Roche and Department of Family and Community Services - [2001] AATA 616

DECISION AND REASONS FOR DECISION [2001] AATA 616

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2000/1058

GENERAL ADMINISTRATIVE DIVISION       )
           Re      PATRICIA ROCHE
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Dr EK Christie, Member

Date2 July 2001
PlaceBrisbane

Decision The Tribunal affirms the decision under review. This means Mrs Roche's application for review is unsuccessful.

(Sgd) EK CHRISTIE
MEMBER
CATCHWORDS
SOCIAL SECURITY - family allowance - overpayment - waiver of debt - whether administrative error - whether special circumstances.

Social Security Act 1991 ss 860, 885, 891, 1069, 1223, 1237, 1237AAD
The Scheme for Compensation for Detriment Caused by Defective Administration
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Patman v Fletcher's Fotographics Pty Ltd (1984) 6 IR 471
McHugh J "The Growth of Legislation and Litigation" (1995) 69 Australian Law Journal 37 at 41

REASONS FOR DECISION

2 July 2001 Dr EK Christie, Member

This is an application by Patricia Roche for a review of the decision of the Social Security Appeals Tribunal ("the SSAT") made on 12 October 2000 to raise and recover a debt of family allowance of $9,336.45 for the period 11 February 1999 to 5 December 1999. The SSAT affirmed the decision of a Centrelink Authorised Review Officer made on 31 March 2000.
At the hearing Mrs Roche was represented by her husband, Kevin Roche. The Department of Family and Community Services was represented by Mr R McQuinlan, a Departmental Advocate.
At the hearing the Tribunal had in evidence before it documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975, the "T" Documents (Exhibit 1) and the following exhibits:

Exhibit 2 Taxation Notice of Assessment – 30.6.00 – Kevin Roche
Exhibit 3 Family Payments Notice, Centrelink – 28.4.00
Exhibit 4 Centrelink Document, Accounts Payable Record of Overpayment
Exhibit 5 Centrelink Form, Changes to Income and Assets – 1.2.99

Issues before the Tribunal

The only issues for the Tribunal to decide were whether the overpayments of family allowance could be waived in part, or in full, under the "special circumstances" or "administrative error" provisions of the Social Security Act 1991 ("the Act"). The parties agreed that the relevant period for consideration for waiver of overpayments was 1 July to 5 December 1999. Mr Roche acknowledged that a debt was due to the Commonwealth for the period 11 February to 30 June 1999.
Facts
Based on the evidence before it, the SSAT made the following findings of fact:
"(i) Mrs Roche was at all material times in receipt of family allowance.
(ii)On 11 February 1999, she provided an estimate of combined taxable income for the 1998/99 tax year of $30200, and was paid family allowance on the basis of this estimate of income for the period 11 February 1999 to 5 December 1999.
(iii)Her actual combined taxable income for the 1998/99 tax year was $129393 (Document T2 Folio 8)."

The date of issue of the notice of overpayment of family allowance was 31 March 2000 (Document T28).
Statutory Framework
Prior to 1 July 2000, the rate of family allowance paid under the Act was calculated in accordance with the rate calculator under Section 1069. Module H of Section 1069 contained the "income test". The income used was that of a particular tax year, called the "appropriate tax year".
For payment during a particular calendar year, unless certain conditions were met, the "appropriate tax year" was the one called the "base tax year". The "base tax year" was the tax year which finished in the preceding calendar year. For example, for payment during the year 1 January to 31 December 1999, the base tax year was the tax year that finished during 1998, that is, the 1997/98 tax year.
The Social Security Act provides for the following circumstances for the "appropriate tax year" to be some year, other than the "base year":

if an "assumed notifiable event" occurs, and income increased a certain amount (Section 1069 H-16, H-17); or
if a "notifiable event" occurs, and income increased a certain amount (Section 1069 H-18, H-19); or
if the person makes a request for another year to be used (Section 1069 H-20, H-21, H-22).

Section 860 of the Act provides for a recalculation of family allowance in prescribed circumstances (e.g. the Department being notified of a notifiable event) that have occurred in relation to the person:
"860 Rate struck for calendar year
If the rate of the family allowance payable to a person in a calendar year has been worked out in accordance with the Family Allowance Rate Calculator in section 1069, the rate of family allowance payable to the person only has to be worked out again during that calendar year if:
(a)the person notifies the Department or an officer that a notifiable event has occurred in relation to the person; or
(b)a notifiable event has occurred in relation to the person and the person fails to notify the Department that it has occurred; or
(c)the Secretary makes a determination in relation to the person under point 1069-H21 in Module H of the Family Allowance Rate Calculator in section 1069; or
(ca)family allowance advance is or is not payable for a particular period; or
(d)the person revises an estimate of his or her income; or
(e)the person has underestimated his or her income; or
(f)the Commissioner of Taxation changes an assessment of the person's taxable income."

Section 885 of the Act provides for a recalculation of family allowance entitlement where a person's income exceeds 110% of the estimated amount of income:
"885(1) If:
(a)in working out the rate of family allowance payable to a person, regard is had to the person's income for a tax year; and
(b)the income to which regard was had consisted of an amount estimated by the person; and
(c)the person's income for that tax year is more than 110% of the amount of the income on which the determination of the rate of family allowance was based;
the person's rate of family allowance is to be recalculated on the basis of that income."

Section 891 of the Act provides for the date of effect of a determination of the rate of family allowance where there has been an under-estimate of income:
"891 If:
(a)the Secretary makes a determination of a person's rate of family allowance; and
(b)in making the determination, the Secretary had regard to the person's income for a tax year; and
(c)the income to which regard was had included an amount or amounts estimated by the person; and
(d)the person's income for the tax year is more than 110% of the amount of the income on which the determination referred to in paragraph (a) was based; and
(e)the Secretary makes a determination varying the person's rate of family allowance, or cancelling the person's family allowance, to give effect to the recalculation required by section 885;
the later determination takes effect on the day on which the earlier determination took effect."

Section 1233 of the Act provides for debts arising under this Act.
"1223(3)        Recalculation of rate of family allowance. Subject to subsection (4), if:
(a)an amount (the "received amount") has been paid to a person by way of family allowance; and
(b)the person's rate of family allowance is recalculated under:
(i)section 884 (amendment of assessable income); or
(ii)section 885 (underestimate of income); or
(iii)section 886 (failure to notify notifiable event); or
(iv)section 886A (overestimate of child maintenance expenditure); and
(c)the received amount is more than the amount (the "correct amount") of the family allowance payable to the person;
the difference between the received amount and the correct amount is a debt due to the Commonwealth.
1223(4)          Family allowance recoverable after end of tax year. If:
(a)       family allowance is paid to a person in a tax year; and
(b)apart from this subsection an amount of family allowance would become recoverable under subsection (3) before the end of the tax year; and
(c)the amount would be recoverable because of:
(i)an increase in the person's income; or
(ii)an underestimate of the person's income;
the amount is recoverable only after the end of the tax year.
Note:   A person's taxable income is defined in point 10790-D11. A person's taxable income may increase, amongst other reasons, because the person underestimated his or her taxable income and the Commissioner of Taxation has made a subsequent assessment of the person's taxable income."

At the outset, Mr Roche acknowledged that there was no dispute in the application of Section 1069 of the Act and the calculation and recalculation of overpayment of the debt. Nor was there any dispute with respect to the use of the "appropriate tax year" or "base tax year" under the Act.
Contentions and Submissions of Parties
Mr Roche stated that their actual income for the 1999/2000 financial year of $43,417 (Exhibit 2, 9 February 2001) was less than the estimated income as provided by Mrs Roche to Centrelink of $50,800 (Exhibit 3, 28 April 2000).
However, Mr Roche contended that the SSAT had failed to consider the application of subsection 1223(4) of the Act in its decision-making process. Consideration of subsection 1223(3) alone would lead to a situation where the overpayment of family allowance was a recoverable debt.
It was Mr Roche's contention that the correct application of subsection 1223(4) of the Act led to an outcome where a debt could not be recovered until the end of the tax year. In Mrs Roche's circumstances, this would be 30 June 1999. Mr Roche submitted that under this construction of subsection 1223(4), the debt that could be recovered by the Commonwealth related only to overpayments accrued over the period 11 February 1999 to 30 June 1999.
He further submitted that recovery of overpayments accrued over the period 1 July 1999 to 5 December were not justified under this construction. Furthermore, the overpayments accrued over this period, could not be recovered as their actual total income was less than the estimated income (see paragraph 15).
With respect to Mrs Roche agreeing to Centrelink using her estimated total 1998/99 income ($30,200) for calculation of family allowance entitlements (Exhibit 5, page 8), Mr Roche submitted that such consent in this form did not refer to use of this income estimate for the following tax year or for the rest of the calendar year.
Mr Roche submitted that he could not identify any special circumstances to warrant waiver of the debt over the period 1 July 1999 to 5 December 1999.
Mr Roche concluded with the submission that the legislative intent of the Social Security Act was to make family allowance payments to children, deemed worthy enough by the Commonwealth to recover social security entitlements, being subject to a means test. However, Mr Roche submitted that not only was the SSAT decision incorrect and unfair in its application of the law, but also was inconsistent with the purpose of the Social Security Act.
Mr McQuinlan submitted that family allowance payments were calculated on the basis of estimates provided by Mrs Roche. The family allowance claim form completed by Mrs Roche contained adequate cautions as to the consequences of actual income exceeding the income estimate, as well as giving an opportunity to provide Centrelink with a new estimate of income at any time (Document T4 Folio 40).
Mr McQuinlan contended that Centrelink had paid entitlements to Mrs Roche according to Section 860 on the basis of information she had provided and continued to use this information until such time that she advised of a new estimate.
Mr McQuinlan stated that when Mrs Roche had completed a "Changes to Income and Assets Form" on 1 February 1999 (Exhibit 5) she had provided an estimate for taxable income for 1998/99 of $30,200 (page 7) and had agreed for this amount to be used to calculate her family allowance payments (Question 14, page 8).
It was not until a Data Matching Programme Review (Document T27 Folio 118, 31 March 2000) that Centrelink first became aware of the difference in actual income ($129,393) and the income estimate ($36,100); an Eligible Termination Payment ("EPT") made to Mr Roche had been the cause of the "blowout" of the income estimate (Document T27 Folio 119).
Mr McQuinlan submitted that Mrs Roche had been forwarded the following Centrelink notification notices:

Document T16 (10 March 1999)
Document T17 (10 March 1999)
Document T18 (19 August 1999)

These notices advised her that her family payment entitlements were calculated on the basis of her estimates for income of $30,200 in 1998/99.

Following the completion of a Family Allowance Review (Document T20, 1 November 1999), Mrs Roche varied the income estimate to $36,100. A Centrelink Notification Notice issued on 8 November 1999 (Document T21) advised Mrs Roche that family allowance payments would be calculated on the new income estimate of $36,100.
Mr McQuinlan contended that the operation of subsection 1223(4) of the Act resulted in no overpayment being raised until the end of the financial year. That is, its operation did not provide for no debt at all, as ultimately, the debt would be recovered under the Act.
Mr McQuinlan concluded by submitting that there was no basis for waiver of the debt because:

the overpayment was not solely due to an administrative error caused by the Commonwealth. Mrs Roche had contributed to the error by providing estimates of income that did not meet the statutory threshold of 110%; and
whilst acknowledging there was no question of dishonesty or deception on Mrs Roche's part, notification notices had been sent to Mrs Roche but had not been actioned in the form of any query or advice raised by Mrs Roche with Centrelink.

At the end of the hearing, the Tribunal invited Mr Roche and Mr McQuinlan to provide supplementary submissions.
Consideration of the Issues
The objective of the Tribunal is to review administrative decisions, not only on their merits, but in accordance with the law at all times. The statutory framework relevant to this application for review has been provided (paragraphs 7-13).
The Tribunal has carefully considered all the submissions, evidence and information before the Tribunal and makes the following findings.
The operation of subsection 1223(3) and 1223(4) of the Social Security Act does not provide for a situation in which there may be no debt at all as Mr Roche contends. Rather, that the debt would be ultimately recovered under the Social Security Act. In reaching this conclusion, the Tribunal has given effect to the following principle of statutory interpretation i.e. by giving effect to all the provisions in Part V.3 of the Social Security Act.
In Patman v Fletcher's Fotographics Pty Ltd (1984) 6 IR 471, Priestley J of the Appeal Court of the Supreme Court of New South Wales considered the requirements for statutory interpretation when a sequence of legislative provisions were involved:
"I see no reason why the Annual Holidays Act 1944 (NSW) should not be read in the ordinary way in which a document is read, that is, from the beginning onwards. In the ordinary course of reading, s 4, although of course it must be read with both what precedes it and follows it, must be read after s 3 and further, in the ordinary course it seems to me that it must be read in the light of s 3. It is preposterous, in the literal sense, to read s 4, make assumptions concerning its purpose based on its language, without reference to what has preceded it, and then to read s 3 in the light of the purpose thus discerned in s 4. A much sounder way of reaching what the draftsman's purpose was, is to read his Act in the sequence in which he wrote it."

The next issue for the Tribunal to decide is whether the overpayments of family allowance could be waived, in part or in full, because of "special circumstances" or "administrative error".
Section 1237 of the Act provides for circumstances where a debt due by a recipient of social security to the Commonwealth may be waived:
"SECTION 1237A – WAIVER OF DEBT ARISING FROM ERROR
1237A(1) Administrative error. 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 facts (such as error by the debtor).
SECTION 1237AAD – WAIVER IN SPECIAL CIRCUMSTANCES
1237AAD The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)the debt did not result wholly or partly from the debtor or another person knowingly:
(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."

The Tribunal finds that the application, by Centrelink, of the statutory framework for the calculation of the entitlement of family allowance for Mrs Roche, as well as the recovery of overpayment in Mrs Roche's circumstances, was correct.
Centrelink is dependent on the estimate of income for the appropriate tax year provided by Mrs Roche in order to calculate family allowance entitlements. In addition, notification notices were sent to Mrs Roche by Centrelink advising the income estimates upon which family allowance payments were calculated. Unfortunately, these notices were not actioned or queried by Mrs Roche by seeking advice from Centrelink. A raised income estimate was not provided until after the Family Allowance Review on 1 November 1999 (see paragraph 27). Moreover, Centrelink did not become aware of the ETP received by Mr Roche until after the Data Matching Programme Review on 31 March 2000 (see paragraph 25).
Accordingly, based on these conclusions, the Tribunal finds that the overpayments cannot be waived because of "administrative error" as the overpayments were not solely caused by the Commonwealth. Mrs Roche has also contributed to the administrative error.
The next issue for the Tribunal to consider is whether paragraph (b) of Section 1237AAD of the Act is satisfied – that is, whether there are "special circumstances (other than financial hardship alone) that makes it desirable to waive" the right to recover all or part of the debt. The Tribunal has had to consider the meaning and application of the expression "special circumstances" on many occasions. The decision of the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 has been an oft-quoted benchmark as to the interpretation of "special circumstances". In that case the Tribunal said (at 3):
"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 must have a particular quality of unusualness that permits them to be described as special."

The Tribunal concludes that there are no circumstances in Mrs Roche's case that warrant the description of "special circumstances" as being "unusual", "uncommon" or "exceptional" and so waive whole or part of the debt due to the Commonwealth.
Based on all of the above findings, the Tribunal has no alternative other than to affirm the decision under review.
Whilst this decision may seem harsh, it would be more correct to describe the outcome as unfortunate. To some extent the outcome reflects the difficulty Mrs Roche has encountered in her awareness and understanding of the Social Security Act in order to pursue her legal obligations. Mrs Roche's rights and obligations as a family allowance recipient are imposed under a wide and diverse number of statutory provisions contained in the Social Security Act. Her problem is well-illustrated by the following statement of His Honour, Justice McHugh of the High Court of Australia discussing the consequences of the rapid growth of legislation enacted throughout Australia, which states:
"The third effect of the growth of legislation is the difficulty of access to it. The rule of law is meaningless unless people know their rights and duties in the sphere in which they choose to act."

The Tribunal makes the observation that the problems of overpayment for the period 1 July 1999 to 5 December 1999 may have arisen because Mrs Roche was not aware or understood her right to request a new tax year to become their appropriate tax year. In this regard the SSAT stated:
"This latter option [a right to request a new tax year] was open to Mrs Roche at 1 July 1999 although the Tribunal [SSAT] understands that she may well have been unaware of this (Document T2 Folio 10)".

However, there was no direct evidence before the SSAT or this Tribunal in this regard. The Tribunal considers that this issue could be pursued as the possible basis for obtaining compensation by Mrs Roche –
(a) through means that fall outside the Social Security Act framework; and

(b)in circumstances where Mrs Roche feels she may have been "unfairly disadvantaged" by the Commonwealth but has no legal claim against it. In this regard, the Tribunal draws the parties attention to Regulation 9 of Financial Management and Accountability Regulations ("Act of Grace Payments") – as well as the Social Security policy document: "Compensation for Detriment Caused by Defective Administration Scheme" respectively. These avenues could be pursued by Mrs Roche.

The Tribunal decides to affirm the decision under review.

I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of Dr EK Christie, Member
Signed:         Denise Burton
  Secretary
Date/s of Hearing  22.5.01
Date of Decision  2.7.01
Rep. for the Applicant              Mr K Roche, applicant's husband
Solicitor for the Respondent    Mr R McQuinlan, Departmental Advocate

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Citations

Roche and Department of Family and Community Services [2001] AATA 616

Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Jackman v Repatriation Commission [1997] FCA 564