Editors --- "Debt: meaning of when 'an amount has been paid to a recipient'; waiver and special circumstances" [2007] SocSecRpr 14; (2007) 9(2) Social Security Reporter, Article 1

• DAVY and SECRETARY TO THE DEWR
• Background
• The issues
• The legislation
• Formal decision

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Debt: meaning of when 'an amount has been paid to a recipient'; waiver and special circumstances

DAVY and SECRETARY TO THE DEWR

(2007/1114)

Decided: 9th March 2007 by S. A. Forgie

Background

Davy received disability support pension (DSP), as he suffered from ADHD. He was unaware that he was receiving DSP during the relevant period. His father dealt with all of Davy’s matters, including letters from Centrelink notifying him of his obligations to report changes of circumstance. Centrelink benefits were being paid into a trust account of the father’s barrister. The father determined the withdrawals to be made from this account. The father had also opened a bank account in Davy’s name. The existence and management of these accounts were without the knowledge of Davy. The father had a significant history of fraud and impersonating others to obtain benefits. Only a small portion of the total DSP paid during the period was directed towards the benefit of Davy, with the father taking the rest. Davy began paid employment but did not notify Centrelink of this. As such, a debt was raised for overpayment of DSP in the amount of $6561.51.

The issues

When has an amount been paid to a recipient by way of a social security payment? If Davy was a recipient who has been paid, did he or another person fail to comply with the social security law, particularly the requirement to notify Centrelink of changes in circumstances? Was DSP, or part thereof, paid to Davy during the relevant period because of the failure to comply? Should the debt, if any, be waived?

The legislation

The Social Security (Administration) Act 1999 (the Administration Act), s.55(2) provides that:

‘Subject to subsections(4) and (4A), the relevant amount is to be paid to the credit of a bank account nominated and maintained by the person.’

The Social Security Act 1991 (the Act) as in force in 2000, when the alleged overpayment occurred, provided in s.1224:

‘(1) If:

(a) an amount has been paid to a recipient by way of social security payment or fares allowance; and

(b) the amount was paid because the recipient or another person:

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

(ii)failed or omitted to comply with a provision of the social security law or this Act as in force immediately before 20 March 2000 ...;

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

When has an amount been paid to a recipient by way of a social security payment?

According to s.55(2) of the Administration Act, amounts are to be paid into an account nominated and maintained by the person.

The AAT considered the meaning of how a bank account is ‘maintained’ by a person. It considered that in order to maintain a bank account a person must first be aware of it. It also requires that the person be in a position to operate the account, such as making deposits and withdrawals, checking the account balance and transaction records. The AAT held that it did not matter whether the person actually did these things. The important fact was that the person was in a position to do so.

The AAT also considered the issue from the point of view of agency relationships. Where an agent opens an account for a principal, consideration would need to be given to whether both persons were maintaining the account.

Thirdly, the AAT undertook a consideration of where the benefit actually fell.

In the case of Davy, the AAT held that he did not maintain the account. Davy did not know that he was receiving DSP, nor was he aware that his father had opened a bank account in his name and had directed payments to the trust account. The account was administered and managed by the barrister, and it was he who had access to the statements, made payments and received deposits, at the direction of the father.

This still allowed for the possibility of an agency relationship, in which case, the payments would be for the principal’s benefit and therefore received by him. However, in Davy’s case, it was his father that directed how the payments would be spent, and he was not acting on the instruction of Davy. As such, there was no agency relationship on these facts.

The Tribunal then went on to consider whether DSP had been paid to Davy even though it had not been paid into an account that was nominated and maintained by him. The Tribunal found that there was a portion of the total DSP that was paid for Davy’s benefit, being payments directed by his father towards rent and car registration and that Davy’s knowledge was irrelevant in deciding this factual issue. This amount, of $1192.85 was held by the AAT to have been received by Davy.

Was there a failure to comply with the social security law?

The AAT found that Davy was not aware of the notices sent to him by Centrelink, informing him of his obligation to report changes. This was due to his ADHD, and the fact that it was his father who dealt with all of his affairs. However, the notices were posted by Centrelink under s.72(1)(b) of theAdministration Act. The AAT held that Centrelink should not be required to be on notice that Davy was unlikely to actually receive the notices. As such, Davy was taken to have been informed of his compliance obligations, and to have failed to meet them.

Was the payment made because of the failure to comply?

According to s.1224 of the Act then in force, a debt would be due if there was a causal relationship between a false statement or omission and the payment. In this case the debt occurred because of Davy’s failure and that of his father to notify Centrelink of Davy’s income. If this notification had occurred, Centrelink would have recalculated his entitlement, and the DSP payments would not have been made. The amount that Davy received, being $1192.85, was therefore because of the failure to comply with the notification requirement.

Waiver

The AAT decided that there could be no waiver under s.1237A(1) of the Social Security Act, as the debt was not due to administrative error.

Waiver under s.1237AAD can only be permitted if there are special circumstances that make it desirable to waive. This includes both a consideration of the person’s individual circumstances, as well as the general administration of the social security system.

In this case, the fact that Davy was deceived by his father did not make it desirable to waive the debt. Davy’s lack of knowledge did not negate the fact that he had the benefit of the money he received, without being entitled to it. It followed that there was no injustice in requiring him to repay the debt. As such, there were no special circumstances permitting waiver of the debt.

Formal decision

The decision under review was set aside and substituted with a decision that the actual debt owed by Davy was $1192.85. The Tribunal declined to waive the debt.

[G.B.]