Re Schulze and Secretary, Department of Family and Community Services
[2004] AATA 705
•30 June 2004
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2004] AATA 705
ADMINISTRATIVE APPEALS TRIBUNAL )
) No S2003/562
GENERAL ADMINISTRATIVE DIVISION ) Re STEPHAN SCHULZE Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Deputy President D G Jarvis Date30 June 2004
PlaceAdelaide
Decision The Tribunal sets aside the decision under review and in substitution therefor decides that the amount of $2,500.00 be waived in the special circumstances of the case, and that the remaining amount of the debt is a debt due to the Commonwealth. D G Jarvis
(Signed)
Deputy President
CATCHWORDS
SOCIAL SECURITY – parenting payment partnered – overpayment – waiver – special circumstances – administrative error – received in good faith – debt partly waived.
Social Security Act 1991 (Cth) s 1237A and 1237AAD
Secretary, Department of Employment, Education, Training and Youth Affairs v Prince (1997) 50 ALD 186
Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529
Zazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 30 ALD 31
Riddell v Secretary, Department of Social Security (1993) 30 ALD 31
Re Ellis and Department of Family and Community Services [2000] AATA 350
Re Brittain and Secretary, Department of Family and Community Services [2000] AATA 16
Re Secretary, Department of Family and Community Services and Lyster (2000) 59 ALD 587
Re Ivovic and Director of Department of Social Services (1981) 3 ALN 61
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
REASONS FOR DECISION
30 June 2004 Deputy President D G Jarvis 1. The applicant, Stephan Schulze, was overpaid parenting payment partnered in respect of the period from 5 November 2001 to 18 March 2003. When this overpayment was discovered a Centrelink officer raised a debt in respect of this overpayment of $9,557.83. The applicant sought a review of this decision and a waiver of the debt. The debt was recalculated and revised to $6,029.53 and the decision to raise and recover the debt was affirmed by an authorised review officer. In a reviewable decision dated 18 September 2003, the Social Security Appeals Tribunal subsequently affirmed the decision of Centrelink to raise and recover the debt, and decided that there was no basis on which the debt could be waived. The applicant has applied to this Tribunal for review of that decision.
2. The applicant appeared in person. Ms S Cerone, an advocate employed by the respondent, appeared for Centrelink. The applicant and his wife gave evidence in support of the application for review, and the respondent called Ms Adele Pugsley, a Centrelink officer, to give evidence. The documents lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“T Documents”) were admitted in evidence, together with a number of other documents to which I will refer as appropriate in these reasons.
The Issue
3. The issue before the Tribunal is whether the debt arising from the overpayment of parenting payments should be waived under the Social Security Act 1991 (Cth) (the “Act”).
Background
4. I make the following findings, based on the documentary evidence before the Tribunal and the evidence of the applicant, the applicant’s wife and the evidence of Ms Pugsley.
5. The applicant is self employed, and conducts a house and garden maintenance business in partnership with his wife. She has worked as a salaried employee of various organisations at different times during the period relevant to the Tribunal’s consideration of the issues in this matter. The applicant and his wife have four sons, ranging in age from 11 to 17. Their eldest son was born on 14 February 1987, and is a student at Blackwood High School.
6. The applicant applied for parenting payment partnered in 1997, and payments were made to him at varying rates from and after 11 July 1997 (exhibit R1 page 99). The fortnightly rates of payment are summarised in exhibit R4. This shows that over the period from August 1997 to 20 March 2003, there were a number of changes in the amounts paid. Of these, the following changes were substantial:
(a)a decrease from $291.80 as at 17/12/98 to $65.50 as from 31/12/98;
(b) an increase from $108.76 as at 11.01.01 to $160.51 as at 25.01.01; and
(c) an increase from $160.51 on 25.01.01 to $311.10 on 8.02.01.
7. The applicant explained that he had incurred a parenting payment partnered debt in the past. Hie evidence was that that overpayment came about because he incorrectly made non-allowable deductions from his wife’s income and recorded a lower income figure in the information that he provided to Centrelink. The applicant conceded that that debt was caused solely by his own error and that the problem came to an end when Centrelink corrected his misunderstanding. Further, he said that he did not like being overpaid and, in accordance with information on the back page of the Centrelink notices, he knew to advise of changes in his and his wife’s income.
8. For some time leading up to February 2001, Mrs Schulze had been employed, and the applicant had not been actively involved in work and was the primary person involved in looking after domestic matters, paying household accounts and dealing with Centrelink. However, Mrs Schulze left her employment in early 2001, and after that the applicant commenced working and Mrs Schulze took over the role of seeing to the management of the household and related domestic issues. Exhibit R2 comprises various Centrelink records including a computer record, from Mrs Schulze’s file, of a call made by Mrs Schulze on 5 January 2001 to Centrelink advising that she would cease work on 19 January 2001. After ceasing work Mrs Schulze dealt with matters involving Centrelink, except for certain specific occasions when she needed to obtain information from the applicant, or when Centrelink would not deal with Mrs Schulze because she was not a nominated person for Centrelink’s purposes.
9. Mrs Schulze said that her practice was to check how much was in the bank account when she withdrew money and that she expected payments in the amount advised on the notices from Centrelink to be paid into the account, but she did understand that the rate of parenting payment partnered changed according to the level of income. Mr Schulze said that he did not pay any attention to the bank accounts but left all domestic management to his wife.
10. Centrelink sent letters to the applicant dated 5 January 2001 and 6 January 2001 advising, inter alia, of the rate of parenting payment partnered that he would receive, the income used to assess the rate of payment and his obligation to notify Centrelink within 14 days if the income amounts for either the applicant or his wife varied (exhibits A3 and A4). The earlier letter records that the combined annual income was $3,643.12 and the latter letter records the combined annual income as $5,477.68. On 9 February 2001, the applicant advised Centrelink that his updated estimate of income for the financial year ended 30 June 2001 was $7,000.00 for himself and $12,000.00 for his wife (exhibit A5). This did not affect the rate of parenting payment to which the applicant was then entitled.
11. In October 2001, Mr Schulze was collating the figures necessary for the preparation of his 2001 tax return. Mrs Schulze made contact with Centrelink in order to advise that the income estimates needed to be increased but she was unsuccessful because, she was informed, she was not a nominated person for the purposes of her husband’s Centrelink information (see exhibit A7). As a result, Mr Schulze contacted Centrelink on 22 October 2001 and advised Centrelink that he estimated the projected combined income of himself and his wife at $30,000.00 in the year ended 30 June 2002. Centrelink then issued to the applicant a notice dated 22 October 2001 advising him of the amount due to be paid on 1 November 2001 in respect of his family assistance allowance, namely an amount of $570.33 (see exhibit A9). However, Centrelink did not send him any notice relating to parenting payment partnered, and took no action to adjust the rate of parenting payment partnered he was then receiving, namely $307.22 per fortnight (see exhibit R4, page 3). This administrative error resulted in an overpayment of parenting payment partnered. On the information which the applicant had provided, he was only entitled to $109.70 on the pay day 13 November 2001, and had no entitlement to parenting payment during the period from 27 November 2001 up to and including pay day 25 June 2002 (exhibit R1, page 114).
12. In February 2002, Centrelink sent a parenting payment partnered review form (the “review form”) to the applicant. Mrs Schulze completed this form, and it was returned to Centrelink on 12 February 2002. Question 4 sought information where the benefit recipient or his or her partner was self-employed. The information required included the gross amount, after business deductions, earned by each partner from their partnership during the preceding financial year. Mrs Schulze did not fill in the relevant dollar amounts, but answered this question by attaching to the form a copy of the partnership profit and loss statement for the year ended 30 June 2001, from which the relevant earnings could be deduced.
13. Question 5 of the review form asks “Has your or your partner’s current income changed from that shown on last year’s tax return?” There were boxes for the answers “No” or “Yes”. If the answer was “Yes”, the form required an estimate of the business income of each partner for the then current financial year. Mrs Schulze did not tick either the “Yes” box or the “No” box, and did not provide an estimate of business income for either partner in the then current financial year, which would have been required if she had ticked the “Yes” box. The form then said: “Please attach a copy of your personal and business tax returns. If these not are not (sic) available or there has been a change in your income please forward a Profit & Loss statement for the past 13 weeks”. The applicant said that at the time when the form was filled in by Mrs Schulze, the tax returns had not been prepared. However, Mrs Schulze did attach a copy of a profit and loss statement for 2000/2001 financial year but not for the past 13 weeks (see exhibit R3). Mrs Schulze said the profit and loss statement had been printed off the computer by the applicant and then attached to the review form. In the course of cross-examination, when asked if she would have intended that Centrelink use that profit and loss statement to assess current income for the partnership, she replied “yes”.
14. Centrelink then reassessed the applicant’s parenting payment entitlement by reference to the form as lodged, and apparently assumed that the income shown in the 2001 profit and loss statement attached to the form was the appropriate income to use for the purpose of that assessment. This should not have been done. Ms Pugsley, a Centrelink departmental officer and advocate, attested that under Centrelink’s procedures, the form should have been photocopied and sent to the applicant with a request that the form be correctly completed and returned. If this did not occur, benefits would have continued for the next 13 weeks, but after that benefits would have been suspended, and if the form was not returned duly completed following a further request, benefits would have been cancelled. I find that the failure to comply with this procedure constituted a further administrative error on the part of Centrelink, and resulted in the amount of the overpayment being greater than otherwise would have been the case.
15. As a result of data matching information provided to Centrelink by the Australian Taxation Office early in 2003, Centrelink ascertained that the income of Mr and Mrs Schulze was greater than the level of income on which the entitlement to parenting payment partnered had been assessed, and that accordingly there had been an overpayment of parenting payment partnered. This led to a debt of $9,557.83 being raised, but as mentioned above, this figure was later recalculated by Centrelink in the light of the parties’ annual income, and the amount of the debt was amended to $6,029.53. The correctness of this revised calculation was not in issue in the proceedings before me.
16. Relevantly, the applicant also told the Tribunal that he was involved in a bicycle accident in December 2002 that resulted in a shoulder reconstruction in June 2003. He said the injury he sustained in this accident impacted on his ability to work because he could not lift his arm. He had three months off work following surgery and gradually increased his duties, although he cannot now do all that he used to.
Respondent’s conentions
17. The respondent admits that the overpayment during the period from 22 October 2001 to 12 February 2002 was due solely to an administrative error by Centrelink, but disputes that the payments were received by the applicant in good faith, and that accordingly the respondent contends that it is not required under s 1237A of the Act to waive the portion of the debt raised in respect of the period before 12 February 2002. The overpayment that arose during the period from 22 October 2001 to 12 February 2002 was approximately $2,000.00 in round figures (T23, page 114). The respondent does not concede sole administrative error on its part for that portion of the debt that accrued after 12 February 2002 until 18 March 2003. The respondent argues that that portion of the debt resulted from a combination of error on the part of the department and an error by the applicant, namely the applicant’s failure to complete the parenting payment partnered review form correctly and, in particular, to attach up-to-date information in answer to Question 5. If the respondent’s argument is accepted then the portion of the debt accrued after 12 February 2002 cannot be waived under s1237A.
Legislation
18. The applicant relied on two provisions in support of his argument that recovery of the debt should be waived by Centrelink, namely sections 1237A and 1237AAD of the Act.
19. The provision of the Act that entitles the Commonwealth to raise a debt in the present circumstances is s 1223(1) as explained by s 1223(1AB). Those sections are recorded below:
“1223(1) Subject to this section, if:
(a) a social security payment is made; and
(b) a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.”
…
“1223(1AB) Without limiting by implication the circumstances to which paragraph (1)(b) applies apart from this subsection, a person who obtained the benefit of a social security payment is taken not to have been entitled to obtain the benefit if the payment should not have been made for any one or more of the following reasons:
(a) the payment was made to the person by mistake as a result of a computer error or an administrative error;
… .”
20. Section 1237A of the Act provides for the waiver of a debt where the debt resulted solely from administrative error and the relevant benefits were received in good faith. Section 1237A relevantly provides as follows:
“(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.
Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).”
Section 1237AAD gives the Secretary a discretion to waive the right to recover all or part of a debt in special circumstances. This section provides as follows:
“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.
Note: Section 1236 allows the Secretary to write off a debt on behalf of the Commonwealth.”
Consideration
21. I find that the debt has been correctly raised under s 1223(1) and is therefore a debt due to the Commonwealth. As mentioned above, the respondent accepts that in respect of the period from 22 October 2001 to 12 February 2002 the overpayment arose solely from administrative error on the part of Centrelink, in that Centrelink did not recalculate the rate of parenting payment following the applicant’s telephone advice of 22 October 2001 as to his revised estimated income. The applicant submitted that this administrative error resulted in parenting payments continuing to be paid for the whole period in respect of which the debt has been raised. He submitted further that if Centrelink had taken the correct action following receipt of the information he provided on 22 October 2001, the review form would not have been sent out to the applicant for completion in February 2002, and so the incorrect assessment made by Centrelink on the basis of that form would not have arisen either. In my opinion, this argument ignores the events which in fact happened. Centrelink in fact did make a reassessment of entitlement following receipt of the review form on 12 February 2002, and the omission to complete the review form correctly in fact contributed to the continued payment of benefits to which the applicant was not entitled under the Act. Further, Ms Pugsley gave evidence that having regard to the category applicable to the applicant under the relevant Centrelink review procedure, his entitlement to parenting payment partnered would have been reviewed every 12 months, and I find that the review form was sent to the applicant pursuant to this procedure. In other words, the review form would have been sent to the applicant in February 2002 even if Centrelink had adjusted his benefits following the telephone advice on 22 October 2001 of the projected increased earnings for the 2002 financial year. This later portion of the debt, post 12 February 2002, did not therefore arise due to sole administrative error on the part of the respondent, and accordingly that error does not enable waiver under s 1237A.
22. I will now address the first portion of the debit that arose before 12 February 2002, being that portion which the respondent concedes, and I consider, arose solely due to administrative error on the part of the respondent. In order for the applicant to succeed under s 1237A, he must have received the payments in good faith.
23. In Secretary, Department of Employment, Education, Training and Youth Affairs v Prince (1997) 50 ALD 186 Finn J explained, at 189, the test of good faith thus:
“For my own part, I consider the burden of the formula in the s 289 setting to be obvious enough. 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 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.
Given the conventional liability of a mistaken payee of money from consolidated revenue to repay that money irrespective of his or her belief as to an entitlement to it (ie the “rule” in Auckland Harbour Board v R [1924] AC 318), the concession made to the mistaken payee by s 289 of the SYA Act does seem in all probability to be directed to a payee who receives the money (to put the matter positively) in the good faith belief that he or she is entitled to receive it. In other words the frame of the section is to exclude from the right to a waiver, a person who knows or has reason to know that he or she is not entitled to receive the payment. It would be surprising to find that the parliament intended otherwise.”
Prince concerned a case in which Mr Prince received Austudy payments into his account without his knowledge. Finn J determined whether, in those circumstances, Mr Prince could have received his payments in good faith. At 189 His Honour decided that:
“… It is clear in the present case that at all relevant times after 22 December 1993 Mr Prince actually knew that he had no entitlement to receive Austudy payments. Is the consequence of this that he could never claim that any of the payments he received from DEETYA as Austudy payments in 1994 were received in good faith even though at the time of receipt of the first three he was unaware that he had received the payment? In other words, can a receipt be otherwise than in good faith when the recipient is unaware that the payment has been received? The short answer to that in my view is “yes”. Knowing that, in the relevant period, he had no entitlement to receive an Austudy payment, he was never in a position to be able to assert that any mistaken payment made to him was one to which he had an entitlement. Thus while he may have received a payment of which he was ignorant, he could not, in the sense that I have explained, have received it in good faith.”
24. The meaning of good faith was further developed in the case of Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529. In that matter, at 534, French J said:
“The criterion of receipt in good faith may be characterised as a positive one as counsel for the respondent submitted. That is not to say that a recipient of a mistaken payment must prove that he or she has considered the entitlement to the money and positively concluded that there is an entitlement. There is no question of an onus here to be met by the recipient who claims benefit of the mandatory waiver. Nor is there some twilight zone between good faith and want of good faith. A waiver can only, in my opinion, be declined where there has been a receipt, without good faith, of moneys mistakenly paid. This accords with the general approach taken by Finn J whose construction of the provision is related to the criteria for want of good faith.
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 some objective basis for such suspicion or doubt. The provision does not, however, authorise the imputation of want of good faith in any of the sense 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.”
And further at 535:
“None of these findings go to that state of mind and whether he had a belief, doubt or suspicion as to entitlement which would require a recipient acting in good faith to make an inquiry. Concern, puzzlement, upset and a perception of unusual circumstances, coupled with the absence of further inquiry, are not enough themselves to constitute want of good faith … .”
25. Further consideration of the requirements of good faith is to be found in the judgment of Cooper J in Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424 where the Court examined an overpayment of family allowance and held (at [40]) that 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.”
26. In his evidence before this Tribunal, the applicant conceded that he understood that he would have expected a reduction in pension to flow from the increased estimation of income and accordingly, I find that he would have had a reasonable expectation that a reduction would occur. He also had an objective basis for believing his payment would reduce as a result of his previous debt experience.
27. The applicant’s Centrelink payment was paid into a bank account that was managed by his wife. However, in my view the applicant cannot shelter behind this fact in circumstances in which he knew that a change in his level of income had ramifications for his rate of parenting payment partnered, given that the applicant had previously experienced a debt in circumstances in which his wife’s income had been incorrectly declared as an amount lower than that which was actually earned. The applicant cannot abdicate responsibility for the receipt and use of his parenting payment partnered monies because under his and his wife’s domestic arrangement, the applicant’s wife was responsible for communicating with Centrelink. I note that it has been accepted by this Tribunal in several cases that the obligation to notify of a change in relevant circumstances is personal to the recipient of the social security payment, and cannot be performed by an agent: Re Junor and Secretary, Department of Social Security (1997) 48 ALD 326 citing Re Johns (GC and NN) and Repatriation Commission (1996) 40 ALD 769. While the obligation to notify of changes in relevant circumstances is personal, it is clear that both Mr and Mrs Schulze understood that changes in income affected the rate of pension payable. It was for that reason that both Mrs Schulze (albeit unsuccessfully) and Mr Schulze contacted Centrelink in October 2001 to advise that their combined estimated income had increased. Mr and Mrs Schulze had reason to know, through their past experiences and knowledge, that the parenting payment partnered pension rate should have changed, as did the rate of family tax benefit, yet they did not check that the parenting payment partnered had in fact been amended. Mr Schulze cannot rely upon his wife’s inaction as a foundation for his own good faith. For the applicant not to monitor his Centrelink payments amounts, in my view, to indifference or recklessness on his part. I therefore find that the applicant did not receive the payments from Centrelink after 12 February 2002 in good faith and I cannot, therefore, waive that portion of the debt under s 1237A(1) of the Act.
28. As to this issue, I also note that the applicant’s wife was not a nominated person for Centrelink purposes, although it appears from exhibit A8 that Mr Schulze was sent a letter that purported to enclose an “SS313 : Authority for a Nominated Person” form. During the hearing the Tribunal was advised that no completed SS313 had been received by Centrelink. However, Mr and Mrs Schulze had established a relationship of agency and principal in the manner in which they conducted their domestic arrangements. The ordinary principles of an agency relationship exists between two parties when one, the agent, is authorised by the other, the principal, to do acts on behalf of the principal which affect the principal’s rights and duties with respect to third persons. Speaking generally, a principal is bound by the acts of an agent where the agent is acting within the scope of his or her authority. Mrs Schulze should have known that the payments had not been adjusted, and under the principles of the law of agency, her knowledge should be attributed to the applicant, who was her principal for the relevant purposes.
29. I now turn to the issue of waiver pursuant to s 1237AAD of the Act, in which the decision-maker has a discretion to waive all or part of a debt if, inter alia, there are special circumstances that make it desirable to do so. A very helpful analysis of the history of this section is included in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 161. After providing this history, French J said at pages 161 and 162:
“… the appropriate course is first to consider the words themselves having regard to their statutory context and apparent purpose. The section confers upon the Secretary a discretion to waive the right to recover all or part of a debt. That discretion is only enlivened when the Secretary is satisfied that the three conditions in pars (a), (b) and (c) of the section are met. It does not follow that the Secretary is then obliged to waive the debt.
The first condition is negative, the second condition requires consideration of special circumstances that make it “desirable to waive” and the third condition requires the waiver be considered more appropriate than write off. The exercise of the discretion thus enlivened may be informed by other considerations which were not required to support satisfaction of the three necessary conditions. It is important in this case to say however that in some cases the satisfaction of the three conditions may be sufficient to persuade the Secretary to waive without reference to any further matter.”
His Honour went on to say (at page 163.2) that he did not accept the proposition that the class of circumstances which may support satisfaction of the condition in s 1237AAD(a) is mutually exclusive of the class of circumstances which may support satisfaction of the “special circumstances” condition in s 1237AAD(b).
30. Section 1237AAD(a) is the first statutory criterion, and involves determining whether the debtor or another person knowingly made a false statement, representation, or failed or omitted to comply with a provision of the Act. In this context “knowingly” was explained in Re Callaghan and Secretary, Department of Social Security (1996) 45 ALD 435 at 445 in the following way:
“There is nothing in s 1237AAD which suggests that the word “knowingly” should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission.”
This analysis has been endorsed in numerous subsequent decisions (see, for example, Re Secretary, Department of Family and Community Services and Jonauskas (2001) 65 ALD 553).
31. Although my above reasons indicate that Mr Schulze was indifferent or reckless in the management of his Centrelink obligations, I find that he did not knowingly fail or omit to advise Centrelink of the change in his and his wife’s income, and in this regard I note that both he and Mrs Schulze endeavoured to, and succeeded in contacting Centrelink to advise of the then revised expected income in October 2001. When Mr and Mrs Schulze answered the parenting payment partnered review form in February 2002, it appears that they omitted to answer all of Question 5 in full, and failed to attach a profit and loss statement for the last 12 weeks, but I find that they did not do so knowingly. It appears that Mr Schulze had minimal input into the form, other than printing out the profit and loss statement that was attached and forwarded to Centrelink, and that Mrs Schulze believed that, in the absence of the relevant taxation return, the previous year’s profit and loss statement was the best information she could provide as to present income. At most, Mrs Schulze, as another person under s 1237AAD, acted on an innocent misunderstanding of what the form required of her. This is not an instance of a person acting with actual knowledge of their omission or failure.
32. The next condition precedent which must be considered is whether there are special circumstances (other than financial hardship alone) such that it is desirable to waive the debts (see s 1237AAD(b)). 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.”
In the same case on appeal (1985) 7 ALD 670 at 674, the Full Federal Court reiterated the need to avoid limiting the scope of what might constitute special circumstances when it explained that:
“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 a later case, Groth v Secretary, Department of Social Security (1995) 40 ALD 54, at 545, Keifel J, after referring to the Federal Court’s decision in Beadle, observed 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 unjust 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.”
33. In my opinion, applying the above principles to the present matter, Mr Schulze can demonstrate several factors that either alone or in conjunction, amount to unusual, uncommon or exceptional circumstances. In so finding, I refer to the following matters.
(a)The applicant suffered an injury to his shoulder in December 2002 when he fell off a bike. This led to a shoulder reconstruction in June 2003 and while the applicant has returned to work, there are still some tasks he cannot perform as he previously did.
(b)The injury led to a reduced work capacity as the applicant could not lift his arm and ultimately had three months off work. There was also a protracted period before the prognosis of his injury became clear and the decision was made to operate. The uncertainty surrounding his injury initially, the limitations it imposed on his movements, and the three months in which he did not engage in any employment reduced the applicant’s earning capacity in late 2002 for a good part of 2003.
(c)There have been two administrative errors by Centrelink in the period in which this debt arose: one in October 2001 when Centrelink did not action the applicant’s advice about a change in estimated income in respect of parenting payment partnered, and another in February 2002 when Centrelink failed to notice the incomplete answer at Question 5 of the review form and further failed to photocopy the form and seek clarification from the benefit recipient in accordance with the usual procedure. I note that in Re Ellis and Department of Family and Community Services [2000] AATA 350, the Tribunal found that departmental error can be considered as part of the special circumstances of a case (see [22] for a summary of matters that have come to similar conclusions). Furthermore, in Re Brittain and Secretary, Department of Family and Community Services [2000] AATA 16 (at [43]) the Tribunal held that:
“… Section 1237A should not be read in isolation from s.1237AAD of the Act, and it is appropriate to consider departmental error in circumstances where it can either be said to be so significant in itself (as in Re Nehma) to give rise to special circumstances, or appears special when put together with all the other circumstances of a case.”
34. The applicant also urged the Tribunal to consider the notional entitlement of his son to Youth Allowance as a further special circumstance. It appears that the applicant’s eldest son did not apply for Youth Allowance upon attaining the age of 16 years, and the applicant said that his son would have given him part of the amount which he (the applicant’s son) would have received in Youth Allowance. The applicant first estimated that he would have received “more than 50 percent” of his son’s Youth Allowance payments, but in answer to further questioning from the Tribunal, he revised this figure to 75 percent of what his son would have received had he applied for Youth Allowance as soon as he was entitled. The actual total notional entitlement amount has been agreed between the parties at the hearing before me, and came to a total of $3,326.00 over a 12 month period. On that figure the amount of Youth Allowance that the son would have paid to the applicant is about $2,500.00 in round figures on the applicant’s final estimate. The Tribunal is mindful that the 75 percent figure put forward by the applicant was, however, an imprecise approximation.
35. Notional entitlement has been found to constitute part of the factual matrix of special circumstances in several cases such as Re Secretary, Department of Family and Community Services and Lyster (2000) 59 ALD 587. However, I note that the legislature has seen fit to amend the Act to provide for set-off of notional entitlement in the circumstances provided for in s 1237AAC. That provision provides for set-off of notional entitlement in only very limited circumstances and by reference to specific payments. It was the respondent’s contention that any attempt to expand notional entitlement by virtue of the special circumstances provision would defeat the intention of Parliament. I think this submission is well founded. In addition, I consider, in any event, that as it is the applicant’s son, and not the applicant, who is notionally entitled to Youth Allowance, the failure of the applicant’s son to apply for a payment to which he would have personally been entitled, in circumstances in which the applicant can only estimate what portion of those monies would have been paid to him and his wife, does not form a sound basis for consideration of waiver of a debt involving public monies.
36. A further special circumstance put forward by the applicant was that he had already paid tax on his parenting payment overpayment and he would effectively be out of pocket to the extent of that tax paid. Except in the instance of non-taxable payments, most overpayments would give rise to a situation where recipients would have paid tax on money they were subsequently required to pay back. This is not a special circumstance. Furthermore, the applicant can (and should) seek an amendment of his tax liability for the relevant financial years from the Australian Taxation Office (“ATO”) so that he is taxed only on the amount of parenting payment partnered that he was actually entitled to receive. The applicant should consult with Centrelink and the ATO to this end and this is not a matter relevant to a consideration of special circumstances.
37. I have carefully considered all of the evidence before the Tribunal and all of the submissions put to me by each party, and have decided that the applicant’s situation amounts to special circumstances for the purposes of s 1237AAD. I also consider it more appropriate to waive than write-off the debt. In all the circumstances I think it appropriate in the exercise of my discretion to waive part of the debt, but not the entire debt.
38. I consider that had Centrelink followed its own policy with respect to incomplete review forms and photocopied the form and sent it back to the applicant for his completion or amendment, the applicant would have had an opportunity to amend the existing error and would have, one can reasonably assume, sent the form back duly completed or corrected. I think it would be reasonable to assume that the form would have been returned to Centrelink within a month of the date that it was first lodged with Centrelink in its incorrect form. The debt calculations at T23 pages 118 to 119 of exhibit R1 indicate that the first pay day one month after the date that the defective review form was provided by the applicant was 19 March 2002, and that after that date the applicant was overpaid $3,442.58.
39. On my findings, the overpayment of this amount was due to a combination of errors by the applicant and Centrelink. In addition, I take into account the hardship caused to the applicant as a result of his bicycle accident, and that (notwithstanding that this did not give rise to an entitlement to waiver under s 1237A of the Act for the reasons referred to above) the applicant had taken steps in October 2001 to advise Centrelink of the altered position of himself and his wife, and a further administrative error was made by Centrelink in not acting on that information. As against these matters, I also take into account the interest of the community in the recovery of public monies (see Re Ivovic and Director of Department of Social Services (1981) 3 ALN 61). In Secretary, Department of Social Security v Smith (1991) 30 FCR 56, von Doussa J considered analogous sections in the Act dealing with the preclusion period arising from payments of compensation, and said (at page 61) that the relevant provisions: “are intended to operate together as a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.” In the circumstances, and in the exercise of the discretion conferred by s 1237AD, I waive $2,500.00 of the debt. The balance of the debt raised, namely $3,529.53, remains a debt due to the Commonwealth, less of course repayments already made by the applicant.
Decision
40. The Tribunal sets aside the decision under review and in substitution therefor decides that the amount of $2,500.00 be waived in the special circumstances of the case, and that the remaining amount of the debt is a debt due to the Commonwealth.
I certify that the 40 preceding paragraphs are a true
copy of the reasons for the decision herein
of Deputy President D G JarvisSigned: .....................................................................................
N Quirke AssociateDate/s of Hearing 9 and 24 March and 1 April 2004
Date of Decision 30 June 2004
Counsel for the Applicant In Person
Solicitor for the Applicant -
Advocate for the Respondent Ms S Cerone
25
5
0