Talbot; Secretary, Department of Education, Employment and Workplace Relations and
[2008] AATA 84
•1 February 2008
CATCHWORDS – SOCIAL SECURITY – parenting payment – debt paid but receipted twice – part of second amount offset against other debts and remainder refunded to pension recipient – whether amount refunded a debt – whether debt may be waived under SS Act – whether amount refunded paid by way of social security payment under SS Act – amount refunded not a debt under SS Act and so may not be waived under SS Act – decision set aside.
Administrative Appeals Tribunal Act 1975 ss 37 and 43(1)
Commonwealth Services Delivery Agency Act 1997 ss 3, 7(1) and (2)
Financial Management and Accountability Act 1997 s 34
Social Security (Administration) Act 1991 ss 41, 42, 43(1), 55, 55(2), 55(4), 55(4A), 60, 61, 123YM(2)(d), 123YM(2)(e), 123YN(2)(d) and 123YN(2)(e)
Social Security Act 1947 s 245B(2)
Social Security Act 1991 ss 23(1), 23(17), 503, 1068A, 1068A(1)-(2), 1135, 1222, 1222(2), 1222(3), 1222A, 1222A(a),1222A(b)(ii), 1223, 1223(1AC), 1231(1)(aaa), 1231(1)(e), 1235, 1236A, 1237A 1237AA, 1237AAA, 1237AAB, 1237AAC and 1237AAD
Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1929) 43 CLR 247
Commonwealth of Australia and Anor v Precision Pools Pty Ltd (1994) 94 ATC 4,727
David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353; 109 ALR 57
Director of Public Prosecutions v Serratore (1995) 38 NSWLR 137; (1995) 132 ALR 461
Elmdene Estates Ltd v White [1960] 1 All ER 306
Federal Commissioner of Taxation v Angus (1960) 105 CLR 489
Larocque v Beauchemin (1918) AC 514
Secretary, Department of Social Security v Migotto (1991) 103 ALR 36; 23 ALD 459
Spargo’s Case (1873) 8 Ch App 407
White v Elmdene Estates Ltd [1959] 2 All ER 605
DECISION AND REASONS FOR DECISION [2008] AATA 84
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2007/2033
GENERAL ADMINISTRATIVE DIVISION )Re:SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Applicant
And:LAUREN TALBOT
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 1 February 2008
Place: Melbourne
Decision:The Tribunal:
1.sets aside the decision of the Social Security Appeals Tribunal dated 11 April 2007; and
2.substitutes a decision that the Secretary does not have power under the Social Security Act 1991 or the Social Security (Administration) Act 1991 to waive repayment of the sum of $1,111.65 mistakenly paid by applicant to the respondent.
SA Forgie
Deputy President
REASONS FOR DECISION
Centrelink[1] mistakenly recorded that it had received two amounts of $2,790.40[2] from the respondent, Mrs Lauren Talbot when it had received only one. On the understanding that it had received the second payment, it credited the sum of $1,678.75[3] against debts that she owed in respect of Parenting Payment (Single) that she received. It reimbursed to her the remaining $1,111.65 by sending her a cheque for that amount. On 23 August 2006, a delegate of the Secretary of what is now the Department of Education, Employment and Workplace Relations (Secretary) raised a debt of $2,790.40 against Mrs Talbot. On 11 April 2007, the Social Security Appeals Tribunal (SSAT) relied on s 1237A of the Social Security Act 1991 (“SS Act”) to set aside the decision of the Secretary to recover the amount of $1,111,65. It substituted a decision that recovery of that amount be waived because it arose solely because of administrative error and because Mrs Talbot had received the payment in good faith. The SSAT declined to waive the remaining sum of $1,678.65 under s 1237AAD on the basis that there were no special circumstances justifying its doing so.
[1]Centrelink, which is also known as the Commonwealth Services Delivery Agency was established on 1 July, 1997 by the Commonwealth Services Delivery Agency Act 1997 (“CSDA Act”). That legislation provides that its Chief Executive Officer may enter arrangements with the principal officer of a Commonwealth authority for the provision of Commonwealth services (CSDA Act, s 7(1)). “Commonwealth services” is defined to mean “... a service, benefit, program or facility for some or all members of the public that is provided for by the Commonwealth, whether under an enactment or otherwise” (CSDA Act, s 3). Arrangements may include arrangements for doing anything incidental or related to the provision of the Commonwealth services e.g. making specified employees or classes of employees available to exercise powers or perform functions delegated to them under specified enactments (CSDA Act, s 7(2)). Such arrangements have been entered into between the principal officer of the Department of Education, Employment and Workplace Relations and its predecessors and the Chief Executive Officer ofCentrelink in relation to pensions, benefits and allowances paid or payable under the SS Act.
[2] The receipt dated 2 September 2003 shows an amount of $2,790.40 while that dated 16 September 2003 shows an amount of $2,790.43. The Secretary’s Statement of Facts and Contentions refers to the figure as $2,790.40. The difference is insignificant and I will refer to the amount as $2,790.40 in these reasons.
[3] The Secretary’s Statement of Facts and Contentions referred to the amount credited as $1,679.75. Given that Centrelink’s letter enclosing the reimbursement to Mrs Talbot refers to a cheque of $1,111.65 (as does the computer record shown at 13 of the T documents), the amount credited must be $1,678.75 as the two amounts cannot exceed the total amount incorrectly receipted i.e. $2,790.40. Therefore, I will refer to the sum credited to Mrs Talbot’s debts as $1,678.75.
I have decided that the Secretary, and so the Tribunal, only has power to waive a debt under the SS Act if, in the circumstances of this case, it is a debt arising under Part 5.2 of Chapter 5 of the SS Act. An amount can only be a debt if it is an amount paid by way of social security payment and a provision of the SS Act provides that it is a debt. In this case, the amounts paid by Centrelink to Mrs Talbot by cheque or credited against the debts that she owed were not paid by way of social security payment. Therefore, they could not be debts due to the Commonwealth and could not be waived by the Secretary.
BACKGROUND
The parties did not disagree on any aspect of the facts leading to the decision under review. In view of that and on the basis of the material in the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T documents), I have made the findings of fact set out in the following paragraphs.
In August 2003, Mrs Talbot was in receipt of Parenting Payment (Single). That payment is subject to, among others, an income test. On 29 August 2003, a delegate raised a debt of $2,790.40 against Mrs Talbot on the basis that she had received income in the form of periodic compensation payments paid as a lump sum in March 2003.[4] The screen dump of the relevant screen in Centrelink’s records shows a single number described as the “Debt ID”.
[4] T documents at 66-72
Mrs Talbot paid the full amount of the debt by bank cheque on 2 September 2003 and was given a paper receipt for that amount.[5] On 2 September 2003, the fact of the payment was posted in Centrelink’s computer records.[6] It recorded that the sum of $2,790.40 had been received by bank cheque and displayed a manual receipt number matching that given to her on the paper receipt she had been given. The screen dump of the computer record of the receipt shows a Debt ID number matching that on the computer record showing the raising of the debt in the amount of $2,790.40.
[5] T documents at 9
[6] T documents at 10
On 16 September 2003, the receipt of the same sum of $2,790.40 was again posted in Centrelink’s computer records.[7] For the most part, the two computer records were identical. They recorded, for example, the same details relating to Mrs Talbot and the same manual receipt number. They had different Document Numbers but that is understandable as the numbers identify the computer records themselves and they are different documents. Where they do differ is in relation to the Debt ID. Whereas only one Debt ID was shown in the record dated 2 September 2003, three Debt IDs are shown on the record dated 16 September 2003. One of the three Debt IDs in the later record matches the Debt ID shown in the record of 2 September 2003 and there are two others relating to different overpayments or adjustments.[8]
[7] T documents at 11
[8] T documents at 66-72, 73-81 and 82-86
From that sum of $2,790.40, Centrelink credited the sum of $1,678.75 in satisfaction of other debts owed by Mrs Talbot. That left an amount of $1,111.65 and, on 9 February 2004, Centrelink credited it to her account. In its letter dated 9 February 2004, Centrelink advised Mrs Talbot that “This represents reimbursements of overrecovered debt number …”.[9] The debt number was that of the one Debt ID shown on the first computer record dated 2 September 2003.
[9] T documents at 12
On 3 July 2006, a delegate of the Secretary decided that the sum of $1,678.75 was recoverable and gave notice to Mrs Talbot under s 196 of the Social Security (Administration) Act 1991 (SSA Act). The letter indicated that a separate invoice would be issued regarding the amount of $1,111.65 that had been incorrectly refunded to her.[10]
[10] T documents at 14
Mrs Talbot asked that an Authorised Review Officer (ARO) review the decision. The ARO undertook that review on 9 January 2006. She considered whether the debt balance of $2,790.40 was correct and whether the amount of $1,111.65 that had been refunded in error and that was now a debt could be waived. The ARO decided that Mrs Talbot owed the full amount of $2,790.40 that had been incorrectly receipted to her and affirmed the delegate’s decision. That sum included the sum of $1,111.65, which had been refunded to her and which the ARO found Mrs Talbot had received in good faith. By 2 January 2003, the total amount owed had been reduced to $2,530.40 as a result of the deduction of amounts from Mrs Talbot’s social security periodic payments.[11]
[11] T documents at 30-33
On 11 April 2007, the Social Security Appeals Tribunal (SSAT) set aside the decision. It did so on the basis that it could waive the amount of “$1,110.65” under s 1237A of the SS Act as Centrelink had paid her that sum solely on the basis of its administrative error and Mrs Talbot had received it in good faith. The SSAT did not waive the balance of the sum of $2,790.40 that had been incorrectly credited to Mrs Talbot’s debts as it decided that there were no special circumstances making it desirable to waive it under s 1237AAD.
LEGISLATIVE FRAMEWORK
Payment of Parenting Payment
Parenting Payment is the subject of Part 2.10 of Chapter 2 of the SS Act. There is no question that Mrs Talbot qualified for its payment to her at all relevant times. The SS Act distinguishes between qualification for a payment and its payability. In relation to payability, there is no question that the Parenting Payment was payable to her using the Pension PP (Single) Rate Calculator (PPSR Calculator) at the end of s 1068A as she was not a member of a couple.[12]
[12] ss 503 and 1068A(1) and (2) and see Part 2.10, Divisions 1 to 4, generally
Inalienability of a social security payment
It is a principle underpinning the SSA Act that a social security payment is “… absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise.”.[13] If the person to whom a social security payment is payable asks the Secretary to do so, the Secretary may make deductions and pay the amounts deducted to the Commissioner of Taxation (Commissioner).[14]
[13] Social Security (Administration) Act 1999 (SSA Act), 60
[14] SSA Act, s 61
General outline of provisions of the SS Act relating to the recovery of certain debts
The principle underpinning Chapter 5 of the SS Act is that an amount of money may be paid to a person that is greater than that to which the person is entitled under the SS Act. It a Chapter concerned with overpayments and debt recovery.
Section 1222 sets out that the general effect of the Chapter is to provide:
“… the methods of recovery by the Commonwealth of:
(a)debts owed to the Commonwealth under Part 5.2; and
(b)debts owed to the Commonwealth under section 1135; and
(c)overpayments under certain other Acts or schemes; and
(ca)debts incurred under other Acts for failing to repay part or all of the overpayments referred to in paragraph (c);
(d)debts under subsection 11(6) of the Data-matching Program (Assistance and Tax) Act 1990.”
Section 1222(2) then goes on to set out the methods of recovery that are available for the various types of debt. It does so in the form of a table identifying the debt in Column 2 by reference to a section of the SS Act. The methods of recovery are detailed in Column 3 with a reference to the enabling statutory provision in Column 4. Those methods include deductions, legal proceedings, recovery by garnishee and repayment by instalments.
Section 1222(3) applies to a situation in which a person has received an overpayment under certain Acts other than the SS Act or under certain schemes or has incurred a debt under another Act for failing to repay all or part of that overpayment. It provides that the amount of that overpayment or debt may be recovered by deduction from the person’s social security payment.
Social security payments recoverable under the SS Act: general principles
All but one of the sections referred to in the table in s 1222(2) comes within Part 5.2. The section that does not is s 1135. It applies to debts arising as a result of payments made under the pensions loans scheme. It is not relevant in this case.
The starting point for my consideration is s 1222A, which comes within Part 5.2 and which provides that:
“If an amount has been paid by way of social security payment, or by way of fares allowance under the Social Security (Fares and Allowance) Rules 1998, the amount is a debt due to the Commonwealth if, and only if:
(a)a provision of this Act, the 1947 Act, the Social Security (Fares and Allowance) Rules 1998 or the Data-Matching Program (Assistance and Tax) Act 1990 expressly provided that it was or expressly provides that it is, as the case may be; or; or [sic]
(b)the amount:
(i)should not have been paid; and
(ii)was paid before 1 January 1991; and
(iii)was not an amount to which subsection 245B(2) of the 1947 Act[[15]] applied.”
As I am concerned with an amount paid in 2003, s 1222A(b)(ii) is clearly not satisfied relevant as, apart from any others, only the provisions of the SS Act are relevant.
[15] Section 245B(2) of the Social Security Act 1947 makes provision for certain amounts paid under that legislation to be debts due to the Commonwealth.
That takes me back to s 1222A(a). It is clear from the opening words of s 1222A that it must be considered in two steps. The first is to consider whether an amount has been paid “by way of social security payment”. Only if it has been paid in that way will it become a debt due to the Commonwealth.
Once the payment has been characterised as a social security payment, the second step is to consider if a provision of, in this case, the SS Act, “expressly provided that it was or expressly provides that it is, as the case may be”, a debt. Part 5.2 has a number of sections dealing with debts arising from specific circumstances. I will consider only one for the purposes of this case. That is s 1223 which begins with the premiss that:
“Subject to this section, if:
(a)a social security payment is made; and
(b)a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;
the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.”
Section 1223(1AC) is concerned with a payment of a social security payment by mistake. It provides that:
“If a social security payment was made by a mistake as a result of a computer error or an administrative error, subsection (1) applies:
(a)whether or not the payment was made under a determination that had effect at the time when the payment was made; and
(b)whether or not a determination in relation to the payment could be made after the time with effect from and including that time.”
An amount paid “by way of social security payment”
Returning to the first step, what is meant by a “social security payment”? A “social security payment” is given a number of meanings by s 23(1). They include a “social security pension”, “social security benefit” and an “allowance” under the SS Act which are included within the definition. A “pension PP (single)” is included within the definition of a “social security pension”. A “pension PP (single)” means a “… parenting payment whose rate is worked out under the Pension PP (Single) Rate Calculator in section 1068A.[16] Therefore, it is a payment that comes within the definition of a “social security payment” within the meaning of s 23(1). The SSAT, the T documents and the Secretary’s and Mrs Talbot’s Statements of Facts and Contentions all refer to the payment as a Parenting Payment (Single) rather than as pension PP (single). I will refer to it as a Parenting Payment (Single) but note that each name refers to the one payment.
[16] s 18
The first step requires me to go beyond a consideration of whether a parenting payment is a social security payment. It requires me to consider whether an amount has been paid “by way of” social security payment. The meanings given to the expression “by way of” in common usage include, in so far as they are relevant:
“… as a form or means of … He grinned by way of apology. …”[17]
“…(a) via; (b) as an instance or a form of; in the capacity or with the function of; (c) by means of, through the medium of; …”[18]
“…a. by the route of; via; through. b. as a method or means of: ê ‘See you round, then,’ he said, by way of farewell.’…”[19]
[17] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[18] Shorter Oxford English Dictionary, 5th edition, 2002, Oxford University Press
[19] Macquarie Dictionary, revised 3rd edition, 2001, The Macquarie Library Pty Ltd
The expression has also been considered in various contexts in various cases. In Commonwealth of Australia and Anor v Precision Pools Pty Ltd and Anor,[20] O’Loughlin J considered a situation in which the manufacturers of in-ground swimming pools had obtained a judgment from the Federal Court that the Commissioner of Taxation (Commissioner) was required to pay them amounts representing refunds of sales tax paid in respect of those in-ground swimming pools. After the judgment but before the Commissioner made the payments, the Commonwealth passed the Swimming Pools Tax Refund Act 1992 (Refund Act). It sought to regulate the circumstances in which the Commonwealth was liable to make any “in situ pool tax refund payment”. An “in situ pool tax refund payment” was defined in s 3 to mean “any payment that the Commonwealth is liable to make by way of refund of an in situ pool tax payment …”. The question for O’Loughlin J was whether the payment that the Commissioner was liable to make in satisfaction of the judgment was a “… payment … by way of refund of an in situ pool tax payment …” within the meaning of the Refund Act.
[20] (1994) 94 ATC 4,727
O’Loughlin J said of the definition of an “in situ pool tax refund payment”:
“ The words ‘by way of refund’ are directly related to the phrase ‘in situ pool tax payment’. They are ordinary English words and their meaning, as used in the legislation, is a question of fact and not of law; it is to be resolved by the relevant tribunal itself, by considering the words in their context with the assistance of dictionaries and other books, and not by expert evidence …
Both the Shorter Oxford English Dictionary and The Macquarie Dictionary recognise that ‘refund’ can mean ‘refinancing’ but they give as its primary meaning the concept of giving back or restoring – with particular reference to money. The phrase ‘by way of’ indicates ‘a method or means’ or ‘through the medium of’. In my opinion, all this leads to the conclusion that what is refunded is the same as or substantially similar to that which first passed. …”[21]
[21] (1994) 94 ATC 4,727 at 4,730
In Director of Public Prosecutions v Serratore,[22] the New South Wales Court of Appeal considered whether a bail proceeding was “a proceeding by way of a prosecution for a prescribed offence” within the meaning of s 5B of the Telecommunications (Interception) Act 1979. If it were, s 74(1) of that legislation provided that lawfully obtained information could be given in the proceeding. The lawfully obtained information in that case took the form of transcripts of telephone conversations alleged to have taken place between Mr Serratore and others. The Court of Appeal decided that a bail application was not a proceeding by way of a prosecution.
[22] (1995) 38 NSWLR 137; 132 ALR 461
Kirby P considered the expression “by way of” which he thought:
“… appears to be intended to soften the classification of a ‘prosecution for a prescribed offence’ and to extend the application of that expression to a wider range of proceedings than might otherwise be embraced by a ‘prosecution’, strictly so called.
… The words ‘by way of’, when used adjectively, have been considered in authority. In NEC Information Systems Australia Pty Ltd v Lockhart (1991) 22 NSWLR 518; 101 ALR 95 (CA), I examined the phrase ‘a proceeding by way of an appeal’ in s 6(8) of the Jurisdiction of Courts (Cross-Vesting) Act 1987. … Of this expression I said, at NSWLR 522; ALR 99:
Proceedings are thus included which, though not an ‘appeal’ strictly so-called, can properly be viewed as being in the nature of an appeal or for the purpose of an appeal or ‘by way of’ an appeal.
With this extension in mind, I held that a summons for leave to appeal to this court was a ‘proceeding by way of an appeal’. Its object was directed to the same end. It was the pursuit of an appellate right. Meagher JA (with whom Samuels JA agreed) did not dissent from this opinion.”[23]
[23] (1995) 38 NSWLR 137; 132 ALR 461 at 468; 144-145
Kirby P concluded that a bail proceeding is not a proceeding by way of a prosecution and his reasoning in encapsulated in the following passage from his judgment:
“(1) An application for ‘bail’ could not, in the ordinary use of that word of the English language be classified as ‘a proceeding by way of a prosecution for a prescribed offence’. It is connected to such a proceeding. It is adjunct to it. It arises out of it. It is related to it. But it is not such a proceeding. … A bail application, of itself, simply cannot be put into that description;
(2) Nor is an application for bail a proceeding ‘by way of’ a prosecution. In order to find the genus of this extended phrase, it is necessary to ask, as was done in Lockhart, what is the characteristic of a prosecution’ which the phrase ‘by way of’ is intended to extend. A prosecution is a proceeding on a charge of criminal offence designed to lead to a conviction with consequent criminal punishment. That is why in Shepherd [Shepherd v Griffiths (1985) 60 ALR 176b at 185], Jenkinson J, rightly in my view, held that a committal was a committal was a ‘proceeding by way of a prosecution’. It was a proceeding that had the same object. Not so in the case of a bail application. It is no part of the purpose of a bail application to punish an accused person. It would be a misuse of the bail discretion to refuse bail in order to impose a criminal sanction on the applicant. Although the effect of the refusal is a loss of liberty, that is not its purpose and object. Yet the purpose and object of a ‘prosecution for a prescribed offence’ may well be, in a given case, the deprivation of liberty. This is the fundamental distinction between a ‘proceeding by way of a prosecution’ and a bail proceeding. In most cases, they have an antithetical, and in all cases, different, objectives; …”[24]
[24] (1995) 38 NSWLR 137; 132 ALR 461 at 470; 147. Cole JA and Santow JA reached a similar conclusion.
It is apparent from these authorities that the meaning of the expression “by way of” will vary slightly according to its context. Despite those variations, there will always be the quality of a connection, described by the expression “by way of”, between two designated “things” or “actions”. There will always be a need to find the essential characteristics of each of the two things or actions.
In the context of s 1222A(a), the designated “things” are the “amount [that] has been paid” and a “social security payment’. It follows from that formulation that the amount must have been paid “as a form” of or “as an instance or a form of” a social security payment. As I have already mentioned, a “social security payment” is defined. The amount must be “by way of”, and so an instance of or a form of, that social security payment as defined. Provided it comes within that description, it need not be a payment for which the person is qualified and to which the person is entitled to be paid. If that were not the case, there would be no need for debt recovery provisions in the SS Act generally and no specific need for s 1222A. It must be an amount that is paid by the Secretary to a recipient on the basis that it is being paid as a pension, benefit or allowance of the sort that comes within the definition of a “social security payment”. The payment will then be a payment that is “by way of” a social security payment.
An amount “paid” by way of social security payment
What is meant by an amount that has been “paid” in the context of s 1222A(a)? The word “paid’ is not defined in the SS Act and nor are any related words such as “pay” or “payment”. In s 1222A(a), the word “paid’ is used as the past tense of the verb “to pay”. The meanings of the word “pay” are numerous, but in the context of a debt recovery provision such as s 1222A(a), its relevant meanings include:
“… 1 … to give (money) to someone in exchange for goods, services, etc … 2 … to settle (a bill, debt, etc). …”[25]
“… 2 … a Give (a person) money etc. that is due for goods receive, a service done, or a debt incurred; remunerate. Also, hand over or transfer (money etc.) in return for something (foll. By to the recipient). …”[26]
“… 1. to discharge (a debt, obligation, etc.), as by giving or doing something. 2. to give (money, etc.) as in discharge of debt or obligation. 3. to satisfy the claims of (a person, etc.) as by giving money due. 4. to defray (cost or expense). 5. to give compensation for. …”[27]
[25] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[26] Shorter Oxford English Dictionary, 5th edition, 2002, Oxford University Press
[27] Macquarie Dictionary, revised 3rd edition, 2001, The Macquarie Library Pty Ltd
Transfer of cash would certainly seem to satisfy the requirement that “an amount has been paid” but there are authorities that, in contexts other than that of the SS Act, suggest that an amount may be “paid’ in a form other than cash. It has, for example, been accepted that:
“… the word ‘payment’ in itself is one which, in an appropriate context, may cover many ways of discharging obligations. It may even … include a discharge, not by money payment at all but by what is called ‘payment in kind’. …”.[28]
[28] White v Elmdene Estates Ltd [1959] 2 All ER 605, Court of Appeal per Lord Evershed, MR at pages 610-611 and affirmed on appeal to the House of Lords (Elmdene Estates Ltd v White [1960] 1 All ER 306)
In Federal Commissioner of Taxation v Angus,[29] the High Court considered whether, among other matters, the Commissioner was satisfied that there was a liability to pay tax in Singapore. The taxpayer received income, either in the form of dividends from shares in a company incorporated in that country or as a trust distribution according to her father’s will. If there was a liability to pay tax, a second issue was whether that tax has been, or would be, paid. Dixon CJ said:
“… The liability for payment of income tax should be understood to include every description of liability which would be sufficient to make it true that the income was not exempt from payment of income tax in the country where the income is derived and the word ‘payment’ should be correlatively be construed as covering every kind of discharge of that liability which in that country was accepted as the equivalent of payment. …
… It is quite consistent … that the dividends, regarded either as dividends or as trust distributions, should not be exempt from tax under the provisions of the Singapore Ordinance and that the process of setting off the rate of tax paid by the company against the taxpayer’s liability was a sufficient ‘payment’, whether it operated as a discharge in full as in this case or as a discharge pro tanto. …”[30]
[29] (1961) 105 CLR 489
[30] (1961) 105 CLR 489 at 504
A more general statement of the principles was made by Mellish LJ in Spargo’s Case:[31]
“… Nothing is clearer than that if the parties account with each other, and sums are stated to be due on one side, and sums to an equal amount due on the other side of that account, and those accounts are settled by both parties, it is exactly the same thing as if the sums due on both sides had been paid. Indeed, it is a general rule of law, that in every case where a transaction resolves itself into paying money by A to B, and then handing it back again by B to A, if the parties meet together and agree to set one demand against the other, they need not go through the form and ceremony of handing the money backwards and forwards.”[32]
[31] (1873) 8 Ch App 407
[32] (1873) 8 Ch App 407 at 414
This principle was cited with approval by Knox CJ and Dixon J in Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd.[33] Isaacs J expressed it in a different way but to the same effect:
“ It is established law that a payment in cash does not require that the formality of handing over actual cash shall take place, so long as what is done is virtually payment in cash. If A owes B £1,000 for cattle, and B owes A £1,000 for a house, mutual receipts for indebtedness would in law be payment in cash on both sides. In Larocque v Beauchemin …[[34]] Lord Macnaghten for the Judicial Committee, applying the doctrine in Spargo’s Case …, pointed to the necessity of independent agreement, each requiring an immediate payment of money down, in order that the setting off of the two demands should amount to a payment in cash.”[35]
[33] (1929) 43 CLR 247 at 263
[34] (1918) AC 514
[35] (1929) 43 CLR 247 at 269-270
In that case, shares in a company were issued to members of the deceased’s family. They were paid for initially by the company’s cheque debited to the deceased’s account in the company’s books. Subsequently, the deceased took another company cheque and paid the proceeds into his personal cheque account. He then drew personal cheques to meet his family members’ liabilities for the shares. The company books showed a transfer of the debits back to the deceased’s account and they were pro rata extinguished as a result of a pre-existing credit in the deceased’s account. The transfer occurred within three years of the deceased’s death and so there was a question whether any part of the amount comprised a gift and so part of the deceased’s dutiable estate.
The peculiarities of companies and of company law determined that the liability upon shares cannot be discharged unless the company obtains funds or assets which have, or are supposed to have, a real equivalent value to the capital represented by the shares. Therefore:
“… although an agreed extinguishment by set-off of the liability of the shareholder to the Company and of the Company’s liability to him is undoubtedly payment, yet probably it is not competent to a Company to incur a voluntary liability for the purpose of enabling such a set-off to be had. …
Further, it seems clear that, with or without a filed agreement, a company may not extinguish the shareholder’s liability with all its peculiar incidents, by merely accepting in its place a liability for a simple contract debt. …”[36]
[36] (1929) 43 CLR 247 at 264 per Knox CJ and Dixon J
It is apparent from these authorities and from the ordinary meanings of the word “pay” that it may refer to the payment of money but that, in some instances, it may also refer to the passing of something in kind. Even if the reference is to a payment of money, it may be that there need not be a physical cash transaction. It may be that book entries showing the crediting and/or debiting of amounts may be sufficient to show a payment. Whether anything other than the transfer of cash will amount to a payment depends on the context in which the term is used.
In this case, the context is that of the SS Act but also that of the SSA Act. The SSA Act provides for the administration of the social security law.[37] Division 3 of Part 3 is concerned with the commencement of a social security payment. Sections 41 and 42 provide that, in most instances, a social security payment becomes payable on the person’s start day in relation to that payment. The “start day” is worked out in accordance with Schedule 2 to the SSA Act.
[37] SSA Act, long title
Division 4 of Part 3 is concerned with the payment of particular social security payments. Section 43(1) of the SSA Act provides that a social security periodic payment is to be paid in arrears and by instalments. The periods of the instalments must not exceed 14 days but their length is otherwise to be determined by the Secretary. Division 4 makes other provisions for the payment of other kinds of payments under the SS Act. Subject to exceptions in relation to the payment of a youth allowance, instalments of a person’s social security periodic payments are to be paid to that person. A “social security periodic payment” is defined in terms that include a “social security pension”[38] and so a pension PP (single). As I said earlier, a reference to a Parenting Payment (Single) is a reference to a pension PP (single).
[38] SSA Act, Schedule 1, item 1(1)
Section 55 of the SSA Act provides that, subject to Part 3A, an amount that is to be paid to a person as a social security periodic payment is to be paid in the manner set out in that section. That means that, subject to any direction by the Secretary to the contrary,[39] the amount is paid to the credit of a bank account nominated and maintained by the person.[40] No limitations are placed upon the form in which the Secretary may decide to make the payment.
[39] SSA Act, ss 55(4) and (4A)
[40] SSA Act, s 55(2)
If the recipient of a social security payment asks the Secretary to make deductions from the instalments and to pay the amounts deducted to the Commissioner, the Secretary may do so.[41] If there is a debt under the social security law, which includes a debt under the SS Act,[42] the Secretary may recover the amount of that debt by way of deductions.[43]
[41] SSA Act, s 61
[42] s 23(17)
[43] s 1231(1)(aaa) and (e)
Having regard to the provisions relating to the payment of social security payments, it becomes clear that the word “paid” may include a cash payment if the Secretary were to choose to do that. Generally, though, payments of social security periodic payments are credited to the recipient’s bank account. Once the person’s account has been credited, the amount of the instalment has clearly been paid even though there has not been a physical transfer of cash. There is no reason on the face of either the SS Act or the SSA Act to conclude that the Secretary could not decide to pay by cheque. I note that payment by cheque is expressly provided for in unrelated provisions relating to the payment of social security payments to which persons, who are subject to the income management regime are entitled.[44] The provisions relating to deductions of amounts in order to repay debts under the social security law taken together with those relating to crediting of amounts of instalment in the recipient’s bank account, lead to the conclusion that amounts of social security periodic payment that are set off against a debt will also be taken as having been paid. That is so even though the only record of the transaction will be by entries in the accounts.
[44] See SSA Act, ss 123YM(2)(d) and (e) and 123YN(2)(d) and (e)
Was any part of the amount of $2,790.40 an amount paid “by way of social security payment”?
I am satisfied that the two separate amounts making up the total sum of $2,790.40 were paid to Mrs Talbot. In neither case did she receive cash but, as I have said, an amount may be paid under the SS Act or the SSA Act in ways other than cash. The sum of $1,111.65 was paid to her when that amount was credited to Mrs Talbot’s bank account. The remaining sum of $1,678.75 was paid to her when it was, even though incorrectly, set off against debts that she had incurred in relation to other payments made to her by Centrelink.
Were the amounts paid to her “by way of social security payment”? That is to say, were the amounts, or either of them, paid to Mrs Talbot as an instance of or a form of social security payment? Given that the payment to which she was entitled was Parenting Payment (Single), the question can also be asked in the context of that payment. Were the amounts, or either of them, paid as an instance of or a form of a Parenting Payment (Single)?
Whether asked more broadly or more narrowly, the answer to the question is the same. The amount of $1,111.65 credited to Mrs Talbot’s bank account was credited on the basis that she had paid Centrelink too much in order to settle her debts. It was paid as a reimbursement of the amount that she had overpaid. It was not paid to her as a Parenting Payment (Single) or as any other form of social security payment. It was not a substitute for any such payment or an amount that could be said to be an instance of or a form of a social security payment. The amount of $1,111.65 was not paid to Mrs Talbot by way of a social security payment.
Similarly, the amount of $1,678.75 was not paid to Mrs Talbot as a social security payment. It can be said to have been paid to her when it was credited to her and against the debt that she owed at the time. The debt that it was credited against was a debt that arose from the Parenting Payment (Single) that was paid to Mrs Talbot. The characterisation of the debt cannot, however, affect the characterisation of the payment so that a payment in reduction of a debt arising from a social security payment becomes itself a payment of a social security payment. The amount of $1,678.75 was a sum that Centrelink regarded, although incorrectly, as an amount paid by Mrs Talbot in reduction or settlement of her debts. Centrelink credited it to her in its accounts but it did not do so on the basis that it was crediting, and so paying, an amount by way of a social security payment. It was crediting it to her on the basis that she had paid the money to it.
It follows that I do not consider that any part of the sum of $2,790.40, and particularly the sum of $1,111.65 was paid to Mrs Talbot by way of a social security payment. My conclusion that neither the sum of $1,111.65 nor that of $1,678.75 is an amount that was paid by away of social security payment means that neither can be a debt for the purposes of s 1222A of the SS Act. Neither can be a debt for the purposes of s 1223. Both sections are predicated, as are all the provisions in Part 5.2, on an amount’s having been paid as a social security payment or by way of a social security payment. It is irrelevant that neither the sum of $1,111.65 nor the amount of $1,678.75 should have been paid to her and both were paid to her by mistake. As neither sum is a debt for the purposes of Part 5.2 of Chapter 5, neither is recoverable under that Part of the SS Act.
Can either amounts be waived under the SS Act?
Part 5.4 of the SS Act is concerned with the non-recovery of debts. The Secretary may write off a debt in the circumstances prescribed in s 1236 of the Act or may waive the Commonwealth’s right to recover the whole or part of a debt from a person only in the circumstances set out in ss 1237A 1237AA, 1237AAA, 1237AAB, 1237AAC or 1237AAD of the Act.[45] The two sections considered by the SSAT were ss 1237A and 1237AAD.
[45] s 1237(1) and see also s 1236A
Section 1237A(1) provides that:
“(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).
(1A) Subsection (1) only applies if:
(a)the debt is not raised within period of 6 weeks from the first payment that caused the debt; or
(b)if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;
whichever is the later.”
Section 1237AAD provides that:
“The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that:
(a)the debt did not result wholly or partly from the debtor or another person knowingly:
(i)making a false statement or a false representation; or
(ii)failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; and
(b)there are special circumstances (other than financial hardship alone) that makes it desirable to waive; and
(c)it is more appropriate to waive than to write off the debt or part of the debt.”
Each section refers to the word “debt” and gives the Secretary power to waive a “debt”. That word does not refer to any debt to the Commonwealth however incurred. It refers only to a debt as defined by s 1235:
“(a) a debt recoverable by the Commonwealth under Part 5.2; or
(b)a debt under the 1947 Act; or
(c)a debt due to the Commonwealth under a scheduled international security agreement; or
(d)a debt under the Social Security (Fares Allowance) Rules 1998.”
Clearly, the amounts of $1,111.65 and $1,678.75 with which I am concerned do not come within the scope of (b), (c) or (d). For the reasons that I have given, they do not come within the scope of (a) as they are not debts recoverable under Part 5.2. As the Secretary’s power to waive a debt relates only to a debt as defined in s 1235, the Secretary does not have power to waive recovery of the amounts of $1,111.65 and $1,678.75. Section 43(1) of the Administrative Appeals Tribunal Act 1975 provides that the Tribunal has all the powers and discretions conferred on the Secretary. A necessary corollary of that is that the Tribunal has no greater powers than those of the Secretary. Therefore, the Tribunal has no power to waive the recovery of the amounts of $1,111.65 and $1,678.75.
Does the Secretary have other avenues to recover the amount of $1,111.65?
I do not have power to decide whether the amount of $1,111.65 is recoverable under the common law. Despite that, I will spend a moment considering whether it may be recoverable for I would not want Mrs Talbot to think that my decision means that the Commonwealth cannot recover the amount from her under any circumstances.
The Secretary has referred to the case of Secretary, Department of Social Security v Migotto,[46] in which Heerey J said:
“ It was accepted that overpayments of Austudy allowance are recoverable as a debt due to the Commonwealth. I was not referred to any express statutory provision to this effect, but it was conceded, correctly in my view, that a payment purportedly made under a statutory entitlement, where the facts which would have given rise to the entitlement did not exist, is recoverable at common law as money paid as a mistake of fact: Church v Secretary, Department of Education (1987) 73 ALR 69 at 82-5, 86-7. If there is to be a valid waiver of debt due to the Commonwealth, there must be a statutory power to waive: cf The Case of Dispensations (1604) Jenk 307; 145 ER 224; Bill of Rights 1688 s 1. …”.[47]
[46] (1991) 103 ALR 36; 23 ALD 459
[47] (1991) 103 ALR 36; 23 ALD 459 at 39; 460-461
For the reasons that I have given, the payments made to Mrs Talbot were not paid to her by way of a social security payment. They were not payments purportedly made under a statutory entitlement on the basis of facts that did not exist. The payments to Mrs Talbot were certainly made on the basis of a fact that did not exist but were not purportedly made under a statutory entitlement. The payments were made to her as a result of Centrelink’s mistakenly recording her as paying the sum of $2,790.40 twice. That led it to mistakenly crediting part of that amount against debts she owed and returning the balance to her. That was a mistake of a different kind from that described by Heerey J but no less a mistake.
The traditional distinction between a mistake of law and a mistake of fact and the different consequences flowing from each was considered by the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia.[48] The majority, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ said:
“… It would be logical to treat mistakes of law in the same way as mistakes of fact …, so that there would be a prima facie entitlement to recover moneys paid when a mistake of law or fact has caused the payment. …”[49]
They considered whether the mistake had to be fundamental but rejected that as a criterion on the basis that:
“… If the payer has made the payment because of a mistake, his or her intention to transfer the money is vitiated and the recipient has been enriched. There is therefore no place for a further requirement that the causative mistake be fundamental; insistence upon that factor would only serve to focus attention in a non-specific way on the nature of the mistake, rather than the fact of enrichment. If a strict approach is taken towards the issue of mistake so that a plaintiff bears the burden of establishing on the balance of probabilities that a causative mistake has been made, there would also be no need to appeal to the element of fundamentality as a limiting factor. So, the payer will be entitled prima facie to recover moneys paid under a legal obligation under a mistake if it appears that the moneys were paid by the payer in the mistaken belief that he or she was under a legal obligation to pay the moneys so that the payee was legally entitled to payment of the moneys. Such a mistake would be causative of the payment.”[50]
[48] (1992) 175 CLR 353; 109 ALR 57
[49] (1992) 175 CLR 353; 109 ALR 57 at 376; 73
[50] (1992) 175 CLR 353; 109 ALR 57 at 378; 74-75
Their Honours rejected a proposition that those seeking recovery of a payment must prove the unjustness of the recipient’s keeping it. They said:
“… The fact that the payment has been caused by a mistake is sufficient to give rise to a prima facie obligation on the part of the respondent to make restitution. Before that prima facie liability is displaced, the respondent must point to circumstances which the law recognizes would make an order for restitution unjust … It follows that the recipient of a payment, which is sought to be recovered on the ground of unjust enrichment, is entitled to raise by way of answer any matter or circumstance which shows that his or her receipt (or retention) of the payment is not unjust.”[51]
[51] (1992) 175 CLR 353; 109 ALR 57 at 379; 76
Two “answers” or defences that the majority considered were, first, that the payments made by the appellants were made for good consideration and, second, that in reliance upon receipt of the payments the respondent, in good faith, changes its position to its detriment.[52] Given their conclusions on those matters, they did not need to go on to consider a further argument that the payments were recoverable by the appellants because the respondent was primarily responsible for the mistake. Furthermore, they had no need to consider whether the payment was recoverable because it was made under a contractual obligation that was void according to statute law.[53] They did, however, elaborate on the defence of change of position to observe that:
“… a defence of a change of position is necessary to ensure that enrichment of the recipient of the payment is prevented only in circumstances where it would be unjust. This does not mean that the concept of unjust enrichment needs to shift the primary focus of its attention from the moment of enrichment. From the point of view of the person making the payment, what happens after he or she has mistakenly paid over the money is irrelevant, for it is at that moment that the defendant is unjustly enriched. However, the defence of change of position is relevant to the enrichment of the defendant precisely because its central element is that the defendant has acted to his or her detriment on the faith of the receipt … In no jurisdiction, however, can a defendant resort to the defence of change of position where he or she has simply spent the money received on ordinary living expenses.”[54]
[52] (1992) 175 CLR 353; 109 ALR 57 at 379-380; 76
[53] (1992) 175 CLR 353; 109 ALR 57 at 384; 66
[54] (1992) 175 CLR 353; 109 ALR 57 at 385-386; 80-81
Matters of the sort considered by the majority of the High Court in David Securities Pty Ltd v Commonwealth Bank of Australia will be relevant in considering whether the amount of $1,111.65 paid by mistake to Mrs Talbot is recoverable as a debt. If it is recoverable, Heerey J observed that its recovery could only be waived if there is a statutory power to do so. That power is found in s 34 of the Financial Management and Accountability Act 1997 (FMAA Act) which provides that, subject to certain procedural steps set out in s 34(2) in relation to larger debts:
“(1) The Finance Minister may, on behalf of the Commonwealth:
(a) waive the Commonwealth’s right to payment of an amount owing to the Commonwealth;
(b) postpone any right of the Commonwealth to be paid a debt in priority to another debt or debts;
(c) allow the payment by instalments of an amount owing to the Commonwealth;
(d) defer the time for payment of an amount owing to the Commonwealth.”
A waiver may be made either unconditionally or on the condition that a person pays an amount to the Commonwealth.[55]
[55] FMAA Act, s 34(3)
Section 34 does not set out any principles guiding the exercise of the Minister’s discretion and it is not my place to do so in view of the fact that the Tribunal does not have jurisdiction to review decisions made under the FMAA Act. I understand that Centrelink has suggested to Mrs Talbot that she apply for waiver of the amount of $1,111.65 under s 34 and I can only repeat that suggestion.
Conclusion
For the reasons that I have given, I:
1.set aside the decision of the Social Security Appeals Tribunal dated 11 April 2007; and
2.substitute a decision that the Secretary does not have power under the Social Security Act 1991 or the Social Security (Administration) Act 1991 to waive repayment of the sum of $1,111.65 mistakenly paid by applicant to the respondent.
I certify that the sixty one preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: .......................................................................
Jayne Haydon Associate
Date of Hearing 12 November 2007
(heard on the papers)Date of Decision 1 February 2008
Solicitor for the Applicant T. Noonan
Centrelink, Legal Services Branch
Solicitor for the Respondent R. Taylor
Robert D. Taylor & Associates
0
8
0