Stuart and Secretary, Department of Family and Community Services [2002] AATA 729 (23 August 2002)

Last Updated: 26 August 2002

DECISION AND REASONS FOR DECISION [2002] AATA 729

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/1289

GENERAL ADMINISTRATIVE DIVISION )

Re MICHAEL STUART

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms N Isenberg, Member

Date 23 August 2002

Place Sydney

Decision The Administrative Appeals Tribunal: Affirms the decision of 8 March 2001 to impose an activity test breach non-payment period. Sets aside the decisions of 23 March 2001 and 26 March 2001 and in substitution therefor determines that the recovery of the debts of $378.99 in respect of the period 23 August 2000 to 28 November 2000 and $206.84 in respect of the period 14 December 2000 to 10 January 2001 is waived.

[SGD] Ms N Isenberg Member

CATCHWORDS

SOCIAL SECURITY - whether the decision to impose a reduction on applicant's newstart allowance was correct - failure to disclose changes in financial circumstances - whether reasonable excuse for failure to provide information - non-discretionary penalties - breach rate reduction period - no discretion - debt - whether special circumstances to waive - whether applicant has the capacity to repay debt - whether cost effective for the Commonwealth to take action to recover the debt

LEGISLATION

Social Security Act 1991 sections 630AA(1), 630AA(2), 1224(1), 1236(1), 1236(1A), 1236(1C), 1237AAD

Social Security (Administration Act) 1999 Part 6

CASES

Re Secretary, Department of Social Security and Bliss (AAT 11473, 13 December 1996)

Re Secretary, Department of Family and Community Services and Difford (2000) 32 AAR 115

REASONS FOR DECISION

23 August 2002 Ms N Isenberg, Member

1. The decisions under review before the Administrative Appeals Tribunal ("the Tribunal") were those of the Respondent, the Secretary, Department of Family and Community Services ("the Department") as follows:

* decision of 8 March 2001 by Centrelink letter dated 23 March 2001 (T26) to impose an activity test breach non-payment period (T32);

* decision of 23 March 2001 to raise and recover a debt of $378.99 in respect of the period 23 August 2000 to 28 November 2000 (T24);

* decision of 26 March 2001 to raise and recover a debt of $206.84 in respect of the period 14 December 2000 to 10 January 2001 (T28 ).

2. Those decisions were affirmed by the authorised review officer on 14 May 2001 (T38) and by the Social Security Appeals Tribunal ("the SSAT") on 21 May 2001 (T2).

APPEARANCES

3. A hearing was held before the Tribunal on 31 July 2002, in which the Applicant gave evidence, by conference telephone, without representation, and the Respondent was represented by Cheryl Collis, an advocate from the Advocacy and Administrative Law Team at Centrelink.

CONDUCT OF THE HEARING

4. The hearing was conducted under somewhat unfortunate circumstances. The Applicant had worked at Muffin Break, baking till shortly before the hearing. The Tribunal contacted the Applicant on his mobile phone, which was running out of battery. He had forgotten that the hearing was to take place. He did not have the "T- documents" with him. He had notified Centrelink only the previous day of his new address so had not received additional material tendered by the Respondent. The Tribunal arranged for the Applicant to attend the nearest Centrelink office and to speak to the Tribunal from there. The hearing ultimately was able to proceed and the Applicant was adamant that it should do so.

5. The Applicant also said that he had just come off shift and was very tired ("delirious"). He was shortly required to attend to fulfil his community service obligations. On learning this, the Tribunal arranged with his community service manager, Jodie Shaw, that he be excused from attending that day. The Applicant expressed his gratitude for this and was again adamant that the hearing should proceed.

6. During the course of the hearing, the Applicant became distressed several times. On many, many occasions during the hearing the Tribunal asked the Applicant if he wanted to proceed, or if he would rather have the matter heard on another day. On every occasion, notwithstanding all of the above, the Applicant said he wanted to proceed and wanted it "over with".

7. When it was time in the hearing for submissions, the Applicant took advantage of the Tribunal's offer to make a submission in writing, as he had nothing to say by way of submission. The Tribunal granted 14 days for him to make further submissions, and the Respondent could have a further 14 days after that to reply. The Tribunal made it clear that if no submissions were made within the time allowed then the matter would be determined on the basis of the material before the Tribunal. No submissions were received.

BACKGROUND

8. On 28 October 1999 Centrelink imposed an 18 per cent activity test breach rate reduction period on the Applicant on the basis he had failed to correctly advise earnings from employment from March to July 1999. A debt amounting to $2,961.62 was raised and the Applicant was advised in writing on 28 October 1999 (T12).

9. On 23 March 2000 Centrelink imposed a 24 per cent activity test breach rate reduction period on the Applicant on the basis that it was his second breach in two years and that he had failed to correctly advise earnings from October to December 1999. A debt amounting to $1,691.64 was raised and the Applicant was advised about the 24 per cent penalty in writing on 23 March 2000 (T26).

10. On 8 March 2001 Centrelink imposed an activity test breach non-payment period on the Applicant on the basis that it was his third breach in two years and that he had not accurately declared earnings in the periods 23 August 2000 to 28 November 2000 and from 14 December 2000 to 10 January 2001 (T30). On 23 March 2001 Centrelink raised and recovered a debt of $378.99 in respect of the period 23 August 2000 to 28 November 2000 and on 26 March 2001 Centrelink raised and recovered a debt of $206.84 in respect of the period 14 December 2000 to 10 January 2001.

11. It was not in dispute that in the periods 23 August 2000 to 28 November 2000 and 14 December 2000 to 10 January 2001, the Applicant had been employed on a casual basis. His earnings in those times were as advised by his employers.

ISSUES BEFORE THE TRIBUNAL

12. The issues before the Tribunal were:

* whether the eight week non-payment period correctly applies to the Applicant;

* whether he knowingly or recklessly provided false or misleading information about his income or failed without reasonable excuse to provide such information in relation to the following periods:

* 23 August 2000 to 28 November 2000 for which a debt of $378.99 was raised;

* 14 December 2000 to 10 January 2001 for which a debt of $206.84 was raised.

LEGISLATION

13. The relevant legislation in this matter is the Social Security Act 1991 ("the Act"), in particular sections 630AA(1), 630AA(2), 1224(1), 1236(1), 1236(1A), 1237AAD. Those sections, so far as is relevant, provide as follows:

"630AA 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."

Section 1224(1) relates to the raising and recovery of debts and provides:

"1224(1) If:

(a) an amount has been paid to a recipient by way of social security payment or fares allowance; 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, the 1947 Act or the Social Security (Fares Allowance) Rules 1998;

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

Section 1236 provides that the Secretary may write off debt. It provides:

"1236(1) Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

1236(1A) The Secretary may decide to write off a debt under subsection (1) if, and only if:

(a) the debt is irrecoverable at law; or

(b) the debtor has no capacity to repay the debt; or

(c) the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

(d) the debtor is not receiving a social security payment under this Act and it is not cost effective for the Commonwealth to take action to recover the debt."

Section 1237 AAD deals with the discretion to waive all of part of a debt in special circumstances. It states:

"1237AAD Waiver in special circumstances

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."

DOCUMENTARY EVIDENCE

14. The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence (TD1, T1-T39 pp1-102).

15. In addition, the following documents were tendered:

Exhibit Document Date

R1 Respondent's Statement of Issues 4 September 2001

R2 Respondent's Statement of Facts and Contentions 4 June 2002

R3 Fax from Workforce (Attachment A) 8 January 2002

R4 Centrelink's Record of Stuart's Income Declaration (Attachment B) Various Dates

R5 Centrelink's Letters to Stuart (Attachment C) Various Dates

R6 Centerlink's Records of Correspondence with Stuart (Attachment D) Various Dates

R7 Records of Disclosures 30 July 2002

THE APPLICANT'S EVIDENCE AND SUBMISSIONS

16. The Applicant gave only a little evidence and was cross-examined on behalf of the Respondent. Questions were also put to the Applicant by the Tribunal.

17. The Applicant said he had no reconciliation of when he worked and his Centrelink payments. He assumed he had declared his jobs. He told the Tribunal that "from now on" he's taking all his payslips to Centrelink and "letting them fill out the forms". He said that in the past he did not realise he was doing anything wrong and anyway it was too long ago. All Centrelink's enquires had "stuffed up" his job opportunities with his employers.

18. As to his present circumstances, the Applicant told the Tribunal he has nowhere to live and is "staying with a lady". He has extensive credit card debts for which he is being pursued, and traffic fines. He has a $6,500 fine in relation to prosecution for social security offences for which he must also do 350 hours of community service. He has no car and his only assets are a bag of clothes. His mobile phone is for in-coming calls only.

19. As to his health he said it is "up the shit" and he is on the "verge of a breakdown", although he has not consulted a doctor in this regard.

20. In cross-examination, the Applicant said he "read everything" he had been sent by the Department. This included the T-documents.

21. He did not agree that he had failed to declare income on the two occasions, which had give rise to the first two activity test breaches. He did, however, agree that he is presently serving community service as a result of being prosecuted in respect of false statements during those periods.

22. The Applicant was then referred to the Centrelink application for newstart allowance dated 5 September 2000 in respect of the period 23 August 2000 to 5 September 2000 (T7), which was in relation to the third breach period. There he had answered "No" to the question: "Did you do any work in the period?"

23. The Applicant agreed that it was not correct and that it must have been a mistake. He accepted that his employer at the time recorded payments to him for that period. He said he did not enquire as to rates of payment before commencing the job so did not know his likely pay. He said he needed work as he was "desperate". At the time he was living out of his car and had lost track of things and he was in a lot of "punch-ups". He couldn't take time off work to ask about his pay, because he was out on the garbage truck. In this regard he noted he had only had his mobile phone for a few days. He said he had enough trouble keeping track of himself let alone keeping track of things for Centrelink purposes. He was just "praying" he'd get it right. He was asked if he considered his conduct to be reckless but he made no coherent reply.

24. He said he had essentially been working full time for the last 9 months but was now just going to go on the dole and be a "dole bludger" to save having so many hassles with Centrelink.

25. The Applicant was asked about his financial circumstances. He said that for the last 10 years he has had a lot of financial troubles. As to his capacity to repay his Centrelink debt, he reiterated his difficult financial circumstances.

26. He said in passing that his fiancee had completed the forms and that he had signed them. He said "I stuffed up. I'm a dickhead".

THE RESPONDENT'S EVIDENCE AND SUBMISSIONS

27. The Respondent called no witnesses.

28. It was submitted that the Applicant has a history of incorrect disclosure which is not readily explained by his claim, previously made, that he had great difficulty disclosing his earnings accurately as his claim forms (SU19's) had to be lodged on the Wednesday of each fortnight whilst his payslips were not received until the Thursday of the relevant week. The Applicant incurred debts for failing to correctly advise earnings in the amount of $2,961.62 for the period March to July 1999 and a debt in the amount of $1,691.64 for the period October to December 1999. It was the conclusion of the SSAT, that in regard to these breaches, that the Applicant had substantially under-declared his income during these periods. From the details of his actual and declared earnings and his admissions he appeared, it was submitted, to understand that he had been sometimes wrong. The size of the debts also underscores the level of under-disclosure.

29. Although the Applicant told the SSAT that after the second breach (23 March 2000) he did his best to avoid further breaches, the evidence does not support this. The SU19 for the fortnight 23 August 2000 to 5 September 2000 reveals no income was disclosed, although the Applicant had clearly earned income during that period. It was the Respondent's position, that the Applicant had failed to provide a reasonable excuse, or had recklessly omitted to provide correct details in relation to his earnings from employment. Despite the SSAT's opinion, that the Applicant had attempted to disclose income correctly subsequent to this period, the advocate for the Respondent submitted that this was not the case. For example, for the period from 28 December 2000 to 10 January 2001 the Applicant under-declared his earnings by $190 and for the period from 18 October 2000 to 31 October 2000 earnings were undeclared by $215.83.

30. The Applicant was involved in casual work with three firms, namely Workforce International, Rak-A-Van and SMS Municipal Services during the relevant periods. It was submitted that it is common practice for people involved in this type of work, to check with the employer the gross hourly rate of pay before undertaking the work in question. A diary record is usually kept by the worker, to keep track of number of hours and days worked. As such, it would not have been difficult for the Applicant to calculate his fortnightly gross earnings correctly on this basis.

31. Alternatively, it was submitted, if the Applicant did not bother to keep such records it would have been a simple matter to ring the employer on the Wednesday before lodging his continuation forms to check the gross fortnightly sum earned.

32. In any event, the Applicant had provided no explanation as to why he declared no earnings in the fortnight 23 August 2000 to 5 September 2000 when he worked for SMS Municipal Services, earning $687.03 (T21). During the same period he worked for Workforce International, being paid $399.12 on 26 August 2000 (T23).

33. By the 8 March 2001 the Applicant had incurred a third breach within a period of two years for failure to correctly disclose earnings. Consequently, pursuant to section 630AA(2)(b) of the Act, it was submitted, the Respondent correctly applied an eight week non-payment period. As a consequence of the breach he was overpaid newstart allowance in the amounts of $378.99 and $206.84 and these are debts recoverable by the Commonwealth.

34. The advocate submitted that even if it was determined by the Tribunal, that the Applicant had correctly declared his income for the relevant periods, there is no power for the Tribunal to waive the activity test breach penalty nor to impose a lesser penalty due to the Applicant's failure to correctly declare his income. Hence, the result was that the Applicant was overpaid newstart allowance in the amount of $378.99 and $206.84 which sums are legally recoverable debts under section 1224(1) of the Act.

35. The Applicant gave evidence that the forms were completed by his fiancee. If this is indeed the case, it makes no difference. Each form carries a caution at Q9, "There are penalties for providing false or misleading information". The Applicant gave evidence that he signed and dated the forms in question, and as such, bears the ultimate responsibility for the contents of the form.

36. The Respondent submitted that it is not appropriate to write off or waive the whole or part of these debts under sections 1236 or 1237AAD of the Act. The Respondent submitted that the discretion in section1237AAD is not available to the Applicant as he "knowingly" made a false statement on his continuation form for the period 23 August 2000 to 5 September 2000 (T7).

In Part 6 of the Social Security (Administration) Act 1999, "knowingly" is coupled with "recklessly", suggesting that reckless indifference to the truth of the statements is not excluded by section 1237AAD(a). The advocate for the Respondent invited the Tribunal's attention to Re Secretary, Department of Social Security and Bliss (AAT 11473, 13 December 1996) where Senior Member Allen said:

"In this matter I am satisfied that the Applicant did, by omission, make false representations as to amounts which he had earned and that at the time he made those representations he knew they were false. He may not have had the intention to defraud the Department of Social Security but s 1237AAD does not require an intention to defraud, all that is required to make the ameliorating discretion of the section non applicable is the intentional making of a statement or representation with knowledge of its falsity...."

37. In the event that the Tribunal did not find the Applicant "knowingly" failed to comply with his notification obligations, it was submitted that the Applicant is not in financial hardship. The non-payment period has been served and he is receiving regular casual work which precludes payment of newstart allowance. It was the Respondent's submission, that he has the capacity to repay the relatively small debts.

38. Furthermore, it was submitted, financial hardship alone is insufficient to attract the application of section 1237AAD.

DISCUSSION AND FINDINGS

39. In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.

40. The first issue for the Tribunal was to determine if the Applicant had breached the activity test requirement for the third time. By necessity this involves consideration of the first two "breaches", that is, in respect of earnings between March and July 1999 and between October and December 1999.

41. While the Applicant did not agree that he did not declare income during these periods, he conceded that he was presently undertaking community service ordered as a result of prosecution in respect of under declaration of income during those periods. He also conceded before the SSAT that his income during those periods was as stated by his employers. He did not dispute the imposition of the activity test breaches at the time they were imposed, namely 28 October 1999 and 23 March 2000, respectively.

42. The Tribunal formed the view, on the basis of the available information and evidence that those activity test breach rate reduction periods were correctly imposed.

43. The Tribunal then turned to consider whether there was a third activity test breach in respect of the periods 23 August 2000 to 28 November 2000 and 14 December 2000 to 10 January 2001, in respect of which the debts of $378.99 and $206.84, respectively have been raised.

44. The Tribunal refers to and accepts the evidence in Exhibit R7 which is corroborated by the T-documents. Exhibit R7 is reproduced below as follows:

"RECORD OF DISCLOSURES -Michael STUART

SMS Municipal Service:

Week Ending 7/9/00 Gross Earnings $687.03 T21pg58

Newstart Form (SU19)

23/8/00 - 5/9/00 Nil Earning disclosed T7pg28

Workforce International:

23/12/00 Gross Earnings $120.00 T23pg66

6/1/01 Gross Earnings $405.00

13/1/01 Gross Earnings $513.75

(21 day) --------------

1,038.75 divided 21 days = $49.46

earnings per day

SU19 28/12/00- 10/1/01 declared $452.20 T16/pg45

(13 days) x $49.46 per day = Gross Earnings $643.00

Underdeclared earnings by $190.80 for the period

Rak A Van: T20pg53

13/10/00 - 19/10/00. Gross Earnings $647.47 divided 6 days = $107.90 Earnings per day

20/10/00 - 26/10/00 Gross Earnings 833.85

27/10/00 & 30/10/00 Gross Earnings 376.60

__________

1,210.38

2 days earning 18&19/10 215.80

___________

1,426.18

SU19 18/10/00 ~ 31/10/00 declared $1,210.35

Underdeclared earnings by $215.83 for the period"

45. The Tribunal was satisfied that the evidence indicated that the Applicant had failed to provide correct information in respect of his income during the relevant periods.

46. The Tribunal then turned to consider the provisions of section 630AA(1) to ascertain if the Applicant might be said to have failed to do so either without reasonable excuse, or knowingly, or recklessly.

47. The Applicant's evidence was that he had made a mistake in completing the form for the period 23 August to 5 September 2000 (T7) and that although his fiancee had completed the forms he had signed them. He accepted that his employer at the time recorded payments to him for that period. He had not enquired as to rates of payment before commencing the job as he was "desperate" for work. He could not take time off work to make enquires about his pay. At the time he was living in difficult circumstances and was just "praying" that he would get it right.

48. Having found the Applicant had failed to provide information in respect of his income during the relevant periods, the Tribunal turned first to consider if he had done so without reasonable excuse.

49. The SSAT referred to Re Secretary, Department of Family and Community Services and Difford (2000) 32 AAR 115, where the Applicant undertook casual work for two days but decided to delay advising Centrelink until he received a pay slip recording the gross amount he was paid. He never received a pay slip and forgot to advise the income which ultimately resulted in an overpayment of $139.49 and an activity breach penalty of $700. The Tribunal held that he had a "reasonable excuse" because he genuinely forgot to comply with his notification obligation.

50. In this case, however, there was ample evidence that the Applicant was aware of his obligations, because he had been previously "breached" for failure to provide information. It was not a matter of forgetting as in Difford's case. The Applicant was aware of his responsibilities and, for whatever reason neglected to provide accurate information. His failure to enquire as to his payment arrangements and his leaving the completion of the forms to his fiancee did not, in the Tribunal's view amount to a "reasonable excuse " for his failure to disclose the information. "Praying" that he got it right also did not discharge his duty regarding notification.

51. Having come to this view, it was not necessary for the Tribunal to consider if the Applicant had knowingly or recklessly failed to provide the information.

52. This then was the third activity test breach, which gave rise to an eight week non-payment period.

53. As a result of his failure to disclose his correct income, debts totalling $585.83 were raised, and under section 1224(1) were debts due to the Commonwealth.

54. The Tribunal then turned to consider if it were appropriate for the debts to be written off under section 1236. Section 1236(1A)(b) provides that the debt may be written off if the debtor has no capacity to repay the debt.

Section 1236(1C) provides:

"1236(1C) For the purposes of paragraph (1A)(b), if a debt is recoverable by means of deductions from a person's social security payment, the person is taken to have a capacity to repay the debt unless recovery by those means would cause the person severe financial hardship."

55. The Applicant was asked about his financial circumstances. He said that for the last 10 years he has had a lot of financial troubles. As to his capacity to repay his Centrelink debt, he reiterated his difficult financial circumstances. He has no home, no car, no assets, many thousands of dollars in credit card debts, traffic fines and other debts. He is presently working but doubts this will continue. He contemplates having to leave work. Continued enquiries by Centrelink with his employers have jeopardised his job prospects. His capacity to work is also limited by his 350 hours of community service obligations. If he does leave work, he will apply for benefits and it is not clear the extent to which he may be eligible. Even if he were in fact eligible, the Tribunal was of the view that imposition of this further debt, upon his pre-existing debts would cause severe financial hardship. The Tribunal exercises the discretion in section 1236(1A)(b) to waive recovery of the debts incurred by the Applicant as the Tribunal finds that the Applicant has no capacity to pay the debts as it will cause severe financial hardship pursuant to section 1236(1C) of the Act.

56. If the Applicant was not entitled to benefits then, in the Tribunal's view, it would not be cost effective for the Commonwealth to take action to recover the debt. Alternatively, the Tribunal exercises the discretion to waive the debts incurred by the Applicant pursuant to section 1236(1A)(d) of the Act.

DECISION

57. The Tribunal affirms the decision of 8 March 2001 to impose an activity test breach non-payment period.

58. The Tribunal sets aside the decisions of 23 March 2001 and 26 March 2001 and in substitution therefor determines that the recovery of the debts of $378.99 in respect of the period 23 August 2000 to 28 November 2000 and $206.84 in respect of the period 14 December 2000 to 10 January 2001 is waived.

I certify that the 58 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member

Signed: H Sim .....................................................................................

Associate

Date of Hearing 31 July 2002

Date of Decision 23 August 2002

Representative for the Applicant Self represented

Advocate for the Respondent Cheryl Collis, an advocate from the Advocacy and Administrative Law Team at Centrelink.