Gates and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 34 (21 January 2011)

Last Updated: 28 January 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 34

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2010/1735 & 2010/4312

GENERAL ADMINISTRATIVE DIVISION		)
	Re		MR LESLIE GATES

Applicant

And

SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal

C Walsh, Senior Member

Date 21 January 2011

Place Perth

Decision

In case No 2010/1735, the Tribunal affirms the decision of the Social Security Appeals Tribunal, dated 9 April 2010, that Mr Gates was to be considered an employee from 1 March 2006 and that his rate of age pension from 29 January 2010 was to be reassessed on the basis that he was an employee and not self-employed. In case No 2010/4312, the Tribunal sets-aside the following part of the decision of the Social Security Appeals Tribunal, dated 1 September 2010: “the recalculated overpayment amount is a debt that is to be recovered from Mr Gates.” and substitutes that part with the following decision: “the recalculated overpayment amount, as it currently stands, is to be waived in full pursuant to section 1237AAD of the Social Security Act 1991 (Cth).” Also in case No 2010/4312, the Tribunal affirms the remaining parts of the Social Security Appeals Tribunal’s decision dated 1 September 2010.

...(sgd) C Walsh.......
Senior Member

CATCHWORDS

Social security – age pension – employee or self-employed – ordinary income – gross v net income -common law indicia of employee v independent contractor - whether special circumstances exist – waiver of recovery of a debt – departmental administrative errors

LEGISLATION

Social Security Act 1991 (Cth) – section 8(1) – section 55- section 1064 – Part 3.2 -section 1237AAD

CASES
Callaghan and Secretary, Department of Social Security [1996] AATA 413
Stevens v. Brodribb Sawmilling Company Proprietary Limited; Gray v Brodribb Sawmilling Company Proprietary Limited [1986] HCA 1; [1986] 160 CLR 16
Hollis v Vabu Pty Limited t/a Crisis Couriers [2001] HCA 44; (2001) 207 CLR 21
Secretary, Department of Social Security v Hales [1998] FCA 219
Dranichnikov and Centrelink [2003] FCAFC 133
Davy and Secretary, Department of Employment & Workplace Relations [2007] AATA 1114
Daly and Secretary, Department of Family and Community Services [2005] AATA 740
Coyne and Secretary to the Department of Family and Community Services [2002] AATA 1156
Reardon and Secretary, Department of Family and Community Services [2002] AATA 33
Haldane-Stevenson v Director-General of Social Security (1985) ASSC 92-046
Re Mrs Paula and Secretary to the Department of Social Security (1985) ASSC 92-042
Re Nemaz and the Secretary to the Department of Social Security [1987] AATA 204; (1987) 12 ALD 107
Commissioner of Payroll Tax (Vic) v Mary Kay Cosmetics Pty Ltd (1982) 82 ATC 4444
Abdalla v Viewdaze Pty Ltd trading as Malta Travel (2003) 53 ATR 30
Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561 at 571
Federal Commissioner of Taxation v Barrett [1973] HCA 49; (1973) 129 CLR 395
Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389
Queensland Stations Pty Ltd v Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539
Marshall v Whittaker's Building Supply Co [1963] HCA 26; (1963) 109 CLR 210
Montreal v Montreal Locomotive Works (1947) 1 DLR 161 at 169
Stevenson Jordan and Harrison Ltd v MacDonald and Evans [1952] 1 TLR 101
Bank Voor Handel Scheepvaart NV v Slatford [1953] 1 QB 248 at 295
World Book (Australia) Pty Ltd v Federal Commissioner of Taxation (1992) 92 ATC 4327
Neale (Deputy Commissioner of Taxation) v Atlas Products (Vic) Pty Ltd [1955] HCA 18; (1955) 94 CLR 419
Roy Morgan [2004] SASC 288
Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1 All ER 433
Bowerman v Sinclair Halvorsen Pty Ltd [1999] NSW IRComm21
Express & Echo Publications Ltd v Tanton [1999] CLR ICR 693
McFarlane v Glasgow City Council [2000] UKEAT 1277_99_1705; [2001] IRLR 7
Re Ivovic and Director-General of Social Services (1981) 3 ALN 61
Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Davy and Secretary, Department of Employment & Workplace Relations [2007] AATA 1114
Secretary, Department of Social Security  v  (Coralie) Hales [1998] FCA 219
Secretary, Department of Social Security v Riddell, 15 September 1993 No A93/62
Director-General of Social Services v Hales [1983] FCA 81; (1982-83) 47 ALR 281
Re Ward and Secretary to the Department of Social Security (1985) 7 ALN N66
Re Kulakov and Secretary, Department of Social Security (1991) 63 SSR 879
Melhem and Minister for Immigration and Citizenship [2010] AATA 993

REASONS FOR DECISION

21 January 2011	C Walsh, Senior Member
INTRODUCTION

1. Mr Gates, who is 72 years of age, has worked with boats for at least 25 years and is highly skilled at “teaking and decking”. Mr Gates has been in receipt of an age pension from Centrelink since 8 August 2003. On 1 March 2006, Mr Gates commenced part-time work at the boat building company Rowat Pty Ltd, trading as Vikal International (Vikal). Vikal manufactures highly specialised, luxury, power boats and motor yachts by tender. Mr Gates obtained work at Vikal for his experience and expertise in teaking and decking, following a recommendation by his son who, at that time, was working at Vikal on fibreglassing.
2. Following starting work at Vikal, Mr Gates began reporting his income to Centrelink fortnightly. In the period 1 March 2006 to 28 January 2010, Centrelink calculated Mr Gates’ age pension on the basis that he was an “employee” of Vikal, rather than as “self-employed” with the effect that Mr Gates’ gross (rather than net) income was taken into account by Centrelink in the calculation of his age pension payments.
3. On 9 November 2009, Centrelink initiated a review of Mr Gates’ entitlement to and rate of age pension. That review resulted in his wife, Mrs Gates, lodging an “Income and Assets” form with Centrelink on 19 November 2009. Mrs Gates responded to Question 8 in that form, which asked “Do you (and/or your partner) CURRENTLY receive any income from work other than self-employment?” , with a “Yes” , named Vikal as Mr Gates’ employer, ticked the “part time” box and entered “13” against the request for a personnel, service or clock card number. In addition, Mrs Gates answered Question 38 in that form, which asked “Are you (and/or your partner) involved in any type of business?, including being “self-employed” or a “sub-contractor”, with a “No”. Mr Gates co-signed that form with his wife thereby declaring that the information provided on that form was complete and correct. On 23 November 2009, Vikal lodged an Employment Declaration with Centrelink which described Mr Gates as a “part-time sub-contractor”.
4. On 9 February 2010 a Centrelink officer decided to cancel Mr Gates’ age pension effective 29 January 2010 due to his level of income and, after verifying Mr Gates’ income from working at Vikal, raised a debt of against him. Mr Gates requested a review of Centrelink’s decision to cancel his age pension and raise a debt against him. That review, which involved Centrelink having many discussions with Mr Gates and his accountant and which gave rise to the provision of fresh information to Centrelink by Mr Gates (including his assertion that he was self-employed and not an employee of Vikal), resulted in Centrelink making a determination, on 17 February 2010, that Mr Gates was self-employed, effective 29 January 2010, allowing his income to be reduced by various business expenses (i.e. his income was thereafter calculated on a “net” and not a “gross” basis). This had the effect of reducing Mr Gates’ income and increasing his rate of age pension from 29 January 2010 and caused his debt to Centrelink to be extinguished.
5. On 3 March 2010 Mr Gates requested a review of Centrelink’s decision of 17 February 2010 because he believed that he should have been paid the age pension at the higher self-employed rate from a date earlier than 29 January 2010. Specifically, Mr Gates sought from Centrelink a payment of arrears of age pension from 1 March 2006, the date he claims he commenced self-employment. On 12 March 2010, a Centrelink authorised review officer (ARO) reviewed and affirmed the decision to assess Mr Gates as being self-employed from the 29 January 2010 and that age pension arrears was not payable from an earlier date. Dissatisfied, on 16 March 2010 Mr Gates applied to the Social Security Appeals Tribunal (SSAT) for a review of the ARO’s decision.
6. On 9 April 2010, the SSAT reviewed Mr Gates' employment status and decided to set-aside the decision made by the Centrelink ARO on 12 March 2010. The SSAT found that Mr Gates was to be considered an employee from 1 March 2006 and that his rate of age pension from 29 January 2010 was to be reassessed on the basis that he was an employee and not self-employed.
7. As a consequence of the SSAT’s decision, on 5 May 2010, a Centrelink officer decided that Mr Gates had been paid $2,684.90 more age pension than he was entitled to in the period 28 February 2008 to 22 April 2010 and raised a debt against Mr Gates for that amount accordingly. Mr Gates requested a review of that decision and, on 8 July 2010, a Centrelink ARO reviewed and affirmed that decision. On 15 July 2010, Mr Gates sought a review of that decision by the SSAT which, on 1 September 2010, set aside the decision made by the Centrelink ARO and substituted it with the decision that: (i) there is debt arising from overpayment of age pension in the period 1 March 2006 to 28 January 2010; (ii) the amount of the overpayment is to be recalculated to take account of the correct fortnightly rate of age pension paid to Mr Gates, as recorded on the Payment Summary screens contained in Mr Gates’ Centrelink records and the gross income from employment at Vikal from 1 March 2006 (as provided by Vikal); and (iii) the recalculated overpayment amount is a debt that is to be recovered from Mr Gates. The amount of overpayment of age pension waas subsequently recalculated by Centrelink as being $2,249.92.
8. Mr Gates maintains that he has been self-employed since he started work at Vikal on 1 March 2006 and that there continue to be errors in the recalculation of the debt amount by Centrelink. Consequently, Mr Gates now seeks a review of the SSAT’s decisions dated 9 April 2010 and 1 September 2010 respectively by this Tribunal.

IS THE NATURE OF MR GATES’ RELATIONSHIP WITH VIKAL ONE OF A CONTRACT FOR SERVICES (SELF-EMPLOYMENT) OR A CONTRACT OF SERVICES (EMPLOYMENT) FOR THE PURPOSES OF DETERMINING THE AMOUNT OF AGE PENSION PAYABLE TO HIM UNDER THE SOCIAL SECURITY ACT 1991 (CTH) ?

9. A person’s age pension rate is worked out using Pension Rate Calculator A at the end of section 1064 of Part 3.2 of the Social Security Act 1991 (Cth) (Act): section 55 of the Act. The amount of age pension payable to a person is subject to an ordinary income test and an assets test. The actual rate of pension will be the lower of the rates produced by the ordinary income test and the assets test. Relevant for present purposes is the ordinary income test which, broadly, means that an age pensioner will be paid a reduced rate of pension if he or she (or his or her “partner”) receives “income”, other than the pension, above a specified limit. “Income” is defined in section 8(1) of the Act to mean, among other things, “an income amount earned, derived or received by the person for the person’s own use or benefit”. “Income amount” is defined to mean valuable consideration, personal earnings, moneys or profits (whether capital or not): section 8(1) of the Act. Earnings from any form of “employment”, whether full-time, part-time or casual are treated as “income” for section 8(1) purposes.
10. For social security purposes, “income” from “employment” is understood to mean the person’s “gross” income, before taxation or any deductions, which can usually be ascertained from the person’s current pay slip, payment summary, tax return or assessment notice: refer to Haldane-Stevenson v Director-General of Social Security (1985) ASSC 92-046. Whereas, where a person is “self-employed” the Secretary generally applies the practices of the Australian Taxation Office (ATO) in calculating the income that person earns, derives or receives from his or her self-employment or ‘business’: refer to Re Mrs Paula and Secretary to the Department of Social Security (1985) ASSC 92-042; Re Nemaz and the Secretary to the Department of Social Security [1987] AATA 204; (1987) 12 ALD 107. That is, the person’s “income” is the “net” (not “gross”) amount of income arrived at after allowance has been made for the cost of running the business, but before income tax and other personal deductions.
11. Consequently, the income amount derived by and the rate of age pension payable to Mr Gates turns on whether the “income” earned by him whilst working at Vikal was derived by him as an “employee” of Vikal or as a “self-employed” person, carrying on a business and providing his services to Vikal.
12. The term “employee” is not defined in the Act, therefore it takes its ordinary meaning. The relationship between an employer and an employee is commonly referred to as a “contract of service”, which relationship can be contrasted with the principal/independent contractor relationship that is usually referred to as a “contract for services”. It is sometimes difficult to discern the true character of a relationship from the facts of the case or where the terms of the contract concerned are unclear or ambiguous or where there is no written contract in existence. The evidence before the Tribunal was that Mr Gates never signed a written contract in respect of his work at Vikal.
13. Because of the difficulties which have in the past arisen in determining the real character of working relationships, the ordinary meaning of “employee” has been the subject of a significant amount of judicial consideration. The Courts have considered the common law contractual relationship between parties in a variety of legislative contexts, including income tax, industrial relations, payroll tax, vicarious liability, workers compensation and superannuation guarantee. Consequently, a substantial and well-established body of case law has developed on this issue. Often there are many relevant facts and circumstances, some pointing to a contract of service, others pointing to a contract for services: Commissioner of Payroll Tax (Vic) v Mary Kay Cosmetics Pty Ltd (1982) 82 ATC 4444. Whatever the facts of a particular case, there is no single feature which is determinative of the contractual relationship. The totality of the relationship between the parties must be considered to determine whether, on balance, the worker is an employee or an independent contractor: Stevens v. Brodribb Sawmilling Company Proprietary Limited; Gray v. Brodribb Sawmilling Company Proprietary Limited [1986] HCA 1; [1986] 160 CLR 16 at 29 per Mason J and Hollis v Vabu [2001] HCA 44; (2001) 207 CLR 21. Consideration should be given to the various factors identified in judicial decisions which have considered the employee/independent contractor distinction. However, it must be borne in mind that no list of factors is to be regarded as exhaustive and the weight to be given to particular facts will vary according to the circumstances: Abdalla v Viewdaze Pty Ltd trading as Malta Travel (2003) 53 ATR 30 and Hollis v Vabu. Where a consideration of the indicia points one way so as to yield a clear result, the determination by the relevant decision-maker should be in accordance with that result: Hollis v Vabu.
14. The following features have been regarded by the courts as the key indicators of whether an individual is an employee or an independent contractor at common law.

CONTROL

15. The classic test for determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of “control” which the former can exercise over the latter: Stevens v Brodribb [1986] HCA 1; 160 CLR 16 at 26 per Mason J and [1986] HCA 1; 160 CLR 16 at 35 per Wilson and Dawson JJ. A common law employee is told not only what work is to be done, but how and where it is to be done. However, with the increasing usage of skilled labour and consequential reduction in supervisory functions, the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it. In other words, the question is whether the payer has the lawful authority to command the worker, irrespective of whether the payer actually exercises that authority: Stevens v Brodribb [1986] HCA 1; 160 CLR 16 at 26 per Mason J and [1986] HCA 1; 160 CLR 16 at 36 per Wilson and Dawson JJ and Hollis v Vabu. See also Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561 at 571; Federal Commissioner of Taxation v Barrett [1973] HCA 49; (1973) 129 CLR 395 at 402; Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389. In the last-mentioned case, Dixon J stated (at 404):

“The question is not whether in practice the work was in fact done subject to a direction and control exercised by and actual supervision or whether an actual supervision was possible but whether the ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions”

16. Similarly, in Zuijs, the High Court of Australia described (at [1955] HCA 73; (1955) 93 CLR 561 at 571) the significance of control in the following way in the context of skilled employment where the nature of the work performed left little scope for detailed control:

“What matters is lawful authority to command so far as there is scope for it. And there must always be some room for it, if only in incidental or collateral matters.”

17. The mere fact that a contract may specify in detail how the contracted services are to be performed does not necessarily imply an employment relationship. In fact, it has been held that it is not uncommon in contracts for services that the payer has a right to specify how the contracted services are to be performed, but the contractor is otherwise free to exercise their discretion (subject to any terms implied by law). This is because the contractor is working for themselves: see Queensland Stations Pty Ltd v Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539.
18. Whilst ‘control’ is not the sole indicator of whether or not a relationship is one of employment as the modern approach to defining the contractual relationship is to have regard to the totality of the relationship between the parties, control is still the most important factor to be considered. This was recognised by Wilson and Dawson JJ in Stevens v Brodribb, wherein their Honours stated [1986] HCA 1; (1986) 160 CLR 16 at 36) that:

“In many, if not most cases, it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee.”

19. In Hollis v Vabu, the fact that the couriers engaged by Vabu had little control over the manner of performing their work (the corollary being that Vabu had considerable scope for the actual exercise of control over the performance of the courier's activities) was an important factor leading to the conclusion that the bicycle courier in question was a common law employee of Vabu. Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ observed (at [2001] HCA 44; (2001) 207 CLR 21 at 44-45) that:

“Vabu's whole business consisted of the delivery of documents and parcels by means of couriers. Vabu retained control of the allocation and direction of the various deliveries...Their work was allocated by Vabu's fleet controller. They were to deliver goods in the manner in which Vabu directed. In this way, Vabu's business involved the marshalling and direction of the labour of the couriers, whose efforts comprised the very essence of the public manifestation of Vabu's business.”

20. Mr Gates maintains that he is self-employed and is not and never has been an employee of Vikal. In relation to the question of “control”, Mr Gates provided evidence to the Tribunal that:
    • he didn’t advertise his services and expertise in teaking and decking and was offered work at Vikal following a recommendation from his son (who had been working at Vikal with fibreglass) and a subsequent interview at Vikal. That is, Mr Gates did not tender for his work at Vikal;
    • he never signed a contract with Vikal in respect of his work arrangements with the company. Mr Gates said that, as far as he is aware, nobody who worked at Vikal had a written contract. According to Mr Gates, there were some “employees” at Vikal which were the painters, sanders, cleaners etc. They were generally not the highly skilled people like him. All the skilled workers were, Mr Gates said, “sub-contractors”;
    • he worked at Vikal three days a week, from about 7.30am until 3.00-4.00pm. Mr Gates said he didn’t like to work longer hours than that, because of his age. He holds a supervisory role in the sense that he trained other workers, mainly apprentices, who were employed by Vikal and not by Mr Gates. Mr Gates said that he helped to “lift the skills of the apprentices” by training them in the art of teaking and decking. Mr Gates also said that training the apprentices was part of his commitment to the company and almost all of the other sub-contractors at Vikal did the same;
    • as an experienced and skilled worker, he had a designated work area in the factory and he had freedom in the way he performed his work as a teaker and decker. Mr Gates stated that there can be up to eight boats under construction at any one time and that they generally took about six months to build. Mr Gates said that, at his own discretion, he moved between the boats depending upon what work could be achieved on a particular boat on a particular day. Mr Gates would occasionally call on other workers to assist him with lifting and other physical tasks that he found difficult at his age;
    • there were two main supervisors at Vikal, namely a tax accountant and a pay-master. Those supervisors did not do any manual work or spend much time on the factory floor (they generally worked in their offices), nor did they supervise Mr Gates. However, they did supervise some of what Mr Gates referred to as the “employees” (being the unskilled workers such as painters, sanders, cleaners etc);
    • since he started work at Vikal on 1 March 2006, he had worked only for Vikal and not for any other companies or customers and his work arrangements at Vikal had been the same since he started work with the company. However, he was in a position to accept or reject work other than his work at Vikal if he chose to do so. The reasons he did not take on any other work was that: (i) he liked working at Vikal because he could work the hours he wanted, on the days he wanted; (ii) his work arrangements at Vikal were free and flexible (i.e. he worked out how many days and hours he would work on a week by week or day by day basis, to suit himself); (iii) Vikal is a reliable company and he had worked for boat building companies in the past who were not; (iv) Vikal is located close to his home which means less travel time for him; and (v) he consistently receives three days of work a week which was enough for him at his age, but he could work less or more than three days if he chose to.
21. The Tribunal considers that the degree of control Mr Gates had over his work at Vikal was consistent with what would be expected of someone as experienced and skilled as Mr Gates in his area of teaking and decking and of a person working in a supervisory capacity (i.e. training apprentices in the craft of teaking and decking boats). There was no evidence before the Tribunal that Vikal did not have the right to exercise control over (or the lawful authority to command) Mr Gates in the conduct of his work if and when it chose to.

DOES THE WORKER OPERATE ON THEIR OWN ACCOUNT OR IN THE BUSINESS OF THE PAYER?

22. In Hollis v Vabu, the majority of the High Court quoted (at [2001] HCA 44; (2001) 207 CLR 21 at 39) the following statement made by Windeyer J in Marshall v Whittaker's Building Supply Co [1963] HCA 26; (1963) 109 CLR 210:

“.....the distinction between an employee and independent contractor is 'rooted fundamentally in the difference between a person who serves his employer in his, the employer's business, and a person who carries on a trade or business of his own.”

23. This distinction is also referred to as the integration or organisation test: see Montreal v Montreal Locomotive Works (1947) 1 DLR 161 at 169, Stevenson Jordan and Harrison Ltd v MacDonald and Evans [1952] 1 TLR 101 at 111 and Bank Voor Handel Scheepvaart NV v Slatford [1953] 1 QB 248 at 295.
24. In Hollis v Vabu, the High Court considered this distinction when determining whether a bicycle courier was a common law employee of Vabu. The majority found that the bicycle courier was a common law employee of Vabu and stated (at [2001] HCA 44; (2001) 207 CLR 21 at 41) that:

“Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations.”

25. While the majority did, in reaching its decision, consider lawful authority to command (that is ‘control’) and other relevant aspects of the relationship between the parties, it at the same time was concerned with the fundamental question of whether the worker was operating his or her own business or was operating within Vabu's business. Accordingly, when applying the indicators of employment, following the High Court’s decision in Hollis v Vabu, it is also necessary to keep in mind the distinction between a worker operating on his or her own account and a worker operating in the business of the payer.
26. Mr Gates told the Tribunal that he felt valued by the company and that he was “part and parcel” of the Vikal business. According to Mr Gates, most of the “subcontractors” (i.e. skilled workers) had been working at Vikal for at least ten to twelve years and so he had come to know them well. He said that training the apprentices in teaking and decking was part of his “commitment to the company” and that he enjoyed training them and “lifting their skills”.
27. The Tribunal considers that the above evidence points clearly toward a finding that Mr Gates should be seen as a worker operating in Vikal’s boat building business (i.e. an employee) and not as a worker operating on his own account (i.e. self-employed).

'RESULTS' CONTRACTS

28. Where the substance of a contract is to achieve a specified result, there is a strong (but not conclusive) indication that the contract is one for services. In World Book (Australia) Pty Ltd v Federal Commissioner of Taxation (1992) 92 ATC 4327 Sheller JA stated (at 4334) that:

“Undertaking the production of a given result has been considered to be a mark, if not the mark, of an independent contractor.”

29. The phrase 'the production of a given result' means the performance of a service by one party for another where the first-mentioned party is free to employ their own means (such as third party labour, plant and equipment) to achieve the contractually specified outcome. Satisfactory completion of the specified services is the 'result' for which the parties have bargained. The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to hours worked. If remuneration is payable when, and only when, the contractual conditions have been fulfilled, the remuneration is usually made for producing a given result: Neale (Deputy Commissioner of Taxation) v Atlas Products (Vic) Pty Ltd [1955] HCA 18; (1955) 94 CLR 419.
30. In contracts to produce a result, payment is often made for a negotiated contract price, as opposed to an hourly rate. For example, in Stevens v Brodribb, payment was determined by reference to the volume of timber delivered, and in Queensland Stations where it was a fixed sum per head of cattle delivered.
31. However, while the concept of 'payment for a result' is expected in a contract for services, it is not necessarily inconsistent with a contract of service. For example, the High Court in Barrett found at [1973] HCA 49; 73 ATC 4147 at 4153 that land salesmen who were engaged by a firm of land agents to find purchasers for land entrusted to the firm for sale and who were remunerated by commission only were employees and not independent contractors. Similarly, the High Court in Hollis v Vabu considered that payment to the bicycle couriers per delivery, rather than per time period engaged, was a natural means to remunerate employees whose sole purpose is to perform deliveries. Further, the Full Court of the Supreme Court of South Australia in Roy Morgan [2004] SASC 288 found that interviewers who were only paid on the completion of each assignment, not on an hourly basis, were employees and not independent contractors. Accordingly, the contractual relationship as a whole must still be considered in order to determine the true character of the relationship between the parties.
32. As regards this issue, Mr Gates provided the following evidence to the Tribunal:
    • he was paid by Vikal on an hourly rate and not a fixed price per job (i.e. he was paid based on the time he had worked and not on the results he had achieved);
    • the income he received from working at Vikal was paid into his own personal bank account as “salary Rowat Pty Ltd”. His bank account statements show that all entries indicating payment from Vikal were the same. That is, they refer to the income received from Vikal as a “salary”;
    • he received pay rises from Vikal on an arbitrary basis and at the same time as other employees. He has also received three Christmas bonuses (bonuses being given by Vikal to its workers based on the performance of the company in a particular year);
    • he did not receive any sick, annual/recreation or long-service leave from Vikal;
    • he declared in an “Income and Assets” form that he and his wife provided to Centerlink on 19 November 2009, that he received income from “work other than self-employment” and on that form recorded “Vikal” as his “Employer’s name”. He also entered “13” against the request for a personnel, service or clock card number. According to Mr Gates, he entered that information on that form in error since he was unaware that Centrelink differentiated in their treatment of employees and self-employed persons for age pension purposes;
    • he had been described by Vikal in an Employment Declaration provided by it to Centrelink on 23 November 2009 as a “part-time sub-contractor”; and
    • Mr Gates explained that each day he worked at Vikal he clocked on and off using his “number 13” card and that he would put in his card with his “claim invoice” to verify the number of hours of work that he was claiming payment for. He would invoice and be paid by Vikal weekly but would report those earnings to Centrelink generally on a fortnightly basis.
33. Based on the above evidence, the Tribunal takes the view that the manner in which Mr Gates is remunerated by Vikal for his work is more akin to that of an employee than it is to an independent contractor or a self-employed person.

WHETHER THE WORK CAN BE DELEGATED OR SUBCONTRACTED

34. The power to delegate or subcontract (in the sense of the capacity to engage others to do the work) is a significant factor in deciding whether a worker is an employee or independent contractor: Stevens v Bodribb [1986] HCA 1; (1986) 160 CLR 16 at 26 per Mason J. That is, if a person is contractually required to personally perform the work, this is an indication that the person is an employee. If an individual has unlimited power to delegate the work to others (with or without the approval or consent of the principal), this is a strong indication that the person is engaged as an independent contractor: Australian Mutual Provident Society v Chaplin and Anor (1978) 18 ALR 385 at 391. Indeed, the courts have held that a power of delegation is inconsistent with a contract of service even if the principal has the right to approve or qualify any replacement worker: Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 1 All ER 433, Bowerman v Sinclair Halvorsen Pty Ltd [1999] NSW IRComm21 and Express & Echo Publications Ltd v Tanton [1999] CLR ICR 693. As discussed above, under a contract for services, the emphasis is on the performance of the agreed services (achievement of a 'result'). Unless the contract expressly requires the service provider personally to perform the contracted services, the contractor is free to arrange for their employees to perform all or some of the work or may subcontract all or some of the work to another service provider. In these circumstances, the contractor is the party responsible for remunerating the replacement worker: McFarlane v Glasgow City Council [2000] UKEAT 1277_99_1705; [2001] IRLR 7.
35. A common law employee may frequently 'delegate' tasks to other employees, particularly where the employee is performing a supervisory or managerial role. However, this 'delegation' exercised by an employee is fundamentally different to the delegation exercised by a contractor outlined above. When an employee asks a colleague to take an additional shift or responsibility, the employee is not responsible for paying that replacement worker, rather the workers have merely organised a substitution or shared the work load. This is not delegation consistent with that exercised by a contractor.
36. Mr Gates informed the Tribunal that he rarely delegated his teaking and decking work to anyone else at Vikal other than to occasionally gain some assistance with cabinet or trimming work. He generally liked to control his work flow and only took on as much work as he was capable of doing himself.
37. The fact that Mr Gates occasionally gained some assistance with cabinet or trimming work does not, in the Tribunal’s opinion, amount to a true delegation of his work in teaking and decking boats at Vikal, in the sense of Mr Gates having the ability to subcontract or delegate his work to a person not already working at Vikal and to be responsible for the payment of that person. Since there is no contract in existence and given that there was no evidence given by Vikal, it is difficult to determine whether Mr Gates is entitled to delegate his work at Vikal or whether Vikal, in the sense of that word, requires him to perform his teaking and decking work personally.

COMMERCIAL RISK

38. The courts have held that where a worker bears little or no risk of the costs arising out of injury or defect in carrying out his or her work, he or she is more likely to be an “employee”: Hollis v Vabu. In contrast, an independent contractor generally bears the commercial risk and responsibility for any poor workmanship or injury sustained in the performance of his or her work and will often carry his or her own insurance and indemnity policy.
39. In relation to the issue of commercial risk, Mr Gates told the Tribunal:
    • he had no access to company profit; and
    • although none of his work had ever been defective to date, he did not bear any risk for work that was defective. That is, he was not required by Vikal to remedy any defective work at his own expense. Mr Gates did not have any insurance for public and product liability of his own and, instead, he was covered by Vikal’s workers’ insurance. He was paid worker’s compensation by Vikal for a work sustained injury in the period 28 February to 12 March 2008.
40. The above evidence clearly indicates that Mr Gates is an “employee” of Vikal.

PROVISION OF TOOLS AND EQUIPMENT AND PAYMENT OF BUSINESS EXPENSES

41. The courts have held that the provision of assets, equipment and tools by an individual and the incurring of expenses and other overheads is an indicator that the individual is an independent contractor: see Stevens v Brodribb and Vabu.
42. In Stevens v Brodribb, the High Court observed (at [1986] HCA 1; (1986) 160 CLR 16 at 36-37, per Wilson and Dawson JJ) that working on one's own account (as an independent contractor) often involves:

“...the provision by him of his own place of work or of his equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion...”

43. Likewise, in Queensland Stations the droving contractor was required to find and pay for all the men, plant, horses and rations necessary and sufficient for the task: see [1945] HCA 13; (1945) 70 CLR 539 at 548, per Rich J.
44. However, as highlighted in Hollis v Vabu, the provision of necessary tools and equipment is not necessarily inconsistent with an employment relationship. In that case, a majority of the High Court found that the provision and maintenance of tools and equipment and payment of business expenses should be significant for the individual to be considered an independent contractor. Their Honours, in referring to the NSW Court of Appeal taxation decision in Vabu v Federal Commissioner of Taxation, stated (at [2001] HCA 44; (2001) 207 CLR 21 at 47) that:

“In classifying the bicycle contractors as independent contractors, the Court of Appeal fell into error in making too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of running them and supplied many of their own accessories...A different conclusion might, for example, be appropriate where the investment in capital was more significant, and greater skill and training were required to operate it.”

45. The weight or emphasis given to this indicator (as with all the other indicators) depends on the particular circumstances and the context and nature of the contractual work. All the other facts must be considered to determine the nature of the contractual relationship: Stevens v Brodribb.
46. Mr Gates advised the Tribunal that he supplied some of his own tools (such as manual and power hand tools) but Vikal supplied the plant and equipment (including woodworking machinery, panel saws and sanding machines) as well as all of the materials associated with his teaking and decking work.
47. The provision of the bulk of the equipment and materials by Vikal is indicative of the existence of an employer/employee relationship between Vikal and Mr Gates.

OTHER INDICATORS – PAID LEAVE & CHRISTMAS BONUSES

48. In addition to the above, other indicators of the nature of the contractual relationship have been variously stated and have been added from time to time: Stevens v Brodribb [1986] HCA 1; 160 CLR 16 at 36 per Wilson and Dawson JJ.
49. Relevant for present purposes is that the provision of benefits to a worker such as annual or recreational leave and sick and long service leave has been found to be suggestive of an employer-employee relationship. The provision of other benefits, such as Christmas bonuses as well as benefits prescribed under an award, may also imply the existence of an employer/employee relationship. However, it has been held that the fact that a contract does not contain provisions for annual and sick leave will not, in itself, be conclusive of a principal/independent contractor relationship: Stevens v Brodribb and Roy Morgan.
50. Mr Gates told the Tribunal that he was not paid sick leave or annual or recreational leave by Vikal. Whilst this fact may infer a principal/independent contractor relationship it is insufficient, by itself, to warrant the conclusion that Mr Gates is “self-employed”. It is often the case that casual or part-time employees are not entitled to such benefits from their employer but does not change the fact that they are an “employee’ for a variety of other reasons.
51. Mr Gates also told the Tribunal that Christmas bonuses were given by Vikal most years, dependant on the company’s performance during the year and that for three years, he had received a Christmas bonus from Vikal. That fact points to Mr Gates being an “employee” of Vikal.

AUSTRALIAN BUSINESS NUMBERS & EMPLOYEES V INDEPENDENT CONTRACTORS

52. Section 8 of the Australian Business Number Act 1999 (Cth) (ABN Act) provides in part that an entity is entitled to an Australian Business Number (ABN) if they carry on an enterprise in Australia. Section 38 of the ABN Act provides, among other things (and subject to certain exceptions), that an enterprise includes activities done in the form of a business but does not include activities done by a person as an “employee”. However, the fact that an individual has an ABN does not prevent that individual from also being engaged as an “employee” in another role or position. That is, someone who carries on a business or trade in their own right other than as an “employee” might also, at certain times, perform work for another as an employee: refer to the decision of the Industrial Relations Commission in Application for Registration by an Association of Employees, ACT Visiting Medical Officers Association D2001/9 dated 7 May 2004.
53. There was evidence before the Tribunal that Vikal requested that Mr Gates obtain an ABN before commencing work at the company. Mr Gates did that and was subsequently able to claim various work-related expenses as tax deductions (including, the cost of travel, stationery, tools, trailer registration and clothing). Mr Gates did not previously require an ABN as he was retired. Despite having an ABN, however, Mr Gates was not paid on a GST-inclusive basis, never lodged any business activity statements with the ATO or remitted any GST to the ATO. Accordingly, the need for Mr Gates to have an ABN remains unclear and it is not, in the Tribunal’s view, proof that he was carrying on a business or self-employed.
54. Mr Gates also gave evidence that he had advised the ATO that he was self-employed but he did not pay tax. That is, he provided evidence of the income he earned from working at Vikal to his tax accountant but he did not have to pay any tax as his earnings each year had not been high enough. A conclusion that Mr Gates is self-employed cannot be reached merely from the fact that he made a declaration to the ATO that he was self-employed for income tax purposes.

CONCLUSION - EMPLOYEE OR SELF-EMPLOYED?

55. Mr Gates’ maintains that he has never been an “employee” of Vikal and that since commencing work at Vikal on 1 March 2006 he has been “self-employed”. In Mr Gates’ view, this is supported by the fact that Vikal lodged an Employment Declaration with Centrelink (on 23 November 2009) which described him as a “part-time subcontractor”.
56. If Mr Gates’ position is correct, he would be able to report his income from Vikal on a “net” basis (ie reduced by various work related expenses) and thereby receive an increased rate of age pension from Centrelink. If, on the other hand, Mr Gates is incorrect, he would be required to report the income from Vikal on a “gross” basis, such that he would not be able to offset any work related expenses against his earned income thereby entitling him to less age pension.
57. Mr Gates’ position is that soon after commencing work at Vikal he went to a Centrelink office in person and advised Centrelink that he was a sub-contractor. Centrelink’s computer records show that Mr Gates went into a Centrelink office on 10 March 2006 and made an enquiry regarding his earnings. However, those records do not specifically state that Mr Gates advised Centrelink that he was a sub-contractor. Centrelink’s records also reveal that Mr Gates made regular contact with Centrelink, advising it of his earnings, commencing 11 April 2006. However, again those records do not show that Mr Gates ever told Centrelink he was “self-employed”.
58. Mr Gates contended before the Tribunal that he was completely unaware until February 2010, when Centrelink reviewed its decision to cancel his age pension payments and the amount of his debt (which review resulted in a decision being made by Centrelink that Mr Gates was to be considered “self-employed effective 29 January 2010), that Centrelink differentiated in their pension calculations between self-employed persons and employees. According to Mr Gates, that is why he failed to declare that he was self-employed in his Centrelink “Income and Assets” form dated 19 November 2009.
59. The Secretary submitted that this supports the contention that Mr Gates did not discuss his self-employment with Centrelink in March 2006, after starting work at Vikal, as the differences would have been explained to him. Further, the Secretary claimed that Mr Gates was sent notices by Centrelink during the period 1 March 2006 to 19 November 2009 advising him of his rate of age pension and requiring him to notify Centrelink if he became self-employed, which should have indicated to him that income from self-employment is treated differently from income from salary or wages.
60. Either way, the relevant issue for determination is whether, based on the totality of the relationship between Vikal and Mr Gates, Mr Gates is an “employee” or an independent contractor (i.e. “self-employed”): Stevens v Brodribb and Hollis v Vabu applied.
61. Having considered the various indicators identified in the judicial decisions which have considered the employee/independent contractor distinction, and bearing in mind that no list of factors is to be regarded as exhaustive and that no single feature is determinative of a particular relationship, the Tribunal is of the view that in the case of Mr Gates the indicia points one way so as to clearly yield the result that he must be found to be an “employee” of Vikal: Abdalla v Viewdaze and Hollis v Vabu applied. That is having weighed all of the facts and circumstances of Mr Gates’ case, the Tribunal considers that, on balance, Mr Gates has been an “employee” of Vikal since commencing work with the company on 1 March 2006 and that he remains an “employee” of Vikal presently. Consequently, the income he earns from his work at Vikal should be reported to Centrelink on a “gross” basis, without any deductions, in accordance with section 1072 of the Act.
62. Since the Tribunal finds that Mr Gates has been an “employee” of Vikal since 1 March 2006 and remains so currently, it is unnecessary for it to consider from what date any arrears of age pension would be payable to Mr Gates by Centrelink.

RECALCULATION OF OVERPAYMENT OF AGE PENSION DEBT

63. As stated in the Introduction, on 1 September 2010 the SSAT affirmed the decision made by a Centrelink ARO that Mr Gates was overpaid age pension during the period 1 March 2006 to 22 April 2010, that the debt was to be recalculated to take into account the correct fortnightly rate of age pension paid to Mr Gates (as recorded in Mr Gates’ Centrelink records and the gross income from employment from 1 March 2006 as provided by Vikal) and that the recalculated overpayment was a debt that was to be recovered from Mr Gates. Centrelink has subsequently recalculated the overpayment amount and Mr Gates does not agree with it. He claims that the recalculation of the overpayment debt amount is “frought with errors” and argues that the amount should be a less. Consequently, he seeks a review of that decision by this Tribunal.
64. At the hearing, evidence was given concerning this issue by Mr Gates and Ms Conlan (for the Secretary). Expert evidence was also given, on behalf of the Secretary, by Mr Martindale, a control officer at Centrelink and expert on debt calculations (evidently, Mr Gates’ debt recalculation was done by Mr Martindale). There was some considerable discussion about how Mr Gates’ (and other people’s) earnings were entered into Centrelink’s computer system for the purpose of calculating an age pension rate and payment amount. Despite an explanation by Mr Martindale of how those calculations are made, Mr Gates expressed some difficulty in understanding them and did not agree with them.
65. However, following a short adjournment to enable the parties time to further ventilate the issue, Mr Gates conceded that when reporting his fortnightly earnings to Centrelink for that part of his debt which related to the period after 12 April 2007, he had advised of the “gross” amount of income he had received for the fortnightly dates indicated on his payslips and not for his pension fortnightly dates. He stated that he had not realised he was required to calculate his fortnightly employment income for the dates set out in the 12 weekly income statement letters sent to him from Centrelink. There were also occasions when Mr Gates said that he had added his Christmas bonus payment to his earned income in the fortnight it was paid to him, instead of declaring it separately to Centrelink.
66. Following the adjournment, Mr Gates also told the Tribunal that he agreed with the calculations of his age pension as presented to the Tribunal by Centrelink (i.e. in the “section 37” or ”T” documents). Mr Gates also acknowledged that he would have a debt to Centrelink in circumstances where:

(i) The Tribunal affirmed the SSAT decision that Mr Gates was an employee of Vikal;

(ii) The Tribunal set aside the SSAT decision that Mr Gates was an employee and substituted that decision with a decision that he was self-employed from 29 January 2010, the date from which Centrelink says he first advised of his changed employment status; or

(iii) The Tribunal set aside the SSAT decision that Mr Gates was an employee and substituted that decision with a decision that he was self-employed from 1 March 2006 and the recalculation of the debt resulted in an amount still to be repaid.

67. Having agreed that Mr Gates would have debt in the aforementioned circumstances, the question for determination then became whether there are “special circumstances” which would warrant the waiving of all or any part of the debt under section 1237AAD of the Act. Since the parties had not had sufficient time to prepare submissions on this issue, as it had not previously been raised, the Tribunal reserved its decision, subject to the receipt of submissions from the Secretary addressing this issue by 26 November 2020 and the receipt of submissions in reply from Mr Gates by 3 December 2010. This issue is dealt with below.

DO “SPECIAL CIRCUMSTANCES” EXIST WHICH WOULD JUSTIFY A WAIVER OF ALL OR PART OF MR GATES’ DEBT?

68. The Secretary has a discretion to waive the right to recover all or part of a debt if satisfied that: (i) the debt did not arise wholly or partly as a consequence of the person “knowingly” making a false statement or representation; or (ii) failing or omitting to comply with the Act and there are “special circumstances” (other than financial hardship alone) that make it desirable to do so and it is more appropriate to waive than write-off all or part of the debt: section 1237AAD of the Act.
69. The Tribunal considers that section 1236 of the Act, concerning writing-off debts, has no application in this case such that it would be more appropriate, if “special circumstances” are found to exist, to waive Mr Gates’ debt under section 1237AAD of the Act. Before turning to consider whether any “special circumstances” exist in this case, it is first necessary to consider whether Mr Gates “knowingly” made any false representations or statements to Centrelink or failed or omitted to comply with the Act.
70. ‘Knowingly’ is not defined in Act. However, it is defined the Oxford Dictionary as follows:

“In a knowing manner; consciously, intentionally”

and in the Cambridge Dictionary as follows:

‘If you do something knowingly, you do it with awareness, especially of its likely effect.’

71. Further, in Callaghan and Secretary, Department of Social Security [1996] AATA 413 (18 November 1996) Deputy President Forgie concluded (at paragraph 48) that:

‘....."knowingly" should be given no other meaning than that a person has actual knowledge rather than constructive knowledge , that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission.’ [Emphasis added]

72. Mr Gates advised the Tribunal that on occasion he may have been a day or two late in advising Centrelink of his new rate of employment income. He said there were also times he had to estimate the amount of his fortnightly earned income and that if he later found he had under or over-declared, he would adjust his earnings accordingly for the next fortnight. The Secretary provided submissions which stated that he is satisfied that Mr Gates did not intend to report his fortnightly earnings incorrectly and did not “knowingly” make false statements or representations to Centrelink and, therefore, it was appropriate to consider whether any “special circumstances” exist (other than financial hardship alone) which would justify a waiver of all or part of Mr Gates’ debt under section 1237AAD of the Act.

The expression “special circumstances” is not defined in the Act. However, the issue of what constitute “special circumstances” has been judicially considered on numerous occasions. In Re Ivovic and Director-General of Social Services (1981) 3 ALN 61 it was held that to constitute “special circumstances” the circumstances need to be so unusual or exceptional that the strict application of the law would be unjust, unreasonable, inappropriate or otherwise unjustified. Further, in the Full Federal Court decision Dranichnikov and Centrelink [2003] FCAFC 133 (19 June 2003), Hill J stated (at paragraph 66) that for “special circumstances” to be found: “....what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary.” The expression was more recently considered in Angelakos and Secretary, Department of Employment and Workplace Relations [2007] FCA 25 wherein Besanko J observed (at paragraph 33): “....the importance of maintaining flexibility in determining what constitutes special circumstances. ...It was not the intention of Parliament to confine the exercise of discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasized. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case.” Further, in Davy and Secretary, Department of Employment & Workplace Relations [2007] AATA 1114 where Deputy President Forgie commented (at paragraph 80): “...“special circumstances” are not merely directed to the person’s own circumstances. Rather, they are directed to those that are “special circumstances...that make it desirable to waive”. That necessarily requires a consideration of the person’s individual circumstances but also a consideration of the general administration of the social security system.” In Secretary, Department of Social Security  v  (Coralie) Hales [1998] FCA 219 (16 March 1998) French J commented (at 162) on the breadth of the discretion of section 1237AAD of the Act as follows: “The evident purpose of s 1237AAD is to enable a flexible response to the 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 construction 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 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.”

77. In Secretary, Department of Social Security v Riddell, 15 September 1993 No A93/62 the Tribunal held that the proper process to determine whether a debt should be waived is to examine all the matters relevant to the case, the wider scheme of the overall administration of the Act and the wider public interest of recovering moneys to which the person concerned was not entitled. In that particular case, the Tribunal found that respondent’s total situation went beyond financial matters alone and necessitated a consideration of her past, present and future living arrangements and other relevant matters. Having reviewed the totality of the respondent’s situation, the Tribunal remitted the matter to the Secretary with directions that the debt outstanding be recovered from the respondent. That approach accords with the Full Federal Court’s decision in Director-General of Social Services v Hales [1983] FCA 81; (1982-83) 47 ALR 281: see also Re Ward and Secretary to the Department of Social Security (1985) 7 ALN N66.
78. Mr Gates submitted that there are “special circumstances” in his case which warranted the waiver of his debt. In support of that submission, the following evidence was provided by him.
    • Mr Gates asserted that when he commenced work at Vikal on 1 March 2006, he should have been advised by Centrelink that employees and self-employed persons are treated differently for the purposes of calculating a person’s age pensions. He claimed that had he been made aware of that fact, he would have told Centrelink he was self-employed and reported his income accordingly from the outset.
    • Mr Gates stated that he has been under considerable strain since the debt was first raised. He said that he had suffered additional “stress and trauma” through Centrelink initially advising him that he owed debts totalling $8,137.82 which was later, following countless inquiries made by him with Centrelink, found to be only $2,249.92 (revealing a Centrelink error of nearly $6,000). According to Mr Gates, he had over the last nine months spent “MANY MANY HOURS examining a multitude of documents forwarded to [him and his wife] by Centrelink in order to untangle the many anomalies” and errors in Centrelink’s calculations of the debt raised against him.
    • Mr Gates noted that prior to this hearing he had already endured two Centrelink ARO reviews, two SSAT hearings and two Tribunal conferences and that that review process had also caused him and his wife significant stress.
    • Mr Gates advised the Tribunal that he has a leaking heart valve that requires a raft of daily medicine and that he has sever varicose veins which cannot be surgically treated because of his heart condition. He stated that he was forced to wear pressure stockings daily, to prevent the veins rupturing and bleeding which, if it happens, is difficult to stop since he takes blood thinning “Warfarin” medicine.
    • Despite those health conditions and his age (72 years), Mr Gates maintained that he had to work part-time to supplement his age pension payments since he still had a home mortgage of $66,000 (on which he made fortnightly repayments of $235). Mr Gates also advised the Tribunal that he has no monetary savings, although that he did have $4,800 in a funeral fund which has since been used to pay his and his wife’s credit card. He also noted that over the past few months he and his wife, through deductions from their pension and partner allowance payments, had repaid Centrelink a total of $1002 off the overpayment debt and that making those repayments had not been “without hardship”.
79. In contrast, the Secretary submitted that no “special circumstances” exist in Mr Gates’ case such that no part of his debt should be waived. According to the Secretary, the reason Mr Gates’ received more than his pension entitlement was that he advised Centrelink, albeit not dishonestly, that he received less employment income in some fortnights than he had actually been paid. Whilst acknowledging that Mr Gates and his wife have been stressed due to the raising of the debt and the review process, the Secretary contended that is not an uncommon or unusual circumstance for people who have incurred Centrelink debts. The Secretary also argued that there is no evidence to suggest that Mr Gates suffered from ill-health or that he was is in financial hardship or that his financial circumstances are significantly different to others in receipt of social security payments.
80. The Secretary directed the Tribunal to the following cases which have considered the issue of whether administrative errors by a government department can constitute a “special circumstance” for the purposes of waiving a debt under section 1237AAD of the Act - Reardon and Secretary, Department of Family and Community Services [2002] AATA 33; Daly and Secretary, Department of Family and Community Services [2005] AATA 740 (4 August 2005) and Coyne and Secretary to the Department of Family and Community Services [2002] AATA 1156.
81. The Secretary contended that Mr Gates’ matter differs from the abovementioned cases in that the departmental administrative errors in Mr Gates’ case occurred after the debt had been raised and, therefore, did not contribute to the debt being incurred. Whilst it is true that Mr Gates’ case differs from the above cases because, in his case, Centrelink’s administrative errors were made after the debt had been raised, what those cases demonstrate is that administrative errors by government departments have previously been considered by the Tribunal to represent a “special circumstance” for the purposes of section 1237AAD of the Act.
82. In Re Melhem and Minister for Immigration and Citizenship [2010] AATA 993, Senior Member Toohey also found guidance as to the meaning of “administrative error” for the purposes of section 22(4A) of the Citizenship Act 2007 (Cth) in Dranichnikov v Centrelink [2003] FCAFC 13. In Dranichnikov, the Court said (at paragraph 62) that it was not possible to formulate a meaning of “administrative error” that would cover every case that might arise, but said:

“Essentially, however, the concept is one where the error of mistake arises as a result of the procedure that has been adopted. An obvious example would be payment of a benefit where the decimal point was wrongfully located. An error was made by Centrelink or the Australian Taxation Office acting on its behalf in its administration of the law will generally be an administrative error. On the other hand, a decision made, in the course of administration of the law would not be an administrative error”.

83. The Tribunal is satisfied, based on the totality of Mr Gates situation, that sufficient “special circumstances” exist to justify a total waiver of his debt under section 1237AAD of the Act: Hales and Re Ward. Whilst it is may be true that Mr Gates overpayment initially arose as a consequence of how he reported his income from Vikal, that fact must be weighed against all of the other circumstances of his case. In particular, the Tribunal considers relevant the administrative errors on the part of Centrelink which resulted in calculating and seeking to recover from Mr Gates a debt which was almost $6,000 more than it should have been. This had a negative flow-on effect for Mr Gates. It caused him (and his wife) considerable stress and strain, not to mention a considerable amount of his time, to attempt to resolve Centrelink’s administrative errors and saw Mr Gates endure a drawn out review process. Added to this, are his poor health, as described above, and his limited financial means: see Re Kulakov and Secretary, Department of Social Security (1991) 63 SSR 879. Those facts, when considered as a whole, take Mr Gates’ case out of the ordinary and are sufficient to categorise his case as unusual or uncommon: Dranichnikov and Angelakos. In reaching its conclusion, the Tribunal is mindful of the intention of Parliament and the general administration of the social security system. However, the Tribunal considers that in the circumstances of this particular case a failure to exercise the discretion in section 1237AAD of the Act would produce an unjust or unreasonable result.

I certify that the 83 preceding paragraphs are a true copy of the reasons for the decision herein of C WALSH, SENIOR MEMBER

Signed:.(sgd) T Freeman............................

Associate

Date/s of Hearing 5 November 2010

Date of Decision 21 January 2011

Representative for the Applicant Mr L Gates (Self-represented)

Solicitor for the Respondent Ms M Conlon