Preston and Secretary, Department of Family and Community Service S

[2003] AATA 974

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 974

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No A2003/6

GENERAL ADMINISTRATIVE  DIVISION		)
Re		NORA PRESTON

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Mr S. Webb, Member

Date30 September 2003

PlaceCanberra

Decision The decision under review is affirmed.

……………………………….

Mr S. Webb, Member

CATCHWORDS

SOCIAL SECURITY - family tax benefit - administrative error - over payment - debt to the Commonwealth - waiver - whether sole administrative error – whether severe financial hardship – whether good faith - whether special circumstances - decision affirmed

LEGISLATION

A New Tax System (Family Assistance) (Administration) Act 1999 sections 71, 95, 97, 101

CASELAW

Pledger v Secretary, Department of Family and Community Services [2002] FCA 1576

Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127

Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424

Haggerty v Secretary, Department of Education, Training and Youth Affairs (2000) 31 AAR 529

Re Lumsden and Secretary, Department of Social Security (1986) ALN 225

Re Reynolds and Secretary, Department of Social Security (1986) AAT 2656

Re Beadle and Director-General of Social Security  (1984) 6 ALD 1

REASONS FOR DECISION

30 September 2003 Mr S. Webb, Member        

1.      Ms Nora Preston (“the Applicant”) applied for review of a decision of the Social Security Appeals Tribunal (“SSAT”) dated 3 December 2002 (T2), which affirmed the decision of an authorised review officer (“ARO”), dated 14 October 2002 (“T24”).  The ARO affirmed the decision of a delegate of the Secretary, Department of Family and Community Services (“the Respondent”) to raise and recover a debt of Family Tax Benefit (“FTB”) in the amount of $1,451.76 on 9 May 2001.

2.      At the hearing on 18 August 2003, the Applicant was self-represented.  The Respondent was represented by Mr S. Meehan, from Centrelink’s Service Recovery team.  The Applicant gave oral evidence and the following materials were taken into evidence and labelled.

exhibit          description

T1 – T26Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975.

A1Centrelink letter to the Applicant dated 26 May 2003.

A2Applicant’s Rates Assessment Notice dated 15 August 2003.

A3Commercial Credit Control letter of demand dated 10 October 2002.

A4ACTEWAGL account dated 24 March 2003.

A5Telstra account dated 14 June 2003.

A6ACTEWAGL account dated 19 June 2003.

R1Respondent’s Statement of Facts and Contentions dated 8 August 2003.

R2Centrelink record of payments to the Applicant dated 7 August 2003.

3.      At the hearing it was agreed that the parties would lodge final written submissions within a specified timeframe.  The Tribunal accepts these supplementary documents into evidence.

A7Applicant’s final submissions dated 19 August 2003 and 15 September 2003.

R3                  Respondent’s final submissions dated 12 September 2003.

background

4.      The following background is drawn from the evidence and is not in dispute.

5.      The Applicant currently lives alone and receives a Widow Allowance.  She has one daughter, Rachel, who has a young child.

6.      On 2 August 2000 the Applicant was notified of the rate of FTB payable in respect of her daughter, Rachel, and another child in her care, Candice (T3, f10). 

7.      On 11 August 2000 Rachel Preston turned 16 and was granted Youth Allowance (T4), which was paid into the Applicant’s bank account (T5, f14).

8.       On 7 September 2000 the Applicant was notified of the FTB rate for Candice, being $216.86 per fortnight, and was told (T6, f16):

“We cannot pay you Family Tax Benefit Part A for Rachel because she is receiving another Commonwealth payment.”

9.      From 17 November 2000 Rachel Preston received payment of Youth Allowance into her own bank account (T5, f15).

10.     On 28 December 2000 the Applicant received an FTB payment from Centrelink in the amount of $1,668.62 (T9, f25) comprising an arrears payment of $1,304.48 for FTB during the period 11 August 2000 to 12 December 2000 and a fortnightly FTB payment of $364.14. 

11.     On 25 January 2001, the Applicant was notified that FTB payments in respect of Candice were cancelled because “she is no longer in your care” (T10).

12.     On 7 May 2001 a Centrelink officer raised a debt in the amount of $1,451.76 (T11) about which the Applicant was formally notified on 9 May 2000 (T13).

13.     On 14 March 2002 the Applicant requested a review over the overpayment decision (T16).  On 13 September 2002 the decision was affirmed (T21, f39) and on 18 September 2002 the Applicant requested the decision be reviewed by an ARO (T23), which was subsequently affirmed on 14 October 2002 (T24). 

14.     Thereafter, the Applicant pursued her rights of review to the SSAT (T2) and subsequently this Tribunal.

issues

15.     The issues before the Tribunal are whether the Applicant was overpaid FTB giving rise to a debt to the Commonwealth and, if so, whether there are grounds for waiver of the debt on the basis of sole administrative error or special circumstances.

evidence of the applicant

16.     The Applicant told the Tribunal that she was confused about the FTB and Youth Allowance payments in respect of her daughter Rachel.  She stated that she did not read Centrelink letters but agreed that she received various letters from Centrelink about the rate of payment of FTB and the grant of Youth Allowance to her daughter Rachel.

17.     The Applicant told the Tribunal that she receives six-monthly bank statements and was unaware that she had been overpaid.  Her evidence was that normally she does not have enough money to pay her bills.  She said she continued to spend at her usual rate after December 2000 and did not ring Centrelink to query the payment, believing she was entitled to the amount paid.

18.      The Applicant gave evidence concerning her financial circumstances, claiming that she was in severe financial difficulty.  She told the Tribunal that she relies on the Widow Pension for her sole income and receives an amount of $380.10 per fortnight.  She stated that she is repaying a $7,000 loan to her parents, who paid out the first mortgage on the house in which she lives.  Her evidence was that she jointly owns the house with her parents and her sister, who previously paid out a second mortgage on the property.  She estimated her living costs as follows:

Groceries$40 per week

Insurance$68 per month

Gas$200 per quarter in winter

Fuel$30 per week

Car registration  $600 per year

Assistance for daughter and grandson  $10 - $20 per week

Rates$660.20 per year

ACTEWAGL  $162 per quarter

19.     The Applicant’s evidence was that she owes outstanding debts to her parents ($7,000.00), Optus ($245.96), Telstra ($88.30), ACTEWAGL ($49.00) and ACT rates ($289.35) that she cannot pay.  She told the Tribunal that she is currently repaying the debt to Centrelink by withholding $5 per fortnight from her Widow Allowance.  The Applicant informed the Tribunal that she could not afford to properly maintain her house, and had difficulty affording to pay for repairs to the hot water service and her washing machine.  She stated that she never has any spare cash and often cannot afford to pay for heating in winter or sufficient food. 

20.     The Applicant gave evidence that her daughter and grandson stay in her house on a regular basis and each have a bedroom, even though they live in Nicholls.  She stated that she helps her daughter financially when she can and pays for their food and other expenses when they stay with her.  The Applicant contended that her financial situation on a Widow Allowance is made more difficult because she is not entitled to discounts in relation to rates, electricity, gas, car registration and other costs that other pensioners can access.

21.     The Applicant stated that she had sought employment but without success.  She told the Tribunal she applied for administrative and secretarial positions but could not compete with younger people.  She gave evidence that her health is poor and she experiences pains but cannot afford to go to the doctor because the surgery no longer bulk bills.

legislation

22.     The relevant legislation in this matter is the A New Tax System (Family Assistance) (Administration) Act 1999 (“the FAA Act”), especially sections 71, 95, 97 and 101.

submissions, consideration of the issues and findings

23.     The Applicant submitted that no overpayment occurred because she was entitled to receive the amount paid on 28 December 2000.  In the alternative she submitted that she should not have to repay any overpayment because it arose from Centrelink’s error and through no fault of her own.  In her submission she did not know that she had been overpaid or that she had received any money that she was not entitled to receive.  She contended that she is in severe financial hardship and cannot afford to repay the amount of $5 per fortnight that is currently being deducted from her Widow Allowance.  She stated she is living in poverty and is only able to eat twice each day.

24.     The Tribunal finds the Applicant to be a witness of truth who gave her evidence honestly and openly, without guile.

25.     There can be no doubt, however, that the Applicant was not entitled to receive FTB payments in respect of her daughter Rachel after 11 August 2000.  The Respondent submitted that the Applicant was indeed paid FTB for Rachel on 28 December 2000 in consequence of a computer error..  The Tribunal is satisfied that an amount of $1,451.76, comprising FTB payments in respect of Rachel for the period 11 August 2000 to 28 December 2000, was paid in error to the Applicant, and so finds.

26. Section 71 of the FAA Act provides:

“71      Debts arising in respect of family assistance other than child care benefit and family tax benefit advance

No entitlement to amount

(1)If:

(a)an amount has been paid to a person by way of family tax benefit, maternity allowance or maternity immunisation allowance (the assistance) in respect of a period or event; and

(b)the person was not entitled to the assistance in respect of that period or event;

the amount so paid is a debt due to the Commonwealth by the person.”

It follows, therefore, that the amount of the FTB overpayment to which the Applicant was not entitled is a debt recoverable to the Commonwealth.

27.     The question thus arising is whether the debt should be recovered in the circumstances.

28. Section 97 of the FAA Act relevantly states:

“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.

…”

29.     In this case the debt, in its entirety, is solely attributable to the administrative error of Centrelink, whereby the Commonwealth’s right to recover the debt must be waived if the Applicant received the overpayment in good faith and would suffer severe financial hardship if it were not waived.

30.     The issue of good faith has been considered by successive courts and tribunals over time and the Respondent pointed to relevant authorities in that regard (Pledger v Secretary, Department of Family and Community Services (2002) FCA 1576; Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127; Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424). Considering the term “good faith” in its context, Finn J said in Prince (supra) at ALR 130:

“Its concern is with the state of mind of a person concerning his or her receipt of the payment: if that person knows or has reason to know that he or she is not entitled to a payment received – ie is not entitled to use the moneys 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.”

The Court held in Jazazievska (supra) at paragraphs 41 and 42:

“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 …

…

42.  A receipt of a payment to which he or she is not entitled, cannot avoid the requirement of good faith in s 1237A(1) by the mere circumstance that the person arranges for direct payment to an account of that person with a financial institution and in consequence is unaware of the fact of the payment at the time of its actual receipt."

31.     The Applicant contended that, on 7 September 2000 she was notified that she was not entitled to receive FBT in respect of her daughter Rachel and would be paid FBT at the rate of $216.86 per fortnight in respect of Candice, who at that time was in her care (T6, f16).  Subsequently, on 18 December 2000, she was notified that she would receive an amount of FBT payment in arrears for the period 11 August 2000 to 12 December 2000 and fortnightly payments of $364.14 in respect of Candice (T8, f21).  The Applicant acknowledged that she understood at the time that she was not entitled to receive FBT payments in respect of Rachel, who was receiving Youth Allowance.  The Tribunal notes that the Centrelink letter in question (T8, f21) makes no reference to Rachel, citing Candice as the Applicant’s FBT child.  This being the case, the Tribunal is satisfied that the Applicant had no reason to know that she was being paid FBT in respect of Rachel.  It follows, therefore, that the Applicant had no reason to know she was in receipt of moneys to which she was not entitled that she could not use and dispose of as her own.  FBT payments in respect of Candice ceased in January 2001 because she was no longer in the Applicant’s care (T10, f26). 

32.     Weinberg J observed in the case of Pledger v Secretary, Department of Family and Community Services [2000] FCA 1576 at [108]:

“108.  It is for the AAT, standing in the shoes of the respondent, to determine whether some, or all, of the payments made to the applicant were received in good faith. In arriving at that determination, the AAT will need to make findings of fact which are significantly more specific that those previously made. It will need to determine, for example, whether the applicant genuinely believed, during the relevant period, that she was entitled to some form of social security pension or benefit which was broadly equated to the amount that she was receiving by way of carer pension. The question is, of course, what she believed, and not what some reasonable person might have believed. However, an unreasonable belief is less likely to be accepted as having been genuinely held.”

33.     The Tribunal is satisfied that the Applicant believed she was entitled to receive the amount of $1,451.76 that she was overpaid on 28 December 2000.  Indeed, it was not until 9 May 2001 that this belief was in any way disturbed when Centrelink informed the Applicant that she had been overpaid.  French J said in Haggerty v Secretary, Department of Education, Training and Youth Affairs [2000] FCA 1287at [16]:

“16.  Consistently with what his Honour said in the Prince case, want of good faith will arise where there is a positive belief that the payment has been made by mistake.  It will also arise where there is a suspicion held by the recipient that he or she may not be entitled to the payment made or a doubt as to the entitlement coupled with objective basis for such suspicion or doubt.  The provision does not, however, authorise the imputation of want of good faith in any of the senses above described simply because there are in existence objective facts which would raise a belief or a doubt or a suspicion of non-entitlement in the mind of some imaginary recipient.  That proposition is quite consistent with the view that the existence of such facts may support an inference that the recipient disbelieved or doubted or was suspicious about his or her entitlement.  “Reason to know” as Finn J used that term in Prince does not necessarily import a criterion of imputed as distinct from actual want of good faith as I have described it.”

34.     In the Applicant’s case, the Tribunal is satisfied that the Applicant’s state of mind, even in her secret mind, was that of belief in her entitlement to receive the money she was paid.  There is no question that she understood that she was not entitled to receive FBT in respect of her 16 year old daughter Rachel and it is not in doubt that she knew she was entitled to receive FBT in respect of the child Candice who was in her care.  That she did not find the payment of arrears or the increase in the rate of FBT unusual or the coincidence of dates unlikely to the extent that doubt or suspicion might have been roused is explained by her stated ignorance of the details of particular social security payments and her failure to pay careful attention to the letters she received from Centrelink.  Even if she had paid closer attention to the detail contained in the Centrelink letters she received she may not have become suspicious that something was wrong on the information provided.  It is reasonable to conclude that her suspicious mind was not aroused, despite her belief of entitlement, because of her ignorance and her lack of attention to detail.  She accepted what she was told and relied on Centrelink to ensure that the rate of FBT and the amount she was paid in respect of Candice was no more and no less than the amount she was entitled to receive.

35.     The Tribunal finds the Applicant received in good faith the amount of $1,451.76 that she was erroneously overpaid by Centrelink.

36.     In the Respondent’s submission the financial circumstances of the Applicant are straitened and difficult but do not constitute “severe financial hardship”..  The words of subsections 97(1) and (2) are clear in that the requisite state of severity of financial hardship must be present.   As noted in the case of Re Lumsden and Secretary, Department of Social Security (1986) ALN 225, the words are to be interpreted in accordance with their ordinary meaning.  In the case of Re Reynolds and Secretary, Department of Social Security (1986) AATA 2656, Deputy President Jennings concluded at page 8:

“[I]n the ordinary case “severe financial hardship” is a condition that is more likely to be demonstrated by a person whose income is materially less than the current maximum pension.”

37.     In this case, the Applicant’s sole income is the Widow Allowance, which is paid at the maximum rate of $380.10 per fortnight.  She is the sole title-holder of the house in which she resides even though she claims that, by informal familial arrangement, the property is co-owned by her parents and sister.  The financial details brought to light on the evidence indicate that the Applicant’s income of approximately $190 per week is sufficient to cover her essential living costs but is not sufficient to cover outstanding debts or the cost of repairs to the house or household equipment. 

38.     The Applicant’s options were considered during the hearing and it may be possible for her to take in a boarder or to sell the house and move into cheaper accommodation.  The Applicant noted, however, that she would be reluctant to take in a boarder because her daughter and grandson may need to move into the house as they are currently living in one small room that is inadequate for their requirements.  She also expressed concerns about her security and personal safety.  The Applicant submitted that she would not be able to sell the house and buy cheaper accommodation because the house is very run down and would not command a high price. 

39.     The social security scheme is beneficial in character and the public interest is not served by driving people in the Applicant’s circumstances to destitution.  The fact that the Applicant owns, at least in part, the house in which she lives does not preclude her from severe financial hardship.  That the Applicant has options open to her is not in doubt and it is not for the Tribunal to determine whether she should sell her home or take in a boarder.  It is clear however on the evidence that the Applicant receives the maximum rate of Widow Allowance and is managing to repay her debt at the rate of $5 per fortnight. 

40. The Tribunal is not satisfied that the Applicant’s financial circumstances constitute severe financial hardship or that she will suffer severe financial hardship if the debt is not waived. It follows that the debt cannot be waived under section 97 of the Act.

41. The Tribunal finds there are no sufficient grounds to write off the debt pursuant to section 95 of the FAA Act.

42. Turning to consider section 101 of the FFA Act, the Tribunal is mindful of the authorities concerning the existence of special circumstances warranting the waiver of a debt in whole or in part (see Re Beadle and Director-General of Social Security (1984) 6 ALD 1). There is nothing in the evidence that suggests the existence of special circumstances in this case. The Applicant is in reasonable health, her financial circumstances are straitened and her circumstances, when considered in their entirety, are neither unusual, uncommon nor exceptional.

43. This being the case, the debt to the Commonwealth cannot be waived pursuant to section 101 of the FAA Act and the decision under review must be affirmed.

decision

44.     The decision under review is affirmed.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb, Member

Signed:         A. Krilis
  Associate

Date/s of Hearing  18 August 2003
Date of Decision  30 September 2003
Representative for the Applicant    self represented
Advocate for the Respondent        Mr Sean Mehan