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

[2009] AATA 668

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 668

ADMINISTRATIVE APPEALS TRIBUNAL      )   

)    No: 2008/6008

GENERAL ADMINISTRATIVE DIVISION        )   

ReChristopher Watt

Applicant

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

Respondent

DECISION

TribunalMs N Isenberg, Senior Member

Date4 September 2009

PlaceSydney

DecisionThe decision under review is varied so as to reflect an adjustment such that Elayan & Watt’s profits of $2513 are not be attributed to Mr Watt for the 2006 financial year. Payment of the amount of the adjusted total debt as remains unpaid at the date of this decision is waived under S1237AAD.

....................[sgd]..........................
  Ms N Isenberg, Senior Member

CATCHWORDS SOCIAL SECURITY – disability support pension – debt due to the Commonwealth – quantum of debt – whether debt should be waived – “special circumstances” – decision under review is varied.

…

RELEVANT ACT/S:

Social Security Act 1991 – ss 9, 55, 68, 1076, 1122, 2707X, 1223(1), 1236(1A), 1237A(1), 1237AAD

…

CITATIONS

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Dainty and Minister for Immigration and Ethic Affairs (1987) 12 ALD 416

Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82

Re Gordon v Department of Social Security 16 AAR 100

Re Boyd v Secretary Department of Social Security (1994) AATA 580

Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225

Unicomb v Secretary, Department of Social Security 50 ALD 405

Secretary, Department of Employment, Workplace Relations and Dolores Vanderpluym [2007] FCA 876

Gillett and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 102

Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435

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

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

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

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

Secretary, Department of Social Security v Hales (1998) 82 FCR 154

Davy v Secretary, Department of Employment & Workplace Relations (2007) 94 ALD 693

…

REASONS FOR DECISION

4 September 2009 Ms N Isenberg, Senior Member

Decision under review

1.      The decision under review is a decision of the Social Security Appeals Tribunal (SSAT) dated 28 October 2008, which affirmed the following decisions of the respondent:

§To raise and recover a debt of disability support pension in the amount of $8,998.74 for the period 21 June 2000 to 17 August 2005 (decision dated 16 November 2006); and

§To raise and recover a debt of age pension in the amount of $361.78 for the period 18 August 2005 to 4 July 2006 (decision dated 28 February 2007).

Basic facts

2.      Mr Watt, is a former practising accountant.  He was paid disability support pension (DSP) between 23 June 1988 and 17 August 2005, and, the age pension, from 19 August 2005 to 4 July 2006.

3. In June, September and December 2000 Centrelink sent Mr Watt ‘information notices’ under section 68 of the Social Security (Administration) Act 1999 (‘Admin Act’) setting out his obligation to notify Centrelink if his circumstances changed.

4.      On 18 June 2001 and 23 November 2001 Centrelink sent Mr Watt requests for information about his involvement in Legh Manor Investments Pty Ltd (‘Legh Manor’).  No response was received and Mr Watt’s DSP was cancelled on 18 December 2001.

5.      On 24 December 2001, Mr Watt faxed to Centrelink a summary of his taxable income for period 30 June 1998 to 30 June 2001 and advised he was unable to complete the Private Company module (Mod PC) that had been previously been sent to him.

6.      In January 2002 Mr Watt completed a pension re-claim and also provided documents in relation to Legh Manor including a Balance Sheet to 30 June 2001, Profit and Loss Account, and Company Tax Return.  He also completed a ‘Module PC’ in relation to Legh Manor. 

7.      On 13 March 2002, Centrelink sent Mr Watt another information notice which, relevantly, advised him to tell Centrelink ‘if you are involved in, or receive benefit from, a private trust or private company’.  A similar letter was sent to Mr Watt in May and June of 2002.

8.      On 14 May 2002 Centrelink raised a debt of $234.39 on the basis that Mr Watt’s income from Legh Manor had not been taken into account.  Mr Watt contacted Centrelink to advise that he did not agree that the loan by him to his company should be assessed.

9.      In February and March 2003, Centrelink sent Mr Watt a request for information in relation to Legh Manor.  As no reply was received Mr Watt’s DSP was suspended in April 2003.  When it was restored Centrelink sent Mr Watt further information notices.

10.     On 3 July 2003, Mr Watt provided information in relation to Legh Manor including the 2002 Company Tax Return, Balance Sheet, Profit and Loss and Balance Sheet and Profit and Loss to 25 May 2003.  On 6 August 2003, he also provided a redrawn copy of the Legh Manor Balance sheet as at 30 June 2001.

11.     On 4 July 2003, a complex assessment officer (CAO) reviewed the decision to attribute to Mr Watt income from Legh Manor, and on 8 August 2003, an authorised review officer (ARO) in consultation with the CAO decided to accept the redrawn balance sheet, and, as a result, Mr Watt’s rate of pension was increased.

12.     On 14 August 2003, the CAO wrote to Mr Watt seeking further information including details of wages, and personal tax returns, but when no response was received, his DSP was again suspended.

13.     On 10 December 2003, Mr Jamal Elayan, Mr Watt’s then business partner, provided copies of the tax return and profit and loss account for Legh Manor for the 2003 financial year.  After questions by the CAO, Mr Elayan sent Centrelink a different version of the 2003 Balance Sheet showing a loan of $37,490.41 to Elayan & Watt Pty Ltd (‘Elayan & Watt’) and a loan to Mr Watt of $54,602.48.  Centrelink had not previously been aware that Elayan & Watt may have had any relevance to Mr Watt’s affairs.  On 24 February 2004, Centrelink obtained an extract from the ASIC database in relation to Elayan & Watt and ascertained that Messrs Watt and Elayan were its directors and shareholders.

14.     On 2 March 2004, Centrelink wrote to Mr Watt seeking details of his involvement in the Elayan & Watt.  No response was provided and Centrelink did not follow up its request.

15.     On 6 January and 10 February 2005, Centrelink sent notices to Mr Watt asking for updated information in relation to Legh Manor and, when no response was received, his DSP was once more suspended.

16.     On 12 April 2005 Mr Watt provided information in relation to Legh Manor including a 2004 company tax return, balance sheet and profit and loss account and a Module PC.

17.     On 18 May 2005, a CAO decided to reduce Mr Watt’s assessable income because Legh Manor was deregistered from 22 April 2005.  The shares that were previously owned by Mr Watt in Legh Manor were recorded on his personal Centrelink record.

18.     Mr Watt requested a review of the decision to record shares on his Centrelink record.  On 25 July 2006 an ARO decided that the decision to assess shares as Mr Watt’s personal investments and also assess earnings from All States Taxation Services was correct.

19.     On 23 August 2006 Centrelink received information from Mr Elayan which included Profit and Loss Accounts, company tax returns and PAYG summaries for the company for the years 2000 to 2005, and balance sheets and tax notices for Elayan & Watt.  As a result, a CAO determined that an overpayment of pension to Mr Watt should be investigated, and as a result, on 16 November 2006, Centrelink decided that Mr Watt had been overpaid $9,360.52 ($8998.74 in respect of DSP and $361.78 in respect of age pension) in the period 21 June 2000 to 21 June 2005.  That decision was affirmed on internal review and by the SSAT.

20.     On 17 December 2008 Mr Watt sought review by this Tribunal.

Issues before the Tribunal

21.     The issues before the Tribunal are:

·Whether Mr Watt owes the Commonwealth a debt for overpayment of DSP and age pension; and if so,

·Whether there are any grounds not to recover any or part of the debt.

Applicable law

22. Section 55 of the Social Security Act 1991(‘the Act’) provides that a person’s rate of pension is worked out using the Pension Rate Calculator A at the end of section 1064.  That section requires the combined income and assets of a person to be taken into account in the calculation of the rate of pension.  A person is paid the lower of the rates calculated under each of the income and assets tests. 

23.     Income is defined in section 8 to include an income amount earned, derived or received by the person for the person’s own use or benefit.  Ordinary income means income that is not maintenance income or an exempt lump sum.

24.     Asset is defined in s11 as property or money.  A financial asset includes a financial investment which includes “a loan that has not been repaid in full”: S9.

25. Section 1122 provides that the value of the assets of a person who lends an amount includes so much of that amount as remains unpaid and section 1076 sets out the method for determining deemed income from financial assets. Sections 1207N and 1207X set out the criteria for the attribution to individuals of the assets and income of private companies.

26.     Section 1223 states that if a person who obtains the benefit of a social security payment was not entitled to that benefit, the payment is a debt due to the Commonwealth. 

27. Section 1236 provides for the writing off of a debt. Section 1237A provides for waiver of a debt attributable solely to administrative error by Centrelink if the debtor received the payment in good faith the payment. Section 1237AAD of the Act enables waiver of a debt if it did not arise from the debtor knowingly making a false statement or failing to comply with the Act. There must, however, be ‘special circumstances, other than financial hardship alone.

The Hearing

28.     The hearing was conducted at Mr Watt’s home.  He was assisted by his friend Geoffrey Brindle, who also gave evidence.  James Larcombe for the respondent also attended the applicant’s home, as did Ms York Choing, the Complex Assessment Officer (CAO).

29. .The documents before the tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act1975 (the T documents), submissions filed by the applicant, dated 14 July 2009 (Exhibit A3) and 1 August 2009, a handwritten document entitled ‘Elayan, Watt & Co P/L – Loans’ (Exhibit A1) and a document entitled ‘All States Taxation Services – Account Transaction [Accrual] – 1/07/2004 to 30/06/2005’ (Exhibit A2).

30.     Mr Watt contended that Centrelink’s decision as affirmed by the SSAT was legally flawed, and could not be ‘justified in terms of natural justice’ and that Centrelink is, in fact, the party at fault having resorted to a combination of unlawful and most improper/unreasonable conduct.  His lengthy submissions addressed primarily Centrelink’s ‘arbitrary’ actions, and in particular, the delay in assessing Mr Watt’s entitlements once it was aware of his interest in Elayan and Watt.  He mentioned many times that Centrelink had failed to tell him ‘what [his] assets could be’.

Consideration of the facts and law

Overpayment

31.     The rate at which a person’s pension is payable is determined with reference to their assets and income.  The Secretary contends that Mr Watt’s actual and deemed income was not properly taken into account when his rate of disability support pension and age pension was calculated. 

32.     The overpayment was said to have arisen because of misapprehensions by Centrelink which led to the following not being taken into account:

·Loan to Elayan and Watt

·Deemed income from Elayan and Watt income

·Profits from Elayan and Watt

·Income from Legh Manor

·Understated wages

Loan to Elayan and Watt

33.     Mr Watt and Mr Elayan were directors and shareholders of Elayan & Watt from 11 May 2000.  

34. Centrelink contends that Mr Watt failed to comply with the Centrelink notices issued to him under subsection 68(2) of the Admin Act in that he failed to inform Centrelink about his interest in Elayan & Watt. As such, Centrelink submits that Mr Watt’s DSP and age pension should be retrospectively cancelled/reduced from the date of the commencement of the two debts for the periods 21 June 200 to 17 August 2005 and 18 August 2005 to 4 July 2006.

35.     Mr Watt said that he had told Centrelink about Elayan &Watt from 2000 - ‘since it was incorporated’, but there was no evidence to that effect.  Centrelink’s actions after that date are inconsistent with it having been informed of Mr Watt’s interest in the company. 

36.     He said in cross examination that he had not lodged a ‘Module PC’ in relation to Elayan & Watt as he had done for Legh Manor in January 2002, because he thought Mr Elayan would do so.He also said that he did not know he had to do one for each company, notwithstanding that the form clearly says that a separate form is required for each company.

37.     He also contended that he notified Centrelink of his involvement in Elayan & Watt in the course of discussions with an ARO on 8 August 2003.  The notes accompanying the relevant ARO decision however confirm that while discussions took place they related only to Legh Manor, and make no reference whatsoever to Elayan & Watt.

38.     Centrelink clearly became aware of Elayan & Watt though in December 2003, when a CAO identified a discrepancy in the Legh Manor 2003 company income tax return and balance sheet.  In February 2004 Centrelink obtained a company search indicating Mr Watt and Mr Elayan were directors of Elayan & Watt.  Centrelink then wrote to Mr Watt seeking details of his involvement in Elayan & Watt but Mr Watt did not respond.

39.     Financial statements for Elayan & Watt were subsequently obtained from Mr Elayan.  The accounts show liabilities including a loan by Mr Watt with balances as follows:

30/6/00          $51,250        

30/6/01          $45,265         

30/6/02          $42,775         

30/6/03          $37,541         

30/6/04          $30,262        

30/6/05          $9,114 

40.     Mr Watt said that he did not dispute that there were loans between himself and the companies nor that there was deemed income from the loans. 

41.     There were two versions of the 2003 Balance Sheet for Legh Manor.  The latter showed a loan of $37,490.41 to Elayan & Watt and a loan to Mr Watt of $54,602.48.  Mr Watt denied though that there was any loan between the companies.  Ms Choing, a CAO gave evidence that the loans between companies were not taken into account.

42.     Mr Watt said at the end of each financial year Mr Elayan would allocate wages which were added onto the loan account.  To that extent Centrelink was ‘double counting’ when it counted both the loan accounts and also income.

43.     Mr Watt told me and, previously the SSAT, that he had prepared all the financial accounts (for both Legh Manor and Elayan & Watt) up until he was too ill to do so in 2005 when he had a heart attack and was hospitalised.  Mr Elayan’s role was to enter the information onto the computer.  I therefore have difficulty in accepting that the accounts were not as he had prepared himself.

44.     Mr Watt claims that the loans existed ‘on paper only’.  He agreed however that the loans recorded were reported to the ATO. 

45.     He also contended that the 2005 figure is reduced by about $20,000 because there was no value placed on goodwill.  He submitted that for the earlier years $20,000 should similarly be reduced to account for non-existent goodwill, but there was, in my view, no basis for doing so.  The reduction of $20,000 for goodwill in 2005 may be appropriate given that the business potentially floundered, given Mr Watt’s poor health and his deteriorating relationship with Mr Elayan.  There were, however, no notes to the accounts or other data to support that contention.

46.     Mr Watt agreed that in the course of the year he would receive some payments in reduction of his loan account.  From his evidence about the reduction in the loan account he received: 2001 $51,250 - 45,265 = $5,985 (p307); 2002 $45,265 - $42,775 = $2,490 (p306); 2003 $42,775 - $37,540 = $5,235 (305); 2004 $37,540 - $30,262 = $7,278 (p304).

47.     He said this was in addition to the $100 per week he received by way of wages.

48.     I accept Centrelink’s submission that the loan reflected the company’s indebtedness to Mr Watt and was properly recorded in the financial statements in accordance with the Corporations Act2001.

49.     Instruction 4.6.5.65 of the Guide to Social Security Law lists circumstances where, even if an amount is legally a loan, it may be regarded as no longer existing for social security purposes.  However none of the circumstances that applies to Mr Watt.

50.     Part 4.6.5.60 of the Department’s Guide to Social Security Law is also relevant to this case and provides that:

Loans made by the customer

Money loaned by a customer is an assessable asset (1.1.A.290). The value is the amount owed to the customer but does not include any interest payable on the loan. The asset value applies whether or not the loan is performing to the terms of the loan agreement. …

51.     Whilst this Tribunal is not bound to apply policy guidelines (see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60) the Tribunal will usually apply the guidelines unless there are cogent reasons in a particular case for not doing so: see Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-645; Re Dainty and Minister for Immigration and Ethic Affairs (1987) 12 ALD 416 at 417; and Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82 at 86.

52.     The words “lend” and “loan” are not defined in the Act.  In Re Gordon v Department of Social Security 16 AAR 100 at 103, to which I was referred, Deputy President Forgie referred to the definition of loan in Chitty on Contracts, 1989 26^th edition and in particular the passage which distinguishes loans from other forms of debt.  That passage reads as follows (at para 3574 in Chitty)

``Definition of loan. A contract of loan of money is a contract whereby one person lends or agrees to lend a sum of money to another, in consideration of a promise express or implied to repay that sum on demand, or at a fixed or determinable future time, or conditionally upon an event which is bound to happen, with or without interest. In many circumstances, the question whether a particular transaction is, in law a loan or not will be immaterial, since the transaction will take effect according to the intention of the parties, however the contract may be classified. But in some circumstances it is necessary to define the nature of a transaction because of particular statutory provisions which may apply to contracts of loan but not to other contracts. In these circumstances the question is, in the last resort, always a question of construction of the particular provision, and it would be unsafe to assume that a transaction which would be classified as a loan for the purposes of one statute will necessarily be so classified for the purposes of other statutory provisions. But subject to this caveat, the authorities on the meaning to be attached to the word `loan’ in a particular statutory context are useful in showing the normal commercial definition of a contract of loan.'’

53.     The Tribunal in Re Boyd v Secretary Department of Social Security (1994) AATA 580 was of the view that s 1122 of the Act is clear in its effect: the value of the loan is that amount that "remains unpaid".

54.     Even if a loan cannot be repaid, the unpaid amount still is to be treated as an asset even if this produces unjust results in some circumstances:  Clayton and Secretary, Department of Family and Community Services [2003] AATA 1225.

55. For the purposes of s 1122 there is no requirement that the person has gained a net advantage from the loan transaction so far as his total assets are concerned: Unicomb v Secretary, Department of Social Security 50 ALD 405.

56.     The Federal Court in Secretary, Department of Employment, Workplace Relations and Dolores Vanderpluym [2007] FCA 876 also concluded that for the purposes of section 1122 of the Act, so much of the loan that remains unpaid is to be included in the calculation of the assets.

57.     I therefore find the loans are properly considered to be ‘financial assets’ under section 9 of the Act.

58.     If Mr Watt were to claim that the loan had been forgiven, then the loan would be regarded as a disposal of an asset which would be assessable for 5 years as from the date the loan was forgiven.

Deemed Income

59. Financial assets are deemed to produce an amount of ordinary income: section 1076. I have found that Mr Watt’s assets include his loans to Elayan & Watt. Income is deemed to have been derived from those assets pursuant to section 9 and section 1076 of the Act: Gillett and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 102.

Profits

60.     While Elayan & Watt recorded a loss in the 2001, 2002, 2003 & 2005 financial years, it made profits of $14,331 in the 2004 financial year, and $5,026 in the 2006 financial year.  Centrelink contended that 50% of the income of Elayan & Watt should be attributed to Mr Watt under section 1207X of the Act because Mr Watt held one A class share of the 2 shares issued in the company: Section 1207X.

61.     Referring to the ‘control’ test outlined in Section 4.12.1.30 of the Guide to Social Security Law, Centrelink contended that Mr Watt has been correctly attributed with 50% of Elayan & Watt.  I agree with this submission in relation to the 2004 financial year.

62.     I have come to a different view though with respect to the 2006 year.  Mr Watt recounted that Mr Elayan had assaulted him in 2005.  That year, when Mr Watt became ill, Mr Elayan had taken over all the company’s assets and had ‘stolen’ the business, taking all the clients and commenced operating under his own name.

63.     I accept Mr Watt’s evidence that in the 2006 financial year Mr Watt had no control over the company and that 50% of E&W’s profits (ie $2513) should not be attributed to him for the 2006 financial year.

Income from Legh Manor

64.   Mr Watt contended that Centrelink had made significant errors in its statement of his financial position. 

65.     He referred to the 2001 Balance Sheet for Legh Manor Investments Pry Limited provided to Centrelink on 24 Jan 2002 which showed assets including two loan accounts by Mr Watt totalling $66,487.18 and liabilities including two loan accounts to Mr Watt totalling $86,069.26.

66.     For reasons which are unclear, another version of the 2001 Balance Sheet for Legh Manor Investments Pry Limited was provided to Centrelink which showed no loan asset, only a liability of $19,582.08 to Mr Watt.

67.     Mr Watt submitted, both orally and in his written submissions, that it was unfair, when the ARO accepted the later financial statements, for Centrelink to subsequently prefer the earlier financial statement. 

68.     Centrelink, however, agreed that it was appropriate for the 2^nd financial statement to be taken into account in its calculations, and had done so.

Wages

69.     Mr Watt notified Centrelink of earnings of $5181 per annum in December 2001.  Earnings of $100 per week ($5200pa) were advised in a letter of 9 December 2003 from Mr Elayan.  Mr Watt’s entitlements were calculated on this basis.

70.     However, information provided by Mr Elayan on 23 August 2006 indicates Mr Watt’s wages were as follows:

·$5,712 in the 2001/02 financial year

·$5,720 in the 2002/03 financial year

·$5,200 in the 2003/04 financial year

·$5,300 in the 2004/05 financial year

71.     Mr Watt said he thought Centrelink had previously been informed of his income.  Even if Centrelink was not informed precisely, then he was confident that on average it still amounted to $100 per week.

72.     The correct amount of Mr Watt’s earnings was not initially taken into account when making payments of DSP and age pension and Centrelink is correct in adjusting his entitlement accordingly.

73.     Mr Watt was therefore overpaid DSP in the period 21 June 2001 to 17 August 2005, and age pension in the period 18 August 2005 to 4 July 2006.  Some SMALL adjustment to the total debt of $9,360.52 is necessary to take into account my findings at paragraph 63.

74.     The amount overpaid is a debt in accordance with section 1223 of the Act.

Recovery of the debt

Write-off

75. The Act makes provision in limited circumstances for debts not to be recovered. Pursuant to s 1236(1A) of the Act a debt may be written-off in very specific circumstances, 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.

76.     None of these apply to Mr Watt.  In particular, he has the capacity to repay the debt through deductions from his ongoing payments of age pension and it is therefore not appropriate to write off the debt.

Waiver

77.     A debt may be waived under s 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.

78.     For a debt to be waived under section 1237A, two conditions must be met:

·that the debt arose solely because of administrative error; and

·payments were received by the debtor in good faith.

Was the debt solely attributable to administrative error by the Commonwealth?

79.     Mr Watt contended that the error in paying him was as a result of Centrelink’s failure to take into account his interest in Elayan & Watt.  As discussed at paragraph 35 above I do not accept that Centrelink was aware of Mr Watt’s interest in Elayan & Watt since 2000 or that it was discussed in 2003.  In coming to that view I note Mr Watt’s long history of failing to properly inform Centrelink, when requested, as to his financial circumstances, and his evidence that he could not recall if he had read the Centrelink letters.

80.     I therefore find that the debt did not arise solely from Centrelink’s error.

Were the payments received in good faith?

81.     Having come to the above view it was not necessary for me to consider if the payments were received in good faith.

Special Circumstances

82. Section 1237AAD of the Act is a further provision that allows for waiver of debts in “special circumstances”:

(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, the  Administration 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.

83.     Before considering Mr Watt’s circumstances I must be satisfied that he is not precluded from consideration by 1237AAD(a).

84.     I accept that there was no evidence that Mr Watt intentionally or deliberately failed to comply with his obligations: inadvertent or unintentional failure does not constitute "knowingly", even when an applicant knows he or she needs to notify: Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435.

85.     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) 6 ALD 1) where (at [3]) 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". See also Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 per Besanko J at [33].

86.     In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel 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.

87.     Evidence was given about several aspects of Mr Watt’s personal circumstances which were said to be ‘special’. 

88.     Mr Watt is in very poor health.  He has multiple serious medical conditions which significant limit his mobility and quality of life.  His GP visits him fortnightly and other than being transported monthly for out-patient visits to the hospital, he does not leave the home.  His is assisted by Homecare 3 times a week.  Watching Foxtel is his only entertainment.  He lives in rental accommodation and has no assets whatever other than less than $1500 in the bank.  He has no family at all and his only friend is Mr Brindle who provides emotional support.  He was assaulted by his former business partner who ‘stole’ his business (which he estimated to be worth about $200,000), taking all the clients and operating under his own name when Mr Watt became ill.  He estimates that Mr Elayan owes him $30,000 but he has no prospects of recovery and is in neither a physical nor financial position to pursue him.

89.     Each matter is different.  Mr Watt has, for a few years, had the benefit of about $9000 to which he was not entitled.  Taxpayers are entitled to expect that in the ordinary course money paid to Centrelink beneficiaries to which they are not entitled will be recovered: Secretary, Department of Social Security v Hales (1998) 82 FCR 154. More recently, that approach was adopted in Davy v Secretary, Department of Employment & Workplace Relations (2007) 94 ALD 693 at 716.

90. I accept though that Mr Watt has had a long and frustrating period of time trying to ascertain precisely where he stands with Centrelink. I agree that his circumstances are unfortunate and have come to the conclusion that they are, taken together, sufficiently unusual or unfair that would justify a waiver of some of the debt under s 1237AAD of the Act.

91.     At the time of the SSAT hearing in October 2008 Mr Watt had repaid Centrelink $4,139.20 and deductions of $85.90 were being made fortnightly from his pension.  The total debt, which is to be adjusted because of my findings in paragraph 63 above, is waived to the extent of all monies currently outstanding in respect of the raised debts, as adjusted.

92.     As to Mr Watt’s contention of a denial of natural justice I observe that Centrelink has corresponded at length over the years with Mr Watt and, when he chooses, he has responded at length.  I note that, for his convenience, the SSAT convened its hearing at his home, as did I.  He was given the opportunity to make submissions both orally and in writing, and he did so at length.  I therefore absolutely reject any suggestion that there has been a denial of natural justice.

Decision

93.     The decisions to raise a DSP debt in the sum of $8998.74 in respect of the period 21 June 2000 to 17 August 2005 and age pension of $361.78 in respect of the period 18 August 2005 to 4 July 2006 are varied so as to reflect an adjustment such that Elayan & Watt’s profits of $2513 are not be attributed to Mr Watt for the 2006 financial year.

94. Payment of the amount of the adjusted debt as remains unpaid at the date of this decision is waived under S1237AAD.

I certify that the 94 preceding paragraphs are a true copy of the reasons for the decision herein of,

Signed:   ....................[sgd].....................................................
               Renee Wallace, Associate

Date/s of Hearing:  28 July 2009
Date of Decision:  4 September 2009
Solicitor for the Applicant:                  Self Represented
Solicitor for the Respondent:             James Larcombe, Centrelink Legal