Ward and Secretary, Department of Employment and Workplace Relations
[2006] AATA 187
•3 March 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 187
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2005/212
GENERAL ADMINISTRATIVE DIVISION ) Re ROBIN WARD Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT & WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Deputy President P E Hack SC Date3 March 2006
PlaceBrisbane
Decision The Tribunal:
1. sets aside that part of the decision under review relating to payments for the period from 26 March 2003 to 3 June 2003 and decides that the debt should be waived pursuant to section 1237A of the Social Security Act 1991;
2. otherwise affirms the decisions under review.
..............................................
Deputy President
CATCHWORDS
SOCIAL SECURITY – disability support pension – failure to notify change of circumstances – overpayment – debt due to the Commonwealth – whether debt should be written off or waived – whether payment received in good faith – special circumstances
Social Security Act 1991 ss 1237A, 1237AAD
Re Beadle v Director-General of Social Security (1985) 7 ALD 670
Groth v Secretary, Department of Social Security (1996) 40 ALD 541
Dranichnikov v Centrelink (2004) 75 ALD 134
Re Hales and Secretary, Department of Social Security (AAT 12159, 27 August 1997)
Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1998)152 ALR 127
Jazazievska v Secretary, Department of Family and Community Services (2002) 65 ALD 424
Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529
Pledger v Secretary, Department of Family and Community Services [2002] FCA 1576
REASONS FOR DECISION
3 March 2006 Deputy President P E Hack SC Introduction
1.The applicant, Mr Robin Ward, received disability support pension in the period from 9 July 1998 to 18 November 2003. Because of monies that he earned by way of income during this period (that have the effect of reducing the amount of his pension) he has been overpaid amounts totalling $19,640.28.
2.On 23 June 2003 Centrelink determined to raise and recover an overpayment debt of $7,628.52 for the period 9 July 1998 to 3 July 2001. Subsequently on 8 September 2004 a similar determination was made in relation to an overpayment debt of $12,011.76 for the period 4 July 2001 to 18 November 2003.
3.The decisions were affirmed by the Social Security Appeals Tribunal. Mr Ward now seeks a review of the decisions in this Tribunal.
4.Mr Mark Thomas of counsel who appeared for Mr Ward accepted that Mr Ward had been overpaid in the amount put forward by Centrelink and did not dispute that there was a debt totalling $19,640.28. The case for Mr Ward, as propounded by Mr Thomas involved two contentions,
· that the debt ought be waived pursuant to s 1237AAD of the Social Security Act 1991 (the Act),
· alternatively, so much of the debt as was incurred after 24 March 2003 ought to be waived pursuant to s 1237A of the Act.
Factual Background
5.There was no real dispute between the parties as to the facts and I need set them out only to the limited extent necessary to consider the two arguments raised. What follows is either common ground or findings that I consider open on the evidence.
6.Mr Ward has been in receipt of disability support pension for a number of years. He is now aged 51 years. He has had a difficult life. He suffers from endogenous depression and personality disorder; he has, as well, numerous physical ailments that he detailed in his oral evidence. In his past he was involved in substance abuse. He has attempted suicide. None of these matters are in issue.
7.But despite these difficulties Mr Ward undertook studies with a view to becoming a psychologist. He completed an honours degree in psychology in 1998. Unfortunately the Psychologists’ Board refused him registration, troubled, no doubt, by some of his earlier history. But he was, nonetheless, able to obtain some limited employment undertaking tutoring through Universities in Brisbane. In addition, Mr Ward also harboured the idea of setting up a consultancy business specialising in counselling.
8.Mr Ward says, and I accept, that he discussed this notion with a Centrelink official in October 1999. Understandably he does not now profess a particularly clear recollection of the conversation. His evidence was that he told this official that he would write off expenses in his counselling business against his tutoring income and that the official “agreed that this seemed like a good idea”. Within the Departmental file is a note to the effect that Mr Ward was “commencing self employment … working from home compiling workbooks for students from Griffith uni … will provide details of gross income and expenses every 3 months … will not work over xmas”
9.It was common ground at the hearing that if advice of this nature had been given it was erroneous. The way in which the Act operates is that Mr Ward could offset expenses against income only to the extent that those expenses were incurred in earning that income, that is to say, Mr Ward could only offset expenses from a consultancy business against income from that business, not from an unrelated activity.
10.However, it seems to me to be likely that Mr Ward genuinely but mistakenly understood that for the purposes of informing Centrelink of his earnings from employment he could bring into account expenses incurred by him pursuing his idea of setting up a consultancy business. The material in the departmental file contains a number of instances where Mr Ward notified Centrelink of his gross income and expenses in particular periods.
11.Despite the initial plan it appears from subsequent notes of discussions between Mr Ward and officials that he did not commence his own business until late March 2000; a note dated 29 February 2000 makes reference to Mr Ward “hoping to start on 19/3/00”.
12.In August 2001 Centrelink noted that in the period between February and July 2001 Mr Ward had received income with the result that he had been overpaid. A debt of $487.83 was raised in this way. Subsequently Mr Ward requested that Centrelink reassess the debt based on the fact that his earnings from tutoring were used by him to provide a free counselling facility. On that occasion Mr Ward said Centrelink had offset these expenses in the past. That led Mr Ward to provide to Centrelink a copy of his 2001 income tax return which disclosed total income of $12,392.00. Subsequent correspondence with Mr Ward brought to light the extent of the overpayment.
13.It is also material to note that by letter dated 21 March 2003 (received by Centrelink on 24 March 2003) Mr Ward notified Centrelink that he had obtained a considerable increase in tutoring hours such that he believed his gross casual pay would amount to $909.00 per week. The letter went on to point out that he had no guarantee of that work continuing into the second university semester. Despite that notification Mr Ward was paid at the full rate thereafter.
Section 1237AAD
14.Section 1237AAD of the Act gives to the Secretary (and the Tribunal) a discretion to waive the right to recover all or part of a debt if satisfied that,
“(a) the debt did not result wholly or partly from the debtor or another person knowingly:
(i) making a false statement or a false representation; or
(ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and
(b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and
(c) it is more appropriate to waive than to write off the debt or part of the debt.”
15.Mr McQuinlan, who appeared for the Secretary, very fairly accepted that the element in paragraph (a) was made out on the basis of a genuine but erroneous belief on the part of Mr Ward that his university income could be offset against what would, in another context, be described as trading losses from his consultancy business. It will be necessary to consider the temporal limitations to this concession. In the circumstances of this case, the element in paragraph (c) will be satisfied if that in paragraph (b) is made out. The case turns on the question of whether there are special circumstances other than financial hardship alone that make it desirable to waive the right to recover the debt.
16.It is not possible to lay down precise limits or precise rules as to what might constitute “special circumstances”; see Beadle v Director-General of Social Security (1985) 7 ALD 670 at 674. But there must be something to distinguish the particular case from others of the class, to take it out of the usual or ordinary case in the class: Groth v Secretary, Department of Social Security (1996) 40 ALD 541, 545. In Dranichnikov v Centrelink (2004) 75 ALD 134 at 148 Hill J, with whom Keifel and Healey JJ agreed, that what is required will be circumstances which distinguish the case in consideration from the usual case.
17.Whilst acknowledging that decisions in this area of the Tribunals jurisdiction turn on their own facts Mr Thomas submitted that the present case was one where special circumstances could best be demonstrated to exist by reference to the decision by Senior Member Hotop in Re Coralie Hayes and Secretary, Department of Social Security (AAT 12159, 27 August 1997). In that case, at paragraph 41, Senior Member Hotop identified four circumstances that he regarded as together amounting to special circumstances making it appropriate to waive the right to recover the debt there due.
18.The argument advanced here by Mr Thomas was that the matters that were of particular relevance as special circumstances in Mr Ward’s case were,
·Mr Ward’s continuing level of impairment brought about by his medical conditions, both physical and mental;
·the substantial attempt by Mr Ward to alter his prospects by way of seeking professional qualifications,
·the genuinely honest approach Mr Ward has taken in his dealings with Centrelink,
·the deleterious affects the application of such a debt would have on Mr Ward’s continuing attempt to break the cycle of unemployability and social security benefits.
19.It is first necessary to consider the temporal limitations to the argument. Given that it is predicated upon a genuine but mistaken belief on the part of Mr Ward there seems to me to be no basis for considering the argument at any time prior to that belief becoming operative. Thus the argument has no application in the period from 7 July 1998 until 11 October 1999 when it appears likely that Mr Ward had the conversation from which his mistaken view was drawn. Prior to that conversation Mr Ward has no basis for failing to declare the income that he received. Any debt incurred in that period must have resulted, in part at least, from Mr Ward knowingly failing to comply with the obligation to report income from earnings.
20.Similarly, in the period after the conversation of 11 October 1999 until, say, 19 March 2000 when, after delays caused by illness, he commenced the business, there seems no basis to conclude that he had any “excuse” for failing to declare income in that period. Thus, in my view, the earliest time when the s 1237AAD question falls to be considered is 19 March 2000.
21.It is undoubtedly true that throughout the period from 19 March 2000 to 18 November 2003 Mr Ward suffered, and continues to suffer, from serious medical conditions. It is unnecessary for present purposes to set out the detail of them beyond that which I have recorded. But as Mr McQuinlan points out, correctly in my view, all recipients of disability support pension will suffer from a condition sufficiently acute to prevent them from working in the foreseeable future. But, to be fair to Mr Ward, it is the case that he has a continuing level of impairment.
22.Next it is true, as Mr Thomas submits, that Mr Ward has made a substantial attempt to alter his prospects of being able to be gainfully employed by seeking professional qualifications. He is to be commended for doing so given the very considerable difficulties that his medical conditions have created for him. It is certainly true to say that very few people with Mr Ward’s life history would manage to complete an undergraduate course at honours level.
23.Next Mr Thomas relies upon the generally honest approach that Mr Ward has taken in his dealings with Centrelink. I do not think that of itself could amount to a special circumstance. The legislation proceeds on the footing that persons will act honestly in their dealings with Centrelink.
24.In the context of the fourth circumstance, the deleterious effect of a debt on Mr Ward’s attempts to break the cycle of unemployability, it is relevant to note that his present income by way of benefits is $450.00 a fortnight from which he pays $290.00 a fortnight in rent. Mr Ward has significant debts in a balance sheet sense but he is not burdened in a cash flow sense with those debts since either by arrangement, or by operation of law in the case of his debt for HECS, only minimal payments or no payments are presently required. I accept nonetheless that the existence of a debt in the order of some $20,000.00 may have a deleterious effect upon Mr Ward but the position is quite different to one where the creditors are pressing for immediate payment. In reality the debts that Mr Ward has are either not presently payable (in the case of the HECS debt and the private loans) or payable in modest instalments (in the case of the SPER and Centrelink debts). In that sense Mr Ward is in a better position than many in a similar position who have immediate and pressing debts e.g. credit card and short term loan debts to meet.
25.Whilst I am prepared to proceed on the basis that the existence of the Centrelink debt is a burden on Mr Ward and, no doubt, plays on his mind, there is no medical evidence that would take his case out of the ordinary in this respect.
26.After careful consideration of these matters I am unable to conclude that Mr Ward’s circumstances are such as amount to special circumstances.
Section 1237A
27.Section 1237A(1) provides that subject to an irrelevant exception the Secretary must waive the right to recover the proportion of the debt attributable solely to administrative error on the part of the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that debt.
28.The payments in issue here need first to be considered. They fall into two distinct categories – payments received following the notification letter and November 2003 payments. The former category comprise five payments as follows,
(a)$423.80 for the period 26 March 2003 to 8 April 2003;
(b)$423.80 for the period 9 April 2003 to 22 April 2003;
(c)$423.80 for the period 23 April 2003 to 6 May 2003;
(d)$376.79 for the period 7 May 2003 to 20 May 2003;
(e)$185.20 for the period 21 May 2003 to 3 June 2003.
29.After those payments were made and received Mr Ward ceased earning income from the University and for a number of fortnights thereafter he was entitled to receive, and was paid, $423.80 per fortnight, later rising to $436.10. Mr Ward had income in October 2003 such that there were overpayments of $94.79 in the period 22 October 2003 to 4 November 2003 and $272.58 in the period 5 November 2003 to 18 November 2003.
30.I am unable to conclude that s 1237A has any application to this latter period. In my view the overpayments arising in that period are not attributable solely to administrative error, rather they are attributable to Mr Ward’s failure to notify Centrelink of his receipt of income in that period.
31.As to the earlier period from 26 March 2003 to 3 June 2003, Mr McQuinlan very fairly conceded that the debt that arose in that period, that is, after the receipt of the 21 March 2003 letter from Mr Ward, was solely attributable to administrative error on the part of Centrelink. That is, Centrelink ought to have acted on the contents of the letter and ceased benefit at that time. The issue for decision was thus confined to the question of whether Mr Ward received payments in that period in good faith.
32.What amounts to “good faith” in this context has been the subject of some considerable discussion in the cases. Mr McQuinlan relied upon the well-known decision of Finn J in Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1998) 152 ALR 127 where at 130 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.”
Mr McQuinlan also relied upon this passage at 131 where his Honour applied the principle to the circumstances of Mr Prince in this way,
“It is clear in the present case that at all relevant times after 22 December 1993 Mr Prince actually knew that he had no entitlement to receive Austudy payments. Is the consequence of this that he could never claim that any of the payments he received from DEETYA as Austudy payments in 1994 were received in good faith even though at the time of receipt of the first three he was unaware that he had received the payment? In other words, can a receipt be otherwise than in good faith when the recipient is unaware that the payment has been received? The short answer to that in my view is ‘yes’. Knowing that, in the relevant period, he had no entitlement to receive as Austudy payment, he was never in a position to be able to assert that any mistaken payment made to him was one to which he had an entitlement. Thus while he may have received a payment of which he was ignorant, he could not, in the sense that I have explained, have received it in good faith.”
33.The reasoning of Finn J was explained by Cooper J in Jazazievska v Secretary, Department of Family and Community Services (2002) 65 ALD 424 where at 435-436, paragraph [40] his Honour said,
“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 purposes 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.”
34.These cases, and the decision of French J in Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529, were considered by Weinberg J in Pledger v Secretary, Department of Family and Community Services [2002] FCA 1576. At paragraph [59] his Honour summarised the effect of them in this way,
“What seems to emerge from these authorities is that whether a payment has been received in good faith can only be determined after a 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.”
35.With these matters in mind I turn to the evidence of Mr Ward. Mr Ward said of that period that having informed Centrelink of the fact of his prospective receipt of wages he thereafter anticipated that wages earned by him would be deposited by his employer into his bank account directly. He expected that the Centrelink benefit would cease. He generally checked on his bank account only by reference to transactions through an automatic teller machine and the balances shown in that way. When he found some $1500.00 to $1600.00 in his account he assumed that that sum had been paid by the University. It appears that that was not so and the balance in his account was attributable to the continuing payments by Centrelink. I accept his evidence.
36.In light of the evidence which I accept I conclude that (a) Mr Ward was not aware at any relevant time (that is, at the time when he accessed the funds wrongly paid by Centrelink) that he had, in fact, been paid by Centrelink; (b) he had no reason to believe that the funds that he accessed in his account were the result of wrongful payment by Centrelink; (c) that at the time he accessed the funds he believed, on reasonable grounds, that what he was accessing, that is, the funds in his account, were funds paid in by the university as salary; (d) that, having notified Centrelink by his letter of 21 March 2003, he expected that Centrelink would suspend his fortnightly payments; and, (e) Mr Ward received the payments in good faith.
37.I consider that what distinguishes the present case from Prince is that at the time of receipt of what turned out to be payments of disability support pension (to which Mr Ward had no entitlement) he was expecting to receive payments from the university to which he had an undoubted entitlement. The payments that he received matched his expectation and, consequently, at the time of receipt, he had no reason to suspect that what he had received was other than the payment from the university to which he had a plain entitlement.
38.It follows that in my view the right to recover the payments identified in paragraph 28 above, that is, payments for the period from 26 March 2003 to 3 June 2003 should be waived pursuant to s 1237A of the Act. In other respects the decisions of the Social Security Appeals Tribunal ought to be affirmed.
I certify that the 38 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC
Signed: .....................................................................................
Robert Hayes, AssociateDate of Hearing 21 February 2006
Date of Decision 3 March 2006
Counsel for the Applicant Mr M ThomasFor the Respondent Mr R McQuinlan, Departmental Advocate
3
6
0