Palejs and Secretary, Department of Family, Community Services and Indigenous Affairs
[2007] AATA 1010
•12 January 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 1010
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2006/841
GENERAL ADMINISTRATIVE DIVISION ) Re KERRY PALEJS Applicant
And
SECRETARY, DEPARTMENT OF FAMILY, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr I Way Member Date12 January 2007
PlaceSydney
Decision The decision under review is affirmed. ......................[Sgd]....................
Mr I. Way, Member
CATCHWORDS
SOCIAL SECURITY – Child care benefit debt – Family benefit debt – recovery of debts – administrative error – consideration of whether payment was received in good faith – whether special circumstances exist – lack of severe financial hardship – decision under review is affirmed
A New Tax System (Family Assistance) Act 1999
A New Tax System (Family Assistance) (Administration) Act 1999
Dranichnikov and Centrelink (2003) FCAFC 133
Groth v Secretary, Department of Social Security (1995) 40 ALD 54
Ivovic and Director General of Social Security (1981) 3 ALN 95
Jess v Scott (1986) 12 FCR 187;
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Beadle and Director-General of Social Security (1985) 7 ALD 670
Riddell v Secretary, Department of Social Security (1993) 30 ALD 31
Secretary, Department of Employment, Education, Training and Youth Affairs v Prince (1997) 152 ALR 127
REASONS FOR DECISION
12 January 2006 Mr I Way, Member 1. This is an application by Mrs Kerry Palejs (“the Applicant”) for review of the decisions of the Social Security Appeals Tribunal (“SSAT”), dated 26 May 2006, that affirmed the decisions of Centrelink to raise and recover three debts that were owed to the Commonwealth by the Applicant in the sum of two thousand four hundred and eighty five dollars and seventy four cents.
2. The three debts comprise:
·A Childcare Benefit debt of $637.92 for the 2001/2002 tax year;
·A Childcare Benefit debt of $464.47 for the 2002/2003 tax year; and
·A Family Tax Benefit debt of $1,383.35 for the 2001/2002 tax year.
3. The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (T1-T42) and Respondent’s Statement of Facts and Contentions dated 28 November 2006 (Exhibit R1).
4. The Applicant was self-represented and gave oral evidence. Mr. James Larcombe represented the Respondent.
issues and legislative framework
5. This matter is to be determined within the provisions of the A New Tax System (Family Assistance) Act 1999 (the Act); and the A New Tax System (Family Assistance) (Administration) Act 1999 (the Administration Act).
6. There was no dispute between the parties that the two Childcare Benefit debts arose from underestimates by the Applicant of her income during the relevant years, compared with her actual income. The Applicant has accepted that she received Childcare Benefit (CCB) in a greater amount than the amount of benefit that she should have received, and that the difference between the received amount and the correct amount is a debt due to the Commonwealth by her. The Applicant informed the Tribunal that she did not wish to contest the CCB debt of $637.92 for the 2001/2002 tax year and was prepared to negotiate with Centrelink repayments of this debt by instalments. However, she contended that the second CCB debt of $464.47 for the 2002/2003 tax year should be waived.
7. The issue before the Tribunal in respect of CCB debts is whether all or part of the Applicant’s CCB debts should not be recovered.
8. In respect of the Applicant’s Family Tax Benefit (FTB) debt, there is no dispute between the parties that the debt of $1,383.35 has arisen because of an administrative error made by Centrelink. In summary, Centrelink had included one of the Applicant’s children as a dependant child when calculating her FTB, when in actual fact the Applicant had advised Centrelink that this child was no longer dependant. This resulted in an overpayment of $1,383.35, and the Applicant contends that this debt should be waived because she received the payment in good faith.
9. The issue before the Tribunal is whether all or part of the FTB debt of $1,383.35 due to the Commonwealth by the Applicant should not be recovered.
10. The questions before the Tribunal are clearly of narrow compass and relate to whether the debts, as set out above, should be recovered.
11. The legislative provisions in respect of recovery of debts are set out in the Administration Act as follows :-
95 Secretary may write off debt
(1)Subject to subsection (2), the Secretary may, on behalf of the Commonwealth, decide to write off a debt, for a stated period or otherwise.
(2)The Secretary may decide to write off a debt under subsection (1) if, and only if:
(a) the debt is irrecoverable at law; or
(b) the debtor has no capacity to repay the debt; or
(c)the debtor’s whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or
(d)it is not cost effective for the Commonwealth to take action to recover the debt.
…
…
97 Waiver of debt arising from error
(1)The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.
(2) The Secretary must waive the administrative error proportion of a debt if:
(a)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt; and
(b) the person would suffer severe financial hardship if it were not waived.
(3) The Secretary must waive the administrative error proportion of a debt if:
(a)the payment or payments were made in respect of the debtor’s eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and
(b) the debt is raised after the end of:
(i)the debtor’s next income year after the one in which the eligibility period or event occurs; or
(ii)the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;
whichever ends last; and
(c)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.
(4)For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.
…
101 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 the family assistance law; 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.
…
12. The operation of section 97 depends on whether the debt is raised within a stipulated period. The Family Assistance Guide explains this at chapter 7.3.2.10 as follows:
The administrative error proportion of the debt MUST be waived if:
·The payment was received in good faith, AND recovery of the debt would cause the debtor severe financial hardship, OR
·The payment was received in good faith, AND the debt has been raised during whichever of the periods below ends last:
oafter the end of the next income year following the income year in which the eligibility period or event which gave rise to the payment of family assistance, OR
omore than 13 weeks from the day the family assistance payment was made that gave rise to the debt
applicant’s evidence and submissions
13. At the outset of her testimony, the Applicant highlighted that she had a good history of timely notifications to Centrelink in respect of changes in her circumstances; and she emphasised that at no time had she undertaken any untoward action in her dealings with Centrelink, nor had she misrepresented herself or not told Centrelink the truth.
14. Having said that, the Applicant told the Tribunal that she did not accept the Respondent’s contention that she did not receive in good faith the overpayment of FTB in the amount of $1,383.35. It was her evidence that her integrity was extremely important and precious to her and that when the FTB payment of $4,332.55 was made to her bank account on the morning of 4 February 2003, she immediately used it to pay off debts. She accepted that she was told by Centrelink later in the day that some thirteen hundred to fourteen hundred dollars was overpaid, however, it was her evidence that she had spent the money by then and she told the Centrelink Officer she could not repay the overpayment. She said she did not tell Centrelink she was not willing to repay the money because it was Centreline’s mistake (as recorded by Centrelink).
15. The Applicant could not recall exactly how she spent the money, nor could she provide any records to throw light on how and when the money was spent. When it was put to the Applicant that she had told the SSAT that the money was spent on her wedding, the Applicant said that the money went towards paying outstanding debts, thereby allowing her to spend money on her subsequent wedding on 10 March 2003. The Applicant drew the Tribunal’s attention to the fact that Centrelink had told her on 20 December 2003 that she was eligible for a lump sum payment of FTB of approximately $2,800.00 to $2,900.00 and that she was very excited about this unexpected windfall. She said she rang Centrelink on 28 January 2003 looking for the money and found that it had been paid into the wrong bank account. She said she gave Centrelink the correct bank details and that she subsequently regularly checked with her bank by phone about the payment and this was how she knew the payment had gone into her account on the morning of 4 February 2003. She said she had not realised that there had been an overpayment until she was so informed by Centrelink later on 4 February by which time the money had been spent. It was on this basis that she contended that she had received the money in good faith.
16. The Tribunal notes that the SSAT recalls the Applicant telling the Tribunal that she could not recall a Centrelink office telling her “there is thirteen hundred to fourteen hundred dollars she is not eligible for” and furthermore the SSAT records the Applicant saying the money was spent promptly, certainly before Centrelink wrote to her on 15 May 2003 saying that she had a debt; and that she had spent most of the money on her wedding.
17. The Applicant told the Tribunal that she married Mr Palejs on 10 March 2003, was now very happily married with three children from a previous marriage and three step-children (from Mr Palejs). She said that she and her husband were in reasonably secure employment (she earns $63,000.00 per annum gross and her husband earns $75,000.00 per annum gross), did not own any property, was renting a house at $400.00 a week, had only the youngest child (aged fifteen) living at home, had no investments, had a credit card debt of about $5,000.00 and was due to start repayments next year for furniture bought for $7,000.00. She agreed that her financial situation was reasonably comfortable. She said that the whole family enjoyed good health.
18. In summary, the Applicant’s oral submissions were that she accepted repaying the CCB debt of $637.92 for the 2001/2002 tax year, that the cost of recovery of the CCB debt of $464.47 far exceeds the amount that would be recovered and that it was not cost effective for the Commonwealth to recover the debt and therefore it would be appropriate to waive the debt; and that the FTB debt should be waived because she had received the payment in good faith and that the debt was solely a result of Centrelink’s administrative error.
19. In her written application to the Tribunal for review (T1) the Applicant also submitted that there had been:
·No consideration to [sic] poor way this whole situation has been handled …
…
·That Centrelink knowing in advance, that they had made an error, but not stopping the payment before I received it. There are two separate file notes on their system acknowledging that they were aware of the error. They have offered no explanation as to why they did not stop the payment process at this stage (before I received it), rather than deposit the money into my account then try and demand repayment.
…
·That Centrelink’s records show they waived the debt on 10 March 2006. They did not advise me of this decision. On 8 May 2006 this decision was revoked. Again, no correspondence to me. How can an agency such as Centrelink operate with such appalling processes?
·That at the time I lodged the appeal I was not working, and not in receipt of any income. I find it hard to believe that this does not equate to ‘serious financial hardship’.
·That the debt could have been waived “if it was more appropriate” to do so. As the other two debts are of less then $650.00 each, the cost to date of recovery action far exceeds the amount that would be recovered, and therefore would be appropriate to waive them.
respondent’s submissions
20. The Respondent accepted that the FTB debt arose because of a Centrelink error, however, it was submitted that the Applicant had reason to know that she was not entitled to the money, therefore she did not receive the money in good faith and section 97(2) (a) of the Administration Act was not satisfied. The Respondent contended that the Tribunal should not accept the Applicant’s evidence about spending the money within hours of it being credited to her account, there being very little detail of how she spent the money, no corroborating records to support her story and inconsistency in what she had told the Tribunal and what she told the SSAT. The Respondent further submitted that recovery of this debt would not cause the Applicant severe financial hardship and that as the overpayment was raised less than 13 weeks after the payment that gave rise to the debt, section 97(2) (b) of the Act applied and was not satisfied.
21. In respect of “received in good faith”, the Respondent submitted (Exhibit R1):
(46) The meaning of the phrase “received in good faith” has been considered by the Federal Court in the matter of Secretary, Department of Employment, Education, Training and Youth Affairs v Prince (1997) 152 ALR 127. In that matter Finn J stated that the phrase “received in good faith” requires that a person received a payment in good faith, regardless of whether a person had acted in good faith. This requires that consideration be directed to the state of mind of a person in relation to his or her receipt of a payment such that :
“…If a person knows or has reason to know that he or she is not entitled to a payment received, i.e. is not entitled to use the monies 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 … In other words, the frame of the section is to exclude from the right to a waiver, a person who knows or who has reason to know that he or she is not entitled to receive the payment”.
22. The Respondent also submitted that waiving the FTB debt under the provisions of section 101 of the Administration Act was not appropriate. For this section of the Act to apply, it was submitted that there must be special circumstances (other than financial hardship alone) and in this case there are no special circumstances that make waiver desirable. In respect of the meaning of special circumstances it was submitted (Exhibit R1):
(49) Paragraph (b) requires that a person must have “special circumstances (other than financial hardship alone)”. In a number of Federal Court decisions it has been held that it is not possible to lay down precise rules about what constitutes “special circumstances”. (Beadle and Director General of Social Security (1985) 60 ALR 225). The purpose of waiver is “to allow a flexible response to the wide range of situations which could give rise to hardship or unfairness” if the debt is recovered (Secretary, Department of Social Security and Hales (1988) 153 ALR 259). Generally what is required are “circumstances … that take the case out of the ordinary.” (Jess v Scott (1986) 12 FCR 187; Dranichnikov and Centrelink (2003) FCAFC 133).
(50) In the case of Ivovic and Director General of Social Security (1981) 3 ALN 95 the AAT wrote (at page 97):
“The reference to special circumstances by reason of which a person liable should be released requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes … Thus whilst keeping the dominant principle of [recovery of a debt] in mind, [the decision maker] must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate”.
23. In respect of write off of the FTB debt under section 95 of the Administration Act the Respondent contended that the debt can be recovered from the Applicant and none of the other matters in section 95 are relevant and therefore a write off is not appropriate.
24. Turning then to the CCB debt, the Respondent submitted that, for the same reasons, in respect to the FTB debt, write off under section 95 and waiver under section 101 of the Administrative Appeals Act is not appropriate. It was further submitted that as there was no administrative error in raising the CCB debts, section 95 of the Administration Act had no application.
25. It was submitted therefore that the decisions under review should be affirmed.
consideration
26. The Tribunal has carefully considered all of the material before it and the submissions of both parties and is satisfied that the following debts are due to the Commonwealth by the Applicant. The three debts comprise:
·A Childcare Benefit debt of $637.92 for the 2001/2002 tax year;
·A Childcare Benefit debt of $464.47 for the 2002/2003 tax year; and
·A Family Tax Benefit debt of $1,383.35 for the 2001/2002 tax year.
27. The tribunal accepts the Applicant’s submission that she no longer wishes to contest recovery of the CCB debt of $637.92 for the 2001/2002 tax year and affirms that part of the decision under review that relates to this debt.
28. In respect of the second CCB debt, namely $464.47 for the 2002/2003 tax year, the Tribunal finds that this debt did not arise from a Centrelink administrative error and did arise from the Applicant underestimating her taxable income. As such waiver of this debt under section 97 (debt arising from error) is not appropriate.
29. The Tribunal is satisfied that at the time of hearing this matter the Applicant is financially comfortable with good prospects for a continuation of such circumstances. The Tribunal is therefore satisfied the Applicant has the capacity to repay the debt and that none of the provisions of section 95 of the Administration Act apply.
30. Therefore the Tribunal is satisfied that write off of the debt is not appropriate.
31. Turning then to the FTP debt of $1,383.35 for the 2001/2002 tax year. For the reasons given above in paragraph 29, a write off of this debt is not appropriate.
32. As the Tribunal has already found the debt arises from a Centrelink administrative error, consideration must be given to waiver of the debt pursuant to section 97 of the Act.
33. The SSAT at paragraph 83 and 84 of its decision (T2/16) correctly sets out the application of section 97 in respect of whether the debt is raised within the stipulated period. The Tribunal is satisfied that the debt was raised on 15 May 2003 and that subsection 97 (2) of the Administration Act applies in this case.
34. It follows that for section 97 to apply, the Applicant must suffer severe financial hardship if the debt were not waived. The Tribunal has already found that the Applicant is in a comfortable financial position and the Tribunal is satisfied that the Applicant would not suffer severe financial hardship if the debt were not waived. The Tribunal finds that waiver of the debt arising from error pursuant to section 97 of the Administration Act is not appropriate. In view of this finding the Tribunal is of the view that it is not necessary to consider whether section 97 (2) (a) of the Administration Act applies, and the Tribunal has not proceeded to make a finding in respect of whether the Applicant received the overpayment in good faith.
35. Finally, the question before the Tribunal is whether there are special circumstances pursuant to section 101 of the Act, which would make it appropriate to waive one or both of the debts under consideration.
36. For section 101 of the Administration Act to apply there must be special circumstances (other than financial hardship alone) that make it desirable to waive. The Applicant’s reliance (in respect of the CCB debt), in her submissions on section 101(c) namely “it is more appropriate to waive than to write off the debt or part of the debt”, does not take away the mandatory requirement of the legislation that requires there to be special circumstances.
37. “Special circumstances” is not defined in the Act or the Administration Act, however its meaning has been considered by the Federal Court. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 Toohey J stated:
“An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context, which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they have a particular quality of unusualness that permits them to be described as special.”
On appeal (1985) 7 ALD 670 at 674 the Full Federal Court reinforced the need to avoid limiting the scope of what might constitute special circumstances, stating:
“We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.”
In Groth v Secretary, Department of Social Security (1995) 40 ALD 54, at 545, Keifel J, referred to the Federal Court’s decision in Re Beadle and Director-General of Social Security (1984) 6 ALD 1, and said that special circumstances:
“would require something to distinguish Mr Groth’s 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 just had occurred that there must be some feature out of the ordinary.”
In Riddell v Secretary, Department of Social Security (1993) 30 ALD 31, the Full Court of the Federal Court said at page 38:
“Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.”
38. The Tribunal has also noted the Respondent’s submissions in respect of the meaning of special circumstances, as set out above in paragraph 22.
39. The Tribunal has considered all of the material before it and the submissions of both parties and finds that the Applicant’s circumstances are not special within the meaning of that term, as set out above, and therefore waiver of the Applicant’s debts pursuant to section 101 of the Administration Act is not appropriate. In making this finding, the Tribunal has taken into account the Applicant’s complaints about the way in which Centrelink has dealt with her and the administrative errors that Centrelink have made particularly in respect of the FTB debt. The Tribunal agrees with the SSAT that Centrelink’s administration of this matter has been less than satisfactory, however, in the Tribunal’s view the circumstances in this case are not such as to warrant a finding of special circumstances.
40. The Tribunal affirms the decisions under review.
I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of Mr I R Way, Member.
Signed: Jun Lee [Sgd]
(Associate)Date of Hearing 12 December 2006
Date of Decision 12 January 2006
Representative for the Applicant Self RepresentedAdvocate for the Respondent James Larcombe, Centrelink Legal Services Branch
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