Leddy and Department of Family and Community Services

[2000] AATA 384

DECISION AND REASONS FOR DECISION [2000] AATA 384

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  N1999/1016

GENERAL ADMINISTRATIVE DIVISION          )          
           Re      JAMES LEDDY      
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       Mr R P Handley, Senior Member 

Date19 May 2000 

PlaceSydney

Decision      The Tribunal sets aside the decision under review and substitutes a new decision that, pursuant to s 1237A(1) of the Social Security Act 1991, recovery of the debt is waived.

(Sgd) R P Handley
  ……………………………..
  Member

CATCHWORDS
SOCIAL SECURITY – Newstart Allowance – overpayment – sole administrative error – good faith – income affecting rate of payment – whether reason to know not entitled to payment.
Social Security Act 1999 ss1237A, 1237AAD.
Department  of Employment, Education, Training and Youth Affairs v Prince (1997) 152 ALR 127

REASONS FOR DECISION

This is an application by James Leddy for a review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 7 June 1999 which affirmed a decision of a delegate of the Secretary, Department of Family and Community Services ("the Department") and an authorised review officer to raise and recover a debt of $1,827.61 in respect of newstart allowance paid during the period 14 October 1997 to 20 January 1998.
At the hearing, Mr Leddy represented himself and the Department was represented by Susan Mantaring of Centrelink. The evidence before the Tribunal comprised the documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 ("the T Documents"). Mr Leddy gave oral evidence.
BACKGROUND
Mr Leddy, who is aged 62, last worked on 27 December 1996, as a car mechanic.  He stopped work because of ill health.  On 2 April 1997, Mr Leddy lodged a claim for newstart allowance ("NSA").  In a Module P Partner Details form lodged on 18 April 1997, he stated that his wife, Lynda Leddy, earned $437.56 gross per week from her employment with K & R Engineering and $128.46 per week from her employment with the Department of Education.  During the period 2 April 1997 to 2 September 1997, Mr Leddy received one payment of NSA of $36.36 on 11 June 1999.  He was otherwise precluded from receiving NSA because of his wife's income.
Mr Leddy claims that, on 23 October 1997, he was advised that he could lodge his NSA application forms every 12 weeks.  On 31 October 1997, Mr Leddy's bank account was credited with a payment of $346.68 in respect of the period 3 September 1997 to 14 October 1997.  On 10 November 1997, Centrelink sent Mr Leddy a letter notifying him that he could lodge his application for payment of NSA every 12 weeks (T6).
On 20 January 1998, Mr Leddy lodged an application for payment of NSA stating that his wife had been paid $6,572.26 in the period 29 October 1997 to 20 January 1998.  On 12 February 1998, Centrelink advised Mr Leddy that he had incurred a debt of $2,089.71 in respect of the period 3 September 1997 to 20 January 1998 because his wife's earnings precluded payment of NSA (T24).  On 16 March 1998, Centrelink reduced the debt to $1,858.59 because part of the debt related to a period before 1 October 1997 when legislative changes took effect (T26).
On 18 May 1998, an authorised review officer set aside the debt due to insufficient information and suggested that additional information be obtained and the debt reassessed.  On 2 June 1998, a Centrelink officer wrote to Mr Leddy stating that he had been overpaid NSA during the period 3 September 1997 to 20 January 1998 in the amount of $2,089.71 (T32).  However, because Mr Leddy had been notified on 16 March 1998 that his debt had been reduced due to legislative changes that came into effect on 1 October 1997, the decision to reduce the debt could not now be reversed, and, as a result, the debt had been recalculated at $1,827.61.
This decision was affirmed by an authorised review officer on 15 July 1998 (T35) and by the SSAT on 7 June 1999.  On 5 July 1999, Mr Leddy lodged an application for review by the Tribunal.
APPLICABLE LEGISLATION
Mr Leddy does not dispute that he received an overpayment of NSA.  He contends, however, that any debt should be waived.  The provisions of the Social Security Act 1991 ("the Act") dealing with waiver relevant in Mr Leddy's case are s 1237A(1) and s 1237AAD:

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.

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 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.

MR LEDDY'S CASE
Mr Leddy said that after he applied for NSA in April 1997, he had often received contradictory letters from Centrelink, sometimes on the same day.  There appeared to be no logic to these letters and he was often confused as a result.  He said that it was Centrelink who first suggested he should move to a 12 weekly reporting system.  His reaction was that this was good because it would make his life easier.
Mr Leddy  said he had stopped work in December 1996 because of ill health.  His heart condition, arthritis and other problems made it very difficult working as a motor mechanic.  When he applied for NSA in April 1997, he understood that his non eligibility was because of his wife's income.  He acknowledged that he knew Centrelink would treat him as a member of a couple.  Nevertheless, he received a health concession card.  He lodged his fortnightly NSA form by mail, always answering the questions honestly and declaring his wife's income.  Her income varied a little from week to week because she is employed on a casual part-time basis.  Centrelink should have been aware of this from the start.
When Mr Leddy received the payment of $346.68 on 31 October 1997, in respect of the period 3 September 1997 to 14 October 1997, Mr Leddy's reaction was that he had paid taxes all his life, he presumed he was entitled to the money, and was not going to rock the boat by questioning the payments.  After all, this payment was for a lengthy period and his regular payments thereafter only amounted to $145 per week.  Nevertheless, he was aware of his continuing obligation to notify Centrelink of his wife's income and he did this in his first 12 weekly form lodged on 20 January 1998.
Mr Leddy assumed that because essentially nothing had changed with his wife's income, with Centrelink being aware that her income varied slightly from week to week because of her casual employment, his obligation to notify Centrelink of her income was fulfilled when he stated her income for the period 29 October 1997 to 20 January 1998 as being $6,571.26.  Generally, Mr Leddy said he found the notification obligations confusing.  Mr Greg Quinton at Centrelink's departmental office, to whom Mr Leddy spoke on two or three occasions, had also been very critical of the system, acknowledging that the rules were always changing.
Mr Leddy said when he received notification of the debt in February 1998, he thought it was a sick joke.  Apart from any social security payments he received, Mr Leddy is totally financially dependent on his wife.  She does not give him any part of her wages.  He has to ask her for a dollar to buy a newspaper.  However, she pays the bills associated with their jointly owned house and car and pays for food and other necessities.  Mr Leddy is currently entitled to a disability support pension (since 2 July 1999) of $13.90 a fortnight ($14.80 from 22 March 2000) which is being withheld to recover the debt.  Mr Leddy said he has no other income or investments but also no debts.
The Tribunal asked Mr Leddy whether there were any special circumstances of which it should be aware, for example, relating to his health.  Mr Leddy said that although he suffers from arthritis in various parts of his body and high blood pressure, he regards these conditions as largely age-related and not, therefore, special.  There were no other special circumstances relating to his situation.
THE DEPARMENT'S CASE
Ms Mantaring, for the Department, acknowledged that the Department accepts that the overpayment was caused solely as a result of its administrative error in putting Mr Leddy on a 12 week reporting period. However, the Department contended that Mr Leddy had not received the NSA payments in good faith. With regard to the meaning of the words "received in good faith" in s 1237A(1) of the Act, Ms Mantaring referred the Tribunal to the Federal Court decision in Department of Employment, Education, Training and Youth Affairs v Prince  (1997) 152 ALR 127. In that decision, Finn J at 130 said:

…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.

Ms Mantaring said it is not in dispute that Mr Leddy advised Centrelink of his wife's earnings.  He acknowledged that he was aware that her income would affect his rate of payment.  Thus, when Mr Leddy started receiving payments of NSA from 31 October 1997, he had every reason to know that he could not have been entitled to the maximum rate of payment.  After all, the only NSA payment he had received prior to that was $36.36 on 11 June 1997.
Ms Mantaring contended that Mr Leddy should have questioned the NSA payments he began receiving from 31 October 1997. He chose not to do so on the basis that he "didn't want to rock the boat" because the payments were favourable to him. Thus, it cannot be asserted that the payments were received in good faith and waiver was not, therefore, available under s 1237A(1).
With regard to the possibility of waiver under s 1237AAD, Ms Mantaring said Mr Leddy had acknowledged that his circumstances are not special and there is, therefore, no basis on which the power of waiver under this section can be exercised.
CONSIDERATION OF THE LAW AND EVIDENCE
The issue for the Tribunal to decide in this case is whether recovery of the debt should be waived. Mr Leddy does not dispute that he received an overpayment of NSA which is a debt due to the Commonwealth . There are two relevant waiver provisions: s 1237A(1) and s 1237AAD of the Act. The power of waiver in s 1237A(1) must be exercised in respect of the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if a person "received in good faith" the overpayment that gave rise to the debt.
Ms Mantaring told the Tribunal that the Department accepts that the overpayment that gave rise to the debt was caused solely by the Department's administrative error in transferring Mr Leddy to a 12 week reporting period.  However, the Department contends that Mr Leddy did not receive the overpayments in good faith.  Ms Mantaring said Mr Leddy was aware that his wife's income affected his rate of payment but chose not to question the new rate of payment from 31 October 1997 because those payments were favourable to him.
Mr Leddy acknowledged that he knew that his wife's income affected his payments.  However, he said the Department was aware of his wife's income which varied slightly from week to week because of its casual part-time nature.  Because his circumstances had not changed in the 12 week reporting period, there had been no obligation on him to notify the Department of a change of circumstances.  He fulfilled his obligation to the Department when he gave details of his wife's income for the previous 12 weeks in the 12 weekly form lodged on 20 January 1998.  Mr Leddy said he had always answered the Department's questions honestly. He said he had presumed he was entitled to the extra payments from 31 October 1997 and "was not going to rock the boat by questioning the payments".  He noted that he had often received contradictory letters from Centrelink and found the system confusing.  He said that when he received notification of the debt in February 1998, he thought it was "a sick joke".
Ms Mantaring referred the Tribunal to Finn J's discussion of the meaning of "received in good faith" in Prince (supra).  The test applied by Finn J was whether the person "knows or has reason to know that he or she is not entitled to a payment received".  In Mr Leddy's case, this is a question of fact for the Tribunal to determine on the balance of probabilities.  The Tribunal is faced with two versions of the events.  In essence, the Department contends that the course of events gives rise to a presumption that Mr Leddy was aware that he was not entitled to the payment.  On the other hand, Mr Leddy gave evidence that he presumed he was entitled to the payment.
In the Tribunal's opinion, the evidence does not support a finding that Mr Leddy knew that he was not entitled to the payments.  But does it support a finding that he had reason to know that he was not so entitled?  On balance, the Tribunal thinks not.  While the Department contends he should have been aware of the overpayment, Mr Leddy's account of his dealings with the Department in particular of his having regularly notified the Department, of his wife's income, of his sometime confusion over contradictory letters, and of his reaction when notified of the debt, lead the Tribunal to conclude that there is insufficient evidence to support a finding that Mr Leddy had reason to know that he was not entitled to the payments.
Finn J in Prince (supra) said that in the absence of such knowledge or reason to know, the receipt would be in good faith. Thus, the Tribunal finds that Mr Leddy received the payments in good faith and the power in s 1237A(1) to waive recovery of the debt must, therefore, be exercised.
Having so determined, it was unnecessary for the Tribunal to consider whether waiver would also be available under s 1237AAD.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of

Signed:         .....................................................................................
  Associate

Dateof Hearing  17 March 2000
Date of Decision  19 May 2000
Representative for the Applicant              Mr Leddy
Representative for the Respondent        Susan Mantering