Underwood and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2010] AATA 166

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 166

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  2009/0843

GENERAL ADMINISTRATIVE DIVISION		)
Re		MARK UNDERWOOD

Applicant

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

Respondent

DECISION

Tribunal  Senior Member Bernard J McCabe

Date 10 March 2009

Place Brisbane

Decision  The Tribunal affirms the decision under review.

.....................[SGD].........................

Senior Member

CATCHWORDS

SOCIAL SECURITY – disability support pension – non-disclosure of income – requirement to repay debt – recalculation of debt – no special circumstances – decision affirmed

Social Security Act 1991 (Cth) ss 1223, 1228B, 1237AAD

REASONS FOR DECISION

10 March 2010  Senior Member Bernard J McCabe        

1. Centrelink says Mr Mark Underwood received Disability Support Pension (“DSP”) payments he was not entitled to receive between 7 July 1999 and 31 October 2006. Centrelink claims the overpayments occurred because Mr Underwood did not disclose the income he was earning from three different part-time jobs. A debt of $24,208.70 was raised against Mr Underwood. That debt included a penalty imposed pursuant to s 1228B of the Social Security Act 1991 (“the Act”) in the amount of $2,149.70.  

2.      Mr Underwood says he should not be required to repay the money. Alternatively, he says he should only be required to repay a smaller amount pursuant to a court order dated 2 May 2008.

3.      I am satisfied the decision under review should be affirmed. I explain my reasons below.

The facts

4.      Mr Underwood, the applicant, decided not to give evidence at the hearing. He did not provide a fresh statement. I pointed out that his evidence was likely to be important in a de novo review like that conducted by the Tribunal. Mr Cusack, the applicant’s solicitor, said his client should not be required to give evidence again. I warned Mr Cusack that I would be left with the evidence offered by the respondent, but he insisted it was inappropriate that his client be questioned.

5.      The respondent to the appeal, the Secretary to the Department of Families, Housing, Community Services and Indigenous Affairs, led evidence from Ms George, a Centrelink officer who had conducted the investigation into Mr Underwood’s affairs. Ms George discussed how she went about calculating the amount of the debt. She explained the investigation began after Mr Underwood admitted to a Centrelink officer that he had been earning income from several different jobs that he had not declared while he was receiving DSP. She sent out notices to the two employers who had been identified and asked them for records. She also obtained access to the applicant’s bank statements.

6.      Ms George said the material from the employers was incomplete. Using the incomplete material and the bank statements, she was able to ascertain how much Mr Underwood had been paid. From that figure, she was able to determine the amount he had been overpaid. She made a formal debt determination in June 2007. She says she subsequently learned of another employer. She revisited the bank statements and identified the amounts paid by that entity and included them in a revised calculation in September 2007. The respondent says that was the final calculation.

7.      In the course of her evidence, Ms George noted the files contained records of an earlier failure to report earnings in 2001. Centrelink became aware at the time that Mr Underwood had not disclosed an amount he earned from a part time job. The amount in question was so small that it did not bring about an overpayment. He was warned about his obligation to report but no further action was taken. Ms George said the information she received indicated that Mr Underwood had earned other monies during and before 2001 that had not been disclosed. Upon examining the evidence, she concluded there was an overpayment after all.

8.      The file was referred to the Director of Public Prosecutions (“the DPP”) in August 2007. The file included a form completed by the applicant in 2005 in which he declared he did not earn any income, or have any employment, during the period under review: exhibit one at p 46.

9.      The applicant was invited to make an appointment to explain himself to the investigator before that referral occurred but the interview did not take place. The applicant was appropriately warned that he might elect not to answer any questions in light of the possibility of prosecution. Ms George explained that Mr Cusack contacted her and asserted his client had a psychiatric condition. She says she asked for evidence of the condition but it was not forthcoming. She says she was aware from looking at the file that Mr Underwood did have a psychiatric disorder but that limited information did not change her view of how to proceed. She said the file met the criteria for referral to the DPP and she sent it off. Four charges were brought against the applicant. Three of the charges were subsequently withdrawn and Mr Underwood pleaded guilty to the fourth charge on 2 May 2008. He was ordered to pay reparations in the amount of $11,749.01.

The legislation

10. Section 1223 of the Act provides that a debt arises when a social security payment is made and “the person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit”. (I note the section was expressed differently prior to amendments in 2001, but the substance of the provision is effectively the same for present purposes.)

11.     Where the overpayment arises because the recipient “refused or failed to provide information in relation to the person's income from personal exertion”, the respondent adds a penalty equal to 10% of the amount of the debt unless it is satisfied there is a reasonable excuse for the refusal or failure. 

12. The debt can be waived or written off in appropriate circumstances. I was not provided with any evidence to suggest that the debt should be written off. The debt did not arise solely because of an administrative error on the part of the Centrelink. That leaves only the power in s 1237AAD to waive a debt because of special circumstances.

The applicant’s argument

13.     Mr Cusack attacked the process by which the debt was determined in the course of his cross-examination of Ms George and during his final submissions. In particular, he criticised:

·The use of bank statements as a source of information about the payments received from employers;

·The decision to include information about remuneration received prior to 2001 because his client had already been questioned about the possibility of an overpayment at that point but no further action had been taken against him (although he had been warned about his obligation to disclose earnings). That, Mr Cusack said, gave rise to an Anshun estoppel;

·The failure to interview his client before referring the file to the DPP for (the ultimately successful) prosecution;

·The decision to recalculate the debt in September 2007;

·Centrelink’s failure to have regard for the difficulty faced by his client in complying with obligations in light of his disability.

14. As I understand his argument, Mr Cusack denies that a debt is due and owing because of errors in the way in which Centrelink went about calculating the debt (although he conceded that his client might still be required to meet the reparations order made by the court on 2 May 2008). He also argued that Centrelink should waive the debt pursuant to s 1237AAD. He argues that Centrelink’s mishandling of the case amounts to special circumstances.

Is the debt properly raised against Mr Underwood?

15.     Ms George explained how she used the employer information and the bank statements to calculate the amount the applicant had been paid by his various employers. She pointed out that the calculation actually favoured Mr Underwood because ordinarily she would take into account the gross payments before tax. In this case, because of the paucity of other evidence from employers, she used the after-tax payments recorded in the bank statements. Mr Underwood did not offer any evidence that disputed the amounts she identified. I am satisfied he was paid the amounts as alleged. I also accept that Mr Underwood did not disclose the fact of his extra earnings during the periods under review despite being clearly advised in a number of letters of his obligation to do so.

16.     Ms George then explained she used those figures to calculate the amount of the overpayment. I have no reason to dispute her figures and I accept them. I also accept her explanation that she became aware of an additional employer that caused her to recalculate the amount of the debt in September 2007.  The decision to do so made sense in the circumstances. Mr Cusack insisted it was unlawful to recalculate the debt, but I do not see why. I accept Ms George’s evidence that the applicant was overpaid DSP in the amount of $22,059.

17.     I do not accept that the respondent was precluded from examining the period before 2001 simply because an earlier breach of the obligation to report earnings had been detected and no further action was taken at the time. If the respondent had known what Mr Underwood knew at the time (but failed to disclose in breach of his obligations), it might have taken action. It was appropriate to revisit the decision when further information came to hand. Mr Cusack’s argument that there is an Anshun estoppel is wrong.

18. The debt was properly raised against Mr Underwood under s 1223. He received money he was not entitled to receive. Nothing that Centrelink officers did during the course of the investigation changes that fact.

Is mr underwood liable to a penalty under s 1228B?

19. The respondent imposed a penalty equivalent to 10% of the debt on Mr Underwood pursuant to s 1228B of the Act. I am satisfied the overpayment occurred because the applicant failed to provide information about his earnings. The only question is whether there is a reasonable excuse for that failure.

20.     Mr Cusack said the applicant had been told that he was not welcome at Centrelink offices because he had Hepatitis C. I would have questioned Mr Underwood about that surprising claim if he had given evidence, but I did not have that opportunity. But even if I accept Mr Cusack’s evidence from the bar table is accurate on this point, it does not explain why Mr Underwood did not report his income by telephone. It also does not explain why Mr Underwood falsely declared that he did not have any income in a review form completed in 2005 (exhibit one at p 46).

21.     Mr Cusack also argued that the applicant laboured under a disability that made it difficult for him to approach Centrelink and deal with them in a straightforward fashion. I was referred in particular to the opinion of Dr Sue McCulloch, a psychologist, dated 25 February 2008. The report was prepared in connection with the criminal proceedings. It was not available at the time the file was referred from Centrelink to the DPP.

22.     I do not need to discuss the details of the report in the course of these reasons. In summary, the report suggests Mr Underwood labours under severe difficulties that go some way towards explaining how he failed to deal properly with Centrelink. Importantly, I note the report does not suggest Mr Underwood was incapable of understanding his obligations to report.

23.     While I accept the matters referred to in the report made it harder for Mr Underwood to cope with many tasks, I do not think those matters provide a reasonable excuse for failing to comply over a long period of time with the obligation to inform Centrelink of his employment earnings.

24. It follows I am satisfied a penalty was properly imposed pursuant to s 1228B. The total debt due and owing is therefore $24,208.70.

Should the debt be waived pursuant to s 1237AAD?

25. The respondent says the discretion in s 1237AAD is not available in this case because the debt arose as a result of Mr Underwood making a false statement or representation. I was directed in particular to the declaration in exhibit one at p 46, where the applicant indicated he was not earning other income. The respondent added that Mr Underwood had been advised by correspondence on a number of occasions that he was obliged to inform Centrelink of any earnings. That lesson was brought home to him in 2001 when a failure to declare earnings merited a special warning.

26.     Mr Cusack appeared to invite me to conclude that the applicant did not have a clear appreciation of his obligations because of his psychiatric conditions. As I have already observed, the report of Dr McCulloch does not suggest the applicant could not understand or appreciate his obligations to disclose earnings to Centrelink. He did not testify that he was unaware of the obligations or that he did not receive any notices. I am satisfied he could have informed Centrelink if he wished to do so, but he did not.

27. I do not think the applicant can access the discretion in s1237AAD because I accept he knowingly made a false representation. But even if I were in some doubt about that, I do not think that special circumstances have been demonstrated.

28.     The expression “special circumstances” is well known: it means circumstances that are unusual in the sense that they are different to the ordinary run of cases. The applicant in this case argues Centrelink dealt with him insensitively, and without sufficient regard for his disability. He is particularly critical of the decision to refer the matter for prosecution.

29.     I am not satisfied that the applicant was dealt with insensitively in all the circumstances. The investigative process in a case like this is bound to be unpleasant, particularly when one knows one has been at fault. I heard nothing in the evidence of Ms George that made me suspect she behaved unreasonably or unfairly towards the applicant. Mr Cusack made much of the failure to afford his client an interview before the referral to the DPP, but Ms George pointed out she offered to arrange an interview and review any evidence of medical conditions that might be relevant. Mr Underwood, presumably on advice, did not take up the offer.

30.     Mr Underwood did the wrong thing and he was caught. He was not treated any worse than anyone else in the same position. Centrelink officers were aware he had health problems but they were also aware he was represented by a lawyer by the time the investigation reached the point where charges were laid. I do not think Ms George can be criticised for the way in which she handled the whole affair. I accept she was appropriately thorough but I also accept she behaved reasonably – by using Mr Underwood’s take home pay as the basis for her calculations, for example. I am unable to fault the decision to prosecute, and the outcome of the prosecution seems reasonable enough. Mr Underwood was treated fairly.

Conclusion

31.     The decision under review is affirmed.

I certify that the 31 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.

Signed: .....................[SGD]......................................................
  Patrick MacDonald, Associate

Date of Hearing  8 February 2010

Date of Decision  10 March 2010
Solicitor for the Applicant          Mr William Cusack
Advocate for the Respondent   Mr Bob Hamilton