Howard and Secretary, Department of Family and Community Services

[2003] AATA 1187

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 1187

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No V03/124

GENERAL ADMINISTRATIVE  DIVISION		)
Re		LESLIE ALFRED & VALERIE WINIFRED HOWARD

Applicant

And SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member J Handley

Date24 November 2003

PlaceMelbourne

Decision The decision under review is affirmed.

(Sgd) J Handley

Senior Member

SOCIAL SECURITY – Overpayment of pensions; whether compliance by applicants with recipient notices; whether error on part of Commonwealth; decisions affirmed.

Social Security Act 1991 s1224(1), s1223(1), s132(1), s1236(1), s1236(1A), s1236(1B), s1237(1), s1237A(1), s1237A(1A), s1237AAD

Re Van Brummelen & Secretary, Department of Social Security (1995) 37 ALD 729

Secretary, Department of Education, Employment, Training & Youth Affairs v Prince (1998) 152 ALR 127

Haggerty v Department of Eduction, Employment, Training & Youth Affairs [2000]
31 AAR 529

Pledger v Secretary, Department of Family & Community Services [2002] FCA 1576

Jazazievska v Secretary, Department of Family and Community Services [2000] 65 ALD 424

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Groth v Secretary, Department of Social Security (1996) 40 ALD 541

Re Secretary, Department of Social Security and Pluta (1991) 23 ALD 317

REASONS FOR DECISION

24 November 2003    Mr J Handley, Senior Member

1.      This is an application of Mr Leslie Howard and Mrs Valerie Howard (“the applicants”) for review of a decision made by the Social Security Appeals Tribunal (“SSAT”) dated 22 January 2003.  The SSAT varied a decision of a Centrelink officer to raise and recover disability support pension and wife pension debts (by reason of alleged overpayment) of $12,628.80 each paid between 20 October 1994 and 15 December 1994 and 1 October 1997 to 11 March 2002.  The SSAT decided that the debt amounts were $17,172.35 each, representing pension paid between 20 October 1994 and 11 March 2002.

2. At the hearing in Ballarat on 15 July 2003 the applicants appeared without legal representation. Mr Sean Meehan, an advocate with Centrelink, represented the respondent. The Tribunal had before it the documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975.

3.      This application had a troubled history prior to it proceeding to hearing.  The initial hearing scheduled in Bendigo on 3 July 2003 was adjourned as it was learnt that the matter had been identified by Centrelink as one for a possible referral to the Director of Public Prosecutions (“DPP”) for criminal prosecution.  This was communicated to the applicants and the Tribunal for the first time on that day.  Ms Rhonda Bradley, an advocate with Centrelink, appeared for the respondent at that hearing.  She advised that she had been informed by the Ballarat Centrelink office that they were awaiting the outcome of the Tribunal’s decision before determining whether to refer the matter to the DPP.  I decided the application should not be heard until this issue was clarified.  I also recommended that the applicants obtain legal advice.

4.      On 4 July 2003, Centrelink advised by letter that it had decided not to refer this matter to the DPP, however Mr Howard produced a separate letter at hearing in Ballarat which stated Centrelink did not guarantee that it would not instigate a prosecution at a later stage.

The Evidence

5.      During the relevant period of 20 October 1994 to 11 March 2002, Mrs Howard was in receipt of wife pension and Mr Howard was in receipt of disability support pension.

6.      Mrs Howard worked as a cleaner at Patience & Nicholson (Aust) Pty Ltd in Maryborough from 13 September 1989 to 1 March 2002 on a casual basis.  Despite undertaking this work, the applicants received a rate of pension for the period of 22 December 1994 to 11 March 2002 based on nil combined earnings.  In the period of 20 October 1994 to 21 December 1994 the applicants received a rate of pension based on the earnings of Mrs Howard of $219.69 per week.

7.      This dispute mainly concerned the circumstances regarding the applicants’ reporting of Mrs Howard’s earnings.  Related to this, the applicants took issue with the record keeping of Centrelink. These issues are considered in detail below.

Reporting of Earnings

8.      The applicants said they had a practice of Mr Howard reporting Mrs Howard’s earnings to Centrelink.  He said he would attend the Maryborough office with her pay slips and they would photocopy them and retain the photocopy for their records.

9.      The applicants said that they stopped this practice “in about 1992” because of a telephone conversation Mr Howard had with a “person handling our file in the Department”.  Mr Howard stated that he made that telephone call after learning that his wife’s employer was reporting her earnings directly to the Department.  He was advised by the Centrelink officer to not report Mrs Howard’s earnings and further advised “we do that, not you”.  Mr Howard said the officer made a “not so subtle threat payments would be terminated” if he continued to report and the officer “seemed extremely angry I had found out”.

10.     Mr Howard said that in accordance with this information he believed the Department were obtaining details of Mrs Howard’s earnings from the “paymaster” at her place of work.  In support of this is a letter written by a Rob Olver on 28 January 2003 (T-1).  That documents reads:

I was the payroll officer at Patience & Nicholson from 1990 to 1996. During that time I received many requests from the Dept. of Social Security in regards to Val’s wages.

The request’s asked for her wages for the last 13 weeks at given dates, which I completed and forwarded to the department.

11.     The applicants said they expected this monitoring to continue until Mrs Howard’s employment was terminated.  They added if Centrelink “had stopped doing that, they should have told us”.

12.     Mr Howard stated that in addition to the employer’s advises to the Department, he continued to go “in to the Department on numerous occasions, telling them when my wife ceased work and when she returned to work due to illness or accident and any other problem we thought the Department should know about”.

13.     Such advice is seen by Mr Howard’s statement to Centrelink on 18 December 1992 (T-5).  This statement reads:

My wife works casual at P & N Boral Maryborough. She ceases work on 23.12.92, does not receive any holiday pay. Will be re-employed on 19.1.93. We will have no other income, apart from pension during that time. Please increase pension to full rate.

14.     Similarly, and notably, a statement made by Mr Howard to Centrelink on 22 December 1994 (T-12) informed the Department:

I request my pension be increased as my wife will cease work today for Christmas close down and will not return until 18.1.95.

15.     The applicant’s said that they “had never stated (Mrs Howard) had stopped working”.

16.     

Mr Meehan pointed to similar documents informing the Department when Mrs Howard was working and requests to adjust their benefits (see T-106, T-107,

T-114, T-17, T-119 and T-123).  These statements were made in the period of 1990 to 1992, preceding the alleged overpayment period.

17.     

Mr Meehan contended that no further communication or contact regarding earnings was made by the applicants beyond the date of Mr Howard’s statement

(T-12), being 22 December 1994.

18.     There are records of contacts made by the applicants after 22 December 1994 for purposes other than reporting earnings.  They include on 4 June 1999 when Mr Howard contacted Centrelink to update his payment cycle and on 20 February 2001 contact was made to change details of their bank account number.

Records of Centrelink

19.     The applicants expressed concern that their Centrelink records were “dry” from 1992 making presenting their case difficult.  They contended they had supplied various information to Centrelink regarding their affairs, including Mrs Howard’s earnings, which are now not on their file.

20.     The applicants gave several examples of information they gave to the Department which they said was not retained.  Mr Howard stated that his wife was very ill with a life threatening illness and had a bypass operation.  He also reported, then, that she would not return to work for some time.  He said he did this at the Maryborough Centrelink office.  He said that this information “had disappeared”.

21.     

Mrs Howard added that in 1995 she was sent an ‘Income and Assets form’.  She said that she filled it out and returned it to the address that the form advised.  She remembered that address to be somewhere in New South Wales.  The Centrelink records apparently do not contain this document.  (At page 63 of the

T-documents is a copy of a letter to Mrs Howard from the Queanbeyan office of Centrelink.  This is the only document originating in New South Wales and it is dated 9 April 2002).

22.     The applicants contended that the mischief in this case is that each time they visited the Centrelink office they reported to different people.  They said they feel that “the information should be put on the computer so that (they) are not forced to rehash their information to vindicate (them)selves”.

23.     Mr Howard further illustrated their point by recounting a situation regarding his son.  He said he wanted to put Centrelink on notice of his son’s illness.  He said to achieve this he “stood there and asked that they put the doctor’s certificate in after submitting it three times”.  He said it was only after insisting on this, that the document was actually retained.

24.     The applicants said during the period in question they did not receive Centrelink letters and other documents as much as they had previously.  They said previously correspondence was sent to them regularly, around once or twice a year.

25.     The applicants also stated Centrelink could have checked their earnings as every year their “taxation was put in and they had our taxation file number”.

Relevant Legislation

26.     The decision which gave rise to the review by the Social Security Appeals Tribunal was made by a Centrelink officer on 19 September 2002.  It concerned the raising of an overpayment of benefits commencing in October 1994 and concluding in March 2002.  During that period the Social Security Act 1991 (“the Act”) was extensively amended however at relevant times prior to 1 July 2001, s1224(1) of the Act applied and it recorded:

If:

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

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

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

(ii)   failed or omitted to comply with a provision of this Act or the 1947 Act;

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

27.     The Family & Community Services and Veterans’ Affairs Legislation Amendment (Debt Recovery) Act 2001 (No.47 of 2001) extensively amended the legislation with respect to the recovery of debts due to the Commonwealth by Social Security recipients. Section 1224 was repealed with effect from 1 July 2002. Section 1223(1) and (1AB), (a), (b), (c), and (d) relevantly applies and it reads as follows:

1223(1) Subject to this section, if:

(a)a social security payment is made; and

(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;

the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.

1223(1AB)Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:

(a)the payment was made to the person by mistake as a result of a computer error or an administrative error;

(b)the person for whose benefit the payment was intended to be made was not qualified to receive the payment;

(c)the payment was not payable;

(d)the payment was made as a result of a contravention of the social security law, a false statement or a misrepresentation.

28. Prior to 23 December 1999 the Act contained s132(1) and (5) which was in the following terms:

(1)The Secretary may give a person to whom disability support pension is being paid a notice which requires the person to inform the Department if;

(a)a specified event of change of circumstances occurs; or

(b)the person becomes aware that a specified event or change of circumstances is likely to occur.

(5)A person must not, without reasonable excuse, refuse or fail to comply with a notice under subsection (1) to the extent that the person is capable of complying with the notice.

29. An identical provision with respect to wife pension was found at s172(5) of the Act. The Act was however amended (relevantly) with effect from 20 March 2000 by the Social Security (Administration and International Agreements) (Consequential Amendments) Act 1999 (Act No.192 of 1999). It is noted that a number of notices were forwarded to the applicants prior to 20 March 2000 and subsequently. The Social Security (Administration) Act 1999 has provisions under Subdivision B commencing at s67 requiring a recipient of a Social Security payment to inform the Department of a “specified event” or a “change of circumstances”.. A similar provision is found at s68.

30. Part 5.4 of the Act contains provision with respect to the “non recovery of debts”.

31. Section 1236(1), (1A) and (1B) concern the “write off” of debts and relevantly provide as follows.

1236(1)Subject to subsection (1A), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.

1236(1A)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.

1236(1B)For the purposes of paragraph (1A)(a), a debt is taken to be irrecoverable at law if, and only if:

(a)the debt cannot be recovered by means of deductions, or legal proceedings, or garnishee notice, because the relevant 6 year period mentioned in section 1231, 1232 or 1233 has elapsed; or

(aa)the debt cannot be recovered by means of deductions or setting off because the relevant 6 year period mentioned in section 86 of the A New Tax System (Family Assistance) (Administration) Act 1999 has elapsed; or

(b)there is no proof of the debt capable of sustaining legal proceedings for its recovery; or

(c)the debtor is discharged from bankruptcy and the debt was incurred before the debtor became bankrupt and was not incurred by fraud; or

(d)the debtor has died leaving no estate or insufficient funds in the debtor's estate to repay the debt.

32.     Section 1236A(1) applies with respect to debts outstanding, at and arising on, or after, 1 January 1996.  Relevantly, it provides that the following sections apply with respect to “waiver” of debts.

33. Section 1237(1), s1237A(1), s1237A(1A) and s1237AAD are reproduced as follows:

1237(1)On behalf of the Commonwealth, the Secretary may waive the Commonwealth's right to recover the whole or a part of a debt from a debtor only in the circumstances described in section 1237A, 1237AA, 1237AAA, 1237AAB, 1237AAC or 1237AAD.

1237A(1)Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

1237A(1A) Subsection (1) only applies if:

(a)the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

(b)if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

whichever is the later.

1237AADThe 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 this Act or the 1947 Act; 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.

Conclusion and Reasons for Decision

34.     There is no dispute in the present application that benefits were paid to Mr and Mrs Howard during the period in issue.  In that same period, Mrs Howard earned income from her employment at Patience & Nicholson.  Subject to quantification (refer later) the amounts paid as Social Security payments exceeded entitlement.  It therefore follows that the amounts paid were greater than the amounts to which Mr and Mrs Howard were entitled are a “debt” within the meaning of s1223(1) and (1AB) of the Act. Section 1223(1) is expressed in absolute terms. Section 1223(1AB) records specific instances giving rise to a debt, without diluting the effect of s1223(1).

35.     In so far as s1224 is concerned, the amounts paid are a “debt” because I am satisfied that the applicants failed or omitted to comply with the provision of the Act namely, the failure to comply with notices issued under s132 and s172 of the Act and s68 of the Social Security (Administration) Act.

36.     I am not satisfied that Mr and Mrs Howard did make a “false statement or false representation” within the meaning of s1224.  I am satisfied and find as a fact that Mr and Mrs Howard acted at all times honestly and in the belief that the paymaster at Patience & Nicholson was reporting earnings to Centrelink.  Additionally I am satisfied that the applicants acted on advice given to Mr Howard, which I am also satisfied was given, that they need not report his wife’s earnings (because that information was being provided by the employer).

37.     Nonetheless over a period of seven and a half years, Mr and Mrs Howard received benefits to which they were not entitled.  There was no dishonesty on their part but they were obliged, under the reporting obligations with respect to notices received, to inform of a change of circumstance of a specified event.  At all relevant times one of the specified events was to inform the Department if their combined income exceeded a stated amount per week.  On each fortnightly period that an overpayment has been calculated against Mr and Mrs Howard the income earned (as has subsequently been learnt) was in excess of the income threshold that has applied from year to year.

38.     

Additionally, notices were received beyond the time that Mr Howard said he had been advised not to provide information.  The T-documents indicate that notices were forwarded to Mrs Howard in December 1991 (T-3), February 1992 (T-4), December 1994, June 2002 (T-39) and August 2002 (T-65).  Mr Howard received notices in July 1993 (T-7), May 1994 (T-8), three notices in September 1994 (T-9,

T-10, T-11), December 1994 (T-13) and August 2002 (T-64).

39.     Section 132(5) provides that a recipient must not without reasonable excuse refuse or fail to comply with a recipient notice.  That sub-section is concerned with penal consequences which no longer have any relevance in the present matter.  (Re Van Brummelen & Secretary, Department of Social Security (1995) 37 ALD 729). If it were relevant to the present enquiry, under this sub-section, Mr and Mrs Howard arguably could demonstrate a “reasonable” excuse for refusing or failing to comply with a notice being the advice that they were given in 1992.

40.     Whilst I am satisfied as a fact that Mr Howard was advised in 1992 that there was no need for him to provide information as to his wife’s earnings (because that information was being provided by the employer) the notices subsequently forwarded to him (and Mrs Howard) clearly indicate that they were obliged to inform the Department of changes of specified events or circumstances.  Those circumstances subsequent to 1992 would have been variations in the salary paid to Mrs Howard from time to time.  The notices required Mr Howard, as a disability support pensioner, and Mrs Howard as a wife pensioner to provide that information.  They did not provide that information.  There has therefore been a failure to comply with the notices.  That notices were not received between 1994 and 2001 does not relieve the applicants of reporting obligations.  The notices received to 1994 were not referable to or limited by a period of time.  Whilst the applicants believed they were not obliged to report, by reason of the advice given by an officer at the Maryborough office, they did, in any event, receive benefits to which they were not entitled under s1223.  There is no escape from this section if a debt is due to the Commonwealth.

41. Section 1236 and s1236(1A) permit a write off of the debt only in the circumstances limited by the section. Those circumstances are that the debt is irrecoverable at law or the debtor/s has no capacity to repay the debt or the debtor/s whereabouts are unknown or that it is not cost effective for the Commonwealth to take action to recover the debt.

42.     The debt is not “irrecoverable” within the meaning of s1236(1B). The applicants apparently do have assets and there is no evidence that they do not have capacity to repay the debt. Their whereabouts are known and it would be, in the circumstances, cost effective for the Commonwealth to take action to recover the debt if only by pension withholding’s or pension reduction.

43.     The respondent submitted in its Statement of Facts & Contentions lodged prior to the hearing that the applicant did not receive the overpayments in good faith.  It was submitted that an absence of good faith was evident given that pensioners were paid at the full rate for an extended period of seven years.  It was also submitted that the applicants could not have received the payments in good faith as they must have understood that Mrs Howard’s earnings affected the rate of pension received.  Additionally it was submitted that the applicants did not ever query the rate of pension that was paid to them.

44.     It was also disputed that the applicants were advised by a Centrelink officer in 1992 to cease reporting income from the employment of Mrs Howard because on 22 December 1994, Mr Howard completed a statement with respect to the employment of his wife.

45.     It was submitted that the applicants should have suspected that they did have an obligation to report earnings to the Department having regard to the notices that they received.  Additionally it was submitted that they should have suspected that payments of pension being paid were greater than their entitlement having regard to the earnings of Mrs Howard.

46.     In written submissions lodged subsequent to the hearing, Mr Meehan also contended that the applicants turned a blind eye to the overpayments being received however, it was acknowledged that both Mr and Mrs Howard did suffer ill health for many years which may have contributed to the failure to either notice or report the overpayments.

47.     In these circumstances it was submitted that the applicants were unable to demonstrate that the debt or any proportion of it was attributable solely to administrative error made by the Commonwealth.  Additionally it was submitted that the payments received in excess of the permissible amount (having regard to the earnings of Mrs Howard) were not received in good faith.

48.     The applicants submitted that payments were received in good faith.  It was submitted that they had been advised by the Department in 1992 that there was no need for them to notify the earnings or changes in earnings of Mrs Howard.  It was submitted that they made an effort to comply with the legislation and to act honestly.  Examples were given of the reporting the cessation of employment at the end of 1994 and also reporting that Mrs Howard had made a Workcover application.

49.     Mr and Mrs Howard submitted that despite the rate of pension that was being paid during the occasions when Mrs Howard was earning income, they were not alert to pension being overpaid because they were “off work a lot” and they “expected benefits to remain fairly high”.  They submitted that they were not aware of the rates of pension payable from time to time (having regard to the earnings of Mrs Howard), that they did suffer from poor health and that they “thought Centrelink would look after us”.

50.     Mr and Mrs Howard were adamant that they felt compromised in their ability to present their application by the absence of relevant documents that they said had been completed and lodged with Centrelink.

51. Section 1237A(1) provides that a debt can only be waived if it was caused (that is, by overpayment) solely by administrative error attributable to the Commonwealth and then only if the debt, or part of it, was received in good faith.

52.     

Section 1237A(1) is also subject to the provisions of s1237A(1A). This

sub-section was not raised in these proceedings and in the absence of evidence or submissions it would not be appropriate to consider it.  Without considering the section in any detail (for the reasons above) it would appear that sub-section (1A) applies to disentitle waiver by sole administrative error in one of the two circumstances recited by the sub-section.  In the context of the present application where it was alleged that an overpayment of pension was paid virtually every fortnight in an amount beyond entitlement for a period of almost seven years, and that period of overpayment commenced in October 1994, the provisions of

sub-section (1) cannot apply because the debt was not raised within a period of six weeks from the first payment that caused the debt. For practical purposes, interpretation and implementation of the sub-section may be difficult in the context of an ongoing overpayment where the realisation of the debt is not known until many years after the overpayments had commenced. I would prefer in the absence of evidence of submissions with respect to this sub-section or assistance in its interpretation to be absent from consideration in this decision and to conclude this review by reference to s1237A(1).

53.     I am reassured of my earlier findings of the applicants being witnesses of truth and had acted in a manner which they believe to be open and honest by comments made by the review officer in “notes” found at T-81.

54.     Consistent with the evidence of Mr Howard, the authorised review officer has found that records were “removed” yet notices were forwarded requiring Mr and Mrs Howard to notify any event of combined income exceeding $78 per week.  There is confirmation that Mr Howard did attend the Maryborough office in December 1994 and reported that Mrs Howard would be stood down over the Christmas period and had then sought to have pension paid at the full rate (because of the absence of earnings).  Whilst this is consistent with the statement that Mr Howard in fact did make on 22 December 1994 (T-12, page 37) the review officer acknowledges that a report was made to Centrelink that Mrs Howard would return to work in January 1995 and that this amounted to notification of a change in circumstances under s132.  The review officer also decided that upon return to work in January 1995 income from salary would exceed the imposed threshold of $78 per week (above which a reporting requirement existed) and the report made in December 1994 was a testament to the compliance with reporting obligations under s132 (page 316).

55.     It would seem however that whilst Centrelink thereafter continued to pay pension as if earnings were not received, it only became aware of a possible overpayment in March 2002 when the employer lodged an “Employment Separation Certificate” (T-18, page 49).

56.     Thereafter there was a great deal of correspondence between Centrelink and the former employer, the applicants and their solicitor with respect to the history of employment which eventually disclosed that between 1995 and 2002 Mrs Howard had, at all relevant times, been employed and had earned income.  It was learnt that she had been incapacitated for a period of years by reason of injuries suffered at the workplace which gave rise to a Workers Compensation claim and it was also learnt that there was a period of incapacity when Mrs Howard underwent coronary surgery.

57.     

The comments of the review officer in his notes at T-81 are difficult to reconcile with the letter of the former paymaster of Patience & Nicholson found at

T-1 page 4, who reported that when he was the paymaster he notified Centrelink of the earnings of Mrs Howard in each quarter between 1990 and 1996.  Upon the basis that the letter contains a truthful recollection by Mr Olver (the paymaster) of his reporting to Centrelink of the earnings of Mrs Howard, it would appear that beyond January 1995 (at least) Centrelink was receiving reports of the earnings of Mrs Howard (and significantly beyond January 1995) yet it did not adjust the pension payments.

58.     Beyond 1996 there is nothing in the documents lodged by the respondent which would indicate that the employer was reporting the salary paid to Mrs Howard.  Whether that is because enquiry was not made of the employer or whether because Mr Olver apparently retired is not known.  What is clear however is that Centrelink learnt in March 2002 that Mrs Howard had been employed and then realised that there may have been an overpayment because the termination of her employment was then reported.

59.     When Centrelink eventually received payroll records from the employer and matched those records against the payments of pension that had been made since 1995 it was learnt that there had been an overpayment of pension to both Mr and Mrs Howard.

60.     I am satisfied therefore that there was administrative error made by the Commonwealth but for reasons which follow, I cannot attribute it solely to administrative error of the Commonwealth.

61.     Mr and Mrs Howard must have known, prior to December 1994, that the rate of pension payable was dependent on the amount earned by Mrs Howard.  The recipient notices between T-3 and T-11 refer to the period of December 1991 until December 1994.  All of the notices advise of pension entitlement based on information that the Department then had as to income either weekly or estimated as annual income.  The notices also advised that if these sums were exceeded, reporting obligations would apply.

62.     An examination of the fortnightly rates of pension that was actually paid (T-43, pages 180-182) reveal that in the period immediately prior to December 1994, pension was then paid – having regard to income then being earned – at $200 per fortnight.  For the fortnight ending 12 January 1995 pension was paid at $348.60.  That fortnight ending was within the period of time that Mr Howard reported that his wife would not be earning and had sought a greater rate of pension.  Consistent with the representation made to Centrelink, payment was increased.  This must have put Mr and Mrs Howard on notice that they then had a greater entitlement to pension because of the absence of income from wages.  It must also mean that the rate of pension payable is dependent upon income received (because the rate of pension that was paid was greater than the rate paid when Mrs Howard was receiving income from wages).

63.     Additionally, it was put by Mr and Mrs Howard (to the SSAT) that they were not aware of the rate of pension paid to them because it was credited directly to their bank account.  Whilst this might result in the absence of fortnightly notices or other advice being sent to them confirming the pension rate being paid, they must surely have known that their bank account balances fortnightly exhibited an amount in credit to which they were not properly entitled.  This was because after January 1995 Mrs Howard had returned to work and was receiving income in the form of wages.  I am satisfied that in fact wages were paid beyond January 1995 because the schedule of salary payments made to Mrs Howard found at T-34 confirms that from 27 January 1995 salary was in fact paid to her.

64.     If the T-documents contain all relevant documents held by Centrelink, it would appear that recipient notification advises were not forwarded to the applicants after December 1994 until early 2002.  If those notices had been sent, Mr and Mrs Howard would have been regularly put on notice of their reporting obligations.  The notices would have also contained reference to the amount of their pension entitlement by reference also to the amount of income that was being received elsewhere.  From at least January 1995 Mr and Mrs Howard would have been aware – or at least reminded – that had they received those notices being from a point in time when Mrs Howard had salary restored – that pension being paid would have been greater than that which was permissible having regard to the income that she was then earning.

65.     However Mr and Mrs Howard had been in receipt of pension payments for many years prior to 1994 and would have been aware of the variation in pension rate payable having regard to the variations from time to time in salary earned.  They would have therefore been aware that the absence of salary at around January 1995 gave rise to a greater pension entitlement.  They must have been aware that when salary was restored from January 1995 that their pension entitlement could not have remained at the level that it was in December/January.  The notices at T-13 and T-14 dated 22 December 1994 (being the date Mr Howard reported his wife would be stood down for Christmas closure T-12, page 37), compel reporting if combined income exceeds $78.00 per week.  In the fortnight ending 27 January 1995, Mrs Howard (having returned to work) earned $581.62 (T-34, page 141).  This was not reported.  The debt thereafter commenced to accumulate.

66.     It is probably unnecessary to consider the “good faith” provisions of s1237A because that appears to apply only where the debt is attributable solely to administrative error on part of the Commonwealth.  I cannot be satisfied that the debt incurred by Mr and Mrs Howard in the present is attributable solely to administrative error on the part of the Commonwealth.  But even if it was, I could not be satisfied that the payments were received in good faith.

67.     In Secretary, Department of Education, Employment, Training & Youth Affairs v Prince (1998) 152 ALR 127 Finn J in his discussion of whether a payment was received in good faith recorded the obligation under the applicable legislation as follows:

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..

68.     In Haggerty v Department of Education, Employment, Training & Youth Affairs [2000] 31 AAR 529 French J was apparently concerned about the expression “reason to know” as it was used in the Prince decision.  His Honour relevantly recorded:

……want of good faith will arise where there is a positive belief that the payment has been made by mistake. It will also arise where there is a suspicion held by the recipient that he or she may not be entitled to the payment made or a doubt as to the entitlement coupled with some objective basis for such suspicion or doubt. The provision does not, however, authorise the imputation of want of good faith in any of the senses above described simply because there are in existence objective facts which would raise a belief or a doubt or a suspicion of non-entitlement in the mind of some imaginary recipient.  That proposition is quite consistent with the view that the existence of such facts may support an inference that the recipient disbelieved or doubted or was suspicious about his or her entitlement.

69.     In Pledger v Secretary, Department of Family & Community Services [2002] FCA 1576 Weinberg J considered both Prince and Haggerty and acknowledged that it was necessary to consider a recipient’s “state of mind” when payments were received.  Whilst Pledger concerned a person receiving a benefit to which there was no lawful entitlement, His Honour discussed the relevance of considering whether that person had an entitlement to another type of benefit.  His Honour found that there was not necessarily a want of good faith on the part of the recipient because of a belief as to an entitlement, as opposed to a belief as to whether the pension being paid was the correct pension in the circumstances of that person.

70.     His Honour concluded:

103. Normal canons of statutory construction would suggest that the words "good faith", which are inherently open textured, are not used in any special sense in the Act. They are therefore to be accorded their ordinary and natural meaning. The words themselves are normative, and not descriptive. In other words, they are value laden, and the values which they reflect must be the values of ordinary, decent members of the community.

71.     A finding of absence of good faith does not mean that there has been fraud or dishonesty on the part of the recipient of a benefit (refer Jazazievska v Secretary, Department of Family and Community Services [2000] 65 ALD 424. No lesser sentiment applies in the present application. Whilst I am satisfied that there was an absence of good faith on the part of Mr and Mrs Howard, it was only to the extent that they did not question or query the rate of pension that had been paid to them beyond January 1995 when they should have been alert to the rate being paid was greater than that to which they were entitled. I acknowledge that they believed that salary details were being provided to Centrelink by the employer and that it followed from that belief that the rate being paid in pension had been calculated by Centrelink by regard to salary information that had been received. It was not until some years later that the applicants learnt that salary data had not been provided to Centrelink.

72.     Whilst acknowledging also that Mr Howard had been informed by a Centrelink officer that reporting conditions were not required and whilst it appears also that Centrelink was in error in making the payments that it did – at the rate that it did – beyond January 1995, the receipt fortnightly of a benefit greater than that to which Mr and Mrs Howard were entitled, does in the circumstances, constitute an absence of good faith.  There must have been a suspicion or a doubt of entitlement to receive pension at the rate that was being paid.

73.     Mr and Mrs Howard each received a payment fortnightly, for approximately seven years, of pension greater than that to which they were entitled.  The payments made were from the public purse.  It is not sufficient for Mr and Mrs Howard to allege that error was solely on the part of the Commonwealth and that they had done all that was required of them, having regard to advices that had been received prior to 1994.  Remaining silent for approximately seven years without query, and whilst retaining the benefit of monies received which were beyond entitlement, amounts in all of the circumstances to a want of good faith.  I repeat that there was no fraud or dishonesty on the part of the applicants but “a person does not act in good faith where the person turns a blind eye to circumstances which raise doubt as to the entitlement of the person to receive and retain the payment or refuses to make reasonable enquiries where doubt exists…..” (refer Jazazievska).

74.     It follows therefore that even if Mr and Mrs Howard were able to demonstrate sole administrative error on the part of the Commonwealth, they would not be able to demonstrate receipt of the monies in good faith.

75. The remaining issue is whether there are any special circumstances which would permit a waiver of the debt under s1237AAD. That section is reproduced earlier. All three sub-sections must be satisfied. The applicants cannot satisfy sub-section (a)(ii) because there was a failure to comply, or omission from compliance, with provisions of the legislation. Additionally there are no special circumstances in the present application being circumstances which are unusual, uncommon or exceptional (Re Beadle and Director-General of Social Security (1984) 6 ALD 1; Groth v Secretary, Department of Social Security (1996) 40 ALD 541).

76.     The decision under review must therefore be affirmed.

Recommendations

77.     The circumstances surrounding the first day of hearing of this application at Ballarat were very troubling.  It appears that a Departmental officer in a regional office of Centrelink decided – without notifying the Advocacy Branch – that the potential for prosecution of Mr and Mrs Howard would be considered after the Administrative Appeals Tribunal had completed its review.  This is hardly consistent with the model litigant policy pronounced by the Commonwealth Attorney-General but ran close to causing a contempt (refer Re Secretary, Department of Social Security and Pluta (1991) 23 ALD 317).

78.     Despite Ms Bradley being able to convince the Departmental officer to authorise her to write a letter satisfying Mr and Mrs Howard and the Tribunal that a prosecution will not be undertaken against them, they produced a letter at the resumption of the hearing in Ballarat where the Departmental officer in effect “reserved his rights” to recommend prosecution at a later time.

79.     I would recommend, having regard to what has been learnt in these proceedings that if Centrelink intends to refer matters to the Director of Public Prosecutions for consideration of whether a prosecution action should commence, that it do so at the earliest opportunity and well before proceedings in this Tribunal are about to be heard.  Fairness dictates that persons who are the subject of an intended or potential prosecution should be put on notice and be given the opportunity to have proceedings in this Tribunal deferred until criminal proceedings are concluded.  The risk of prosecution to Mr and Mrs Howard in the present case caused them unnecessary distress and the conduct of the relevant Centrelink officer was inappropriate.

80.     Secondly I recommend that repayment of the amounts overpaid be, by way of withholding, at a rate calculated by regard to the applicants present financial circumstances.  I understand that payments have been withheld to date in a sum greater than $50 per fortnight each.  The applicants’ only income presently is pension.  I understand that they are in debt elsewhere and their home is in need of urgent repair.  Continuing to make payments at $50 per fortnight each may cause financial hardship.  It is for those reasons that I would recommend a review of the applicants’ present financial circumstances with consideration being given to a reduction in the fortnightly withholdings.

I certify that the 80 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J Handley,
Senior Member.

Signed:         Elsa Genovese
  Personal Assistant

Date of Hearing  15 July 2003 (Ballarat)
Date of Decision  24 November 2003
Advocate for the Applicant       Self-represented
Advocate for the Respondent   Mr S Meehan, Centrelink