e.g. for fuel, meals, clothing) ask Centrelink if you need to report them with your gross earnings. Most allowances are not counted as part of your income from employment. Make sure when you report to answer all of the questions carefully. No-one wants you to get into debt to Centrelink. If you get a debt, you’ll have to pay it back.[1]
[1] Exhibit 2, ST1, pages 414 to 728.
Patricia Phillips, Mr Phillips’s spouse, during this period, declared income from her employer outlined in the columns marked “NVE” in the Employment Income Summary records.[2]
[2] Exhibit 1, T8, pages 240 to 256.
On 18 May 2011, the Department requested details of Patricia Phillips’ employment records from her employer, Virginia Palms Motel, and received copies of her payroll history as part of the response to that request.[3]
[3] Exhibit 1, T4, pages 19 and 25 to 80.
Resulting from this review, the Department resolved to raise and recover debts from the Applicant, being:
(a)MAA debt in the sum of $16,095.59 representing the period 2 January 2004 to 27 June 2007;
(b)an AGE debt in the sum of $4,996.01 for the period from 28 June 2007 to 12 May 2011 (together “the debts”).[4]
[4] Exhibit 2, ST1, at page 736.
The Applicant sought a review of the Department’s decision to raise and recover the debts by an ARO[5] and the ARO reviewed the Department’s calculations as follows:
(a)from 2 January 2004 to 27 June 2007 the Applicant was paid MAA totalling $18,753.07, but was entitled to receive $2,657.48, resulting in a debt of $16,095.59; and
(b)from 28 June 2007 to 12 May 2011, the Applicant was paid AGE totalling $26,386.54 but was entitled to receive $21,424.46 which resulted in a debt of $4,962.08.
[5] Exhibit 1, T5, at page 82.
The Applicant sought a further review of the ARO’s decision on 26 September 2018 which was reviewed and affirmed by the Tribunal’s Social Security and Child Support Division (“AAT1”) on 27 March 2019.[6]
[6] Exhibit 1, T2, pages 7 to 12.
The Applicant then sought a review of the AAT1’s decision by the Administrative Appeals Tribunal General Division (“the Tribunal”).[7]
[7] Exhibit 1, T1, page 1.
At the date of the hearing before this Tribunal, 28 August 2019, Mr Phillips owed:
(a)an AGE debt of $4,962.08; and
(b)a MAA debt of $11,426.89.[8]
[8] Attachment B to Exhibit 3.
Mr Phillips has, as at 25 July 2019, been repaying the debts by a voluntary withholding arrangement from his AGE pension since 24 July 2019[9] at the rate of $15.00 per fortnight.
[9] Attachment A to Exhibit 3.
Mrs Patricia Phillips is still employed by the Virginia Palms Motel and is earning approximately $1,700.00 per fortnight.[10]
[10] Attachment C to Exhibit 3.
THE ISSUES
The issues to be decided by the Tribunal in this matter are:
(a)whether the Applicant owes a debt to the Commonwealth; and
(b)whether there exists any reason why the debt should not be recovered.
THE HEARING
Mr Phillips (“the Applicant”) appeared in person and gave evidence to the Tribunal. He was accompanied by his support colleague, Mr Rod Bruce.
The Department (“Respondent”) was represented by Mr C. Murphy and Mr R. McQuinlan.
THE LEGAL FRAMEWORK
In this matter, the relevant legislation is contained in the Social Security Act1991 (Cth) (“the Act”) and although not carrying the same legal weight as the Act, the Guide to Social Security Law provides policy guidance and is designed to maintain consistency of approach when decision-making and should, unless there are persuasive reasons not to do so, be followed (“the rate of Mature Age Allowance”).[11]
[11] Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577.
The Act, in section 660YFA, states that a person’s MAA is to be calculated using the Benefit Rate Calculator (“BFCB”) at the end of section 1068.
BFCB states that a person’s rate must take into account the ordinary income tests in Module G which states that a person’s ordinary income, and the ordinary income of that person’s partner must be worked out on a fortnightly basis in order to determine the effect that income has on the maximum rate of payment. The Act, in sub-section 8(1), defines ‘income’ as an amount that is earned, derived or received for the person’s own use or benefit but excludes amounts defined under sub-sections 8(4), (5) and (8).
Section 1072 of the Act provides that a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A which is not applicable in this case.
Section 1073B of the Act is of further relevance as it provides if:
(a)A person is receiving a Social Security pension or a Social Security benefit; and
(b)The person’s rate of payment of the pension or benefit is worked out with regard to the income test module of a rate calculator in this Chapter; and
…
(d)The person earns, derives or receives, or is taken, either by virtue of the operation of section 1073A or any other provision of this Act, to earn, derive or receive, employment income during the whole or a part of a particular instalment period of the person;
the person is taken to earn, derive or receive, on each day in that instalment period, an amount of employment income worked out by dividing the total amount of the employment income referred to in paragraph (d) by the number of days in the period.
The aggregate effect of the foregoing provisions is that the gross fortnightly employment income of the Applicant and their partner must be applied to the ordinary income test in Module G of section 1068 of the Act in order to determine the rate of MAA.
Rate of Age Pension
Section 55 of the Act allows that, unless a person is permanently blind, the person’s AGE Pension Rate is calculated using Pension Rate Calculator A (“PRCA”) in section 1064 of the Act.
The PRCA of section 1064 of the Act states that a person’s rate must take into account the ordinary income test in Module E. Step 1 of the ordinary income test in Module E states that a person’s ordinary income must be calculated on a yearly basis to determine the effect income has on the maximum rate of payment.
The Act, in section 1064-E2, requires that if a person is a member of a couple, to work out the person’s ordinary income for the purposes of Module E, the couple’s ordinary income must be aggregated on a yearly basis, and divided by 2.
The aggregate effect of the provisions above is that the gross yearly employment income of the partners, less travel allowance, must be applied to the ordinary income test in Module E of section 1064 of the Act in order to calculate the applicable rate of AGE.
The Relevant Legislation Defining Debt to the Commonwealth, Recovery and Exceptions to Recovery
The Act, in section 1223(1), provides that:
1Subject to this section, if:
(a)a Social Security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the account 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 68(2) of the Social Security (Administration) Act1999 (Cth) (“the Admin Act”) is also relevant to the review of this matter as it provides, inter alia, in the case of a person to whom a Social Security payment is being made:
2The Secretary may give a person to whom this sub-section applies a Notice that requires the person to do any or all of the following:
(a)inform the Department if -
(i) A specified event or change of circumstances occurs; or
(ii)The person becomes aware that a specified event or change of circumstances is likely to occur;
(b)give the Department one or more statements about a matter that might affect the payment to the person of the Social Security payment;
(c)give the Department one or more statements about a matter that might affect the operation, or prospective operation, of Part 3B in relation to the person.
Other provisions of the Act relevant to this particular matter are:
Writing Off a Debt
Section 1236 which permits that the Secretary may write-off a debt if it is irrecoverable at law, if the debtor has no capacity to repay it, if the debtor’s whereabouts are unknown or if it is otherwise not cost-effective for the Commonwealth to take action to recover it.
Waiver as a Result of Sole Administrative Error
Section 1237, which provides that where a debt or a part thereof, has arisen solely as a result of administrative error and the debtor had received the payment in good faith, then the Secretary must waive the right to recover the debt.
Waiver by Way of Special Circumstances
Section 1237AD of the Act provides that the Secretary may waive the right to recover all of part of a debt where there are special circumstances present other than financial hardship, but only where the debt did not result from a person knowingly making a false statement or representation, or failing or omitting to comply with a relevant legislative provision.
CONSIDERATION
The Applicant told the Tribunal that it was his wife, Patricia Phillips, who reported her earnings to Centrelink by telephone in compliance with the Act. He told the Tribunal that he never reported her earnings as he had not had any earnings of his own. He also confirmed that she always reported her earnings by telephone and in no other manner.[12]
[12] Transcript of Proceedings, page 7.
The Applicant, in a response to a question by the Senior Member asking whether he disputed the Department’s calculations being correct and that his wife would have given them the wrong information, replied that, that was right.[13] Later in his evidence to the Tribunal when asked if he required the Centrelink employee, Mr Lucas, who had extracted the figures relied upon by the Secretary at the hearing, to be called, he advised that he would not require him as he didn’t think he was in error but that the error had occurred elsewhere. The following exchange took place:
Senior Member: So you don’t wish to examine Mr Lucas on his extractions of the figures, et cetera?
Mr Phillips: - - - No, I don’t - I don’t think that he’s in error at all. I think it’s been generated somewhere else in Centrelink.[14]
[13] Transcript of Proceedings, page 9.
[14] Transcript of Proceedings, page 20.
This response is, in the view of the Tribunal, representative of the fundamental focus of the Applicant’s argument that it was a sole administrative error and therefore the Secretary was obliged to waive the right to recover the debt.
Mr Phillips told the Tribunal that he was effectively justified in this belief because of his experience of Centrelink error making over many years. He recalled an instance of where he was advised that he had received a loan from Centrelink in the mid-1990s and that they now had no record of it. This was confirmed during the hearing by Mr Murphy for the Respondent who told the Tribunal that notwithstanding extensive internal enquiries, they had been unable to find any evidence of any such loan having been made. It is to be noted that Mr Phillips was unable also to provide any details of the alleged loan.
Mr Phillips also referenced an occasion when Mrs Phillips received a letter of demand while the Applicant was out of town and became suicidal because she was so shocked at receiving such a letter when the debt was accrued by Mr Phillips. He also told the Tribunal that he believed that the Department was in error because his pension had been cancelled ‘on about six different occasions’[15] for reasons such as his losing his paperwork, or there were hiccups in reporting. He also cited an incidence of the Department thinking that he was no longer living at his present address and then cancelled his pension. He also cited an incidence where Centrelink claimed he was earning too much money and again cancelled his pension. His argument to the Tribunal was effectively, that Centrelink can use their records to take action swiftly at times when it suits them to do so, but were unable, for some seven years, to accurately record his wife’s reported fortnightly income. His contention would seem to be, that Centrelink can cancel his pension when there is a relatively minor omission in their recordkeeping, but notwithstanding this recordkeeping accuracy (the Tribunal’s term), they couldn’t keep an accurate record of his wife’s reported earnings.
[15] Transcript, page 20.
Mr Phillips told the Tribunal that he was in dire straits financially because before he retired, he had gone as Guarantor for his son’s housing loan and he had mortgaged his family home to raise the deposit for his son’s family home purchase. This action was taken prior to the Centrelink debt accruing. His circumstances were now more difficult because his son’s marriage had now broken down and the Applicant and his wife had been paying down both mortgages and didn’t have sufficient income to pay them and were living on very little.
He told the Tribunal that on weekends, he and his wife were looking after three of their five grandchildren, the two eldest having left home. They are doing this to assist their son who tries to work weekends whenever he can to meet mortgage, car payments and debts. He told the Tribunal that his son had nearly taken his own life as a result of the difficulties trying to get assistance through Centrelink. He was not sure how much was left to pay on both the mortgages as his son and Mrs Phillips were paying them off but, thought that the remaining mortgage debt was between $80,000.00 and $130,000.00. This Tribunal also notes that the Applicant told the AAT1 that his daughter had been ’couch surfing’ at his and his wife’s home as well as with other various family members.[16]
[16] Exhibit 1, T2 at page 10.
The Secretary’s Statement of Facts, Issues and Contentions contains worked examples of how Centrelink has applied the appropriate calculator to both the Applicant’s MAA and AGE.[17]
[17] Exhibit 2, pages 567 and 568.
The worked examples were taken randomly from the earnings sheets of Mrs Phillips during the years 2004, 2006 and 2010. Further, the earnings sheets were also randomly selected from different pay periods during the years selected. The calculations covered MAA, AGE and also included income received by Mrs Phillips from a compensation payment covering off one of the calculations for AGE.
The worked examples were selected at random from the earnings sheets and reporting sheets of Mrs Phillips during those years. The examples also represented the figures from different months during those years. In the case of 2004, a period in the month of June was selected, in 2006 it was May and in 2010 it was March. Centrelink also interrogated the wage records from the Virginia Palms Motel controlling entities in order to establish the actual wage history of Mrs Phillips for the entire period. These figures were then used for the conversion into the Centrelink fortnights to establish whether, when compared to the reported earnings, there was a fair correlation.[18]
[18] Exhibit 2, pages 5, 6 and 7.
Although Mr Phillips stated that he agreed that the calculations were correct insofar as to how the application of the calculator had been employed, he did not agree so far as the amounts declared by his wife were recorded. The Tribunal has, out of an abundance of caution, rechecked the Secretary’s calculations made in the worked examples and finds them to be correct.
The difficulty for Mr Phillips remains the discrepancies between the earnings as recorded by Mrs Phillips’s employers as having been paid to her during the relevant period and the amounts she had advised to Centrelink in compliance with her husband’s responsibilities for the same period. The reported earnings have been made across not insignificant periods of time, in the case of MAA, from January 2004 to June 2007 and in the case of AGE, from June 2007 to May 2011.
Mr Phillips told the Tribunal that he agreed that the calculations as worked out with the use of the calculation tool were correct insofar that the formula had been correctly applied. However, he disagreed with the findings because there had, in his opinion, been incorrect input because Centrelink had not recorded his wife’s reported income accurately. This had led to a fundamental flaw through incorrect data input.
The Tribunal, as a cautionary measure, checked the calculations supplied by the Secretary in their Statement of Facts, Issues and Contentions[19] and concurs with the calculations made. The Tribunal has also considered the indications of underreporting commented upon by the AAT1 Decision[20] and the Earned Income Summary Screen Capture Data which confirms the discrepancy[21] between earned and reported income for Mrs Phillips.
[19] Exhibit 3, pages 5, 6, 7 and 8.
[20] Exhibit 1, T2 at page 10.
[21] Exhibit 1, T8 at page 242.
The Tribunal, in matters such as this, has to look at the whole of the evidence and the circumstances with a fresh vision. In this matter, the Secretary asserts that there has been an overpayment of benefits paid to Mr Phillips due to a long-term underreporting of income as earned by his wife. Both the Secretary and Mr Phillips agree that the calculation tool has been correctly applied so far as it represents the figures subjected to it. However, the outcome is not accurate according to Mr Phillips because the reported income from his wife has been accurately presented by her and consistently recorded incorrectly by Centrelink at a lower figure. Thus, the decision in this matter hinges upon the level of credibility that can be attached to the Applicant’s assertions with regard to Centrelink’s recording errors.

To assess this aspect of the Applicant’s matter under review, it is necessary to weigh the evidence of the Applicant to the Tribunal against the recorded data held by Centrelink. Mr Phillips told the Tribunal during questioning by Mr Murphy that his wife reported her earnings by telephone on every occasion during the relevant period. He also confirmed that he was not there in her presence when she carried out this action normally, but was there ‘At times, not all the time.’[22]
[22] Transcript of Proceedings, page 9.
The following exchange between Mr Murphy and Mr Phillips is very telling in the view of the Tribunal of the general arrangements prevailing between Mr Phillips and his wife so far as the reporting of her income to Centrelink is concerned:
Mr Murphy: You said that, your evidence was that you were never there when your wife reported her earnings, it was done by telephone and it was always done by telephone; that’s correct?
Mr Phillips: - - - Yes, but I was there at times when she reported her earnings.
Mr Murphy: At times?
Mr Phillips: - - - At times, not all the time.
Mr Murphy: Not all the time?
Mr Phillips: - - - But there was other people present at other times.
Mr Murphy: Did your wife tell you what she earnt?
Mr Phillips: - - - No.
Mr Murphy: So you had no way of knowing how much she worked, that is how many hours she did or how much income she earnt?
Mr Phillips: - - - No idea.
Mr Murphy: Why was it that you didn’t report her earnings while - - - ?
Mr Phillips: Because a lot of the time I wasn’t there. I wasn’t in attendance, so I didn’t - I wasn’t able to report her earnings.
Mr Murphy: So if I understand correctly, you weren’t present, it was her that would report the earnings by telephone and that you weren’t aware of what she was earning, how much she was working?
Mr Phillips: - - - That’s correct.[23]
[23] Transcript of Proceedings, page 9.
Mr Murphy then took Mr Phillips to Exhibit 1, T7 of the T-documents and the following exchange took place:
Mr Murphy: So this is the EA&S screen that Mr Lucas in the witness statement was referring to? If you could look at line - sorry, the fourth line down there’s a date 14/12/2006. The third column from the left has the date.
Senior Member: It’s got a figure of $1,080.23. Is that correct?
Mr Murphy: That’s right.
Witness: Yes.
Mr Murphy: You will see there as you go across there’s the letters BIR, if you drag your finger across. So that as Mr Lucas says in his witness statement is the apportion income that your income declared - sorry, that your wife earnt for that particular fortnight on that date. Then if you could look at the line below that, so still on 14/12/2006 there’s a figure $948.60, and if you go across there’s the NBE. So that’s what Mr Lucas says is the income that was declared by Mrs Phillips. Do you see that?
- - - Yes, I’ve got that.
Do you see the discrepancy between those two numbers on that date? So next to the date on 14/12/2006 it says $1,080.23 and then below that $948.60. Do you see the discrepancy between those two numbers?
- - - Yes.
So do you accept for the fortnight of 14/12/2006 that - - - ? - - - Excuse me a minute, are they the two that you’re referring to, that one and that one?
The 14/12/2006? - - - Yes, and this is the 30^th of the 11^th.
No, there’s two - those two here?
- - - Okay. Thank you.
Senior Member: Are we clear down there?
- - - Yes, thank you. We are right now. Okay, good. We’ll try to keep up here.
Mr Murphy: Do you accept for that fortnight, so 14 December 2006, that your wife earned more income than she declared to Centrelink?
- - - No.
Why do you say that?
- - - Because we were in business for years ourselves. She was not about to make a fundamental mistake in giving the wrong amount of gross for her earnings. I find it impossible. And in addition to that, I have other people, family members, that have been in attendance when she’s delivered her amount to Centrelink over the phone and noticed that she was quoting her gross amount as per her payslip. She always takes it off her payslip.
If I could take you to - so just going down the line to 30 November 2006 there’s again a number $1,178.11, which is the income earned, and then the number below that, the $976.30 is the income declared?
- - - Right.
Do you see the discrepancy there?
- - - I do.
So do you accept that on the 30^th of November 2006 your wife earned more income than she declared to Centrelink?
- - - No. This will remain constant all the way through for the reason I’ve just stated.
So as I understand your evidence to the Tribunal on every occasion throughout this seven year period we’re talking about today where your wife earned more income than she declared that is incorrect?
- - - Definitely. I can’t conceive of the idea that she would have given you the wrong amount or submitted the wrong amount on any occasion whatsoever.[24]
[24] Transcript of Proceedings, pages 11 and 12.
Mr Phillips said that the only exception to the reporting process not being accurate was an occurrence when there had been a holiday in his wife’s pay period and a miscalculation had occurred. He asserted that this resulted in the ‘- - - Immediate cessation of my pension’.[25] He also stated that his pension was cancelled on six occasions ‘- - - for various reasons, and it’s mainly because of discrepancies that have been perceived by Centrelink that were inaccurate.’[26]
[25] Transcript of Proceedings, page 12.
[26] Transcript of Proceedings, page 12.
The continuing exchange in the transcript[27] between Mr Murphy and Mr Phillips further serves to illustrate the Applicant’s knowledge and observations surrounding the reporting of his wife’s earnings to Centrelink.
[27] Transcript, pages 12 and 13.
Mr Murphy: In any case, Mr Phillips, isn’t your evidence that you didn’t know, as I understand your evidence earlier was that you didn’t know how much your wife worked or how much she earned; that’s right, isn’t it?
Mr Phillips: - - - That’s correct. On many occasions, not all occasions.
Mr Murphy: So how is it then that you could know what she was reporting was right or not?
Mr Phillips: - - - Because if I’m looking over her shoulder at her payslip I know what she’s reporting, but I’m not privy to how much she normally earns on a regular basis.
Mr Murphy: So if I get this right your evidence is that you’ve looked at her payslips over this seven year period?
Mr Phillips: - - - Only when she’s been reporting it over the phone.
Mr Murphy: I am not sure I quite understand. So - - - ? - - - Well, she rings Centrelink to report her earnings every fortnight without exception except when she was in hospital or incapacitated and there was nothing to report obviously. When she has reported it on occasion, I have been able to look over her shoulder when she’s reporting and noticed that her payslip corresponds with the amount that she’s reporting, and I’ve had other family members tell me the same thing when I haven’t been there.
Mr Murphy: Are you saying that you used to check what she would report with what she earned with her payslips?
Mr Phillips: - - - The gross amount is reported and it’s on her payslip.
Mr Murphy: So, how could you - - -?
Mr Phillips: - - - On those occasions that I was present she was reporting her gross income, and other family members were there when I weren’t, and they’ve reported the same thing, she was reporting her gross amount.
Mr Murphy: On what occasions were you there to check what she reported, when were those occasions?
Mr Phillips: - - - Various - various occasions over the years.
Mr Murphy: Do you have any evidence that you were there?
Mr Phillips: - - - Well, I live there. When I’ve been home - home when she’s been reporting her gross income to Centrelink, I’ve noticed that she was reporting the correct amount off her payslip.
Mr Murphy: If I understand your evidence correctly, it is that your wife would report her earnings by telephone?
Mr Phillips: - - - That’s correct.
Mr Murphy: You would on occasions be there when she did so?
Mr Phillips: - - - Correct.
Mr Murphy: And then on those occasions you say you would check what she reported with her payslips?
Mr Phillips - - - I was watching her, looking at her payslip while she was reporting the amount.
Mr Murphy: And based on those experiences, you say that on every other occasion you weren’t present she would have done the same, she would have reported correctly?
Mr Phillips: - - - Correct, and other family members have noted the same thing when I haven’t been there, but apart from that, I said before, we’ve been in business for ourselves over the years and she’s not about to make a silly mistake, and certainly not on the sort of scale that you’re admitting to.
Mr Murphy: I put it to you, Mr Phillips, that it’s inherently improbable that your wife has reported her earnings correctly over a seven year period and on all of those occasions, Centrelink has incorrectly recorded that information?
Mr Phillips: - - - Well, it seems that’s the evidence.
Mr Phillips asserts that there is no debt because he believes that Centrelink has made consistent and continuing errors in recording his wife’s reported earnings and quoted examples to the Tribunal of errors that he claimed Centrelink had made over the years in relation to his pension, as supporting his contention that it would be Centrelink’s fault.
Mr Phillips referred, in particular, to an experience he had with Centrelink when he retired in 2007 and he was overpaid by Centrelink on two occasions and had to draw Centrelink’s attention to that fact. He says he was advised that he could draw the money from his bank account as everything was in order. He advised that Centrelink finally realised he was correct and then they decided to retrieve the overpaid funds by way of a pension withholding arrangement. He also told the Tribunal that Centrelink had told him he had raised a loan with them at some time in the mid-1990s, however, no evidence of such a loan was able to be adduced before the Tribunal at the hearing. The Tribunal asked Mr Phillips what relevance the loan matter had to the current issue before the Tribunal and he replied that there was no record of it anymore but he told the Tribunal that he thought the figure that the girl at Centrelink had initially given to him was in the vicinity of $24,000.00 to $28,000.00. He also made an allusion that the loan was strangely similar in amount to that of the current debt.
Mr Phillips also made reference to a sum of $350.00 which was mentioned in the Secretary’s Statement of Facts, Issues and Contentions[28] and stated that it formed part of the ‘- - - whole raft of errors in the documentation you sent me. At any time I never ever remember getting an amount of $350.00 18 March 2020’. The Applicant was directed by Mr Murphy to page 125 of Exhibit 1 to an entry for 18 March 2010 which showed the amount of $349.54 being paid to Mr Phillips as his aged pension. The Applicant stated that ‘I don’t recall ever getting that much money at any time.’
[28] Exhibit 2, page 8.
The Tribunal asked Mr Phillips if he had checked his bank statements to try and verify the payment and was told by the Applicant that he had no bank statements. Mr Phillips did, however, concede later in his evidence that he just never recalled at that date receiving the amount of $349.54 as it correctly turned out to be. Mr Murphy asked the Applicant if he remembered receiving statements from Centrelink from time to time which outlined what he was getting paid. His reply was '- - - No. No, they would have just been picked up by my wife and filed.’ When directed to the supplementary T-documents at page 699 and shown the copy of a statement letter from Centrelink addressed to him and which showed the amount of $349.54 being paid to him on the corresponding date, he responded ’- - - No, all I’m saying is I don’t recall getting that much. I’m not saying that I didn’t get it’.
The Applicant told the Tribunal that he was sometimes present when Mrs Phillips was reporting her earnings, but certainly not every time, in fact, it would seem in his own words a lot of the time he wasn’t there in attendance and thus he could not report her earnings.
His evidence also stated that on some occasions he looked over her shoulder and looked at her payslip and knew that what she was reporting was accurate. He only did this on occasions and only when she was on the telephone reporting. He told the Tribunal that he never saw or examined her payslips otherwise.
He also told the Tribunal that other family members had told him they had seen her reporting accurately when he had not been there. Unfortunately, the Applicant chose not to call either his wife to corroborate his assertions regarding this process, nor did he proffer the identities of the family members who told him of his wife’s accuracy and reporting. He chose also not to call them as witnesses to attest to their knowledge of her reporting activity. The Tribunal considers that these assertions in the Applicant’s evidence outlined above are devoid of credibility in the absence of reliable, corroborative evidence.
The Applicant’s evidence indicated that he seemingly left financial affairs, in general, in control of Mrs Phillips. For example, when asked if he kept the Centrelink Statements of his benefits, he replied that he did not and that his wife would have picked them up and filed them. When asked by the Tribunal if he had bank statements from which he would be able at the very least, ascertain what he had been paid and to be able to cross-check what he received against what had been declared, he stated he had no bank statements.
The Tribunal considers that if his wife kept the records filed and in some order given his and his wife’s stated business backgrounds, the first step that they would have taken would be to interrogate their own records relating to the issue. The Applicant’s assertions are incongruous with the evidence to the contrary before the Tribunal.
The difficulty for Mr Phillips is that although he may believe that Mrs Phillips reported her earnings accurately, he is unable to rebut the Secretary’s documented evidence as to the sums of money reported during the relevant period. His lack of acceptance of the accuracy of the reported earnings is based on a belief that they are wrong and this belief is in turn based upon his experiences in the past where he alleges Centrelink has made errors which have adversely affected him. The Tribunal accepts that Centrelink is like many very large organisations where mistakes are made throughout various sections of the system. Some mistakes are of large magnitude and of a flawed operational nature, others are smaller and perhaps of a more confined or even individual nature. Here, however, the evidence exists of hard data provided by one person recorded over a not inconsiderable time period by different persons within the organisation and the data reflects a long-term trend of understating reported earnings on many discrete occasions. The Tribunal considers that in the circumstances, such a situation would be highly unlikely to occur unless the input being reported was regularly less than the true figure of earnings. For the data to be systematically under-recorded by so many different persons within Centrelink at so many different times would be, in the view of the Tribunal, highly unlikely given that the sums of money representing the difference between actual and reported earnings are quite disparate in nature.
Mr Phillips contended that the errors that he claims Centrelink was responsible for were such that they arose solely as a result of administrative error on the part of Centrelink in accurately recording his wife’s earnings. He felt that he should be given the benefit of the application of Section 1237A of the Act and that the Secretary must waive the right to recover the debt in his circumstances.
The material in the Secretary’s Statement of Facts, Issues and Contentions was considered by Mr Phillips to represent errors on the part of the Secretary which rendered the recovery proceedings against him nugatory in a sense. The Tribunal accepts that Mr Phillips, as a self-represented Applicant, was in some difficulty understanding the concept of the Secretary’s statement as an expression of how the Respondent viewed the situation and how it was the Applicant’s objective to rebut any contention with which he disagreed by adducing credible evidential material which the Tribunal could draw upon in coming to its decision. The Tribunal had no credible evidence presented to it by the Applicant of such a standard that would have provided such a benefit for the Applicant’s argument.
Should the Debt be Written-off, Waived or Waived under Special Circumstances?
Debt Write-Off
Section 1236 of the Act allows the Secretary to write-off a debt if:
(a)it is irrecoverable at law;
(b)the debtor has no capacity to repay it; and
(c)the debtor’s whereabouts are unknown or if it is otherwise not cost-effective for the Commonwealth to recover it.
The relevant Section of the Act which would have application to the Applicant’s situation is Section 1236(1C) which provides that if a debt is recoverable by means of deductions from a Social Security payment, the person is taken to have capacity to repay the debt unless recovery would cause severe financial hardship. The Act does not define ‘severe financial hardship’ as such, however, the term has been considered in a number of decisions over years by the Tribunal and in the matter of Feneley & Secretary, Department of Family and Community Services [2003] AATA 496, the Tribunal defined the concept of ‘severe financial hardship’ thus:
36.Severe financial hardship is not defined in the Act. However, the meaning of the term, while not implying destitution, goes beyond straightened financial circumstances and imports a need for the particular circumstances of a person to include suffering of a severe or extreme nature.
Mr Phillips’s situation is financially constrained, as is that of many recipients of social welfare benefit payments. He is providing financial support to his son and his children and, presumably from time to time, for his daughter also. His wife is earning an income from her employment and although the Tribunal accepts that his household is of modest means he is, by virtue of the evidence before the Tribunal, not in such a situation where he is suffering severe financial hardship. The evidence is that since 2019, a voluntary payment arrangement between the Department and the Applicant is in place and debt recovery is being facilitated by a withholding arrangement of $15.00 per fortnight from his AGE pension. This evidences a capacity to repay on a continuing basis. The debt is thus recoverable and the Applicant’s whereabouts are not unknown.
It is the view of the Tribunal that Section 1236 is not applicable and that the debt cannot be written-off.
Debt Waiver
Sole Administrative Error
Section 1237A of the Act provides that where the debt, or part thereof, has arisen solely as a result of administrative error and the debtor has received the payment in good faith, the Secretary must waive the right to recover the debt.
The word ‘solely’ in this context has been defined by the Tribunal to mean, in the ordinary sense, ‘exclusively’, ‘only’ and ‘to the exclusion of all else’ as defined in the case of Re Gehardt and Department of Employment, Education and Training [1996] AATA 10,941. The operation of the Section was refined further in the matter of Ward and Secretary, Department of Families and Community (2000) AATA 212 where Deputy President Forgie held at paragraph [47]:
This means that the Secretary’s duty to waive does not extend to those debts which are attributable to errors or other factors which are independent of the Commonwealth’s administrative error. It makes no difference that those other errors or factors are minor.
Here, the Applicant has been unable to produce any evidence in rebuttal of the Respondent’s claim for the debt, based upon a sole administrative error. The Tribunal has therefore found that notwithstanding the Applicant’s obligations to comply with his reporting responsibilities, of which he was fulsomely reminded to do by multiple reminder notices from the Department, his Delegate, Mrs Phillips, failed to correctly declare her employment income. The Department only became aware of the discrepancies once the answers to its enquiry of her employer were received and then proceeded to engage in the debt recovery process.

The Tribunal agrees with the Secretary’s contention that the Applicant’s failure to comply with the written notices was a significant contributing cause of his prevailing circumstance. This lack of diligence to his personal responsibilities, combined with his wife’s failure to correctly advise the Department of her income and changes thereto, are the direct contributing causes of the debt. The debt is therefore not attributable solely to an administrative error on the part of the Commonwealth and so the debt cannot be waived under the provisions of Section 1237A of the Act.
Special Circumstances Waivers
The Act, in Section 1237AAD, makes provision for the Secretary to waive the right to recover all or part of the debt where there are special circumstances present other than financial hardship but only where the debt did not result from a person knowingly making a false statement or representation, or failing or omitting to comply with a relevant legislative provision. The guiding principle behind the recovery process attaching to money paid by the Commonwealth to individuals who are not entitled to it is encapsulated in the statement of Justice French (as he then was) in the matter of Secretary, Department of Social Services v Hales (1998) 82 FCR 154 at 155 where His Honour stated:
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 person’s concerned.
Given that the Applicant has, in his evidence, pled ‘special circumstances waiver’, it is appropriate for the Tribunal to examine the jurisprudence around this term as it applies to the matter before it. The Applicant’s special circumstances are adequately enunciated in the decision of the AAT1[29] and in the Statement of Facts, Issues and Contentions of the Secretary[30] and within the direct evidence of the Applicant to this Tribunal.
[29] Exhibit 1, T2 at page 9.
[30] Exhibit 3 at page 11.
They can be characterised as follows:
(a)Marital problems caused by the debt issues;
(b)Financial affairs being in a ‘mess’;
(c)He and his wife have regular care of their grandchildren and expend considerable sums of money doing so;
(d)Their son’s marriage has collapsed and they are trying to financially assist him;
(e)He and his wife mortgaged their home before the Applicant retired to raise a deposit for their son to buy a home and then they also went as guarantors for their son’s home loan to enable him to secure a mortgage to purchase his residence;
(f)Their son has only intermittent work and his wife is helping pay both mortgages;
(g)Both the Applicant’s house and the daughter’s house have been burgled and his daughter was ’couch surfing’ at his home and other family members’ home.
Section 1237AAD of the Act, when allowing that the Secretary may waive the right to recover all or part of a debt where special circumstances are present, other than financial hardship, is prescriptive of the requirement that the debt did not arise as a result of a person knowingly making a false statement or representation, or failing to comply with a relevant legislative provision. ‘Person’, in the context of the Section, includes the wife of the Applicant in this matter.
The term ‘knowingly’ is undefined in the Act, however, guidance may be taken from previous decisions of the Tribunal wherein the term has been examined. The matter of Re Callaghan and SDSS (1996) 45 ALD 435 is instructive where the Tribunal commented:
48.There is nothing in Section 1237AAD which suggests that the word “knowingly” should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission.
In the case of Mr Phillips, the Tribunal is satisfied that he had no intention to dishonestly make claims which he was not entitled to receive. He delegated his reporting responsibilities to his wife from whom the Tribunal did not have the opportunity to receive evidence. Should the Tribunal accept that there was no knowing omission on the part of Mrs Phillips, meeting the requirement that ’special circumstances’ existed is still necessary in order for the debt recovery to be waived.
The Applicant would have to establish, inter alia, that the ‘special circumstances’ of which he claimed and relied upon would, in the context of the Social Security legislation, require consideration of his circumstances in light of the general administration and purpose for which the Social Security system has been created. A consideration of ’special circumstances’ as they apply in this context can be found in the matter of Davey and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114] where the Tribunal stated:
80.… “Special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances …” that make it desirable to waive. That necessarily requires a consideration of the person’s individual circumstances, but also a consideration of the general administration of the Social Security system. Waiver of the debt would mean that Mr Davey would have had the benefit of part of his DSP in circumstances in which he was not entitled to it … He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement … The system of administration of the Social Security Act does not visit any injustice for many, if not all, Social Security recipients but it did not lead to any injustice or unfairness on Mr Davey that is not visited, or potentially visited, upon all other recipients of Social Security payments under the Act. Therefore, I am not satisfied that there are special circumstances that make it desirable to waive the debt under section 1237AAD of the Act ….
The bar to clear when testing for ‘special circumstances’ is set quite high. The matter of Gammaldi and Secretary, Department of Social Services (Social Services Second Review) [2016] AATA 1028 indicates the difficulty of meeting the special circumstances test. In that matter, the party had suffered a difficult year involving family health issues, business challenges, increased responsibility and it was considered that such circumstances did not meet the necessary standard.
The matter of Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25, is also indicative of the level of difficulty in meeting the special circumstances test. There it was stated by Besanko J. that:
… There is less risk of overstatement if the words “unusual” or “uncommon” are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.
In this matter, the statutory context surrounds the premise that overpaid money should be recovered by the Commonwealth. The special circumstances need not be exceptional or unique, but must nonetheless possess a peculiar quality to set them outside of the norm.
Additionally, the previously mentioned matter of Davey reflects the sentiment of the Social Security Guide at Section 6.7.3.40 where it states:
The integrity of the Social Security system relies on recovery of overpayment. In general, if a person has had the use and advantage of the money paid incorrectly to them and has the means to repay it without excessive hardship (e.g. through withholdings), they should do so. In such a case, special circumstances waiver would be appropriate only if the person’s particular circumstances made it unjust for the general rule to apply. Their circumstances would need to distinguish their situation from that of the many other people who do have to repay their debts.
Although it does not carry any legislative imperative, the Guide serves to define the purpose and application of the philosophy attaching to the Social Security system that should be followed when decisions have to be made in relation to the application of the law.
The Tribunal has carefully considered the Applicant’s claim for special circumstances waiver and has come to the decision that although difficult to deal with, they are not out of the usual type of challenges faced by many other citizens. The Tribunal accepts the Secretary’s contention that his children are adults and are only his financial responsibility if he wishes to make them so. It is natural in most circumstances for a parent to assist their child or children where they are able, however, that responsibility should not be consigned back to the taxpayer to meet by a waiver of recovery proceedings for a debt incurred by the parent.
The Applicant’s claim that the financial burden of meeting the mortgages over both his property and that of his son’s should be taken into account as part of the case for a special circumstances waiver as he undertook these obligations before retirement is not tenable in the Tribunal’s view. The Tribunal considers that given the Applicant’s evidence to the Tribunal that the mortgages have a balance of between $80,000.00 and $130,000.00, there would be scope for the Applicant to rearrange matters with his son to reduce the overall liability. The Applicant obviously entered the arrangement willingly and with a generous disposition towards his son and his then-wife. However, he clearly did so without keeping a lookout for the future. This circumstance is, it is agreed, unfortunate, but not unusual in the general vicissitudes of life. Poor decision making has plagued many. However, the regrettable consequence flowing from these choices are not the responsibility of the taxpayer and should not be underwritten by a waiver of debt.
It is also noted by the Tribunal that Mrs Phillips may be eligible for a part-pension. However, she apparently will not engage with Centrelink. That is a matter for her and any foregone benefits as a result of her choice are not a consideration for the Tribunal.
The Tribunal, after consideration of the evidence, has decided that Mr Phillips’ situation does not fall into the category of being so unusual, uncommon or exceptional as to set it apart from other debtors of Centrelink. His case is not of such a markedly different nature so as to make it ‘special’. Further, Mr Phillips’ circumstances are such that he still has choices available to him which may alleviate his overall disadvantages; a situation that places him at advantage over other recipients of benefits payments.
The Tribunal has reached the same conclusion as both the Authorised Review Officer and AAT1 review in this matter and that is that the decision should be affirmed.
DECISION
The decision of AAT1, dated 27 March 2019, is affirmed.

I certify that the preceding 90 (ninety) paragraphs are a true copy of the reasons for the decision herein of Senior Member P J Clauson

...........[SGD].............
Associate
Dated: 18 June 2020

Date of hearing: 28 August 2019

Date final submissions received: 25 July 2019

Advocate for the Applicant: Rod Bruce

Solicitors for the Respondent: Services Australia

[2020] AATA 1819

18 June 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Procedural Fairness

Statutory Construction

Appeal

Date of hearing:	28 August 2019
Date final submissions received:	25 July 2019
Advocate for the Applicant:	Rod Bruce
Solicitors for the Respondent:	Services Australia