George; Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and [2011] AATA 91 (14 February 2011)

Last Updated: 16 February 2011

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 91

ADMINISTRATIVE APPEALS TRIBUNAL )

) No 2008/4998 & 5000

GENERAL ADMINISTRATIVE DIVISION		)
	Re		SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Applicant

And

FERENC GEORGE ROZALIA GEORGE

Respondents

DECISION

Tribunal

The Hon. B Tamberlin, QC, Deputy President Mr D Letcher, QC, Senior Member

Date 14 February 2011

Place Sydney

Decision

The decision under review is affirmed.

................[sgd]..............................
The Hon. B Tamberlin, QC
Presiding Member

CATCHWORDS

SOCIAL SECURITY – pensions – age pension – whether overpayment of pension – means test – casino records of gambling losses used by Centrelink to infer income level – inference that can be drawn from circumstantial evidence – decision under review affirmed

Social Security Act 1991 ss 8, 1072, 1223

L’Estrange v Federal Commissioner of Taxation (1978) 78 ATC 4744

Martin v Osborne [1936] HCA 23; (1936) 55 CLR 367

McDonald v Director-General of Social Security [1984] FCA 57; (1984) 6 ALD 6

Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; (1981) 4 ALD 139

Szajntop v Federal Commissioner of Taxation [1993] FCA 231; (1993) 93 ATC 4307

Vu v Federal Commissioner of Taxation [2006] FCA 889

REASONS FOR DECISION

14 February 2011

The Hon. B Tamberlin, QC, Deputy President and Mr D Letcher, QC, Senior Member

1. On 15 September 2008 the Social Security Appeals Tribunal (SSAT) decided that Mr and Mrs George did not owe any debts to the Commonwealth pursuant to the Social Security Act 1991 (the Act).
2. The Secretary now seeks a review of that decision on the ground that the SSAT erred in finding that no debts exist, and that gambling losses allegedly incurred by the Respondents cannot be treated as income.
3. The Secretary claims that social security payments by way of age pension were made to Mr and Mrs George to which they were not entitled, and that such overpayments are recoverable as a debt due to the Commonwealth under s 1223 of the Act.
4. The relevant period over which the overpayments were made is said by the Secretary to be between 1 January 2002 and 14 May 2007.
5. On 18 May 2007 Mr and Mrs George were advised that their age pensions would be suspended, because of information received from the Gaming Authority concerning gambling activity undertaken by Mr George at Star City Casino during the relevant period. As a consequence of receiving this information, further details were sought from Mr and Mrs George in relation to their income and assets. Some information was provided.
6. On 29 June 2007 Mr and Mrs George were notified that they were each indebted to Centrelink in the sum of $32,669.89. They thereupon sought a review by an Authorised Review Officer (ARO) of the decisions to raise and recover the debts, and on 29 February 2008 the ARO affirmed the Centrelink decisions to raise and recover the debts from them. They then applied to the SSAT to reverse the decisions of the ARO which it did.
7. The age pension is a means-tested social security payment, and in determining the amount of payment the person’s income and assets are taken into account. In this case, the Secretary contends that Mr and Mrs George had received undisclosed income which meant that because of the amount of such income they were not qualified to receive a major part of the age pension during the relevant period.
8. The expression “income” is defined in s 8 of the Act to mean an “income amount earned, derived or received by the person for the person’s own use or benefit” or a periodic gift or allowance.
9. The expression “income amount” is defined to mean valuable consideration, personal earnings, moneys or profits. The concept of “ordinary income” is income that is not maintenance income or an exempt lump sum: see s 1072 of the Act. The income can be of a capital nature or otherwise. An income amount is earned, derived or received regardless of the means by which it is obtained or the source from which it is obtained.
10. By s 1223 of the Act where a social security payment is made and the recipient was not entitled to obtain that benefit, the amount of the payment is a debt due to the Commonwealth and may be recovered. This applies to the age pension.

OVERVIEW

11. The case of the Secretary is that during the relevant period Mr George regularly gambled at Star City Casino, and purchased gambling chips at the casino totalling in the order of $499,000. On the information given, the conclusion was drawn that Mr George had incurred gambling losses in the order of $223,250. From the extent of these alleged gambling losses the Secretary’s position is that it should be inferred from the evidence, which is of a circumstantial nature, that his income was such as to establish that he and his wife were not entitled to a major part of the age pension.
12. Mr George admits that he and his wife regularly attended the casino during the relevant period and that he did gamble. He says, however, by using a particular way of operating, that he did not in fact incur any gambling losses or at least any losses which would provide evidence disentitling him from age pension benefits as a result of income received.
13. Mr George says that the Secretary’s case depends on inferences sought to be drawn from the recording of alleged losses, said to have been suffered by Mr George during the relevant period, by operators of the casino. The Secretary’s case is based on expert evidence called on behalf of the Commonwealth and on inferences said to be available from the data assembled by the casino.

ISSUES

14. The main factual issue concerns the use which can be made of records of the Star City Casino kept during the relevant period in the form of a “Patron Profile Report” in respect of Mr George’s activities at the casino during 2001 to 2007. The Secretary relies on the information referred to in that report and on the analysis of the data by Mr Steven Kouparitsas of Axiom Associates and by Mr Temple-Cole of KordaMentha, who were called as expert witnesses by the Secretary.
15. It was conceded that as a result of further information provided to the Secretary, that if the Secretary is successful on this application it will be necessary to recalculate the debt in respect of the period 1 January 2002 to mid 2003. That is to say for part of the relevant period.
16. This factual issue turns on the accuracy and extent of reliance which can reasonably be placed on the Patron Profile Report in respect of Mr George.
17. Mr George says that his activities at the casino did not involve gambling losses as asserted by the Secretary, and he says that no gambling losses have been shown on the evidence before the Tribunal, to substantiate the proposition that the Secretary is entitled to recover any debt under the Act. He also considers that there is no evidence that confirms the existence of any substantial losses, and that the evidence relied on by the Secretary does no more than raise a suspicion at best or basis for speculation, and that is not sufficient to make a finding in favour of the Secretary.

FACTUAL BACKGROUND

18. Mr and Mrs George are elderly Hungarian migrants in their seventies who migrated to Australia in the early 1970s. They worked for most of their lives as labourers and in factories. During the relevant period they say that they had limited assets in the form of a house, a car, some furniture and cash at the bank varying between $20,000 and $30,000. They have no substantive income other than the pension and their average jointly monthly expenditure is approximately $2,000 to $3,000 for the period 2001 until 2008. They do not manifest any outward signs of wealth. The Secretary has not adduced any express, specific or detailed evidence to contradict the assertions of their financial position, apart from the reliance on the records of Star City Casino. There is no evidence, for example, to contradict the evidence of Mr and Mrs George that at all material times they have lived frugally. They pointed out that for the past decade or so Mrs George has looked after her elderly mother-in-law and has not made any claim for a Carer’s Allowance, and Mr George has not made any claim for worker’s compensation. He ceased work due to a back injury.
19. Mr George gave evidence in the form of an affidavit which outlines his activities at the casino, and he gave further oral evidence in chief and under cross-examination.
20. His evidence was that during the relevant period after he ceased work in early 2002 and until 2007 he would regularly attend the casino largely for social reasons. Mr George was given “privileges” at the casino in the form of gold and platinum card memberships, which allowed him to obtain access to the casino’s “Endeavour Room”, where he and his guests received benefits such as complimentary food, alcohol and entry into lottery prize draws. Also, Mrs George held a “partner card” which was linked to the membership of Mr George. She did not gamble other than very occasionally on poker machines and attended socially with her husband and from time to time with guests and friends.
21. Mr and Mrs George took advantage of the benefits of membership and greatly valued them as part of their lifestyle. The casino’s own records list many pages of names of the George’s friends who they entertained at the casino, making use of the privileges scheme.
22. In order to qualify and remain eligible for membership with its attendant benefits, Mr George gave evidence that he manipulated his operations at the casino in a number of ways, so that he was able to obtain the privileges and benefits without risking the loss of any money. He says that he was able throughout the entire period effectively to mislead the casino’s operators.
23. He said that he would gamble and lose only very small amounts and would purchase only cash chips which are cashed in at the cashier’s cage rather than coloured chips, which could only be cashed at the table at which the chips were purchased. He said he would bet evenly on both red and black colours which would mean he would not generally incur a loss but would break even, unless the roulette ball landed on the number zero. He said he would recycle casino chips by purchasing them and subsequently cashing them at the cashier’s cage at some distance from the place where the chips were bought, and in addition he would attend different tables throughout an evening, putting at least a portion of the purchased chips in his pocket well away from the eyesight of the dealer. He said he would also purchase chips for friends and attended tables that were generally busy and sometimes where there were up to 10 players at a table. Mr George gave evidence, by way of example, that when he was at a roulette table, he would obtain $200 worth of cash chips, place them in his pocket and wait for in the order of 30 to 40 minutes and cash them at the cashier. Sometimes he placed the chips in his pocket and sometimes they remained in front of him.
24. The Secretary relies on the Patron Profile Report generated from the casino’s records. It does not disclose any assets or income of Mr George but is alleged to record his gambling activities, and is sought to be used to show that he had large gambling losses.
25. The data within the report is collected by a computer program operated by the casino known as the PitTrak System. Dealers who are operating tables have access to a terminal which operates the system, and the dealers key-in information concerning a person’s gambling activities from the terminals. A player’s activity that is recorded is known as Rating. To activate a Rating, the patron must present the dealer with his or her membership card which is then swiped by the dealer and the Rating thereafter commences. The purpose of the Rating is to assess the amount of losses incurred by a gambler. These are taken into account when awarding membership incentives and privileges designed to encourage persons incurring substantial losses to frequent the casino and engage in more gambling activities.
26. The records contained in the report record the date on which a patron is rated, and this is generated automatically when the patron’s card is swiped. There is an entry in respect of time which records the time at which the rating commenced and a field in respect of buyings, which represents the value of chips purchased by the patron at the table. This is dependent on the dealer’s observation. In addition, there is a recording of hours which represent the hours played and this is also dependent on the casino staff’s observation as to when a patron left the particular table. Finally, there is a record of the win and this refers to the wins for the casino and the losses for the patron. If it is positive, it means the patron has lost the figures or a certain amount at the casino. If it is negative, it means the patron has won the amount from the casino. Again, this record is largely dependent on the casino staff’s observations.
27. The data recorded is not a financial recording of actual revenue at the casino. It is designed as a rough estimate to the casino of what level of complimentary items and incentives should be made available to a particular member/patron. It is a system designed and used to establish player entitlements and is not meant to be a precise detailed representation or record of the casino’s revenue for statutory purposes.
28. In a letter of 26 October 2007 Mr Stevens, the casino’s “Regulatory Affairs Manager” wrote:

“As we have indicated previously in regards to the ratings of Table Games play there is a significant human involvement in the recording process. The Table Games supervisors are often responsible for more than one table and often more than one player at each table. Their observations form the basis for the play information that is recorded on the ‘rating card’”.

29. Mr Stevens also said that the casino could not guarantee that the ratings are 100 per cent accurate but that it was satisfied as to the “reasonableness” of the information. The reasons why the ratings method used by the casino is not completely precise, include the fact that the staff member may have to rate several players at once, and that the game supervisor has other responsibilities in addition to rating patrons. In addition, patrons may vary bets and ratings are only designed to show the average bet, and the patron does not always identify himself or herself at the gaming tables. These considerations would assume greater difficulty in observation as activity at the tables became more intensive.
30. The casino reports generated from PitTrak are not retained by the casino for the purpose of regulatory reporting requirements and accordingly basic underlying records are not available.
31. The casino Patron Profile Report is said by the Secretary to be sufficiently reliable for the Tribunal to be comfortably satisfied that it contains reliable information about the conclusions reached by dealers who were present while Mr George was gambling, and the records provide sufficient evidence of gambling losses and make good its case as a matter of reasonable inference as to the level of income of Mr George. The Secretary submits that the evidence of Mr George as to his successful manipulation of the casino operations in order to get and maintain his entitlement to benefits should not be accepted.

LEGAL PRINCIPLES

32. This case calls for an application of evidentiary principles relating to circumstantial evidence and the inferences which can be drawn from it in the circumstances. The Secretary does not submit that the Respondents have received income equal or equivalent to the amount of the gambling losses indicated in the Patron Profile Report. The submission is rather that the existence of substantial gambling losses is a strong indication in the form of circumstantial evidence that the Respondents must have had access to and received undeclared income of a sufficiently large order to make them ineligible for entitlement to the age pension. This raises the question whether the Patron Profile Report provides relevant or sufficiently cogent evidence to warrant the drawing of an inference of disentitlement due to excess income.
33. In support of the Applicant’s case, the Secretary has referred to observations made in several income tax cases concerning the inferences to be drawn from evidence as a result of asset betterment investigations: see L’Estrange v Federal Commissioner of Taxation (1978) 78 ATC 4744 at 4764-6; Szajntop v Federal Commissioner of Taxation [1993] FCA 231; (1993) 93 ATC 4307 at 4313; Vu v Federal Commissioner of Taxation [2006] FCA 889 at [26]. However, those taxation cases are distinguishable on their facts and relevant circumstances and are of little assistance in this case. Also, they are made in the context of income tax legislation which impose onus of proof provisions not applicable under the Act.
34. In Martin v Osborne [1936] HCA 23; (1935) 55 CLR 367 at 375, Dixon J said:

“If an issue is to be proved by circumstantial evidence, facts subsidiary to or connected with the main fact must be established from which the conclusion follows as a rational inference. ... [T]he class of acts and occurrences that may be considered includes circumstances whose relation to the fact in issue consists in the probability or increased probability, judged rationally upon common experience, that they would not be found unless the fact to be proved also existed.” (Emphasis added).

The above remarks are apposite in the present case.

35. The relevant principles for present purposes were adverted to by Deane J in Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; (1980) 4 ALD 139 at 155-156 as follows:

“In my view, the Tribunal was bound, as a matter of law, to act on the basis that any conduct alleged against Pochi which was relied on as a basis for sustaining the deportation order should be established, on the balance of probability, to its satisfaction by some rationally probative evidence and not merely raised before it as a matter of suspicion or speculation or left, on the material before it, in the situation where the Tribunal considered that, while the conduct may have occurred, it was unable to conclude that it was more likely than not it had.” (Emphasis added).

36. The fact that a witness is disbelieved does not, of course, mean that the position advocated by the other party must be taken to have been established or that the case for the other side is therefore made out. Careful regard must be paid to the totality of the evidence and material before the Tribunal before determining the question as to what finding should properly be made or what inference should be reasonably drawn in the circumstances of the particular case. The case for a party is not made out by a party if the decision-maker is left in a substantial state of doubt as to whether a matter or conclusion has been proven or where a finding advanced is a matter of speculation or guesswork: see McDonald v Director-General of Social Security [1984] FCA 57; (1984) 6 ALD 6 at 11 where Woodward J said in relation to the insufficiency of evidence:

“If the AAT finds itself in a state of uncertainty after considering all the available material, unable to decide a question of fact either way on the balance of probabilities, it will be necessary for it to analyse carefully the decision it is reviewing. If, for example, it is a decision whether or not to cancel a pension in the light of changed circumstances, then it has failed to achieve the statutory requirement of reaching a state of mind that the pension should be cancelled. If, on the other hand, it is a decision, to be made in the light of fresh evidence, whether or not the pension should ever have been granted in the first place, then it has failed to be satisfied that the person ever was permanently incapacitated for work.” (Emphasis added).

37. In the present case, the Tribunal must consider whether the Patron Profile Report in respect of Mr George provides any or sufficient circumstantial evidence of undisclosed income such as to disqualify them from entitlement to the benefit of the age pension during the relevant period. This requires consideration of the relevance, reliability and accuracy of the data recorded in the report, bearing in mind the limited purpose for which it was brought into existence.

REASONING

38. We do not accept the evidence and submission by Mr George that he was able to successfully manipulate his gaming activities in such a way that he gambled over a six year period in such a way as to convince dealers that he was gambling and losing money when he was not. We consider that the evidence adduced on behalf of the casino demonstrates that at all relevant times there was in place an intensive scrutiny and surveillance of gaming activities which would detect and expose the types of activities which Mr George says he was engaged in. We accept the evidence of Mr Stevens that dealers were trained to look out for the types of deceptive and unusual pattern of activities asserted by Mr George. In particular, we do not accept the evidence of Mr George as to placing of bets on different colours in such a way as to avoid a loss or that this could escape detection if implemented regularly over a long period of time. Furthermore, we do not accept that Mr George would have been able to conceal from detection the concealment of his chips so that dealers would be misled into the belief that they had been lost in gambling activities.
39. The substance of the case for Mr George is that he engaged in his system in order to qualify for greater benefits from the casino than he would otherwise receive. He believed that he would get more benefits if he bought more chips. This understanding was quite mistaken, because the casino was really concerned to form an estimation as to how much he lost at gambling and this is the reason why the records were kept. The casino was not concerned primarily with how many chips he purchased or in any way with his income or assets. His reasoning as to entitlements discloses that he misunderstood the basis on which the privileges were given.
40. We do not accept Mr George’s denial of any gambling activity at all or that he was able to escape the risk of loss. Nor do we accept the explanation for the Patron Profile Report concerning his different coloured betting and his concealment of chips. Although he said that he attended with friends at the casino he did not call any of his friends. We do not accept that although his friends were present, he usually sat alone at the gambling tables. This “explanation” is not sufficient to explain why none of those “friends” were called to corroborate his account as to how he engaged in activities at the casino.
41. Having regard to the whole of the evidence and in particular to that of statements as to the extensive surveillance activities, and with the benefit of a view of the gaming room at the casino and the facilities provided to better understand the evidence, we do not accept the explanations given by Mr George as to his activities at the casino. In particular we do not accept the evidence that he did not suffer any significant gambling losses. On this aspect of the matter, we prefer the evidence of Mr Stevens, and we conclude that if the activities alleged to have been engaged in by Mr George were in fact carried out invariably or consistently they would have been readily detected by the surveillance systems in force at the casino.
42. The next matter which arises is what use can be made of the Patron Profile Report by the Secretary in the circumstances of this case.
43. We have reached the conclusion that, on the evidence before us, we cannot conclude on the balance of probabilities that inference should be drawn that any particular amount of gambling losses or order of losses was incurred by Mr George over the relevant period. We do not accept that the casino’s Patron Profile Report on Mr George can reasonably be used as the basis for any circumstances or probative inference as to the likely income or assets of Mr and Mrs George during the relevant period.
44. There is no direct evidence of Mr George spending money at the casino or losing money. There is no television footage, as it is deleted after a short period of time. No cash receipts or statutory financial records or documents have been provided by the Secretary.
45. The Patron Profile Report was created for an entirely different internal casino purpose and its data is heavily dependent on direct observations, opinions and conclusions by dealers. In the circumstances we consider there is a real probability of serious substantial inaccuracy arising from distraction of staff members and supervisors’ inability to make precise accurate observations. The purpose of the report is directed to providing a guide as to provision of incentives to patrons to encourage gambling. There is no systematic verification on a daily basis as to data entered into the PitTrak system or the accuracy of the records in relation to table game records or their estimation. Mr Stevens agreed that there are basic important weaknesses in the system in relation to inaccuracies of data entering into the PitTrak system. His estimate, based on no experiment or documented comparison, was that PitTrak was accurate to about 10 percent for each table of roulette players provided there were no strategies used by the players, such as Mr George had given evidence about. That is, the variation for individual players could be much greater and in fact was a matter of speculation rather than calculation.
46. In addition, we note that in order to compensate for the obvious inadequacies associated with the report and data entry, allowances have been made by the witnesses for the Secretary for margins of error between 10 and 40 per cent. These are unverified and are not based on any actual surveying or by the collection of data in any way. They are said to be derived from “personal experience”. The fact is that the Secretary has not adduced evidence on which to base the assertion that any particular margin of error can be applied so as to substantiate the proposition that Mr or Mrs George expended substantial amounts and inferentially, during the relevant period, had assets and income which would disqualify them from entitlement to receipt of the age pension.
47. Evidence of the two experts Mr Kouparitsas and Mr Temple-Cole was provided by the Secretary. This material, however, does not advance the Secretary’s case because the data underlying the reports has not been established to be accurate, and therefore the expert opinions are of little utility. Mr Kouparitsas has never seen the operation of the PitTrak system and has never spoken to the casino’s staff in relation to it and he has assumed that the data contained in the Patron Profile Report was reliable, and also that it was used by the casino for legislative requirements. He did not consider directly how the data was collected. He was not able to verify the data in any way for the basis of his calculations. As far as a margin of error was concerned, he simply applied the guess work as to margins varying from 10 per cent through 40 per cent as instructed. No basis has been laid or established as to the soundness or appropriateness of the figures for present purposes. Accordingly, his evidence is of no assistance.
48. Mr Temple-Cole simply made calculations and applied percentage margins, and expressed no view about the accuracy or reliability of the data. This evidence was of no assistance to the Tribunal.
49. In our view it has not been established on the balance of probability by any rationally probative evidence, as opposed to suspicion or speculation, that Mr and Mrs George were not entitled to receipt of the age pension during the relevant period or that any debt is due by either of them to the Commonwealth.

DECISION

50. The decision of the Tribunal is that the decision under review, being the decision of the Social Security Appeals Tribunal of 15 September 2008, is affirmed.
    

I certify that the 50 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon. B Tamberlin, QC, Deputy President and Mr D Letcher, QC, Senior Member.

Signed: .........[sgd]............................................................................

Associate

Dates of Hearing 30, 31 March and 25 June 2010

Date of Decision 14 February 2011

Counsel for the Applicant Mr J Hmelnitsky

Solicitor for the Applicant Ms L Buchanan, Australian Government Solicitor

Counsel for the Respondent Mr J Hynes

Solicitor for the Respondent Ms Z Cheng, Henry Davis York