Vaughan and Department of Family and Community Services - [2001] AATA 815

DECISION AND REASONS FOR DECISION [2001] AATA 815

ADMINISTRATIVE APPEALS TRIBUNAL Nº V2001/664

GENERAL ADMINISTRATIVE DIVISION

Re: LOUISE EILEEN VAUGHAN
Applicant

And:SECRETARY TO THE
DEPARTMENT OF FAMILY AND
COMMUNITY SERVICES
Respondent

DECISION

Tribunal: G.D. Friedman, Member

Date:26 September 2001
Place:Melbourne
Decision:The Tribunal sets aside the decision of the Social Security Appeals Tribunal dated 14 May 2001 and substitutes a decision that in accordance with s1237A(1) of the Social Security Act 1991 the right to recover the proportion of the debt that is attributable solely to administrative error made by the Commonwealth is waived with effect from 29 July 1999.

(sgd) G.D. Friedman
Member
STUDENT ASSISTANCE - youth allowance - overpayment - debt to Commonwealth - administrative error by Centrelink - whether payments received in good faith
Social Security Act 1991 s1237A
Haggerty v Department of Education Training and Youth Affairs [2000] FCA 1287
Jazazievska v Department of Family and Community Services [2000] FCA 1484
Secretary, Department of Education, Employment, Training & Youth Affairs v Prince
[1997] 1565 FCA

REASONS FOR DECISION

26 September 2001 G.D. Friedman, Member

This is an application by Louise Eileen Vaughan (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) made on 14 May 2001 which affirmed a decision of a Centrelink delegate of the Secretary to the Department of Family and Community Services (the respondent) dated 23 October 2000. The original decision by Centrelink was that an overpayment of $2089.00 in Youth Allowance payments (youth allowance) to the applicant during the period 9 March 1999 to 28 June 1999 (the relevant period) was due solely to an administrative error by the Commonwealth but that recovery of the debt should not be waived because the payments were not received in good faith.
At the hearing of this matter on 19 September 2001 the applicant was represented by Mr J. Singh of Counsel. The respondent was represented by Mr D. Perdon of the Administrative Law Team, Centrelink. The evidence before the Tribunal comprised oral evidence and the documents lodged under s37 of the Administrative Appeals Tribunal Act1975 together with four exhibits (Exhibits A1 to A4) tendered by the applicant.
BACKGROUND
The applicant was born on 24 April 1976. On 17 March 1999 she applied to Centrelink for youth allowance as she had enrolled in a full-time course in natural resources management at Northern Metropolitan Institute of TAFE. At that time she was receiving newstart allowance (newstart). On 18 March 1999 Centrelink advised the applicant that newstart payments would cease from 17 March 1999 because she had commenced full-time studies. On 22 March 1999 Centrelink advised the applicant that youth allowance would commence effective from 9 March 1999.
Payment of both newstart and youth allowance was made to the applicant's account with the Plenty Community Credit Union (credit union) during the relevant period. On 29 July 1999 a delegate of the respondent decided that the applicant had been overpaid the sum of $2089.00 and that this was a recoverable debt to the Commonwealth. On 23 October 2000 an authorised review officer affirmed the decision, and on 22 January 2001 the applicant applied to the SSAT for review. Following the decision of the SSAT the applicant lodged an application with the Tribunal on 12 June 2001.
EVIDENCE
The applicant told the Tribunal that during the relevant period she was unaware that she was continuing to receive newstart in addition to youth allowance because she only received account statements annually, and the previous statement was sent to her in August 1998. She said that at the time she was employed on a casual basis at a hotel, and she produced copies of the forms on which she had calculated her earnings from casual employment and which she had submitted to Centrelink fortnightly. She said that she operated her credit union account using an automated telling machine and had no reason to question the balance of her account at any time during the relevant period, as she was aware that her youth allowance entitlement varied because her earnings from casual employment differed from week to week. She told the Tribunal that at no time was the balance in her account large enough to alert her to the possibility that she had been receiving payments to which she was not entitled. For these reasons she said that she had no need to ask the credit union for a statement or seek information about specific transactions.
The applicant said that she became aware of the overpayment in July 1999 when informed by Centrelink. She said that if she had known about the overpayment earlier she would have contacted Centrelink immediately, as she knew that she had no entitlement to newstart whilst in receipt of youth allowance. The applicant stated that at all times she acted honestly and in good faith and had repaid approximately $1280.00 of the debt.
CONSIDERATION OF THE ISSUES
The Social Security 1991 (the Act) provides in relation to the waiver of a debt arising from an 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.

Mr Singh, on behalf of the applicant, said that there was no dispute that the sole cause of the debt was administrative error by Centrelink. He submitted that the applicant received youth allowance in good faith and therefore the respondent must waive the recovery of the debt. He referred the Tribunal to Secretary, Department of Education, Employment, Training & Youth Affairs v Prince [1997] 1565 FCA in which Finn J stated at p 4, in relation to the burden concerning waiver of a debt to the Commonwealth:

. . . 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.

Mr Singh also referred the Tribunal to Haggerty v Department of Education Training and Youth Affairs [2000] FCA 1287 in which French J said at par 16:
Consistently with what his Honour said in the Prince case, want of good faith will arise where there is a positive belief that the payment has been made by mistake. It will also arise where there is a suspicion held by the recipient that he or she may not be entitled to the payment made or a doubt as to the entitlement coupled with some objective basis for such suspicion or doubt. The provision does not, however, authorise the imputation of want of good faith in any of the senses above described simply because there are in existence objective facts which would raise a belief or a doubt or a suspicion of non-entitlement in the mind of some imaginary recipient. That proposition is quite consistent with the view that the existence of such facts may support an inference that the recipient disbelieved or doubted or was suspicious about his or her entitlement. "Reason to know" as Finn J used that term in Prince does not necessarily import a criterion of imputed as distinct from actual want of good faith as I have described it.

At par 17 French J said:

None of these findings go to the state of mind and whether he had a belief, doubt or suspicion as to entitlement which would require a recipient acting in good faith to make an inquiry. Concern, puzzlement, upset and a perception of unusual circumstances, coupled with absence of further inquiry, are not enough themselves to constitute want of good faith.

Mr Singh noted that in Jazazievska v Department of Family and Community Services [2000] FCA 1484 Cooper J said at par 40:
. . . 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.

At par 41 Cooper J said:

A person does not act in good faith where the person turns a blind eye to circumstances which raise doubt as to the entitlement of the person to receive and retain the payment or refuses to make reasonable inquiries where doubt exists.

And at par 42:

A recipient of a payment to which he or she is not entitled, cannot avoid the requirement of good faith in s1237A(1) by the mere circumstance that the person arranges for direct payment to an account of that person with a financial institution and in consequence is unaware of the fact of the payment at the time of its actual receipt.

Mr Singh submitted that the applicant was unaware that she was receiving payments to which she was not entitled, as she had no reason to seek a statement from the credit union and the amount of youth allowance received by her varied in accordance with her earnings from casual employment. He said that the frequency of payments, including instances when payments were made within days of each other, did not alert her to the overpayments as she used the proceeds at various times and did not know the dates on which Centrelink made deposits to her account. Mr Singh submitted that Centrelink was aware of the overpayment early in the relevant period but took no steps to inform the applicant until July 1999.
The Tribunal was told that in accordance with Prince the question to be addressed is the state of mind of the applicant at the time the payments were received, and in this case the applicant did not know about the overpayment at that time. Mr Singh submitted further that in the circumstances the applicant lacked the positive belief that the duplicate payments were made by mistake, and that she had no suspicion or doubt about her entitlements, so the lack of good faith described in Haggerty did not apply.
Mr Singh stated that the Tribunal should accept the honesty and credibility of the applicant's evidence because at all times she took the necessary steps to inform Centrelink of her circumstances regarding her earnings at the hotel in order to ensure that she received only her genuine entitlements. In relation to Jazazievska, he said that there was no evidence that the applicant had set up an arrangement to have the payments made to the credit union account as a means of ensuring that she would be unaware of the overpayment. Similarly he said that there was no evidence that the applicant had turned a blind eye to circumstances which may raise doubt as to her entitlement to receive and retain the overpayment, or had refused to make reasonable inquiries where doubt existed.
Mr Perdon, on behalf of the respondent, conceded that the debt was due solely to administrative error by Centrelink, but submitted that the test was knowledge of an entitlement to a payment received, not of actual knowledge of its receipt. He said that the applicant knew that she was entitled to only one payment each fortnight, so that in accordance with the test in Prince she could not have received the duplicate payment in good faith even if she received a payment of which she was ignorant. Mr Perdon said that there were no special circumstances, other than financial hardship alone, which would justify the waiver of any or all of the debt.
Further Mr Perdon submitted that the applicant was reckless, careless or indifferent regarding her credit union account because she could have obtained balance and transaction information at any time via the automatic telling machine or from the credit union by telephone, letter or in person; payments were deposited in her account as little as one day apart; amounts of approximately twice the expected payment of $250.00 were deposited each fortnight; and there were times within the relevant period that the applicant made withdrawals that were in excess of the amounts she should have received each fortnight. Mr Perdon submitted that because the applicant was aware that she was entitled to receive only one payment each fortnight, she must be taken to have disbelieved, doubted or was suspicious regarding her entitlement, and therefore she acted without good faith.
In reaching its decision the Tribunal takes into account the written material, the oral evidence and the submissions made at the hearing. After hearing oral evidence and examining relevant documents, including the forms submitted to Centrelink regarding her earnings from casual employment, the Tribunal finds that the applicant is an honest witness. As the duplicate payments received in the relevant period were not large amounts and they varied because of the applicant's fortnightly earnings from casual employment, the Tribunal accepts that at that time the applicant had no reason to make inquiries of the credit union about the amounts deposited into her account or her balance of account. The Tribunal concludes that she was unaware that she was receiving duplicate payments until informed by Centrelink.
The Tribunal accepts that the applicant knew that she was entitled to receive only one payment each fortnight and that had she been aware of the overpayment she would have notified Centrelink. However the Tribunal accepts the submission by Mr Singh that the test outlined in Prince refers to knowledge of the payments actually received, rather than knowledge of a general entitlement to only one payment each fortnight.
In relation to the test in Haggerty, because of the Tribunal's findings concerning the applicant's lack of knowledge of the overpayment or of any reason to make inquiries of the credit union, the Tribunal finds that there was no reason for belief, doubt or suspicion by the applicant as to an entitlement which would require her acting in good faith to make an inquiry. Similarly there was no evidence of concern, puzzlement, upset and a perception of unusual circumstances by the applicant. Therefore the Tribunal finds that she lacked the requisite positive belief or suspicion that something was amiss.
In relation to Jazazievska the Tribunal accepts the submission by Mr Singh that there is no evidence that the applicant acted without an honest belief that she was entitled to receive and retain the payments when she received them and decided to exercise control over them by retaining them, or that she was unaware of the payments merely because she arranged a direct deposit to her account.
For these reasons the Tribunal is satisfied that the overpayment giving rise to the debt to the Commonwealth was received by the applicant in good faith, and that the right to recover the debt must be waived.
DECISION
The Tribunal sets aside the decision of the Social Security Appeals Tribunal dated 14 May 2001 and substitutes a decision that in accordance with s1237A(1) of the Social Security Act 1991 the right to recover the proportion of the debt that is attributable solely to administrative error made by the Commonwealth is waived with effect from 29 July 1999.
I certify that the twenty [20] preceding paragraphs are a true copy of the reasons for the decision of
G.D. Friedman, Member
(sgd)       Catherine Thomas
              Clerk
Date of hearing:  19 September 2001
Date of decision:  26 September 2001
Counsel for applicant:                 Mr J. Singh
Solicitor for applicant:                  John D. Snodgrass & Associates
Solicitor for respondent:              Nil - Mr D. Perdon with Centrelink