Hadid and Secretary, Department of Family and Community Services
[2003] AATA 392
•30 April 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 392
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2002/1376
GENERAL ADMINISTRATIVE DIVISION ) Re NADA HADID Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr S Webb, Member Date30 April 2003
PlaceSydney
Decision The Tribunal affirms the decision under review. [SGD] Mr S Webb, Member
CATCHWORDS
SOCIAL SECURITY – family tax benefit – overpayment – debt to the Commonwealth – whether sole administrative error – whether special circumstances
LEGISLATION
A New Tax System (Family Assistance)(Administration) Act 1999 - ss 20, 71, 95, 97, 101
Family Assistance Estimate Tolerance (Transition) Determination 2001
AUTHORITIES
Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62
Re Morar and Secretary, Department of Family and Community Services [2002] AATA 944
Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424
Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 50 ALD 186
Jones v Gordon (1877) 2 App Cas 616
Secretary, Department of Family & Community Services v Allan [2001] FCA 1160
Re Beadle and Secretary, Department of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Hales (1998) 51 ALD 695
REASONS FOR DECISION
April 2003 Mr S Webb, Member 1. This application by Mrs Nada Hadid (“the Applicant”) seeks review of the decision of the Social Security Appeals Tribunal (“the SSAT”) on 4 September 2002 (T2) to affirm the decision of an authorised review officer (“ARO”) on 1 August 2002 to recover a debt in the amount of $5,302.14 (T20).
2. A hearing before the Tribunal was held on 18 February 2003 in Sydney, at which the self represented Applicant and her husband, Mr Farouk Hadid, gave oral evidence. Mr Bernard Slattery, an advocate from Centrelink’s Advocacy and Administrative Law team, represented the Secretary, Department of Family and Community Services (“the Respondent”).
BACKGROUND
3. The following information is provided by way of background and is not in contention between the parties.
4. The Tribunal finds:
(a)The Applicant is married and has four children, two of whom are adult. The Applicant was paid Family Tax Benefit (“FTB”) at the rate of $449.26 per fortnight from 1 July 2000 on the basis of an estimate of combined income of $22,000 (Exhibit T3).
(b)The Applicant’s husband, Mr Hadid, commenced working as a real estate agent for LJ Hooker Greenacre on 1 January 2001 (Exhibit T6), whereby his income increased.
(c)On 27 June 2001, Centrelink sent the Applicant a letter informing her the rate of FTB would be $142.82 per fortnight, based on an estimate of combined income of $46,000 (Exhibit T9).
(d)On 12 February 2002 Centrelink raised a debt against the Applicant in the amount of $6,302.14, based on her combined income for the 2000 – 2001 financial year of $43,585 (Exhibit T10) and wrote to the Applicant informing her of the debt and that $1,000 would be waived under transitional arrangements (Exhibit R1, Attachment A).
(e)On 19 February 2002 the Applicant appealed Centrelink’s decision (Exhibit T12). The decision was reconsidered and affirmed on 18 March 2002 (Exhibit T15), whereupon the Applicant sought a review of the decision (Exhibit T16).
ISSUES BEFORE THE TRIBUNAL
5. The issues before the Tribunal are:
(a)whether the decision to raise and recover from the Applicant a debt to the Commonwealth in the amount of $6,302.14 was the correct and preferable decision; and if so
(b)whether there are sufficient grounds to write off or waive the debt.
LEGISLATION
6. The relevant legislation in this matter is the A New Tax System (Family Assistance)(Administration) Act 1999 (“the Administration Act”) and in particular sections 20, 70, 71, 95, 97 and 101.
EVIDENCE BEFORE THE TRIBUNAL
7. The Tribunal had before it the following documents.
EXHIBIT
DESCRIPTION
T1-T21
Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act1975.
R1
Respondent’s Statement of Facts and Contentions dated 11 February 2002 with Attachments A - E.
R2
Records of payment of FTB 2000 – 2001. Three pages dated 11 February 2002.
R3
Summary of income assessments: 2000 – 2001, 2001/02, 2002/03. One page dated 10 February 2002.
8. By agreement of the parties, a submission was provided by the Respondent in explanation of changes in the rate of FTB prior to January 2000 (Exhibit R2). The Applicant declined the opportunity to provide a written submission in response.
evidence of the applicant
9. The Applicant told the Tribunal she lives with her husband and has four children, the youngest of whom is educated at a private school. She gave evidence that she operates a tobacconist business and lost approximately $3,500 in a recent robbery which was not recoverable by way of insurance. She gave evidence the business costs approximately $30,000 per week to operate and pays her approximately $500 per week.
10. The Applicant told the Tribunal her husband wrote to Centrelink on 10 January 2001 advising of his employment with LJ Hooker as a real estate agent and his changed income. She gave evidence that either she or her husband had rung Centrelink to provide this information but could not recall when the telephone call had been made or who had made the call.
11. The Applicant gave evidence that she could not recall filling out an income review form and did not recall receiving a letter from Centrelink containing such a form (Exhibit T8).
12. The Applicant stated that she sent a letter to Centrelink on 19 February 2002 (Exhibit T12) attaching a copy of her husband’s previous letter (Exhibit T6). She told the Tribunal that her English was not good, in consequence of which her husband wrote the letters to Centrelink and she signed them.
13. The Applicant stated that she could not recall the date when the rate of FTB reduced, but knew she would not receive the same amount from Centrelink with her husband earning in employment. She told the Tribunal she did not check the rate of payment each fortnight, but relied on Centrelink to set the correct rate, noting “they will pay me what I can get”.
evidence of mr hadid
14. Mr Hadid told the Tribunal he and his wife, the Applicant, operated a grocery business prior to his employment as a real estate agent with LJ Hooker. He stated that the grocery business was sold to his brother in February 2001, whereafter his wife commenced a tobacco business in March 2001. He had not informed Centrelink of the change in his wife’s business because she did not earn in excess of $22,000 per year.
15. Mr Hadid told the Tribunal he borrowed $450,000 to build a house for his family and had a credit card debt of $15,000. He stated that he had borrowed a further amount of $120,000 in order to establish the tobacco business. He gave evidence that his real estate business, LJ Hooker Real Estate in Greenacre, was not profitable but he received approximately $500 net per week plus a six monthly commission on sales and a 50 percent share of the profits.
16. Mr Hadid gave evidence that he had worked as an interpreter for the Department of Social Security during 1984 and 1985, and knew an officer in the Campsie Centrelink office. He stated that he rang the Campsie office on 7 or 8 January 2001 to advise of his change in income, but was told his wife should contact Centrelink on a “13” number. It was his evidence that his wife subsequently rang Centrelink to provide the information “in the next day or so” and he wrote and posted a letter with the information on 10 January 2001.
17. Mr Hadid gave evidence that he read all the letters from Centrelink and had taken note of Centrelink statements concerning combined income. He gave evidence that he could not specifically recall receiving letters from Centrelink on 27 February 2001 and 9 April 2001 in which the Applicant’s combined income is recorded as $22,000. Mr Hadid acknowledged that he “probably did read” the letters and would have been aware that the combined income information was wrong. He told the Tribunal he did not contact Centrelink about this, relying on the information he had provided about his income in January 2001.
18. Mr Hadid could not recall filling out an income review form, but thought he may have done so but could not recall when.
ISSUES, SUBMISSIONS AND FINDINGS
19. The Tribunal notes the difficulty expressed by the Applicant and Mr Hadid recalling the detail of their communications with Centrelink in 2001 and discrepancies in their evidence in this regard. The Tribunal accepts, however, that such difficulties may be understood in the context of the busy lives of the Applicant and Mr Hadid.
does the Applicant owe a debt to the Commonwealth?
20. The rate of the Applicant’s FTB may be based on an estimate of her and her husband’s combined income pursuant to section 20 of the Administration Act. It is not disputed that the Applicant’s combined income for the 2000-2001 financial year was estimated to be $22,000 in June 2000 (Exhibit T3). It is not disputed, on this basis, the rate of FTB was correctly calculated to be $449.26 per fortnight, and the Tribunal so finds.
21. The Applicant alleges that both she and her husband informed Centrelink of the change in his income consequent upon his employment as a real estate agent. The evidence is that Mr Hadid commenced a real estate business, LJ Hooker Real Estate in Greenacre, from which he declared income of $500 per week. The Tribunal finds the Applicant, however, continued to receive FTB at the same rate until 26 July 2001 (Exhibit T9), when the rate was reduced to $142.82 per fortnight on the basis of an estimate of combined income of $46,000.
22. The Tribunal finds the actual combined income of the Applicant and her husband for the 2000-2001 financial year was $43,585 (Exhibit T10) on the basis of which the Applicant was entitled to receive an amount of $3,990.39 in FTB payments. The evidence is the Applicant received an amount of $10,292.53 in FTB payments during the 2000-2001 financial year. This being the case, the Tribunal finds the Applicant received an amount of $6,302.14 to which she was not entitled.
23.Subsection 71(2) of the Administration Act provides that:
“Overpayment
(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.”
The Tribunal finds, therefore, that the amount of $6,302.14 that the Applicant received in excess of her entitlement is a debt due to the Commonwealth.
24. The Tribunal notes that the first $1,000 of a debt arising in the 2000-2001 financial year in consequence of an error in the estimation of combined income for the purpose of FTB is to be waived pursuant to the Family Assistance Estimate Tolerance (Transition) Determination 2001 (“the Determination”). Thus, applying the Determination, the amount of the Applicant’s debt that is recoverable to the Commonwealth is $5,302.14. The Tribunal so finds.
should the debt be written off or waived?
25. In order to address this question the Tribunal must determine whether or not the debt was caused by the sole administrative error of Centrelink and received in good faith by the Applicant, in which case, if found, the debt must be waived pursuant to section 97 of the Administration Act. If the debt was not solely attributable to Commonwealth administrative error or was not received in good faith, the Tribunal must consider sections 95 and 101 of the Administration Act and determine whether there are grounds to write off the debt, or to waive the debt on the basis of special circumstances.
waiver of debt arising from error
26. Section 97 of the Administration Act provides:
“Waiver of debt arising from error
(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.”
27. The Applicant contended that the debt had not arisen through any fault on her part and was solely attributable to Centrelink, contending that both she and her husband had contacted Centrelink to provide information concerning Mr Hadid’s increase in income in consequence of his employment as a real estate agent. The Applicant pointed to a letter her husband allegedly sent to Centrelink dated 10 January 2001 containing this information.
28. Mr Slattery, for the Respondent, submitted that the letter was not received until a copy was provided under cover of a letter dated 19 February 2002. Mr Slattery contended the absence of any record of telephone contact between the Applicant or Mr Hadid is indicative that the information was not provided to Centrelink in January 2001 as alleged by the Applicant.
29. The Tribunal accepts that the Applicant and Mr Hadid fully understood their obligation under law to inform Centrelink of Mr Hadid’s change in income. The absence of Centrelink records must be weighed up against the evidence of the Applicant and her husband.
30. The Tribunal notes the Applicant claimed “I have with my husband filled out a review form back in January 2001 and informed you of our changes in income” (Exhibit T12), but in oral evidence she could not recall completing the form. Mr Hadid could not recall when he had completed the form. Centrelink sent a review form to the Applicant in a letter dated 9 April 2001 (Exhibit T8), but there is no such completed form in evidence before the Tribunal. Mr Slattery informed the Tribunal that such forms are stored off-site, separately from the Applicant’s Centrelink file. He accepted, however, that the Applicant’s records were accessed on 12 and 26 April 2001 and 2 May 2001 (Exhibit R1, Attachment B) for periods of time that would be consistent with an officer processing such a form. The Tribunal accepts, on the balance of probabilities, that the Applicant and her husband did complete an income review form that was sent to them on 9 April 2001 and returned it to Centrelink, whereupon their records were updated and a revised income estimate in the amount of $46,000 was entered for the 2001-2002 financial year (Exhibit T9).
31. This being the case, the Tribunal is not persuaded that the absence of Centrelink records alone is sufficient to dislodge the evidence of the Applicant and her husband. The Tribunal finds, on the balance of probabilities, that Mr Hadid contacted the Campsie Centrelink office by telephone and sent the letter (Exhibit T6) advising of his increase in income to Centrelink on or about 10 January 2001.
32. The consequence of Centrelink’s failure to act upon this information was that the rate of the Applicant’s FBT was paid, without adjustment, at a higher rate than the Applicant was entitled to receive, thereby giving rise to the debt. This being the case, the overpayment and consequent debt pursuant to section 71 of the Administration Act were caused solely by Centrelink’s administrative error.
33. A debt that is caused solely by the administrative error of the Commonwealth may only be waived if the amount in question was received in good faith in cases of severe financial hardship. The Tribunal is mindful of the authorities concerning the interpretation of the term “good faith” and notes the words of Cooper J in Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424 at 435-436:
“Prima facie, s 1237A(1) is concerned with actual personal receipt by the debtor of the payment or payments which give rise to the debt. The issue of good faith is, for the purpose of the section, to be determined when the debtor commences to exercise control over the payment by retaining it. It is at this time that the recipient must act with the requisite good faith. A lack of good faith does not mean that the recipient of the payment must be acting fraudulently when the payments is received and retained. It means that for whatever reason, the recipient acts without an honest belief that he or she was entitled to receive and retain the payment when he or she receives the payment and decides to exercise control over it by retaining it.”
Finn J observed in Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 50 ALD 186 at 189:
“For my own part, I consider the burden of the formula in the section 289 setting to be obvious enough. Its concern is with the state of mind of a person concerning his or her receipt of the payment: if that person knows or has reason to know that he or she is not entitled to a payment received -–ie is not entitled to use the moneys received as his or her own – that person does not receive the payment in good faith. Absent such knowledge or reason to know, the receipt would be in good faith.”
With regard to the state of mind of a person in such circumstances, the Tribunal turns to Jones v Gordon (1877) 2 App Cas 616 at 629 wherein, albeit in a different context, Lord Blackburn observed:
“…If he was (if I may use the phrase) honestly blundering and careless, and so took a bill of exchange or a bank-note when he ought not to have taken it, still he would be entitled to recover. But if the facts and circumstances are such that the jury, or whoever has to try the question, came to the conclusion that he was not honestly blundering and careless, but that he must have had a suspicion that there was something wrong, and that he refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind – I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover – I think that is dishonesty.”
34. The Tribunal finds the Applicant and her husband were aware that the rate of FBT had not been adjusted as it should have been in response to the increase in Mr Hadid’s income. The Tribunal is satisfied that both Mr Hadid and the Applicant were aware that Centrelink had made an error. It was Mr Hadid’s evidence, in such circumstances, that he chose not to contact Centrelink, contending that he should not have to inform Centrelink about its errors. The Tribunal notes that errors occur from time to time in the administration of the social security system but this does not relieve a person in the Applicant’s situation from responsibility for ensuring they are properly entitled to receive the social security benefits they are being paid. In the case at hand, there can be no doubt the Applicant and Mr Hadid knew they were not entitled to receive FBT at the rate at which it was being paid to the Applicant in the period 10 January 2001 to 27 July 2001.
35. This being the case, the Tribunal finds the debt cannot be waived on the grounds of Commonwealth error pursuant to section 97 of the Administration Act.
write off
36. Section 95 of the Administration Act sets out the circumstances in which the Secretary, or the Tribunal standing in the Secretary’s shoes, may decide to write off a debt. Subsection 95(2) provides:
“(2) The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c) the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d) it is not cost effective for the Commonwealth to take action to recover the debt.”
37. Mr Slattery submitted that the grounds on which the debt may be written off are not made out. The Tribunal agrees. The debt is recoverable at law by way of deductions from the Applicant’s FBT and there is no evidence the Applicant does not have the capacity to repay the debt. The Tribunal finds that the necessary grounds to consider writing off the debt are not made out on the facts.
waiver in special circumstances
38. Section 101 of the Administration Act provides:
“Waiver in special circumstances
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.”
39. Mr Slattery submitted that it would not be appropriate to waive the debt in the circumstances and pointed to the cases of Re Jones and Secretary, Department of Family and Community Services [2003] AATA 62 and Re Morar and Secretary, Department of Family and Community Services [2002] AATA 944. The Tribunal observes, however, that Re Jones and Re Morar are distinguished on the facts as neither case involved findings of administrative error in the Commonwealth.
40. The Tribunal is mindful of the authorities on this question and notes the conclusions of Heerey J in Secretary, Department of Family & Community Services v Allan (2000) 66 ALD 147 at 150 :
“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances: Beadle v Director General of Social Security (1985) 7 ALD 670 at 673; 60 ALR 225 at 228. Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances: Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281 at 284-7; 65 ALD 211; 32 AAR 120; see also Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 71; 57 ALD 600 at 607.”
In the oft quoted case of Re Beadle and Department of Social Security (1984) 64 ALD 1, Toohey J said that circumstances must be unusual, uncommon or exceptional for them to be considered “special circumstances”.
41. Mr Hadid submitted that he and his wife have worked hard for many years without break for little money, contending they have large debts and are struggling financially. Mr Hadid claimed that his income is expended servicing debt repayments of approximately $4,600 per month and the family relies upon his wife’s income to cover their weekly living costs. The Tribunal accepts that Mr Hadid and his wife are experiencing some financial difficulties, but finds their financial circumstances are not distinguished from those ordinarily experienced by many families struggling to manage their debts while raising children. The Tribunal finds, therefore, that the Applicant’s financial circumstances are not unusual, uncommon or exceptional.
42. Keifel J commented in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545:
“The phrase “special circumstances”, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle’s case (at ALR 229; ALD 674), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied.”
The Tribunal finds nothing in the evidence before it to indicate that anything unintended or unjust has occurred. The Applicant submitted recovery of the debt was unfair as the debt arose through no fault on the part of herself or her husband. The Tribunal does not agree and notes the words of French J in Secretary, Department of Social Security v Hales (1998) 51 ALD 695 at 695-696:
“From time to time in the administration of social security benefits overpayments occur. Sometimes these are the result of innocent non-compliance with the requirements of the law which can be affected by the stress associated with the circumstances that led to the receipt of benefits in the first place. The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth. This case primarily concerns the proper construction of a section of the Social Security Act1991 (Cth) which provides for the waiver of debts where special circumstances are found to exist. There is a tension in the construction of such provisions between the needs for certainty of application and flexibility of response to the situations that may arise from time to time.”
In the present case, the Applicant and her husband received benefits to which they were not entitled which are recoverable at law. Recovery of the debt in the circumstances is neither harsh nor unfair. The financial circumstances of the Applicant and her husband are constrained but not unusual or exceptional in any measure. This being the case, the Tribunal is satisfied that the circumstances of the Applicant’s case are not sufficient to enliven the discretion set out in section 101 of the Administration Act.
decision
43. The Tribunal affirms the decision under review.
I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S Webb, Member
Signed: .......................................................................................
AssociateDate of Hearing 18 February 2003
Date of Decision 30 April 2003
Advocate for the Applicant Self-representedAdvocate for the Respondent Mr B Slattery
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