Sekhon; Secretary, Department of Family and Community Services

[2002] AATA 854

DECISION AND REASONS FOR DECISION [2002] AATA 854

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2001/630

GENERAL ADMINISTRATIVE  DIVISION       )          
           Re      SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Applicant
           And    HARMINDER KAUR SEKHON   
  Respondent

DECISION

Tribunal       Ms S M Bullock, Senior Member Dr J D Campbell, Member Mr S Webb, Member            

Date27 September 2002

PlaceSydney

Decision      The Tribunal sets aside the decision under review pursuant to section 43 of the Administrative Appeals Tribunal Act 1975 and substitutes its decision that: 1. A lump sum preclusion period of 593 weeks will apply commencing on 6 November 1992 and ending on 18 March 2004; and 2. The Commonwealth's right to recover Mrs Sekhon's compensation debt, in the amount of $50,681.95, is waived pursuant to section 1237A of the Social Security Act 1991.
  ..............................................
  Ms S M Bullock
  Presiding Member          
CATCHWORDS
SOCIAL SECURITY - Lump sum compensation payment - Compensation affected payment - Job Start Allowance and Disability Support Pension - Lump Sum Preclusion Period - Debt to Commonwealth - Liability for Debt - Administrative Error - Payments received in good faith – Special circumstances.
LEGISLATION
Social Security Act 1991 (Cth) ss 17; 23; 1165; 1166; 1174; 1177; 1179; 1182; 1184; 1222A; 1225; 1226; 1237A; 1237AAD

AUTHORITIES
Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529
Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424
Haidar v Secretary, Department of Social Security (1998) 52 ALD 255
Re Sawyer and Secretary, Department of Family and Community Services [2002] AATA 451
Re Secretary, Department of Social Security and McAvoy (1996) 44 ALD 721
Re Lukic and Secretary, Department of Social Security (AAT 6944, 6 May 1991)
Re Secretary, Department of Social Security and Gulevsky (AAT 10959, 24 May 1996)
Re Davis and Secretary, Department of Family and Community Services [1999] AATA 84
Re Farmer and Secretary Department of Social Security (AAT 8694, 7 May 1993)
Re Ford and Secretary, Department of Family and Community Services [2002] AATA 369
Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 50 ALD 186
Jones v Gordon (1877) 2 App. Cas. 616

REASONS FOR DECISION

27 September 2002   Ms S M Bullock, Senior Member  Dr J D Campbell, Member  Mr S Webb, Member   

1. This is an application by the Secretary of the Department of Family and Community Services ("the Applicant") for review of a decision made by the Social Security Appeals Tribunal ("the SSAT") dated 2 April 2001 (T2).  The SSAT set aside the decision of a Centrelink Authorised Review Officer ("ARO"), dated 1 December 2000 (T50), to affirm the decision of the original decision-maker, dated 3 October 2000 (T52), which was to recover a compensation charge of $50,681.95 from Mrs Sekhon ("the Respondent").

2. At the Hearing the Applicant was represented by Mr B Slattery of Centrelink's Advocacy and Administrative Law Team and the Respondent was represented by Mr M B Smith of Counsel.  The Respondent gave sworn evidence at the hearing.

3. Documents were prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("T1-T52") and were taken into evidence. Other documents tendered and taken into evidence at Hearing as Exhibits were:

Exhibit No.   Description  Date  
A1      Applicant's Statement of Facts and Contentions, with Attachments A, B and C.     30 August 2001  
A2      Transfer under the Real Property Act 1900 (NSW) dated by the Office of State Revenue on 30 May 2000, reference number 6901843V. 30 May 2000
A3      Centrelink policy guidelines from the "Guide to Social Security Law" headed "6.4.2 Recovery of Compensation Affected Payments (CAPS)" and "6.4.3 Failure to Pay a Recoverable Amount".           Last updated 4 May 1999  
R1      Respondent's Statement of Facts and Contentions.     1 July 2001   
R2      Clinical Psychological Assessment of Harminder Kaur Sekhon by Associate Professor S Hayes.           22 March 2002        
R3      Two reports by Dr K Bleasel, Neurosurgeon.     19 June 1995 19 January 1998    

1. After the Hearing, the following documents received from the parties were taken into evidence:

Exhibit No.   Description  Date  
A4      Information provided by the Applicant pertinent to the correct dates of the preclusion period.           6 August 2002         
A5      Applicant's Submissions on the correct dates of the preclusion period.       12 August 2002           
A6      Applicant's Further Information and Submissions in relation to the correct dates of the preclusion period.    21 August 2002       
R4      Respondent's Submissions on correct dates of the preclusion period.         12 August 2002           

BACKGROUND

1. On 18 May 1989 (T5), the Respondent was injured in a car accident while walking home from work.  At the time she was employed as a trainee with the Westpac Bank.  She was hospitalised with head injuries, spinal injuries and injuries to her arms and legs. She pursued a claim for compensation in the District Court.  She commenced a graduated return to work at Westpac and resumed full time duties on 13 September 1990.  She ceased work at Westpac on 23 October 1992.

2. The Respondent claimed and was granted Job Search Allowance on 17 February 1993. On 26 February 1993, Centrelink wrote to the Respondent (T8) and her solicitor, Stoikovich and Banfield (T7), advising, in the event the Respondent received a compensation payment, some or all of the social security payments she was receiving may have to be repaid and that a preclusion period may apply. On the same day Centrelink also issued the Government Insurance Office of New South Wales at Hurstville with a formal notice pursuant to section 1177 of the Social Security Act 1991 ("the Act") (T6), drawing attention, relevantly, to sections 1178, 1179 and 1182 of the Act.

3. The Respondent claimed and was granted Disability Support Pension on 5 May 1994. On 3 May 1994, Centrelink wrote to the Respondent (T11) and her solicitors (T12) in the same terms as in the previous letters dated 26 February 1993. On the same day Centrelink issued GIO Compulsory Third Party Insurances at Sydney with a formal notice pursuant to section 1177 of the Act (T13).

4. On 16 August 1994 (T14) and 7-8 September 1995 (T16, T17), the Respondent's solicitor wrote to Centrelink requesting details of the social security benefits paid to the Respondent.  This information was supplied by Centrelink in letters dated 13 September 1994 (T15) and 13 September 1995 (T19, T20) respectively.  On 23 February 1998, the Respondent's solicitor submitted an "Estimate of Social Security Charge / Preclusion" form to Centrelink (T25) on the basis of a proposed compensation settlement amount.  A facsimile response from Centrelink dated 2 March 1998 (T26) set out the estimated charge and preclusion period that would arise.  The details provided by facsimile were set out in a letter of the same date (T27).

5. The compensation claim was settled by verdict on 26 June 1998 and an appeal was lodged.  GIO informed Centrelink of the settlement by verdict on 29 September 1998, stating that the gross lump sum was $469,568.00 (T28).

10. In a facsimile addressed to GIO Australia, dated 1 October 1998, Centrelink advised that:

"…the Department has no charge under Part XVII of the Social Security Act 1947 and/or Part 3.14 of the Social Security Act 1991." [emphasis added] (T29) 

11. Centrelink confirmed this advice in a letter to GIO Australia dated 2 October 1998 (T31), and in a letter of the same date to the Respondent's solicitor (T32).  The Centrelink Delegate of the CEO wrote:

"After consideration of the terms of settlement of the claim, it has been determined that, under part 3.14 of the Social Security Act 1991, Centrelink's charge relating to the above compensation id number is Nil."

12. In a letter to the Respondent dated 2 October 1998 (T30), Centrelink set out the preclusion period that would apply, from 24 October 1992 to 24 February 2006, on the basis that the Respondent was entitled to receive a lump sum compensation payment of $469,568.00.

13. The appeal against the compensation verdict was subsequently withdrawn and a final verdict was entered on 17 December 1998, providing an award to the Respondent of $497,568.99 (T37).  The amount included an amount of $79,195.99 for past loss of earnings, an amount of $155,491.00 for future loss of earnings and an amount of interest, $28,000.00.  The total award for loss of earnings (including related interest) was $262,686.99.  An amount of $17,666.17 was paid back to Westpac in lieu of wages.

14. On 26 February 1999, an amount of $260,000.00 was paid to the Respondent by her solicitor (T52, folio 118).  The balance of the settlement, after disbursement of costs, was paid to the Respondent by her solicitor in two subsequent instalments of $110,000.00 and $818.74.   The Respondent informed Centrelink of her receipt of the payment on 13 April 1999 (T34).

15. On the basis of the settlement of the Respondent's compensation claim in the amounts already referred to, Centrelink calculated that an amount of $245,020.82 was the amount to be used for the purpose of calculating a preclusion period pursuant to section 1165 of the Act. Using a divisor of $412.70, a preclusion period of 593 weeks was recalculated, commencing on 14 September 1990 and concluding on 24 January 2002 (T43, folio 90).

16. Social Security payments to the Respondent continued until 1 April 1999.  On 25 June 1999, applying a charge period of 17 February 1993 to 1 April 1999, Centrelink calculated that the Respondent had been paid $35,439.80 in Disability Support Pension and $15,242.15 in Job Start Allowance payments.  Centrelink raised the total amount, $50,681.95, as a compensation charge (T36).

17. In a letter dated 25 June 1999 (Exhibit A1, Attachment B), a "Recovery Notice under section 1174 of the Social Security Act 1991" was served on NSW Insurance Ministerial Corp to recover the amount of $50,681.95.  A letter of the same date was sent to the Respondent informing her of the amount to be repaid because of her compensation payment and of the preclusion period.  The letter also informed her that Centrelink had asked GIO to repay the total amount before paying her the balance of the compensation payment (T38).

18. On 5 July 1999, GIO responded to Centrelink's letter of 25 June 1999 informing Centrelink that the settlement moneys, after deductions, had been paid to the Respondent (T39).  No deductions had been made pursuant to any refunds owing to Centrelink on the basis of the 'Nil recovery' information provided by Centrelink in the letter of 2 October 1998. On 23 July 1999 Centrelink replied with a letter of demand for payment, pursuant to the previously issued section 1174 notice dated 25 June 1999 (T42).

19. On 3 October 2000, Centrelink wrote to the Respondent demanding payment of $50,681.95 (T52, folio 114).  In response, the Respondent requested a review of her liability to pay this amount.  A review by a delegate of the Secretary was conducted and on 8 November 2000 the Respondent was advised that the delegate decided to:

"…affirm the decision under review to recover the charge of $50,681.95 and to impose the preclusion period until 24 January 2002." (T47)

20. The Respondent sought review of the decision by an ARO on 17 November 2000.  The review officer decided to affirm the decision on 1 December 2000 (T50).  The Respondent then applied for review by the SSAT.  On 2 April 2001 the SSAT set aside the decision and decided:

"[T]hat the Secretary must waive the recovery of the overpayments to Mrs Sekhon of the sums of $15,242.15 and $35,439.80 pursuant to section 1237A of the Social Security Act, 1991." (T2)

EVIDENCE
Mrs Sekhon

21. Mrs Sekhon told the Tribunal, since her accident, she suffers from bladder nerve damage, migraines, pain in her neck, shoulders, right arm and hand, panic attacks, and has difficulty making decisions.  These disabilities prevent her from working.

22. Mrs Sekhon told the Tribunal that after her accident she had returned to work at Westpac in December 1989 on a part-time basis, with her salary being complemented by periodic compensation payments.  She had continued to work part time until September 1990, when she had resumed full time duties.  She did not receive further periodic compensation payments thereafter.  She ceased work in 1992 on being dismissed by Westpac and has not worked since, despite her early efforts to find suitable employment. 

23. Subsequent to her application for Job Start Allowance and Disability Support Pension, Mrs Sekhon recalled receiving advice from Social Security that she may have to make some repayments on settlement of her compensation claim.  In response to a letter from Centrelink dated 2 March 1998 (T52), Mrs Sekhon recalled a telephone conversation with a Centrelink officer on 11 March 1998 which she had annotated on the letter as follows:

"I might not have to pay anything, depends on the compensation.  She said they will write to my solicitor if I have to pay anything back and Insurance Co will pay them before they pay me." (T52, folio 134)

24. Mrs Sekhon recalled being contacted by her solicitor, Stoikovich, Banfield and Macri, regarding a letter from Centrelink about the terms of settlement of her compensation claim in which Centrelink had determined that there was no compensation charge to be repaid.  Mrs Sekhon has asked her solicitor about the no charge determination and was told that she did not have to repay any money to Centrelink.

25. Mrs Sekhon said she understood from this conversation and the letter from Centrelink that she did not have a debt to Centrelink and that she would not be able to receive social security payments because a preclusion period would be applied.  The insurers had repaid Westpac and her solicitors had paid the doctors and other fees from the claim moneys.  She subsequently received a cheque in the amount of $260,000.00 in February 1999 and later received the balance of funds, being over $100,000.00.  She understood these moneys were hers, to use as she liked.  She informed Centrelink that she had received a lump sum payment of compensation in April 1999 and her social security payments stopped soon after.  Nobody told her and she had no reason to believe that matters were not as they should be at this time. 

26. Mrs Sekhon spent the money on necessary items and repaying an amount of $283,000.00 to her former husband, who had built her a house in Baulkham Hills and made mortgage repayments on her behalf.  She subsequently sold the house as she did not want to live there as there was no public transport.  With the assistance of her son, she commenced looking for another house to buy.  A suitable property at 160A Tennyson Road, Gladesville was identified from a newspaper advertisement and a cursory external viewing.  The property was purchased at auction the next day.  However, on inspection of the interior of the house, Mrs Sekhon decided that she could not live in it as the bathroom would need renovation.  Mrs Sekhon told the Tribunal that she suffers panic attacks and has difficulty showering as a result.

27. Mrs Sekhon moved in with her son at 21a Brierley Crescent, Plumpton, where she continues to reside.  She agreed to an arrangement with a development company, R Bhindar and Company, for unspecified work to be carried out on the Gladesville property "in a year or two".  In consideration of this arrangement she took out a mortgage over the property for $380,000.00, lodging an amount of $300,000.00 with the development company "to get income with which to renovate or build again".  The remaining $80,000.00 loan was retained in a bank account to service the mortgage repayments.

28. In June 1999 Mrs Sekhon received a letter from Centrelink telling her that an amount of $50,681.95 would have to be repaid by GIO.  Subsequently on 4 October 2000, she received a letter from Centrelink demanding payment of $50,681.95.  At the time she had nothing left from her compensation settlement, having paid for a trip to visit her family in India and was relying on her son for financial support, as she has had no income since April 1999.

MEDICAL EVIDENCE

Associate Professor S Hayes

29. Associate Professor Hayes conducted a clinical psychological assessment of the Respondent on 21 March 2002 (Exhibit R2) and applied Depression Anxiety Stress Scales, the Beck Depression Inventory and the Personality Assessment Inventory – Critical Items Form.  On the basis of the test results, Associate Professor Hayes found that Ms Sekhon was:

"…suffering from extremely severe depression, anxiety and stress, and also had some features of post-traumatic stress disorder.  In particular, she suffers from extremely disabling panic attacks which prevent her from completing her university work and which virtually render her housebound." (Exhibit R2, p.4)

30. Associate Professor Hayes reviewed medical notes pertaining to Mrs Sekhon's medical history and reported:

"…letters prior to 1998 indicate that she was suffering from difficulties in concentration and these difficulties were such that it was impossible for her to take up her previous occupation of clerical work, despite the fact that she is an intelligent woman.  Her psychological conditions impair her ability to reason properly and she finds it difficult to take in information because of her high levels of anxiety."

Dr K Bleasel, Neurosurgeon

31. The two reports prepared by Dr Bleasel, Neurosurgeon (Exhibit R3), were prepared for the purpose of the Mrs Sekhon's compensation case in the District Court.  The reports focus on impairment.  However, Dr Bleasel notes:

"Because of her constant pain, her sleepless nights, her lack of ability to do much in comparison with her description of herself as a highly active well motivated woman with capacity to earn a good living, she has become profoundly depressed and in need of constant psychiatric and psychological help." (Exhibit R3, Report of 19 January 1998, p.3)

SUBMISSIONS
The Applicant

32. Mr Slattery, for the Applicant, submitted that the SSAT had misapplied section 1237A(1) of the Act, contending that the social security payments to Mrs Sekhon during the preclusion period gave rise to her debt to the Commonwealth. Mr Slattery put to the Tribunal that the Respondent's liability increased as the compensation affected payments continued, stating:

"Immediately before the award of the lump sum the liability was pending.  The release of the compensations amount without the department's charge being recovered at that point the liability turned into a debt." (Transcript, p.4) 

33. It was put to the Tribunal that the social security payments that were paid to Mrs Sekhon gave rise to the debt on the payment of the lump sum compensation and not the administrative error of Centrelink. Therefore, section 1237A(1) of the Act does not apply.

34. Mr Slattery referred the Tribunal to departmental policy guidelines contained within the "Guide to Social Security Law" (Exhibit A3) which state:

"6.4.3   Failure to Pay a Recoverable Amount
…
The following table shows the action required if a compensation payment is released without refunding Centrelink's charge…If the insurer or compensation payer has…NOT been served either [a preliminary or a recovery] notice, (or) been served either notice incorrectly…Then…a recovery notice should be served on the customer."

35. Mr Slattery opined that Centrelink had followed this policy guideline in serving a notice on the customer. A revocation notice (T31) had been served incorrectly on the insurer, releasing the insurer of liability. Consequently a notice pursuant to section 1166 of the Act had been served on the customer, the Respondent, in accordance with the policy and thereby giving rise to a compensation debt under section 1225 of the Act.

36. Mr Slattery considered that a letter to Mrs Sekhon dated 25 June 1999 (T38) suits the purpose of section 1166 of the Act, comprising a notice of recovery. In the event that this letter is deficient for the purpose, a letter from Centrelink dated 8 November 2000 (T47) would satisfy section 1166 of the Act. On this basis Mr Slattery argued that Mrs Sekhon had been served notice by the Secretary, as required, raising a compensation debt to the Commonwealth.

37. Mr Slattery noted that section 1237A of the Act only applies where administrative error is the sole cause of the debt, requiring that that proportion of the debt so caused must be waived. The cause of the debt in this instance is not administrative error, but rather the compensation affected payments Mrs Sekhon received during the preclusion period. The debt arises regardless of Centrelink's failure to recover the debt from the insurer.

38. Referring the Tribunal to Re Lukic and Secretary, Department of Social Security (AAT 6944, 6 May 1991); Re Secretary, Department of Social Security and Gulevsky (AAT 10959, 24 May 1996); and, Re Davis and Secretary, Department of Family and Community Services [1999] AATA 84, Mr Slattery argued that the special circumstances tests pursuant to section 1184 of the Act were not satisfied. In each of these cases the Tribunal, differently constituted, had decided not to exercise the discretion to find special circumstances where the people concerned owned real property.

39. Mr Slattery submitted that Centrelink's administrative error determining a nil charge was not insignificant in the consideration of special circumstances, but "other players" contributed to the error.  Centrelink sent Mrs Sekhon's solicitor six letters regarding the accruing charge (T7 folio 42, T9 folio 44, T12 folio 47, T15 folio 50, T19 folio 55, T26 folio 64), yet the solicitor did not question the erroneous nil charge determination when informed of this by Centrelink.  In Mr Slattery's view, this failure amounts to contributory error.

40. Mrs Sekhon's evidence regarding a mortgage and a loan were insufficient to be accepted as a fact. In Mr Slattery's opinion, the evidence reveals that Mrs Sekhon owns real property without encumbrance in Gladesville, which can be sold to alleviate financial hardship. Mrs Sekhon transferred an amount of $50,000 to her son's account in July 2000.   She has no debt to her son arising from his provision of accommodation and other support.

41. Mrs Sekhon's medical circumstances were noted by Mr Slattery, who observed that she had been compensated for the effects of her injuries.  Therefore, her medical circumstances are not decisive in these circumstances or in any way special.

The Respondent

42. Mr Smith, for the Respondent, rejected Mr Slattery's interpretation of section 1237A of the Act. Mr Smith argued that the departmental policy guidelines (Exhibit A3) had not been complied with. The policy guidelines do not permit Centerlink to recover a debt from a customer in cases where a notice has been correctly served pursuant to section 1177 or section 1179 of the Act to recover that debt from the insurer. In this case notices pursuant to section 1177 (T6 and T13) and section 1174 (Exhibit A1, Attachment B) of the Act had been correctly served on the insurer. A notice pursuant to section 1182 of the Act (T31, folio 71) revoking the section 1177 notice and releasing the insurer of liability was served in error. Some time later, attempts were made, in contravention of departmental policy guidelines, to recover the debt from Mrs Sekhon.

43. Mr Smith argued that Mrs Sekhon is not liable for repayment of the debt because she has not been served a valid notice under section 1166 of the Act and the debt has not been properly raised pursuant to section 1225 of the Act. The two letters sent to Mrs Sekhon, which the Applicant has argued constitute notices for the purpose of section 1166 of the Act (T38 and T47), are deficient for the purpose. Neither letter provides proper written notification of the Secretary's determination of liability pursuant to section 1166 of the Act.

44. Mr Smith argued, in the event that one of the letters is determined to be sufficient for the purposes of section 1166 of the Act, a debt is raised against Mrs Sekhon. In this event, it would be necessary to consider why Centrelink decided to pursue recovery of the debt from Mrs Sekhon, rather than from the insurer pursuant to the preliminary notices it had previously given. Mr Smith attributed cause to the erroneous revocation notice under section 1182 of the Act, releasing the insurer from liability to repay the charge.

45. Mr Smith pointed out that once the error was realised, the documents reveal that departmental officers Caroline Gunnulson and Karen McGrann "determined that this charge would then have to go to the customer" (T46, folio 94).  On this basis, Centrelink's decision to recover the debt from Mrs Sekhon, and the letters sent to her as a consequence, are solely attributable to the administrative error which released the insurer from liability.  Accordingly, Mrs Sekhon's liability for the debt is solely attributable to administrative error. 

46. Mr Smith noted, in these circumstances, it is necessary to establish whether Mrs Sekhon received the payments in good faith.  Drawing the Tribunal's attention to Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529 and Jazazievska v Secretary, Department of Family and Community Services (2000) 65 ALD 424, Mr Smith stressed that good faith may be established by investigating the subjective mental state of the recipient at the time, not that of his or her solicitor.

47. Mr Smith submitted that Mrs Sekhon received in good faith both the pension payments from Centrelink and the compensation payment from GIO, whichever may have given rise to the debt.  She understood that Centrelink would inform the insurer of the amount, if any, to be repaid following settlement of her compensation claim, and that the insurer would deduct this amount from her compensation settlement prior to disbursement of the balance.  Subsequently Mrs Sekhon was informed that Centrelink had determined a nil charge, and that no repayment would be required.  She had spoken with her solicitor to check that this advice was correct.  Mrs Sekhon accepted this advice on its face and, in good faith, received payment of her compensation settlement following payment of disbursements by the insurer and her solicitor.

48. In essence, Mr Smith put to the Tribunal that Centrelink made clear representation to Mrs Sekhon, her solicitor and GIO that the compensation moneys that would flow to her were hers to spend without any charge from Centrelink. Mrs Sekhon both accepted and acted upon this clear representation, disposing of her money as she saw fit. Mr Smith identified doctrines of estoppel in the policy underlying section 1237A of the Act concerning the recovery of moneys paid by mistake, appreciating that persons who have incurred social security debts are likely to be in particularly vulnerable situations.

49. Mr Smith relied on Haidar v Secretary, Department of Social Security (1998) 52 ALD 255, Re Sawyer and Secretary, Department of Family and Community Services [2002] AATA 451, Re Ford and Secretary, Department of Family and Community Services [2002] AATA 369 where misadvice by a department was seen as relevant to 'special circumstances'.

50. In the current case, Mr Smith opined that a stronger case was made out than in Re Sawyer and Secretary, Department of Family and Community Services (supra) and Re Ford and Secretary, Department of Family and Community Services (supra) where Centrelink customers had not received what they had been advised to expect.  Mrs Sekhon received what she had been led to believe she was entitled to and accepted advice that this money was hers to spend as her own.  The situation more closely resembles that addressed in Re Secretary Department of Social Security and McAvoy (1996) 44 ALD 721 in which departmental officers misled the recipient and the Tribunal decided that recovery of the debt must be waived pursuant to section 1237A of the Act. In that matter the Tribunal also found that there were 'special circumstances' grounds for exercising the discretion to waive recovery under section 1237AAD of the Act. Mr Smith submitted that similar 'special circumstances' grounds may be found in the current case that are sufficient to warrant the exercise of discretion pursuant to section 1237AAD of the Act.

51. Mr Smith referred the Tribunal to medical evidence from Associate Professor S. Hayes, Clinical Psychologist, and Mrs Sekhon's own evidence, regarding her difficulty making financial decisions.  Mrs Sekhon's difficulty increased her reliance upon the information and advice provided to her by others, in this case by Centrelink.

52. Mr Smith submitted that these circumstances describe special circumstances and provide a just basis for the exercise of discretion pursuant to section 1184 of the Act, or in the alternative pursuant to section 1237AAD of the Act.

53. After the hearing, Mr Slattery made submissions on the date of commencement of the preclusion period on the basis of Westpac records of Mrs Sekhon's employment.  The records and supporting medical certificates show that periodic compensation payments were made in respect of periods of workers compensation leave taken during the period 14 September 1990 to 5 November 1992 (Exhibit A6).  The date of last payment being 5 November 1992, the date of commencement of the preclusion period, therefore, is 6 November 1992.  On this basis the preclusion period will conclude on 18 March 2004, Mr Smith submitted.

54. Mr Smith submitted that Mrs Sekhon returned to full time work with Westpac on 14 September 1990.  There is conflicting evidence before the Tribunal regarding the last date periodic compensation was paid.  On this basis, Mr Smith continued that the Tribunal should accept the evidence provided by Mrs Sekhon, which is supported by documentary evidence (T35, folio 77) used by Centrelink when calculating the preclusion period in the decision under review, that is commencing on 14 September 1990.

55. The Respondent was given the opportunity at a Telephone Directions Hearing held on 26 August 2002 to provide further submissions, in addition to those contained within Exhibit R4 and as provided by Mr Smith at Hearing, on the direct evidence provided by Westpac indicating 5 November 1992 was the last date of payment of periodic compensation.  The Respondent's representatives declined to do so.

CONSIDERATION OF ISSUES AND FINDINGS

56. The Respondent has received compensation affected payments during a preclusion period arising from an award of lump sum compensation for loss of earnings. The Applicant has calculated a compensation charge which it intends to recover from the Respondent, applying the compensation recovery provisions of the Act. Recoverability hinges on a debt to the Commonwealth being raised by express provision under the Act. Thus, in the first instance it is necessary to determine whether a debt to the Commonwealth is raised for which the Respondent is liable. Thereafter, a determination must be made as to the recoverability of the debt and whether or not circumstances exist to mitigate recovery of the debt such as to write the debt off or to waive it. The Act deals with amounts recoverable at Part 5.2 and sets out methods for the recovery of debts to the Commonwealth at Part 5.3. The non-recovery of debts is dealt with at Part 5.4 of the Act

Is a debt to the Commonwealth raised? 

57. Under Part 5.2 of the Act in the case where a person receives both compensation affected payment, as defined in subsection 17(1) of the Act, and compensation as part of a lump sum, as defined in subsection 17(2) of the Act, a debt to the Commonwealth may be raised pursuant to section 1225 or section 1226 of the Act:

"1225   Compensation debts

1225(1)If a person is liable to pay a compensation debt, that debt is a debt to the Commonwealth.

Note 1:for compensation debt see section 23.

Note 5:If the person does not pay the debt or enter into an agreement to pay the debt within a certain time, interest may become payable on the debt (see section 1229). If the person enters into an agreement to pay the debt and breaches the agreement, interest may become payable on the debt (see section 1229A).

…
1226   Compensation payer and insurer debts

1226(1) If a person is liable to pay an amount to the Commonwealth because of:

(a)a notice by the Secretary under section 1174 of this Act or section 154 of the 1947 Act (compensation payers); or

(b)a notice by the Secretary under section 1179 of this Act or section 155 of the 1947 Act (insurers);

the amount is a debt due to the Commonwealth and is recoverable by the Commonwealth by means of legal proceedings.

Note 1:         for compensation payer see subsection 17(1)
Note 2:                    for legal proceeding see section 1232

…"

58. "Compensation debt" is defined at section 23 of the Act:

"compensation debt means an amount that a person is liable to pay to the Commonwealth because of a notice by the Secretary under section 1166 or 1170 of this Act or subsection 153(2) or (3) of the 1947 Act."

59. Section 1166 of the Act provides:

"1166   Person may have to repay amount where both lump sum and payments of compensation affected payment have been received

1166(1)          If:

(a)       a person receives a lump sum compensation payment; and

(b)the person receives payments of compensation affect payment for the lump sum preclusion period;

the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.

Note 2:A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B)."

60. Thus, a compensation debt is raised by notice of the Secretary determining the liability of a person to pay the amount specified in the notice, whereby repayment is required to satisfy the determination of the Secretary. The Applicant has argued that payment of compensation affected payments and compensation as part of a lump sum award gives rise to the Respondent's debt to the Commonwealth. 

61. The Tribunal notes that there is no condition applying to the grant of compensation affected payments that requires the payments to be repaid on receipt of a lump sum compensation award. The compensation recovery provisions under Part 3.14 of the Act confer discretion in the Secretary to determine liability and raise a debt to the Commonwealth in such circumstances.

62. Accordingly, the Tribunal finds that the Respondent did not accrue a liability to repay the Commonwealth merely because she was paid compensation affected payments.  The payment of lump sum compensation for loss of earnings, of itself, did not give rise to a debt to the Commonwealth for which the Respondent is liable. 

63. The policy underlying the compensation recovery provisions at Part 3.14 of the Act is to prevent double payment, whereby a person receiving a social security payment is also paid a compensation payment for the same period. In such cases, a lump sum preclusion period is to be calculated in accordance with section 1165 of the Act, as follows:

"1165  Compensation affected payment not payable during lump sum preclusion period

…

Person not member of a couple-payment received on or after 20 March 1997

1165(1A)        If:

(a)a person receives or claims a compensation affected payment; and

(b)       the person is not a member of a couple; and

(c)the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;

no compensation affected payment is payable to the person for the new lump sum preclusion period.

Note 1: For new lump sum preclusion period see subsections (5) to (8).

Note 2: A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B).

…

1165(5)If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:

(a) begins on the day after the last day of the periodic payment period; and

(b) ends after the number of weeks worked out under subsections (8) and (9).

Note:    For periodic payments period see section 17.

…

1165 (8)If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:

Compensation part of lump sum

Income cut-out amount

Note 1:                    For compensation part of lump sum, see section 17.
Note 2:                    For income cut-out amount, see section 17.

1165 (9)If the number worked out under section (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number

…."

64. For the purpose of calculating the lump sum preclusion period to apply in this case, the Tribunal accepts evidence that the last day of the periodic payment period, being the last day periodic compensation was paid to the Respondent, was 5 November 1992, and so finds. The period of preclusion, being 593 weeks, is not in dispute. Thus, the Tribunal finds that a preclusion period of 593 weeks, commencing on 6 November 1992 and concluding on 18 March 2004 applies. Whether the preclusion period should be reduced by enacting section 1184 of the Act is dealt with later in this decision.

65. Compensation affected payments were paid to the Respondent during the period17 February 1993 to 1 April 1999 in the amounts of $35,439.80 in Job Start Allowance payments and $15,242.15 in Disability Support Pension payments. The Tribunal finds that these amounts were paid to the Respondent during the lump sum preclusion period. Accordingly, the total amount of the compensation affected payment, in the amount of $50,681.95, may be raised as a compensation debt to the Commonwealth pursuant to section 1225 or section 1226 of the Act by determination of the Secretary that a person is liable to repay that amount.

66. Centrelink issued preliminary notices (T6 and T13) to the insurer under section 1177 of the Act. In so doing Centrelink made clear its intention to determine the amount to be repaid by the insurer on settlement of the Respondent's compensation claim pursuant to section 1179 of the Act. This was confirmed in the letter dated 25 June 1999 (T38, folio 80) that Centrelink sent to the Respondent. The Tribunal finds that Centrelink intended, in the first instance, to recover the amount of $50,681.95 from the insurer and raise a debt to the Commonwealth in that amount pursuant to section 1226 of the Act.

67. When considering settlement of the compensation claim, the Respondent's solicitor sought advice from Centrelink about the amount of the compensation charge that would have to be repaid so that this could be taken into account. On 2 October 1998, Centrelink determined that a nil charge would apply and served a notice under section 1182 of the Act (T31) on the insurer, revoking the preliminary notice and releasing the insurer from liability.

68. The insurer acted on Centrelink's determination, disbursing the compensation settlement moneys in February 1999. Subsequently, on 25 June 1999 and 23 July 1999, Centrelink served successive notices under section 1174 of the Act (Exhibit A1, Attachment B and T42, folio 85) on the insurer, without admission of error or explanation. These notices determined the insurer's liability for repayment of the amount specified and raised a debt to the Commonwealth pursuant to section 1226 of the Act in that amount. The revocation of preliminary notices, in error, does not, as an essential consequence, invalidate the recovery notices that were served following discovery of the error. However, Centrelink did not rectify or pursue the matter with the insurer in a timely manner and the debt was not recovered. The Tribunal finds that the insurer acted upon Centrelink's advice of a nil charge, thereby raising questions about the statutory force of the subsequent recovery notices in light of estoppel considerations.

69. Subsequently on 3 October 2000, Centrelink turned its attention to the customer, the Respondent, and attempted to raise a compensation debt to the Commonwealth pursuant to section 1225 of the Act. In order to raise a compensation debt to the Commonwealth pursuant to section 1225 of the Act, the Secretary must give a notice pursuant to section 1166 of the Act.

70. It has been argued by the Applicant that three letters sent to the Respondent by Centrelink may each satisfy the requirements for a notice pursuant to section 1166 of the Act. These requirements are not onerous. At the minimum, for such a notice to be valid, the Secretary must:

(1)give the notice in writing to the person; and

(2)determine that the person is liable to pay to the Commonwealth an amount pursuant to subsection 1166(1); and

(3)specify the amount to be repaid.

71. The first letter, dated 25 June 1999 (T38) describes the effect of the Respondent's compensation payment on her social security payments.  It states, inter alia:

"I have been advised that you are entitled to a lump sum compensation payment of $497,568.99 and I have calculated that the amount of social security payments to be repaid is $50,681.95.  The preclusion period start date is 14 September 1990 and the end date is 24 January 2002
…
I have therefore asked NSW INSURANCE MINISTERIAL CORP to repay $50,681.95 to Centrelink before they pay you the rest of your compensation payment. My authority to do this is contained in section 1174 of the Social Security Act 1991."

72. The Tribunal finds that this letter does not satisfy the requirements of section 1166 of the Act and that, at the time, Centrelink had not determined that the Respondent would be liable to repay an amount to the Commonwealth. The letter does not purport to be a notice pursuant to section 1166 of the Act. On the contrary, it makes clear reference to a notice served under section 1174 of the Act to recover moneys from the GIO Ministerial Insurances Corp. The letter does set out the amount determined by the Secretary to be repaid, but does not determine that the Respondent is liable for the repayment.

73. The second letter dated 3 October 2000 (T52, folio 114), is in the following terms:

"This is about your Centrelink account.  At the time of writing, the amount owing is $50681.95.
If you have paid $50681.95 in the last 7 days, please ignore this letter.
Please pay $50681.95 within 14 days or, if you cannot do this, please phone me on … to talk about it." 

74. The Tribunal finds that this letter does not satisfy the minimum requirements of section 1166 of the Act and does not therefore raise a debt to the Commonwealth pursuant to section 1225 of the Act. The letter does not set out or make any reference to a determination by the Secretary of the amount to be repaid, nor does it purport to be a notice pursuant to section 1166 of the Act. The letter does not provide any information about the raising of a debt to the Commonwealth or its cause or nature. The letter does, however, require the Respondent to pay an amount of $50,681.95, which is 'owing' on her Centrelink account.

75. The third letter, dated 8 November 2000 (T47), is a response to the Respondent's initial request for a review of the decision to recover a compensation charge of $50,681.95.  Affirming the decision under review, the letter states:

"The correct legislative basis has been applied to your compensation lump sum settlement. The Centrelink Preclusion Period and Charge have been calculated correctly under Section 1165 and 1166 of the Social Security Act 1991." (T47, folio 97)

76. The Tribunal finds that the basis of this finding and the reasons for it are not transparent in the letter. The letter does not identify any document setting out the original determination of the Respondent's liability to repay the debt or the reasons for the decision to recover the debt from the Respondent. It does not point to any document that may satisfy the notice requirements of section 1166 of the Act which may have been relied upon by the original decision-maker or in the review when making this finding, thereby establishing a basis for the Respondent's liability for the repayment.

77. Setting to one side questions about the veracity of the findings, the letter does not purport to be anything other than it is: a written response to a request for review of a decision.  The letter records a decision to "affirm the decision under review to recover the charge of $50,681.95 and to impose the preclusion period until 24 January 2002." (T47, folio 97)  It does not explicitly determine that the Respondent is liable to pay the charge to the Commonwealth, but instead relies upon the original decision in this regard.  Absent the original decision and the determination of the Respondent's liability, which must lie at its heart, the review letter, alone, provides only an implication of liability.

78. The Tribunal finds the comments of Caroline Gunnulson, Area West Compensation, Centrelink (T46, folio 94), which point to but do not reveal the determination in question, of assistance in the following terms:

"On the 16/06/99 a compensation document was sent to AWC from Blacktown CSC to advise that the customer had rec'd a cheque from her solicitor for an amount of $260,000 in February 1999.
On the 17/06/99, I followed up the settlement details with David Hughes (GIO) and also Ian from Westpac (workers comp insurer).
I issued charges/notices on 25/06/99 as I was under the impression that the GIO were under notice and had released the money prior to doing a record check with our office.  Charge advice & the preclusion period details were sent to the customer at the address of 13 Therese Crt, Baulkham Hills.
A reply dated the 07/07/99 was sent back from the GIO stating that the settlement monies had been released, due to rec'ing our notice dated 02/10/98 of a nil charge under Section 1182(1) & also the copy of the nil charge letter sent to the customer's solicitor.
After rec'ing this information, I spoke to Karen McGrann who was the Compensation section manager at the time, it was then determined that this charge would then have to go to the customer."

79. The Tribunal finds that the determination referred to here was a determination made by a delegate of the Secretary for the purpose of section 1166 of the Act and, therefore permits the review letter dated 8 November 2000 to satisfy the requirements of section 1166 of the Act. The Respondent reluctantly conceded this point but noted significant deficiencies in the document.

80. Taking these factors and considerations into account, and noting the deficiencies in administrative procedure, the Tribunal finds that on 8 November 2000 Centrelink raised a debt to the Commonwealth pursuant to section 1225 of the Act in the amount of $50,681.95 for which the Respondent is liable pursuant to section 1166 of the Act.

81. This being the case, the Tribunal turns to consider whether sections 1184, 1236, 1237A or 1237AAD of the Act apply in the circumstances to the extent that recovery of the debt, in whole or in part, should be waived or written off and whether or not a part or whole of the compensation should be treated as not having been made.

Administrative error

82. It is necessary to consider whether the Respondent's debt is attributable solely to an administrative error made by the Commonwealth and if so, whether the Respondent received in good faith the payments that gave rise to the debt pursuant to section 1237A of the Act, which states :

"1237A Waiver of debt arising from error

Administrative error

1237A(1)Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

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).

…"

83. The evidence clearly reveals a serial of administrative errors, one built upon another without rectitude, in the administration of the Respondent's claims.  However, the first question that must be asked and answered here is whether the Respondent's debt to the Commonwealth, in the amount of $50,681.95, is solely attributable to the administrative errors of the Commonwealth.

84. In order to answer this question it is first necessary to ventilate and examine the administrative errors that have occurred in the administration of the Respondent's claims. The Applicant argued that the compensation recovery procedures set out in the departmental policy guidelines (Exhibit A3) in the "Guide to Social Security Law" had been followed.  The policy guidelines state at "6.4.2 Recovery of Compensation Affected Payments (CAPs)":

"Circumstances when recovery is sought from a customer
Recovery of CAPs from a customer, or former customer should ONLY occur when:

• The insurer or compensation payer released the compensation payment, AND:

  -     The customer FAILED to notify Centrelink that they claimed compensation, AND a preliminary notice was NOT served, OR

  -     The customer NOTIFIED Centrelink that they claimed compensation, BUT a preliminary or recovery notice was NOT served, or was served incorrectly, OR

• The customer failed to notify Centrelink of an increase in the rate of periodic compensation, OR

• The customer's compensation was awarded or settled overseas, OR

• The customer received an ex gratia payment.

  Any amount to be recovered from a customer MUST be recorded as a compensation debt." (Original emphasis)

85. There is clear evidence that:

(1)the insurer released the compensation payment and notified Centrelink; and

(2)the customer, the Respondent, informed Centrelink that she was claiming compensation; and

(3)Centrelink correctly served preliminary and recovery notices on the insurer. 

86. The determination of a "Nil charge" by Centrelink and the subsequent serving of a revocation notice under section 1182(1) of the Act (T31) were in error. Noting that the departmental policy guidelines have no statutory force, the Tribunal finds, prima facie, the process by which Centrelink sought to recover the debt from the Respondent does not comply with the departmental policy guidelines and is deficient for statutory purposes.

87. The Tribunal finds that Centrelink's error determining a "Nil charge", while of crucial significance in the light of subsequent events, is but one of a serial of errors in the administration of the Respondent's claims.  The Tribunal found the following errors:

1. Centrelink created duplicate client accounts with separate reference numbers in the name of the Respondent without appropriate cross-reference data. 

2. Centrelink erroneously determined a 'Nil charge' and, as a consequence, gave a written notice to the insurer under section 1182 of the Act, dated 2 October 1998, in the following terms:

   "NOTICE UNDER SUBSECTION 1182(1) OF THE SOCIAL SECURITY ACT 1991.
   I note that the Secretary to the Department of Social Security gave notice to Gio Australia under section 1177 of the Social Security Act 1991 on 1 October 1998.
   I now revoke that notice under subsection 1182(1).  This means that you may now make payment to Harminder Sekhon of any amount for which you are liable." (T31)

   The Tribunal finds three errors of significance in this notice:

   (i)The first sentence of the letter identifies a specific notice of the Secretary given under section 1177 of the Act on 1 October 1998, which is not in evidence.

   (ii)The specific revocation of this notice in the second sentence of the letter is given broad application by the third sentence, which releases the insurer from liability.

   (iii)The third sentence of the letter gives explicitly authority to the insurer to release the compensation settlement monies to the Respondent without any amount being recovered to the Commonwealth, as is clearly required by the Act and the policy it applies.

3. Centrelink erroneously wrote to the Respondent on 2 October 1998 (T30) advising her that a preclusion period would apply from 24 October 1992 to 24 February 2006. 

4. There is no evidence that Centrelink acted in a timely manner to identify, rectify or explain the erroneous revocation notice or the preclusion period advice.

5. Nine months later, without any admission of error or explanation, Centrelink attempted to recover the debt from the insurer, issuing the insurer with two notices that may fulfil the requirements of section 1179 of the Act. The first notice, dated 25 June 1999 (Exhibit A1, Attachment B) relevantly states:

   "As a Delegate of the Secretary to the Department of Family and Community Services, I give notice under section 1174 of the Social Security Act 1991 (the Act) that the Secretary proposes to recover from NSW Insurance Ministerial Corp an amount of $50,681.95, being the amount of social security payments received by Harminder Kaur Sekhon from 17 February 1993 to 1 April 1999.
   Under subsection 1174(2) of the Act, NSW Insurance Ministerial Corp is liable upon being given this notice to pay $50,681.95 to the Commonwealth…"

   The second notice, dated 23 July 1999 (T42, folio 85) relevantly states:

   "A Notice, under section 1174 of the Social Security Act 1991, was issued to you on 25 June 1999 requiring that you pay 50,681.95 within 14 days. As more than 14 days have elapsed since the date of this Notice, I am now writing to request payment of the above amount immediately.
   … 

   Please note:  if full payment is not received within 7 days this matter will be referred to the Australian Government Solicitor."

6. In a letter dated 25 June 1999 (T42, folio 86) Centrelink informed the Respondent of the debt and stated:

   "I have therefore asked NSW INSURANCE MINISTERIAL CORP to repay $50,681.95 to Centrelink before they pay you the rest of your compensation payment. My authority to do this is contained in section 1174 of the Social Security Act 1991."

7. In the same letter of 25 June 1999, Centrelink informed the Respondent that a preclusion period would apply, commencing on 14 September 1990 and concluding on 24 January 2002.  This information, which the Tribunal has found to be incorrect, conflicted with previous information provided by Centrelink to the Respondent regarding the dates of the preclusion period.  Centrelink did not explain the discrepancy to the Respondent.

8. Almost sixteen months later, Centrelink determined to recover the debt from the customer, the Respondent.  The determination was not properly recorded or documented.  A notice setting out the determination was not provided to the Respondent.  However, in a letter dated 3 October 2000 (T52, folio 114), Centrelink demanded payment of $50,681.95 by the Respondent within 14 days. 

88. These are serious matters of concern for Centrelink to reflect upon. The Tribunal finds that Centrelink's failure to correctly identify and address its administrative errors has caused unreasonable delays, reducing the likelihood of recovering a debt to the Commonwealth. Furthermore, a person in a vulnerable situation has not been able to rely on information provided to her by the Commonwealth in pursuance of its administration of the Act.

89. It has been argued before the Tribunal that the Respondent's debt arose from her receipt of compensation affected pension payments, or from the settlement of her compensation claim.  The Tribunal has found that this is not the case.  No conditions requiring repayment attach to the grant of compensation affected payments.  The Respondent's entitlement to receive compensation affected payments ceased because of the lump sum preclusion period determined on finalisation of the compensation settlement, not because she did not otherwise qualify to receive the payments.  In the case where a person receives both lump sum compensation and compensation affected payments, a debt to the Commonwealth arises pursuant to the notice of the Secretary. 

90. The Tribunal has found that the Secretary intended, in the first instance, to recover a debt from the insurer pursuant to section 1226 of the Act. However, on settlement of the Respondent's compensation claim, Centrelink determined a "Nil charge" and released the insurer from liability for repaying a debt to the Commonwealth.  Centrelink's intention to raise and recover the debt from the insurer, in accordance with usual practice and the relevant statutory procedures, had failed through its own error.  The Tribunal has found that the error released the insurer from liability and authorised the release of compensation moneys to the Respondent.  On the evidence before the Tribunal this is the reason Centrelink sought to make the Respondent liable for the debt, and there is no other.  

91. It is significant that the insurer and the Respondent complied with their responsibilities under the Act, informing Centrelink of the compensation claim and providing information as required. It is clear that the matter would have been properly resolved in accordance with the intention of the Act and the original intention of the Secretary to recover the debt from the insurer had Centrelink's administrative errors not occurred.

92. The Tribunal finds that the Respondent's liability for the repaying the Commonwealth, and hence her debt in the amount of $50,681.95, arises solely from the administrative error of the Commonwealth. 

Receive in good faith

93. Turning to the question whether the Respondent "received in good faith the payment or payments that gave rise to that proportion of the debt", the Tribunal is mindful of the words of Cooper J in Jazazievska v Secretary, Department of Family and Community Services (supra) at 435-436:

"Prima facie, s 1237A(1) is concerned with actual personal receipt by the debtor of the payment or payments which give rise to the debt.  The issue of good faith is, for the purpose of the section, to be determined when the debtor commences to exercise control over the payment by retaining it.  It is at this time that the recipient must act with the requisite good faith.  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."

94. The Applicant has submitted that the payments that gave rise to the Respondent's debt were the compensation affected payments she was paid during the lump sum preclusion period.  The Tribunal has found this not to be the case.  The compensation affected payments were paid as an entitlement to a person who met the qualifying requirements applying to the payments.  The Respondent received the compensation affected payments in the knowledge that she was entitled to do so and in good faith, and the Tribunal so finds. 

95. The Tribunal finds that the payment that caused the dual payment, the consequence of which is the raising of a debt to the Commonwealth for which the Respondent is liable, is the lump sum compensation payment.  The payment of lump sum compensation including an award for past and future loss of earnings gives rise to a lump sum preclusion period, whereby compensation affected payments are not payable.  Thus, the amount paid in compensation affected payments during the period for which compensation for loss of earnings is also paid, may be recovered as a debt to the Commonwealth.

96. The Tribunal is persuaded by the evidence before it and finds that the Respondent believed she was entitled to receive the amounts that she was paid, and did not suffer doubt in that regard.  When receiving compensation affected payments, the Respondent was informed by Centrelink that it was possible, but not certain, that an amount may have to be repaid depending on the outcome of her compensation claim.  The Respondent also accepted advice from Centrelink (T52, folio 134) that if such amount was to be repaid this would be determined by Centrelink and paid by the insurer before any moneys would be paid to her.  On settlement of her compensation claim, the Respondent was informed that Centrelink had determined a nil charge on 3 October 1998.  She checked this information with her solicitor.  She accepted the advice she was given by her solicitor that there was no debt to repay to Centrelink and the money was hers, to spend as she liked.  The Respondent received the compensation settlement in three payments in February and March 1999, and informed Centrelink on 13 April 1999, as she was required to do (T34).  Subsequently, the Respondent received written advice from Centrelink, dated 25 June 1999, that a charge of $50,681.95 had been determined and that this amount would be recovered from the insurer. The Tribunal finds that on receipt of this letter the Respondent had reason to suspect that Centrelink may have made an error determining a "NIL charge", but accepted that Centrelink would recover the amount from the insurer.  The matter was not progressed until Centrelink wrote to the Respondent on 3 October 2000, nearly 16 months later, demanding payment of $50,681.95 within 14 days.    The evidence reveals and the Tribunal finds that by 3 October 2000 the Respondent had reasonably disposed of the lump sum compensation payment acting in good faith, making a series of necessary expenditures and debt repayments, and investing a proportion of the moneys for her future security.

97. The Tribunal is mindful of the words of Finn J in Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 50 ALD 186 at 189, where his Honour said:

"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."

98. The Tribunal finds that there is no evidence the Respondent was aware Centrelink had made an error calculating the compensation charge, at the time she received the compensation settlement.  Centrelink's letter dated 25 June 1999, four months after the Respondent received the settlement payments, alerted her to an amount that would have to be repaid.  While the letter did not explain that an error had occurred as a result of which she had received an amount to which she was not entitled, the Tribunal has found that following receipt of this letter, the Respondent had reason to know Centrelink may have made an error determining a "NIL charge".  However, the letter affirmed what the Respondent had been told all along: that Centrelink would recover the amount from the insurer. 

99. The Applicant submitted that the Respondent had reason to know that an error had been made in the calculation of the compensation charge.  Centrelink had provided estimates of the charge to the Respondent's solicitor on receipt of requests setting out likely settlement amounts.  However, there is no evidence that the Respondent was aware of the detail of the estimates that were contained in written communications between Centrelink and her solicitor. 

1. The Tribunal finds that the Respondent had no reason to doubt what she had been told and that, while she may have had reason to suspect an error had been made after 25 June 1999, she did not interpret this to mean that she had received payment of an amount to which she was not entitled.  On the contrary, the Respondent had been told by her solicitor that she was entitled to receive the money and that there was no debt to be repaid.

2. The medical evidence reveals that the Respondent has difficulty concentrating, taking in information and making reasoned decisions.   Associate Professor Hayes noted (Exhibit R2, p.5):

   "…Her psychological conditions impair her ability to reason properly and she finds it difficult to take in information because of her high levels of anxiety.  This is adequately documented in the correspondence which was available to me.  Therefore, her ability to properly plan and provide for the future would have been severely disrupted and she would not have been reasoning in an adequate or appropriate fashion.

   …At the time of the correspondence between her solicitors and Centrelink, she would have been incapable of properly concentrating on the issues, and making reasoned decisions."

3. In these circumstances it is clear that the Respondent was relying on her solicitor and Centrelink to a greater extent than may ordinarily be expected of a person without the Respondent's psychological difficulties. The Tribunal finds that the Respondent did not doubt the information she was provided by Centrelink and her solicitor. Whether or not another person not suffering the Respondent's psychological difficulties may have formed a different opinion, is not relevant to the individual facts in this case.  The extent to which psychological difficulties may affect a person's ability to recognise circumstances which raise doubt about an entitlement to receive a payment must depend upon the severity of the symptoms.  Associate Professor Hayes diagnoses her symptoms as "extremely severe depression, anxiety and stress" (Exhibit R2, p.4) with an 11 year history of treatments for panic attacks and depression.  On this basis, the Tribunal finds it reasonable to assume that the Respondent's psychological difficulties may have reduced her ability to recognise doubts arising from circumstances which to another person without such difficulties may raise doubts. 

4. With regard to the state of mind of a person in such circumstances, the Tribunal turns to Jones v Gordon (1877) 2 App. Cas. 616 at 629 wherein, albeit in a different context, Lord Blackburn observed:

   "…If he was (if I may use the phrase) honestly blundering and careless, and so took a bill of exchange or a bank-note when he ought not to have taken it, still he would be entitled to recover.  But if the facts and circumstances are such that the jury, or whoever has to try the question, came to the conclusion that he was not honestly blundering and careless, but that he must have had a suspicion that there was something wrong, and that he refrained from asking questions, not because he was an honest blunderer or a stupid man, but because he thought in his own secret mind – I suspect there is something wrong, and if I ask questions and make farther inquiry, it will no longer be my suspecting it, but my knowing it, and then I shall not be able to recover – I think that is dishonesty."

5. There is nothing in the evidence before the Tribunal to indicate that the Respondent acted in any way dishonestly or was suspicious that anything was wrong. She made inquiries of Centrelink about what would happen on settlement of her compensation claim and she gave information openly and honestly, as the Act requires. She consulted her solicitor about her situation and relied upon the advice she received. Her psychological conditions render it difficult for her to concentrate, receive information and make reasoned decisions. In these circumstances it is reasonable to expect that the Respondent would place a greater reliance upon information she received from authoritative sources, such as Centrelink and her solicitor, than a person without such difficulties.

6. The Tribunal finds that the Respondent relied upon the information and advice she was provided by Centrelink as any citizen is entitled and could reasonably be expected to do in the circumstances, as noted in Re Secretary, Department of Social Security and McAvoy (supra) at 729:

   "Citizens are entitled to act upon the advice given to them by representatives of government through its departments and agencies."

7. Nonetheless, the Respondent was not entirely passive or void of critical faculties.  She sought information and advice about her situation from Centrelink and her solicitor.  The Tribunal finds it not surprising, in the circumstances, that the Respondent accepted and acted upon the advice she was given, which she had no reason to doubt.

8. The Tribunal finds no element of dishonesty in the Respondent's actions.  At the time the Respondent received the payments that gave rise to the debt, in February 1999, she did not know that she was not entitled to receive the amount she had been paid.  The Tribunal finds that a person thinking clearly, with all their mental faculties intact, may have recognised the circumstances raised doubts about her entitlement to receive the payments, the Respondent, not being a person of health, did not recognise such doubt.  She did not become aware that an error had occurred as a result of which she may be required to repay an amount of money until she was served a repayment demand on 4 October 2000.  The Tribunal finds, even at that late stage, the Respondent was not made fully aware that she had received an amount of money to which she was not entitled.

9. Taking all these factors into account, the Tribunal finds that the Respondent received in good faith the payments that gave rise to her compensation debt.

10. The two limbs of section 1237A of the Act are satisfied. The Tribunal has no discretion to exercise. The right to recover the debt, which is solely attributable to the administrative error of the Commonwealth and was received in good faith, comprising the amount of compensation affected payments paid to the Respondent in the period 17 February 1993 to 1 April 1999 (T37), must be waived.

11. This being the case, it is not necessary for the Tribunal to consider matters raised in submissions relating to waiver of the debt in the special circumstances of the case. The application of section 1236 of the Act is not appropriate given the Tribunal's findings.

12. Finally, having found that the correct preclusion period is from 6 November 1992 until 18 March 2004, the Tribunal must determine whether or not, pursuant to section 1184 of the Act, there are any special circumstances in the Respondent's case which would warrant treating a part or a whole of the compensation payment as not having been made. The Tribunal, in reaching a finding on this issue, is mindful of many Federal Court and other Tribunal decisions dealing with section 1184 of the Act. In the particular circumstances related to this Respondent, and on the evidence, the Tribunal finds that while Mrs Sekhon suffers from psychological difficulties, she has been compensated for these. The Respondent does have available to her considerable realisable assets. The Tribunal therefore finds that it would not be appropriate in all of the circumstances to exercise the discretion in section 1184 of the Act.

13. Accordingly, in all the circumstances and for the reasons expressed above, the Tribunal sets aside the decision under review pursuant to section 43 of the Administrative Appeals Tribunal Act 1975 and substitutes its decision that:

14. A lump sum preclusion period of 593 weeks will apply commencing on 6 November 1992 and ending on 18 March 2004; and

15. The Commonwealth's right to recover the compensation debt, comprising compensation affected payments of $50,681.95 that were paid to the Respondent during the preclusion period, is waived.

    I certify that the 112 preceding paragraphs are a true copy of the reasons for the decision herein of Ms S M Bullock, Senior Member, Dr J D Campbell, Member and Mr S Webb,  Member.

    Signed:.......................................................................  

    Associate

    Date of Hearing         1 August 2002 

    Date of Decision  27 September 2002
    Representative for the Applicant              Mr B Slattery, Departmental Advocate 

    Solicitor for the Respondent  Mr B Gerogiannis, Legal Aid Commission of NSW

    Counsel for the Respondent  Mr M B Smith