Dobson; Department of Family and Community Services [2000] AATA 41 (28 January 2000)

Last Updated: 4 February 2000

DECISION AND REASONS FOR DECISION [2000] AATA 41

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V1999/718

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES

Applicant

And LAURENCE DOBSON

Respondent

DECISION

Tribunal Mr J.T.C. Brassil, AM, Member

Date 28 January 2000

Place Melbourne

Decision The Tribunal sets aside the decision under review and substitutes therefor the following: 1. The Tribunal finds there was a debt to the Commonwealth owed by Laurence Dobson, the respondent in this matter, that the debt ceased on 27 November 1997, that all such withdrawals since by the Secretary against that debt were not legal and directs the Secretary to repay the full amount of those withdrawals to the respondent immediately.

(Sgd.) J.T.C. Brassil

Member

CATCHWORDS

SOCIAL SECURITY - newstart allowance - overpayment - whether a debt to the Commonwealth - fraud - effect of bankruptcy on the debt - waiver

Social Security Act 1991 - Sections 658, 1224 and 1237AAD

Bankruptcy Act 1966 - Subsection 153(2)

Secretary, Department of Social Security v Danielson, (1997) 44 ALD 19

Osgood and Secretary, Department of Social Security (AAT 11539, 14 January 1997)

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

Civitareale and Secretary, Department of Family and Community Services [1999] AATA 486

R v Sinclair, [1968] 3 All ER 241

REASONS FOR DECISION

28 January 2000 Mr J.T.C. Brassil, AM, Member

1. The application is an appeal against a decision of the Social Security Appeals Tribunal (SSAT) on 25 May 1999 which set aside a decision to raise and recover an overpayment of newstart allowance in the sum of $2,453.83 for the period 26 June 1996 to 27 November 1996. The SSAT sent the matter back to Centrelink with directions to recalculate on the basis of a reduced amount of earnings and declined to waive the recalculated debt.

2. The appeal was heard first on 4 October 1999 at which the applicant was represented by Mr Paul Kanowski and at a resumed hearing on 3 November 1999 when the applicant was represented by Mr Michael Todd. At both hearings the respondent was self-represented.

3. The documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 were taken into evidence. Medical evidence was given by Dr Elisha on behalf of the respondent and numerous exhibits were presented by both the applicant and the respondent.

Facts

4. During the period in 1996, 6 June to 27 November, the respondent was in receipt of newstart allowance (T16) and was required to make applications fortnightly (see T3 to T9). On the form a declaration of work and earnings is required. On those forms there are declarations of earnings only fortnights ending on 18 September, $221.40 (T6) and 30 October, $69.31 (T9). The latter payment relates to performance in the Crawford Production series "State Coroner". Departmental computer records (T19) confirm these amounts.

5. Mr Dobson has had a career as an actor and has appeared in a large number of productions, mainly television, although generally not in lead roles. In the period being considered he was able to get some work from Frontline Productions Pty Ltd (T11) which was considered by the SSAT in its decision.

6. He also did some work in two different areas with the Board of Studies. The first of these was with schools in the western suburbs of Melbourne and involved assessment of candidates in drama studies and the second was of a clerical nature at the head office of the Board of Studies. Details of payments from the Board were available to the Tribunal (T14, T27, and in a letter to Centrelink, 23 September 1999, Exhibit R1).

7. The respondent 0n 27 November 1997 entered into bankruptcy on a debtor petition and was discharged on 4 June 1998 (ITSA Report, Exhibit R2). Centrelink did not prove in the bankruptcy.

Evidence

8. The Tribunal had a report from Dr Benjamin Elisha, the respondent's general practitioner (Exhibit A4, 23 September 1997). Dr Elisha was not available to give evidence at the first hearing but was able to do so at the resumed hearing. In his report, referring to the year 1996, Dr Elisha stated he had rarely "seen a patient who had to cope with such a series of disasters in the same year". He also stated that "as a result of this his mentality at the time was not coherent". He mentioned that one additional factor was the death of Mr Dobson's mother during the year.

9. In oral evidence Dr Elisha described the respondent as having been plagued with illness over a number of years, ischaemic heart disease, hypertension, depression together with shoulder and back injuries. He had a bout of severe depression in 1996 and in the same year underwent angioplasty requiring 4 stints. He was also diagnosed with diabetes at this time.

10. Dr Elisha said he did not expect Mr Dobson to function properly at work, was sick every second day and would have needed an enormous effort to conduct his personal life.

Submissions

11. Mr Kanowski outlined the detailed calculations of the officers of Centrelink following their examination of the pay information provided by the Board of Studies which indicated that the respondent had received payments he had failed to report as the legislation required, Section 658 of the Social Security Act 1991 ("the Act"). These calculations were notionally distributed against the fortnightly payment periods used by Centrelink. He submitted that there was an overpayment of $2751.13 which had been raised on 27 May 1997 in accordance with Section 1224 of the Act.

12. The fortnightly forms were missing for the periods ending on 4 September 1996 and 13 November 1996 but it was submitted that the amounts could be inferred, Secretary, Department of Social Security v Danielson,(1997), 44 ALD 19, and this had been done.

13. It was submitted that Mr Dobson had an obligation to notify payments and he omitted to do so. This should be considered against the need for him to claim some of the payments from the Board of Studies which he proved able to do.

14. Withdrawals from Mr Dobson's Disability Support Pension against the overpayment commenced, initially at $48.70 per fortnight until 1 August 1997 and then $20 per fortnight until 30 October 1997. The withdrawals were re-commenced at the lower rate on 11 December 1997 and continued until 24 June 1999 leaving $1645.03 outstanding as at 9 July 1999 (Exhibit A3, letter from Centrelink Prahran to respondent).

15. In respect to the effect of the bankruptcy Mr Kanowski submitted that while Centrelink had not been notified of the debtor petition and had not proved their debt it was relevant that subsection 153 (2) of the Bankruptcy Act 1966 provided inter alia:

"153. (2) The discharge of a bankrupt from 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

...."

16. It was the applicant's submission that while North J in the Federal Court, Secretary, Department of Social Security v Southcott (1998) 50 ALD 162, found that a debt under Section 1224 of the Act is subject to the usual consequences of bankruptcy the operation of subsection 153(2) above would prevent the respondent from avoiding the debt. It was submitted that the debt was raised because of the overpayment which followed from the false representations of the respondent to obtain an advantage, the higher than justified payments of newstart allowance.

17. Mr Kanowski submitted that the decision of Forgie DP in a recent AAT decision, Secretary, Department of Family and Community Services and Civitareale [1999] AATA 486, deals with the meaning of fraud in relation to the operation of debt under Section 1224 of the Act and should assist the Tribunal.

18. Mr Kanowski, and later Mr Todd, at the resumed hearing, made submissions on Section 1237AAD of the Act which permit the Secretary to waive a debt if there are special circumstances (other than financial hardship alone) that would make the waiver desirable provided that the debtor or another person did not knowingly make a false statement or representation. It was the applicant's submission that false representation had been made knowingly by the respondent in this matter, hence the Tribunal should not waive the whole or any part of the debt.

19. The respondent submitted that there were special circumstances at the relevant time which should be taken into account.

20. He submitted that the death of his mother on 31 October 1996 was, for him, a traumatic event and he did not work for some days after this even though the Board of Studies report says he did work then on 2,3,4 November. He had previously divorced and then had a 20 year relationship which, in 1996, broke down because of his health and consequent behaviour.

21. He submitted that the evidence of Dr Elisha regarding his health should convince the Tribunal that he was not coping. He suffered bipolar disorder which Dr Elisha had referred to more generally as severe depression. He submitted that Dr Elisha was right in stating that he had great difficulty in coping with everyday living and some things did not get done because it was beyond him.

22. He did not claim he did not know he had to notify Centrelink about payments and did not dispute that there had been payments received. Payments for his acting arrived sporadically and some were payments of royalties or residuals for series he had appeared in years ago that were being repeated overseas. In regard to the other payments he was not sure that Centrelink and the Board of Studies had got it right.

23. He submitted that his bankruptcy should be examined to decide whether he still owed Centrelink who had continued to deduct $20 each fortnight.

Consideration of the Issues

24. The Tribunal is satisfied that the respondent failed to notify payments to Centrelink which he is obliged under Section 658 of the Act to do.

25. While there may still be doubt about the total amount of debt raised under Section 1224 of the Act the Tribunal is satisfied that there was a debt, of the order of $2500 and that Centrelink was making withdrawals from the Disability Support Pension now being paid to the respondent, apparently until 24 June 1999 except for a short period of suspension late in 1997.

26. The threshold issue for consideration relates to the effect of Mr Dobson's bankruptcy on the debt.

27. Turning to Southcott, in which the Secretary used a garnishee as the method of recovery, the Tribunal adopts the view of North J in that judgment (50 ALD 162 at 167) :

"The availability of the methods of recovery are limited to a time when there is a

debt to the Commonwealth. If the recipient of the overpayment has become

bankrupt, the debt due to the Commonwealth is replaced by the right of the

Commonwealth to prove in the bankruptcy and none of the means of recovery

provided in s 1224(2) are available."

28. The effect of this is that the debt of Mr Dobson to the Commonwealth ceased on 27 November 1997 when he went into bankruptcy unless under subsection 153(2) of the Bankruptcy Act it can be decided that, as the applicant submitted, the debt was incurred by a fraud to which Mr Dobson was a party.

29. The attention of the Tribunal was directed by the applicant to the decision of Forgie DP in Civitareale in which the same consideration was necessary. Can the actions of Mr Dobson in omission to notify, in all the circumstances, be characterised as a fraud ?

30. The dictionary definition of fraud used in Civitareale was that given in Osborn's Concise Law Dictionary (7th edition, Roger Bird, 1983):

"In general, fraud is obtaining of a material advantage by unfair or wrongful means; it involves moral obliquity. It must be proved to sustain the common law action of deceit. Fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false..........."

DP Forgie also turned to R v Sinclair [1968] 3 All ER 241 at 246:

"To cheat and to defraud is to act with deliberate dishonesty to the prejudice of

another's proprietary right."

This judgment also provides that it is a subjective, and not an objective, test (246).

31. From all the evidence, in particular that of the medical and emotional condition of the respondent at the relevant time, the Tribunal is not able to find that the omission to notify accurately was a deliberate dishonesty nor was any false misrepresentation made either knowingly or recklessly by the respondent. It is the subjective decision of the Tribunal that the failure to notify cannot be characterised as fraud pursuant to subsection 153(2) of the Bankruptcy Act.

32. It follows then that any debt to the Commonwealth by the respondent ceased on 27 November 1997 and that any withdrawal since that date was not an option open to the Secretary although those made prior could be made. Those withdrawals made since that date were not legal and should be repaid to the respondent.

33. As there is no debt to the Commonwealth now existing the Tribunal does not need to consider use of the discretion of the Secretary to waive pursuant to Section 1237AAD of the Act although from the evidence before the Tribunal it would have considered waiver favourably if a debt remained.

Decision

34. The Tribunal will set aside the SSAT decision under review and substitute therefor a decision that there was a debt to the Commonwealth owed by the respondent, that any debt remaining when the respondent went into bankruptcy on 27 November 1997 ceased and that all withdrawals by the Secretary, since that date in respect to the debt, made from other pension payments due to the respondent were not legal and should be returned to the respondent immediately.

I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J.T.C. Brassil, AM, Member

Signed: Judith Holt, Associate

Dates of Hearing 4 October, 3 November 1999

Date of Decision 28 January 2000

Applicant Mr P. Kanowski, Mr M. Todd,

Administrative Law Team, Centrelink

Respondent Self-represented