STEPHEN SACK and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 708

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 708

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/5672

GENERAL ADMINISTRATIVE DIVISION		)
Re		STEPHEN SACK

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Senior Member Jill Toohey

Date17 September 2009

PlaceSydney

Decision The decision under review is affirmed.  

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

Senior Member

CATCHWORDS

SOCIAL SECURITY – Newstart allowance – Overpayment raised -– Whether debt owed – Whether assets exceeded assets value limit - Whether grounds for write-off or waiver of debt – Applicant conceded overpayment and debt – No special circumstances - Decision affirmed

Social Security Act 1991, ss 11, 611, 1118, 1223, 1236, 1237A, 1237AAD

Beadle v Director-General of Social Security (1985) 7 ALD 670

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Kirkovski v Secretary, Department of Families and Community Services [2004] FCA 790

Re Evans and Secretary, Department of Social Security [1993] AATA 497

REASONS FOR DECISION

17 September 2009 Senior Member Jill Toohey           

Background

1.      On 3 December 2007 Centrelink raised an overpayment of $34,583.76 against Mr Stephen Sack on account of newstart allowance paid to him between 28 November 2002 and 12 April 2006.

2.      Centrelink says Mr Sack was not entitled to newstart allowance during the relevant period because he failed to disclose interests in properties the value of which made him ineligible for the allowance.  That decision was affirmed on internal review by Centrelink and on review by the Social Security Appeals Tribunal.

3.      Mr Sack has applied for review by this tribunal. In his application, he says the debt should have been waived because of his special circumstances.

Issues

4.      I have to decide:

(a)whether Mr Sack has a debt to the Commonwealth by reason of overpayment of newstart allowance and, if so, the amount of the debt;

(b)if Mr Sack has a debt, whether some or all of it should be written off or waived.

The facts

5.      Mr Sack applied for newstart allowance in 2002 after separating from his wife.  At the time, they jointly owned three properties.  Mr Sack lived in one of the properties.  He continued to hold the properties jointly with his wife until they agreed in August 2006 on a property settlement.  On 1 November 2006 one property was transferred to Mr Sack and one was transferred to his wife.  Mr Sack later transferred his interest in the third property to their son.

6.      In his application for newstart allowance, Mr Sack stated he was single and was purchasing his home; he had no other assets.  On this basis he was determined to be eligible for newstart allowance at the rate applicable to a single homeowner. 

7.      Centrelink wrote to Mr Sack about his newstart allowance on five occasions during the relevant period.  Each letter advised he should notify Centrelink of any changes in his circumstances and set out the meaning of assets and the value which, if exceeded, would affect his allowance.  Mr Sack received these letters but did not read them.

8.      Someone contacted Centrelink in 2006 alleging that Mr Sack was living in a marriage-like relationship with his wife.  This proved not to be the case but the allegation led Centrelink to investigate Mr Sack’s circumstances and to discover his undisclosed property interests.  As a result, Centrelink stopped Mr Sack’s newstart allowance and raised an overpayment of $34,583.76.

9.      Centrelink calculated the overpayment by reference to valuations by the Australian Valuation Office (AVO) of Mr Sack’s interest in two of the properties.  His principal home was disregarded in calculating his assets.  The value of his assessable assets as calculated by Centrelink was above the limit applicable to him during the relevant period meaning he was not entitled to newstart allowance during the relevant period.

10.     Mr Sack’s recollection of his initial interview with a Centrelink officer is vague.  As he recalls it, he “just signed” the application form, but he concedes he “would have been” asked about his properties.  He cannot explain why he did not disclose his interest in the two other properties.

11.     Mr Sack says, and I accept, that he found the separation from his wife very difficult at the time, and for some years.  His difficulties were compounded by the fact that he has dyslexia and his wife had taken care of all their paperwork including to do with their properties, and he “just went along” with what she arranged.  A report from Irlen Dyslexia Centre records that Mr Sack has a form of visual dyslexia which affects how his brain interprets messages it receives from the printed page.

Does Mr Sack have a debt to the Commonwealth?

12.     The relevant legislation is the Social Security Act 1991 (the Act).

13.     A debt to the Commonwealth arises if a person receives a social security payment they are not entitled to: s 1223(1).

14.     A newstart allowance is not payable to a person whose assets exceed the allowable assets value limit in s 611.  Asset means property or money.  The value of the assets is reduced by any charge or encumbrance.  A person’s principal home is disregarded for the purposes of calculating their assets: ss 11, 611, 1118 and 1121.

15.     The assets limits applicable to Mr Sack during the relevant period were:

$145,250 at 28 November 2002

$149,500 at 1 August 2003

$153,000 at 20 September 2004

$157,000 at 3 January 2006

16.     The Tribunal has before it the calculations made by Centrelink of the overpayment.  Taking into account the mortgage on each property, that Mr Sack had a half-share in each, and that he lived in different properties at different times, Centrelink calculated the value of Mr Sack’s assets during the relevant period as:

$175,990.00               28 November 2002 - 27 November 2003

$199,787.50              28 November 2003 - 27 November 2004

$262,000.50              28 November 2004 - 1 May 2005

$253,825.50              1 May 2005 - 27 November 2005

$245,957.50              28 November 2005 - 31 December 2005

$240,957.50              1 January 2006 - 12 April 2006

17.     The Act does not specify any method by which the value of assets is to be calculated. In Kirkovski v Secretary, Department of Families and Community Services [2004] FCA 790 at [17], Bennett J noted that, in a majority of cases, the test applied by the Administrative Appeals Tribunal (AAT) is “a net market value approach based on comparable sales and the “best use” to which the asset could be put”.  Her Honour found no error in that approach.

18.     In Re Evans and Secretary, Department of Social Security [1993] AATA 497, the AAT discussed how valuations should be approached generally and the need for the Tribunal to satisfy itself that the valuer was experienced in the sort of valuation undertaken, was independent of the purposes for which the value was sought, and carried out the valuation in accordance with accepted practices of the profession.

19.     The valuations are before the Tribunal.  Mr Sack does not dispute they were undertaken by qualified AVO assessors showing the valuation for each property for each year of the relevant period.

20.     I am satisfied the valuations were undertaken by suitably qualified, independent valuers in accordance with Re Evans and I accept their assessments as correct.

21.     I am satisfied that the value of his assets made Mr Sack ineligible for newstart allowance during the relevant period.  I am satisfied that he has a debt of $34,583.76 to the Commonwealth on account of the overpayment (now reduced by the repayments he has made).

Are there any grounds for writing off or waiving all or any of the debt?

22.     It became clear at the hearing that Mr Sack does not dispute the overpayment or that he should repay it.  He explained that he has pursued his applications for review because he was worried that he might lose his house.  This appears, in part, to be because Centrelink obtained a judgment against him for the amount of the debt when he failed to make repayments.  It is clear that Mr Sack finds dealing with financial matters and the bureaucracy somewhat overwhelming.

23.     Mr Sack impressed me as an honest man.  He said in evidence that, after his marriage ended, he “just put his head in the sand” but, in the last two to three years, things have improved for him.  He has involved himself in voluntary work and is now employed.  He has a new relationship with a partner who is clearly supportive.  They have bought a property together; he still has the property he acquired after the property settlement with his wife, which is rented out; and he owns a unit jointly with his son in which he lives during the week so as to be closer to work.

24.     Mr Sack does not dispute that he has the capacity to repay the debt.  For a time after the overpayment was raised, he was making repayments of $50 each fortnight.  For reasons which are not really clear, the repayments stopped after a relatively short period, it seems because a direct debit from his bank account was cancelled.

25.     Although Mr Sack does not dispute the debt, I should still be satisfied that it should be recovered.

26.     A debt can be written off only if: it is irrecoverable at law; the debtor has no capacity to repay; the debtor’s whereabouts are unknown; or it is not cost-effective to try to recover the debt: s 1236(1A).  None of these applies to Mr Sack.

27.     A debt must be waived if it is attributed solely to administrative error by Centrelink and the payment was received in good faith: s 1237A(1).

28.     On at least five occasions, Centrelink wrote to Mr Sack about his newstart allowance.  Each letter contained the usual advice about the requirement to notify Centrelink of changes in circumstances including if the value of Mr Sack’s assets exceeded the relevant limit.  Each letter advised he must notify Centrelink if the value of his assets exceeded $249,750 or thereabouts.  Centrelink concede that this figure was incorrect; it was the figure applicable to a couple; during the relevant period, the assets limit applicable to Mr Sack as a single person was between $145,250 and $157,000.

29.     Documents before the Tribunal show that Centrelink became aware of the error in its advice to Mr Sack as early as 5 February 2003 but did not correct it and continued to send him letters advising him of the incorrect assets limit.  There are other unexplained errors in the Centrelink documents but none is material.

30.     I have no doubt that Mr Sack received the payments in good faith.  However, I am not satisfied that the debt can be attributed solely to administrative error.  The payments made to Mr Sack were at the correct rate for a single person and were based on his assets as he disclosed them to Centrelink.  The situation might have been different had he relied on Centrelink’s advice as to the assets limit and decided there was no need to disclose his assets but he did not; he did not even read the letters. 

31.     Section 1237AAD provides that a debt may be waived if it did not result wholly or partly from the debtor knowingly making a false statement or a false representation, or failing or omitting to comply with the relevant legislation; and there are special circumstances, other than financial hardship alone, that make it desirable to waive; and it is more appropriate to waive than to write off the debt or part of the debt.

32.     I have no reason to doubt that Mr Sack was extremely distressed about the end of his marriage, or that he has a form of visual dyslexia that means he pays little attention to documents. I am satisfied that he did not knowingly make a false statement or representation to Centrelink about his assets.

32.      As to whether there are special circumstances which mean the debt should be waived, the Act gives no guidance as to the meaning of that expression but it has been considered on many occasions by the courts and by this tribunal.

33.      In Beadle v Director-General of Social Security (1985) 7 ALD 670 at 674, the Full Court of the Federal Court said it depends on the circumstances of the particular case whether they constitute special circumstances:

… it is not possible to lay down precise limits or precise rule.  The matter is one for the Director General bearing in mind the purpose for which the power is given.  The phrase “special circumstances”, although lacking precision, is sufficiently understood in our view not to require judicial gloss.

34.      In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Kiefel J said special circumstances would require something to distinguish the applicant’s case from others, something:

… to take it out of the usual or ordinary case. …. It would of course follow that that if one were to conclude there was something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.

35.      Although in his application for review Mr Sack asked that his special circumstances be given consideration, he did not press this at the hearing.  Nor did he seek to rely on submissions made to Centrelink on his behalf by the Welfare Rights Centre.  Those submissions included that Centrelink should have been on notice of his properties from documents, including an employment separation certificate, which listed another property as his address; that he missed out on certain benefits because of the delay in settling his property with his wife; that he was “not in a good way” after his marriage ended; and that he was making repayments of $50 each fortnight.

36.      I am satisfied that nothing in the submissions made on Mr Sack’s behalf, or in the material before me, takes his case out of the ordinary.  He concedes the overpayment was made and that he has the capacity to repay the debt.  Nothing unfair, unintended or unjust will follow repayment of the debt.  It was clear, by the end of the hearing, that Mr Sack’s main concern was not whether he should repay the debt, but how.

Decision

33.     The decision under review is affirmed.

I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Jill Toohey.

Signed: ………[sgd]…..…..

Steven Mulipola, Associate

Date of hearing:  15 September 2009
Date of decision:  17 September 2009
Representative for the Applicant:              Self-represented

Representative for the Respondent:         Centrelink Legal Services and Procurement