Lamb and Department of Family and Community Services [2002] AATA 133 (4 March 2002)

Last Updated: 6 March 2002

DECISION AND REASONS FOR DECISION [2002] AATA 133

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2001/858

GENERAL ADMINISTRATIVE DIVISION )

Re GLENNIS LAMB

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr IR Way, Member

Date 4 March 2002

Place Brisbane

Decision The Tribunal affirms the decision under review.

. (Sgd) I R Way.

Member

Decision No: 133/2002

CATCHWORDS

SOCIAL SECURITY - Overpayment - Recovery of Debt - Whether special circumstances exist to allow for the debt to be waived - Whether unusual, uncommon or exceptional circumstances - Errors by Department - Whether applicant contributed to error through her misunderstanding of Departmental correspondence - Financial hardship

Secretary, Department of Social Security v Hayles (1998) 82 FCR 162

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

Beadle v Director-General of Social Security (1985) 7 ALD 670

Re Secretary, Department of Social Security and McAvoy (1996) 23 AAR 543

REASONS FOR DECISION

4 March 2002 Mr IR Way, Member

1. This is an application by Glennis Lamb ("the applicant") for review of a decision made by Centrelink on 26 April 2001 to raise and recover a debt of $30,135.64 comprising age pension payments for the period between 10 July 1997 and 7 March 2001. This decision was affirmed by an Authorised Review Officer on 29 May 2000 and by the Social Security Appeals Tribunal ("SSAT") on 20 August 2001.

2. The Tribunal had before it the documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, a statement made by the applicant and signed by her on 31 January 2002 (Exhibit A1) and a letter from the Department of Social Security to the applicant dated 20 March 1997 (Exhibit A2). The applicant gave oral evidence at the hearing.

Agreed Facts

3. There is no dispute between the parties about the facts set out in sub-paragraphs (a)-(n) below and the Tribunal so finds:

(a) The applicant lodged an application for age pension at the Biggera Waters office of the department of Social Security on 7 March 1997.

(b) In her application the applicant indicated that her occupation was "home duties".

(c) The applicant further indicated that the balance of her bank account was $3.00 and that she had "nil" cash.

(d) The applicant indicated that she did not own her own home.

(e) With her application for age pension, the applicant lodged a "Partner Details" form, also on 7 March 1997 at the Biggera Waters office of the Department of Social Security.

(f) On the "Partner Details" form, the applicant indicated that her husband, Patrick Ernest Lamb, worked as a "Real Estate Property Consultant", employed by Hillsea First National at Runaway Bay.

(g) The "Partner Details" form indicates that Mr Patrick Lamb earns a gross amount of $500 per week.

(h) The "Partner Details" form further indicates that Mr Patrick Lamb has two bank accounts with Suncorp Metway, with amounts of $41,000 and $17,500 deposited.

(i) The "Partner Details" form indicated that Mr Patrick Lamb expected to earn $988 within the next fortnight.

(j) At Q15 of the "Partner Details" form, Mr Patrick Lamb has answered "yes" to the question whether he has "any other investments or money on loan".

(k) On 20 March 1997, the respondent sent a letter to the applicant advising, amongst other things, that age pension had been granted to her and that the amount of combined yearly income used to calculate her rate of pension was $1,969.24 from financial investments (T9). This letter also required the applicant to advise the respondent if the combined income figure shown on the letter was incorrect. (T9 p52)

(l) The respondent sent further letters to the applicant on 19 September 1997 (T11) and 9 October 1997 (T12). Each of these letters listed the Applicant's combined yearly income as $1,396.98 and again required her to advise the respondent if the income figure shown was incorrect.

(m) From 20 March 1997 onwards, the rate of the applicant's age pension was calculated without reference to her partner's earnings from employment. The respondent became aware of this error after the applicant lodged an income and assets review form on 21 February 2001 (T13).

(n) On 5 April 2001, the Respondent raised an age pension debt against the Applicant in the amount of $30,135.64 for the period 10 July 1997 to 7 March 2001 (T19-20)

Issue

4. The sole issue before the Tribunal is whether there are special circumstances that would warrant the exercise of the discretion under s1237AAD of the Social Security Act 1991 ("the Act") to waive the right to recover all or part of the applicant's debt to the Commonwealth.

Legislative Framework

5. Section 1237 (AAD) of the Act relevantly provides as follows:

"Waiver in special circumstances

1237AAD. 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 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."

Applicant's Evidence

6. In her written statement the applicant stated that in late 1997 she and her husband tenanted the unit in Biggera Waters in which they were living (which her husband had bought in his name on an interest only loan), and moved into rented accommodation in Main Beach. In about October 1998 they moved from Main Beach to Chevron Island because they could not afford to continue renting in Main Beach. The applicant said that at that stage with her husband's earnings and the aged pension they were coping quite well and she considered they were "comfortable". The applicant and her husband still live in the unit at Chevron Island, the rental being $210.00 per week.

7. The applicant stated:

"(a) When I applied for the pension in 1997, no-one at the department of Social Security explained to me what the income limits were for getting the pension. I filled in all the forms and told the Department everything to do with my financial affairs and those of my husband and I assumed that the department would work everything out correctly. I even had to take in copies of my husband's earnings records from his employment as a real estate agent so that they could verify his income. I remember that all the papers I took in were photocopied and then given back to me. I assumed that the Department would take into account everything I had told them and assess everything correctly.

(b) When I got the first letter from the Department of Social Security, dated 20 March 1997, I assumed that all the information on it was correct, as only two weeks earlier, I had been in and given them all of my husband's pay details and other information they asked for.

(c) I did read the section on the back of the letter that said that the department had assessed my combined yearly income and that it was $1,969.24. I thought that as the letter was addressed to me only, and not to me and my husband, the reference to my 'combined yearly income' related to me only and meant my income from all sources, such as investments and other things. It was never explained to me, as I now know, that my combined yearly income means that of my husband too. If I had known this to be the case then of course I would have realised that the figure on the back of the letter was wrong, as it obviously did not include my husband's income. Again, because I had been in and told the Department everything only two weeks before getting this letter, I assumed that they had worked everything out correctly.

(d) I looked at the other information on the back of the letter dated 20 March 1997, especially the things that are listed under the heading 'What you must tell us' and I didn't think that any of them applied to me. Again, when I read the bit that says 'your combined income', I assumed that this applied to me only, as it does not say 'your and your partner's income' and as far as I was concerned, my income as shown on the letter was correct. When I read the part in the letter about Assets and what I had to tell the department in that regard, I saw that one part says 'if your or your partner's combined financial investments are more than $50,231.12'. If the part about income requires me to tell the Department about my husband's income, then I don't understand why it is not worded like the sentence in the 'Assets' section, which refers to 'your and your partner's combined financial investments'.

(e) Since being told that I have to pay back more than $30,000 to the Department my life has become terrible. My multiple sclerosis, from which I have suffered for many years has gotten worse and I am constantly in pain. My legs are especially bad at the moment and I take Panadol and Valium to relieve the pain. I have also been on Prednisone on and off for my multiple sclerosis and at one stage I was on 80 mg a day, an extremely high dosage. My doctor has told me that my condition is worse if I worry and of course I now worry all the time with a $30,000 debt hanging over our heads.

(f) My husband is very concerned about our future and feels that he will have to keep on working indefinitely so that we can survive now that I am not getting any pension. He has been working harder and harder since this happened. He is now aged 63 and it is taking its toll on him in terms of his health and the tight money situation has certainly put strains on our relationship. Another worry that we have is that my husband suffers from impaired glucose tolerance and we are scared that he might become very sick at any time.

(g) We only have minimal savings in the bank now, having spent most of our money on living expenses and the upkeep of my husband's unit at Biggera Waters, which has not been sold. We make sure that we keep about $2,000 for emergencies, such as repairs on the car and medical things. In my husband's job, it is essential that he has a car, so we need to ensure that money is kept aside to keep it on the road all the time. This is all the money we have now.

(h) My solicitor has shown me the Statement of Facts and Contentions submitted by the Department for my appeal and I really don't know where they get their information from. In paragraph 12, Mr Foster says that I have an interest in 'at least investment property'. I have never had an interest in the unit at Biggera Waters as it was always in my husband's name only. Furthermore, my husband has just sold the unit as we simply could not afford to keep it. I have told the Department all of this information, including the fact that my husband got about $1,300 out of it in the end, after paying all the expenses of selling the unit. I don't understand how the Department can be saying that my financial situation is considerably healthier than a large number of social security recipients. I certainly don't feel I am in a very good position.

(i) My husband and I are now in a tight financial position. We pay rent of $210 per week, which looks like going up soon, we don't get any assistance at all from the government and I now owe the department more than $30,000. When bills come in that we cannot afford to pay, we have to rely on handouts from our daughter Toni, which we find very embarrassing to have to do. We have one car, a Holden Calais that is about 10 years old, which my husband uses for his work. We don't go out to dinner or any social functions because we don't have the money and because of my poor health. All we do is socialise with friends on a regular basis. My husband is depressed about our situation and feels he must keep working to support us.

(j) I just don't see any way out of this financial mess which I believe came about through no fault of my own, but through a mistake made by the Department of Social Security right from the start.

(k) I never hid anything from the Department. I gave them all the information they wanted about my husband's work. The Department made a mistake in processing my application from the start by totally disregarding the information I provided about my husband's income.

(l) I think the way the letters from the Department are worded is very confusing and I thought that the information on the letters about my income was correct. Not for one moment did I think that the Department would make such a terrible mistake with such terrible consequences for me."

8. In her oral evidence the applicant told the Tribunal she applied for the aged pension when she was 60 years and 9 months old because she had reached the required age and needed the money; and because of the small amount she and her husband had she felt she should be entitled to receive the pension. She said that prior to notification of pension on 20 March 1997 she had never been told by Centrelink of the amount of pension that she would receive nor had she been told about the amounts her husband could earn before her pension could be affected. When taken to the Department's letter of 20 March 1997 advising her that her claim for pension had been successful she said the letter had been addressed to her and she reinforced the comments she had made in her written statement concerning the confusion in her mind as to the meaning of "your combined yearly income". On cross-examination the applicant was taken to her claim for pension where at T4/40 she had shown under income and assets a balance of $3.00 in bank accounts, nil cash and no income or assets. Apart from what she had already said about her interpretation of the meaning of the term, "combined yearly income", she was unable to explain to the Tribunal how she could have thought the total annual income figure of $1,969.24 from investments was hers, when she had no investments or income.

9. With respect to the income her husband was earning from his employment as a Real Estate Property Consultant, the applicant told the Tribunal her husband received an advance on commission of $600 per week which resulted in approximately $530.00 per week in the hand after tax and superannuation. She said that financially life was now very hard and that since her age pension had been stopped her life had changed dramatically. She and her husband cannot afford to go out to dinner, they have only a small amount of money left in their bank account to meet emergencies and the debt hanging over their heads has led to tensions between her and her husband and considerable stress for both of them. She told the Tribunal she had been married for 43 years and had two children from this marriage. She said that her daughter had been very good to her and sends money if asked but she found it hard to ask for money from her. She said that she had not worked for the past 32 years during which period she suffered from multiple sclerosis and this and her general health had been worsened by the stress and tiredness arising from what she described as a devastating debt. She said she found it hard to cope with her present situation and that her husband who was now 63 years old had to work long hours (including every second weekend) to earn as much as he could because of the debt. She also told the Tribunal that her husband suffered from impaired glucose tolerance and required regular checking by Doctors for this condition. In answer to a question from the Tribunal, the applicant was unable to put forward any further circumstances which might be considered to be special.

10. The Tribunal notes the respondent's advice that the current balance of the applicant's debt is $27,167.97 and that this amount is being recovered at a fortnightly rate of approximately $110.00, this being the total social security payment being made to Mrs Lamb at this time and in accord with the percentage of withholding arising from Mr Lamb's income.

Submissions

11. Mr Palma told the Tribunal that the applicant does not dispute the fact that she has received an overpayment of the amount calculated by Centrelink and that this was a debt to the Commonwealth. However, he submitted that recovery of this debt by way of withholding any entitlement the applicant may have to pension has caused her financial hardship and further deterioration in her health. The applicant and her husband now have minimal savings, they pay substantial rent with no Government assistance; they now depend solely on the husband's earnings and the husband feels he is locked into having to work indefinitely in order provide for himself and his wife despite his diminished health. Mr Palma contended that the applicant had no "no clear capacity" to repay the debt, contrary to what the respondent claimed.

12. In considering whether it should exercise the discretion pursuant to section 1237AAD of the Act, it was submitted by Mr Palma that special circumstances, other than financial hardship alone exist in this case.

13. He drew the Tribunal's attention to the major mistake made by the respondent in totally disregarding the information clearly provided by the applicant in respect of her husband's income when she applied for the pension and the confusing wording of the letter received by the applicant on the 20 March 1997 advising her of the outcome of her claim for aged pension. He submitted that on a plain reading of the letter it could be understood to mean only the applicant's combined income from all sources and that this is exactly what Mrs Lamb thought the letter meant. Further on this point Mr Palma referred the Tribunal to that part of the letter about "what you must tell us" under the heading "Assets" where it was said "if you and your partner's combined financial investments are more than". It was submitted that given the language in this clause if the Department wanted to know if the combined income of Mr and Mrs Lamb as shown was not correct, it should have stated under the heading "Income" similar words, namely "If you and your partner's combined income as shown above is incorrect".

14. In consideration of this case Mr Palma referred the Tribunal to Secretary, Department of Social Security v Hayles (1998) 82 FCR 162, Re Beadle and Director-General of Social Security (1984) 6 ALD 1 and Re Secretary, Department of Social Security and McAvoy (1996) 23 AAR 543.

15. It was submitted that the applicant had every right to expect the Department would have got it right. She had provided full disclosure of her and her husband's financial circumstances when applying for the aged pension but the Department got it wrong by completely disregarding the information about Mr Lamb's earnings.

16. Mr Palma put to the Tribunal that the applicant should not be asked to bear the consequences of the department's mistake when she thought she had fully complied with everything the Department asked her to do.

17. It was submitted that the circumstances in this case are sufficiently unusual to permit them to be described as "unusual, uncommon or exceptional", that the applicant and her husband at this time of their life should not be faced with a devastating debt and that the applicant should have her debt to the respondent waived under the provisions of section of 1237AAD.

18. Mr Foster for the respondent submitted that Mr Lamb's level of income, after tax, was well above the amount Mr and Mrs Lamb would receive if they were both on the pension and as such it could not be said that the applicant was suffering financial hardship. Further to this it was submitted that recovery of the debt was being affected by withholding Mrs Lamb's current social security payments of approximately $110.00 per fortnight, but this recovery did not affect the level of income available from Mr Lamb's employment and on this basis the applicant clearly had a capacity to repay the debt.

19. The respondent admitted it was in error in failing to code the information provided by Mrs Lamb about her husband's income. It was submitted that while the Department was in error, the existence and size of the applicant's debt can also be attributed to an oversight by the applicant. Mr Foster said that, in addition to incorrectly interpreting the Department's letter of 20 March 1997, the applicant failed to direct adequate attention to notices sent to her on 20 March 1997, 19 September 1997 and 9 October 1997, clearly indicating that only investment income was being taken into account and requiring the applicant to notify the respondent if the income amounts being used were incorrect.

20. Taking into account all of the circumstances of this case it was submitted that recovery of the applicant's Aged Pension debt of $30,135.64 should not be waived under section 1237AAD.

Considerations

21. The Tribunal accepts that this matter is contested by the applicant on the basis that the Tribunal should exercise the discretion to waive whole or part of the applicant's debt to the Commonwealth under the special circumstances provisions of section of 1237AAD of the Act.

22. In so doing, the Tribunal notes that when this matter came on for hearing at the SSAT, waiver under 1237A(1) of the Act was considered and determined, but the SSAT did not go on to consider whether there were special circumstances pursuant to section 1237AAD.

23. Special circumstances are not defined in the Act. However, the interpretation and the application of the discretionary provisions of the Act have been dealt with by the Tribunal and Federal Court in numerous cases.

24. In considering whether "special circumstances" prevail, the Tribunal is mindful that in accordance with the authorities cited below, there is a need to consider all of the particular circumstances of this matter in order to ascertain whether there are circumstances which are unusual, uncommon or exceptional so as to make the strict application of a compensation preclusion period unjust, unreasonable or otherwise inappropriate. The Tribunal is also mindful of the need to adopt a flexible response to a wide range of situations that could give rise to hardship or unfairness and in this context an absence of financial hardship does not stand in the way of a finding that special circumstances prevail.

25. In Re Beadle and Director-General of Social Security (1984) (supra) it was said:

"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 circumstances answer any of these descriptions must depend upon the context in which they occur. For it is 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."

26. This decision was generally affirmed on appeal by the Full Court of the Federal Court of Australia in Beadle v Director-General of Social Security (1985) 7 ALD 670 where it was said that:

"the phrase 'special circumstances', although lacking precision is sufficiently understood in our view not to require judicial gloss"

27. In the decision of Secretary, Department of Social Security v Hayles (1998) (supra) Justice French stated:

"The evident purpose of section 1237AAD is to enable a flexible response to a wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt. It is inappropriate to constrain that flexibility by imposing a narrow or artificial constraint upon the words. It may be that there will be few cases in which the Secretary will be satisfied that there are special circumstances in the absence of financial hardship. It may be that there are a few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words is to erode its useful purpose."

28. Turning first to the question of financial hardship. The Tribunal accepts that the applicant does not now enjoy the comfortable lifestyle that she did prior to the reduction in her social security payments and recovery from her of the debt owing to the Commonwealth. The Tribunal is also mindful that the applicant and her husband have very little savings available to them; that they have no investments of any consequence; and that the repayment of the debt owing to the Commonwealth at the current rate of repayment will take approximately 10 years.

29. These difficulties are to be balanced by the fact that the applicant's husband is currently in employment for which he receives remuneration of $600.00 per week pre-tax and the fact that the applicant's repayment of the debt is being satisfied by withholding the social security benefits to which the applicant is currently entitled. The Tribunal accepts the respondent's contention that this puts the applicant and her husband in a much better position than if they both were in receipt of the pension.

30. A further factor to be taken into account is the health and age of the applicant's husband. He is 63 years of age and has a health problem which might affect his capacity for employment in the future. However, there is no medical evidence before the Tribunal which would assist the Tribunal in considering the prospect or otherwise of Mr Lamb continuing in employment. It would be speculation to conclude that his future working life has only a short span.

31. The Tribunal also notes that the applicant and her husband do not own a house or unit and are in rental accommodation at a weekly rental of $210.00.

32. The Tribunal is satisfied that the applicant's current financial position is one of discomfort when compared to her life style prior to April 2001. However, after consideration of all of the material before it and the submissions of both parties, the Tribunal finds that the applicant's financial circumstances are not such that she can be said to be suffering financial hardship.

33. Turning then to other circumstances. Clearly the respondent has perpetrated a major error in failing to take into account Mr Lamb's income. The applicant has fully and truthfully provided information about her husband's employment and financial position. There is no suggestion in this matter that Mrs Lamb has made a false statement or intentionally made an untrue representation and the Tribunal accepts the applicant's submission that Mrs Lamb was entitled to have confidence in the respondent's determination of her pension.

34. That being said, the Tribunal is of the view that the respondent is also entitled to expect that pensioners will reasonably respond to departmental letters requiring of them confirmation of information contained in such letters; or notification of changes in their circumstances.

35. This raises the question as to whether as contended for the applicant the letter sent to Mrs Lamb on 20 March 1997 was confusing or misleading.

36. Dealing first with the phrase "your combined yearly income" compared with the phrase "you and your partner's combined financial investments are more than". Clearly the wording is different. However, the Tribunal does not accept that this can lead to an interpretation of "your combined yearly income" as an expression applying only to Mrs Lamb's income. The full text of the second phrase in the letter to Mrs Lamb dated 20 March 1997 is "if your and your partner's combined financial investments are more than $50,231.12 (this is $1,000.00 more than the value of financial investment we have recorded for you)". This clearly refers to the income from financial investments shown earlier in the letter and the income figure calculated under this heading clearly relates to the income shown under "how we have assessed your combined yearly income". The Tribunal is mindful that Mrs Lamb in oral evidence, admitted that when she made her claim she said she had no investments or income and the Tribunal therefore is satisfied that it would be reasonable to expect that Mrs Lamb should have interpreted "your combined yearly income" as being from investments in her husband's name. The Tribunal is also satisfied in the light of the considerable efforts Mrs Lamb made to declare her husband's income it would be reasonable to expect her at least to question a level of yearly income of $1,969.24.

37. As indicated earlier in these reasons for decision, the Tribunal has accepted Mrs Lamb as a credible witness and one who has not acted dishonestly in this matter. However, the Tribunal is satisfied that not only has the respondent been in error in this matter, but so has Mrs Lamb. She has mistakenly misinterpreted the contents of the Department's letter and the SSAT was correct in determining that both parties are at fault in this matter. As such the Tribunal is satisfied that this matter can be distinguished from the case of McAvoy (Supra) where the applicant was repeatedly given wrong advice by the Department and this was the sole reason for the debt to the Commonwealth. The Tribunal, with respect, agrees with Senior Member Handley in McAvoy, where he said "the responsibility for efficient and effective administration of Departmental practice and policy must carry with it a responsibility for any error or mistake which is made by the Departmental officers alone". However, this is not the situation in this matter. The debt has not arisen from an error or mistake which has been made by the Department officers only. Had Mrs Lamb not mistakenly interpreted the Department's letter and had she complied with the requirements of that letter she would not now be faced with a large debt to the Commonwealth.

38. The Tribunal accepts that recovery of a very large debt is having an adverse affect of the applicant's and her husband's wellbeing and lifestyle. However, the Tribunal is satisfied that these are not circumstances that satisfy the concept of "special circumstances".

39. After careful consideration of all the material before it and the submissions of both parties, the Tribunal is satisfied that in this matter there are no circumstances which are unusual, uncommon or exceptional so as to make the strict application of the recovery of the debt owing to the Commonwealth, unjust, unreasonable or otherwise inappropriate.

40. The conjunctive construction of section 1237AAD requires that all of the provisions of sub-sections (a), (b) and (c) must be satisfied before the Tribunal can exercise its discretion to waive the debt in whole or part. In the absence of special circumstances the Tribunal finds that it is not appropriate to exercise the discretion contained in section 1237AAD to waive the right to recover all or part of the applicant's debt to the Commonwealth.

41. The Tribunal affirms the decision under review.

I certify that the 41 preceding paragraphs are a true copy of the reasons for the decision herein of Mr IR Way, Member

Signed: .....................................................................................

Associate

Date/s of Hearing 4 February 2002

Date of Decision 4 March 2002

Applicant Mr Palma

Respondent Mr Foster