Editors --- "Overpayment of parenting payment: special circumstances waiver; relevance of exempt assets when considering capacity to repay" [2007] SocSecRpr 13; (2007) 9(1) Social Security Reporter, Article 13

• ANGELAKOS v SECRETARY TO THE DEWR
• Background
• The legislation
• The decision of the AAT
• The issues before the Federal Court
• Discussion
• Formal decision

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Overpayment of parenting payment: special circumstances waiver; relevance of exempt assets when considering capacity to repay

ANGELAKOS v SECRETARY TO THE DEWR

Decided: 29th January 2007 by Besanko J.

Background

Angelakos claimed parenting payment in March 2002. On his claim form he ticked ‘yes’ to the question of whether he owned real estate other than the home in which he lived. He failed to notice the note to the question which indicated that he would need to complete a real estate form and directing him to request such a form from Centrelink.

Centrelink erroneously processed the claim without a completed real estate form. Centrelink sent Angelakos a letter dated 4 April 2002 which, among other things, asked him to notify Centrelink if his assets were greater than $39,469.

At the time of hearing, Angelakos was the registered proprietor of a property in Torrensville (‘the Torrensville property’). He lived there with elderly parents, his wheelchair bound partner and 15 year old son, all of whom he cared for and gave financial support.

The Torrensville property had been purchased for around $24,000. Angelakos’ father had contributed $8000 to the purchase price and the remainder was secured by a mortgage and the instalments paid by Angelakos.

Angelakos also owned a property at Flinders Park (‘the Flinders Park property’).

On 9 November 2004 Centrelink raised a parenting payment debt of $30,385.82 on the grounds that Angelakos’ assets exceeded the allowable limit and he had not been entitled to the payment from 4 April 2002 to 3 November 2004.

The legislation

Both the AAT and Federal Court considered section 1237AAD of the Social Security Act 1991(the Act) which states, among other things, that the Secretary may waive the righto recover all or part of a debt if the Secretary is satisfied that there are special circumstances (other than financial hardship alone) that make it desirable to waive the debt.

The decision of the AAT

The AAT held that the debt could not be waived on the grounds of sole administrative error because Angelakos had erred both in failing to ask for and complete the real estate form and in failing to thoroughly read the letter of 4 April 2002.It was accepted that his errors were innocently made.

Angelakos had submitted that the debt should be waived under section 1237AAD on the grounds of special circumstances because:

• Centrelink error was the main contributing factor for the existence of the debt;

• Raising the debt had caused him to suffer a breakdown and ongoing vulnerability;

• He had little or no opportunity for employment due to his significant caring responsibilities;

• He would find it difficult to repay the debt due to his financial commitments to support his family;

• It would be unreasonable to expect him to sell either the Torrensville property because his parents lived there and considered it their home, or the Flinders Park property because he and his partner intended to live there in the future.

The AAT had regard to these circumstances but observed that Angelakos had ‘significant assets (if his preserved superannuation benefits and his two properties are taken into account)’. (Reasons, para. 23)

Angelakos submitted that his preserved superannuation and principal home (the Torrensville property) should be excluded when considering his assets as they were exempt from the assets test under section 1118(1) and 1118B(1) of the Act.

The AAT held that these sections were of ‘no relevance’ in this case because:

‘These provisions deal with the calculation of a person’s assets for social security benefits purposes, rather than in determining a person’s capacity to repay a debt arising from an overpayment of benefits’. (Reasons, para. 23)

The AAT found that the properties were unencumbered and Angelakos received some financial assistance from his parents and partner. It found that he was not ‘impecunious and in straitened circumstances’. The AAT held that there was nothing ‘unusual, uncommon or exceptional’ about the case to justify waiver. (Reasons, para. 23)

The issues before the Federal Court

The issues before the Court were:

• whether the AAT had misconstrued the term ‘special circumstances’ in s.1237AAD and failed to apply the correct legal test;

• whether the AAT had taken into account an irrelevant matter, being the applicant’s entitlement to certain assets; and

• whether the AAT had failed to take into account a relevant matter, namely that the applicant had changed his position by spending the overpayment caused primarily by the respondent’s error.

Discussion

Angelakos’ first submission was that the AAT had applied too stringent a test for what constituted ‘special circumstances’ by requiring that the circumstances be ‘unusual, uncommon or exceptional’. He contended that this test, laid down in Beadle Director-General of Social Security (1984) 6 ALD 1 was not approved on appeal by the Full Court in Beadle v Director General of Social Security[1984] AATA 176; (1985) 60 ALR 225. He further submitted that this test was inconsistent with Dranichnikovv Centrelink ([2003] FCAFC 133; 2003) 53 ATR 270 and Ryde v Secretary, Department of Family and Community Services ( 2005) FCA 866. (Reasons, para. 26)

The Court considered the abovementioned decisions. In Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 it had been held that s.1237AAD(b) did not mandate the inclusion of financial hardship for a finding of special circumstances and further, that the concept of special circumstances is broad and requires a flexible approach. In both Dranichnikov and Ryde it was observed that the test ‘unusual, uncommon orexceptional’ had not been affirmed by the Full Court. Both Dranichnikov and Ryde approved of the test in Jess v Scott (1986) 12 FCR 187 which required that the circumstances be such that they ‘take the case out of the ordinary’. After considering the cases, the Court made the following observations about the special circumstances generally and more specifically about the test ‘unusual, uncommon or exceptional’, which in Ryde had been found to be overstated:

I note her Honour’s reference to the Tribunal in the case before her probably overstating the test. I also note that the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context. (Reasons, para.33)

The Court rejected Angelakos’ first submission. It held that, when the AAT’s reasons were read as a whole, the AAT had not applied too demanding a test. In addition to its consideration of the phrase ‘unusual uncommon or exceptional’ the AAT had also referred to Groth v Secretary, Department of Social Security which held that special circumstances ‘would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case.....’ Furthermore, the AAT had regard to Riddell secretary, Department of Social Security which held:

‘Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.’ (Reasons, para. 35)

The Court held that there was ‘nothing to suggest that [the AAT member] did not think it appropriate to apply those remarks to the task he was required to undertake’. Further, that ‘this was not a case where the facts suggested that a precise formulation of the test was necessary or likely to be decisive. It seems to me to be implicit at the very least that the Tribunal member did not consider that there were any features which meant that the case was unusual or out of the ordinary.’ (Reasons, para. 36)

Angelakos’ second submission was that the AAT had erred in taking into account the Torrensville property and his preserved superannuation as assets. It was argued that his parents were the beneficial owners of the Torrensville property and that he could not sell it. It was further argued that he could not access his preserved superannuation funds for at least the next three years.

The Court found that although this submission was put in terms of the AAT having taken into account an irrelevant consideration, in fact the arguments went to questions of fact not questions of law. The Court did not accept the submission that the AAT had failed to give proper and genuine consideration to a relevant matter, namely financial hardship and the capacity to repay.

The Court held that:

In the circumstances, the Tribunal member adopted abroad approach to the question of financial hardship and the applicant’s capacity to repay the debt and I do not think that he erred in law in doing so...I think the Tribunal member was aware of the various claims on the applicant and his plans in relation to the properties. It might be said that he should have placed more weight than he did on the possible claims on the Torrensville property and restrictions on the use of the preserved superannuation benefits, but in view of the evidence he was entitled to conclude that the applicant owned assets of considerable value, and any error (if there was an error) rises no higher than an error of fact. (Reasons, para. 46)

Finally the Court rejected Angelakos’ third submission that the AAT failed to take into account a relevant consideration, namely, that he had changed his position as a result of Centrelink error:

The Tribunal member was not obliged to approach the matter in this way. He clearly took into account the respondent’s error and the nature of the error. He took into account the financial hardship the applicant might suffer if required to repay the debt. I do not think the fact that the applicant might have spent the moneys which are the subject of the debt on ordinary living expenses is of any particular significance. The significant matter was financial hardship and the applicant’s capacity to repay the debt, and, as I have said, those matters were addressed by the Tribunal member.(Reasons, para. 48)

Formal decision

The appeal was dismissed and costs awarded to the respondent.

[A.M.]