Zygmunt Nocon and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2013] AATA 390

[2013] AATA 390 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2013/0193
Re	Zygmunt Nocon
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT

DECISION

Tribunal	Senior Member A K Britton
Date	11 June 2013
Place	Sydney

Decision Summary

The reviewable decision made by the Social Security Appeals Tribunal on 13 December 2012 not to waive any part of the debt owed by the Applicant under s 1237AAD of the Social Security Act 1991 (Cth), is set aside and in substitution the Tribunal decides to waive 50 per cent of the debt for the period to 1 October 2010.

The decision is remitted to the Respondent for recalculation of the debt owed by the Applicant in accordance with these reasons for decision.

The balance of the decision made by the Social Security Appeals Tribunal is affirmed.

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

Senior Member A K Britton

CATCHWORDS

SOCIAL SECURITY — Age pension — Meaning of “income”— Whether overseas pension amounts to income—— Reviewable decision set aside

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) - ss 37

Social Security Act 1991 (Cth) – ss 8(1); 1064; 1072; 1237A

Social Security Act 1947 (Cth)

Social Security (International Agreements) Act 1999 (Cth)

CASES

Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Inguanti v Secretary, Department of Social Security (1988) 80 ALR 307
Read v Commonwealth (1988) 167 CLR 57
Rose v Secretary, Department of Social Security (1990) 21 FCR 241

Secretary Department of Social Security v Hodgson (1992) 37 FCR 32
Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35
Secretary, Dept of Employment and Workplace Relations v Richards (2007) 98 ALD 310
Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126

SECONDARY MATERIALS

The Guide to Social Security Law, Version 1.195, 13 May 2013

REASONS FOR DECISION

Senior Member A K Britton
11 June 2013

1. Zygmunt Nocon seeks review of the decision made by the Secretary, and affirmed by the Social Security Appeals Tribunal, to: (i) treat pension payments made to him by the Polish Government since April 2004, as “income” when calculating his rate of Australian age pension; and, (ii) raise and recover a debt as a result of the alleged overpayment of age pension received between April 2004 and September 2011 (the debt period). Mr Nocon contends that consistent with the advice given by Centrelink to members of the Polish community resident in Sydney over ten years ago, the pension paid by the Polish government constitutes “blocked income” and should be disregarded in calculating his Australian pension entitlements.

2. In the alternative he contends that the debt should be waived because it arose as a result of a series of errors made by Centrelink.

3. The issues to be determined are whether pension payments made to Mr Nocon by the Polish Government throughout the debt period amount to “income” for the purposes of the Social Security Act 1991 (Cth) (the Act) and, if so, whether the power to waive or write-off any resultant debt can and/or should be, exercised.

   RELEVANT LEGISLATION

4. The rate of the age pension is calculated by applying the Pension Rate Calculator in s 1064 of the Act. Where a person’s “ordinary income” exceeds their “ordinary income free area” their rate of pension is reduced (ss 1064-A1 and 1064-E1).

5. “Ordinary income” is defined to mean a person’s gross ordinary income from all sources for the period calculated without any reduction (s 1072 by the Act). Section 8(1) defines “income” in relation to a person, to mean:

   (a)an income amount earned, derived or received by the person for the person's own use or benefit…

   …

   but does not include an amount that is excluded under subsection (4), (5) or (8).

6. Subsections (4), (5) and (8) do not apply in this matter.

7. Section 8(2) provides that a reference in the Act to an “income amount earned, derived or received” is a reference to:

   (a)an income amount earned, derived or received by any means; and

   (b)an income amount earned, derived or received from any source (whether within or outside Australia).

8. An “income amount” is defined to include moneys.

   DID THE AMOUNT RECEIVED BY MR NOCON CONSTITUTE INCOME?

9. The Polish government has being paying a pension to Mr Nocon since 2002. Prior to 1 October 2010 that pension could not be paid into an Australian bank account and could only be paid into a Polish bank account. In 2010, pursuant to the Social Security (International Agreements) Act 1999 (Cth), the Australian government entered into an agreement with the government of the Republic of Poland, the effect of which was to enable pension payments made by the Polish government to Australian residents to be paid into an Australian bank account, if directed by the pensioner.

10. The definitions of “income” and “income amount” as used in the Act are terms of wide application (Read v Commonwealth (1988) 167 CLR 57 at 69; Secretary, Department of Social Security v McLaughlin (1997) 81 FCR 35 at 42). It is settled that income cannot be “earned, derived or received” unless it is also realised: Readv Commonwealth (1988)167 CLR 57 per Mason CJ, Deane and Gaudron JJ at 67. Income can be realised — and hence received — even if temporarily not accessible: Rose v Secretary, Department of Social Security (1990) 21 FCR 241at 245.

11. In Rose a Full Court of the Federal Court considered whether a retirement pension paid by the government of the German Democratic Republic to an account held by Mr Rose in the GDR, amounted to “income” within the meaning of the Social Security Act 1947 (Cth). The definition of income in that Act is not materially different to that contained in the current version of the Act. Mr Rose had migrated from the GDR and spent a large part of each year in that country. At that time his pension was not transferable or payable outside the GDR. The Court held that Mr Rose’s German pension nonetheless constituted income within the meaning of the Social Security Act1947 and stated (at 244) that the use of the phrase “within or outside Australia” in the definition — ‘… personal earnings, moneys, … earned, derived or received by that person for the person’s own use or benefit by any means from any source whatsoever, within or outside Australia … [emphasis added]’ — indicated that:

    [T]he legislature was concerned to ensure that it mattered not whether the source of derivation or receipt of the moneys was within or outside Australia … The words “within or outside Australia” are designed to ensure that there is no reading down of the section to exclude only persons who earn, derive or receive moneys etc payable from sources within Australia.

12. Their Honours stated (at 245):  

    The pension payments made to the appellant in the GDR are moneys “received” by [Mr Rose] in the sense of “realised” by him in the GDR. It is not to the point that those moneys are in that sense received by him outside Australia. The payments answer the description of moneys “earned, derived or received” (in the sense of “realised”) by him for his own use or benefit from a source outside Australia and fall within the definition of “income” in s 3.

13. In Inguanti v Department of Social Security (1988) 15 ALD 348; Shepherd J considered whether payments made under an Italian pension fund amounted to income, notwithstanding that there was a delay of up to 18 months before the first payment would be received by Mr Inguanti in Australia. Shepherd J stated (at 351):

    If the prospect of the moneys ever being received is remote, or, if receipt of them, although certain, is likely to be so far in the future as to make entitlement to them of no relevant benefit at the time the matter is considered, it will be correct to say that the moneys are not being “derived”.

14. His Honour held that in that case the delay in payment was not so remote “as to make [Mr Inguanti’s] entitlement [to the Italian pension] either nugatory or of no relevant benefit”.

15. Picking up on Shepherd J’s analysis the Guide to Social Security Law (at 4.3.6.10) refers to the concept of “blocked income” and states:

    Therefore, because access to a foreign pension is severely limited, for example, the paying country restricts payment of pensions overseas, or access is restricted to residents of or to people physically present in the paying country, does NOT mean the pension is considered ‘blocked’.

    Depending on the circumstances of the individual case, however, it MAY be accepted that a pension is NOT income for social security purposes, where the prospect of receiving the money is so remote that the monies are not ‘earned, derived or received’ for the person's own use or benefit.

16. Conflicting evidence was given in these proceedings about whether prior to October 2010, funds held in a Polish bank account, could be transferred to an account in Australia at the request of the account holder.

17. Mr Nocon visited Poland on a number of occasions throughout the debt period. During those visits he used pension payments paid into his Polish bank account to meet his daily living and other expenses. While apparently not accessible in Australia, Mr Nocon was able to, and did, access those funds when he visited Poland. It follows that the facts of this case do not come within the Inguanti exception and therefore the monies were “derived or received” by Mr Nocon for his use and benefit and therefore constitute “income” within the meaning of the Act. Given this finding it is not necessary to decide whether those monies would have constituted income had Mr Nocon not visited Poland.

18. As discussed below I accept that Mr Nocon was advised by Centrelink that pensions paid into Polish bank accounts prior to October 2010 constituted “blocked income”. Nonetheless the assessment of the proper character of the money is a question of statutory construction to be determined by the Tribunal.

    CAN THE DEBT BE WAIVED ON ACCOUNT OF ADMINISTRATIVE ERROR?

19. Section 1237A of the Act provides that the Secretary, or Tribunal acting as substitute decision-maker, must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth:

    Waiver of debt arising from error

    Administrative error

    1Subject 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.

    Note:     Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).

20. Section 1237A poses the question: “is an administrative error made by the Commonwealth the only cause that objectively can be ascribed to some or all of Mr Nocon’s debt?” (see Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126, at 135). If the answer to that question is yes, and the overpayment was received in good faith, that part of the debt attributable to that error must be waived.

21. In a statement dated 19 November 2012 Mr Nocon wrote that he and other members of the Polish community attended meetings organised by the “Polskie Biuro Pomocy Spolecznej” (Polish Welfare Office) in Sydney in January 2001 and April 2002. The meetings had apparently been convened because of uncertainty within the Polish community about Centrelink’s treatment of the Polish pensions. He claims that the Centrelink representatives who attended those meetings explained that as Australia did not have an agreement with the Polish government, the Polish pension constituted “blocked pension” and not income.

22. In separate statements prepared for these proceedings, Ireneusz Berwecki and Miroslawa Kilanowska claimed that they attended the 2001 meeting and corroborated Mr Nocon’s account of being told that the Polish pension was a “blocked pension” and would not be regarded as income until such time Poland and Australia entered into an agreement.

23. Mr Nocon claimed that, as instructed by the Centrelink representatives who attended the 2001 and 2002 meetings, shortly after receiving notice that he would be paid the Polish pension, on or about 10 April 2002, he rang Centrelink to advise of this development. There is no record of that contact in documents produced under section 37 of the Administrative Appeals Tribunal Act 1975 (Cth).

24. Mr Nocon also stated that in late 2010 he attended a meeting organised by the Polish consulate at which a Centrelink representative stated that if, prior to Australia entering into the agreement with Poland on 1 October 2010, a person had notified Centrelink that they had been receiving the Polish pension there would be “no problem” and each case would be dealt with individually. He stated that sometime after that meeting “Centrelink suddenly recalled that I exist … and started ill-treating me”, demanding that he repay monies received over a decade ago.

25. Centrelink wrote to Mr Nocon on 13 July 2012 about his claim that he had been told that because there was no intergovernmental agreement, Polish pensions were treated as blocked income and the rate of Australian pension would not be affected. In the letter the Centrelink Authorised Review officer wrote:

    Departmental representatives recall information provided about ‘blocked income’ at community meeting slightly different to your recollection. Departmental representatives remembers people being told:

    ·Polish pension payments were not ‘blocked’

    ·However, if individuals could provide a letter to Centrelink saying their payment was not allowed outside Poland, then their circumstances could be looked [at] on a case by case basis.

26. While possible that Mr Nocon, Ms Berwecki and Ms Kilanowska may have misunderstood the information conveyed at the meeting, I think it more probable than not that their account is accurate. It has the ring of truth and it is broadly consistent with the recollection conveyed by the unnamed departmental representatives to the ARO. Their account indicates that they held the opinion that (i) some people could not take money out of Poland; and (ii) if that could be established, Centrelink was open to treating that “income” as blocked.

27. In an Income and Asset Review form dated 27 February 2004, signed by Mr Nocon, hewas asked::

    Do you (and /or you partner) receive income from outside Australia?

    This includes … “Other  …overseas pensions, benefits or allowances”

28. In these proceedings Mr Nocon said he answered “no” to that question because this was consistent with the advice he had received at the 2001 and 2002 meetings.

29. I accept as claimed that shortly after being notified by the Polish Government that he would be receiving a Polish pension Mr Nocon notified Centrelink by phone. I also accept that he believed the answer he gave to the above question to be truthful because he understood that Centrelink considered that a Polish pension did not constitute income. However there is no evidence to suggest that at any time Centrelink or its officers advised the Polish community not to disclose receipt of the Polish pension. By his own admission Mr Nocon understood that he was required to disclose receipt of the Polish pension to Centrelink. Indeed, as he points out, he contacted Centrelink in April 2002 to convey that he had been granted the pension because this is what he had been instructed to do.

30. I accept that the genesis for the overpayment was the inaccurate information provided at the meetings attended by Mr Nocon. Coupled with his poor language skills and possibly his understanding that Centrelink already held that information, this contributed to Mr Nocon’s decision to provide an inaccurate answer to the income question in the Income and Asset Review form.

31. Section 1237A sets a high hurdle. For a debt to be waived under this provision it must be “attributable solely” to administrative error. The provision is not concerned with apportionment of blame. Once established that the debt is even partly caused by a factor other than Centrelink administrative error, the power to waive the debt cannot be exercised. It follows that the power to waive the debt under this provision cannot be exercised.

    CAN THE DEBT BE WAIVED BECAUSE OF SPECIAL CIRCUMSTANCES?

32. Section 1237AAD of the Act gives the decision-maker the power to waive all or part of a debt if satisfied, among other things, that “there are special circumstances (other than financial hardship alone) that make it desirable to waive [the debt]”.

33. It is not in issue that s 1237AAD(a) is satisfied: that is, the debt did not arise as a result of Mr Nocon knowingly making a false statement or representation, or failing or omitting to comply with a relevant statutory provision.

34. The term “special circumstances” is contained in a number of provisions of the Act and has been the subject of exhaustive consideration by the Administrative Appeals Tribunal and the Federal Court. The Federal Court has consistently declined to adopt a prescriptive formula. (See for example French J in Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531 at 535). Nonetheless, the Court has emphasised that the term denotes a requirement that there be “something to distinguish [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545. This however is not to be interpreted as a requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”: per Hill J in Secretary Department of Social Security v Hodgson (1992) 37 FCR 32 at 42. Nor is there a requirement that the circumstances be unique to the individual: per Katzmann J in Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs (2010) 185 FCR 52 at 65.

35. The Guide to Social Security Law, issued on 13 May 2013 (the Guide) provides direction to decision-makers on the application of the “special circumstances” discretion (see s 6.7.3.40). The Tribunal is not bound to apply the policy expressed in the Guide, but may do so and, indeed, will usually do so unless there are cogent reasons in a particular case for not doing so (see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60). The Guide states:

    Interaction of 'administrative error' & 'special circumstances'

    Administrative error by the Commonwealth would not generally lead to a 'special circumstances' waiver. The [Social Security] Act contains a specific waiver provision for debts attributable solely to an administrative error (section 1237A).

    However, taken in context, an administrative error may sometimes combine with other circumstances to create a situation that is, overall, special.

    When it is desirable to waive recovery

    ….

    The integrity of the social security system relies on recovery of overpayments. In general, if a person has had the use and advantage of the money paid incorrectly to them and has the means to repay it without excessive hardship (e.g. through withholdings), they should do so. In such a case, special circumstances waiver would be appropriate only if the person's particular circumstances made it unjust for the general rule to apply. Their circumstances would need to distinguish their situation from that of the many other people who do have to repay their debts.

36. In support of his argument that his circumstances constitute “special circumstances” Mr Nocon points to a decision of the SSAT: Kucminska v Secretary, Chief Executive Centrelink [2012] MO51718 (unreported, Mr D Stevens) 7 December 2012. The Tribunal decided that special circumstances existed for the purpose of s 1237AAD of the Act. The facts of that case are different to those in that matter and in any event decisions of the SSAT are not binding on the Tribunal.

1. Mr Nocon has entered into an agreement with Centrelink to repay the subject debt at the rate of $20 per fortnight. He has no dependents or debts and his major expense is rental payments of $344per week. He receives a pension from Poland of about $300 per month. He lives modestly but concedes his position could not be described as straitened.

2. Mr Nocon’s financial position alone does not constitute special circumstances. However as a result of incorrect information he now finds himself liable to repay a not inconsiderable debt. If paid by instalments it would not jeopardise Mr Nocon’s financial security or cause him to suffer excessive hardship, nonetheless given his modest means it will reduce the little discretionary income available to him. Having regard to the totality of his circumstances, in particular the manner in which his debt came about, I am satisfied that “special circumstances” are established and it is desirable to waive part of the debt.

3. As stated in the Guide as a general rule, where a person who has had the advantage of social security payment they were not entitled to receive, they should be required to repay that amount to the Commonwealth unless they are unable to do so without excessive hardship. While Mr Nocon will not suffer excessive hardship if he were to repay the debt, in my opinion having regard to the totality of the circumstances I think it would be unjust to apply that rule in this case. In my opinion it is appropriate to waive part of the debt, namely 50 per cent of the debt for the period to 1 October 2010.

   CONCLUSION

4. The reviewable decision made by the SSAT on 13 December 2012 not to waive any part of the debt owed by Mr Nocon is set aside and in substitution I have decided to waive 50 per cent of the debt for the period to 1 October 2010.  The balance of the decision is affirmed.

I certify that the preceding 40 (forty)  paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton

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

Associate to Senior Member Britton

Dated 11 June 2013

Date(s) of hearing	22 May 2013
Applicant’s Representative	Jan Strak
Solicitors for the Respondent	Department of Human Services, Program Litigation and Review Branch