White; Department of Family and Community Services [1999] AATA 16 (15 January 1999)

Last Updated: 29 January 1999

Administrative

Appeals

Tribunal

DECISION AND REASONS FOR DECISION [1999] AATA 16

ADMINISTRATIVE APPEALS TRIBUNAL )

) N o Q98/507

GENERAL ADMINISTRATIVE DIVISION )

Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And CANDICE SHARON WHITE

Respondent

DECISION

Tribunal Dr EK Christie, Member

Date 15 January 1999

Place Brisbane

Decision The Tribunal varies the decision under review of the Social Security Appeals Tribunal to provide that the debt shall be written off.

(Sgd) EK CHRISTIE

MEMBER

CATCHWORDS

SOCIAL SECURITY - parenting allowance - overpayment - whether appropriate to waive right to recover debt by reason of administrative error or special circumstances - whether appropriate to write off debt.

Social Security Act 1991

Social Security Legislation Amendments (Carers' Pension and other Measures) Act 1995 (No. 143 of 1995) ss 1236, 1237A, 1237AAD

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Re Callaghan and Secretary, Department of Social Security (1996-1997) 45 ALD 435 at 445

Director-General of Social Services v Hales (1983) 47 ALR 281

Riddell v Secretary, Department of Social Security (1993) 42 FCR 443

Re Waller and Secretary, Department of Social Security (1985) 8 ALD 26

REASONS FOR DECISION

15 January 1999 Dr EK Christie

1. This is an application by the Secretary, Department of Social Security to review a decision made by the Social Security Appeals Tribunal ("SSAT") on 15 May 1998. This decision set aside the decisions made by a delegate of the Secretary, Department of Social Security ("the Department") on 26 May 1997 and affirmed by an Authorised Review Officer on 5 January 1998 to raise and recover a debt due to the Commonwealth of overpayments of parenting allowance. At the date of the hearing the debt due to the Commonwealth was $8,021.53.

2. In reaching its decision, the SSAT concluded:

* that the administrative error which led to overpayments of parenting allowance, over the period 28 March 1996 to 22 May 1997, to the respondent was not solely caused by the Commonwealth;

* that, as a result, the debt due to the Commonwealth could not be waived because of administrative error; and

* "that due to the White's present financial difficulties, particularly Mr White's bankruptcy and the necessity for him to repay related debts, and Centrelink's errors which constituted a significant contribution to the circumstances surrounding the debt, the debt should be written off until the youngest child of Mr and Mrs White turns 18 years, namely 17 October 2001."

3. At the hearing, the applicant was represented by Ms T Guthrie, a Departmental Advocate. The respondent was represented by her husband, Mr Anthony White.

4. At the hearing, the Tribunal had in evidence before it, documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 (Cth)(as amended), the "T" Documents (Exhibit 1), and the following exhibits:

* Exhibit 2 Parenting allowance claim - 30 November 1995

* Exhibit 3 Newstart Allowance, Anthony White - 9 November 1995

* Exhibit 4 Home Child Care Allowance, Candice White - 22 June 1995

5. At the end of the hearing, the respondent was asked to provide a Statement of Financial Circumstances to the Tribunal. Supplementary submissions on this Financial Statement were received from the Department on 2 December 1998. A reply to these Departmental submissions was received from Mrs White on 11 January 1999. In addition, following the evidence of Mr Anthony White, the respondent's husband, the Tribunal requested Mr White seek a medical statement from his treating psychiatrist outlining the medical condition he was treated for, frequency and number of consultations and any medication. However, this statement was not received within 28 days of the hearing. Accordingly, Mr White was given a further 28 days to obtain the medical statement but still failed to provide the statement to the Tribunal within this extended time. However, Mrs White's reply of 11 January 1999 gave some response to this issue.

Issues before the Tribunal

6. The issue before the Tribunal was whether the debt of $8.021.53 due to the Commonwealth could be written off. Alternatively, whether the debt could be waived, in part or in full, because of "administrative error" or "special circumstances".

Facts

7. The general facts were not in dispute and may be stated briefly. The respondent claimed parenting allowance in December 1995, declaring her income on the application as $370 per fortnight.

8. From 9 November 1995 to 15 March 1996, the respondent's husband received Newstart Allowance. Over this entire period, he continued to declare to Centrelink his wife's income on his fortnightly Newstart Allowance forms. Over this period he had declared his wife's income to range from $370 - $505 per fortnight.

9. Centrelink concedes that it had erred in coding the respondent's income as $0 in March 1996 when her allowance was reclassified from Parenting Allowance/Newstart Allowance to Parenting Allowance/Low.

Evidence of Anthony White

10. Over the period 12 December 1995 to 6 June 1996, the respondent had received eleven Departmental letters (or "notification notices") which contained conflicting information on the Parenting Allowance entitlements. Mr White stated that they had been "bombarded" with Departmental letters and that, because of their contradictory content, were placed in a situation of "not knowing what to make of the notification notices".

11. During cross-examination, Mr White said that he had read some of the notification notices but that "all he probably would have read was the amount he was entitled to". He conceded that he did not read the back of each notification notice sent by the Department. Consequently, he had never queried the Department or contacted them as to the error on the notification notice where it specified the respondent's income as $0.

12. Mr White acknowledged that it was not until 23 March 1996 that the Department "got it right" in terms of the correct income and Parenting Allowance.

13. Mr White stated that both he and his wife had been discharged bankrupts for 2-3 years having "lost everything" due to the failure of his previous business and being declared bankrupt. In addition, he had used the mortgage of his parents-in-law home as a security for his business and felt a strong personal obligation to now repay the mortgage on their behalf.

14. Mr White said that the period when Parenting Allowance overpayments were made to his wife was an extremely stressful one for him as he had received psychiatric treatment for depression. He described this time as "a tumultuous period of his life affecting his business and marital relations".

15. Mr White was aged 45 and for most of his working life had been a sales representative. He had been in full-time employment from around mid-1996 up until the end of August 1998, when he had once again become unemployed. During cross-examination, he agreed that he could consider applying for Newstart Allowance, now that he was unemployed. However, he had not yet applied because of the fact "that he would not be entitled to it because of his wife's income". He acknowledged that he was aware of the effect of his wife's income on Newstart Allowance payments.

Evidence of Candice White (the "respondent")

16. The respondent stated that she had not read the notification notices sent to her by the Department but had passed them on to her husband "to look at to see what was going on". In addition, she had never contacted the Department to query whether the income information on which Parenting Allowance payments were based was correct.

17. The respondent was emphatic under cross-examination that the problem with Parenting Allowance overpayments made to her arose through "the fault of the Department" and that "the Department was wrong in doing what they did [sending the incorrect allowance]".

18. During further cross-examination, the respondent said that her understanding of Parenting Allowance was that the entitlement was based on her income alone, rather than the combined income of both her and her husband.

19. The respondent stated that family payments to her children were no longer claimed, notwithstanding that she might be entitled to this allowance. The reason for this, she explained, was because "she did not wish to go through a similar problem again because of a lack of trust in the Department".

20. A Statement of Financial Circumstances was received by the Tribunal from Mr White on 7 October 1998. The Statement indicates Expenses and Debts at around $367 per week with a further $200 per week for rent. A loan of $6,500 for a failed business remains owed to his father-in-law (Mr JH Wright). Mr and Mrs White's assets are very limited; a car valued at $10,000 was listed as the sole item of property. Mr White's income on this Statement was nil whereas Mrs White's income was given as $380 per week. Mrs White's reply submissions (11 January 1999) indicate a further expense for car repayments of $105 per week. In addition, she has been receiving family allowance since 10 December 1998.

Contentions and Submissions of the Parties

21. The Advocate for the Department submitted that the debt due to the Commonwealth had arisen because of a failure of the respondent to notify the Department of her correct income over the period 28 March 1996 to 22 May 1997. The notification notices the Department had sent to her contained valid notification notices according to the statutory requirements imposed by the Social Security Act 1991.

22. Over this period, the Department had sent notification notices on 23 March 1996 (Document T11), 28 March 1996 (Document T12), 23 May 1996 (Document T14) and 6 June 1996 (Document T15).

23. The debt was raised on 26 May 1997 following the receipt of an Additional Parenting Allowance Review by the respondent on 12 May 1997 (Document T13). On 26 May 1997, the Department decided to raise and recover the Parenting Allowance overpayment.

24. The Departmental Advocate, Ms Guthrie, referred to the evidence before the Tribunal that the respondent had not read the notification notices but had passed them on to her husband. In turn, her husband had only read part of the front page of the notice and probably not the back page. Ms Guthrie contended that as a result, the respondent had not become aware that the information on the back of the notification notices was incorrect, specifically, that her income was not $0. However, whilst the claim for Parenting Allowance made on 30 November 1995 (Question 13, Exhibit 2) specified her income as $370 per fortnight, at no stage had the respondent queried the Department whether the income amount specified on each of the four notification notices was correct.

25. The Departmental Advocate submitted that there was an obligation under the Social Security Act to advise the Department on this point as the income of the respondent was the basis for entitlements. The consequence of not meeting the Social Security Act's obligations was that a debt accrued to the Commonwealth.

26. The Departmental Advocate distinguished between the Parenting Allowance paid to the respondent over two periods viz 28 September 1995 to 7 December 1995 and from 7 December 1995 to 6 June 1996. Over the former period the respondent's entitlement was $62.80. Over the latter period the entitlement was $285.80 (Document T20 Folio 62). It was the Departmental Advocate's contention that the significant increase in entitlement between these two periods should have been detected by the respondent. Moreover, that it should have alerted the respondent to the need to contact the Department to enquire whether the correct amount was being paid. However, no such enquiry was made by the respondent.

27. The Departmental Advocate acknowledged that the earlier Departmental letters to the respondent "may have created confusion" as to the amount of entitlement. However, the administrative error which led to the overpayments was not solely caused by the Commonwealth. The Departmental Advocate contended that the four notification notices sent to the respondent over the period 23 March 1996 to 6 June 1996 (paragraph 22) were essentially ignored by the respondent. Accordingly, the overpayments of Parenting Allowance had not been received in good faith.

28. In terms of waiver for "special circumstances", the Departmental Advocate referred to the Tribunal decision in Callaghan and Department of Social Security (AAT Decision 3630 delivered 18 November 1996) in terms of the statutory meaning of "knowingly failed" where, at page 21, Deputy President Forgie stated:

"There is nothing in section 1237AAD which suggests that the word `knowingly' should be given any meaning other than that a person has actual knowledge, rather than constructive knowledge, that he or she is making a false statement or representation or that he or she is failing or omitting to comply with a provision of the Act. That actual knowledge is to be ascertained by reference to the statements of the person as to his or her actual state of knowledge at the time and to events surrounding the false statement or the act or omission."

29. Ms Guthrie submitted that the respondent should have been aware of how changes in income affected Parenting Allowance entitlements. Accordingly, it was the Departmental Advocate's contention that there was a "knowing failure" on the respondent's part to accept Parenting Allowance entitlements over two time periods when there was a significant difference in the amount of payment. However, there was no query made by the respondent to determine whether the amount paid was correct. Furthermore, she submitted that there was nothing "unusual", "uncommon" or "exceptional" in the circumstances in terms of how the overpayments of Parenting Allowance were made.

30. In her Supplementary Submissions, the Departmental Advocate questioned the veracity of the Statement of Financial Circumstances contending that:

* as discharged bankrupts Mr and Mrs White have no obligation to repay creditors. The loan referred to in Question 6 of their Statement referred to a loan secured over Mrs White's parents' home. Whilst Mr White's evidence was that he felt responsible for the repayment of the mortgage, because of the failure of his business, the mortgage was not Mr or Mrs White's legal responsibility;

* the evidence before the Tribunal was that Mr and Mrs White have three children; the two eldest children were employed. The evidence of Mr White was that neither of the employed children contributed to any household expenses or paid board;

* the Expenses listed in the Statement were excessive for a three person household. A portion of these Expenses was clearly attributable to the two employed children; and

* based on these contentions, Mrs White had some capacity to repay the debt. Moreover, in their circumstances at the time the Financial Statement was prepared, both Mr White (being unemployed) and Mrs White would be entitled to Social Security benefits if they applied. Any entitlements so received could be applied to repay the debt owed to the Commonwealth.

31. The Departmental Advocate referred to the SSAT decision with respect to the "write-off provisions" of the Social Security Act, contending that the provisions had not been addressed in the decision. Based on her submissions on the respondent's Statement of Financial Circumstances (paragraph 30), she contended that the respondent had a capacity to repay the debt. Some form of recovery was possible.

32. The Departmental Advocate concluded with the submission that the Department would prefer some form of recovery over time, even if the instalments were small. She noted that the respondent was entitled to Family Payment (but see paragraphs 19, 30). Although the amount of entitlement may be small ($22 per fortnight), it might be sufficient as instalments to recover the debt.

33. Mr White, on behalf of the respondent, submitted that the reasons for the overpayments of Parenting Allowance were "the Department's fault completely". The notification notices sent by the Department contained conflicting information as to their entitlements which led to a confusing situation for the respondent. Mr White acknowledged that he had not read all of the documents the Department had sent his wife.

34. He contended that if the Department had not made an error from the outset, the problem of overpayment would not have arisen. Mr White stressed that as social security recipients, both he and his wife had always provided the Department with the information they requested.

35. Mr White concluded with the submission that the respondent had no capacity to repay the debt due to the Commonwealth.

The Law

36. The relevant legislation for waiver or write-off of debts in this case is the Social Security Act 1991 and the Social Security Legislation Amendment (Carers' Pension and other Measures) Act 1995.

37. Section 1237 provides for circumstances where a debt due by a recipient of social security to the Commonwealth, may be waived:

"Section 1237A - WAIVER OF DEBT ARISING FROM ERROR

1237A(1) Administrative error. 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).

SECTION 1237AAD - WAIVER IN SPECIAL CIRCUMSTANCES

1237AAD 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 or the 1947 Act; and

(b) there are special circumstances (other than financial hardship alone) that make it desirable to wave; and

(c) it is more appropriate to waive than to write off the debt or part of the debt."

38. Section 1236 provides for circumstances where a debt due by a recipient of social security may be written off.

"SECTION 1236 - SECRETARY MAY WRITE OFF DEBT

1236(1A) [Class of debts]. The Secretary may decide to write off a debt under subsection (1) if, and only if:

(a) the debt is irrecoverable at law; or

(b) the debtor has no capacity to repay the debt; or

(c) the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or

(d) the debtor is not receiving a social security payment under this Act and it is not cost effective for the Commonwealth to take action to recover the debt."

Consideration of the Issues

39. The objective of the Tribunal is to review administrative decisions, not only on their merits, but in accordance with the law at all times.

40. In terms of waiver of debt for administrative error [section 1237A(1)], the Tribunal finds that Mrs White has contributed to the administrative error, over the period 28 March 1996 to 22 May 1997, by not responding to the obligations imposed upon her in the Department's notification notices.

41. In this regard, the Tribunal agrees with the following finding by the Social Security Appeals Tribunal, in the circumstances of this case:

"Whilst it is conceded by Centrelink that an administrative error on its part contributed to this debt, the Tribunal has been unable to find that the debt arose solely due to administrative error. Whilst Mrs White was subject to a series of conflicting notices under section 950 of the Act for the period from December 1995 to March 1996, the four notices of 23 March 1996, 28 March 1996, 23 May 1996 and 6 June 1996 received during the period the subject of the debt indicated that she was receiving PgA at a rate assessed on combined income of $0. Mrs White's income from earnings at this time averaged at $505 per fortnight. She did not seek to clarify her position with Centrelink in circumstances where the Tribunal is of the opinion that it was reasonably prudent to do so."

42. Accordingly, the amount of parenting allowance received over the period 28 March 1996 to 22 May 1997 is a debt due to the Commonwealth. However, recovery of this debt cannot be waived under subsection 1237A(1) of the Act, as it is not attributable solely to administrative error on the part of the Commonwealth.

43. The next issue for the Tribunal to consider is whether the debt should be waived for "special circumstances" (Section 1237AAD).

44. The Tribunal has had to consider the meaning and application of the expression "special circumstances" on many occasions. The decision of the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 has become an oft-quoted benchmark as to the interpretation of "special circumstances". In that case, the Tribunal said (at 3):

"An expression such as `special circumstances' is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."

45. On examination of Mrs White's situation the Tribunal concludes that it cannot find any "unusual", "uncommon", or "exceptional" circumstances which warrant the description "special circumstances" and so justify the waiver of the debt arising over the period 28 March 1996 to 22 May 1997 by applying the Section 1237AAD provision "Waiver in Special Circumstances".

46. The final issue for the Tribunal to consider is whether the debt should be written off (section 1236).

47. Section 1236(1A) confers a discretionary power to write off a debt. In deciding whether or not to exercise this discretion, however, the Tribunal must have regard to all the relevant circumstances of the particular case and to the scope and purposes of the Act: Riddell v Secretary, Department of Social Security (1993) 42 FCR 443 at 450. The Tribunal, however, has customarily had particular regard to certain matters referred to by the Federal Court of Australia (Full Court) in Director-General of Social Services v Hales (1983) 47 ALR 281. The "Hales factors" were summarised by the Tribunal (Senior Member J Dwyer) in Re Waller and Secretary, Department of Social Security (1985) 8 ALD 26 at 42 as follows:

"(a) the fact that the applicant has received public moneys to which she was not entitled;

(b) the way in which the overpayment arose whether as a result of innocent mistake or fraud;

(c) the financial circumstances of the (applicant);

(d) the prospect of recovery;

(e) whether a comprise is offered;

(f) whether recovery should be delayed if there is a prospect that the circumstances of the person who received the overpayment may improve;

(g) compassionate considerations and the fact that the Act is social welfare legislation and any financial hardship which may result from an action for recovery."

The Tribunal comments on these matters as follows.

48. Mrs White has received public moneys, by way of parenting allowance, over the period 28 March 1996 to 22 May 1997, for which she was not entitled. Both the Department and Mrs White have contributed to the administrative error which resulted in the overpayment. However, the Tribunal finds that the payments did not arise from fraud on Mrs White's part, but rather, on the balance of probabilities, through an innocent mistake.

49. The existing financial circumstances of Mrs White are uncertain. Whilst not favourable, as can be adduced from the Statement of Financial Circumstances, due regard must be given to the future employment prospects of Mr White - including the continuity of Mr White's casual employment referred to in Mrs White's reply submission (11 January 1999), any claims by Mr White for social security entitlement as well as potential future contributions to the family household by their two eldest children, whilst employed.

50. The current Statement of Financial Circumstances - specifically Income, Expenses and Debts - indicates a severe negative cash flow at this time (see paragraph 20). The Tribunal has not considered "Mortgage and other Loan Repayments" in this assessment. Should these existing financial circumstances persist, the Tribunal can make no other conclusion than to find that Mrs White has no capacity to repay the debt at this time. The prospects for recovery, based on existing cash flow, would be impractical. Given the fact that the Act is social welfare legislation, financial hardship may result from an action for recovery at this point in time.

51. Furthermore, compassionate considerations are warranted given Mr White's treatment for a psychiatric condition during his bankruptcy period (see paragraph 14 and Mrs White's reply submissions 11 January 1999). Actions to recover the debt should avoid any recurrence or aggravation of this condition.

52. However, recovery of the debt could be delayed as there are prospects that Mrs White's financial circumstances may change over time (paragraphs 15, 49). The prospects for either of these options are real.

53. The preferable decision in this matter is to write off the debt.

54. It is for these reasons that the decision under review will be varied. This means that Centrelink will not require the moneys to be repaid for the moment but they may still pursue the person for the debt at some time in the future, if say, their cash flow circumstances changes.

I certify that this and the 14 preceding pages are a true copy of the decision and reasons for decision herein of Dr EK Christie, Member.

Signed: Susan Gray

Associate

Date/s of Hearing 9.9.98

Date of Decision 15.1.99

Solicitor for Applicant Ms T Guthrie, Departmental Advocate

Representative for Respondent Mr A White (respondent's husband)