Neilsen; Secretary, Department of Family and Community Services [1999] AATA 918 (3 December 1999)

Last Updated: 7 January 2000

DECISION AND REASONS FOR DECISION [1999] AATA 918

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V1999/855

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And GAYLE NEILSEN

Respondent

AND V1999/1063

Re GAYLE NEILSEN

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr J Handley, Senior Member Dr C Re, Member

Date 3 December 1999

Place Melbourne

Decision The decision of the Social Security Appeals Tribunal dated 30 June 1999 waiving a debt raised by the overpayment of partner allowance is varied, and in substitution it is decided that the debt be recovered (V1999/855). The decision of the Social Security Appeals Tribunal dated 30 June 1999 imposing a lump sum preclusion period from 8 March 1997 to 10 February 2006 is affirmed (V1999/1063).

..Sgd. Mr J. Handley ..

Senior Member

CATCHWORDS

SOCIAL SECURITY - lump sum preclusion period - overpayment of partner allowance - decision of Social Security Appeals Tribunal to vary preclusion period and waive existing debt - whether special circumstances exist to eliminate or reduce the preclusion period and waive the debt.

Social Security Act 1991 s.1184(1), 1236(1A), 1237A, 1237AAD.

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

REASONS FOR DECISION

3 December 1999 Mr J. Handley, Senior Member

Dr C Re, Member

1. This is an application by both parties to review the decision of the Social Security Appeals Tribunal ("SSAT") dated 30 June 1999.

2. On that date the SSAT decided that a decision made by an officer of the Department of Family and Community Services ("the Department") to impose a lump sum preclusion period between 31 October 1996 and 5 October 2005 be varied by imposing a preclusion period from 8 March 1997 until 10 February 2006. The SSAT also decided that a decision made by a delegate of the Secretary of the Department to raise and recover a debt of $11,781.94 for partner allowance paid to Mrs Neilsen for the period 22 April 1997 until 19 October 1998 be set aside and remitted to the Department for reconsideration in accordance with the directions that the debt exists but recovery of it be waived.

3. In application V1999/855 the Secretary of the Department applies to review that part of the decision made by the SSAT with respect to waiver of the debt. In application V1999/1063 Mrs Neilsen applies to review that part of the SSAT decision concerning the imposition of a preclusion period.

4. The applications were listed for hearing on 25 November 1999. Mrs Neilsen was unrepresented and appeared with her husband. The Secretary of the Department was represented by Mr Baker.

5. The facts giving rise to the disputes are basically agreed and may be summarised as follows.

6. In the late 1980's Mrs Neilsen suffered two back injuries while employed by Telstra. She subsequently became totally incapacitated and received weekly compensation payments until 7 March 1997. Common law proceedings had been issued and they were eventually settled upon her signing a common law release on 4 April 1997 for the sum of $375,000. A condition of the settlement was that Mrs Neilsen was entitled to receive the weekly compensation payments paid prior to 7 March 1997.

7. On 22 April 1997 Mrs Neilsen and her husband attended the Morwell office of the Department (then known as the Department of Social Security) to enquire whether she had any entitlement to a social security benefit. She said that she attended the office at that time because her weekly compensation had ended and she had no income. Her husband had previously been self-employed in partnership in a garage in Venus Bay but had been declared bankrupt and was not earning income.

8. Mrs Neilsen said that she attended the departmental office with documents relating to her husband's bankruptcy and also a copy of the common law release. At the time of attending the office the common law proceedings had settled (the release was signed on 4 April 1997) but the common law funds had not been received. Mrs Neilsen said she left a copy of the release with an officer at the Morwell office. The claim form which enquired as to the status of her compensation claim appears at T-3 of the documents lodged by the Department pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 ("T documents"). It records that payments did cease on 7 March 1997 and that a common law lump sum had not been received. Mrs Neilsen said that she was told by the officer that enquiries would need to be made from the compensation section of the Department to determine her entitlement to a social security payment. She said she was told by that officer that there was no record of any compensation claim. Mrs Neilsen said she protested and assured the officer that a claim had in fact been made, yet the officer insisted that there was no record of any such claim.

9. On the following Monday Mrs Neilsen said that she received a telephone call from the same officer confirming that she would qualify for a social security payment and that benefits would be processed immediately. She said she received the call because the officer was aware that she was not receiving any income and that the officer was concerned to ensure that social security benefit would be paid as soon as possible. Mrs Neilsen said that she again told the officer that it was not correct to say that Telstra would have no record of the compensation claim, yet the officer assured her that she would be entitled to a benefit and that it would be paid forthwith.

10. Having been assured by the officer at Morwell that there was an entitlement to benefit, despite protests that the advice the Department received concerning the status of the compensation claim was obviously incorrect, Mrs Neilsen believed that she had, in the circumstances, an entitlement to a social security benefit. For reasons that she was unable to explain the Department processed an application for partner allowance. That benefit was thereafter paid until October 1998. In September 1998 Mrs Neilsen applied for Disability Support Pension. She said it was at this time, when she was questioned by another officer within the Morwell branch of the Department, that she first learnt that a concept of preclusion from benefits existed. She also learnt at that time that she probably had been incorrectly paid partner allowance and indeed should not have been paid it at all.

11. At T-5 is a letter forwarded by the Department to Mrs Neilsen, dated 23 April 1997, putting her on notice that were she to receive weekly compensation or a lump sum compensation payment she would be liable to repay any Social Security payments received. Mrs Neilsen said she did not receive that letter. She said at or about that time - indeed she said even to the present time - she and her husband have had extreme difficulty with their personal mail being interrupted and sometimes being tampered with. She said complaints had been made to an investigation officer within Australia Post. On many occasions she said mail that had been sent to her was not received. Accordingly, Mrs Neilsen said that by reason of the letter appearing at T-5 never having been received, she had no notice of her obligation to notify the Department in the event of receipt of compensation payments.

12. In late May 1997 Mrs Neilsen received her common law settlement monies. She said that it did not occur to her at that time to notify the Department of receipt of those funds nor again enquire as to her eligibility to continue to receive benefit, having previously been assured by the Department that she did have an entitlement.

13. Mrs Neilsen said that $25,000 of the settlement funds were retained by her solicitor as solicitor-client costs. From the net sum remaining - $350,000 - her solicitor arranged for the purchase of the house that was previously rented by her and Mr Neilsen, transferred monies upon her instructions into an investment fund and established family trusts. Mrs Neilsen also purchased a motor car in the sum of $45,000 and a caravan at $23,000, discharged a number of debts at $15,000 and engaged builders to renovate the home which had been purchased. The home was purchased for $70,000 and renovation costs totalled approximately $130,000. Subsequently there has been disputation with one of the builders arising out of the withholding by Mrs Neilsen to him of the sum of $45,000. This matter apparently is the subject of a hearing to be convened before the Building Complaints Tribunal in April 2000.

14. Recently Mrs Neilsen and her husband have borrowed $75,000 from a solicitor in exchange for a first mortgage over the home to permit them to extend the home and have it established as a bed and breakfast venue. Advertising has been undertaken through the Victorian Bed and Breakfast Council and through the Victorian Government Tourist Bureau. It is expected that income in the sum of $15,000 per annum will be generated by the venture.

15. At the present time Mr Neilsen is in part time employment earning $139 net per week. Mrs Neilsen withdraws $700 per month from her investment which initially had a capital sum of $100,000 but which has now been depleted and presently has a balance of $78,000. From the sum of $700 per month Mrs Neilsen repays the mortgage to the solicitor with respect to the borrowed monies at $500 per month.

16. Mrs Neilsen estimated her present assets being her home with a value of approximately $120,000, the sum remaining in the investment fund of $78,000, the motor vehicle being $25,000 and the caravan of $18,000. She said that she also holds 600 Telstra shares with current value of $9 each.

17. Mr Neilsen remains in bankruptcy and is not due for discharge until October 2000. He said however that his solicitor is currently applying for early discharge.

18. The home at Venus Bay was registered in the name of the Neilsen Trust to ensure that any creditors of Mr Neilsen would not be permitted to realise the home to repay his debts.

Submissions

19. Mr Baker submitted that the Department was in error in making payments of partner allowance to Mrs Neilsen and conceded that monies received by her were received in good faith. He submitted however that there was no sole administrative error on the part of the Department because the Department was mislead by the failure of Telstra to respond to enquiries as to the status of the compensation claim and - if it were accepted that Mrs Neilsen was not aware of her obligation to notify the Department as to the status of her compensation claim - the Department could not be responsible for letters that it sent to her requiring her to give them such notice if in fact the letter was not ever received.

20. Mr Baker submitted that the SSAT was in error in finding that there were no special circumstances so as to decide that a preclusion period should exist and should not be reduced but then finding that there were special circumstances for the purposes of deciding that the debt should be waived.

21. He submitted this was not a case where the circumstances of Mrs Neilsen were extreme or unusual, and the debt, he said, should be reinstated. It was submitted that the meaning of "special circumstances" as applies under s.1184 of the Social Security Act 1991 ("the Act") has the same meaning as would apply to those same words as they appear at s.1237 of the Act.

22. With respect to the present ability of Mrs Neilsen to repay the debt Mr Baker noted that Mrs Neilsen, as the beneficiary of a family trust, owns real estate which has a value considerably greater than the present mortgage, has monies invested, owns a motor vehicle and a caravan and Telstra shares. The combined value of the assets exceeds considerably the amount of the debt.

23. Mrs Neilsen submitted that the only reason that she is in dispute with the Department was because of incorrect advice given to her by her solicitor and by the Department. She said she was never told by her solicitor that she would be precluded from receiving a benefit for a period of time and had she been advised she would not have made enquiry as to her entitlement to a benefit. Additionally she said that had the Department correctly advised her when she made enquiry on 22 April 1997 she would have been then told that she did not have an entitlement and benefit would not have been paid. Mrs Neilsen submitted that a letter sent to her by the Department on 23 April 1997 was not ever received and in those circumstances she can not be held accountable for failing to notify the Department of the compensation monies she received in settlement of her common law claim in May 1997. She said at all times she acted on the advice given to her by the Department and accepted that the advice received was correct.

24. With respect to the preclusion period Mrs Neilsen acknowledged that a concept of precluding persons from receiving social security benefits did exist as a matter of law, but she said in her case it should be eliminated.

Conclusion & Reasons For Decision

25. The provision of a period of time within which persons are precluded from receiving a social security benefit arises in circumstances where a compensation payment has been received. The legislation provides a formula which, for the present purposes, amounted to precluding Mrs Neilsen from receiving benefit for 464 weeks.

26. The only alteration made by the SSAT to the primary decision made by the respondent was with respect to the commencement and conclusion dates of the preclusion period. This was because the employer (eventually) told the Department that weekly compensation ended on 30 October 1996 whereas in fact it did end on 7 March 1997. In all other respects the SSAT affirmed the decision made by the Authorised Review Officer ("ARO") to impose a preclusion period of 464 weeks. For reasons that follow, it is our decision that that portion of the decision of the SSAT should be affirmed.

27. With respect to the overpayment of partner allowance, the SSAT also decided that a debt existed but having regard to what it found to be special circumstances of Mrs Neilsen it was decided that the debt be waived. Again for reasons that follow, it is our decision that that part of the decision of the SSAT should be set aside and in substitution for it the decision made initially by the ARO should be reinstated.

Preclusion Period - V1999/1063

28. Section 1184 of the Act relevantly provides-

"For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

(a) not having been made; or

(b) not liable to be made;

if the Secretary thinks it is appropriate to do so in the special circumstances of the case."

Accordingly if we were to treat the whole or part of a compensation payment as not having been made - so as to determine the extent, if any, of a period of preclusion from benefit - we would need to decide that there were special circumstances with respect to Mrs Neilsen.

29. We are prepared to find as a fact that Mrs Neilsen did attend the Morwell office of the Department on 22 April 1997 and did provide an officer of the Department with a copy of the common law release. We acknowledge the comments made by the SSAT that the questionnaire then completed is incomplete to the extent of how a person represents to the Department that common law proceedings have ended but monies have not been received. Nonetheless at 22 April 1997 whilst Mrs Neilsen was in a position where her weekly compensation had ended and no other income was available to her and her husband, she was advised that there was an entitlement to a benefit. However six or seven weeks later she received the benefit of her common law settlement, having net proceeds of $350,000 applied by her solicitors to establish a number of trusts, having monies invested into a superannuation fund and causing the trust to purchase a home. Thereafter she contracted with builders to undertake certain renovations and she acquired a new motor car and a new caravan. She also held approximately $5,400 worth of shares in Telstra.

30. In Re Beadle & Director General of Social Security (1984) 6 ALD 1 at 3 the Administrative Appeals Tribunal decided-

"An expression such as 'special circumstances' is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether the circumstances answer any of these descriptions must depend upon the context in which they occur. For it is in the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."

31. We are unable to find that the circumstances of Mrs Neilsen are special having regard to the meaning given to the term "special circumstances" by the above decision.

32. In the exercise of the discretion available to us the purpose of the policy underlying the imposition of a period of preclusion is to ensure that persons who receive a compensation benefit do not also receive a social security benefit for the period of time covered by the compensation payment. In the present circumstances Mrs Neilsen has been precluded from receiving benefit from a date commencing after the conclusion of her weekly compensation payments but she subsequently received $375,000 in settlement of common law rights. The payment of costs to her solicitor are not special in the circumstances, nor is the extent of her injuries, particularly noting that compensation has been paid with respect to those injuries and the incapacity consequential upon those injuries.

33. Significantly, Mrs Neilsen is not now impecunious. Her equity in the family home - despite some uncertainty as to the present market value of the home - would exceed $50,000 (allowing for the mortgage recently secured when monies were borrowed). She has $78,000 invested in a superannuation fund to which she apparently has ready access. She owns a motor car and a caravan which have a combined market value presently in excess of $40,000 and she has Telstra shares presently valued in excess of $5,000. The recent commencement of a bed and breakfast business will give her and her husband the opportunity to earn income.

34. In these circumstances we have decided that the discretion to treat the whole or part of the compensation payment as not having been made or not liable to be made should not be exercised in favour of Mrs Neilsen. In the circumstances the preclusion from receipt of benefits and the extent of the period of preclusion from receipt of benefits as decided by the SSAT should be affirmed.

Overpayment - V1999/855

35. With respect to the overpayment of partner allowance we would agree that that allowance should not ever have been paid and that its payment occurred as a result of administrative error on the part of the Department. However s.1237A of the Act only permits the debt to be waived if the debt was received in good faith and the receipt was attributable solely to administrative error made by the Commonwealth. Receipt of the allowance could not be said to be attributable solely to the error made by the Commonwealth. The monies were received by a combination of Mrs Neilsen not receiving a letter posted to her by the Department on 23 April 1997, the failure on the part of her solicitor to advise her prior to settlement of her common law claim that a period of preclusion would exist and the failure on the part of Telstra to respond to enquiries made by the Department.

36. Accordingly the only opportunity to waive the debt would be that as found at s.1237AAD of the Act where for the present purposes only sub-section (b) applies. That section provides-

"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 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."

37. For reasons given above there are no special circumstances which would permit the debt to be waived and having regard to the provisions of sub-section (c) it would not be "appropriate" to waive the debt as opposed to having it written off. Mrs Neilsen clearly has assets that would permit her to repay the debt without undue hardship.

38. Having regard to the provisions of s.1236(1A) of the Act (which relates to circumstances in which the Secretary may decide to write off a debt), write off of the debt would not in the circumstances be available to Mrs Neilsen.

39. In all of the circumstances we are satisfied that the decision under review insofar as it concerned the imposition of a preclusion period should be affirmed and the decision under review insofar as it concerned an overpayment of partner allowance should be varied to the extent that whilst we have decided that the debt does exist, in substitution for the decision of the SSAT to waive that debt, we have decided that that debt be recovered.

I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J. Handley, Senior Member.

Signed: ....Carolyn Irons ............................................

Secretary

Date/s of Hearing 25 November 1999

Date of Decision 3 December 1999

Solicitor for the Applicant Mr T. Baker, Departmental Representative

Solicitor for the Respondent self-represented