Fothergill and Secretary, Department of Social Services (Social services second review)

[2016] AATA 920

Fothergill and Secretary, Department of Social Services (Social services second review) [2016] AATA 920 (18 November 2016)

Division	GENERAL DIVISION
File Number	2015/4832
Re	Andrew Fothergill
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Regina Perton, Member
Date	18 November 2016
Place	Melbourne

The Tribunal affirms the decision under review.

[sgd]........................................................................

Regina Perton, Member

SOCIAL SECURITY – benefits payable to a third party wrongly paid into applicant’s bank account – administrative error on the respondent’s part – debt imposed for overpayment - whether waiver available due to administrative error – good faith – whether severe financial circumstances – whether waiver due to special circumstances – decision affirmed

A New Tax System (Family Assistance) Administration Act 1999 ss 71(2), 97, 101

Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866

REASONS FOR DECISION

Regina Perton, Member

18 November 2016

1. This dispute arises following the payment by Centrelink of Family Tax Benefit (FTB) into the wrong bank account.  Following the discovery of the mistake, the respondent raised a debt of $5,586.17 being the amount wrongly paid to Mr Fothergill between 29 December 2014 and 13 February 2015 (the relevant period).  Mr Fothergill is the father of the person who was actually meant to be the recipient of that money.   Mr Fothergill believes he is entitled to keep the funds on the basis that he received the payments as a result of administrative error on the part of the Commonwealth.  He is of the view that he should not have to repay the moneys to Centrelink based on a lack of knowledge that he and his wife were receiving payments to which they were not entitled and his difficult financial circumstances.

   BACKGROUND

2. Mr Fothergill is the father of five children.  Four of those children remain dependants of Mr Fothergill and his wife.  The eldest is now a parent herself and it was she who applied for FTB and other available payments.  Mr Fothergill’s daughter became entitled to payments from 21 September 2014.  The first payment was made to her, albeit into the wrong bank account, which was not the one nominated in her claim form, on 29 December 2014. The first payment was $3869.32.  Subsequent payments were made on 2 January 2015 of $367.3; on 16 January 2015 of $416.5; on 30 January 2015 of $416.50 and on 13 February 2015 of $416.50. 

3. Centrelink, which administers FTB for the respondent, appears to have become aware of the qualified recipient not receiving her payments on 19 February 2015.  Centrelink records indicate that the agency initially asked the eligible recipient if she could retrieve the payment from the incorrect account which was in her parents’ name but she told Centrelink that was not possible.  Furthermore she had no legal access to that account.  Centrelink therefore arranged for a fresh payment to her nominated account. 

4. Centrelink records show that contact was made with either Mr or Mrs Fothergill on 19 February 2015 to ask them to leave the incorrectly paid funds in the bank account:

   Contacted owner of the incorrect account and advised that we have paid:

   Advise the incorrect recipient to leave the funds in the bank account as funds will be automatically returned to the department within the next 28 days.  If no funds or only part of the payment is returned, a debt will be raised against the incorrect recipient to recover the remainder of the funds.

   Told other party above.  Did not indicate who the payment was for or the amounts.

5. Mr Fothergill denies that there was any such contact on 19 February 2015.   He maintains that he and his wife only became aware of the incorrect payments in May 2015.  Centrelink sent an Account payable to Mr Fothergill dated 11 May 2015 which states that he is to pay $5,586.17 by 9 June 2015.  The explanation of why this amount is payable states:

   You have received payments amounting to $5586.17 for the period 21/9/2014 – 11/2/2015 that were intended for a third party.  This means you have been overpaid $5586.17.  We are required to recover this amount from you.

   Details of amount payable

   For Family Tax Benefit

   Period   Received      Entitled           Amount Payable

   21 Sep 2014 to 11 Feb 2015   $5,586.17       $0.00              $5,586.17

6. There is no covering letter providing any more details of why there is a debt or why the Fothergills were not entitled to FTB.  There is no acknowledgement that they were entitled to their regular FTB payments during that period given the document says there was no entitlement to that benefit during the relevant period.  On the second page of the Account payable, there is a sentence suggesting contact be made with Centrelink if Mr Fothergill does not agree with the decision or would like more information.  A Centrelink record dated 11 May 2015 stated:

   …

   Waive option considered, but not appropriate.

   Custoemr [sic] issued with payment of $5586.17 in its entirety …

   Attempted to contact customer.  N/A

   …

7. A file note dated 18 May 2015 indicates that Mr Fothergill contacted Centrelink’s telephone service stating that he did not receive monies that he was being billed for.  According to the file note:

   Spoke with Andrew.  Andrew was unwilling to provide bank statements or to show evidence that he did not infact receive the payments despite the third party and ….bank confirming that the bank account does belong to Andrew and his wife.  Andrew stated that under privacy he does not need to provide anything….

8. On 29 May 2015 an authorised review officer of Centrelink (ARO) affirmed the decision that Mr Fothergill was required to repay the FTB debt.  The ARO noted that she had tried to contact him by telephone that day to discuss the review but was unsuccessful.  Amongst other things, the ARO stated:

   …

   I am satisfied the debt resulted solely from administrative error.  Receiving a payment in good faith implies that a person has no knowledge, or reason to believe, that they were not entitled to receive a payment.  You did not contact the department to query these payments and therefore found the amounts were not received in good faith.

   Therefore I found you did not satisfy the requirements for waiver under sole administrative error and the debt cannot be waived.

   I have also considered whether the recovery of the debt can be waived due to special and unusual circumstances (other than financial hardship alone) that make it more appropriate to waive than to write off the debt.  I was unable to speak with you but have previously stated that you believe you did not receive the funds and were to provide evidence.  To date evidence has not been provided.  Therefore based on the available evidence, I could not find your situation as markedly apart from other recipients and cannot waive the debt.

   …

9. On 26 June 2015 Mr Fothergill lodged an application with the Social Security Appeals Tribunal (SSAT), which became the Social Security & Child Support Division of the Administrative Appeals Tribunal (AAT1) on 1 July 2015.  The AAT1 determined that Mr and Mrs Fothergill were not aware that they were being overpaid until they received the account payable in May 2015, that the payment was due to administrative error on Centrelink’s part and that they had acted in good faith.  However, the AAT1 determined that it could not waive the debt because of the wording of the legislative provisions.

10. Mr Fothergill applied to the General Division of the Tribunal on 17 September 2015 for review of the AAT1 decision.

    LEGISLATION

11. The legislation that governs the administration of FTB payments is A New Tax System (Family Assistance) Administration Act 1999 (the Administration Act). Section 71(2) of the Administration Act relates to overpayments:

    71(2) If:

    (a) an amount (the received amount) has been paid to a person by way of assistance; and

    (b) the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;

    The difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.

12. Section 97 of the Administration Act covers debts that have arisen due to Centrelink administrative errors:

    (1) The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.

    (2) The Secretary must waive the administrative error proportion of a debt if:

    (a) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and

    (b) the person would suffer severe financial hardship if it were not waived.

    (3) The Secretary must waive the administrative error proportion of a debt if:

    (a) the payment or payments were made in respect of the debtor’s eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and

    (b) the debt is raised after the end of:

    (i) the debtor’s next income year after the one in which the eligibility period or event occurs; or

    (ii) the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;

    whichever ends last; and

    (c) the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.

    (4) For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.

13. Section 101 of the Administration Act allows for waiver of a debt due to special circumstances. 

    Waiver in special circumstances

    101.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 a false representation; or

    (ii) failing or omitting to comply with a provision of the family assistance law; 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.

    IS THERE A DEBT TO THE COMMONWEALTH?

14. The Tribunal is satisfied that Mr Fothergill was paid FTB to which he was not entitled when his daughter’s FTB payments were mistakenly paid into his account instead of hers. Pursuant to s 71(2) of the Administration Act, he therefore has incurred a debt to the Commonwealth. The Tribunal also has no reason to doubt that the amount of the debt identified is correct, namely $5,586.17.

    SHOULD THE DEBT BE WAIVED?

15. Centrelink accepts that the debt has arisen due to administrative error on its part.  The Tribunal is satisfied that Mr Fothergill did not contribute to the error.

16. For the Tribunal to waive the debt, it must be satisfied that Mr Fothergill received the payments in good faith and also that he would suffer severe financial hardship if the debt were not waived.

17. Mr and/or Mrs Fothergill and their dependants were eligible for, and in receipt of a range of Centrelink benefits during the relevant period, including FTB, Carer payment, Carer allowance and Newstart allowance.  There were also various payments such as school kid’s bonus and the like around the time of the relevant period.  Mr Fothergill also started working casual shifts as a bus driver, after having been injured some years earlier and having to give up his career as a truck driver as a result.  The incorrect payments were paid into the bank account directly with no correspondence alerting them to their existence. 

18. The Tribunal accepts the evidence given to AAT1 and this Tribunal about the lack of awareness of the payments.  The Tribunal is satisfied that the Fothergills were not aware of the payments incorrectly made into their account and is therefore satisfied that the payments were received in good faith. Mr Fothergill therefore meets s 97(2)(a) of the Administration Act.

19. Mr Fothergill told the Tribunal about the difficulties his family faces both on the financial front and in caring for their children.  Two of his daughters have ongoing medical problems, one of whom has required several hospitalizations. 

20. Mr Fothergill works as a casual bus driver for 30 to 38 hours per week earning around $40,000 in the 2014/15 financial year.  His wife cares for the children at home due to their health setbacks.  He has a personal loan on which in excess of $20,000 is still owed with repayments of $700 per month.  There is also several thousand dollars owing on credit cards.  There are expenses for utilities, internet charges and the children’s education expenses.  They pay rent of $250 per week and have two cars to run, although one is currently out of action requiring expensive repairs which they cannot afford at present.

21. The respondent’s advocate submitted that the phrase severe financial hardship sets a high bar.  He submitted that whilst financially things may be difficult for the Fothergills, their financial circumstances could not be described as severe.  As well as Mr Fothergill’s income, there are a number of Centrelink benefits being paid to them including FTB and carer payments and allowances due to Mrs Fothergill’s care for the children suffering from chronic health conditions.   The eldest of the daughters at home receives disability support pension.  Centrelink are allowing gradual repayment of the debt, rather than insisting as they did in the original demand, that the payment be made in a lump sum. 

22. The Tribunal accepts that the Fothergills are facing financial difficulties and are living week to week but does not find that their situation can be described as severe financial circumstances. Therefore the Tribunal finds that Mr Fothergill does not meet the requirements of section 97(2) of the Administration Act.

23. Section 101 of the Administration Act allows for waiver of debts if there are special circumstances other than financial circumstances alone that warrant such an action.  Mr Fothergill cited the combination of the health issues faced by two of his daughters, the caring responsibilities he and his wife face as a result, his injuries that kept him off work and without income for some years until recent years when he was finally able to get a job driving buses and that he had not sought the moneys incorrectly paid into his and his wife’s joint account which they had spent thinking it was their legitimate entitlements.

24. The term special circumstances is not defined in the legislation.  For the Tribunal to exercise its discretion to determine that Mr Fothergill’s situation constitutes special circumstances, it must be satisfied that there is something to make the case stand out from the usual or the ordinary.  There have been many Federal Court cases that have looked at the phrase special circumstances e.g. Angelakos v Secretary, Department of Employment and Workplace Relations 100 ALD 9; [2007] FCA 25. In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866, Branson J held that the use of the term special circumstances in the legislation demonstrated an intention to proscribe waiver in ordinary cases.  Branson J stated that the hardship or unfairness should be sufficient to justify departure from the general rule in the particular case.

25. The Tribunal accepts Mr Fothergill’s evidence that he did not know about the payment of his daughter’s entitlements into his bank account until some months after they had ceased.  The manner of notification of the debt and the demand for payment within a month may well have left Mr Fothergill confused and upset particularly given the wording of the initial demand for repayment.  The Tribunal also notes the health issues that the family faces and accepts that their financial situation is a tight one. 

26. The Tribunal accepts that this may well be an unusual case.  However, this is not a situation where Mr and Mrs Fothergill have been overpaid due to incorrect calculations of their entitlements.  The money that was paid into their bank account was a benefit that was meant for someone else, namely their daughter, who was not part of their family unit.

27. The Tribunal notes that there are a number of social security benefits flowing into the household and that Mr Fothergill is working.  Centrelink has now agreed to gradual repayment of the debt by withholding a portion of their entitlements.  Further negotiations may well be possible to alter the rate at which those payments are made if they are causing considerable hardship.  

28. The Tribunal does not believe it appropriate to waive the debt due to special circumstances in a situation such as this that involves a debt due to payments made to the wrong bank account.  The Tribunal is not satisfied that the circumstances in this case constitutes special circumstances (other than financial hardship alone). Hence, the Tribunal finds that the waiver provisions of s 101 of the Administration Act should not be applied.

29. The Tribunal finds that Mr Fothergill owes a debt of $5,586.17 to the Commonwealth due to mistaken payments of money into his bank account to which he was not entitled.  The Tribunal notes that part of the debt has been repaid.

    DECISION

30. The Tribunal affirms the decision under review.

31.     I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Ms Regina Perton, Member

[sgd]...........................................................

Associate

Dated   18 November 2016

Date of hearing	18 July 2016
Applicant	In Person
Advocate for the Respondent	Mr Tim Noonan
Solicitors for the Respondent	Department of Human Services, Freedom of Information and Litigation Branch