O'Cass and Secretary, Department of Family and Community Services

[2000] AATA 226

DECISION AND REASONS FOR DECISION [2000] AATA 226

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q1999/104

GENERAL ADMINISTRATIVE DIVISION          )          
           Re      ARON GEORGE O'CASS & KAREN ANN O'CASS   
  Applicants
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       Mr K L Beddoe (Senior Member) 

Date23 March 2000

PlaceBrisbane

Decision      The decisions under review are affirmed.         
Decision No 226/2000  (Sgd)  K L Beddoe
  (Senior Member)
CATCHWORDS
SOCIAL SECURITY : Overpayment and recovery of debt – Waiver of a debt

Social Security Act 1991 – s94(1)(c)(i), s1223, s1236, s1237A, s1237AAD

Department of Employment, Education and Training v Prince (1997) 152 ALR 127
Beadle and Ors v Department of Social Security (1985) 7 ALD 670

REASONS FOR DECISION

Mr K L Beddoe (Senior Member) 

1. The applicants requested review of decisions by the respondent to raise and recover debts due to the Commonwealth of $11,717.10 for each applicant.  The claimed debts arose from payments made by the respondent during the period 15 November 1996 to 30 April 1998.  The Social Security Appeals Tribunal affirmed the decisions of the respondent.

2. The applicants do not contend that they were entitled to the payments under the Social Security Act 1991 ("the Act"). Their case was conducted on the basis that the Commonwealth's right to recover the debts should be waived. The statutory provisions relied on are sections 1237A(1) and 1237AAD of the Act.

3. Section 1237A(1) reads:

   "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."

4. Section 1237(1A) has no operation on the facts of this case.

5. Section 1237AAD reads:

   "1237AAD 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:

1. 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."

1. This is not a case where section 1236 would authorise the writing off of the debt.  There was no submission to the contrary.

2. Section 1223(1) of the Act applied in two formats during the relevant period. If an amount had been paid to a person before 1 October 1997 by way of social security payment and the recipient was not qualified for the payment and the amount was not payable to the recipient the amount so paid is a debt due to the Commonwealth. With effect from 1 October 1997 the entitlement and payability tests ceased to be cumulative and became alternatives.

3. At the hearing on 11 November 1999 Mr O'Gorman of counsel appeared for the applicants and Mr Letch represented the respondent.  At the resumed hearing on 24 November 1999 the applicants were represented by Ms Bolton of Welfare Rights Centre and Mr Letch again represented the respondent.  Following the resumed hearing the matter was adjourned to allow the parties to make submissions in writing.  Written submissions were subsequently made by the parties and the applicants also made written submissions in reply.

4. Oral evidence, all of which was frank and truthful, was given by the applicants and two Centrelink officers. The documents lodged in the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 were before the Tribunal as the T documents and further documents were tendered and marked as exhibits as follows:

   Exhibit A       Affidavit of Aron George O'Cass
   Exhibit B       Copy bank card
   Exhibit C       Affidavit of Karen Ann O'Cass
   Exhibit I         Statement of Pauline Hyde

Findings of Fact

1. The first applicant was involved in a motor vehicle accident in 1986. The effects of the accident were such that by 1991 he had left his employment and been granted a disability support pension under the Act. Complementary to the grant of pension was payment of a wife's pension to the second applicant. Both pensions were paid to a bank account at the ANZ Bank. There is no dispute that the applicants were entitled to receive payment of these benefits.

2. While receiving the benefit the first applicant studied part-time at Griffith University on a scholarship.  He eventually obtained appointment as a lecturer at the University of New England.  Upon obtaining this position the applicants notified Centrelink that payment of the disability support pension was no longer required because of the taking up of employment.

3. Payment of the disability pension and wife benefit was suspended by Centrelink in consequence of this advice.  Centrelink's records show that this was done on 20 February 1996 because the first applicant had commenced employment at the University (T3).

4. The applicants did not and have not made further application for payment of a disability pension and wife benefit.

5. From this point the facts take on a bizarre character.  By letter dated 1 November 1996 the respondent wrote to the first applicant and advised that payment of disability support pension would start again from 31 October 1996.  The letter indicates that Centrelink had lost sight of the fact that the applicant was in employment albeit the information was included in the Centrelink data base.  The letter was addressed to the applicant's previously advised address at Armidale.

6. The second applicant contacted Centrelink and told them that the claim for disability support pension had not been reactivated.  In filling out a form for review of family payments the second applicant advised Centrelink that her husband was being paid $40,000 p.a. in respect of his employment at the University.  That advice was given to Centrelink in November 1996.  Document T7 shows that taxable income was said to be $32,000.  In her contact with Centrelink the second applicant was told that a clerical error had occurred in relation to the disability support pension and the pension had not been reactivated.

7. In November 1996 the Department of Social Security office at Armidale received three separate advices from the ANZ Bank stating that the first applicant's bank account had been closed.  The Bank returned the payments of pension sought to be paid to that account (T8).

8. By letters dated 25 November 1996 the Regional Manager of the Department of Social Security wrote to both applicants in effect requesting a new bank account number so that the payments of benefits could be made to the applicants.  The applicants say, and I accept, that they did not receive these letters.  I have come to that view because the original letters are held on the respondent's file and do not show a date received stamp as to when they were returned to the office.  For reasons which she is unable to explain because of the passage of time, Pauline Hyde said that she had written the second applicant's bank account details on the original letter (T10).  In her evidence she speculated that she had done so because the second applicant brought the letters back to the office and advised her bank account details.   That hypothesis has several problems which appear to me to be insurmountable.  The first is that the applicants deny they received the letters, the second is that the letters have not been stamped in when allegedly received back from the second applicant, the third is that there is nothing in writing signed by the second applicant and the fourth is that by her own admission Ms Hyde has no recollection of the incident so that her hypothesis as to what happened has no basis in fact.

9. In January 1997 the applicants received pension cards.  The second applicant rang the Department of Social Security and she says, which I accept, that she was told because the pension was suspended the cards were valid for 1997.  A further card was received by the second applicant for 1998.  She again contacted the Department of Social Security and was told that many cards had been issued in error and she should tear it up.  On neither of these occasions was the second applicant told that the applicants were entitled to the cards because they were receiving the disability support pension and the wife's benefit respectively.

10. The applicants' evidence is that they did not receive bank statements throughout the period November 1996 to April 1998 and did not therefore know that the pension benefits were being paid into the account.  Copies of the bank statements are exhibited in the applicants' affidavits (Exhibits A and C).  The bank account is in the first applicant's name.  He said deposits were initially made to the account in respect of funds coming from:

(a) Scholarship funds from University

(b) Family Allowance

(c)  Reimbursements of travel expenses

(d) Occasional miscellaneous receipts.

1. The bank account was said to be used by the first applicant on a needs basis.  Expenditures identified are as follows:

(a) Electricity, car registration and telephone

(b) Repairs to family home

(c)  Holiday expenses

(d) Daily household expenses.

1. The account was normally accessed by automatic teller machine but the first applicant says he took no interest in the state of the account unless he was confronted with an inadequate balance in the account.  Further, he said, many transactions were conducted by "EFTPOS" when no account balance details are provided.  The bank statements do not reveal any occasion when the account was overdrawn.

2. The applicants are unable to explain the fact of non-receipt of bank statements but did say there was a history of difficulties with delivery of mail in their area.  Upon realising that he did not have bank statements to assist in preparing income tax returns the first applicant obtained a statement from the bank for this purpose (T36).  He did not explain why no action was taken to remedy the non-receipt of bank statements.

3. The first applicant said he attended the Armidale office of the Department of Social Security to advise that he had obtained employment and over the relevant period he and the second applicant made contact by attendance on five occasions.  The receipt of the letter dated 1 November 1996 notifying recommencement of the pension (T4) resulted in one of those visits to the respondent's Armidale office to advise that the pension was suspended.

4. The applicants did not maintain a household budget and apparently had a haphazard approach to money except that they tried to keep a reasonable balance in the bank account.

5. It is that haphazard approach which is the likely explanation for what occurred from April 1997 when certain other income amounts ceased being deposited in the subject bank account.  The first applicant continued to make withdrawals from the account for amounts which bear no relationship with the Family Allowance payments being deposited into the account.  I have analysed the bank account to quantify the transactions from November 1996 to April 1997 and from May 1997 to April 1998.  That analysis shows the following:

15 November 1996 to 30 April 1997

Balance of account at 15/11/1996  $3,508
Add:       other deposits made (incl F/P)  $12,978
               pension payments credited  $7,588
Deduct:  withdrawals  $20,649
Balance at 30 April 1997  $3,382
(figures rounded and cents ignored)

1 May 1997 to 30 April 1998

Balance of account at 1 May 1997  $3,382
Add:       other deposits made (incl F/P)  $17,619
               pension payments credited  $15,845
Deduct:  withdrawals$33,351
Balance at 30 April 1998  $3,267
(figures rounded and cents ignored)

1. The balance figures shown are those appearing in the bank statements.  There is a discrepancy in the figures amounting to just over $200, which I have been unable to eliminate, but that discrepancy is of no consequence for present purposes.

2. Evidence given by officers of Centrelink was of little assistance to the Tribunal.  Much of that evidence was based on reconstruction from the documents.  In particular I am satisfied that the evidence regarding documents T9 and T10 was not based on any recollection of facts and relied on an assumption that the letters had been received and returned by the applicants.  I am not satisfied that I should accept that the letters were ever sent to or seen by the applicants.  The most likely explanation is that they were placed on the applicants' files after the notation of the applicants' bank account was made by Mrs Hyde and I so find.

3. I regret to say that I was left with the impression that the officers were reluctant to accept that they had participated in a misappropriation of money that can only be explained by accepting that administrative error alone caused the payments to be made.  Centrelink knew at all relevant times that the applicants were not entitled to the payments but continued to pay them.
   The Applicants' Submissions

4. There was no relevant false statement or false representation by the applicants which can be said to have caused the overpayments.  The overpayments were caused entirely by error on behalf of the respondent.  When notified in 1996 of the resumption of the pension the applicants contacted the respondent by telephone and were advised that the letters had been sent in error and payment of pension would not resume.  The applicants knew that the relevant bank account had been closed and were entitled to be satisfied that the payments would not be made.

5. When the applicants received pension cards they again contacted Centrelink in both 1997 and 1998.  On the second occasion the second applicant was told to tear the card up.

6. This is a case involving special circumstances which justify waiving the debt because the overpayment was caused by administrative error, the applicants were unaware the payments were being made to their bank account and as a consequence of these factors and their circumstances they are now suffering financial hardship because of the requirement to repay the resulting debts due to the Commonwealth.
   The Respondent's Submissions

7. The respondent concedes that the payments to the applicants were "reinstated" in error in November 1996.  By inference the respondent concedes that the payments constituting the debt were due solely to administrative error.  The respondent says, however, that the applicants did not receive the payment in good faith.  It says that the applicants' claim that they had no knowledge of the payments is implausible and should not be accepted.  In this submission the respondent relies on the judgment Department of Employment, Education and Training v Prince (1997) 152 ALR 127.

8. The real basis of the respondent's submissions is that I should not accept that the applicants are witnesses of truth and they were aware of the receipt of payments to which they were not entitled.

9. The respondent's submissions include the following quite extraordinary statement:

   "(Documents T9 and T10) were in fact received by the applicants.  The respondent contends that Mr or Mrs O'Cass, or both, presented to the office of Armidale Centrelink in late November 1996 with the letters dated 25/11/96, provided new account details, and accepted redirection of pensions to which they knew they had no entitlement to receive".

1. While I do not accept that there is any factual basis for that submission, accepting for the moment that there is some basis in fact, it is clearly the fact that Centrelink also knew that the applicants were not entitled to receive the payments.  The applicants had told Centrelink they were no longer entitled, the pensions had been suspended and the applicants did nothing to suggest that situation should be changed.

2. The respondent says I should not accept the first applicant's evidence to the effect that he took little interest in his bank account so long as the hole in the wall kept producing money.

3. In relation to the applicants' claim that they suffer financial hardship because of the debt, the respondent in effect, asserts that the applicants do have the financial capacity to repay the debt.
   Consideration

4. I am satisfied that Centrelink made the subject payments to the applicants in the knowledge that they were not entitled to those payments.  The payments were made because of administrative error and for no other reason.

5. I am also satisfied that the applicants were aware, at all relevant times, that they were not entitled to receive such payments.

6. The payments were made into a bank account operated in the main by the first applicant.  In the period 15 November 1996 to 30 April 1997, 36.7% of the withdrawals from the bank account were financed by the pension payments incorrectly paid to the account.  In the period 1 May 1997 to 30 April 1998 the percentage of withdrawals financed by the incorrect payments rose to 47.5%.  In those circumstances I am unable to accept the applicants' assertion that they were unaware that the payments were being received.  They received and spent the funds.  At least they had constructive notice of the receipt of the moneys. This is not a case of mistaken entitlement – the applicants knew at all relevant times they were not so entitled.

7. It follows, in my view, that I cannot be satisfied that the payments were received bona fide as explained in Prince. In particular at 152 ALR 130 Finn J 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".

1. It makes no difference that the applicants may have been unaware of the receipt of the payments.  They knew they were not entitled and they do not claim otherwise.  It follows that they cannot assert that they received the payments in good faith.

2. Section 1223 of the Act provides in effect that where an amount has been paid to a person by way of social security payment and the recipient was not qualified for the social security payment and the amount was not payable to the recipient the amount so paid is a debt due to the Commonwealth. The section was amended with effect from 1 October 1997 so as to make the tests in the alternative but nothing turns on that for present purposes.

3. The first applicant ceased to be qualified for payment of disability support pension when he took up employment at the University because he ceased to have a continuing inability to work (section 94(1)(c)(i)).  As to why the pension was only suspended is not clear but I am satisfied that while the first applicant continued in his employment he did not qualify for a disability support pension.

4. The payments in question were therefore payments for which the applicants were not qualified and, so far as is relevant, the amounts paid were not payable to them within the terms of the Act. The amounts so paid totalling $23,434 are debts due to the Commonwealth within the terms of section 1223 of the Act.

5. Because I cannot be satisfied that the applicants received the amounts in good faith section 1237A of the Act does not apply to require that the debts be waived. This is so notwithstanding that the overpayments were caused by administrative error made by the Commonwealth.

6. I turn now to consider whether there are special circumstances which justify the exercise of the discretion to waive the right to recover all or part of the debts within the terms of section 1237AAD. I have taken into account the serious errors made by Centrelink in making the payment, that no notification was made to the applicants, their evidence that they did not receive bank statements, and their financial circumstances.

7. I am satisfied, in particular, that the applicants had no basis upon which they could become aware of the incorrect payments until they received bank statements or upon non-receipt of the bank statements instituted enquiries as to the state of the bank account.  While it is reasonable to accept that payments may not be noticed in the bank account for a period of time it is not reasonable, in my view, to maintain a level of withdrawals from the account which exceeds the known level of deposits for an extended period of time without consideration of the state of the account.  In so far as the first applicant said that he kept making withdrawals until the money ran out consideration of the bank statements suggests that this was unlikely to happen because of the credit balances maintained in the account.

1. Given that situation it must be accepted that the applicants had constructive notice of the payments because they used the money deposited and as has been shown above the so called pension payments were a significant percentage of total deposits.

2. As an arbitrary basis to fix a time I have come to the view that the applicants must be taken to have been aware of the overpayments at the time they should have received bank statements issued by the National Australia Bank on 18 February 1997.  There is no evidence when such statements should have been received in the ordinary course of post but I have not assumed that they were posted on 18 February 1997.  I assume they were posted in the week following that date so as to be received by the applicants no later than Friday 28 February 1997.  The overpayments made to this date totalled $5,248.80 being $2,624.40 in respect of each applicant.

3. At 2 December 1996 before the first incorrect payment of pension was deposited the account balance was $3,271.51 CR.  At 28 February 1997 the account balance was $3,397.00 CR.  It will be apparent that if the pension payments of $5,248 had not been deposited in the account the balance would have been $1,851 overdrawn if the bank had accepted all debits charged to the account.  Even at that early stage the applicants were withdrawing and using the funds deposited for incorrect pension payments.

4. These are not circumstances which are so unfair, inappropriate or extraordinary as to justify a finding of special circumstances. There is no basis for a waiver of debt under section 1237AAD. The applicants had the use of the Commonwealth moneys in circumstances where they knew they had no entitlement to those moneys. If the use of the moneys arose out of a lack of awareness or a lack of concern for their financial circumstances, as seems to be the case, rather than a deliberate decision to use the moneys to which they knew they were not entitled, the result must be the same. There are no circumstances in this case which can be said to be so unfair or inappropriate so as to justify a finding of special circumstances (cf Beadle and Ors v Department of Social Security (1985) 7 ALD 670). Nor do the applicants financial circumstances satisfy me that repayment of the debt will cause significant financial hardship.

5. The decisions under review will be affirmed.

I certify that the 53 preceding paragraphs are a true copy of the reasons for the decision herein of Mr K L Beddoe (Senior Member)

Signed:         
  T G Lowther
  Associate

Dates of Hearing  11 November 1999 & 24 November 1999
Date of Decision  23 March 2000
Counsel for the Applicant                 Mr O'Gorman
Solicitor for the Applicant                  Ms Bolton

Representative for the Respondent Mr Letch