Sperling and Secretary Department of Families and Community Services and Indigenous Affairs

[2007] AATA 1191

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1191

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No  A 2006/34

GENERAL  ADMINISTRATIVE  DIVISION		)
Re		DONNA SPERLING

Applicant

And Sec. DEPT OF FAMILIES & COMMUNITY SERVICES & INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal  J.W Constance, Senior Member

Date 29 March 2007

Place Canberra

Decision

1.      The decision of the Social Security Appeals Tribunal made 30 January 2006 is set aside.

2. In substitution for the decision set aside it is decided that the following debts raised against Ms Sperling on 24 August 2005 are waived pursuant to section 97 of the A New Tax System (Family Assistance) (Administration) Act 1999:

$1182.60 for financial year 2000-2001

$1328.84 for financial year 2001-2002

$1427 15 for financial year 2002-2003

$2075 20 for financial year 2000-2004

$2120 60 54 for financial year 2004-2005; and

           the debt for $259.84 raised on 5 September 2005 is not waived

.....................................................

J.W Constance, Senior Member

CATCHWORDS

SOCIAL SECURITY- Family Tax Benefit scheme- Overpayment debt to Commonwealth- Applicant received Family Tax Benefit- Payments continued at same rate after child left home- Applicant had given appropriate notification- Overpayments received “in good faith”- Wavier as a result of financial hardship

A New Tax System (Family Assistance) (Administration) Act 1999 ss 71, 97

Re Allinson and Department of Social Security (1994) 34 ALD 265

Pereira v Director of Public Prosecutions (1988) 82 ALR 217

Re McKnight and Secretary, Department of Social Security (1994) 83 SSR 1212

REASONS FOR DECISION

29 March 2007
J.W Constance, Senior Member

INTRODUCTION

1.      Ms Sperling is seeking a review of a decision of the Social Security Appeals Tribunal to refuse her request that debts totalling $8394.30 owed by her to the Commonwealth be waived.

2.      For the reasons which follow I have decided that all but $259.84 of the amount owing should be waived.

FACTS

3.      Unless otherwise stated the following findings of fact are based on the evidence of Ms Sperling. I am satisfied of the facts found on the balance of probabilities.

4.      For a number of years prior to 2000 Ms Sperling received Family Tax Payments, Basic Parenting Payments and Family Allowances in respect of her three sons and her daughter, Carlene Tickell. On 1 March 2000 Carlene turned sixteen.  On 2 March 2000 Carlene was granted a Youth Allowance and the payment of the Family Tax Benefit to Ms Sperling in respect of Carlene ceased.

5.      From 1 July 2000 Centrelink commenced payment of Family Tax Benefits to Ms Sperling in respect of Carlene. From the same date the Family Tax Benefit replaced the payments referred to in the proceeding paragraph.[1] It appears from the Centrelink documents which are part of exhibit R1[2] that this came about because of incorrect data entry by Centrelink recording the change in Carlene’s circumstances.  There is no suggestion that Ms Sperling contributed to this error or was aware of it at the time. The Secretary has not offered an explanation as to why the payments ceased for the period 2 March 2000 to 1 July 2000 if the data error related to the change of circumstances in March 2000.

[1] Ex.R1 p.28.

[2] The documents filed pursuant to section 37 of the Administrative Appeals Tribunal Act (1975).

6.      There is no dispute that from 1 July 2000 onwards Ms Sperling was not entitled to receive the payment in respect of Carlene.  The payment continued to be made to Ms Sperling until 24 August 2005. The Secretary has not given an explanation as to how this payment continued well past Carlene’s twenty-first birthday without Centrelink becoming aware of the error.

7.      The payments received by Ms Sperling for Carlene and her other children were paid directly into her bank account. Payments were received fortnightly and varied in amount, partly because Ms Sperling was working part-time and her weekly earnings varied.  This affected the payments to which she was entitled.  Ms Sperling was also aware that the fortnightly payments did not always accurately reflect her entitlement and that at the end of each financial year, if necessary, Centrelink made a payment to adjust the total received during the year.  From the figures provided it appears that the average fortnightly overpayment varied from $45 to $79.  .

8.      On a number of occasions Centrelink forwarded a letter to Ms Sperling which included advice that particular fortnightly payments included a payment in respect of Carlene. Copies of the computer records of these letters indicate that the dates of these letters are 21 June 2000, 20 July 2000, 3 October 2000, 16 December 2000, 15 January 2001, 12 October 2001, 15 December 2001, 18 February 2002, 5 June 2000 2, 6 February 2003, 9 April 2003, 2 August 2003, 10 November 2003, 3 May 2004, 26 June 2004, 16 December 2004 and 22 June 2005. [3]  There has been no explanation as to the apparent randomness of the dates on which these letters were sent nor is there evidence available to allow me to make a finding as to whether other letters of advice as to payments being made did or did not include Carlene’s name.

[3] Ex.R1 T7 to T22 inclusive.

9.      The computer printouts of the letters sent showed the information contained in the letters but not the format in which the information was set out.  At my request and following an adjournment to allow Counsel for the Secretary to obtain instructions, I was informed by Counsel that the format of some of the letters was the same as other letters in evidence.[4]  If this is correct (although there is no evidence to support this assertion) Carlene’s name would have been readily apparent on the letters in that format.  However I am not satisfied that all of the letters sent were in this format and therefore I cannot be satisfied that a person who did not read the letters carefully would become aware that payments were being made in respect of Carlene.  Also I cannot be satisfied as to how many of the letters sent did disclose this information clearly.  At least one letter advising of a Family Tax Benefit Payment during the period under consideration did not refer at all to the children in respect of whom the payment was made.[5]

[4] Ex.A1 pp.2-3.

[5] Ex.R1 letter of 13 June 2002.

10.     Having listened to and having observed Ms Sperling give her evidence I accept her as an honest witness.  I am satisfied that she did not read all of the letters she received from Centrelink in relation to the payments being made [6]and that she did not become aware of the overpayment until August 2005.

[6] Transcript p-13.

11.     On 19 June 2001 Carlene ceased to be in the care of Ms Sperling. Ms Sperling telephoned Centrelink and advised an officer of this. In June or July 2001 Ms Sperling lodged with Centrelink a statutory declaration confirming the change although it appears Centrelink cannot now locate this document.[7]  In addition a short time later, at the request of a Centrelink officer, Ms Sperling lodged a form to verify that Carlene was no longer living at home. [8]  There is no explanation offered by the Secretary as to why Centrelink did not cease the payment in respect of Carlene on receipt of this information. Centrelink’s own records relating to Carlene’s ceasing to live at home confirm that in July 2001 Ms Sperling was contacted to verify that in fact Carlene was not living at home.[9]

[7] Transcript p-6.

[8] Transcript p-7.

[9] Ex A3.

12.     On 24 August 2005 Ms Sperling contacted Centrelink to make enquiries as to the effect of her ceasing to receive child support for the children.  During that discussion an officer of Centrelink advised her that a benefit was being paid to her for Carlene.  Ms Sperling again informed Centrelink that Carlene had left her care in 2001.  Centrelink then acted to stop the benefit which was being paid.

STATUTORY BACKGROUND

13.Section 71 of the Act provides;

“(1) If:

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

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

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

(2)   If:

(a)an amount (the received amount) has been paid to a person by way of assistance; and

(b)the received amount is greater than the amount (the correct amount) of assistance that should have been paid to the person under the family assistance law;

the difference between the received amount and the correct amount is a debt due to the Commonwealth by the person.”

14.Section 97 of the Act provides;

(1)    “The Secretary must waive the right to recover the proportion (the administrative error proportion) of a debt that is attributable solely to an administrative error made by the Commonwealth if subsection (2) or (3) applies to that proportion of the debt.

(2)   The Secretary must waive the administrative error proportion of a debt if:

(a)   the debtor received in good faith the payment or payments that gave          rise to the administrative error proportion of the debt; and

(b)   the person would suffer severe financial hardship if it were not waived.

(3)   The Secretary must waive the administrative error proportion of a debt if:

(a)the payment or payments were made in respect of the debtor’s eligibility for family assistance for a period or event (the eligibility period or event) that occurs in an income year; and

(b)the debt is raised after the end of:

(i)the debtor’s next income year after the one in which the eligibility period or event occurs; or

(ii)the period of 13 weeks starting on the day on which the payment that gave rise to the debt was made;

whichever ends last; and

(c)the debtor received in good faith the payment or payments that gave rise to the administrative error proportion of the debt.

(4)   For the purposes of this section, the administrative error proportion of the debt may be 100% of the debt.”

ISSUES FOR DETERMINATION

15.     The following issues arise for determination:

(a)    has Ms Sperling received an overpayment of family tax benefit and if so, in what amount;

(b)    if overpayments have been received, are they "debts" within the meaning of the legislation;

(c)    if so, are there grounds for some or all of the debts to be waived?

DETERMINATION OF THE ISSUES

Has Ms Sperling received an overpayment of Family Tax Benefit and, if so, in what amount?

16.     I am satisfied on the evidence, and it is not disputed by Ms Sperling, that she has received an overpayment of Family Tax Benefit.  Although Ms Sperling has not agreed to the amount of this overpayment, she has not challenged any aspect of Centrelink’s calculations.  I accept the calculations set out in Exhibit R1, documents T25-30 inclusive.  The amounts are as follows:

Y/e  30/06/01                 $1182.60

Y/e  30/06/02                 $1328.84

Y/e  30/06/03                 $1427.15

Y/e  30/06/04                 $2075.22

Y/e  30/06/05                 $2120.65

Y/e  30/06/06                 $   259.84

Total  $8394.30

Is each overpayment a “debt” within the meaning of the legislation?

17.     I am satisfied that each of the amounts referred to in the preceding paragraph is the difference between the correct amount Ms Sperling should have received and the amount she in fact received for each of the financial years referred to.  Pursuant to subsection 71(2) of the Act set out previously, each amount is a debt due to the Commonwealth by Ms Sperling.

Are there grounds for some or all of the debts, or for any part of a debt or debts, to be waived?

18. Section 97 of the Act set out earlier in these reasons provides for the waiver of a debt or part of a debt in certain circumstances.

19.     A number of separate questions need to be answered to determine whether section 72 applies in this case:

(a)are any, or any part or parts, of the debts “attributable solely to an administrative error  made by the Commonwealth”;

(b)if so, were the payments that gave rise to these debts or parts of them received by Ms Sperling "in good faith";

(c)if so, were any of the debts raised after the periods referred to in subsection 97(3);

(d)in respect of all or any of the debts which were not raised after the periods referred to in subsection 97(3), would Ms Sperling suffer “severe financial hardship” if those debts or some of them were  not waived?

20.     I am satisfied that all of the debts are “attributable solely to an administrative error made by the Commonwealth.”  The payment of the allowance was commenced in July 2001 as a result of, and only as a result of, Centrelink’s decision to do so.  The reason for this decision is not clear.  What is clear is that no other factor contributed to the making of the initial payment in July 2001. The Secretary does not dispute this.

21.     The Secretary has argued that, because of the amount being paid into Ms Sperling’s account and/or the correspondence forwarded to her, she was aware, or at least should have been aware, of the overpayment and therefore she contributed to it.  I have found that Ms Sperling was not aware of the overpayment until she was informed of it in August 2005. The only point for further consideration on this question is whether Ms Sperling should have been aware of the overpayment at some stage.

22.     I am not satisfied that Ms Sperling should have been aware of the overpayment which was being made.  I accept her evidence that she did not read all of the correspondence received and, in any event, I cannot be satisfied as to the form of the correspondence which is said to have been sent to her, the frequency of the correspondence or its contents (other than the contents of those letters identified by the Secretary)  The Secretary has not provided evidence of the format of letters he claims were sent to Ms Sperling despite my request for this.  Neither has evidence been tendered to indicate why the letters the Secretary relies upon were sent at seemingly random intervals.  I also take into account that at least one letter sent concerning payment did not specify the persons to whom the payment related.  There may have been others in this category.

23.     I accept Ms Sperling’s evidence that the amount being paid into her account did not alert her to the error and there are no grounds to justify the conclusion that she should have become aware of the error by reason of this.  The amount paid into her account by Centrelink varied from fortnight to fortnight and at times included payments for three children together with Carlene’s youth allowance. In addition, payments of child support were made to the same account. I also take into consideration that Ms Sperling informed Centrelink on at least three occasions around July 2001 that Carlene was no longer in her care and it was reasonable for her to believe that Centrelink would act on this information.

24.     There can be situations in which a failure by a recipient to become aware of an overpayment when it was reasonable to have done so can be said to contribute to a debt and so prevent it being solely attributable to the administrative error. Such was the finding of this Tribunal in Re Allinson and Department of Social Security (1994) 34 ALD 265. However in that case the Tribunal was satisfied that Mr Allinson queried some matters relating to the overpayment but not others, and took advantage of matters which favoured him without query. The Tribunal was also satisfied that Mr Allinson received and read notices which set out in detail his obligations and the definitions of particular terms. As I have stated, I am satisfied that Ms Sperling was not in such a situation.

25.     I am satisfied that all of the debts were attributable solely to an administrative error by the Commonwealth.

26.     In Pereira v Director of Public Prosecutions (1988) 82 ALR 217 at 220 the Federal Court reviewed the authorities as to the meaning of “in good faith” and concluded :

“What seems to emerge from these authorities is that whether a payment has been received in good faith can only be determined after careful consideration of the actual state of mind of the recipient of that payment.  In that sense the test is entirely subjective, and not objective. However, plainly idiosyncratic views as to what might be regarded as acceptable behaviour, including the standards of a "Robin Hood", will not be regarded as amounting to “good faith”.  It should be noted, in this regard, that wilful blindness is itself a state of mind”

27.     I am also satisfied that Ms Sperling did not engage in ‘wilful blindness”” to the overpayment such as was identified by the Tribunal in Re McKnight and Secretary, Department of Social Security (1994) 83 SSR 1212.

28.     On the basis of my findings as to Ms Sperling’s state of mind set out in my findings of fact and referred to in paragraphs 21 to 26 of these reasons, I am satisfied that Ms Sperling did receive the overpayments “in good faith.”

29.     Documents T25, T26, T27 and T28 respectively disclose that the debts for each of the financial years 2000-2001 to 2003-2004 inclusive were raised on 24 August 2005.  In each case the debt was raised after the end of Ms Sperling’s next income year after the year of eligibility for the payment. As I have found that the payments were received in good faith, under subsection 97(3) the debts must be waived in full.

30.     The remaining debts of $2120.65 (for 2004-5, raised 24 August 2005) and $259.84 (for 2005-06, raised 5 September 2005) fall to be considered under subsection 97(2).  This requires a decision as to whether Ms Sperling would suffer “severe financial hardship“ if they were not waived. They are separate debts, raised on different dates, for payments made for different periods.  Whilst the existence of one debt may be relevant to whether or not another should be waived, they should be considered separately.

31.     Ms Sperling gave evidence as to her financial situation.  This evidence was largely unchallenged. Her disposable income is approximately $360 per week from which she pays fixed outgoings of approximately $185 per week. This leaves approximately $175 per week to meet the general living expenses for herself and her eleven year-old son.  Ms Sperling has virtually no savings and her only assets are personal effects and furniture.  She also has a liability to make a credit card debt of $700 in respect of which she is not meeting the weekly repayments of $25.

32.     It is clear that for a person to suffer ‘severe financial hardship”, more is required than for the person to be in straitened financial circumstances. However, taking into account Ms Sperling’s responsibility for her son, her modest income, her commitments and her lack of assets which could be realised to meet the debt, I am satisfied that if the debt of $2120.65 is not waived she would suffer severe financial hardship.

33.     On the basis that the larger debt is waived I am not satisfied that Ms Sperling would suffer severe financial hardship if the debt of $259.84 is not waived.  IN making this decision I am assuming that the Secretary will permit Ms Sperling to pay off the debt at a similar rate to that at which deductions for the debts have been made to date ($15 per fortnight).  I also assume that payments deducted so far will be credited to reduce the $259.84 debt.

DECISION

34.     The decision of the Social Security Appeals Tribunal made 30 January 2006 is set aside.

35. In substitution for the decision set aside it is decided that the following debts raised against Ms Sperling on 24 August 2005 are waived pursuant to section 97 of the A New Tax System (Family Assistance) (Administration) Act 1999 (Cth):

(a)$1182.60 for financial year 2000-2001

(b)$1328.84 for financial year 2001-2002

(c)$1427 15 for financial year 2002-2003

(d)$2075 20 for financial year 2000-2004

(e)$2120 60 54 for financial year 2004-2005; and

the debt for $259.84 raised on 5 September 2005 is not waived

I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of J.W. Constance, Senior Member.

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

Geoff Foley, Associate

Date of Hearing  6 February 2007
Date of Decision  29 March 2007
Solicitor for the Applicant               Unrepresented
Solicitor for the Respondent         Sec. Dept. FACSIA