Merrifield and Secretary, Department of Family and Community Services
[2004] AATA 603
•15 June 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 603
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2003/1455
GENERAL ADMINISTRATIVE DIVISION ) Re
Kenneth Merrifield
Applicant
And
Secretary, Department of Family and Community Services
Respondent
DECISION
Tribunal Mr RP Handley, Deputy President Date15 June 2004
PlaceSydney
Decision The Tribunal sets aside the decision under review and remits the matter to the Respondent for reconsideration in accordance with the following directions:
(1) The Tribunal finds that Mr Merrifield received an overpayment of newstart allowance in the period 17 December 1996 to 7 October 2002.
(2) Such overpayment constitutes a debt due to the Commonwealth.
(3) Recovery of this debt should be by way of reasonable fortnightly instalments.
(4) The amount of the overpayment giving rise to the debt should be recalculated in accordance with the following:
(a) For the period 17 December 1996 to 31 March 1997, Mr Merrifield’s income included net rental income from his property at 10 Gerroa Road, Shoalhaven Heads;
(b) For the period 17 December 1996 to 31 March 2000, Mr Merrifield’s income included net rental income from his property at 27 Warwick Road, Dundas Valley. The Tribunal finds that Mr Merrifield’s daughter, who was living at the property during this period, made Mr Merrifield’s housing loan repayments in respect of the property in lieu of rent. Thus, it may be that Mr Merrifield derived only a minimal net rental income for the property during this period. If the Respondent is not in possession of all the relevant information as to Mr Merrifield’s net rental income for the property for this period, then Mr Merrifield is under an obligation to use his best endeavours to provide this.
(c) For the period 1 April 2000 to 7 October 2002, the Respondent should clarify whether the overpayment takes account of an additional overpayment of $606.41 raised by the Respondent of which Mr Merrifield has received notice.
(5) The Respondent should also clarify whether instalment repayments made by Mr Merrifield since 30 January 2003, as at 6 April 2004 totalling $775 and continuing at a rate of $50 per fortnight, have been taken into account in calculating the outstanding debt.
..............................................
RP Handley
Deputy President
CATCHWORDS
SOCIAL SECURITY – newstart allowance – overpayment of newstart allowance – whether the Applicant was entitled to newstart allowance – assets of the Applicant including real property owned and income generated by real estate property – whether the Applicant correctly reported his income – examination of the Applicant’s real estate property holdings – special circumstances – whether there are special circumstances to warrant the waiver of any debt due – held an overpayment occurred in part as a result of inadvertent mistakes made by the Applicant – held that whilst the Department may have lost the Real Estate Details forms lodged by the Applicant, the Applicant had a responsibility to more rigorously pursue his concerns that he was being incorrectly paid – held there is a debt due to the Respondent and there are no special circumstances to prevent recovery – decision under review is set aside and matter remitted to the Respondent for recalculation of the debt taking into account rental income received by the Applicant and payments already made by him in reduction of the debt.
Social Security Act 1991 ss 1224, 1237A, 1237A(1A), 1237AAD
Beadle v Director-General of Social Security (1985) 60 ALR 225
Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484
Secretary, Department of Employment Education Training and Youth Affairs v Prince (1997) 50 ALD 186
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
REASONS FOR DECISION
15 June 2004 Mr RP Handley, Deputy President
Summary
1. The Applicant, Kenneth Merrifield, was found by Centrelink and an Authorised Review Officer to have been overpaid newstart allowance for the period 18 May 1998 to 7 October 2002 as a result of the rate of newstart allowance he received during this period being based on an incorrect income disclosure, as Mr Merrifield did not disclose income that he received from a rental property. No special circumstances were found that would justify waiving recovery of or writing-off the debt. The Social Security Appeals Tribunal (“SSAT”) affirmed this decision on 7 August 2003. This is the decision to be reviewed by the Administrative Appeals Tribunal.
Background
2. Mr Merrifield was born in England on 27 March 1947 and is aged 57. Mr Merrifield is a widower, his wife, Eileen Christine Merrifield, having died on 1 June 1994 (T p33). He has an adult daughter, Caroline, who now resides in Brisbane with her family.
3. On 20 May 1996, Mr Merrifield lodged with the then Department of Social Security in Nowra a claim for newstart allowance, a form detailing his assets and a form providing details of his self-employment (T4 p24). He did not pursue his claim at this time because of an impending visit to England. Mr Merrifield lodged similar forms detailing his assets, income and investments on 31 December 1996 (T7) and, on 14 January 1997, he lodged a claim for newstart allowance (T9 p33). In answer to question 61, as to whether he received money from any source, Mr Merrifield ticked “No”; in answer to question 67, as to whether he owned or had “an interest in any real estate or farm”, he ticked “No”; and in answer to question 69, as to whether he held any other assets other than his own home, he ticked “No” (T p39). He also lodged a Real Estate Details form which stated that he owned a house at Shoalhaven Heads from which he received a gross weekly income of $160 per week and in respect of which he owed $67,000, secured by a mortgage over the property (T p42).
4. On 18 May 1998, the Department wrote to Mr Merrifield informing him that his newstart allowance entitlement for the period 12 May 1998 to 25 May 1998 was $321.50. The letter also informed him that he was obliged to tell the Department if his circumstances changed, including if his income had changed from the rate last notified or if the income shown in the letter was incorrect (T14 pp68-69). The letter notified Mr Merrifield that income included “income from rent” (T p70). During the remainder of 1998, and in the period 1999 to July 2000, the Department regularly informed him of his newstart allowance and his obligation to tell the Department of any change in his income, including any income received from rental property.
5. On 25 July 2000, 14 August 2000 and 31 May 2001, Mr Merrifield telephoned the Department and informed them that there was a change in his income as he was presently in employment (T p72).
6. On 3 September 2002, a Centrelink data match with the Australian Taxation Office revealed Mr Merrifield as the owner of two investment properties (T p75). Centrelink subsequently sent him a letter requesting that by 24 September 2002 he complete and lodge details of his assets, income, investments and real estate, and provide Centrelink with copies of his income tax returns (T p75). On 10 September 2002, Mr Merrifield phoned Centrelink and informed them that he had previously provided information as to his taxation returns. He was informed that he should complete and return the forms relating to his income and assets but was not required to provide his taxation returns (T p75). Mr Merrifield failed to lodge the required documents by 24 September 2002.
7. On 10 October 2002, a notice was issued to Mr Merrifield advising of the suspension of his newstart allowance (T74). On 16 October 2002, an officer of Centrelink telephoned to inform him that a decision had been made to cancel his newstart allowance because of his failure to return the completed forms (T 18 p76). On 23 October 2002, the Australian Taxation Office provided details of his rental income to Centrelink (T19 p78).
8. On 2 January 2003, a debt was raised against Mr Merrifield in the sum of $9,673.46 for an overpayment of newstart allowance for the period 18 May 1998 to 7 October 2002 on the basis that income from a rental property at Newtown had not been taken into account in calculating the payments due to him (T20 p79). On 13 February 2003, Centrelink received a request for a review of the decision from Mr Merrifield (T21). He stated that the overpayment was due to an administrative error by Centrelink in that it had failed to correctly calculate the amount of newstart allowance payable to him and that poor communications within Centrelink had added to the problem (T p80).
9. On 1 May 2003, the original decision-maker advised Mr Merrifield that, having conducted a review, he had decided not to change the decision. However, it could be referred to an Authorised Review Officer if Mr Merrifield provided complete income tax returns for the years 1997/1998 to 2001/2002 (T23 p88). On 23 May 2003, Mr Merrifield requested a review by an authorised review officer (T p85) who, on 12 June 2003, affirmed the decision, stating that Mr Merrifield had failed to declare rental income from a property in Newtown and income from bank investments (T p90). On 2 July 2003, Mr Merrifield lodged an application for a review of this decision by the SSAT (T26 p100).
10. On 7 August 2003, the SSAT affirmed the decision to raise and recover a debt representing an overpayment of newstart allowance (T2). The SSAT found that Mr Merrifield had provided insufficient and misleading details as to his property ownership, albeit unintentionally. It also found that write-off of the debt was not appropriate in this case, and that because the debt was at least partly due to the incomplete and misleading information provided by Mr Merrifield, the debt could not be due solely to administrative error and therefore recovery of the debt could not be waived (T p13). On 11 September 2003, Mr Merrifield lodged an application for a review of this decision by the Tribunal.
11. On 9 March 2004, Centrelink recalculated the debt owing, and now seeks to recover the sum of $17,561.12 for the period 17 December 1996 to 7 October 2002.
12. At the hearing, the Applicant represented himself and the Respondent was represented by George Lozynsky, Advocate, of Centrelink. The evidence before the Tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“the T Documents”) together with the documents tendered by the parties at the hearing. Mr Merrifield gave oral evidence.
Applicable Legislation
13. The relevant legislation is the Social Security Act 1991 (“the Act”). Section 1224(1) provides that if a social security payment has been made to a person and the amount was paid because of a false statement or false misrepresentation or a failure or omission to comply with a provision of the Act, then the amount paid becomes a debt due to the Commonwealth. Following amendments to the Act that took effect on 1 July 2001, s 1223(1) now provides that if a social security payment is made to a person who is not entitled to that payment, then the amount of the payment is a debt due to the Commonwealth.
14. Section 1236(1) provides that the debt may be written off, including if the debtor has no capacity to repay the debt (s 1236(1A)).
15. Section 1237A(1) provides that “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”.
16. Section 1237AAD states:
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 Merrifield’s evidence
17. Mr Merrifield said that from late 1992/early 1993, he and his wife ran a general store and takeaway business in Shoalhaven Heads. They had previously lived in Sydney where Mr Merrifield worked as an engineer for Shell. After his wife died on 1 June 1994, he found running the business on his own was too much because the shop was open 16 hours a day, seven days a week. Therefore, in August 1994, he put the business on the market although he did not finally sell it until January 1996.
18. In April 1996, Mr Merrifield went to see the Department in Nowra to find out about looking for work and obtaining Social Security benefits. He had never before applied for Social Security benefits. He started to fill out the necessary claim and assets forms but when he advised the departmental officer that he had made a commitment to take his wife’s ashes to England, he was advised to postpone making an application until after he had returned from England because of the obligations to look for work if he was receiving newstart allowance. He took this advice and did not pursue his application. He travelled to England in July 1996 returning to Australia in early September 1996.
19. Because at that time, Mr Merrifield had an idea for a small business, he approached the Department of State and Regional Development for assistance. He was advised to go to the Department and apply for the Special Employment Development program. Mr Merrifield said this involved more limited obligations to look for work than newstart allowance in order to allow time for the recipient to establish a small business. Mr Merrifield said ultimately his proposal “didn’t go anywhere”. However, in the meanwhile he had been receiving newstart allowance.
20. Mr Merrifield was issued with the necessary forms to claim newstart allowance by the Commonwealth Employment Service office in Nowra on 10 December 1996. He lodged the claim form and a Real Estate Details form at the Department’s Nowra office on 14 January 1997. At the time he completed the form, Mr Merrifield assumed there would be a waiting period of three months before he would be paid the allowance. He explained to the departmental officer who was present when he completed the form in the Nowra office, Mrs Brumpton, that he would be moving into the house which he and his wife had purchased at 10 Gerroa Road, Shoalhaven Heads, when the tenants who were currently in occupation moved out in March 1997. Mr Merrifield and his wife had lived in a rental property in Shoalhaven Heads and Mr Merrifield could not initially bring himself to move into the house they had bought after her death.
21. Thus, when Mr Merrifield stated his home address at question 7 of the newstart allowance application form as being 10 Gerroa Road, it was because he believed that by the time his newstart allowance payments commenced, he would be living at 10 Gerroa Road. Mr Merrifield told Mrs Brumpton of this who noted on the form “client states … his residential house is being leased out until March 97 and he is living with a male friend”. He acknowledged that his answer to question 8, “How long have you lived at your house address?” of “3 years” was incorrect. He probably wrote this because he had lived in Shoalhaven Heads for three years.
22. Mr Merrifield noted that in his answer to question 42, “Do you have any illness which prevents you doing certain types of work?”, he stated that he suffers from polio which he contracted as a child. This illness has had an ongoing effect throughout his life.
23. Mr Merrifield said that he answered “No” to question 53, “Will you (or your partner) get any income in the next fortnight?” because he assumed this meant earned income. He acknowledged that in January 1997, he was receiving rent from 10 Gerroa Road, as disclosed on the Real Estate Details form which he lodged on 14 January 1997. He also then still owned the family home in Dundas Valley where his daughter was living. She was not specifically paying him rent but was making the required housing loan (mortgage) repayments. Mr Merrifield did not consider this to be rent although he acknowledged that on his accountant’s advice these payments were claimed as rent in Mr Merrifield’s income tax returns.
24. Mr Merrifield acknowledged that he made a mistake in answering question 67. This question asked “Do you own or have an interest in any real estate or farm?” His answer “No” was incorrect because in addition to 10 Gerroa Road, he then owned the Dundas Valley house.
25. Mr Merrifield said he also made a mistake in answering one of the questions on the Real Estate Details form. In answering the first 12 questions on the form, he supplied details of his property at 10 Gerroa Road which was being rented out for $160 per week. However, in his answer to question 13, “Describe any building that you have other than the house you live in?”, he gave details of the age and construction of the Dundas Valley house.
26. Mr Merrifield said when he moved into the house at 10 Gerroa Road, he phoned Mrs Brumpton to inform her that he had done so. From her note on the application form, she was aware that he would be doing so. Mr Merrifield revealed that it was a short phone conversation and Mrs Brumpton said she would amend his file records accordingly.
27. Mr Merrifield said having started to receive newstart allowance, he took care to notify the Department of any money he earned. In September 1997, a departmental officer phoned him for confirmation that he was living at 10 Gerroa Road. The officer agreed that a letter from the Manager of the Real Estate office who had arranged the renting of the property confirming the end of the rental, would be sufficient. Mr Merrifield arranged for Elders Real Estate in Berry to supply the required letter. The Tribunal notes that although no record of this phone call or a letter from Elders appears in the T Documents, there is a departmental print out with allowance history and transaction summary generated on 9 September 1997 (T29).
28. Mr Merrifield said on 11 September 1997, he was asked by the Department to supply his income tax return for the financial year ended 30 June 1996. He supplied this together with a letter from his accountant on 19 September 1997 (T11).
29. Mr Merrifield was asked why when completing an Application for payment of newstart allowance form, in respect of the period 5 August 1997 to 18 August 1997 (T12), he did not notify a change of circumstances. He responded that there had been no change in his circumstances since he notified the Department that he had moved into his house at 10 Gerroa Road in March 1997.
30. Mr Merrifield was also asked about a letter sent to him by the Department dated 18 May 1998 (T14) notifying him that his next fortnightly payment of newstart allowance would be $321.50. Mr Merrifield acknowledged that after receiving such notification letters for a while, he no longer read the notice on the back of the form. He said it appeared his payment was always reduced by rental income which had continued to be taken into account even after he notified Mrs Brumpton that he had moved into 10 Gerroa Road.
31. Mr Merrifield said his next change of circumstances occurred in about April 2000 when the sale of his Dundas Valley house and the purchase of a one bedroom unit at Newtown was settled. The unit was purchased outright without finance. Initially, his daughter lived there for about a month, mainly to tidy the place up and prepare it for rental. She then moved to Brisbane and Mr Merrifield placed the unit in the hands of Real Estate Agents, Kelly & Sons of Newtown, who arranged tenants. Rent from the unit was paid to Mr Merrifield.
32. Mr Merrifield said he completed a Real Estate Details form (form R1) providing all the relevant information about the Newtown unit, including the rental income received and when the tenants had moved in, in late April 2000. He thought he had probably obtained the form R1 from the Department’s Nowra office. He remembers having handed this form in personally when he went into the Nowra office to lodge his 12 weekly continuation of payment form. He did not speak to anyone in particular about the form – he handed it to a departmental officer who glanced at the form, said it was fine and they would contact him about it if it was necessary to do so. Mr Merrifield said he attached a copy of a one page letter from his solicitor to the form confirming the date of settlement of the transactions.
33. In cross-examination, Mr Merrifield was referred to the Authorised Review Officer’s Decision Statement of 12 June 2003 (T25) where she recorded that Mr Merrifield had told her that his daughter had lived in the flat for six months. Mr Merrifield denied this and said the officer’s record was wrong. At most, his daughter had lived in the unit for six weeks before moving to Brisbane.
34. After lodging the form R1, Mr Merrifield noticed in the subsequent period there was no change to the rate of newstart allowance he was being paid. So the next time he went into the Nowra office to lodge his 12 weekly continuation of payment form, he went to the counter and told the officer that there appeared not to have been any adjustment to his rate of newstart allowance notwithstanding his now receiving income from a rental property. Mr Merrifield could not recall the officer to whom he spoke. However, Mr Merrifield remembers her looking up his file on the computer and telling him that rental income was being taken into account and that everything “looked OK”. Mr Merrifield was reassured. In cross-examination, Mr Merrifield acknowledged that he had probably not told the counter officer any details of the rental property when making the inquiry.
35. Mr Merrifield continued to notify the Department of any casual earnings. He remembers raising the question of whether his rental income was being taken into account when he phoned to notify casual earnings, probably on 14 August 2000 (T p73). There continued to be a nagging doubt in is mind about this. He also raised this on a second occasion when he went into the Nowra office to lodge his 12 weekly continuation of payment form. Again, the counter officer checked his file on the computer, and told him rental income was being taken into account. On another occasion, Mr Merrifield tried to contact one of his departmental case managers – Pauline Crannage or Paul (Mr Merrifield could not recall Paul’s surname) – to query this but was unable to contact them. He did, however, speak to another officer about his casual earnings (T17, recording a phone conversation on 31 May 2001).
36. Mr Merrifield acknowledged that in September 2002, he had received a letter asking for information about his rental properties and copies of his income tax returns going back to 1996. Mr Merrifield said he did not complete the forms because he was fed up with the way in which Centrelink was handling his file and all the hassles involved. Instead, he asked for his allowance to be cancelled. A computer record in the T Documents (T p75) dated 10 September 2002 states:
Customer phoned very irate because this is the third year he has received a request for tax returns etc re his rental property. He said he spoke to someone last year who assured him it would all be fixed up He went to his MP about it. He has a rental property which is as per tax liaison. We have a rental property which is his home address. I cannot find a rental RV on record. All I can think is that the review was deleted, but the address of rental property was not amended. I advised customer to complete mods and return them. He did not have to supply Tax Returns. He said that I should forget it all and cancel his payment, because it was not worth all the hassle. He eventually agreed to complete Mods. 10/9
However, Mr Merrifield did not complete and return the forms and his newstart allowance was subsequently cancelled and an overpayment raised based on information receiving from the Australian Taxation Office.
37. Since then, Mr Merrifield has been living off the rental income from his Newtown unit together with his earnings from any casual work he has been able to obtain. However, his capacity to undertake such casual work is limited as a result of the ongoing effects of the polio he contracted as a young child and of his back condition. He can only sit and stand for short periods and has difficulty walking. The last report on him from Mission Employment to Centrelink stated that he was unemployable. Mr Merrifield’s general practitioner has also prepared a report for Centrelink stating that he is unable to work. He works for a couple of hours at the local newsagent on Saturday mornings when required – usually about 75% of Saturdays. Otherwise he only has income of $78 per month from other investments.
38. Mr Merrifield said he manages on his small income and is not in financial hardship. He commenced making repayments of the debt in January 2003, at the rate of $25 per fortnight. He stopped these for a while when he was told that he need not make the payments while the matter was under review by the Tribunal. However, after receiving recent threatening letters from the Department, he decided to make the payments in any event and increased the repayment to $50 per fortnight from 23 February 2004. Since 30 January 2003, he has repaid a total of $775. Mr Merrifield also noted that the overall debt calculation appears to be incorrect because it fails to take into account another overpayment of newstart allowance of $606.41.
39. Mr Merrifield produced a report of an x-ray of his full spine dated 15 September 1998. This records:
There is a very marked scoliosis convex to the right side in the lower thoracic region and to the left side in the lumbar region. The vertebrae are osteoporotic. There also is a thoracic kyphosis, maximal around T7/8 where there are large osteophytes …
Further Documentary Evidence
40. At the conclusion of the hearing, the Tribunal asked Mr Lozynsky to provide a copy of the Customer Record Access Monitor Report (“the CRAM Report”) for Mr Merrifield on the basis that the Tribunal would not disclose the names of the Centrelink officers recorded as being “users” in the Report to Mr Merrifield, thereby protecting their privacy. The Tribunal made an order under s 35(2) of the Administrative Appeals Tribunal Act 1975 in respect of the Report.
41. The purpose of the Tribunal examining the CRAM Report was to ascertain whether it would provide evidence to corroborate Mr Merrifield’s account of his contact with Centrelink. While the Report did provide a record of the dates on which Mr Merrifield’s computer file was accessed, it was not possible to tell exactly what was the extent of the Centrelink officer’s activity on the occasion of each access and the reason for the access. The Report was therefore of very limited assistance.
Application of the Law and Findings
42. The first issue for the Tribunal to determine is whether Mr Merrifield received an overpayment of newstart allowance and if so whether that overpayment is a debt due to the Commonwealth. The second issue for the Tribunal is whether any debt should be recovered and, in particular, whether pursuant to s 1237A(1) or 1237AAD of the Act the debt should be waived.
43. The Respondent contends that Mr Merrifield made incorrect statements in completing his newstart allowance claim form in January 1997. Mr Merrifield acknowledged that he made two mistakes in completing the form. First, he stated he had been living at the house at 10 Gerroa Road for three years when, in fact, he had not yet moved into it. He said he probably wrote this because he had been living in Shoalhaven Heads for three years. Second, he answered question 67 incorrectly when he stated that he did not own any real estate apart from his own home because, at that time, he still owned his former family home at Dundas Valley. Mr Merrifield said he also made a mistake on the accompanying Real Estate Details form when he provided details of the age and construction of his Dundas Valley house rather than his house at 10 Gerroa Road.
44. The Tribunal accepts that these mistakes were inadvertent, and that there was no intention on the part of Mr Merrifield to mislead or deceive the Department. Indeed, the Tribunal found Mr Merrifield to be frank and honest in giving evidence and his account of the relevant events was entirely credible. Clearly, Mr Merrifield is a person of strong moral principles who sought to “do the right thing” throughout.
45. In addition to the above mistakes, Mr Merrifield also answered question 53 of the newstart allowance application form incorrectly when he stated he would not receive any income in the next fortnight. He explained that he assumed that “income” in this context meant “earned income”. However, his then rental income from the 10 Gerroa Road property was properly declared on the Real Estate Details form. With regard to where Mr Merrifield was living in January 1997, he stated his home address as 10 Gerroa Road. He said he did this because he was planning to move into that property in March 1997 when the then current tenants vacated it. Mr Merrifield obviously discussed this with the departmental officer who was present when he completed the form because she wrote a comment to this effect on the last page of the form.
46. The Tribunal accepts Mr Merrifield’s evidence that in March or April 1997, he phoned a departmental officer at the Nowra office. He recalls that it was Mrs Brumpton, who was the person present when he completed the newstart allowance claim form in January 1997. Mr Merrifield told the officer that he had moved into his house at 10 Gerroa Road. She said that she would amend his file records accordingly. Although there is no departmental record of this phone call, the Tribunal accepts Mr Merrifield’s evidence and finds that it did occur. The CRAM Report records that a number of Centrelink officers accessed Mr Merrifield’s computer file between 21 March 1997 and 18 April 1997 but is otherwise of no assistance.
47. Mr Merrifield gave evidence that he received no rental income from his Dundas Valley property during the period prior to the settlement of the sale of the property in March 2000. However, his daughter was making the required housing loan repayments in respect of the property through this period and these amounts were treated as rental income for the purposes of Mr Merrifield’s income tax returns for this period. Mr Merrifield obviously should have declared his ownership of this property in January 1997 and the arrangement with his daughter over the housing loan repayments.
48. The Tribunal considers that the claimed overpayment period constitutes two parts. The first part is from the commencement of the payment of newstart allowance, effective from 17 December 1996, to the time the sale of Mr Merrifield’s Dundas Valley property was settled, which the Tribunal takes to be 31 March 2000 in the absence of other definitive evidence. The second part is the period from 1 April 2000 to the cessation of the payment of newstart allowance on 7 October 2002.
49. The Tribunal finds that any overpayment that occurred in the first period arose in part at least as a result of inadvertent mistakes made by Mr Merrifield in completing his newstart allowance claim form in January 1997. However, although only mistakes, they nevertheless constitute false statements and so, pursuant to s 1224(1) of the Act, the overpayment received by Mr Merrifield in respect of this first period constitutes a debt. While the Tribunal finds that an administrative error was made when the departmental officer failed in March or April 1997 to record on Mr Merrifield’s file that he moved into his property at 10 Gerroa Road, any debt for this period cannot be attributed solely to this administrative error. Thus, waiver pursuant to s 1237A(1) is not applicable.
50. Nevertheless, the Tribunal is not satisfied that the overpayment for the first period – from 17 December 1996 to 31 March 2002 – has been calculated correctly. The Tribunal therefore directs that the overpayment should be recalculated in accordance with the following:
a.For the period 17 December 1996 to 31 March 1997, Mr Merrifield’s income included net rental income from 10 Gerroa Road, Shoalhaven Heads.
a.For the period 17 December 1996 to 31 March 2000, Mr Merrifield’s income included net rental income from 27 Warwick Road, Dundas Valley. The Tribunal accepts that Mr Merrifield’s daughter, who was living at the property during this period, made Mr Merrifield’s housing loan repayments in lieu of rent. Thus, it may be that Mr Merrifield derived no net rental income for the property during this period.
The Tribunal notes that the Respondent may not be in possession of all the relevant information to undertake this calculation. Where it does not have this information, Mr Merrifield should use his best endeavours to provide this.
51. With regard to the second part of the claimed overpayment period, the Tribunal accepts Mr Merrifield’s evidence that he lodged a Real Estate Details form following settlement of the sale of his Dundas Valley property and of the purchase of Unit 311, 1 Georgina Street, Newtown in March 2000. The CRAM Report records that a Centrelink officer accessed Mr Merrifield’s computer file on 10 April 2000 but is otherwise of no assistance. The Tribunal finds that he lodged this form, which included details of the rental income received by Mr Merrifield from the Newtown unit, at the Department’s Nowra office together with a copy of a one page letter from his solicitor confirming the date of settlement. This form appears to have been lost by the Department.
52. The Tribunal finds that Mr Merrifield’s daughter lived in the Newtown unit for a period of about six weeks, paying no rent but preparing the unit for renting out and assisting in making the necessary arrangements for this with Kelly & Sons, Real Estate Agents of Newtown. Thereafter, the unit was let to tenants from which Mr Merrifield derived a rental income.
53. The Tribunal accepts Mr Merrifield’s evidence that when he realised his newstart allowance payments had not been reduced following his lodging the Real Estate Details form in about April/May 2000 detailing his rental income from the Newtown unit, he approached a counter officer at the Department’s Nowra office when he next lodged his 12 weekly continuation of payment form. He asked the officer whether his rental income was being taken into account in calculating his entitlement to newstart allowance. She checked his file on the computer, told him that the rental income was being taken into account and assured him that everything “looked OK”. The Tribunal notes that the CRAM Report records two Centrelink officers accessed Mr Merrifield’s computer file on 25 July 2000, three officers accessed his file on 14 August 2000 and another officer accessed his file on 15 August 2000 and 16 August 2000. The Report is not otherwise of any assistance.
54. However, Mr Merrifield continued to have a nagging doubt that his rental income from the Newtown unit was not being taken into account. He queried this on at least two other occasions – on the phone, possibly at the time of a phone call recorded on the Department’s file on 14 August 2000, and on another visit to the Nowra office to lodge his continuation of payment form. On both occasions, he was told rental income was being taken into account. However, in cross-examination, Mr Merrifield acknowledged that he had not mentioned the address of the rental property when making the enquiry. Notwithstanding this reassurance, Mr Merrifield’s nagging doubts continued.
55. The relevant question which must be asked about Mr Merrifield concerning these events is whether he received the continuing overpayments of newstart allowance in “good faith”? This is because, pursuant to s 1237A(1), where a proportion of a debt is attributable solely to administrative error made by the Commonwealth, waiver is only applicable where the debtor received the payment “in good faith”. The meaning of the phrase “in good faith” in this context has been examined by the Federal Court in a number of cases. The Respondent referred the Tribunal to the decision in Secretary, Department of Employment Education Training and Youth Affairs v Prince (1997) 50 ALD 186, a case involving similar provisions in the Student and Youth Assistance Act 1973, where at 189, Finn J said of “good faith”:
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 – it 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.
56. In Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484 at para 40-41, Cooper J discussed the meaning of “in good faith” in s 1237A(1):
40 Prima facie, s1237A(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 payment 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.
41 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 inquiries where doubt exists. Although said in a different context, the observations of Lord Blackburn in Jones v Gordon (1877) 2 App Cas 616 at 629 are apposite. His Lordship said :
"... 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. I think, my Lords, that that is established, not only by good sense and reason, but by the authority of the cases themselves."
57. In Mr Merrifield’s case, he expected his rate of newstart allowance to change following his having declared the commencement of rental income from his Newtown unit. From Mr Merrifield’s evidence, he made two enquiries of the Department in June 2000 and in August 2000 and despite reassurances given at these times, continued to have nagging doubts. These doubts were, of course, well-founded. Indeed, it was clear from the departmental notices received by Mr Merrifield which detailed the fortnightly income taken into account in calculating his entitlement to newstart allowance (ranging from $35.32 (Notice dated 19 June 2000 – T52) to $30.75 (Notice dated 2 July 2001 – T58) and $26.18 (Notice dated 11 March 2002 – T65), that the fortnightly income amounts taken into account in calculating his entitlements bore no relation to the actual income Mr Merrifield was receiving.
58. While Mr Merrifield took some steps to question the correctness of his payments, in light of his continuing doubts, he would have been wise to pursue his concerns more vigorously providing greater detail to enable a more thorough investigation to be made. It is for this reason that the Tribunal finds that he did not receive the payments in good faith. There is no suggestion of bad faith on Mr Merrifield’s part or that he acted improperly. However, he had an obligation to notify the Department of events affecting his payments and the Tribunal considers that it was not unreasonable to expect that he should have done more to pursue his “nagging doubts” more vigorously.
59. Thus, the Tribunal concludes that because Mr Merrifield did not comply with his notification obligations under the Act, the overpayment for the second part of the overpayment period from 1 April 2000 to 7 October 2002 is a debt pursuant to s 1224(1) of the Act. Moreover, waiver pursuant to s 1237A(1) is not applicable in respect of this second part of the overpayment period because he did not receive the payments “in good faith” within the meaning attributed to this phrase by the Federal Court: he continued to have nagging doubts about the correctness of the payments he was receiving and could have pursued these doubts more vigorously.
60. However, once again the Tribunal has concerns over the calculation of the overpayment for this period in the light of questions raised by Mr Merrifield of whether an overpayment of $606.41 should have been included in the total overpayment amount and the apparent failure of the Department to take into account instalment repayments now totalling $775 made by Mr Merrifield in the period 30 January 2003 to 6 April 2004 and continuing at a rate of $50 per fortnight. The Tribunal therefore directs that the overpayment for the second period, that is from 1 April 2000 to 7 October 2002, should be recalculated.
61. The final question is whether the total debt for the two periods should otherwise be recovered. The Tribunal finds that write off – the suspension of recovery of a debt – under s 1236 of the Act is not appropriate in these circumstances. A debt may also be waived pursuant to s 1237AAD where the debt did not result wholly or partly from the debtor or another person knowingly making a false statement or representation, or failing or omitting to comply with a provision of the Act, and where there are special circumstances (other than financial hardship alone) that make it desirable to waive, and it is more appropriate to waive rather than to write off the debt or part of the debt.
62. The Tribunal finds that Mr Merrifield did not knowingly make a false statement or representation or fail to omit to comply with a provision of the Act. While in the second part of the overpayment period, Mr Merrifield should have pursued his “nagging doubts” more rigorously, in the Tribunal’s view his not having done so, having made some efforts in this regard, does not amount to “knowingly” failing or omitting to comply with a provision of the Act. He did not deliberately fail or omit to comply – indeed, he consciously sought to comply, albeit not as vigorously as he might have done.
63. With regard to whether there are “special circumstances”, although the Act provides no guidance as to the meaning of this phrase, this has been the subject of statutory interpretation by the Federal Court and the Tribunal. The leading case is probably Beadle v Director-General of Social Security (1985) 60 ALR 225, a decision of the Full Federal Court. In Beadle (supra), the Court did not think it possible to lay down precise limits or precise rules. It would depend on the circumstances of the particular case as to whether they constituted special circumstances. Moreover, even though the phrase “special circumstances” lacks precision, it “is sufficiently understood in our view not to require judicial gloss” (at 228).
64. In that case, the Court affirmed the decision of the Tribunal under review, Re Beadle and Director-General of Social Security (1984) 6 ALD 1, in which the Tribunal, whilst acknowledging that the phrase “special circumstances” is “incapable of precise and exhaustive definition”, said, nevertheless, that the circumstances “must have a particular quality of unusualness that permits them to be described as special” (at 3).
65. The Tribunal is not satisfied that Mr Merrifield’s circumstances are so unusual or exceptional as to be described as “special”. He told the Tribunal he is not in financial hardship and while there are some constraints on what he can do as a result of the ongoing effects of polio and his back condition, nevertheless he is capable of limited part-time work if this is available. However, the Tribunal recognises that Mr Merrifield has only a very limited capacity to repay the debt and should be permitted to continue with repaying it by instalments out of his income as he commenced doing in January 2003.
66. In conclusion, the Tribunal sets aside the decision under review and remits the matter to the Respondent for reconsideration in accordance with the following directions:
(1)The Tribunal finds that Mr Merrifield received an overpayment of newstart allowance in the period 17 December 1996 to 7 October 2002.
(2)Such overpayment constitutes a debt due to the Commonwealth.
(3)Recovery of this debt should be by way of reasonable fortnightly instalments.
(4)The amount of the overpayment giving rise to the debt should be recalculated in accordance with the following:
(a)For the period 17 December 1996 to 31 March 1997, Mr Merrifield’s income included net rental income from the property at 10 Gerroa Road, Shoalhaven Heads;
(b)For the period 17 December 1996 to 31 March 2000, Mr Merrifield’s income included net rental income from his property at 27 Warwick Road, Dundas Valley. The Tribunal finds that Mr Merrifield’s daughter, who was living at the property during this period, made Mr Merrifield’s housing loan repayments in respect of the property in lieu of rent. Thus, it may be that Mr Merrifield derived only a minimal net rental income for the property during this period. If the Respondent is not in possession of all the relevant information as to Mr Merrifield’s net rental income for the property for this period, then Mr Merrifield is under an obligation to use his best endeavours to provide this.
(c)For the period 1 April 2000 to 7 October 2002, the Respondent should clarify whether the overpayment takes account of an additional overpayment of $606.41 raised by the Respondent of which Mr Merrifield has received notice.
(5)The Respondent should also clarify whether instalment repayments made by Mr Merrifield since 30 January 2003, as at 6 April 2004 totalling $775 and continuing at a rate of $50 per fortnight, have been taken into account in calculating the outstanding debt.
I certify that the 66 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RP Handley, Deputy President
Signed: .....................................................................................
AssociateDate/s of Hearing 14 April 2004
Date of Decision 15 June 2004
Representative for the Applicant Self represented
Representative for the Respondent Mr G Lozynsky, Advocate, Centrelink
1
4
0