Rizkalla and Secretary, Department of Families, Community Services and Indigenous Affairs

[2006] AATA 639

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 639

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2006/160

GENERAL ADMINISTRATIVE DIVISION		)
Re		ZAKI and ANGEL RIZKALLA

Applicants

And SECRETARY, DEPARTMENT OF FAMILIES, COMMUNITY SERVICES and INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr RG Kenny, Member 

Date21 July 2006 

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

.........[Sgd].........

RG Kenny
  Member 

CATCHWORDS

SOCIAL SECURITY – overpayment of age pension – debt due to Commonwealth – no basis to write off debt –– overpayment not due solely to administrative error by Commonwealth –absence of good faith – no special circumstances to justify waiver - no basis for waiver of debt

Administrative Appeals Tribunal Act 1975 s 37
Social Security Act 1991 ss 17, 23(5A), 23(5B), 43, 44, 1173, 1174, 1180, 1184F, 1236, 1237A, 1237AAD

Student and Youth Assistance Act 1973 s 289(2)(b)

Beadle v Director-General of Social Security (1985) 7 ALD 670
Director‑General of Social Services v Hangan (1982) 70 FLR 212
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Beadle and Director-General of Social Security (1984) 1 AAR 362
Secretary, DEETYA v Prince (1997) 26 AAR 385
Jazazieuska v Secretary, Department of Family and Community Services  (2000) 65 ALD 424

REASONS FOR DECISION

21 July 2006	Mr RG Kenny, Member
APPLICATION

1.      Zaki Rizkalla and his wife, Angel Rizkalla (the applicants), received income support payments under the Social Security Act1991 (the Act) in the form of age pension in the period from 16 July 2001 to 4 May 2004.  On 25 October 2004, a Centrelink officer, on behalf of the Secretary, Department of Family and Community Services and Indigenous Affairs (the respondent), determined that Mr and Mrs Rizkalla had been overpaid in relation to the age pension payments and that the overpayments of $19,367.38 and $3,263.32, respectively, were debts due by them to the Commonwealth.  The decisions were affirmed by an authorised review officer on 24 November 2005 and, in turn, by the Social Security Appeals Tribunal on 22 February 2006.  On 10 March 2006, Mr and Mrs Rizkalla sought review of the decisions by the Administrative Appeals Tribunal (the Tribunal).

Hearing

2. Mr and Mrs Rizkalla were not represented at the hearing. Ms J Forsyth appeared for the respondent. The material before the Tribunal included documents prepared in accordance with section 37 of the Administrative Appeals Tribunal Act 1975.

Determination of Debt

3. The qualifying criteria for age pension are set out in section 43 of the Act and this requires a recipient to be of pension age as defined in subsections 23(5A) and (5B) of the Act. Mr and Mrs Rizkalla were born on 19 December 1925 and 3 April 1927, respectively, and I am satisfied that they met the relevant qualifying criteria for age pension at all relevant times. Payability requirements for age pension are set out in section 44 of the Act and payments are made in accordance with the rate calculator regimen set out in Part 3 of the Act. The rate of pension depends, among other things, on income earned by the recipient and his or her spouse. Age pension is a ‘compensation affected payment’ as that term is defined in sub-section 17(1) of the Act. ‘Compensation’ is defined in subsection 17(2) of the Act and that definition embraces compensation payments received by Mr Rizkalla from Comcare since 1987, following an injury in 1986, under the Safety, Rehabilitation and Compensation Act 1988.  The mode of treatment of compensation affected payments when determining rates of pension is set out in section 1173 of the Act.  This provides that the daily rate of pension is to be reduced by the daily rate of periodic compensation. This means that the age pension payable to Mr Rizkalla should have been reduced on a dollar for dollar basis because of his compensation payments.  On 16 July 2001, when the initial claim for age pension was made by Mr and Mrs Rizkalla, this compensation was paid in the amount of $223 per week. 

4.      In the period from 16 July 2001 to 4 May 2004, the compensation payments to Mr Rizkalla were not taken into account when calculating the level of age pension for him or for Mrs Rizkalla.  When the rate of pension was correctly calculated taking into account Mr Rizkalla’s compensation payment, his rate of pension was nil and therefore age pension was not payable.  Indeed, the amount of compensation exceeded the level of age pension and, in that situation, section 1174 of the Act provides that this excess amount may be assessed as ordinary income of Mrs Rizkalla for the purposes of calculating her rate of pension.  Again, when this was done, Mrs Rizkalla’s rate of pension was nil.  Mr and Mrs Rizkalla do not dispute the respondent’s determination that the appropriate rate of age pension payable to them in the period from 16 July 2001 to 4 May 2004 was nil and I am reasonably satisfied that the respondent’s calculations are correct and that Mr and Mrs Rizkalla’s concession in that regard was properly made.

5.      Section 1180 of the Act enables a notice to be given to Mr and Mrs Rizkalla that they were liable to pay an amount specified in the notice.  This was done by the respondent on 25 October 2004 and the amount of $22,630.70 was nominated in that notice.  This comprised the sum of the individual overpayments raised against Mr and Mrs Rizkalla of $19,367.38 and $3,263.32, respectively.  Section 1184F of the Act provides that the amount specified in the section 1180 notice is a debt due to the Commonwealth.  I am reasonably satisfied that those amounts constitute such debts owed by Mr and Mrs Rizkalla.

ISSUES FOR DETERMINATION

6.      The respondent concedes that, in his initial claim for age pension, Mr Rizkalla advised that he was in receipt of compensation payments from Comcare in the amount of $223 per week.  The respondent also concedes that, in calculating the amount of pension payable to Mr and Mrs Rizkalla, it did not factor in as income the compensation amount and that this led to the overpayment of age pension.

7.      While accepting that there are debts owed by them of $19,367.33 and $3,263.32, respectively, Mr and Mrs Rizkalla consider that these debts should be waived on either of two grounds.  The first ground was that the debts arose through administrative error on the part of the Commonwealth.  The second ground was that there were circumstances in this case which justify waiver of the debt.   Accordingly, I have given consideration to whether the debts should be waived as provided for in subsection 1237A(1) and section 1237AAD of the Act.  I have also considered whether the debts should be written off as provided for in section 1236 of the Act.

SHOULD THE DEBTS BE WRITTEN OFF?

8.      Section 1236 of the Act, in part, reads:

“1236(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

1236(1A)  The Secretary may decide to write off a debt under subsection (1) if, and only if:
          (a)       the debt is irrecoverable at law;  or
          (b)       the debtor has no capacity to repay the debt;  or

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

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

9.      The only component of that provision of potential relevance in this matter is that relating to lack of capacity to repay the debt.  In a statement of his financial position completed by him on 5 June 2006, Mr Rizkalla advised that he and his wife owned an investment unit, which was valued at $280,000, at the Gold Coast; had cash deposits in various bank accounts totalling $118,215; and had a share portfolio valued at $6,111.  In his evidence, Mr Rizkalla confirmed this, and I am satisfied that this was a correct statement of his financial position.  He said that he had paid for the unit in cash in 2003 and that it was not subject to any mortgage.  He also contended that most of his bank accounts were term deposits which precluded him from gaining immediate access to his deposits without incurring a penalty.

10.     Mr Rizkalla is currently repaying the debt to the respondent through deductions from his compensation payments and I am reasonably satisfied that there is no lack of capacity for the debt to be repaid either on that continuing basis or by payment of a lump sum when particular term deposits reach their maturity date.  In that situation, the debt should not be written off.

Waiver of Debt

9.      The matters relating to waiver of a debt due to sole administrative error by the Commonwealth and to the applicant’s special circumstances arise under subsection 1237A(1) and section 1237AAD, respectively.  In so far as relevant in this matter, they read:

“1237A.(1)       Administrative error

1237A.(1)  Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

1237A.(1A)  Subsection (1) only applies if:

(a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

(b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

whichever is the later.

1237AAD.      Waiver in special 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.”

Waiver under s 1237A

10.     The first element to be satisfied under sub-section 1237A(1) of the Act is that the debt must be attributable solely to an administrative error made by the Commonwealth.  With his initial claim for age pension, Mr Rizkalla lodged a document entitled “Mod C – Compensation and Damages”.  Therein, he advised that he was receiving $223 per week compensation from Comcare.  That amount was not included in the calculation of age pension for Mr and Mrs Rizkalla.  I am satisfied that this amounted to administrative error on the Commonwealth’s part and this was conceded by the respondent.  The second element of sub-section 1237A(1) of the Act also requires that the overpayment arose solely for that reason.  This will not be satisfied if there has been some contribution to the causing of the debt by the applicant: see Director‑General of Social Services v Hangan (1982) 70 FLR 212 at 215, 225 and 235.

11.     Mr Rizkalla was sent a series of letters by the respondent during the period of the overpayment.  These were dated 25 February 2002,  24 July 2002, 15 January 2003, 8 July 2003, 30 December 2003 and 16 January 2004. In all of those letters, Mr Rizkalla’s income was stated to be in the order of $18,000 to $19,000 and he was required to advise the respondent if that figure was incorrect.  Mr Rizkalla gave evidence that he always read the letters sent to him and that he realised that the income figure appearing in the letters was incorrect.  He said that he made telephone contact in 2002 and 2003 with the respondent to query the amount and was told “not to worry”, that “the amount was entered routinely” and that the “Australian Taxation Office (ATO) used different methods to calculate income”.  There are no records of any such contacts by Mr Rizkalla in the repondent’s files. 

12.     The first reference to an advice by Mr Rizkalla that the income levels described in the letters to him were incorrect was in a letter he wrote on 18 July 2004.  There, he advised that his usual income over the previous two years was in the range of $25,000 to $30,000 per year.  That letter by Mr Rizkalla was in response to a request mailed to him by the respondent on 15 July 2004 in which clarification of his income level was sought.  By then, his age pension had been cancelled.  This was done on 5 May 2004 after the respondent became aware that Mr and Mrs Rizkalla had purchased, in 2003, an investment unit at the Gold Coast.  They had not advised the respondent of this purchase and the cancellation of age pension on 5 May 2004 was on the basis of the level of their assets.  Further investigation by the respondent led to a decision by the respondent that they were also precluded from payment of the age pension because of their income levels.  Mr and Mrs Rizkalla were notified of this by letter dated 12 May 2004.  After further investigations were conducted by the respondent, the decision to raise the overpayments was made on 25 October 2004.

13.     There are no records of any contact by telephone or otherwise between Mr Rizkalla and the respondent in relation to his income level before July 2004. In giving evidence, he was uncertain of when the contacts were made and the means adopted to provide information to the respondent.  I do not accept Mr Rizkalla’s evidence that he contacted the respondent to advise the correct level of his income at any time before his letter of 15 July 2004.  I am satisfied that, had he advised the respondent after he received the notices in 2002, 2003 and early 2004, this would have triggered a review of his payments and earlier recognition that payments were being made at a level greater than that to which Mr and Mrs Rizkalla were entiltled.  Therefore, I am satisfied that Mr Rizkalla contributed to the overpayments and that they can not be held to have been made on the basis of Commonwealth error alone.

14.     Even if there had been no contribution to the overpayments by Mr Rizkalla, I am satisfied that the final element under sub-section 1237A(1) of the Act is not met.  This is that the payment must have been received by Mr Rizkella in good faith.  In the Federal Court, Cooper J considered the matter of good faith in Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424. His Honour said (at 40):

“A lack of good faith does not mean that the recipient of the payment must be acting fraudulently when the payment is received and retained. It means that for whatever reason, the recipient acts without an honest belief that he or she was entitled to receive and retain the payment when he or she receives the payment and decides to exercise control over it by retaining it.”

15.     The meaning of the expression “good faith” was also considered by the Federal Court in Secretary, DEETYA v Prince (1997) 26 AAR 385 in the context of paragraph 289(2)(b) of the Student and Youth Assistance Act 1973.  There is no difference of consequence between the provisions of that paragraph and those of sub-section 1237A(1) of the Act.  In that case, Finn J said:

………, I consider the burden of the formula in the s 289 setting to be obvious enough. Its concern is with the state of mind of a person concerning his or her receipt of the payment: if that person knows or has reason to know that he or she is not entitled to a payment received - that is, is not entitled to use the moneys received as his or her own - that person does not receive the payment in good faith. Absent such knowledge or reason to know, the receipt would be in good faith.

Given the conventional liability of a mistaken payee of money from consolidated revenue to repay that money irrespective of his or her belief as to an entitlement to it (that is, the ‘rule’ in Auckland Harbour Board v The King [1924] AC 318), the concession made to the mistaken payee by s 289 of the SYA Act does seem in all probability to be directed to a payee who receives the money (to put the matter positively) in the good faith belief that he or she is entitled to receive it. In other words the frame of the section is to exclude from the right to a waiver, a person who knows or has reason to know that he or she is not entitled to receive the payment. It would be surprising to find that Parliament intended otherwise.” (page 388)

16.     The letters sent to Mr and Mrs Rizkalla in 2002, 2003 and early 2004 clearly advised them of the combined annual income on which calculations were based.  Mr Rizkalla said in his evidence that he read those letters and was aware that the income amount attributed to them was not correct and that the figure should have been higher.  The letters also advised that notification was to be given to the respondent if there was an increase in that declared amount.  I am satisfied that Mr and Mrs Rizkalla had reason to know that their pension payments were calculated on an incorrect basis and that their receipt of the payments was not in good faith as that term is described above.  This means that the debts can not be waived under subsection 1237A(1) of the Act.

Waiver under s 1237AAD

17.     For waiver of a debt under 1237AAD of the Act, it must be the case, amongst the other requirements of the provision, that there are special circumstances other than financial hardship alone that make it desirable to waive the debt.  The Act provides no guidance as to the meaning of the term “special circumstances” in that provision.  In Beadle v Director-General of Social Security (1985) 7 ALD 670, the Full Federal Court stated that it was not possible to lay down precise limits or precise rules for the meaning of the term. The Court indicated that this would depend upon the circumstances of each particular case but commented that, even though the term lacks precision, it was sufficiently understood “not to require judicial gloss" (at 674). There, the Court affirmed the decision of the Tribunal (Re Beadle and Director-General of Social Security(1984) 1 AAR 362) where (at 364) the Tribunal had acknowledged that the term was "incapable of precise or exhaustive definition" and that, to be special, the circumstances "must have a particular quality of unusualness that permits them to be described as special".

18.     In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Keifel J, after referring to the Federal Court's decision in Beadle’s case, observed (at 545) that special circumstances:

“would require something to distinguish… [the]… case from others, to take it out of the usual or ordinary case….. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.”

19.     Matters raised by Mr Rizkalla with the potential to contribute to his circumstances being special were his age, state of health, shortfall of income over expenditure, difficulty in gaining access to his cash reserves, problems with the English language for both himself and his wife and also his wife’s health.  

20.     While I accept that Mr and Mrs Rizkalla are not in the best of health, this is not an unusual situation in the case of people of their mature years.  At the date of hearing, they are aged 80 and 79 years, respectively.  However, it is their age which qualifies them for receipt of the age pension and can not, in itself, be a matter which takes their situation out of the ordinary.  Despite Mr Rizkalla’s  concern at not being able to gain access immediately to monies in his bank accounts, the existence of those assets and their availability, albeit with some penalty attaching to early access to the funds, places Mr and Mrs Rizkalla in a much superior position to many others who are in receipt of social security payments.  Mr Rizkalla referred to his weekly expenses as exceeding his weekly income.  However, in making that calculation, he included losses in the share market and donations to various Christian and charitable organisations amounting to $2,280 per annum and I do not accept that these can be considered in calculating normal weekly expenses.  The former is a capital loss which would vary with the vagaries of the share market and the latter are payments made on a voluntary basis.  The fact that Mr Rizkalla is able to make those payments indicates that he is not suffering financial hardship.  I note Mr Rizkalla’s reference to poor English and difficulty in dealing with documents.  However, I am satisfied that this has been greatly overstated by him. He takes responsibility for completing documentation when dealing with the respondent and was able to give his evidence and understand exchanges at the hearing.  I also note that Mr Rizkalla described himself as having worked in Canberra as a public servant and as a senior lecturer at a University.  

21.     I am satisfied that there are no factors, either individually or taken together, in this case that enable it to be characterised as unusual or unfair and I am satisfied that there are no special circumstances in the applicant’s case that would justify waiver of the debt under section 1237AAD of the Act.

DECISION

22.      The Tribunal affirms the decision under review.

I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member.

Signed:         J Lauriston
  (for) Legal Research Officer

Date/s of Hearing  3 July 2006
Date of Decision  21 July 2006
The Applicant was unrepresented 
For the Respondent                  Ms J Forsyth, Departmental Advocate