Department of Social Security v McKenzie, K.A.L

[1993] FCA 861

93

JUKiMENT NO. ..8P.. !..J ....., .. ,.,..

IN THE FEDERAZ, COURT OF AU.YJ?RALIA )

I	GENERAL DIVISION	j	NO QG 209 of 1992
I	)
QUEENSLAND DISTRICT REGISTRY	1

BETWEEN:  DEPARTMENT OF SOCIAL SECURITY
(Applicant)

AND :  KERRI-ANNE LORELEI McKENZIE
(Respondent)

m m :  Ryan J

Place: Brisbane

m:  19 November 1993

MINUTES OF ORDER

THE COURT ORDERS:

I

.I	1.	That the appeal be dismissed.
i

NOTE :  Settlement and entry of Orders is dealt with in 0.36
of the Federal Court Rules.

REGISTRY

RECEIVED

3 0 NOV 1993

FEDERAL COURT OF

AUSTRAW PRINCIPAL

IN THE FEDERAL COURT OF AUSTRALIA	)
)
GENERAL DIVISION	) No QG 209 of 1992
1
QUEENSLAND DISTRICT REGISTRY	1

BETWEEN:	DEPARTMENT OF SOCIAL SECURITY (Applicant)
AND :	KERRI-ANNE LORELEI McKENZIE (Respondent)

Coram:  Ryan J

Place: Brisbane

m:  19 November 1993

REASONS FOR JlJDQtENT

Rvan J: This is an application by way of appeal on a question of law from a decision of the Administrative Appeals Tribunal ("the AAT") handed down on 3 December 1992 affirming a decision of the Social Security Appeals Tribunal ("the SSAT") dated 10 October 1991. As noted by the AAT:

"In its decision, the SSAT had varied a decision of a delegate of the applicant dated 21 August 1991, to raise and recover from the respondent, Ms Kerri-Anne McKenzie an amount of $9,542.96 which had been paid to her as sickness benefit for the period 13 October 1988

to 22 March 1991. The SSAT did so by waiving the balance of the over

payment still outstanding at the date of its decision."

The respondent, MS McKenzie, was injured in a motor vehicle	accident on 7 July 1977. She was then seven years of age. An
action was commenced on her behalf by her next friend in the Supreme Court of Queensland. In that action, there was judgment for the plaintiff for $97,743.36 and the trial Judge, Williams J, made a protection order with respect to the respondent and appointed the Public Trustee to manage her estate and affairs. His Honour indicated in the course of his reasons for judgment that he would have made a protection order even had the respondent been of age at the date of judgment because he took the view that the respondent was not, at least at that time, capable of managing her own affairs. By way of ancillary directions to the Public Trustee, his Honour ordered that the Public Trustee hold the balance of the judgment sum (after payment of costs) as a separate trust fund for the plaintiff and apply such fund and the income thereof in such manner as the Public Trustee should think fit for the maintenance and otherwise for the benefit of the plaintiff. It was further ordered that the Public Trustee be authorised to invest the balance of the moneys paid to him in securities in which trustees are authorised by law to invest and to apply such moneys and the income thereof in the manner indicated.
After the making of the protection order, the respondent applied to the appellant for, and received, first, sickness benefits, and, later, unemployment benefits. Payments of those benefits were received by the respondent between 13 October 1988 and 22 March 1991. During that period the appellant gradually learned of the existence of a fund held on
account of the respondent by the Public Trustee and of the
terms on which that fund was so held. Upon being fully apprised of those matters, the applicant took the view that the moneys held by the Public Trustee were required to be brought into account for the purpose of the test enshrined in s.1068 of the Social Security Act 1991. After determining the amount of benefits to which the respondent was actually entitled in the light of the income derived from the fund in the hands of the Public Trustee, it was determined as at 21
~ugust 1991 that she had received an overpayment of $9,542.96.
The respondent sought a review of that determination by the SSAT which decided, on 14 October 1991, to direct a recalculation of the amount of the overpayment and that recovery of the overpayment be waived. The appellant sought a review of the decision of the SSAT, and as already noted, the AAT, on 3 December 1992, affirmed the decision of the SSAT. It was common ground before the AAT that the respondent had received an overpayment so that the sole question for the AAT was whether recovery of the amount of that overpayment should be waived. In resolving that question, the AAT took the view that it was bound to act in accordance with directions made by the Minister pursuant to s.1237 of the Social Security ~ c t on

8 July 1991. (The SSAT had applied the same directions in

coming to the decision which the T bas called upon to

review).

After the AAT pronounced its decision, a Full Court of this	Court, on 3 June 1993, held in Riddell v Secretary, Department
Social Security (1993) 114 ALR 340 that the Ministerial determination of 8 July 1991 was not authorised by s.1237(3)
of the Social Security Act. Accordingly, the Full Court set /
aside, as infected by error of law, a decision of the AAT which had proceeded on the basis that the instrument of 8 July 1991 was valid and binding upon it. It is accepted on both

sides that the present decision of the AAT proceeded on the same basis and, accordingly, is infected by the same error of law. The controversy between the parties is thus reduced to one as to what orders should be made by this Court in light of the conceded error of law.

On behalf of the applicant, it is contended that the decision of the AAT should be set aside and the matter be remitted to the AAT to be further heard and determined in accordance with the law as explained in Riddell's case.

On the other hand, Counsel for the respondent has contended that this Court should, notwithstanding the conceded error of law, affirm the AAT's decision because no good purpose would be served by remitting the matter to the AAT.

The powers of this Court on an application of this kind are set out in sub-ss. 44(4) and (5) of the Administrative Appeals

Act 1975 which provide:

appeal and may make such order as it thrnks appropriate by reason of	" ( 4 ) The Federal Court of Australia shall hear and determine the
its decision.
( 5 ) Wrthout limiting by implication the generality of subsection
an appeal include an order affirming or setting aside the decision of ( 4 ) , the orders that may be made by the Federal Court of Australia on
the Trlbunal and an order remitting the case to be heard and decrded agam, either with or wlthout the hearing of further evidence, by the Tribunal in accordance with the directions of the Court."

In my view, the scope for the Court to substitute its own decision for that of the AAT is circumscribed by the fact that the appeal is confined by S. 44(1) of the Administrative

Appeals Tribunal Act to a "question of law". That imports a

necessary limitation on the power of the Court under S. 44(5) to make such order as it thinks appropriate by reason of its decision, since the Court's decision can only be one determining a question of law identified in the appeal. Thus Sheppard J said in Minister for Immigration and Ethnic Affairs

v Gungor (1982) 42 ALR 209 at 220:

" ~ t is, in my opinion, not correct to say that this court is by these provisions given wide powers to make such order as it thinks fit. Implicit in its powers are a number of restrictions. The appeal is expressly limited to error of law, which alleged error is the sole matter before this court and is the only subject matter of any order made consequent on the appeal. The order which this court can make after hearing the appeal is also similarly restricted to an order which is appropriate by reason of its decision. It follows that the only order which can be properly made is one the propriety of which is circumscribed by and necessary to reflect this court's view on the alleged or found error of law. To go further I would see as amounting to exceeding the jurisdiction of this court under this section. A power to make "such order as it thinks appropriate by reason of its decision" is much more restrictive than a power "to make such order as it sees fit" or a power "to make a decision in substitution for the decision" the subject of the appeal. Section

4 4 ( 5 ) confirms, though it states that it does not purport to limit,

this as an appropriate reading of the power in s. 44(4 ) when it lmits its statement of the express power of the court when setting aside a decision to the making of an order remitting the case to be heard again. Having set aside a decision, it has no express power to substitute what it sees as the correct decision unless such is the appropriate order by reason of its decision on the point of law in the context of the particular proceedings."

That approach was endorsed by Toohey J as a member of a Full

Hangan (1982) 45 ALR 23 at 34.	Court of this Court in Director-General of Social Services v
The reports contain examples of cases in which this Court, having detected an error of law by the AAT, has itself made orders disposing of the matter which had been before that Tribunal. However, an examination of those cases reveals that in most of them only one result could have been reached by the
AAT had it correctly applied the law. Thus, in Harradine v Secretary, Department o f Social Secur i t y (1989) 87 ALR 305
Wilcox J observed at 307:

"Ordinar~ly, if the court considers that the Administrative Appeals Tribunal has erred in law in its consideratron of a matter, the court orders that the tribunal's decasion be set asrde and remits the matter to the tribunal for further hearing and determination according to law. But, having regard to the concessions made on behalf of the respondent during the hearing before the tribunal, it was agreed in the present case, by both the appellant, who argued the matter in person, and counsel for the respondent, that the only issue for determination in connection with the matter was the correct construction of s. 136; and that whichever party was successful upon that issue was entitled, as a matter of law, to succeed in the tribunal. The issue of constructron having been resolved in favour of the appellant, it follows upon this analysis of the position, with which I agree, that the tribunal would be bound, upon any remission, to make an order allowing the appellant's claim for unemployment benefit. That being so, it is appropriate for the court rtmelf to make that order, thus relieving both the tribunal and the parties of the burden of a further hearing."

See also Austral ian Trade Commission v Richard Shrapnel Consulting Serv ices P t y Ltd (1988) 85 ALR 287 at 290. S t a t e

Rail Author i ty o f New South Wales v C o l l e c t o r o f Customs

(1981) 14 AAR 307 to which I was referred by Mr OJGorman of Counsel for the respondent was a similar case in that the Court upheld the conclusion reached by the AAT as correct in law although reaching that result for somewhat different

reasons from those which had commended themselves to the AAT.

In Secretary, Department of Community Serv ices and Health v Theologidis (1991) 33 FCR 186, another Full Court considered

an appeal under S. 44 of the Administrat ive Appeals Tribunal

Act from a decision of the AAT by way of review of a decision

requiring repayment of an amount of housing assistance which had been overpaid. The decision of the AAT was summarized by the Full Court at 189 as follows:

"After a substantial hearing the Tribunal set aside the decision, substituted a decision that the respondent ceased to be an eligible person from 8 May 1985 (ie the date on which assistance was approved) and remitted the application to the Secretary to recalculate the amount of assistance which had been overpaid to the applicant. The Tribunal's finding of fact endorsed the conclusion of the Department that the respondent had never lived in the house and had never had any intention of doing so."

After identifying an error by the AAT in its construction of S. 5 of the First Home Owners Act (1983), the Full Court

concluded at 191:

"In our view the Tribunal erred in its construction of 5.5. The appeal will be allowed with costs and the decision of the Tribunal of 15 March 1991 set aside. In the notice of appeal the appellant seeks an order that the matter be remitted to the Tribunal to be determined again in accordance with the reasons of this Court. However, the powers of the court under s.44 of the AAT Act are of sufficient width 60 as to permit, in a case such as the present, the making of an order affirming the decision under review by the Tribunal, namely, that of 9 February 1989, as varied on 12 April 1989. As we understand the reasons of the Tribunal, it would have affirmed the decision under review if it had decided the question of law as it has now been decided by this Court. Accordingly, we also order that the decision under review by the Tribunal be affirmed."

In that case, it was a necessary implication from the decision of the AAT that, however it had directed itself in law, it would not have interfered with the exercise of the discretion to demand repayment. In the present case, however, the AAT

itself exercised a discretion, so for the respondent's	submission to succeed it is necessary to discern in the AAT's
reasons some indication that, if unfettered by the invalid Ministerial determination, it would have waived the repayment of the benefits overpaid to Ms McKenzie.
An indication of that kind had been given expressly by the AAT
in Director-General of Social Services v Hales (1983) 47 ALR
281 where Lockhart J observed at 310:

"Notwithstanding the Tribunal's error in its construction of s.140(1) and the application of that interpretation to the facts, I am satisfied that the Tribunal's alternative finding of extreme hardship and scant chance of effective recovery was a proper exercise of its discretion in revrewing the Director-General's decision, that this finding stands independently of the erroneous findang and is sufficient to support the Tribunal's ultimate decision to set aside the Director-General's decision and to remit the matter to him for reconsideratlon with the direction that only so much of the overpayment claimed by the Director-General as is referable to the first pension year after the review of Mrs Halesf pension in 1974 be recovered from her. In these crrcumstances I see no necessity to remit the matter to the Tribunal to be heard and determined again."

No alternative finding has been expressed by the AAT in the present case. However, it has been submitted that an alternative determination to waive the overpayment is implicit in the AAT's reaching that result after subjecting the exercise of its discretion to the restrictions laid down in the Ministerial determination of 8 July 1991.

It is clear that the AAT has regarded the Minister's notice of 8 July 1991 as restricting the power of waiver conferred by S. 1237 of the Social Security Act; see eg re Secretary,

Department of Social Security v W R (1991) 24 ALD 721 at 727.

That view was shared by the AAT as constituted for the hearing

at para 32 of its reasons for decision: of the application concerning MS McKenzie as it was observed "On the basis of the evidence before us, the first occasion upon which the question of waiver of the overpayment was considered was in the decision of the SSAT on 10 October, 1991. For the reasons given in Hart and Department of Social Security (unreported, 23 October, 1992, Decision No. 8335, Miss Forgre, Deputy President) and bearing in mind sub-section 42A(1) of the AAT Act, we have concluded that we must consrder whether or not the balance of the overpayment can be waived must first be considered in accordance wrth the Minister's Directions dated 8 July, 1991 rather than those dated 5 May, 1992. Those Directions provide that the power to warve a debt given by section 1237 of the Social Security Act 1991 must only be waived in specified circumstances. Of those crrcumstances, only paragraph (g) is applrcable and that provides:

"Where in the oplnion of the Secretary special circumstances

apply such that the circumstances are extremely unusual, uncommon or exceptional (as discussed by the Federal Court of Australra in Beadle v Director-~eneral of Social Security (1985) 7 ALD 670."

The AAT then indicated at para 35 that it regarded itself as required to "consider whether the circumstances in this case are extremely unusual, uncommon or exceptional". After discussing aspects of protection orders generally and as pertaining to Ms McKenzie, the AAT made certain findings about the conduct of the Department of Social Security in relation to MS McKenzie and the Public Trustee. It then posed in the form of a sub-heading the question "Should the debt be waived?" and continued:

"54. In our view, the circumstances in this case are special in the

sense that they are extremely unusual, uncommon or exceptional as discussed at paragraphs 32-34 above. Miaa McKenzie is a person who has been found to be incapable of managing her own affairs and, since that finding, no steps have been taken to alter it. A Protection Order was made to protect her estate and manage her affairs and the Department was aware of that order within two months of its having been made. Despite the good start, Miss McKenzie was then badly let down by the system put in place to manage her affairs and protect her property.

55. The Department took no notice of the advice it had received and so did not take any particular care in processing her claim. In these days when much is maintained on computer records in the Department, it would not seem unreasonable to expect that an entry be made when notice is received that the Public Trustee is involved in a

person's estate even if that person is not then a client of the	Department. The Department owes a duty to rtself as well as to the
person to take particular care where it is dealing with a person found to lack the capacity to manage his or her own affairs either in whole or in part. Although we appreciate that the relationship between the claimant for a pension or benefit and the Department is not that of contracting parties, it seems to us that the position of the Department has some features m common with that of a contracting party who knows that he or she is dealing with a person who is a Protected Person. The contracting party is on notice and must take appropriate steps to protect hrs or her position if the contract is to be enforceable (see paragraph 4 1 above). So too should the Department take appropriate steps to ensure that it has sufficient knowledge of the claimant's affairs.
56. In this case, the Department did not show any care at all in this matter and did not even act when it became patently clear on the claim forms that funds were held on Miss McKenzre'a behalf by the Public Trustee. Had the Department made any enquiry of the Public Trustee, it would have been aware of the extent of the trust fund and the overpayment would never have occurred in the first place.
57. We note that the Publlc Trustee dld not assist Miss McKenzie an managing the money she received from the Department and did not seem to regard itself as having any responsibility m relation to it. Had it done so, the debt owed to the Department mlght have been substantially smaller.
58. Miss McKenzie has impressed us as a person who has trled, to the best of her abilities, to be honest and open in her deal~ngs with
the Department. She has given it information about her affaars in so far as she has been capable of dorng that and in so far as she has been given information about her affairs as managed by the Public Trust Office. She has not attempted to obtain anything above what she understood to be her entitlement.
59. Taking all of the aspects, which we have discussed lnto account, we are satisfied that all of these factors bring the circumstances of this case into those which can be described as "special" within the meaning of paragraph (g) of the Ministerial Directions. In doing so, we distinguish a case such as Hart and Department of Social Security in which the Department has information which should make it take additional care in its dealings with a person but no steps have been taken to appoint a person or authority to manage the affairs of that person."

It is true that the AAT in the present case did not expressly or exhaustively consider in the way outlined in Riddell's case (supra) all of the circumstances of the payments to MS McKenzie which were relevant to the exercise of the discretion under S. 1237 of the Social Security Act. In Riddell's case, the Full Court, at 347, observed:

"The court was invlted to give general guidance to the Administrative Appeals Tribunal as to the circumstances relevant to be taken into account in exercising the discretion conferred by S. 1237(1). However, we do not think it is appropriate for the court to accept

that invitation. 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."

However, I consider that the AAT commenced its application of the restrictions contained in the Ministerial determination of 8 July 1991 from the implied premise that the whole of the circumstances in which the overpayment had been made to MS McKenzie, on balance, required an exercise in her favour of the power to waive repayment. It then asked itself whether those circumstances were "extremely unusual, uncommon or exceptional". It has been demonstrated by Riddell to be erroneous and unnecessary to ask that question. However, had it not been asked, the implied premise to which I have referred would have entailed the same result, namely the affirmation of the SSAT's decision to waive repayment of the debt.

It was submitted by Mr Hack of Counsel who appeared for the applicant that the AAT, in identifying one of the circumstances which it regarded as "extremely unusual, uncommon or exceptional" i.e. the administrative failure of the Department to make and preserve a record of the notification by the Public Trustee of the fact that MS McKenzie was an Incapacitated Person, gave a weight to that circumstance which was unreasonable in the sense used in

Associated Provincial Picture Houses Ltd v Wednesbury

Corporation [l9481 1 KB 223. In a related way, it was

which I have just referred imposed a standard of submitted that the AAT's identification of the circumstance to	administrative competence which was practicably impossible of
attainment. The third related submission was that compliance with the standard of administrative competence erected by the AAT would involve a contravention of the principles enshrined in the Privacy Act 1988.
I do not regard it as a legitimate extension of the principles
enunciated by Lord Greene M.R. in Wednesbury to examine separately each consideration which is concededly relevant to the exercise of an administrative discretion and evaluate whether unreasonable weight has been accorded to it. His Lordship observed, at 229:

"It i s t r u e t h e d i s c r e t i o n must b e exe rc i sed reasonably. Now what

does t h a t mean? Lawyers f a m i l i a r wi th t h e phraseology commonly used

i n r e l a t i o n t o exe rc i se of s t a t u t o r y d i sc re t ion6 o f t e n use t h e word

"unreasonablen i n a r a t h e r comprehensive sense.	I t has f requent ly
been used and is f requent ly used as a genera l desc r ip t ion of	t h e

t h i n g s t h a t must not be done. For ins tance , a person ent rus ted wi th

a d i s c r e t i o n must, s o t o speak, d i r e c t himself properly i n law. H e

must c a l l h l a own a t t e n t i o n t o t h e ma t t e r s which he is bound t o

consider . H e must exclude from h i s cons idera t ion mat ters which a r e

i r r e l e v a n t t o what he has t o consider . I f he does not obey those

r u l e s , he may t r u l y be s a i d , and o f t e n i s sa id , t o be a c t i n g

"unreasonably." Similarly, t h e r e may be something s o absurd t h a t no

s e n s i b l e person could ever dream t h a t it l a y wi th in t h e powersef t h e

au thor i ty . Warrlngton L.J. i n Short v Poole Corporation [l9261 Ch.

66, 90, 91 gave t h e example of t h e red-haired teacher, dismissed

because she had r e d h a i r . That i s unreasonable m one sense. I n another sense it is tak ing i n t o cons idera t ion extraneous matters. It is s o unreasonable t h a t it might almost be described as being done i n

bad f a r t h ; and, i n f a c t , a l l t h e s e t h i n g s run i n t o one another."

His Lordship then concluded, by way of summary, at 233:

"The cour t is e n t i t l e d t o i n v e s t i g a t e t h e a c t i o n of t h e l o c a l

a u t h o r i t y wath a view t o see ing whether t h e y have taken i n t o account

mat ters which they ought not t o t a k e i n t o account, o r , conversely,

have refused t o t a k e i n t o account	o r neglected t o t ake i n t o account
mat ters whrch they ought t o t a k e i n t o account.	Once t h a t quest ion is

answered i n favour of t h e l o c a l au thor i ty , it may be s t i l l poss lb le

t o say t h a t , although t h e l o c a l a u t h o r i t y have kept wi th in t h e four

corners of t h e mat ters which they ought t o consider , they have

never the less come t o a conclusion s o unreasonable t h a t no reasonable au thor i ty would ever have come t o it. I n such a case, again, I th ink

t h e cour t can i n t e r f e r e . The power of t h e cour t t o i n t e r f e r e i n each

case is not a s an a p p e l l a t e a u t h o r i t y t o over r ide a decis ion of t h e

l o c a l author i ty , but a s a j u d i c i a l a u t h o r i t y which is concerned and

concerned only, t o see whether t h e l o c a l a u t h o r i t y have contravened t h e law by ac t lng i n excess of t h e powers which Parliament has confided i n them."

I am unable to impugn the exercise, as a whole, of the

discretion favourably to MS McKenzie which I have imputed to
the AAT, as unreasonable in that sense.

Whether more effective steps could have been taken within the applicant's Department to monitor MS McKenziers circumstances and her receipt of income was a question of fact on which the AAT was peculiarly well-placed to make a finding. I am not persuaded, in the context of the application to this Court, to rule that the findings indicated in paras 50, 55 and 56 of the AAT's reasons for its decision were not open to it, or to remit the matter to the AAT to afford the parties an opportunity of adducing further evidence which might bear on that question.

Nor am I able to conclude that the steps which the AAT suggested should have been taken by the Department in relation to information from the Public Trustee would have infringed the principles set forth in S. 14 of the Privacy Act. Ms McKenzie had probably consented to the disclosure by the Public Trustee to the Department of information concerning the funds held on her behalf when, in her special benefit claim form of 24 October 1989, she said:

"I . . . . . . . wish t o s t a t e i n support of any claim for Special Benefit

that money held i n Trust, mentioned on my claim form is held by the

Public Trustee.	I derive no income from it and am unable t o ge t
access t o it."

At the least, she then afforded the Department an opportunity to request her consent to the disclosure of information by the Public Trustee so as to entitle that agency to the protection afforded by para l(b) of Principle 11 annexed to S. 14 of the Privacy Act. I also uphold M r O'Gorman's submission that the suggested disclosure would independently have been protected

by sub-para (e) of the same paragraph as "reasonably necessary

... for the protection of the public revenue".

For the reasons given, none of the grounds of attack on the exercise of discretion, unfettered by the Ministerial determination of 8 July 1991, which I have imputed to the AAT has a real prospect of success. In the light of the impact on the decision of the AAT, understood in the way outlined above, of my decision there has been an error of law, I think it appropriate not to remit the matter to the AAT for further hearing and determination. Instead, I shall simply order that the application by way of appeal be dismissed. As the parties have agreed, there shall be no order as to the costs of the application.

I certify that this and the preceding thirteen (13) pages are a true copy of the reasons for judgment of his Honour Mr Justice Ryan

Counsel for the applicant:	Mr P Hack
Solicitor for the applicant:	Australian  Government
Solicitor
Counsel for the respondent:	Mr D 0' Gorman
Solicitor for the respondent:	Welfare Rights Centre Inc.