Weiss and Secretary, Department of Family and Community Services

[2004] AATA 758

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 758

ADMINISTRATIVE APPEALS TRIBUNAL      )

)     No Q2003/1050 and Q2003/1087

GENERAL ADMINISTRATIVE DIVISION		)
Re		PETER WEISS

Applicant

And SECRETARY, DEPARTMENT
OF FAMILY AND COMMUNITY SERVICES

Respondent

Re             SECRETARY, DEPARTMENT

OF FAMILY AND COMMUNITY
  SERVICES

Applicant

And          PETER WEISS

Respondent

DECISION

Tribunal Ms MJ Carstairs, Member

Date20 July 2004

PlaceBrisbane

Decision The Tribunal varies the decision under review and decides that the applicant owes a debt to the Commonwealth in the sum of $20,361.37 for the period January 1996 to 17 March 1998 and that debt should be recovered.

[Sgd]        
  MJ Carstairs

Member

CATCHWORDS

SOCIAL SECURITY – benefits and entitlements – overpayment of newstart allowance – criminal conviction for misappropriating Centrelink funds during period 29 January 1996 to 1 September 1997 – applicant failed to advise Centrelink of income after 1 September 1997 – debt owed to Commonwealth – recovery of debt - applicant bankrupt – bankruptcy now discharged – discharge does not prevent recovery of overpayment as it arose from fraud by the applicant – sentencing judge on criminal offences did not make any finding as to applicant’s inability to repay the misappropriated monies – applicant has capacity to repay - no  basis to waive recovery of debt

SOCIAL SECURITY – benefits and entitlements – recovery of debt – garnishee action – process for issuing garnishee notice properly followed

Social Security Act 1991 ss 1224, 1230C, 1233, 1237AA, 1237AAD

Social Security (Administration) Act 1999 s 157

Bankruptcy Act 1966 s 153

Re Civitareale and Secretary, Department of Family and Community Services (1999) 57 ALD 451

Secretary, Department of Social Security v Southcott (1998) 50 ALD 162

Walker v Secretary Department of Social Security (1997) 48 ALD 512

Briginshaw v Briginshaw (1938) 60 CLR 337

Re Secretary, Department of Social Security and Truscott (1995) 39 ALD 597

Minister for Immigration and Ethnic Affairs v Daniele (1981) 5 ALD 135

REASONS FOR DECISION

20 July 2004  Ms MJ Carstairs, Member

1.      Application number Q2003/1050 is an application by Peter Weiss (the applicant) for review of a decision made by the Social Security Appeals Tribunal (the SSAT), on 1 December 2003, varying a decision of a Centrelink delegate of Secretary to the Department of Family and Community Services (the respondent), that the applicant owed a debt to the Commonwealth.  The respondent’s delegate had determined the debt at $20,361.37, but had later added a sum of penalty interest. The SSAT varied the amount of the debt, reducing it to $15,212.31.  The issue about penalty interest has been resolved as the respondent agrees with the conclusion reached by the SSAT that no penalty interest applied during the period that the applicant was declared bankrupt, that is from 11 November 1998 to the discharge date of 3 May 2003.

2.      The respondent also lodged an application for review of the SSAT’s decision (application number Q2003/1087).  These reasons and the ultimate outcome relate equally to this application as to Mr Weiss’ application for review.

3. At the hearing the applicant represented himself. The respondent was represented by Ms H Wallis-Dunn. The Tribunal had before it the documents lodged under s37 of the Administrative Appeals Tribunal Act1975 (numbered T1-T55) as well as exhibits marked A1-A2 for the applicant and R1 for the respondent.  The Tribunal also had before it the Statements of Facts and Contentions for the applicant dated 12 April 2004 and for the respondent dated 7 April 2004.

BACKGROUND

4.      The applicant is aged forty. He is married with three children.  Another child is expected soon.  The applicant pleaded guilty to criminal charges including misappropriation, in relation to his receipt of newstart allowance in the period 29 January 1996 to 1 September 1997 (“the period”).  During the period he was operating a construction business, Weiss Constructions. The applicant was convicted of offences under Queensland and Commonwealth legislation by Hangar SJDC in the District Court of Queensland at Southport on 14 March 2000.  He received a two year goal sentence for the offences relating to the receipt of newstart allowance, which was to be served concurrently with terms of imprisonment imposed for the other offences.  The cumulative sentence was seven years, with a non-parole period of two and a half years, which he served.  He was released on 15 September 2002.

5.      The applicant was declared bankrupt by creditor’s petition on 11 November 1998 and was discharged from bankruptcy on 3 May 2003. On 13 May 2003 Centrelink sent a letter of demand claiming a debt totalling $25,794.38 (T7).  This included penalty interest, now not disputed as wrongly imposed during the bankruptcy. The applicant queried the letter of demand, stating that because he had been discharged from bankruptcy he should not be required to repay.  On 1 August 2003, Centrelink again wrote to the applicant, and informed him that action would be taken to direct that money being held by the Australian Taxation Office, and otherwise payable to the applicant, should be paid to Centrelink (the garnishee action) (T9).  The amount garnisheed from the tax refund on 1 August 2003 was $6,788.52. The applicant now makes regular weekly payments of $30 per week towards the debt.  He did not do so prior to the garnishee action.

6.      The applicant sought review of the decision to recover the debt and, in particular, the garnishee action.  An authorised review officer affirmed the decision to recover the debt and the legality of the garnishee action.  When the SSAT reviewed the matter, the SSAT reduced the amount of the debt to $15,212.31, but otherwise affirmed the decision that the debt should be recovered and affirmed that the garnishee action was in accordance with the law.  The SSAT confined the debt to the period 29 January 1996 to 1 September 1997, as the SSAT was satisfied that the period matched the period for which the applicant was prosecuted; that after 1 September 1997 the applicant’s business had collapsed; and he was taking steps to secure employment, that is, carrying out his obligations to qualify for newstart allowance.

7.       The applicant sought review with this Tribunal on 24 December 2003.

EVIDENCE

8.      The applicant said that when he had originally claimed newstart allowance in 1996 he was experiencing financial difficulties in his business.  He said that he acknowledged the debt until September 1997, and said this was reflected in submissions at his trial.  He said that, on 11 August 1997, the Building Services Authority cancelled his building licence, and other cancellations flowed from this, including the cancellation of his business name, which effectively meant the end of his business operations.  He said he then was unemployed and he looked for other work and tendered for government contracts on behalf of others. He said that if work was offered he could have obtained a supervisor’s licence, or carpenter’s and joiner’s licences despite having lost his building licence.  In regard to his work efforts after September 1997, he said that he checked the jobs vacant advertisements in the Gold Coast Bulletin, but mostly made enquiries directly through contacts that he had in the building industry.

9.      The applicant referred to his newstart allowance claim form dated 6 January 1998 (T31), which stated that he had applied during the previous fortnight for a carpenter’s position at Dreamworld, and one as a foreperson with Hornibrook Baulderstone. He said that he was interviewed for the Dreamworld position but was unsuccessful, and the other position was unsuitable as it required travel. He said that he obtained work in 1998 but was terminated when his employer became aware of the court proceedings.

10.      The applicant referred to records from the Building Services Authority (exhibit A2) showing accounts on which he had defaulted in the period 1993 to 1998.  He said was able to pay creditors by mortgaging his house, but he said he was ultimately forced into bankruptcy when he was imprisoned. The main debts at the time of his bankruptcy were $42,000 owed to the ATO, $15,000 to Centrelink, and an amount due to a concrete contractor on the Gold Coast.

11.     The applicant said it was clear from the transcript of the court proceedings (T5) that he had received a longer sentence because of his inability to repay the debt. He said that if he was required to repay the Centrelink debt, despite having served the term of imprisonment, there was no point to his bankruptcy.  He said that if the judge had known when sentencing him that Centrelink would demand repayment, a reduced sentence would have been imposed and he said he knew of instances where others had received shorter sentences for similar offences.

12.      The applicant said that he did not regard his actions in claiming newstart allowance as amounting to fraud because he had used his own name to claim, and he noted that he was never charged with fraud, but with misappropriation.

13.     The applicant said that he was released from prison towards the end of 2002 and obtained employment in January 2003 as a construction manager for a large building company. He said that he receives a salary of $50,000, however he pays $30 per week to Centrelink and the family find it difficult to make ends meet.  He said that he was relying on the tax refund in 2003 to repay people who had lent him money, and he was shocked that the garnishee action was carried out without his knowledge.

14.     The transcript of proceedings in the District Court on 14 March 2003 (T5) recorded that the applicant was convicted on his own admission of four counts of misappropriation with a circumstance of aggravation, three counts of false pretences, one count of wilful false promise, two counts of attempted imposition, one count of forgery, one count of uttering, seven counts of opening a false name bank account, and seven counts of operating a false name bank account. Reference was made in submissions before the Court to the applicant having forged documents relevant to the initial assessment of his newstart allowance, and that the charges of forgery and uttering related to these documents (T5, p27). The initial claim and separation certificate were at T30.  The transcript of submissions before the Court shows that reference was made to the lack of prospects for any reparation.

15.     The judge stated in sentencing the applicant that there were a large number of offences both State and Commonwealth, involving substantial sums (net $275,000).  He also referred to the applicant’s prior conviction for an offence of dishonesty.  He referred to the aspects of deterrence (T5) and said:

“Obviously, defrauding the tax office and the social service department involves defrauding the community generally.”

16.     On 4 May 2000 a Centrelink delegate wrote to the applicant at Woodford Prison notifying him that he owed $25,794.38 and that his bankruptcy did not preclude the respondent recovering the debt at the end of his bankruptcy. The repayment history on the applicant’s computer records with Centrelink (exhibit R1) showed that the applicant had not made payments on the debt to Centrelink between 24 September 2002 and 6 August 2003 when the garnishee action was taken.

17.     Included in the documents before the Tribunal were the applicant’s fortnightly review forms for newstart allowance in 1996–1998 (T31) and various extracts of bank accounts in the applicant’s name or under his control, relating to the same time (T32).

CONSIDERATION OF THE ISSUES

18.     The issues raised by the applicant are, the amount and period of the debt; whether his debt was discharged by the bankruptcy; whether there are grounds for waiver of the whole or part of the debt; and whether the action taken by Centrelink when garnishing the applicant’s tax refund in August 2003 was action correctly taken under the Act.

(a)  The Legislation

19.     The relevant provisions of the Social Security Act 1991 (the Act) in regard to debts and recovery or non-recovery of them are found in Part 5.2 of the Act:

“1224.(1)  If:

(a)an amount has been paid to a recipient by way of social security payment; and

(b)       the amount was paid because the recipient or another person:

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

(ii)       failed or omitted to comply with a provision of this Act or the 1947 Act;

the amount so paid is a debt due by the recipient to the Commonwealth.”

20. Specific provision is made for waiver in certain circumstances where a person has been convicted for social security offences. Section 1237AA of the Act provides:

“1237AA.(1)  If:

(a)a debtor has been convicted of an offence that gave rise to a proportion of a debt; and

(b)the court has indicated in sentencing the debtor that it imposed a longer custodial sentence on the debtor because he or she was unable or unwilling to pay the debt;

the Secretary must waive the right to recover the proportion of the debt that arose in connection with the offence.”

21. The provisions for recovery of a debt using garnishee action are at s1230C and s1233 of the Act

“1230C.(1)  Subject to subsection (2), a debt due to the Commonwealth under this Act is recoverable by the Commonwealth by means of one or more of the following methods:

(a)if the person who owes the debt is receiving a social security payment—deductions from that person’s social security payment;…

(c)repayment by instalments under an arrangement entered into under section 1234;

(d)legal proceedings;

(e)garnishee notice.

1230C.(2)  Subject to subsection (3), a debt due to the Commonwealth under this Act is recoverable by means of a method mentioned in paragraph (1)(d) or (e) only if the Commonwealth:

(a)has first sought to recover the debt by means of a method mentioned in paragraph (1)(a), (b) or (c); and

(b)can establish that the person who owes the debt:

(i)has failed to enter into a reasonable arrangement to repay the debt; or

(ii)after having entered into such an arrangement, has failed to make a particular payment in accordance with the arrangement.

…

1233.(1)  If a debt is recoverable from a person (in this section called the debtor) by the Commonwealth under section 1227A or 1230C of this Act,… the Secretary may by written notice given to another person:

(a)by whom any money is due or accruing, or may become due, to the debtor; or

(b)who holds or may subsequently hold money for or on account of the debtor; or

(c)who holds or may subsequently hold money on account of some other person for payment to the debtor; or

(d)who has authority from some other person to pay money to the debtor;

require the person to whom the notice is given to pay the Commonwealth:

(e)an amount specified in the notice, not exceeding the amount of the debt or the amount of the money referred to in the preceding paragraph that is applicable;…”

22. Section 157 of the Social Security (Administration) Act 1999 limits the extent of review by Tribunals of garnishee action taken by the Commonwealth: Walker v Secretary Department of Social Security (1997) 48 ALD 512.

23. In regard to the issues of whether a debt may be recovered after a person is discharged from bankruptcy, s153 of the Bankruptcy Act 1966 (the Bankruptcy Act) provides:

“(1)     Subject to this section, where a bankrupt is discharged from a bankruptcy, the discharge operates to release him or her from all debts (including secured debts) provable in the bankruptcy, whether or not, in the case of a secured debt, the secured creditor has surrendered his or her security for the benefit of creditors generally …

(2)       The discharge of a bankrupt from a bankruptcy does not:

…

(b)release the bankrupt from a debt incurred by means of fraud or a fraudulent breach of trust to which he or she was a party or a debt of which he or she has obtained forbearance by fraud;…”

24.      In his Statement of Facts and Contentions, the applicant said that in 1996, when he claimed newstart allowance, his business was deteriorating and he needed income support as he was financially destitute. He said that eventually he lost everything when his business failed and he was imprisoned. The applicant submitted that the Tribunal should find the debt was $15,207 as stated at his trial and agreed to by the SSAT.

25.      The applicant pointed to the sentencing remarks and said that the judge was aware that there was no prospect of reparation or restitution.  He said that several times in submissions the Court was told that he had lost everything.  He said that his sentence was so manifestly excessive it was clear that his inability to repay was taken into account. The applicant submitted the debt should be waived or written off, and all moneys recovered thus far, should be returned to him.  He said that he and his family have been made to suffer despite his release from prison, and they should be able to get on with their lives.  He said that they struggle on his modest salary, and are expecting a fourth child and there are many demands that they are unable to meet. He said that the garnishee action was illegal and caused him hardship.

26.     Ms Wallis-Dunn submitted that a debt of $20,361.370 was established on the evidence from 29 January 1996 to 17 March 1998 and that the SSAT was incorrect to decide that there was no debt after 1 September 1997.  She submitted that the payment of newstart allowance after 1 September 1997 was a continuation of the applicant’s initial fraudulent claim and that s635 of the Act required a proper claim and s635(2) deemed a claim as not made if the person was not qualified at the time. She said that the applicant was not qualified in January 1996 and any payment thereafter was a debt under s1224 of the Act. Ms Wallis Dunn submitted further that because all later payments of newstart allowance were contaminated by the initial fraudulent misrepresentation, they were “…incurred by means of fraud”, and thus satisfied s153(2)(b) of the Bankruptcy Act and survive the bankruptcy.

27. Ms Wallis Dunn submitted that the Tribunal should not accept the applicant’s uncorroborated evidence that he was actively seeking, and available for, full-time work, after 1 September 1997. She also submitted, referring the transcript of proceedings in the District Court and bank records, that the applicant had not disclosed income amounts received after 1 September 1997, and the failure to disclose these receipts to Centrelink meant that a debt arose under s1224 of the Act. She also submitted that the actions of non-disclosure constituted “fraud” within the meaning of the Bankruptcy Act. Ms Wallis Dunn referred to deposits to the applicant’s bank accounts of $1,160 on 25 November 1996 (T32, p202); $24,600 on 4 December 1997 (T32, p248); $300 on 23 December 1997 (T32, p243); $46,750 on 29 December 1997 (T32, p249); and $15,000 on 24 February 1998 (T32, p251).  She said that this information was required to assess a rate of newstart allowance and the applicant did not report it where asked on fortnightly forms.

28.     Ms Wallis-Dunn submitted that s8 of the Act defines “income” broadly to include amounts derived from criminal activities.  She referred also to s1073 of the Act as applying to lump sums and requires that they are taken into account in assessing social security payments for 12 months following receipt.  She submitted that it was more likely than not that the amounts the applicant derived precluded any entitlement to newstart allowance, though she acknowledged that some payments may have been business receipts which might not be assessed at face value under the legislation.  She submitted that the amount of income precluded entitlement after 1 September 1997 and the debt should not be waived.

29.     Ms Wallis Dunn submitted in regard to the garnishee action that the Tribunal’s powers of review were limited and that Centrelink’s actions were lawful.  

(b)  Is There a Debt?

30.     The issues raised in this matter are interrelated, but the first issue that must be addressed is the question of whether there is a debt.  As Burchett J noted in Walker, the question of whether the procedure under s1233 of the Act relating to the garnishee action may be used requires the Tribunal to ascertain that there is an amount due and payable. That question also must be addressed by the Tribunal prior to considering waiver.

31. For the period (that is, the period for which the applicant was prosecuted), the Tribunal is satisfied that a debt was established under s1224 of the Act (since repealed). The applicant pleaded guilty; and he acknowledges that he was not entitled to benefits during that time as his business was operating. As was stated in Minister for Immigration and Ethnic Affairs v Daniele (1981) 5 ALD 135 (at p138):

“There are powerful reasons of public policy why the Tribunal cannot ignore the conviction or seek to set it at nought.”

32.     For the period after 1 September 1997, the respondent says there an additional debt amounting to some $5000 which the respondent says was paid because “the recipient…made a false statement…or failed or omitted to comply” with the Act. The Tribunal accepts that the applicant’s business had ceased by 1 September 1997, and accepts his evidence that he was looking for work at this time.  However the Tribunal also accepts the respondent’s submission that bank account records show that at relevant times in the period from September 1997 to March 1998 the applicant was receiving large sums into bank accounts in his name or under his control (T32) that he was not reporting in his claim forms to Centrelink (T31). 

33. The Tribunal accepts the submission that the receipt of $24,600 on 8 December 1997 and $46,750 on 29 December 1997 would have precluded the applicant from receiving newstart allowance if treated as lump sums under s1073 of the Act. The Tribunal also takes into account that the applicant was assessed by the ATO on taxable income of $183,578 for the financial year ending 1997 and this was not information that was provided to Centrelink in order to properly assess qualification for any claims made at or about September 1997. The Tribunal is reasonably satisfied that the amounts, if known to Centrelink would have disentitled him to newstart allowance. On this basis, the Tribunal is reasonably satisfied that a debt arose under s1224 of the Act from 1 September 1997 to 17 March 1998 as the applicant failed or omitted to comply with provisions of the Act which required that he inform Centrelink about income.

34.     Given the applicant’s admitted dishonesty in the period and the payments to bank accounts of substantial sums after 1 September 1997, the Tribunal is satisfied that the SSAT’s finding that the applicant was qualified for newstart allowance after 1 September 1997 was not the correct or preferable decision.  The Tribunal reinstates the original decision that the applicant owes a debt of $20,361.37 for the period 29 January 1996 to 17 March 1997.

(c) The Effect of Bankruptcy

35.     In considering the issue of bankruptcy, the Tribunal takes into account the decisions of Secretary Department of Social Security v Southcott (1998) 50 ALD 162 and Re Civitareale and Secretary, Department of Family and Community Services (1999) 57 ALD 451. When a person becomes bankrupt, the respondent may lodge a proof a debt and Centrelink did so in the applicant’s case. The exceptions to a bankrupt being freed of obligations of repayment of debt on discharge from bankruptcy are those provided for in s153(2) of the Bankruptcy Act and include debts incurred by means of fraud: s153(2)(b). In Civitareale’s case the Tribunal observed that the test of fraud is a subjective not an objective one and referred to a dictionary definition that fraud “is obtaining of a material advantage by unfair or wrongful means; it involves moral obliquity”. 

36.     The Tribunal is satisfied on the basis of the transcript of the District Court, the applicant’s plea of guilty, and the clear reference by the judge in sentencing to the applicant’s fraud that the debt until 1 September 1997 arose as a result of fraud.  After 1 September 1997, there is no admission of guilt and the Tribunal is mindful that the direct evidence in the documentation before the Tribunal was more limited.  The Tribunal takes into account that the applicant was not prosecuted for the later period.  The Tribunal considers that it should be cautious in reaching a decision on actual fraud and applies the principles stated by the High Court in Briginshaw v Briginshaw (1938) 60 CLR 337:

“...Reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved.  The seriousness of an allegation made, the inherent unlikelihood of an occurrence of the given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal.  In such matters ‘reasonable satisfaction’ should not be produced in inexact proofs, indefinite testimony, or indirect inferences.”

37.     The Tribunal does not accept the respondent’s submission that the applicant’s claims for newstart allowance after 1 September 1997 were tainted by the initial fraud in the first claim form and that he could not later establish entitlement based upon the submission of fortnightly forms for payment.  However the Tribunal takes into account that the receipt of large sums into his accounts after 1 September 1997 would have precluded an entitlement to newstart allowance, regardless of whether the applicant was actively seeking work, and that these payment were made into a bank account in a false name.  On this basis, the Tribunal is satisfied that the debt from 1 September 1997 to March 1998 was incurred by means of fraud, and this part of the debt also survives the applicant’s discharge from bankruptcy.

(d) The Garnishee Action

38. In respect of the garnishee action, s1230C of the Act permits recovery by garnishee notice where a debtor has failed to enter a reasonable arrangement to repay the debt. It was clear from the documentary material that Centrelink told the applicant while he was still in gaol in 2000 about the amount of the debt and that in its view that the debt would not be discharged by his bankruptcy. When he was released he obtained employment in early 2003. A notice was sent to him again on 13 May 2003 referring to the debt and its recovery, and the applicant contacted Centrelink, contesting the requirement to repay. At that time, the applicant had made no arrangement to pay the debt, understandably, as he was contesting that he would be required to pay at all. However for the action to garnishee, the Act requires only that the Commonwealth has sought to recover by other means and that no reasonable arrangement has been entered into. The Tribunal is satisfied that these procedural steps were met, no reasonable arrangement had been entered into (s1230C(2)(b)), and the garnishee action was lawful.

(e) Waiver

39. In respect of the question of waiver, the only section arising is s1237AA of the Act. For the reasons given above concerning fraud, s1237AAD, which allows consideration of special circumstances, is not available to the applicant as the debt must not have resulted wholly or partly from the debtor or another person knowingly making a false statement or false representation or failing or omitting to comply with a provision of the Act.

40.     The Tribunal takes into account the reasoning in Re Secretary, Department of Social Security and Truscott (1995) 39 ALD 597 in which the Tribunal said in regard to the meaning to be given to the word indicated in s1237AA of the Act:

“…we consider that the word indicated …should be given its broader meaning so that it will mean either ‘shown’, ‘stated’ or ‘expressed’ as well as ‘implied’.  It must be remembered however that the sub-section requires that ‘in sentencing the court indicated’…and not that an indication can be drawn from all relevant material… Therefore the indication either an express statement or an implication… must be found in what the sentencing court itself has done and not in conclusions which might be drawn for example comparing the person’s sentence with those given to other people for the same or similar offences.” (at para 20)

41. Having carefully examined the sentencing remarks, the Tribunal finds that the Court made no reference to the applicant’s inability to repay. The Court referred to relevant matters required to be taken into account under s16A of the Crimes Act1914 but made no mention of the applicant’s inability to repay. Regardless of what might have been said in submissions before the District Court, s1237AA requires that the Court itself must indicate in sentencing that a longer custodial sentence was imposed and this is not the case here. For these reasons the debt cannot be waived.

DECISION

42.     The Tribunal varies the decision under review and decides that the applicant owes a debt to the Commonwealth in the sum of $20,361.37 for the period January 1996 to 17 March 1998 and the debt should be recovered.

I certify that the 42 preceding paragraphs are a true copy of the reasons for the decision herein of Ms M J Carstairs, Member

Signed:         Sarah Oliver
  Associate

Date of Hearing  4 May 2004 (at Mackay)
Date of Decision  20 July 2004

The Applicant represented himself
For the Respondent                  Ms Wallis-Dunn, Departmental Advocate