UNTERRHEINER And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
[2003] AATA 487
•29 May 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 487
ADMINISTRATIVE APPEALS TRIBUNAL )
)No N2002/1458
GENERAL ADMINISTRATIVE DIVISION ) Re KAREN UNTERRHEINER Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr S Webb, Member Date29 May 2003
PlaceCoffs Harbour
Decision The Tribunal determines to set aside the decision under review and, in substitution therefor, decides that the Commonwealth’s right to recover a debt in the amount of $4,017..01 from the Applicant is appropriately waived in the special circumstances of this case.
[Sgd] S Webb, Member
CATCHWORDS
SOCIAL SECURITY – rent assistance - over payment – debt recovery - administrative error and good faith accepted – whether severe financial hardship – whether special circumstances
LEGISLATION
A New Tax System (Family Assistance)(Administration) Act 2000 sections 71, 95, 97, 101
Social Security Act 1991 section 1237A
CASE LAW
Re Allegakoen and Secretary, Department of Family and Community Services [1998] AATA 678
Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127
Re Jones and Secretary Department of Family and Community Services [2003] AATA 62
Re Klaverstyn and Secretary, Department of Family and Community Services [2003] AATA 71
Secretary, Department of Family & Community Services v Allan (2001) 66 ALD 147
Re Beadle and Department of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Re Bestel and Secretary, Department of Family and Community Services [1999] AATA 867
REASONS FOR DECISION
29 May 2003 Mr S Webb, Member 1. In this application, Mrs Karen Unterrheiner (“the Applicant”) seeks a review of the decision of the Social Security Appeals Tribunal (“the SSAT”) on 9 August 2002 (Exhibit T2) to affirm the decision of an Authorised Review Officer (“the ARO”) (Exhibit T31). On 24 June 2002 the ARO affirmed the decision made by a delegate of the Secretary, Department of Family and Community Services (“the Respondent”) on 9 May 2002 (Exhibit T27) to raise and recover a debt of $4,017.01, being an overpayment of rent assistance during the period 1 July 2000 to 16 April 2002.
2. A hearing before the Tribunal was held on 19 March 2003 at which the self represented Applicant and her husband, Mr John Unterrheiner, gave oral evidence. The Respondent was represented by Ms Marian Buckley, a Centrelink Advocate.
3. The following written material was placed into evidence before the Tribunal:
Exhibit no
Description
T1 - T34
Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
A1
Written submission by Mr Unterrheiner, dated 25 November 2002
R1
Respondent’s statement of facts and contentions, dated 13 January 2003
issues
4. There is no dispute between the parties that the rate of rent assistance paid to the Applicant during the period from 12 January 1995 to 16 April 2002 was calculated in error by Centrelink and received in good faith by the Applicant. The parties agree that the Applicant received an overpayment of Rent Assistance, through no fault of her own, in consequence of which the Respondent raised a debt to the Commonwealth in the amount of $10,111.11, deciding thereafter to waive an amount of $6,094.10 and to recover an amount of $4,017.01 from the Applicant.
5.This being the case, the relevant issues in this matter are:
(a) Whether the Applicant has a debt to the Commonwealth in the amount of $4,017.01;
(b) whether the Applicant would suffer severe financial circumstances if the $4,017.01 debt is recovered; and
(c) whether the special circumstances of the case are such that it would be appropriate to waive the $4,017.01 debt in whole or in part.
legislation
6. The relevant legislation in this matter is the A New Tax System (Family Assistance) (Administration) Act 1999 (“the Act”) and in particular sections 71, 97 and 101.
background
7. The following background is provided by way of information and is not disputed by the parties.
8. In 1991 the Applicant and her husband rented the house in which they reside with their three children, paying $50 per week in rent. The house is located on a farm on which Mr Unterrheiner is employed. The weekly amount of rent has remained unchanged since 1991.
9. The Applicant was paid an amount of $25 per week Rent Assistance as a component of her Family Payments in 1991. On 20 March 1993 amendments to the Act came into effect, whereby a threshold structure was introduced for Rent Assistance. The amendments included a savings provision to ensure that no existing recipient would receive less as a result of the changes. The Applicant’s rent assistance was, therefore, preserved.
10. Following further amendments to the Act in 1995, a “workaround” was required in order to preserve the Applicant’s Rent Assistance in a computer system, whereby an officer “dummied rent to $999.99 to ensure correct rate of RA paid $25.00 FN” (Exhibit T10 folio 53). The “workaround” resulted in the Applicant’s Rent Assistance being set and paid at the maximum rate in error.
11. On 20 March 1996, amendments to section 63 of the Act came into effect. These amendments had the effect of reducing the saved amount of Rent Assistance by the rate of increase in Consumer Price Index that would otherwise apply, thereby ensuring the amount of Rent Assistance remained constant, albeit being reduced in real terms, until such time as the recipient was no longer receiving more Rent Assistance than those without the benefit of a preserved rate of Rent Assistance. These amendments were discussed by the Tribunal in the case of Re Allegakoen and Secretary, Department of Family and Community Services [1998] AATA 678. There is some doubt in the present case, whether the Applicant’s Rent Assistance was duly adjusted in accordance with the amending legislation. In any event, the Applicant continued to receive incorrect Rent Assistance payments.
12. On 1 July 2000 new family assistance laws came into effect. The Applicant continued to receive Rent Assistance payments at an incorrect rate. On 4 April 2002 the Applicant provided rental information to Centrelink which was subsequently verified in a Rent Certificate on 24 April 2002 (Exhibit T23) and the administrative error was recognised.
13. The amount of the overpayment of Rent Assistance was calculated to be $10,111.11 during the “debt period 2.10.97 – 16/4/2002”, amounts prior to 1 October 1997 not being recoverable (Exhibit T25 folio 96). A decision was taken to waive the proportion of the overpayment arising prior to 30 June 2000, an amount of $6,094.10, on the basis that the overpayment arose from the sole administrative error of the Commonwealth and had been received in good faith by the Applicant. In consequence a debt to the Commonwealth in the amount of $4,017.01 was raised against the Applicant, who has subsequently pursued her appeal rights.
applicant’s evidence
14. The Applicant informed the Tribunal that she lives with her husband and four children, aged 16, 17, 19 and 23, in a house on a farming property that her husband manages. She told the Tribunal the family has lived in the house for 14 years and the $50 weekly rent has remained constant during this period.
15. The Applicant gave evidence that she has always provided information about any change in circumstances to Centrelink as required and believed she was entitled to receive the amounts she was paid. She told the Tribunal she did not know the amount of Rent Assistance she was receiving had increased in 1993 and had always completed Centrelink forms correctly.
16. The Applicant told the Tribunal the family has a low income and that it is sometimes hard to make ends meet. She said she pays the bills first then buys food, thereby ensuring the family always lives within its means. She estimated their household expenditures as follows:
Electricity $240 bi-monthly
Telephone $200 per month
Gas $45 per quarter
Car registration $210 per quarter
NRMA $55 per year
Food $200 per week
Tithing to church for aid $50 per week
Fuel $60 per week
Chicken feed $20 per week
In addition, the Applicant said she has to purchase educational materials and text-books for two of her children who are in their final years of high school. She gave evidence that both attend a Christian private school on a financial hardship bursary, where the combined fees are “$900 to $1,000”.. She said there are significant costs associated with maintaining their car which recently required new tyres and a reconditioned engine. She gave evidence that the family has not been in a position to replace old items of household equipment, such as their 27-year old washing-machine which regularly breaks down. She told the Tribunal each time the machine breaks down it costs at least $100 for the technician to come out and rectify the problem.
17. The Applicant told the Tribunal the family has medical and dental costs, which she could not estimate with accuracy. She gave evidence that two of her children are asthmatic and require Ventolin puffers, especially when suffering from infections. The Applicant told the Tribunal she has been diagnosed in the high-risk category for breast cancer in consequence of which she has regular mammograms and has had three biopsies performed. She gave evidence that her husband suffers from a bowel condition that has not yet been fully investigated and is awaiting a colonoscopy. She gave evidence her husband has special dietary requirements in consequence of his bowel condition. She said he also suffers from headaches and dizziness that may be related to the agricultural chemicals he is required to use in the production of bananas and macadamias on the farm. She told the Tribunal this condition has not yet been fully diagnosed.
18. The Applicant told the Tribunal she is very worried about her husband’s health and his ability to continue to work on the farm. She said she is also very worried about her own health and the possibility of breast cancer.
19. The Applicant informed the Tribunal she and her husband purchased a unit in Nambucca Heads a number of years ago as an investment. She said the investment had not been a success and the unit had been for sale for eight years. It was a coincidence, she said, that the unit sold during the period when Centrelink raised the overpayment debt. She told the Tribunal the sale yielded a net amount of $20,000, which represents their entire savings. She said they intend to use the money to purchase a house for their retirement.
20. The Applicant told the Tribunal the family went for a holiday on the coast together in August 2002 that cost approximately $2,000. She gave evidence that the family is lucky to have $50 per month left over once all the bills are paid and expenses met, in which case they may have a meal out together for a treat, at KFC or a pizza for example.
evidence of mr unterrheiner
21. Mr Unterrheiner told the Tribunal he earns $657 per week gross and pays $138 per week in tax. He said he receives $469 net after tax and $50 per week rent have been deducted by his employer. He gave evidence that his wife, the Applicant, earns $60 per week performing administrative duties on the farm and is paid approximately $40 per month for casual cleaning duties. He informed the Tribunal that his 23-year old daughter works for a church and a sports store on Saturday mornings for which she earns a total of $270 per week. He told the Tribunal his son is an apprentice who earns $260 per week. His son and his daughter live at home and pay for their own clothes and expenses, and help out with household costs as much as they can.
22. Mr Unterrheiner told the Tribunal the family has the following assets and liabilities:
ASSETS VALUE
Cash proceeds from sale of a unit $20,000
Toyota Landcruiser: $5,000 - $8,000
1,000 shares in Nambucca River Cooperative Store,
which were an inheritance from his father: $1,000
Household furniture and effects, including a computer
used by his daughter in her church work and a televisionbought by his mother for the family: $5,000 - $10,000
Shares in NRMA in consequence of demutualisation: $600
Superannuation in employer fund: $16,000
LIABILITIES
School fee arrears: $1,000
Tax debt: $260
Overpayment of Family Tax Benefit: $800
23. Mr Unterrheiner gave evidence that he suffers from a medical condition that is having an adverse impact upon his ability to perform his employment duties on the farm, the symptoms of which include headaches, dizziness and interrupted sleep. He told the Tribunal the condition has not yet been conclusively diagnosed and is being medically investigated, but may be a reaction to chemicals he is required to use on the farm in the cultivation of bananas and macadamias. He informed the Tribunal his doctor, Dr North, recommended he undergo chemical detoxification treatment on a regular basis over a twelve month period. Mr Unterrheiner said he is undergoing the treatment, but is still required to continue to use the sprays in the course of his employment. Mr Unterrheiner told the Tribunal the family’s continued residence in the house in which they have lived on the farm for the past 14 years is conditional upon his employment. He expressed concern that he may not be able to continue to work on the farm because of his medical condition, in consequence of which the family, then, would be forced to relocate into alternative accommodation.
24. Mr Unterrheiner stated that he has a stomach and bowel problem and is in the high-risk category for bowel cancer. He told the Tribunal that he was found to have “helicobacter” in his stomach four years ago but the bowel problem is not yet fully investigated and he is on a waiting list for a colonoscopy.
25. Mr Unterrheiner stated he has no formal qualifications or training. He told the Tribunal he is heavily involved with his church and runs the church youth group on a voluntary basis. He speculated about the likelihood of encountering difficulties securing suitable employment in the event he is prevented from continuing in his current employment on the farm.
26. Mr Unterrheiner gave evidence that he had paid part of the costs incurred when his mother recently underwent heart by-pass surgery. He told the Tribunal the surgery was performed in Sydney in consequence of which it was necessary to transport and accommodate his father and other family members in Sydney for the duration. He said both sets of parents lived nearby, but were unwell and had some difficulty visiting. He informed the Tribunal that he built a small cabin near the house for his parents to stay in to alleviate this difficulty. He said the cabin cost $3,500 which he was able to fund when his accumulated holiday leave entitlement was paid out.
27. Mr Unterrheiner gave evidence that he has the use of a farm vehicle for work purposes and his wife relies on their own vehicle for transport. He told the Tribunal he had borrowed $6,500 to repair the family vehicle in 2001, repaying the debt from the proceeds from the sale of the unit in Nambucca Heads. Mr Unterrheiner told the Tribunal the family is continuing to experience mechanical problems with the vehicle, in consequence of which he anticipates incurring additional mechanical repair costs.
submissions, consideration of the issues and findings
28. The Applicant and her husband gave their evidence openly and without guile, impressing the Tribunal as witnesses of truth.
29. The Tribunal carefully considered all the evidence, the submissions of the parties, the relevant legislation and caselaw in order to make the correct and preferable decision in this matter.
is there a debt to the commonwealth?
30. There is no disagreement between the parties that Rent Assistance was overpaid to the Applicant in the amount of $10,111.11, and the Tribunal so finds. The Tribunal has not recalculated the amount of the overpayment, finding there is no reason to doubt the rectitude of the original calculation by Centrelink.
31.Section 71 of the Act relevantly provides:
“71 Debts arising in respect of family assistance other than child care benefit and family tax benefit advance
…
Overpayment
(2) If:
(a) an amount (the received amount) has been paid to a person by way of assistance; and
(b) the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;
the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.”
32. This being the case, the Tribunal finds the amount of the overpayment of Rent Assistance is a debt due to the Commonwealth for which the Applicant is liable.
33. The Respondent accepts that the debt arose through the sole administrative error of the Commonwealth and was received in good faith by the Applicant. Having considered all the evidence in detail and being mindful of the authorities in relation to “good faith” (see Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127), the Tribunal finds no reason to disturb the Respondent’s concession. This being the case, the Tribunal finds the debt was solely caused in 1995 by the administrative error of the Commonwealth and the Applicant, being ignorant of any error and having diligently complied with her notification obligations, believed she was entitled to receive the amount she was paid, whereby she received those payments in good faith.
Should the debt be recovered?
34. The question before the Tribunal is whether the debt should be recovered from the Applicant in accordance with the recovery provisions of the Act. It is necessary, therefore, to determine whether the debt should be waived on the basis of the “administrative error” or “special circumstances” provisions of the Act.
administrative error
35. Prior to the commencement of the Act on 1 July 2000, the waiver of debts arising from the sole administrative error of the Commonwealth was governed by the operation of section 1237A of the Social Security Act 1991 (“the SS Act”), which provided:
“1237A Waiver of debt arising from error
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.”
36. Accordingly, as the circumstances of the present case satisfy the terms of the section, the Secretary must waive the Commonwealth’s right to recover the debt that had arisen prior to 1 July 2000, on which day section 97 of the Act came into effect. Thus, the Commonwealth’s right to recover an amount of $6,094.10 was waived pursuant to section 1237A of the SS Act.
37. Waiver of debts arising solely from the administrative error of the Commonwealth on and after 1 July 2000 must be considered pursuant to section 97 of the Act, which provides:
“97 Waiver of debt arising from error
(1) The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.
(2) The Secretary must waive the administrative error proportion of a debt if:
(a) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and
(b) the person would suffer severe financial hardship if it were not waived.
(3)The Secretary must waive the administrative error proportion of a debt if:
(a) the payment or payments were made in respect of the debtor's eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and
(b) the debt is raised after the end of:
(i) the debtor's next income year after the one in which the eligibility period or event occurs; or
(ii) the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;
whichever ends last; and
(c) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.
(4)For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.”
38. It is common ground that subsection 97(3) of the Act does not apply in the present case, the debt having been raised within the period contemplated by subparagraph 97(3)(b)(i) and the Tribunal so finds. It is necessary, therefore, to determine pursuant to paragraph 97(2)(b) whether or not the Applicant would suffer “severe financial hardship” if the remaining proportion of the debt, an amount of $4,017.01, is not waived.
39. Ms Buckley, for the Respondent, submitted that the debt could not be waived pursuant to section 97 of the Act as the Applicant would not suffer severe financial hardship if the debt were not waived. In Ms Buckley’s submission the monthly income received by the Applicant and her family exceeded the total amount of their monthly expenditures by approximately $400. Ms Buckley accepted that the Applicant’s financial circumstances were difficult but submitted that this does not constitute “severe financial hardship”, drawing the Tribunal’s attention to the cases of Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62 and Re Klaverstyn and Secretary, Department of Family and Community Services [2003] AATA 71.
40. In the case of Re Jones and Secretary, Department of Family and Community Services (supra) the Tribunal concluded at paragraph 25:
“However, the Tribunal was also satisfied that s97 could not apply as the applicant has not established severe financial hardship. The family is struggling. The Tribunal accepts that, in reality, their financial situation is not significantly different, despite their salaries, from that of people who receive social security. However, the term severe financial hardship must be seen in the context of the legislation. With income of $50,000.00 being well in excess of income support payments under the Act, severe financial hardship is not shown.”
41. In the present case the Tribunal finds the Applicant and her husband have a combined gross income of less than $39,000 and their two adult children, who are both in employment and reside with their parents, earn, in combination, a total of $27,560. The evidence is that the combined net weekly income of the Applicant and her husband is approximately $580 per week and their weekly expenses are approximately $600 per week. It is fair and reasonable in the circumstances to expect the Applicant’s two adult children to make a financial contribution toward the cost of their board and lodging from their earnings. Considering their earnings and the financial circumstances of the family, an amount of $50 per week each would not be an unreasonable sum. On that basis, the Applicant’s combined net weekly income would exceed weekly expenses by an amount of approximately $80. The Tribunal notes, furthermore, that the Applicant’s financial circumstances are not so severe to prevent her maintaining a tithing contribution to her church of $50 each week. This act of charity, while extremely generous in the circumstances, is, none-the-less, an item of discretionary expenditure that cannot be considered a necessity.
42. The Tribunal accepts that the Applicant is struggling to make ends meet without the additional burden of repaying the debt to the Commonwealth in the event that debt is not waived. The evidence is, however, that the Applicant has some capacity to repay the debt and is, in fact, repaying a debt to the Commonwealth at the rate of $20 per week. The Tribunal notes the observation of Deputy President Wright in the case of Re Klaverstyn and Secretary, Department of Family and Community Services (supra) at paragraphs 32 and 33:
“… In my opinion it will be difficult for him to repay the Commonwealth debt of $686.00, even at the rate of $30.00 per fortnight.
However, difficulty is not the same as severe financial hardship …”
43. The Tribunal notes the Applicant has access to family savings of $20,000 that she and her husband intend to use as a deposit on a property for their retirement. In the circumstances and considering all the evidence, the Tribunal is not satisfied that the Applicant would suffer severe financial hardship if the debt of $4,017.01 is not waived and so finds. This being the case the debt cannot be waived pursuant to section 97 of the Act.
special circumstances
44. The Applicant submitted that the debt should be waived in the special circumstances of the case. The Tribunal turns to consider section 101 of the Act, which provides:
“101 Waiver 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 the family assistance law; 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.”
45. The Tribunal is satisfied the Applicant and her husband have acted honestly and in compliance with family assistance law at all relevant times, and subsection 101(a) of the Act does not apply. The debt is recoverable at law and none of the grounds whereby a debt may be written off pursuant to section 95 of the Act are made out.
46. The Tribunal turns to consider whether there are special circumstances that make it desirable to waive the debt and, in so doing, is mindful of the authorities on this question. Heerey J observed in Secretary, Department of Family & Community Services v Allan (2000) 66 ALD 147 at 150:
“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances: Beadle v Director General of Social Security (1985) 7 ALD 670 at 673; 60 ALR 225 at 228. Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances: Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281 at 284-7; 65 ALD 211; 32 AAR 120; see also Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 71; 57 ALD 600 at 607.”
Toohey J in Re Beadle and Department of Social Security (1984) 6 ALD 1 said that circumstances must be unusual, uncommon or exceptional for them to be considered special circumstances. Keifel J commented in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545:
“The phrase “special circumstances”, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle’s case (at ALR 229; ALD 674), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this 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. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied.”
47. Ms Buckley drew to notice the case of Secretary, Department of Social Security v Hales (1998) 82 FCR 154 and the comments of French J at paragraph 155:
“From time to time in the administration of social security benefits overpayments occur. Sometimes these are the result of innocent non-compliance with the requirements of the law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place. 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 persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth. This case primarily concerns the proper construction of a section of the Social Security Act 1991 (Cth) which provides for the waiver of debts where special circumstances are found to exist. There is a tension in the construction of such provisions between the needs for certainty of application and flexibility of response to the situations that may arise from time to time.”
48. In the case at hand it is necessary, therefore, to consider whether something unfair, unintended or unjust has occurred, and to determine whether the circumstances of the Applicant are unusual, uncommon or exceptional to the extent that the circumstances constitute “special circumstances”.. In the event of such a determination it will then be necessary to determine whether it is appropriate to enliven the discretion to waive the debt.
49. The Respondent acknowledged the stress that is placed upon the Applicant and her family by raising and recovering the debt. The Respondent submitted, however, that debt-related stress, while unfortunate, is not an unusual or uncommon situation. The Respondent submitted that the Applicant’s financial circumstances were difficult and somewhat straitened, but were not exceptional. The Respondent accepted the Applicant's contention that she and her husband faced an uncertain future and that there was a lack of clarity surrounding Mr Unterrheiner’s medical condition and prognosis. These circumstances, in Ms Buckley’s submission, were neither unusual nor exceptional and, therefore, not special circumstances for present purposes.
50. Ms Buckley submitted on behalf of the Respondent that the existence of administrative error alone does not constitute special circumstances. She contended that waiving the debt in consequence of such a finding would frustrate the intent of the Parliament and pointed to the case of Re Bestel and Secretary, Department of Family and Community Services [1999] AATA 867. In Re Bestel (supra), the Tribunal found that Mr Bestel had a debt to the Commonwealth that was caused solely by the administrative error of the Centrelink as he did not receive the payments that gave rise to the debt in good faith. In the absence of other factors comprising special circumstances the Tribunal concluded at paragraph 69:
“The Tribunal does not consider in the circumstances of this case, having found that Mr Bestel did not receive the additional payments of parenting allowance in good faith, that it would be appropriate to use administrative error in these circumstances as a special circumstance. Such an approach would, the Tribunal believes, represent a frustration of the intention of Parliament, given that there is a provision under the Act which deals with sole administrative error which occurred in Mr Bestel's case.”
51. The Tribunal notes that Re Bestel (supra) is to be distinguished from the present case to the extent that the element of good faith was not made out in that case. The Tribunal is unable to accept the generality of the Respondent’s submission with regard to the constitution of special circumstances in cases where sole administrative error is found to exist. The Tribunal accepts that it would be inappropriate to permit section 101 of the Act to frustrate the intention of the Parliament expressed in section 97 of the Act. It does not follow, however, and there is nothing in the construction of section 101 of the Act to require it, that sole administrative error, in the absence of good faith or severe financial hardship pursuant to section 97 of the Act, must be excluded as a factor that may contribute to a finding of special circumstances.
52. In the Applicant’s submission recovery of the debt would be unfair. The Applicant submitted that she had always complied with Centrelink’s requirements, providing information openly and honestly. She submitted that Centrelink’s failure to identify and rectify the administrative error over a period of almost ten years, despite several changes to the governing legislation, constituted special circumstances. In her submission the debt was solely caused by an administrative error in 1993 which was not recognised until April 2002. She observed that Centrelink waived the debt that had arisen prior to 1 July 2000 but not thereafter. In the Applicant’s submission it was unfair and unjust to waive only the proportion of the debt that had arisen before the new laws came into effect, whereby the new severe financial hardship test was imposed upon the waiver of debts arising from administrative error. She contended that the onus was on Centrelink to ensure that all social security recipients were properly informed about the legislative changes and their possible effects. The Applicant submitted that Centrelink had failed in this regard. She submitted that Centrelink had neither audited their records prior to the implementation of the new debt recovery provisions in the Act nor informed them of the changes before they came into effect. In the Applicant’s submission, she and her husband were left in ignorance of the debt and, through Centrelink’s mismanagement, were denied the opportunity to address the error in payment of rent assistance before changes in family assistance law came into effect on 1 July 2000.
53. The Applicant submitted that recovery of the debt would be a further impediment to their purchase of a property for retirement purposes, thereby compounding the financial difficulties she and her husband face in that regard. In the Applicant’s submission, it would be unreasonable and unfair to expect her to repay the debt from the proceeds from the sale of the unit in Nambucca Heads as those funds are the family’s sole savings and are intended as a deposit on the purchase of a property. She submitted that in the event the property had not sold when it did, the funds would not be in the bank and would not be available to repay the debt. In her submission, in such circumstances, it would not be fair or just for Centrelink to require them to sell the unit, which was their only real asset.
54. In the Applicant’s submission the combination of difficult financial and health circumstances in the family and the uncertain future she and her husband face comprise special circumstances in consideration of which it is most appropriate to waive the debt.
55. The Tribunal has found as a fact that the family is not facing severe financial hardship. This does not, however, indicate that the family is in a comfortable financial position. Ms Buckley on behalf of the Respondent accepted that the Applicant is attempting to manage in difficult financial circumstances and the Tribunal agrees. The Tribunal finds that the Applicant is experiencing financial hardship, albeit not severe financial hardship. The Tribunal accepts that the Applicant and her husband have few assets and manage on a very tight budget. The level of financial hardship the Applicant faces, however, is not unusual, uncommon or exceptional among those on low incomes struggling to make ends meet and does not, therefore, of itself alone constitute special circumstances.
56. The Tribunal accepts that both Mr Unterrheiner and the Applicant face significant uncertainty in their medical and health outlook, enduring symptoms and incurring the cost of medical treatments and special dietary requirements. The Tribunal notes that such circumstances are not exceptional, being the unfortunate experience of many people suffering potentially serious health problems of one form or another. The Tribunal accepts that the Applicant and her husband are dependent upon his continuing ability to perform his duties on the farm if they are to remain in the house in which they have lived for the past 14 years. These factors alone do not, however, constitute special circumstances.
57. The Tribunal agrees with the Applicant’s contention that Centrelink should have informed her about the substance and likely effect of successive legislative changes and should have checked her records when implementing the changes. Centrelink’s failure to check or review the accuracy of the Applicant’s records over an extended period precluded discovery of the original administrative error and prolonged its effect, thereby increasing the amount of the overpayment and the Applicant’s debt. Centrelink’s failure to provide information about legislative changes and the implications of such changes meant the Applicant was not alerted to the changes and the likely effect of such changes on her income or her potential liability in the case of error.
58. It is clear from Ms Buckley’s submissions and the Respondent’s concessions in this matter that the introduction on 1 July 2000 of the severe financial hardship test alone prevented the Respondent from waiving the entire debt. The introduction of the new test, in effect, narrowed the circumstances in which debts arising solely from administrative error of the Commonwealth must be waived. It follows, therefore, that the potential liability of a person receiving family payments under the Act to repay debts arising solely from Commonwealth error increased on 1 July 2000 in relation to those payments, even though the person may have received the payments in good faith.
59. In the present case, the Applicant gave evidence, which was not contested, that she was not informed of the changes on 1 July 2000 that affected her liability to repay an accumulating debt of which she was ignorant and in relation to which she was receiving payments in good faith. It is a fact that the debt arose solely from a Commonwealth error, which occurred at least five years prior to the introduction of legislative amendments on 1 July 2000 and was perpetrated thereafter by Centrelink’s failure to identify the error.
60. Considering all the evidence, the submissions of the parties, the relevant legislation and caselaw, the Tribunal is satisfied the constellation of factors in this case constitute special circumstances pursuant to section 101 of the Act. Centrelink’s failure to identify its administrative error over an extended period of time, its failure to inform the Applicant about the substance and effect of legislative changes, whereby her potential liability to repay a debt to the Commonwealth that she was unaware of and was receiving in good faith increased, and the health and financial circumstances in which the Applicant finds herself are sufficiently unusual and uncommon to be considered special. The Tribunal so finds.
61. Further, the Tribunal finds that the effect of strictly applying the debt recovery provisions of the Act would be unfair and unjust in the circumstances of the present case. The Respondent must bear responsibility for verifying the basis of claims and the payment of allowances under the Act in accordance with law, and informing recipients of changes that may affect them. In this case, the Respondent did not fulfil its responsibilities despite the passage of at least eight years and the passage of successive amending legislation.
62. In such circumstances it would be unfair and unjust to require the Applicant to repay the remaining proportion of the debt to the Commonwealth that has been raised against her. This being the case, the Tribunal finds it is appropriate in the special circumstances of the case to waive the Commonwealth’s right to recover the amount of $4,017.01 from the Applicant pursuant to section 101 of the Act.
decision
63. The Tribunal determines to set aside the decision under review and, in substitution therefor, decides that the Commonwealth’s right to recover a debt in the amount of $4,017.01 from the Applicant is appropriately waived in the special circumstances of this case.
I certify that the 63 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S Webb, Member
Signed: L Bonouvrie
AssociateDate/s of Hearing 19 March 2003
Date of Decision 29 May 2003
Advocate for the Applicant Self Represented
Advocate for the Respondent Ms Marian Buckley
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