LARISA TAYLOR and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS

[2010] AATA 373

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 373  

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/4353

GENERAL ADMINISTRATIVE DIVISION )

Re LARISA TAYLOR

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES & INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr R G Kenny, Senior Member

Date19 May 2010

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

................[Sgd]..............................

SENIOR MEMBER 

CATCHWORDS

SOCIAL SECURITY – Pensions, Benefits and Allowances – Applicant in receipt of weekly compensation payments – Overpayment of social security payments – Debt due to the Commonwealth - No special circumstances to disregard any part of compensation payments – No special circumstances to make it appropriate to waive debt – Debt not attributable solely to Commonwealth error - Social security payments not received in good faith –– Decision under review affirmed.

Social Security Act 1991 (Cth), ss 17, 1173, 1180, 1181, 1184F, 1184K, 1223, 1236, 1237A, 1237AAD

Student and Youth Assistance Act 1973 (Cth) s 289

Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424
Re Haggerty and Secretary, Department of Education, Training and Youth Affairs (2001) 67 ALD 129
Secretary, Department of Employment, Education, Training and Youth Affairs v Prince (1997) 50 ALD 186
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Secretary, Department of Social Security v (D A) Smith (1991) 23 ALD 277
Sekhon v Secretary, Department of Family and Community Services (2003) 76 ALD 105

REASONS FOR DECISION

19 May 2010  Mr R G Kenny, Senior Member

BACKGROUND

1.      Larisa Taylor received social security payments, in various forms, under the Social Security Act 1991 (Cth) (the Act) from 2 November 1995 until 11 April 2007 (the overpayment period). Ms Taylor was born in New Zealand and suffered injuries in a motor vehicle accident there in 1988. On 28 October 2005, Ms Taylor came to Australia. From 11 April 2006, because of her injuries, she received weekly payments from the New Zealand Accident Compensation Corporation (“ACC”) as well as, from time to time, some amounts for arrears. The weekly payment was in the order of $372.41 and the following arrears sums were paid: NZ$1,502.10 on 4 April 2006, NZ$10,520.95 on 23 June 2006, NZ$21,993.51 on 14 July 2006 and NZ$75,747.80 on 30 November 2006. On 21 February 2008, a Centrelink delegate raised a compensation charge of $101,968.59 which was a debt due by Ms Taylor to the Commonwealth. That decision was affirmed by an authorised review officer on 14 March 2008 and, in turn, by the Social Security Appeals Tribunal (“the SSAT”) on 6 August 2008.

ISSUES AND LEGISLATION

2.      The payments received by Ms Taylor from Centrelink comprised sickness allowance, job search allowance, newstart allowance and parenting payment.  These are compensation affected payments under s 17(1) of the Act. Pursuant to s 1173 of the Act, weekly compensation payments are assessed as direct deductions from the rate of compensation affected payments after the income and assets test have been applied. This had not been done with Ms Taylor’s Centrelink payments before 11 April 2007 and, accordingly, she was paid more than she was entitled to until 11 April 2007. On 12 April 2007, Ms Taylor’s parenting payment was cancelled because the amount of her fortnightly compensation payment exceeded the amount of her fortnightly parenting payment. An issue for determination is whether the debt raised for overpayments from 2 November 2005 until 11 April 2007 may be written off under s 1236 of the Act or waived under s 1237A or s 1237AAD of the Act.

3. Further, because of the arrears payments paid to her, Ms Taylor received income support to which she was not entitled and, under s 1223 of the Act, this is a debt. A recoverable charge was imposed on her under ss 1180, 1181 and 1184F of the Act. An issue for determination is whether the charge may be waived under s 1237A or s 1237AAD of the Act or whether any part of her arrears payments should be treated as not having been received by Ms Taylor under s 1184K of the Act such that the recovery charge would be reduced.

EVIDENCE

The applicant

4.      After Ms Taylor was injured, the ACC paid her a lump sum of $10,000 for pain and suffering and also paid weekly compensation for a short recuperation period.  After 1995, she contacted a lawyer in New Zealand and was advised that she would not be able to receive compensation because she was living in Australia.  Nonetheless, in April 2006, she received an email message from the ACC which advised that she would receive compensation for incapacity to work of some NZ$89,000.  This came as a complete surprise to her.  She began to receive payments in April 2006.  The monies were paid into a New Zealand bank account she had jointly with her mother.  At that time, she was receiving payments from Centrelink and was concerned whether the compensation payments would impact on these.  She contacted her local member of parliament for advice and, as a result, contacted Centrelink and was told to attend a Centrelink office. 

5.      Ms Taylor attended her local Centrelink office and spoke with an officer by name of Jason.  At his request, she completed a Mod C, a standard Centrelink questionnaire about compensation payments.  Jason advised her that she would be contacted by Centrelink and advised about the effect of her compensation payments.  She made an appointment on 25 May 2006 to meet with a Centrelink officer on 31 May 2006 concerning her parenting payment.  This appointment was changed to 28 June 2006 when she met with Susan Davey.  Ms Davey asked her about a range of matters including compensation payments.  Ms Taylor told Ms Davey that she had received compensation payments from the ACC and provided her with a copy of the email the ACC had sent to her.  She recalled that Ms Davey had advised her that there was an overpayment in her parenting payments and that these may be cancelled if her compensation was assessed.  She was given another Mod C to complete but advised Ms Davey that she had previously completed this form for Jason.  Ms Taylor could not recall completing the Mod C for Ms Davey but said that she was advised that the matter would be forwarded to Centrelink’s specialist compensation team (AWC) and that a member of that team would contact her and advise about the effect of her compensation payments.

6.      Ms Taylor agreed that she had received a letter from Centrelink in January 2006 which advised her that she was required to advise Centrelink if there was any change to her assets or her income or if she received compensation payments.  She agreed that she was aware of this obligation and that the information was required by Centrelink to ensure that it paid people their correct entitlements.  Ms Taylor did not provide further information to Centrelink about her compensation payments until March 2007 and said that this was because she relied on the assurance given to her by Ms Davey that she would be contacted by Centrelink.  Ms Taylor understood that, because Centrelink had not contacted her, the compensation payments would have no effect on her Centrelink payments.  She said that she found it “all a bit weird” that she would continue to be paid social security payments while receiving the compensation payments and, from discussions with other people, suspected that there might be a problem.   

7.      Ms Taylor said that all of the compensation money she received had now been spent and that most of it had been spent by the time she contacted Centrelink in March 2007.  This included the payment of $75,000 she received in November 2006.  Much of the money was used to pay debts she had accrued.  Ms Taylor completed a statement setting out her expenses for 2006 and 2007[1].  They totalled approximately $138,640.00.  Most of the items were for weekly payments of rent, food, car expenses, preschool expenses, sporting activities and entertainment.  Other items were periodic payments for car repairs, household utilities, health and dental treatment.  Individual items were furniture, clothing and travel to and from New Zealand. 

[1] See exhibit 2

8.      Ms Taylor no longer receives compensation from the ACC and she said that it ceased, without warning, in September 2009.  This enabled her to again receive Centrelink payments.  Currently, she receives parenting payment and family tax benefit amounting to $1,002.32 per fortnight.  She has been paying her debt by reduction of $40 per fortnight from her payments and has recently negotiated with Centrelink for this to be reduced to $15 per week.  Ms Taylor has credit card debts of $10,000 and $5,000.  She has entered into a payment plan with the financial institution for the lesser debt and makes payments of $40 per week.  Her repayments for the other debt have been put on hold pending an arrangement being made with the institution.  The compensation monies paid to Ms Taylor were net amounts after the New Zealand government deducted taxation payments.  Recently, she has been advised that the Australian Taxation Office has ruled that the compensation payments are subject to Australian tax.  Ms Taylor said that this matter is to be resolved between the Australian and New Zealand governments and she is not aware of the outcome of these negotiations.  Ms Taylor has no savings and struggles to make ends meet each week.  Ms Taylor has two children, one of whom lives with her.  All are in good health.  

Susan Davey

9.      Ms Davey has been employed by Centrelink since 1997.  She works in the family assistance office and conducted an interview with Ms Taylor on 28 June 2006.  She had no independent recollection of what took place but was assisted in recall by her contemporaneous notes which were part of the Centrelink file.  The notes record that Ms Taylor advised Ms Davey that she had been receiving regular compensation payments from New Zealand since April and that she had been overpaid the parenting payment.  The notes also record that Ms Taylor was advised that her parenting payment may be cancelled if her compensation payments were assessed against it on a dollar for dollar basis.  Ms Davey noted that a Mod C was completed by Ms Taylor.  Ms Davey created a record of the responses given by Ms Taylor to the Mod C questions.  She said that she did this in the presence of Ms Taylor.  She wrote, for question 9, that Ms Taylor had claimed compensation payments as a result of a motor vehicle accident.  Question 10 asked whether Ms Taylor had ever received compensation payments.  The response recorded by Ms Davey was “no”. 

10.     Ms Davey said that her Centrelink role did not include compensation matters as this was done by the AWC.  The file note records that she sent the Mod C to the AWC for assessment.  It also records that she sent the AWC a “letter stating amount receiving”.  She said that this would be a reference to a copy of an email given to her by Ms Taylor about her compensation payments.

Other evidence

11.     A Centrelink file note records that a parliamentary member’s office contacted Centrelink on 24 April 2006 about Ms Taylor’s compensation payments.  It notes that Ms Taylor was due to receive compensation from New Zealand and that she was concerned about the effect that this might have on her Centrelink payments.  The file note indicates that the member’s office was advised that Ms Taylor should attend a Centrelink office and complete a Mod C.

12.     The Mod C which Ms Davey said was completed by Ms Taylor in the interview on 28 June was not in evidence.  Mr McQuinlan said that a search of Centrelink’s file failed to locate it.  Ms Davey’s evidence was that she forwarded it to the AWC.  It would seem to have been received by the AWC because a file note was completed by an AWC officer on 4 July 2006.  It does not identify any documents such as a Mod C or a letter but refers to some of the information that was copied from it by Ms Davey on 28 June 2006.  In particular, it notes that Ms Taylor was not receiving any weekly compensation payments.  The AWC wrote that it was clear for her to be paid Centrelink benefits.

13.     In evidence were documents comprising Centrelink’s calculations of the overpayment alleged against Ms Taylor. 

SUBMISSIONS 

14.     Ms Taylor conceded that she received the compensation payments for incapacity to work and the income support payments as determined in the decision under review.  Also, she did not dispute Centrelink’s calculations of the overpayment amount of $101,968.59.  She submitted that she had advised Centrelink in April 2006 when she spoke with Jason and again in June 2006 in the interview with Ms Davey that she was receiving compensation payments from the ACC.  She submitted that, thereafter, she relied on the advice that she had been given which was that Centrelink would contact her to provide her with information about the effect of the compensation payments on her Centrelink payments.  She continued to do this until March 2007 when she again contacted Centrelink about her compensation payments.  She submitted that, because Centrelink knew that she was receiving compensation payments from April 2006, the continuation of her Centrelink payments was due to administrative error on its part and that the debt should be waived.

15.     For the respondent, Rick McQuinlan submitted that all of the compensation payments received by Ms Taylor, including the arrears payments, were periodic payments.  He submitted that the arrears payments were a commutation of the weekly sums that should have been paid to Ms Taylor from 2 November 1995.

16.     Mr McQuinlan noted that there was no record in Centrelink’s files of any dealings between Ms Taylor and Jason but he conceded that Centrelink was aware of Ms Taylor’s compensation payments from 28 June 2006 when she was interviewed by Ms Davey.  However, he submitted that the continuation of parenting payment thereafter was not due solely to administrative error by the Commonwealth.  He submitted that Ms Taylor had contributed to this because of the negative response she gave to the question on the Mod C about the receipt of compensation payments.  Also, he submitted that, from her interview with Ms Davey, Ms Taylor was aware that she had been overpaid and that there was an absence of good faith on her part to continue to receive weekly compensation payments as well as substantial sums for arrears of compensation payments without again contacting Centrelink for information about their effect on her Centrelink payments.  Mr McQuinlan submitted that the debt should not be waived because of Ms Taylor’s contribution to the continuing payment of her Centrelink benefits.  He also submitted that there were no special circumstance which would justify treating any of Ms Taylor‘s payments as not having been received by her or that would justify waiver of any part of the debt.

CONSIDERATION 

Cancellation of payments

17.     I am satisfied that, on 12 April 2007 Centrelink correctly cancelled Ms Taylor’s parenting payment because the amount of her fortnightly compensation payment exceeded the amount of her fortnightly parenting payment. 

The debt

18.     I am satisfied that social security payments received by Ms Taylor in the overpayment period are compensation affected payments[2]. Ms Taylor does not dispute the receipt of compensation payments and social security payments as Centrelink contended. I am satisfied that those concessions were properly made. I accept Mr McQuinlan’s submission that all of the compensation payments received by Ms Taylor, including the arrears payments, were periodic payments during the overpayment period. I am satisfied that, in accordance with s 1173 of the Act, the rate of Ms Taylor’s compensation affected payments was reduced to nil during the overpayment period. Ms Taylor conceded, and I am satisfied on the basis of the Centrelink documents in evidence, that the calculation by Centrelink of the overpayment was correct and that the amount of $101,968.59 is a debt due by Ms Taylor to the Commonwealth[3].

[2] See s 17(1) of the Act.

[3] See ss 1180, 1184F and 1223 of the Act.

Writing off or waiving the debt

19. Provision is made for a debt to be written off under s 1236 of the Act. This is the case if the debt is irrecoverable at law; or the debtor has no capacity to repay the debt; or the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or it is not cost effective for the Commonwealth to take action to recover the debt. The only component of that provision of potential relevance in this matter is that relating to lack of capacity to repay the debt. Ms Taylor is repaying the debt to the respondent through deductions from her parenting payments and I am satisfied that the debt should not be written off.

20. A debt may be waived under s 1237A of the Act which, in so far as relevant, reads:

1237A  Waiver of debt arising from error

Administrative error

(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.

21.     The first element in that provision is that the debt must be attributable solely to an administrative error made by the Commonwealth.  At some point during the overpayment period, Centrelink became aware that Ms Taylor was receiving compensation payments and error is attributable to the Commonwealth for subsequent social security payments.  I am satisfied that no such error arose before Centrelink became aware of her compensation payments.  Ms Taylor claimed that she notified an officer named Jason in April 2006 but no record of this can be found in Centrelink’s files.  It was clearly noted by Ms Davey on 28 June 2006 and by the AWC officer in July 2006.  Due to what is set out below, the time when Centrelink became aware of the compensation payments is not material.

22.     Though there was Commonwealth error, I am satisfied that the failure to take account of the compensation payments was not solely attributable to that error.  There was an error in the response to Question 10 in the Mod C.  Ms Taylor was uncertain whether she had completed the Mod C when she was with Ms Davey.  However, Ms Davey’s evidence was that Ms Taylor did complete it.  Whether Ms Taylor completed it or not, I am satisfied that the answer to Question 10 denying receipt of compensation payments was recorded by Ms Davey from information provided by Ms Taylor.  It was relied upon by the AWC officer who cleared Ms Taylor for further payments.  Also, Ms Taylor was aware of her obligation to advise Centrelink of the receipt of compensation payments.  She had advised Ms Davey of the weekly payments but, after seeing her, she received substantial arrears payments of NZ$21,993.51 on 14 July 2006 and NZ$75,747.80 on 30 November 2006.  She did not advise Centrelink of these payments.

23.     Error will not be attributed solely to the Commonwealth unless it was the “the single or sole cause” of the error[4].  I am satisfied that the incorrect information in the Mod C and her failure to advise Centrelink of her arrears payments contributed to Centrelink’s continuation of social security payments to her.

[4] See Sekhon v Department of Family and Community Services (2003) 76 ALD 41 at [22] and [34]

24.     I am also satisfied that the further requirement in the provision is not met by Ms Taylor.  This is the requirement that she receive the social security payments in good faith.  The meaning of the expression “good faith” was considered by the Federal Court in Secretary,Department of Employment, Education, Training and Youth Affairs v Prince[5] in the context of a similar provision in the Student and Youth Assistance Act 1973 (Cth)[6].  Finn J said of the provision:

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 monies received as his or her own -- that person does not receive payment in good faith.  Absent such knowledge or reason to know, the receipt would be in good faith.

[5] (1997) 26 AAR 385 at [188] and [189]

[6] s 289(2)(b) of the Student and Youth Assistance Act 1973 (Cth)

25.     In Re Haggerty and Secretary, Department of Education, Training and Youth Affairs[7] French J said:

Consistently with what his Honour said in the Prince case, 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.

[7] (2001) 67 ALD 129 at [45]

26.     Consideration must be given to Ms Taylor’s state of mind and her knowledge of the circumstances in which she received the social security payments[8].  From 28 June 2006, Ms Taylor knew that she had been overpaid and that her parenting payment may be cancelled.  From then until March 2007, she continued to receive weekly compensation payments and the last two arrears payments.  Her evidence was that she found it “all a bit weird” that she would continue to be paid social security payments while receiving the compensation payments and she had suspicions that there might be a problem.  Yet, she did not reveal the true situation until March 2007.  I am satisfied that her knowing in June 2006 that she had an overpayment gave reason for her to know, and provided an objective basis on which she should know, that continuing weekly payments at the same rate and further large arrears payments would result in further social security payments to which she was not entitled.  I am satisfied that Centrelink payments after 28 June 2006 were not received by Ms Taylor in good faith.

[8] See also Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424

27. A debt may also be waived under s 1237AAD of the Act which reads:

1237AAD  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 this Act, the Administration 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.

28.     The Act provides no guidance on the meaning of the term “special circumstances”.  In Groth v Secretary, Department of Social Security[9], it was observed that what is required is:

… something to distinguish... [the]… case from others, to take it out of the usual or ordinary 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.

[9] (1995) 40 ALD 541 at 545.

29.     Ms Taylor’s evidence is that she is in a difficult financial position.  Although she struggles to do so, she is able to “make ends meet” with her social security payments and child support payments[10]. She has credit card debts for which she has entered into payment arrangements. She has arranged with Centrelink for the repayment of her debt to be through deductions from her payments at $15 per fortnight. The taxation matter is ongoing and there is no evidence of what the outcome of this may be. Financial hardship alone is not sufficient for the purposes of s 1237AAD and no other circumstance arises in her situation which may be described as special such that it takes her out of the usual or ordinary case of a social security recipient so as to justify the discretion in the provision being exercised in her favour. Indeed, her account, if it is to be believed, of how she expended the monies she received in 2006 and 2007 vitiates against a favourable exercise of discretion.

[10] Receipt of child support payments was referred to in the reasons published by the SSAT.

30. I am satisfied that Ms Taylor’s debt may not be waived under s 1237A or s 1237AAD of the Act.

Disregarding part of the compensation

31. Under s 1184K(1) of the Act, part of Ms Taylor’s compensation payments may be treated as not having been received by her. It reads:

s1184K Secretary may disregard some payments

(1)For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

(a)       not having been made; or

(b)       not liable to be made;

if the Secretary thinks it is appropriate to do so in the special circumstances of the case.

32.     The provisions relating to setting off compensation payments against social security payments have been described as operating as a:

… fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.[11]

[11] Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281-282.

33.     Similarly, they have been described as a safeguard against “double dipping” in that:

People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source[12].

[12] Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 148.

34. Those considerations must be kept in mind when determining, for the purposes of applying s 1184K(1) of the Act, whether or not special circumstances arise in a given case. I have noted that the only matter of potential relevance to special circumstances is Ms Taylor’s evidence of her financial situation. I have also noted her account of how she expended all of her compensation and social security monies over a two year period. This included the payment of NZ$75,000 received in November 2006. The statements of her two bank accounts show balances of NZ$10,141.16 and NZ$76,205.84, respectively, as at the end of November 2006. They show balances of NZ$6,534.47 and NZ$946.71, respectively, at the end of April 2007. This was during the period where she suspected that she was not entitled to receive payments from two sources and includes the time when she contacted Centrelink to disclose her compensation payments. Ms Taylor was unable to explain some of the withdrawal amounts during that period. One such withdrawal was NZ$15,000 on 24 April 2007 which was after the Centrelink decision to raise the debt against her. An exercise of the discretion in s 1184K of the Act would bestow a double benefit on a Ms Taylor and I am satisfied that this would not be appropriate in her situation.

DECISION

35.     The decision under review is affirmed.

I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member.

Signed: ............................[Sgd].................................................
             Kate Slack Research Associate

Date of Hearing  11 May 2010
Date of Decision  19 May 2010
Applicant was not represented
Rick McQuinlan, Departmental Advocate