Secretary, Department of Social Services and Michael Ruzicka

[2014] AATA 341

[2014] AATA 341

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2013/2462
Re	Secretary, Department of Social Services
APPLICANT
And	Michael Ruzicka
RESPONDENT

DECISION

Tribunal	Regina Perton, Member
Date	30 May 2014
Place	Melbourne

The Tribunal sets aside the decision under review and substitutes a decision that Mr Ruzicka owes a debt to the Commonwealth for the period from 3 April 2009 to 9 August 2012.  The Tribunal remits the matter to the Secretary for recalculation of the debt for that period.  

................[sgd]........................................................

Regina Perton, Member

SOCIAL SECURITY – Newstart allowance – undeclared assets – overpayment – debt to the Commonwealth – special circumstances – waiver of debt – decision set aside and remitted for recalculation of debt

Social Security Act 1991 ss 9, 661,1223(1), 1236, 1237A(1), 1237AA)

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Ryde v Secretary, Department of Family and Community Services [2005] FCA 866 

REASONS FOR DECISION

Regina Perton, Member

30 May 2014

1. Michael Ruzicka was granted Newstart Allowance (NSA) in 2008.  Mr Ruzicka’s rate of payment was based on the assets he had listed when he lodged the claim.  However Centrelink, which administers NSA on behalf of the respondent, later discovered that Mr Ruzicka held some assets that he had not declared to the agency.  These included ownership of a former matrimonial home which was sold about a year after he commenced receiving NSA, an additional bank account holding proceeds of the property for a time and, later, two cars bought out of proceeds of the property sale.

2. On 14 August 2012 Centrelink determined that Mr Ruzicka was overpaid NSA between 19 January 2008 and 9 August 2012 due to the value of his assets and that, as a result, he owed a debt to the Commonwealth totalling $45,179.98.  On 11 December 2012 an authorised review officer (ARO) of Centrelink affirmed the original decision. 

3. On 24 April 2013 the Social Security Appeals Tribunal (SSAT) set aside the decision under review and remitted the matter to Centrelink with the following directions: 

   ·The period of Mr Ruzicka’s debt is 1 September 2008 to 30 March 2009 and 3 April 2009 to 10 August 2012;

   ·Recovery of the proportion of the debt incurred in the period 1 September 2008 to 22 January 2011 is waived.

4. On 24 May 2013 the Secretary to the Department sought review of the decision of the SSAT stating that the entire debt should be reinstated and that it was inappropriate to waive part of that debt.   

5. The issues before the Tribunal are whether Mr Ruzicka owes a debt to the Commonwealth because of the overpayments; and, if so, whether the debt should be waived due to error on Centrelink’s part, an inability on Mr Ruzicka’s part to repay the debt or because of special circumstances.

   IS THERE A DEBT TO THE COMMONWEALTH?

6. The overpayments arose because the assets held by Mr Ruzicka and the deemed income from those assets were of greater value than that which had been notified to Centrelink. There is an asset upper limit for recipients of various social security benefits whereby a person is not entitled to the particular payment if he or she exceeds that limit.  A base asset level is also set whereby a person who holds that amount or less in assets is entitled to the full amount of the benefit (provided their income from sources other than the pension is also below a certain level).  If the person is above the base rate of assets for which he or she is entitled to the full amount of the benefit but below the top asset limit, he or she is entitled to a reduced payment on a sliding scale. Those assets are also deemed to be producing income at a prescribed rate and the deemed income may also affect entitlement to the social security benefit.  The asset limits and deemed income rates are adjusted twice a year.

7. Section 611 of the Social Security Act 1991 (the Act) states that NSA is not payable if the value of the person’s assets is more than the person’s asset limit.  The applicable assets limit depends on whether a person is a homeowner and whether that home is his principal place of residence.

8. Mr Ruzicka owned a property in Hoppers Crossing at the time he applied for NSA.  He had been living in that home for some time on his own after he and his former partner split up.  Following a burglary in August 2007, Mr Ruzicka moved in with his mother who lived in a nearby suburb.  She was not well and he cared for her.  He also cared for his stepfather who had split up with Mr Ruzicka’s mother many years earlier but required assistance since suffering a stroke many years ago and more lately, cancer.  His stepfather has since died leaving his home to Mr Ruzicka although the estate has yet to be finalised and Centrelink did not consider the home as Mr Ruzicka’s during the period during which the debt arose. 

9. Mr Ruzicka, who left school after Year 10, worked in the fabric industry for several years.  He suffered a back injury but still kept on working, including gardening and in a café in which he had invested money that subsequently was lost.  He has worked erecting safety fences and continues to be motivated to work either in his own business or for another person.  He has tried money making ventures in buying two cars that he thought he could resell at a higher price but that has not worked out, leaving him with vehicles that count as assets he holds. 

10. Mr Ruzicka lived with the mother of his two oldest children for about 15 years until she decided to leave taking the children with her.  He has had ongoing disputes in the Family Court in relation to the children.  For many years they had lived in a unit owned by Mr Ruzicka’s mother that was next door to the mother’s home.   Eventually they bought land in Hoppers Crossing and built a house on the block. 

11. A few months after his long-term partner left him, he formed a relationship with another lady.  She and he subsequently split up around December 2007.  He has been involved in Family Court matters in relation to child access with a child from that relationship.  Mr Ruzicka stayed in the empty house for some time but strange events happened which caused him concern.  The burglary was the last straw and he subsequently moved in with his mother for a time. 

12. One of the issues in determining Mr Ruzicka’s asset values at various points of time is deciding when the Hoppers Crossing home ceased to be his principal place of residence.  The initial decision maker and the ARO determined that it was January 2008.  The SSAT decided that it was still Mr Ruzicka’s place of residence until some time later. 

13. Mr Ruzicka told the Tribunal that the Hoppers Crossing house remained his principal place of residence until its sale and settlement in early 2009.  He said that he was in a hazy mental state in late 2007 and early 2008.  His doctor indicated that he was suffering from severe anxiety and depression.  Mr Ruzicka had left all his possessions in the marital home but neglected its maintenance for a time.  His stepfather helped him to tidy it prior to sale.   Mr Ruzicka did not rent out the home or remove his possessions until required to do so once the sale of the property was finalised. 

14. Mr Ruzicka’s first partner had placed a caveat on the marital home which was in his name alone. The first sale of the property fell through but the home was eventually sold and part of the proceeds paid to the former partner in due course based on an agreement made by the parties. 

15. There was no evidence to rebut Mr Ruzicka’s evidence that the Hoppers Crossing residence was his principal place of residence until it was transferred to a new owner.  He was hazy on dates but a copy of the transfer in Centrelink records indicates the property was transferred to a new owner on 30 March 2009 and the relevant stamp duty paid.  The Tribunal is satisfied that the Hoppers Crossing house should be treated as Mr Ruzicka’s principal place of residence until 30 March 2009.  The Tribunal directs that the debt be recalculated for the period between 19 January 2008 and 30 March 2009 on the basis that the Hoppers Crossing property was Mr Ruzicka’s principal place of residence.

16. Mr Ruzicka presented evidence that he had repaid his former partner $60,000 out of the proceeds of the sale of the Hoppers Crossing property.  Bank records held by Centrelink indicate that this happened in June 2011.  Bank records show that the proceeds of the sale of the Hoppers Crossing home were held as cash in the bank from 3 April 2009.  The Tribunal finds that the moneys in the bank were assets for the purposes of the assets test for NSA (section 9 of the Act).  The Tribunal accepts that the calculation of the debt for that period should therefore stand. 

17. Mr Ruzicka has hoped that he could earn some money by purchasing cars at a lesser value and then resell them at a profit.  He bought two relatively expensive cars at an auction without doing any significant research as to their resale value and how much work was needed to repair one of them.  He still has those cars which he has not been able to sell.  They are considered assets for the purposes of the assets test and are taken into account in calculating the level of assets as are the moneys in the bank.

18. Mr Ruzicka was sent numerous notices advising that he had to report changes to his circumstances and assets.  He did not declare the Hoppers Crossing property to Centrelink in his claim form for NSA nor had he informed Centrelink that the proceeds of the property had been put into a bank account.  Mr Ruzicka was unable to explain why he had not done so beyond citing his health problems during that period.

19. Regardless of the circumstances that led to the overpayments, the amount overpaid is a debt owed to the Commonwealth pursuant to s 1223(1) of the Act.  The calculations of the amount of the debt by Centrelink are complex and are to be recalculated on the findings made above. 

20. The Tribunal finds that Mr Ruzicka was overpaid NSA between 3 April 2009 and 10 August 2012 and therefore has a debt to the Commonwealth following for that period.  There will need to be a recalculation of whether he was paid the correct amount in the earlier period and whether any debt arose during that period.

    SHOULD THE DEBT BE WAIVED DUE TO ADMINISTRATIVE ERROR OR WRITTEN OFF BECAUSE OF AN INABILITY TO REPAY? 

21. Section 1237A(1) of the Act provides for waiver of a debt arising solely from administrative error:

    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.

    Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).

22. Mr Ruzicka did not declare the moneys obtained from the sale of his principal place of residence to Centrelink.  In his claim form, he stated that I have no real estate interests other than the home in which I live.  At that time, he appears to have been staying with his mother and given that address for service of Centrelink documents.  He did not have an interest in his mother’s home but did have an interest in the Hoppers Crossing principal place of residence.  The documents he provided to Centrelink at the time of his claim had a variety of registered addresses including his mother’s and his own Hoppers Crossing residence. 

23. The failure to identify Mr Ruzicka's Hoppers Crossing home ownership, its sale and the banking of the proceeds were not due to error on Centrelink’s part.  It was Mr Ruzicka who failed to advise of his interest in the property.  Therefore, the Tribunal finds that the debt was not attributable solely to administrative error by the Commonwealth and the debt cannot be waived on this ground.  

24. Section 1236 allows for write off of a debt in certain circumstances

    (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.

    (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.  

25. None of these circumstances apply to Mr Ruzicka.  The Tribunal finds that it is not appropriate to write off his debt.

    SHOULD THE DEBT BE WAIVED DUE TO SPECIAL CIRCUMSTANCES?

26. Section 1237AAD of the Act provides for waiver of the debt in special circumstances:

    The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

    (a)the debt did not result wholly or partly from the debtor or another person knowingly:

    (i)        making a false statement or a false representation; or

    (ii)       failing or omitting to comply with a provision of this Act 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.

27. The term special circumstances is not defined in the legislation.  For the Tribunal to exercise its discretion to determine that Mr Ruzicka’s' situation constitutes special circumstances, it must be satisfied that there is something to make the case stand out from the usual or the ordinary (Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25). In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866, Branson J held that the use of the term special circumstances in the legislation demonstrated an intention to proscribe waiver in ordinary cases.  There have been numerous other decisions citing similar views of what constitutes special circumstances.

28. Mr Ruzicka stated that his severe depression and his carer duties to family members were perhaps part of the reason why he did not provide required information to Centrelink.  He was somewhat at a loss to explain why he was able to deal with other transactions such as the sale of his Hoppers Crossing home and purchase of cars.

29. The respondent submitted that Mr Ruzicka had knowingly failed to comply with his obligations under the Act in failing to declare significant information including depositing the proceeds of the property sale into the bank. 

30. The Tribunal is somewhat equivocal about making a finding that Mr Ruzicka knowingly failed to provide relevant information to Centrelink.  It appears that he did not read correspondence sent to him and did not realise that he had not provided required information about his Hoppers Crossing home.  However due to other findings below, it is not necessary for the Tribunal to determine whether or not he meets section 1237AAD(a) of the Act.

31. The Tribunal accepts that Mr Ruzicka was unwell with a recognised medical condition and at the same time was caring for family members including his grandmother and his stepfather.  He still suffers from depression and other ailments. 

32. The respondent submitted that Mr Ruzicka’s circumstances are neither special nor unusual.  The respondent pointed out that in addition to his own assets, Mr Ruzicka is the beneficiary to his late stepfather’s estate and appears to be in a significantly better position than any recipients of newstart allowance.  The Tribunal concurs that it appears that Mr Ruzicka has the capacity to repay the debt, particularly as it is likely to decrease when recalculated for the specified period. 

33. The Tribunal is not satisfied that the situation that Mr Ruzicka finds himself is vastly different from the situation of other benefit recipients who have incurred debts due to overpayments. The Tribunal is not satisfied that the circumstances in this case constitute special circumstances. Hence, the Tribunal finds that the waiver provisions of s 1237AAD of the Act should not be invoked. 

34. The Tribunal finds that Mr Ruzicka owes a debt to the Commonwealth because of overpayment of NSA.  The debt is to be recalculated for the period taking into account the Tribunal’s findings.  

    DECISION

35. The Tribunal sets aside the decision under review and substitutes a decision that Mr Ruzicka owes a debt to the Commonwealth for the period from 3 April 2009 to 9 August 2012.  The Tribunal remits the matter to the Secretary for recalculation of the debt for that period.  

I certify that the preceding 35 (thirty -five) paragraphs are a true copy of the reasons for the decision of Regina Perton, Member

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Associate

Dated 30 May 2014

Date of hearing	7 March 2014
Applicant	In person
Advocate for the Respondent	Tim de Uray
Solicitors for the Respondent	Program and Litigation Review Branch, Department of Human Services