Zuber and Secretary, Department of Social Services (Social services second review)

[2017] AATA 326

Zuber and Secretary, Department of Social Services (Social services second review) [2017] AATA 326 (15 March 2017)

Division:GENERAL DIVISION

File Number:           2016/2622

Re:Yves Zuber

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Mr D.J. Morris, Member

Date:15 March 2017

Place:Perth

The Tribunal affirms the decision under review.

.......[Sgd].................................................................

Mr D.J. Morris, Member

CATCHWORDS

SOCIAL SERVICES – Disability Support Pension (DSP) – Invalidity pension granted by foreign country with reciprocity agreement – whether applicant therefore overpaid in Australian DSP – should debt be waived or written off, in part or in full – do special circumstances other than financial hardship apply – decision under review affirmed

LEGISLATION

Social Security Act 1991 – s 8(1) – s 1064(1)(b) – s 1064-E1 – s 1072 – s 1228A(1) – s 1228A(2) – s 1236 – s 1237AAD

CASES

Secretary, Department of Social Security v Hales [1998] FCA 219

Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114

SECONDARY MATERIALS

Agreement between Australia and Swiss Confederation on Social Security, made on 9 October 2006 – art 29(1)

Department of Human Services Information Sheet – Social Security Agreement between Australia and Switzerland (undated)

Administrative Arrangements for the implementation of the Agreement between Australia and the Swiss Confederation on Social Security (version 2007)

REASONS FOR DECISION

Mr D.J. Morris, Member

15 March 2017

BACKGROUND

1. Mr Yves Zuber was granted Disability Support Pension (Australian DSP) under the provisions of the Social Security Act 1991 (the Act) in February 2002.

2. After a protracted exchange he had with the Government of the Swiss Confederation, Mr Zuber was granted a Swiss Invalid Pension (Swiss Pension) and on 14 March 2013 the Department of Human Services (the Department) was advised of this grant and that the Swiss Pension had been paid in arrears from 1 July 2010.

3. On 11 April 2013 an officer of the Department raised a debt of $18,035.68 for the period 1 July 2010 to 28 February 2013 on the basis that the rate of Mr Zuber’s Australian DSP should be adjusted to take into account the grant of the Swiss Pension backdated to 1 July 2010.  This decision was the original decision.

4. Mr Zuber requested that the original decision be reviewed.  A review was conducted by an authorised review officer (ARO), an officer of the Department not involved in the original decision.  On 9 May 2014 the ARO affirmed the original decision.

5. Mr Zuber sought a review of the decision by the Social Services and Child Support Division of this Tribunal (AAT1).That hearing took place on 15 April 2016 which Mr Zuber attended and at which he gave evidence.

6. On 15 April 2016 AAT1 affirmed the original decision. Dissatisfied with that result, Mr Zuber has sought a review in the General Division of the Tribunal. That is this hearing.

7. The hearing took place on 1 February 2017. Mr Zuber represented himself and gave evidence on affirmation. The Respondent was represented by Ms Jacky Vetter.

8. The Respondent tendered documents under section 37 of the Administrative Appeals Tribunal Act 1975 (the ‘T’ documents).

9. The Respondent also tendered the Secretary’s Statement of Issues, Facts and Contentions and attachments dated 26 August 2016 (Exhibit R1).

10. The Applicant tendered the following documents at the hearing:

    ·Submission of 28 pages of Mr Yves Zuber dated 29 September 2016 (Exhibit A1); and

    ·Statement of Financial Circumstances (Centrelink reviews) of 4 pages dated 1 February 2017 (Exhibit A2).

11. At the conclusion of the hearing, the Tribunal gave leave to parties to make further written submissions.

12. On 16 February 2017 the Respondent provided the Tribunal and the Applicant with the Secretary’s Written Submissions and attachments (Document numbered R2).

13. On 21 February 2017 the Applicant provided the Tribunal a further written submission in reply of 35 pages (Document numbered A3).

14. These documents were taken into account by the Tribunal.

    THE LAW

15. Australia has reciprocal social security agreements with a number of other sovereign states, including Switzerland. The legislation relevant to these agreements is the Social Security (International Agreements) Act 1999 (the International Agreements Act).

16. Section 5 of the International Agreements Act provides that there is an Agreement between the Government of Australia and the Swiss Federal Council (the Agreement) which relates to reciprocity in social security matters. The text of this Agreement is set out in Schedule 20 of the International Agreements Act.

17. Article 29(1) of the Agreement says:

    If a Competent Institution of a Contracting State has overpaid cash benefits to any person under this Agreement the amount of the overpayment may be deducted in favour of that Competent Institution from arrears of a corresponding benefit to which there is entitlement under the legislation of the other Contracting State, in so far as this is permitted by the legislation of the second Contracting State.

18. The Respondent provided submissions (R2) at the request of the Tribunal about the Swiss social security system. The Secretary noted at [2.9] of R2 that, in Switzerland, social security is based on a three tier model of compulsory contributions, usually through deductions from paid employment, compulsory and voluntary occupational schemes, and private savings.

19. The Tribunal notes that this arrangement in Switzerland is not uncommon in foreign countries, where a personal contribution or “subscription” is the norm. It is different from the social security system in Australia where income support benefits are paid out of general revenue. That is why the law in Australia includes an income and asset test regime.

20. The Act provides, at section 1064(1)(b), that the rate of Australian DSP is to be calculated in accordance with the Rate Calculator at the end of section 1064. Essentially, that calculator uses an income test and an assets test with the lower of the two rates being the applicable test. The maximum payment rate for a person’s DSP may be reduced by their ordinary income if the person’s ordinary income exceeds the person’s “ordinary income free area” as set out in section 1064-E1. The term “ordinary income” is defined in section 8(1) of the Act as income that is not maintenance income or an exempt lump sum. Section 1072 of the Act sets out the general meaning of ordinary income and says:

    A reference in this Act to a person’s ordinary income for a period is a reference to the person’s gross ordinary income from all sources for the period calculated without any reduction, other than a reduction under Division 1A.

21. Relevant to Mr Zuber’s situation, the Act also sets out in section 1228A specific provisions relating to comparable foreign payment debt recovery. Section 1228A(1) of the Act says that if a person has been paid an amount by way of an Australian social security payment in respect of a particular period and another amount was paid as a lump sum to the person by way of a payment of arrears of a comparable foreign payment in respect of that period, and, assuming that the lump sum had been paid by way of periodical payments of the comparable foreign payment in respect of the period the Australian social security payment would have been reduced, then the amount by which the Australian social security amount would have been reduced is, under section 1228A(2) of the Act, a debt due and payable to the Commonwealth.

22. It was common ground that Mr Zuber had received Australian DSP in the period 1 July 2010 to 28 February 2013. It was also common ground that Mr Zuber had received a lump sum payment of CHF39,909 by way of arrears for the period 1 July 2010 to 28 February 2013 (T30, p192). The Swiss Franc/Australian Dollar exchange rate on 28 February 2013 was CHF1 = AUD1.04.

23. For completeness, the Tribunal makes the following findings in relation to the basis of the debt: Mr Zuber received Australian DSP for the period 1 July 2010 to 28 February 2013.  Mr Zuber received a lump sum payment of CHF39,909 by way of arrears for the period 1 July 2010 to 28 February 2013.

24. Because under section 1072 of the Act the gross amount of Mr Zuber’s ordinary income in this period must be taken into account, applying section 1228A, the Applicant’s Australian DSP should have been reduced by the amount of $18,035.68, and this amount is a debt due and payable to the Commonwealth.

    Is there a reason the debts should not be recovered?

25. Where a person has been overpaid and incurred a social security benefit debt, it is reasonable to expect that the person will repay the debt.  As French J said in Secretary, Department of Social Security v Hales [1998] FCA 219:

    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.

26. The term ‘overpaid’ is a bit unfortunate. It should not be inferred that Mr Zuber has done anything wrong. He pursued, as was his right, a potential entitlement he had to a Swiss Pension to which he had subscribed for many years under the social security arrangements applicable in that country, and to which, in evidence at the hearing, he said he continues to subscribe. The overpayment has come about not by any positive action he did (except making his claim for a Swiss Pension), but by the act of the Swiss Government.  When the Swiss Government accepted Mr Zuber’s entitlement to a Swiss Pension, they backdated the entitlement to 1 July 2010, and paid the backdated amount to him by way of a lump sum.

27. But the factual consequence is that Mr Zuber was therefore paid an Australian DSP for a specific period for which he was later also paid a Swiss Pension. The Australian DSP should be reduced in accordance with the Act to take account of the foreign corresponding payment, consistent with the Agreement. Otherwise, logically, the outcome would be that a person is receiving two pensions for the same period based on the same qualification.

28. There are certain provisions in the Act which provide that, in particular circumstances, recovery of debts may be written off (which means that recovery of the amount may be deferred) or waived, and the waiver may be in whole or in part.

29. Section 1236 of the Act provides:

    Secretary may write off debt

    (1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

    (1A)The Secretary may decide to write off a debt under subsection (1) if, and only if:

    (a)the debt is irrecoverable at law; or

    (b)the debtor has no capacity 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.

    (1B)For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:

    (a)the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or

    (aa)the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance)(Administration) Act 1999 has elapsed; or

    (b)there is no proof of the debt capable of sustaining legal proceedings for its recovery; or

    (c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud: or

    (d)the debtor has died leaving no estate or insufficient funds in the debtor’s estate to repay the debt.

    (1C)For the purposes of paragraph (1A)(b), if a debt is recoverable by means of:

    (a)deductions from the debtor’s social security payment; or

    (b)deductions under section 84 of the A New Tax System (Family Assistance) (Administration) Act 1999; or

    (c)setting off under section 84A of that Act;

    the debtor is taken to have a capacity to repay the debt unless recovery by those means would result in the debtor being in severe financial hardship.

30. There are separate provisions in the Act which provide that the recovery of a debt may be waived where there are special circumstances. Section 1237AAD of the Act provides:

    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 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.

    The Applicant’s contentions and evidence

31. Mr Zuber contended that there are ‘special circumstances’ in his case which should have been taken into account by the Respondent. The special circumstances that he cited are that he had made a contribution to the Swiss Government for several years which enabled him to be granted his Swiss Pension and that, had he not made these contributions, he would not have that entitlement. He told the ARO that he had been attempting to be granted his Swiss Pension for some twelve years and that, in so doing, he had incurred certain expenses and that these expenses should also be taken into account in calculating his debt. He also cited additional continuing costs he incurs because of his medical conditions.

32. Mr Zuber told the Tribunal that he believed the costs of obtaining his Swiss Pension and the costs of contributing to the Swiss pension system, which enables him to continue to receive his Swiss Pension, should be taken into account.

33. He told the Tribunal that he is currently receiving an Australian DSP payment.  He said that he also receives CHF1,657 per month from Switzerland which is a fixed amount.  He said that other regular income he received was an amount of $710 per month, which is continuing repayment of a substantial private loan he had made to a friend.

34. He agreed with the Respondent that the amount he got in total income was approximately $1,886 per fortnight. This amount is arrived from: $355 per fortnight income from repayment from his friend of his private loan; $426 per fortnight payment in Australian DSP; and $1,105 being the AUD amount of his Swiss Pension’s fixed monthly payment, divided by two. The Tribunal notes, and accepts, Mr Zuber’s evidence at the hearing that the fixed amount of Swiss Pension he actually receives fluctuates by between $35 and $55 per fortnight, according to the applicable exchange rate between the two currencies from time to time.

35. He told the Tribunal that he owned his own home with an approximate market value of $500,000 but this residence is subject to mortgage. He agreed that on 1 April 2016 he had some $79,000 in savings but he had, since that time and prior to this hearing, paid most of this money into his home mortgage. He told the Tribunal he currently owes about $157,000 on his residence and that, because of his recent pay-down, his monthly mortgage repayments had reduced by approximately $250 per month. He is currently repaying his debt to the Department in the amount of $30 per month.

36. Mr Zuber submitted to the Tribunal evidence of his travel from Perth to Zurich in 2011 with a cost of $2,207.87 for air tickets. He provided an estimate of $113 for medical travel insurance and $458.70 which he said was for ‘court costs’ in Switzerland. He also cited his annual medical costs and annual pharmaceutical costs and estimated this to be around $2,000 each year which he has paid in the last sixteen years and expects to pay in the future. He gave evidence about certain additional regular costs he incurred because of his medical care.

    Consideration

37. The Respondent submitted that the way the agreement between the Swiss and Australian governments is administered is agreed to formally through an administrative process.  This is the ‘Administrative Arrangement for the implementation of the Agreement between Australia and the Swiss Confederation on Social Security’ (the Administrative Arrangement), a copy of which was before the Tribunal.

38. The Administrative Arrangement provides that one Contracting State will arrange for an agreed report and all available medical information and documents to be sent with any claims for disability pensions to the other Contracting State. If one Contracting State requests an additional medical examination, the other Contracting State arranges the requested examination in the territory in which the person resides in accordance with the applicable regulations and the cost of those examinations are reimbursed upon presentation of a detailed statement of costs.

39. In the Secretary’s Written Submissions dated 16 February 2017 at [2.14], the Respondent contended that medical examinations required by Switzerland of a resident of Australia who has applied for a Swiss benefit under the Agreement ‘invariably occur in Australia’.

40. The Consul General of Switzerland with jurisdiction in the State of Western Australia is based in Melbourne. On 14 May 2001 an officer of the Consulate General of Switzerland in Melbourne wrote to the Applicant in the following terms (T5, p 42):

    Application for a disability pension

    Dear Sir

    With reference to our recent telephone conversation I would like to let you know that the Swiss Compensation Office in Geneva has examined your application, but with the documents received said Office is not yet able to reach a decision:

    The Swiss Compensation Office would be obliged if you could send the following:

    1.    Exact indications (and names) of drugs you are presently taking:

    2.    Neurological examination (please supply typewritten report)

    1.    Psychiatric examination (please supply typewritten report), anamnese, medical history, present health condition, diagnosis, prognosis, therapy, inability to work (in %).

    The cost of the examination will be paid by the Swiss Compensation Office in Geneva upon receipt of all relevant documents.

41. The Consulate General sent Mr Zuber a further letter dated 3 December 2002 (T6, p 43) advising him that in order to proceed with his application for a Swiss Pension he would have to undergo a further examination and asking him to contact a medical practitioner in Nedlands, Western Australia, to make an appointment.

42. This correspondence is consistent with the submissions of the Respondent to the Tribunal, that a person seeking Pension undertakes medical examinations in the territory in which the person lives.

43. Mr Zuber said that some of the costs he incurred when he travelled to Zurich, namely his overnight stay and local transport costs, and his visit to the Swiss hospital were reimbursed to him, but not the cost of his air travel.  The Applicant furnished details of the cost of his flight there and I have no reason to doubt these details, but corroborative documentation, such as official correspondence from the Swiss Government, would be essential before I could consider taking these costs into account in terms of whether the debt against the arrears payment Mr Zuber received should be adjusted because of a ‘special circumstance’, that is, pertaining to Mr Zuber’s particular personal circumstances, and which is not simply related to the financial cost he incurred. 

44. An example of what might be considered a special circumstance would be independent documentation that other Australian claimants of Swiss Pensions do not have to travel to Switzerland to finalise their claim, but that Mr Zuber was required to.  That would place the Applicant in a particular category, not merely a member of a class of persons.  But such evidence was not before the Tribunal and, even if it were, there would have to be some other quality that made Mr Zuber’s situation special or unique, other than a financial cost.

1. The Applicant also argued that he would not be entitled to the Swiss Pension if he had not made, and did not continue to make, contributions to the relevant Swiss Government authority. The Tribunal does not dispute that Mr Zuber has made these contributions, but does not consider that these payments amounted to special circumstances within the terms of section 1237AAD(b) of the Act. The Swiss Government’s requirement that persons ‘subscribe’ in order to be able to claim benefits is not an uncommon practice by many national governments and the fact that this requirement is different from the social security regime in Australia is not a ‘special’ requirement that was imposed only on, or is peculiar to, the Applicant.

2. Mr Zuber also contended that the Tribunal should take into account that he incurred, and continues to incur, additional costs in relation to his medical conditions. He provided documentation of medical consultations, his therapy dog, pain management, gym membership and pharmaceutical costs. Persons with medical conditions, including recipients of DSP, frequently incur additional costs directly related to their particular medical conditions. While I do not dispute that the Applicant, as a consequence, has additional household expenditure because of his medication, therapy and medical appointments, I cannot find that these additional costs fall within the terms of section 1237AAD(b) which stipulates that the special circumstances relating to waiver of a debt must be special circumstances “other than financial hardship alone”.

3. The Tribunal has periodically considered the question of what is meant by ‘special circumstances’ in this part of the Act. A useful commentary on the phrase can be found in Timothy Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114. In that case, Deputy President Forgie said, at [80]:

   …“special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances ... that make it desirable to waive”. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system. Waiver of the debt would mean that Mr Davy would have had the benefit of part of his DSP in circumstances in which he was not entitled to it… He has had the benefit of the money and there is no injustice in requiring him to repay the money of which he has had the benefit but not the entitlement. [Emphasis added]

4. With respect, I agree with Deputy President Forgie’s reasoning in this regard. Mr Zuber has had the benefit of some two and a half years of arrears payment of his Swiss Pension for a period when he had already received Australian DSP payments. The Applicant agreed during the hearing that he receives around $1,886 per fortnight. The maximum basic rate of Australian DSP for a single person, including pension supplement and energy supplement, is currently $877.10 per fortnight.  Mr Zuber is therefore materially in a substantially better financial position than other persons on disability support pension.  In fact, his annual income is substantially more than twice what a single Australian DSP recipient receives.  In terms of his other circumstances, it was also not disputed that he has a residence valued at approximately $500,000 which was mortgaged, with his equity being around $340,000, and because of his recent mortgage pay-down, on his own evidence he is financially better off by some $250 per month.

5. The Tribunal considers that the legislative provisions allowing the Secretary the discretion to write off, or waive, all or part of the Applicant’s debt have not been satisfied in this case. The mandatory requirements set out in section 1236(1A) of the Act are not met. There is no evidence that the provisions of section 1236(1C) of the Act, that recovery of the debt would result in the debtor being in ‘severe financial hardship’ are relevant in Mr Zuber’s case: he is, as is set out above in terms of an estimated fortnightly income conceded at the hearing by the Applicant to be correct (taking into account the minor exchange rate fluctuations), in a substantially better financial position than the majority of social security recipients.

6. The provisions for waiver of all or part of the debt under section 1237AAD(a) and (c) of the Act are also not met and after careful consideration I can find no special circumstances applicable to Mr Zuber, other than financial hardship alone, that should have led to the Secretary making a different decision, in consideration of section 1237AAD(b). The Applicant received an Australian DSP payment for a period when he was later paid a Swiss Pension in arrears.

7. Without for a moment questioning that he may have genuine continuing additional costs because of his medical conditions, Mr Zuber is nonetheless clearly in a better position than the majority of other Australian DSP recipients to repay the debt and the current rate of repayment of $30 per fortnight as negotiated between the Applicant and the Respondent is not, adopting the reasoning of His Honour in Hales, inappropriate in all the circumstances of the Applicant.

8. The consequence of my findings is that the original decision was correct. The debt of some $18,035.68 is a recoverable debt due and payable to the Commonwealth.

   DECISION

9. The decision under review is therefore affirmed.

I certify that the preceding 53 (fifty -three) paragraphs are a true copy of the reasons for the decision herein of Mr D.J. Morris, Member

..........[Sgd]..............................................................

Administrative Assistant

Dated: 15 March 2017

Date of hearing:	1 February 2017
Date final submissions received:	21 February 2017
Applicant:	In person
Representative for the  Respondent:	Ms J Vetter
Solicitors for the Respondent:	Sparke Helmore Lawyers