Chan and Secretary, Department of Family and Community Services [2002] AATA 239 (12 April 2002)

Last Updated: 16 April 2002

DECISION AND REASONS FOR DECISION [2002] AATA 239

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/35

GENERAL ADMINISTRATIVE DIVISION )

Re STANFORD CHAN

Applicant

And SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms J A Shead, Member

Date 12 April 2002

Place Sydney

Decision The decision of the Social Security Appeals Tribunal of 15 December 2000, is varied as follows: (i) The Tribunal finds that Mr Chan owes a debt of $329.20 pursuant to section 1224 of the Social Security Act 1991 ("the Act") arising from his failure to declare income on each fortnightly continuation form on 24 September 1999 and 8 October 1999; (ii) The Tribunal finds that the debt owing by Mr Chan pursuant section 1224 of the Act is to be waived due to the exercise by the Tribunal of the discretion to find special circumstances in his case, pursuant to section 1237AAD of the Act; and (iii) the Tribunal sets aside that part of the decision under review that imposed an activity test breach rate reduction of 18% for a period of 26 weeks.

..............................................

Ms J A Shead

Member

CATCHWORDS

Social Security - newstart allowance - whether earned, derived or received income - overpayment - whether debt incurred - whether special circumstances - imposition of penalty for failure to declare earnings - whether Applicant had a reasonable excuse for failure to provide information

Social Security Act 1991 sections - 8(1), 8(2), 630AA (1), 1224(1), 1237AAD

Social Security (Administration) Act 1999 section - 68

Re Gregory and Secretary, Department of Social Security (1988) 15 ALD 513

Re SAS and Secretary, Department of Social Security (AAT 3270, 6 March 1987)

Re Smith and Director-General of Social Services 4 ALN No 135

Carruthers and Secretary, Department of Social Security (1993) 31 ALD 567

Bartlett v R (1990) 100 ALR 177

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Re Vitalone and Secretary Department of Social Security (1995) 38 ALD 169

Re King and Secretary, Department of Social Security (1994) 34 ALD 583

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

Re Secretary, Department of Social and Danielson (AAT 10603, 18 December 1995)

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

Re Ivovic and Director-General of Social Services (1981) 3 ALN N95

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

Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690

Secretary, Department of Social Security and Hales (1998) 82 FCR 154

Riddell v Secretary, Department of Social Security (1993) 42 FCR 443

Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531

Re Shelmerdine and Secretary, Department of Family & Community Services [2000] AATA 91

REASONS FOR DECISION

Ms J A Shead, Member

1. This is an application for review to the Administrative Appeals Tribunal ("the Tribunal") by Stanford Chan, also known as Ming Pau Chan, ("Mr Chan") for review of a decision of the Social Security Appeals Tribunal ("the SSAT") dated 15 December 2000. That decision affirmed a decision made on 8 April 2000 by a Centrelink delegate of the Secretary to the Department of Family and Community Services ("the Respondent") to raise and recover an overpayment of newstart allowance of $329.20 paid to Mr Chan for the period 11 September 1999 to 8 October 1999 ("the relevant period") and to impose an activity test breach rate reduction of 18 percent for a period of 26 weeks from 8 April 2000. The original decision was affirmed by an authorised review officer ("ARO") on 8 November 2000. In making that decision the ARO applied sections 630AA, 1224 and Module 1068G of the Social Security Act 1991 ("the Act") and Section 68 of the Social Security (Administration) Act 1999 (T20).

2. Mr Chan was present at the hearing before the Tribunal and gave evidence. Ms Fu interpreted the Cantonese language. Mr B Slattery represented the Respondent. Mr Gordon Young gave evidence.

3. Documents submitted pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the T documents", numbered T1-T24) were taken into evidence. The following documents were also tendered to the Tribunal:

Exhibit Document

Exhibit R1 Respondent's Statement of Facts & Contentions dated 3 July 2001

Exhibit R2 Respondent's letter dated 4 July 2001

BACKGROUND

4. By way of background, the Tribunal extracts the history of the matter from the SSAT decision:

"1. Mr Chan was paid newstart allowance from 16 May 1996.

2. Between 23 September 1999 and 2 October 1999, Mr Chan was employed by Gecko Art and Design Pty Limited ("Gecko").

3. Mr Chan did not disclose his employment with Gecko in his fortnightly continuation forms lodged on 24 September 1999 and 8 October 1999.

4. Following a data matching exercise with the Australian Tax Office, which disclosed that Mr Chan received income from Gecko in respect of that period, Centrelink decided to raise and recover a debt of $329.20 on 8 April 2000 being the amount Centrelink claimed Mr Chan had been overpaid on account of newstart allowance as a result of his failure to disclose his employment.

5. On 10 May 2000, Mr Chan sought a review of this decision. The review was directed to an authorised review officer. However, the matter was first reconsidered by the original decision maker who confirmed the decision on 5 October 2000. Following a further request from Mr Chan, an authorised review officer then considered the matter and affirmed the decision on 8 November 2000.

6. The authorised review officer based his decision on the failure of Mr Chan to disclose to Centrelink his employment with Gecko. Gecko disclosed to Centrelink that Mr Chan was paid the sum of $537.10 by a cash cheque number 181440 which Commonwealth Bank records showed was cashed on 5 October 1999. The authorised review officer noted Mr Chan's claim that he had not been paid and that this was the reason that he had not advised Centrelink of his employment. The authorised review officer took the view that as Mr Chan had not demonstrated any effort to claim the money allegedly owed to Mr Chan by Gecko in the 12 months since his employment with that company which might have validated Mr Chan's claim, he had to "go with the facts" that were available to him. Accordingly, in addition to affirming the decision to raise the debt of $329.20, he also affirmed the decision to apply the activity test breach." (T2)

5. The SSAT's summary of the evidence at paragraph 13 of the decision included the following:

"i. ... On the Friday when other employees got paid by the bookkeeper, he did not receive any pay. He asked Mr Young "Can you pay me now?" Mr Young replied with words to the effect "Your name is not on the payroll list, if you come in tomorrow you can collect your pay." It was agreed Mr Chan would call in the next day, the Saturday, at 10am to collect his pay. ...

j. When Mr Chan arrived at the factory on the Saturday, Mr Young was working on the computer. Mr Young printed out something from the computer which stated Mr Chan had worked for 53 hours. Mr Young asked him to sign the piece of paper. ... as he agreed that was the correct number of hours worked. Mr Young then calculated the payment which he would receive and told him that it would be at the rate of $6.00 per hour. He mentioned a total of approximately $300.00. Mr Chan asked him why it was only $6.00 an hour. Mr Young replied it was because Mr Chan's English was too bad. Mr Young, on being pressed by Mr Chan, denied he had ever promised to pay him $16.00.

k. Mr Chan stated that he then got very angry and refused to accept the pay offered at the rate of $6.00 per hour. He was very upset as he had come a long way from Campsie to go to work and travelling took a long time. He considered the offer of $6.00 an hour an insult. It was no more than he would receive form Centrelink. He did not take with him the printout from the computer. He walked out of the meeting. ...

l. Mr Chan did not consider returning to the factory to try to recover the money he was entitled to receive. This was because he had no evidence as to what had been agreed and the $6.00 offered by Mr Young was unacceptable.

...

q. In answer to a question from the Tribunal, Mr Chan stated that he had not followed the matter up as he knew nothing about the laws in Australia. Further, he had no evidence at all of the conversations he had had with Mr Young on the question of his pay. Even the piece of paper from the computer was kept by Mr Young. He did not seek further advice at the time as he still had Centrelink to assist him and the money he received from Centrelink was no different to what Gecko was prepared to pay him.

...

s. Mr Chan admitted that he did not include any details of his work with Gecko in the subsequent fortnightly form lodged by him on 8 October 1999 as he had not received any pay from Gecko at that time and did not expect to receive any in the circumstances."

6. The SSAT did not alter that decision, for the reason set out in paragraphs 27 to 37 of its decision:

"27.It is not disputed that Mr Chan was paid newstart allowance in the sum of $329.20 in respect of the period 23 September 1999 to 1 October 1999 in the belief that Mr Chan was not entitled to receive any income arising from employment in that period. Mr Chan did not disclose his employment with Gecko nor the receipt or his entitlement to receive any money for the work done.

28. Mr Chan has argued that he did not disclose any earnings to Centrelink because he did not receive any.

29. Section 8(1) of the Social Security Act 1991 ("the Act") defines "income" in relation to a person to mean, among other things:-

"(a) An income amount earned, derived or received by the person for the person's own use or benefit;"

"Income amount" is defined in the same subsection to mean, among other things "personal earnings".

Whilst it is in dispute as to whether Mr Chan in fact was paid anything at all for his work at Gecko it is not disputed that he was entitled to be paid something. The disagreement was as to the rate of pay not the fact of pay. Mr Young claims that Mr Chan was paid at the rate of $12.00 per hour gross for the relevant period; Mr Chan claims that he refused to accept an insulting offer of $6.00 per hour gross for that same period.

30. Income is "earned" when the income/generating activity occurs. Income is "derived" when the recipient had "a legal entitlement" to receive the income. Income is "received' when it comes into the recipient's possession or control.

For the purposes of the Act it is sufficient for the income to be earned or derived. It does not have to have also been received. In this case the income was "earned" when Mr Chan was engaged to work for Gecko. It was "derived" when he had worked for 7 days and he was entitled to receive pay for that period. The failure to make the payment does not extinguish Mr Chan's legal entitlement to receive it. He is entitled to pursue payment through legal process if necessary. This is not a case where the entitlement to payment is disputed by the employer so that there is no clear present legal entitlement to receive the money. The only thing that is in dispute is the amount not the entitlement. It follows that Mr Chan, whether he actually received payment or not, was entitled to be paid and accordingly in so far as newstart allowance was paid to him on the basis that he had no entitlement to income an overpayment has occurred.

31. Section 1224(1) of the Act provides:-

"1224 (1) If:

(a) an amount has been paid to a recipient by way of social security payment under this Act or the 1947 Act; and

(b) the amount was paid because the recipient or another person:

(i) made a false statement or a false representation;

or

(ii) failed or omitted to comply with a provision of this Act or the 1947 Act;

the amount so paid is a debt due by the recipient to the Commonwealth."

32. Mr Chan lodged 2 fortnightly forms in the relevant period. In neither did he disclose either his employment with Gecko or his entitlement to receive any income from this work. In relation to the first form, lodged on 24 September 1999, the Tribunal is prepared to accept Mr Chan's explanation that, at that point of time, he had only worked for 1 day with Gecko (the day before) and that this was in the nature of a trial rather than a commitment to employ him by Gecko. Nor was it clear to Mr Chan that he would be paid a wage for that day as this had not been discussed by him with Mr Young.

33. However, by the time Mr Chan lodged his next form on 8 October 1999 it was or should have been clear to Mr Chan that he had in fact worked for 7 days with Gecko and that he was entitled to be paid for that work. The amount was in dispute, but even on Mr Young's reckoning, which Mr Chan knew but rejected, Mr Chan was entitled to receive at least $6.00 per hour for his work. In the event, Mr Chan believed that he was entitled to a rate of $16.00 per hour. On the other hand, Mr Young's evidence was that he tendered payment at the rate of $12.00 per hour. Whilst the Tribunal has made no finding that Mr Young in fact did tender payment at the rate of $12.00 per hour there is no dispute between the parties that the rate of $6.00 per hour was tendered by Mr Young. Mr Chan therefore should have disclosed both the fact of the employment and the pay proffered with it in the form lodged by him on 8 October 1999. He did not do so because as he said he was never actually paid the amount. The amount of $6.00 per hour was rejected by him as an insult and as being no more than Centrelink would have paid anyway.

34. It is perfectly understandable that Mr Chan may have thought that as he had not received any actual pay, there was no "income" to declare. However, as was discussed above, it is sufficient for income to be earned or derived and not actually received for it to be income for the purposes of the Act. Accordingly, whilst Mr Chan may not have intended to make a false statement in his return, by failing to disclose his employment with Gecko and the income derived from that employment, he in fact did do so. Accordingly, pursuant to section 1224(1) of the Act the amount paid to him on account of newstart allowance for this period is a debt due by him to the Commonwealth.

35. In the circumstances outlined above, there is no power in the Secretary to waive the right to recover all or part of this debt and accordingly the debt of $329.20 remains due and payable.

36. Unfortunately for Mr Chan, Centrelink also determined to impose an activity test breach rate reduction period because of his failure to provide the information in relation to his entitlement to income from Gecko. The relevant sections of the Act are as follows:-

630AA(1) If a person:

(a) refuses or fails, without reasonable excuse, to provide information in relation to a person's income from remunerative work (the failure); or

(b) knowingly or recklessly provides false or misleading information in relation to the person's income from remunerative work (the provision of information);

when required to do so under a provision of this Act, a newstart allowance is not payable to the person.

630AA(2) If a newstart allowance becomes payable to the person after the time it ceases to be payable under subsection (1), then:

(a) if the failure or the provision of information is the person's first or second activity test breach in the 2 years immediately before the day after the failure or the provision of information--an activity test breach rate reduction period applies to the person; or

(b) if the failure or the provision of information is the person's third or subsequent activity test breach in the 2 years immediately before the day and the failure or the provision of information--an activity test non-payment period applies to the person.

37. In the very unusual circumstances of this case, it could be said that the imposition of these sections on Mr Chan is harsh. On one view of the facts, there was no obligation on Mr Chan to disclose payment at the rate of $12.00, if in fact it was not offered to him. Nor should he disclose a rate of $16.00 per hour when clearly that was disputed by the employer. However, there was no dispute that he was offered at least $6.00 per hour and that he was in fact employed by Gecko for 7 days. Mr Chan's reasons for not disclosing these 2 facts is based on his refusal to accept the "insulting" pay. Whilst the rejection of such a rate of pay could be thought reasonable, nevertheless the employment and the rate of pay offered should have been disclosed to Centrelink. Had this been a case where there was a failure of the employer to pay a wage, even although there was a present legal entitlement in the employee to receive it, then it could have been argued that the mistaken view of the law as to what constitutes "income" would have been a reasonable excuse for failing to disclose the income to Centrelink. However, this is not the case here. On the most favourable view of the facts for Mr Chan, Mr Young tried to pay him at a rate of $6.00 per hour and the failure to make this payment was due to Mr Chan's rejection of that offer. This was a matter within Mr Chan's control and in the opinion of the Tribunal does not afford a reasonable excuse for not disclosing this information to Centrelink. Harsh though the outcome may be in this case, it follows that it was open to Centrelink to apply an activity test breach rate reduction period in accordance with section 630AA.(2) of the Act."(T2)

7. Mr Chan's reasons for the Application to the Tribunal were essentially set out in paragraph 1 of his three page Application:

"...I haven't received any income from Gecko Art & Design P/L. But Mr Cameron decided reducing my newstart allowance Payment by 18%, based on that I got income from employment. He also according to my earnings form Centrelink, wanted me to make amount payable of $329.20.

I worked for Gecko Art & Design P/L for 7 days, but I haven't received any income from them. The first working day (23/09/1999,Thursday) is trying; we did not talk about wages. In the second working day (25/09/1999, Saturday) morning, the employer Gordon Young told me that if I continuee working for them, my wage is $16/hour. I continued working for them until 1/10/1999 (Friday), every worker got paid on Friday, but just I haven't got paid, I have asked Gordon Young to pay my wages, he told me that he will pay me on the next day (Saturday). I went there next day, Gordon Young told me that My (sic) wage is $6/hour,I disagreed, and I also argued with him. But I have not evidence for against him." (T1)

8. The Tribunal had to determine the application having regard to the written material, the evidence and the case law.

LEGISLATION

9. The Act, in so far as is relevant, provides as follows:

"Income test definitions

8(1) In this Act, unless the contrary intention appears:

...

income, in relation to a person, means:

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

(b) a periodical payment by way of gift or allowance; or

(c) a periodical benefit by way of gift or allowance;

but does not include an amount that is excluded under subsection (4), (5), (7A) or (8).

income amount means:

(a) valuable consideration; or

(b) personal earnings; or

(c)moneys; or

(d) profits;

(whether of a capital nature or not).

8(2) A reference in this 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).

Failure to provide information etc.

630AA(1) If a person:

(a) refuses or fails, without reasonable excuse, to provide information in relation to a person's income from remunerative work (the failure); or

(b) knowingly or recklessly provides false or misleading information in relation to the person's income from remunerative work (the provision of information);

when required to do so under a provision of this Act, a newstart allowance is not payable to the person.

630AA(2) If a newstart allowance becomes payable to the person after the time it ceases to be payable under subsection (1), then:

(a) if the failure or the provision of information is the person's first or second activity test breach in the 2 years immediately before the day after the failure or the provision of information--an activity test breach rate reduction period applies to the person; or

(b) if the failure or the provision of information is the person's third or subsequent activity test breach in the 2 years immediately before the day after the failure or the provision of information--an activity test non-payment period applies to the person.

Debts arising from recipient's contravention of law

1224(1) If:

(a) an amount has been paid to a recipient by way of social security payment; and

(b) the amount was paid because the recipient or another person:

(i) made a false statement or a false representation; or

(ii) failed or omitted to comply with a provision of the social security law or this Act as in force immediately before 20 March 2000 or the 1947 Act;

the amount so paid is a debt due by the recipient to the Commonwealth."

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 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."

ISSUES BEFORE THE TRIBUNAL

10. The issues before the Tribunal were:

(a) whether Mr Chan earned, derived or received income in the form of wages from Gecko during the relevant period;

(b) whether Mr Chan made false statements in relation to his employment and receipt of income on his newstart allowance continuation forms, and if so

(c) (i) whether Mr Chan has incurred a debt to the Commonwealth of $329.20; and if so

(ii) whether the debt should be recovered from Mr Chan; and

(d) whether Mr Chan failed without reasonable excuse to advise of his employment and, as a consequence, whether an activity test reduction of 18% for a period of 26 weeks form 8 April 2000 should, or must, have been imposed.

DISCUSSION OF THE EVIDENCE

11. Mr Chan's evidence was largely in accordance with in his Application for Review, as set out in paragraph 6.

12. Mr Young of Gecko Art & Design Pty Limited ("Gecko") gave evidence that Mr Chan had responded to an advertisement for a junior factory hand. He had been interviewed on one day and started the next day. He stated that employees were paid by cash cheque. On what he described as the "last Saturday", 2 October 1999, Mr Young stated that Mr Chan had worked a few hours by way of make-up for time off. At about 2 pm Mr Young gave Mr Chan a cheque. Mr Chan said to him "You've made a mistake" and a discussion ensued as to the hourly rate of pay. Mr Young stated that "He took the cheque from me and he walked out."

13. It was put to Mr Young that the cheque was dated 3 October 1999. Mr Young stated that he had guessed the date. Mr Slattery for the Respondent also put to Mr Young that Mr Chan's evidence was that he had not worked on the second Saturday and that they had argued when Mr Young told Mr Chan that he would be paid $6 an hour. Mr Young stated "No, I never mentioned $16 and I never mentioned $6". The evidence continued:

"Mr Slattery: Right. Mr Chan says that not only did he not take the cheque he never saw the cheque. What do you say to that?

Mr Young: The cheque was the flashpoint, the catalyst for the argument. He looked at the cheque and that's first time I knew, and that's first time I knew, he having looked at his cheque that this was an issue.

Mr Slattery: So the only method that you communicated Mr Chan the amount of money was the amount of money on that cheque?

Mr Young: Yes, and I think when he asked how much he was getting an hour I said he was getting $12 an hour."

Later Mr Young agreed that he could not recall whether Mr Chan worked on the first Saturday or the second Saturday. The Tribunal put to Mr Young:

"Ms Shead: Mr Chan is saying that he asked for his pay on the Friday when other employees got paid and he didn't receive any pay.

Mr Young: Yes, that's true because he wanted to make up the time on the Saturday afterwards. That made him as many days as possible in the pay period and that's the other reason why I think he worked on the second Saturday so that I could pay him at the end of the Saturday rather than pay him a day less and - or pay him a day more and him not turn up on the Saturday.

Ms Shead: I put to you that Mr Chan's evidence is that he worked on the first Saturday and then he worked Monday through to Friday and then when other employees were getting paid by the bookkeeper he didn't receive any pay on that ...

Mr Young: ... bookkeeper on Friday?

Ms Shead: Mr Chan's evidence to the SSAT was that ...

Mr Young: Okay, that's possible, yes."

14. It was not disputed between Mr Chan and Mr Young that Mr Chan worked at Gecko in the relevant period. Having regard to the evidence, and the documentary evidence (T5), the Tribunal was satisfied that Mr Chan worked about 53 hours at Gecko. It was not disputed that there was a discussion between Mr Chan and Mr Young on Saturday 2 October 1999 about Mr Chan's pay rates for that work.

15. Mr Chan stated that he refused to accept the pay rate of $6 an hour. Mr Chan also stated that he left Gecko without being paid. Mr Chan did not include any details of his work with Gecko in the fortnightly newstart continuation forms lodged by him on 24 September 1999 and 8 October 1999.

16. Mr Chan contended he had completed a tax file number declaration form when he started at Gecko and he stated "... so if I was to continue getting payments from Centrelink I would not have done so. " Also he had been concerned that if he reported to Centrelink that he had worked, in circumstances where he did not receive payment, that he would receive no benefit. He noted: "If that was to happen then I would have no money to purchase food. That means I could not survive and also because I had no intention of going back to the factory to get the pay from them."

CONSIDERATION OF THE ISSUES

17. The Tribunal was unable to confidently prefer the evidence of either Mr Chan or Mr Young although there were a number of aspects of Mr Young's evidence that caused the Tribunal disquiet. The cheque was not drawn in the name of a particular employee, in this case Mr Chan, but rather to cash. Gecko's Ms R Rivette had told the SSAT "...the normal practice of the company was to pay its staff every second Friday. A part-time bookkeeper attended the office on that day to deal with the payroll. Normally cheques were drawn in the names of each employee. 1 October 1999 was a payday but Mr Chan was not paid on that day with other employee." (T2, paragraph 10d) (The later aspect of the evidence was consistent with Mr Chan's evidence.) Mr Young's explanation as to why Mr Chan was not paid on the Friday payday 1 October 1999 was different to that explanation given to the SSAT. Before the SSAT, it was stated Mr Chan asked Mr Young ". 'Can you pay me now?' Mr Young replied words to the effect 'Your name is not on the payroll list, if you come in tomorrow you can collect your pay.'" (T2, paragraph 13i) Before the Tribunal, Mr Young seemed to be saying that Mr Chan was not paid because he was making up time. Further, Mr Young contradicted himself in his evidence before the Tribunal.

Whether earned, derived or received income

18. Mr Chan's essential claim was that he did not take or receive the Gecko cash cheque of $537.10 (T3). Section 8(1) of the Act defines "income" by reference to an "income amount" which is earned, derived or received, by the person. In Re Gregory and Secretary, Department of Social Security (1988) 15 ALD 513 the Tribunal had considered the situation where earnings were earned in one pension period but not received until a later pension period. There the Tribunal applied the approach of the "income" being "derived" when the pensioner has a present entitlement to it and held the earnings to be income in the first pension period. In Re SAS and Secretary, Department of Social Security (AAT 3270, 6 March 1987) the Tribunal said in respect of "present legal entitlement":

"By present legal entitlement, we understand that there must inhere in the future recipient of the moneys in question, a legal right to insist upon payment, and if necessary, to initiate legal proceedings to recover those moneys at the time of the alleged 'earning' or 'deriving'."

19. In Re Smith and Director-General of Social Services 4 ALN No 135, the Tribunal considered the meaning of "derived" and held that "derived" covers a wider field than "received". Moneys may be derived before they are received, so long as the person has a "present legal entitlement" to it.

20. Having regard to those decided cases, and the evidence before the Tribunal, the Tribunal was well satisfied that Mr Chan had an entitlement to gross wages of $636.00 (T5), and thus he had earned and derived it even if he did not receive the wages. Accordingly the Tribunal was satisfied that it was Mr Chan's income under section 8(1) of the Act for the relevant period.

Whether an overpayment arose pursuant to section 1224 of the Act

21. Section 1224 concerns debts that arise from the failure or omission by a recipient of a social security payment to comply with a provision of the Act or from his making a false statement or false representation. If an amount was paid to that person by reason of that false statement or representation or failure or omission, the amount so paid is a debt due to the Commonwealth.

22. The Tribunal firstly was satisfied that Mr Chan was a recipient within the meaning of section 1224 of the Act; newstart allowance payment details for 11 September 1999 to 24 September 1999 and 25 September 1999 to 8 October 1999 were extracted at T8. Secondly the Tribunal was satisfied that newstart allowance was paid to him was by way of a social security payment under the Act. The third issue was whether the amounts were paid to Mr Chan because he either made a false statement or false representation (section1224(1)(b)(i)), or failed or omitted to comply with a provision of the Act (section 1224(1)(b)(ii)).

23. Though not expressed in the Respondent's written submissions, the oral submissions in chief on behalf of the Respondent relied upon section 1224(1)(b)(i) of the Act.

24. The Tribunal doubted whether section 1224(1)(b)(ii) of the Act could apply in this matter. The Tribunal noted that particular provision is a penalty provision and, as such, should be construed strictly (Carruthers and Secretary, Department of Social Security (1993) 31 ALD 567, Bartlett v R (1990) 100 ALR 177 and Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355). The Tribunal also noted in Re Vitalone and Secretary Department of Social Security (1995) 38 ALD 169 Mathews J noted in relation to section 163, being a provision relating to notices, under the Social Security Act 1947, at para 31, that:

"Non compliance with it is potentially punishable by imprisonment. Accordingly, it needs to be interpreted in a manner which is favourable to the individual concerned. It should certainly not be construed so as to impose strict liability. An element of fault on the part of the individual concerned is thus inherent in the concept of 'refusing or failing' to comply with the section."

Accordingly the Tribunal doubted whether section 1224(1)(b)(ii) of the Act concerning failure or omission to comply with a provision of the Act could apply to Mr Chan.

25. Turning to consider section 1224(1)(b)(i) of the Act, the Tribunal noted Mr Chan did not dispute that he had not disclosed that he worked for Gecko and that he did not declare the income when completing the newstart continuation forms for the relevant period. Before the SSAT, Mr Chan made the admissions that he did not disclose the employment with Gecko in the fortnightly forms lodged on 24 September 1999 (T2, paragraph 13e) and 8 October 1999 (T2, paragraph 13s). The basis of Mr Chan's claim was that he had not received any actual payment; therefore there was no "income" to declare.

26. On behalf of the Respondent, Mr Slattery urged the Tribunal to adopt the analysis of the SSAT in its statement of reasons for decision at paragraphs 32 to 34. In effect, Mr Slattery submitted that the Tribunal should follow the reasoning of the SSAT at paragraphs 32 to 34 and conclude, without direct evidence of the fact, that Mr Chan submitted the fortnightly forms during the period under review and that by failing to disclose his employment with Gecko and the income derived from Gecko, he had made a false statement.

27. The Tribunal noted the advice on behalf of the Respondent that no actual forms completed by Mr Chan can be provided as a result of Centrelink's normal culling process. In Re King and Secretary, Department of Social Security (1994) 34 ALD 583 the Tribunal suggested that, in reaching a conclusion that section 1224 applies, the Tribunal needs to be confident that the statements are "quite clearly and unambiguously on any objective criteria is not true". It is however difficult to make a finding regarding section 1224 of the Act in the absence of such documentation.

28. In the Federal Court decision in Secretary, Department of Social Security v Danielson (1997) 44 ALD 19, Cooper J however considered whether "...there was evidence before the AAT upon which it could properly find that the respondent [Ms Danielson] made false statements or false representations". Danielson (supra) dealt with newstart continuation forms which: "In accordance with the Department's usual record-keeping practice, ... were destroyed and were not available to be used by the decision-maker to ascertain gross income declared by the respondent each fortnight". However the Department was able to ascertain on the basis of "mathematical logic" that she had under-declared her gross income from casual employment from her weekly payslips. In the AAT decision of Re Secretary, Department of Social and Danielson (AAT 10603, 18 December 1995), Senior Member Beddoe stated:

"It is, in my view, not open to this Tribunal to infer that the respondent somehow comes within the terms of subsection 1224(1) because there is no evidence before the Tribunal as to what the respondent did."

This Tribunal noted that Cooper J, however, disagreed with the approach taken by Senior Member Beddoe in Danielson (supra), stating:

"...that there is no direct evidence of a fact does not necessarily mean that there is no evidence of a fact."

29. This Tribunal was not prepared to make the inference proposed by the Respondent's representative referred in paragraph 26 above. The Tribunal was prepared, however, on the basis of the evidence before it to infer that, on the balance of probabilities, Mr Chan had submitted the 2 continuation forms during the relevant period. It was not disputed by Mr Chan that he had not disclosed his employment with Gecko on the 2 relevant continuation forms and therefore the Tribunal finds that Mr Chan had not declared on the continuation forms that Gecko had employed him during the relevant period. The Tribunal also finds that the continuation forms were destroyed.

30. Earlier the Tribunal has expressed its unease at the evidence in this case. The Tribunal notes however that Mr Chan's evidence before the SSAT and the Tribunal was largely consistent. The SSAT had noted "Mr Chan's evidence was given in what appeared to be a sincere manner" (T2, paragraph 21) and the Tribunal did not disagree with that.

31. Given the uncertainty of the evidence referred to earlier, it was open to the Tribunal to make a finding that, on the balance of probabilities, Mr Chan genuinely believed that as he had not received any actual payment, therefore there was no "income" to declare, nor did he have to disclose about having worked at Gecko. The Tribunal finds that Mr Chan genuinely believed that he did not make a "false statement or false representation" within the meaning of section 1224(1) of the Act.

32. However, this Tribunal is bound to apply the legal interpretation of the meaning of "false" in section 1224(1) of the Act. In Re King (supra) it was held that a reference to a false statement in section 1224(1) of the Act should be read as a reference to a statement that was objectively wrong or incorrect. It is clear that the test to be applied to whether a statement is a false statement or not is an objective test not a subjective test. The fact that Mr Chan genuinely believed that he had not made a false statement is not the test. The Tribunal considers that from an objective point of view, when Mr Chan omitted to declare his employment with Gecko during the relevant period in the 2 continuation forms, Mr Chan had made a false statement. Therefore the Tribunal finds that Mr Chan in not declaring his work with Gecko in the 2 continuation forms in the relevant period had made a false statement within the meaning of section 1224(1) of the Act. Accordingly, the Tribunal finds that there is a debt of $329.20 due to the Commonwealth pursuant to section 1224(1)(b)(i) of the Act.

Waiver in special circumstances

33. The Tribunal then considered whether it was appropriate to apply the principles of special circumstances (section 1237AAD of the Act, Beadle v Director-General of Social Security (1985) 7 ALD 670). There are three elements in subparagraphs (a), (b) and (c) of section 1237AAD of the Act and all three elements must be present for waiver of a debt. In respect of section 1237AAD(a), having regard to Mr Chan's evidence and the Tribunal's earlier finding that Mr Chan genuinely believed that he did not make a "false statement or false representation", the Tribunal finds that Mr Chan had not "knowingly" made a false statement or representation in terms of section 1237AAD(a)(i) of the Act. Accordingly section 1237AAD(a)(i) of the Act was satisfied.

34. The written and oral submissions on behalf of the Respondent did not rely upon section 1237AAD(a)(ii) of the Act. For the reasons expressed in paragraphs 23 and 24 above, the Tribunal doubted whether section1237AAD(a)(ii) of the Act could apply in this matter.

35. In respect of subparagraph (b) of section 1237AAD of the Act, the Tribunal noted the Tribunal and the Federal Court had considered the meaning of the term "special circumstances" on a number of occasions. In Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 the Tribunal at N97 said:

"The reference to special circumstances 'by reason of which' a person liable 'should be released' requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes. ... Thus whilst keeping the dominant principle of s115 in mind, he must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate."

36. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at page 3 the Tribunal 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."

This approach was approved by the Federal Court on appeal in Beadle and Director-General of Social Security (1985) 7 ALD 670 where the Court, however, noted that they would place less emphasis on the dictionary definition of "special". It was also noted that in Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 the Tribunal added a number of factors it considered relevant in that case. Those factors of "financial hardship, legislative changes, incorrect legal advice, ill health" were not considered an exhaustive list but rather as "useful guides" for the exercise of the discretion.

37. The Tribunal noted in Secretary, Department of Social Security and Hales (1998) 82 FCR 154, the Court said:

"The evident purpose of s.1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship of unfairness in the event of a rigid application of a requirement for recovery of debt."

38. The Court in that matter also clearly decided that financial hardship was not an essential prerequisite for the exercise of the discretion. Hales (supra) is the leading authority on this point. In the Full Federal Court Riddell v Secretary, Department of Social Security (1993) 42 FCR 443, the Court rejected any restriction on the term "special circumstances" so that the special circumstances definition is wide and rejects the notion that you need something extremely unusual, uncommon or exceptional in order to produce special circumstances. Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531 supported Riddell (supra).

39. In respect of the application of sections 630AA and 1224 of the Act, the SSAT stated in the "...unusual circumstances of this case, it could be said that the imposition of these sections on Mr Chan is harsh." The SSAT did not apply section 1237AAD of the Act. The SSAT and the Respondent's representative before the Tribunal both noted that Mr Chan's reasons for not following up the payment of the wages were his opinion that $6 an hour was insulting, so that Mr Chan's actions in refusing payment for his work should not succeed as a claim for "special circumstances". The Tribunal also noted Mr Chan stated he was unfamiliar with wage recovery processes. Having heard the evidence and in the circumstances of the unsatisfactory nature of the evidence of Mr Young, having found that Mr Chan had not "knowingly" made false statements to the Department, the Tribunal also finds that because of the unusual circumstances of the case and the inability of the Tribunal to form a concluded view of the evidence, "special circumstances" apply, so it was appropriate to waive the debt in accordance with section 1237AAD of the Act.

Whether activity test breach and rate reduction should be imposed: failure to provide information

40. Section 630AA(1)(a) of the Act refers to a refusal or failure "without reasonable excuse" to provide information. It was submitted on behalf of the Respondent that the failure by a person to notify earnings not received, or not yet received, may be taken to be unreasonable and that Mr Chan had no reasonable excuse. In support of that submission, Mr Slattery relied upon the decision in Re Shelmerdine and Secretary, Department of Family & Community Services [2000] AATA 91 where the Tribunal said:

"15. I do not accept the applicant's submissions that he had a reasonable excuse for failing to provide information in relation to his income because, in effect, he had not received the income, or alternatively, that the amount was not known to him. "Income" is defined in the Act to include "an income amount earned, derived or received by the person for the person's own use and benefit". I consider that the applicant had "earned" the income on 22 August 1997, although the income was payable at a later date. In this matter the income was paid finally when the producer had paid the after tax sum to the applicant's agent, and the agent had taken his commission. The matter of Sas relied upon by the applicant, is distinguishable on its facts. I consider that income can be earned or derived but not received until a later time. As Shepherd J remarked in Inguanti v Secretary, Department of Social Security 80 ALR 307 at 311:

"...

The use of the verbs "earned", "derived" and "received" in juxtaposition in the definition of "income" in the Act strongly suggests that each was intended to have a different meaning. Notwithstanding that the word "derived" can mean "received", I reject the submission made on behalf of the applicant that "derived" is used in that sense here. Sometimes moneys will be earned, derived and received simultaneously. At others they will be earned or derived but not received until a later time. ...

16. I am satisfied on the evidence that the applicant failed, without reasonable excuse, to provide information in relation to his income, and in accordance with s630AA(1) of the Act, NSA was not payable to him. In addition, I consider it was appropriate that the activity breach reduction period be imposed. The documentary evidence discloses that the applicant was aware prior to 5 November 1997 of the possibility of the imposition of a breach (T18/35). He had previous experience of the necessity to provide information regarding casual earnings; as his failure to do so in the period 13 January 1996 to 25 January 1996 had led to an overpayment being raised. The information provided by the Departmental officer on 14 November 1997 (T9/24) which the applicant maintains was misleading, related, clearly, to the matter of the overpayment; but equally clearly, the applicant did not follow the advice, he did not declare the income in his next statement, and the income was not offset against the overpayment. I reject the applicant's submissions on this topic "

41. Annexed to the written submissions on behalf of the Respondent was a sample Newstart continuation period for the relevant period and the Respondent's representative noted that Question 1 on that sample form stated "Did you do any work in the period?" and after that a further question which stated "What was the amount earned in the period before tax or other deductions?" The Respondent's representative contended that was a straightforward question which was answered falsely by Mr Chan. Mr Slattery contended that: "The question of reasonableness, we say, is in whether the refusal to advise the employment was reasonable."

42. The Tribunal having earlier found that Mr Chan's failure was based on his genuine belief that he had received no wages, the Tribunal was prepared to accept that belief was a "reasonable excuse". The circumstances of Mr Chan's case distinguished it from those in Shelmerdine (supra).

43. In relation to the Respondent's representative contention, even if the Tribunal was minded to infer that the sample form, without more, accorded with the newstart continuation form for the relevant period and that Mr Chan's evidence was evidence of the facts, the representative had not presented proper evidence that would allow the Tribunal to find that the sample form should be so considered.

44. Having regard to the Tribunal's findings in paragraphs 42 to 43, the Tribunal considered that section 630AA(1)(a) of the Act cannot apply to Mr Chan.

45. For the reasons expressed in paragraphs 23 & 24 above, the Tribunal doubted whether 630AA(1)(b) of the Act could apply in this matter.

46. Having found that sections 630 AA(1)(a) and 630AA(1)(b) of the Act cannot apply to Mr Chan, the Tribunal therefore finds that section 630AA(2) which imposes an activity test breach does not apply to Mr Chan. The Tribunal finds that no activity test and rate reduction should be imposed in Mr Chan's case.

CONCLUSION

47. The decision of the SSAT of 15 December 2000, is varied as follows:

(i) The Tribunal finds that Mr Chan owes a debt of $329.20 pursuant to section 1224 of the Act the arising from his failure to declare income on each fortnightly continuation form on 24 September 1999 and 8 October 1999;

(ii) The Tribunal finds that the debt owing by Mr Chan pursuant section 1224 of the Act is to be waived due to the exercise by the Tribunal of the discretion to find special circumstances in his case, pursuant to section 1237AAD of the Act; and

(iii) the Tribunal sets aside that part of the decision under review that imposed an activity test breach rate reduction of 18% for a period of 26 weeks.

I certify that the 47 preceding paragraphs are a true copy of the reasons for the decision herein of Ms J A Shead, Member.

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

Associate

Date/s of Hearing 6 July 2001

Date of Decision 12 April 2002

Representative for the Applicant Self

Advocate for the Respondent Mr B Slattery