Editors --- "Austudy debt: special circumstances waive" [2005] SocSecRpr 12; (2005) 7 Social Security Reporter, Article 12

• STRANG and SECRETARY TO THE DFaCS
• Background
• The issue
• Evidence and submissions
• Formal decision

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Austudy debt: special circumstances waive

STRANG and SECRETARY TO THE DFaCS

(2005/193)

Austudy debt: special circumstances waiver

STRANG and SECRETARY TO THE DFaCS

(No. 2005/193)

Decided: 2 March 2005

by E.K. Christie.

Background

Strang was paid Austudy during the period 19 July 1999 to 30 June 2001.

During that period she was a member of a couple with Burford. Burford claimed and was paid parenting payment.

Burford had made a loan to HBurford Pty Limited the balance of which was $166,091 as at 19 July 1999 and$152,931 as at 30 June 2001. The loan was not disclosed to Centrelink on forms completed by Strang and Burford on 1 March 1999 and 22 June 1999. Hence Strangways paid Austudy without taking into account the effect of these loans on her rate of payment, and a debt was subsequently raised of $15,299.67 for the period 19 July 1999 to 30 June 2001.

The issue

The issue in this case was whether the debt could be waived under s.1237AAD of the Social Security Act(the Act) which provides:

The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:

(a) the debt did not result wholly or partly from the debtor or another person knowingly:

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

(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and

(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

(c) it is more appropriate to waive than to write off the debt or part of the debt.

Evidence and submissions

Strang stated that she had no knowledge of her partner’s personal company, no awareness of loans involving himself and his personal company and no awareness of his financial situation. She argued that she could not disclose to Centrelink anything about the loans between her partner and his personal company as she did not know the loans existed. She contended that she had completed her sections of the application forms appropriately, fully disclosing all her financial information as required. She then passed the forms over to Mr Burford to complete the areas relevant to him.

The Department argued that the debt in this case could not be waived under s.1237AAD of the Act, on the basis of “special circumstances” because Burford had “knowingly” made a false statement. Burford knew that he was the major shareholder of his company. His answer to the question on his claim form that he did not own shares in a private company was therefore false and with his actual knowledge. On a later form returned to Centrelink, Question 18 asked “Does the company owe money to any associates?”. Question 18 clarified “Money owed to by the company includes salaries and wages owed, loans made to the company, and dividends allocated to a shareholder that have not yet been paid to the shareholder”. Burford answered “No”, which it was submitted was clearly a false statement which he knew to be incorrect.

It was also argued that there were no circumstances which could be described as “special” in this case.

Burford’s evidence was that he did not, in any way, knowingly make a false statement or answer statements on his claim form that were intended to mislead or to defraud Centrelink. At the time he had completed his own claim form for parenting payment in August1999 his company “Island Surf and Sail “had ceased [in 1998]. He had then set up a new company, H Burford Pty Ltd in1999. However, this company was not operating at this time i.e. the company was not active and operational. He had responded to the relevant question on the claim form believing the wording of the question about “operating” a business referred to a business which was actively operating, which his company H Burford Pty Ltd was not. In relation to the question whether any loans made to the company were yet to be repaid, Burford had answered “No” because he had taken out personal bank loans and then lent the funds to Island Surf and Sail. Those loans had been repaid to the bank.

Knowingly

The AAT applied the test in Re Callaghan and Secretary, Department of Social Security (1996-7) 25 ALD 435,that actual knowledge was required for the purposes of s.1237AAD. The Tribunal concluded that Burford could only be said to have “constructive knowledge” of his false statements, and this was not enough.

Special circumstances

In its consideration of special circumstances the AAT considered and followed Re Marshall and Cairns and Secretary to the DFaCS [2003] AATA 352 and found special circumstances existed on the basis of:

(a) Strang’s lack of control and knowledge on the status of Burford’s involvement in his personal company as he failed to disclose any of his financial information to her;

(b) Strang’s complete reliance on Burford to provide Centrelink with the correct financial information as to his personal company business;

(c) no indication given by Burford that there may have been problems with the amount of Austudy entitlement Strang received based on his involvement in his personal company;

(d) that Strang had trusted Burford to perform the role of correctly informing Centrelink of his financial situation;

(e) that Strang was not a “nominated “person for Centrelink purposes; and

(f) in these circumstances, Strang did not have a basis to raise a query with Centrelink whether she had been paid the correct social security entitlements.

Formal decision

The AAT set aside the decision under review and in substitution therefore decided to waive the Austudy debt in the sum of $15,299.67 for the period 19 July 1999 to 30 June 2001.

[A.T.]