SOCIAL SECURITY - family tax benefit - recovery of overpayment - waiver of debt - sole administrative error - whether overpayment received in good faith - whether recovery of debt would cause severe financial hardship - special circumstances

A New Tax System (Family Assistance) (Administration) Act 1999 ss97, 101, 102

Social Security Act 1991

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

Beadle v Director-General of Social Security [1984] AATA 176; (1985) 60 ALR 225

Re Bestel and Secretary, Department of Family and Community Services [1999] AATA 867

Re Coyne and Secretary, Department of Family and Community Services [2002] AATA 1156

Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541

Haggerty v Department of Education, Training and Youth Affairs (2000) 21 AAR 529

Re Ivovic and Director-General of Social Services (1981) 2 ALN N95

Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] FCA 1565; (1997) 50 ALD 186

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

Re Trio and Secretary, Department of Family and Community Services [2002] AATA 865

1. This is an application brought by the Secretary, Department of Family and Community Services (the applicant), for review of a decision of the Social Security Appeals Tribunal ("SSAT") dated 24 May 2002 (T2). The SSAT found that the Ms Ingrid Birgden, the respondent, had been overpaid family tax benefit under the A New Tax System (Family Assistance) (Administration) Act 1999 ("the Act"), that she consequently owed a debt to the applicant, but that a large part of that debt should be waived pursuant to s97 of the Act as it had resulted solely from administrative error. In so finding, the SSAT set aside the decision of a delegate of the applicant dated 17 January 2002 (T12), as affirmed by an Authorised Review Officer on 11 February 2002 (T12).

2. The Tribunal received into evidence the documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975 (T1-T16), as well as two exhibits, one lodged by the applicant (Exhibit A1) and one lodged by the respondent (Exhibit R1). In addition the Tribunal heard evidence from the respondent. The applicant was represented by Mr J. Underwood, a departmental advocate, and the respondent represented herself.

3. The following facts, comprising a brief history of the application, are not in dispute.

4. The respondent was in receipt of family allowance in the 2000 calendar year, paid to her at the rate of $48.00 per fortnight. With effect from 1 July 2000, family allowance was replaced by family tax benefit.

5. Ms Birgden was advised by letter dated 17 June 2000 that her regular rate of family tax benefit from 27 July 2000 would be $74.76 per fortnight (T16/59).

6. By letter dated 28 June 2000, Ms Birgden was advised that her rate of family tax benefit would be $301.98 per fortnight from 27 July 2000. This was comprised of two components:

Ms Birgden was further informed that the combined income of her and her partner used to calculate these payments was $4,900 (T3A/18). This figure represented an estimate of Ms Birgden's income alone. Her partner's income was disregarded (T4/21).

7. It is admitted by the applicant that in "August 2000" the respondent provided another assessment of her and her partner's income (Exhibit A1 paragraph 6). This estimate was not used to reassess her family tax benefit rate. It was further admitted that this was solely due to administrative error.

8. In a letter dated 6 April 2001 (T4A/23) the applicant advised Ms Birgden that her family tax benefit rate was being assessed based on an estimated combined income for her and her partner of $4,900. The letter stated that this estimate was provided by Ms Birgden.

9. In a letter dated 8 May 2001 (T16/64) the respondent wrote to the applicant referring to the error in her and her partner's estimated income. She stated that her current estimate was that her income for the 2001/2002 financial year would be $10,500, and her partner's would be $65,000. On a departmental form dated 10 May 2001, Ms Birgden provided an income estimate for herself and her partner, giving the same figures (T5/27-28).

10. The actual combined income of Ms Birgden and her partner for the 2000/2001 tax year was over $73,000. A reconciliation of the family tax benefit resulted in a debt of $7,247.37 being raised (T8/36). The right to recover $1000 of the debt was waived, pursuant to a ministerial direction under s102 of the Act. This left a debt of $6247.37.

11. On 11 February 2002 an Authorised Review Officer affirmed the decision to raise and recover the debt (T12/42-46). On 24 May 2002 the SSAT affirmed the decision to raise the debt but waived the right of the applicant to recover the amount arising in the period "18 August 2000 to mid-April 2001" pursuant to s97 of the Act. The SSAT found that the debt incurred in that period arose solely due to administrative error, that the respondent had received the payments in good faith during that period, and that the respondent would suffer severe financial hardship were the debt not waived (T2/3-10).

12. The first issue before the Tribunal is whether that part of the debt owed by the respondent relating to the period "18 August 2002 to mid-April 2001" should be waived by virtue of the fact that it in part arose solely from administrative error. In answering this question, the Tribunal must address the following questions:

* did the respondent receive the payments in the relevant period "in good faith"?; and

* would the respondent suffer "severe financial hardship" if the debt were not waived?

13. In the alternative, the respondent contends that the whole of the debt should be waived, owing to the "special circumstances" of the case.

14. Section 97 of the Act sets out the provisions relevantly applicable to waiver of debt arising from administrative error as follows:

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

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

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

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

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

15. The Act also makes provision for waiver where "special circumstances" exist:

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 the family assistance law; 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."

16. The respondent handed a document to the Tribunal incorporating a statement and written submissions. The following is taken from both that document and her oral evidence. As the respondent was representing herself, the Tribunal allowed her to present her oral evidence and the larger part of her submissions together. However, as these submissions were mostly in response to the written submissions of the applicant, for the sake of convenience the bulk of Ms Birgden's submissions are herein set forth separately from her evidence.

17. Ms Birgden stated that her son, Laurence, was born in April 1991. He was born with severe cerebral palsy. Since that time, Ms Birgden has not worked full time. Her husband has. Since the birth of her son, Ms Birgden has received a number of different payments from Centrelink, including Disability Allowance, Family Allowance and Parenting Payment. She stated that in 1999 she was receiving close to $200 per fortnight in government benefits.

18. The respondent stated that at different times she has worked in contract positions at Flinders University, and more recently undertaken in addition casual work at Adelaide University. These jobs have had various pay rates. The variation in her income has, she said, resulted in a constant variation in the benefits she has received from Centrelink.

19. The respondent said that over a number of years, there had been many anomalies in the correspondence she had received from Centrelink. She had written to Centrelink on a number of occasions questioning discrepancies in the information they quoted. Before the Tribunal were several examples of her letters in this vein (T16/60, T16/62). She gave various examples of the anomalies in letters Centrelink had sent her. In a letter dated 11 November 1999, she said Centrelink had quoted her and her partner's combined annual income as $43.04. She said that this, and other similar errors, had no effect on the payments made to her. This history of anomalies meant that she did not take much note of odd statements from Centrelink.

20. Ms Birgden acknowledged that she had received the letter dated 17 June 2000 from Centrelink, advising her that from 27 July 2000 her Family Tax Benefit Part A payment would be $74.76, and that with regards to this payment there was "No income recorded" (T16/59).

21. The respondent acknowledged that she further received the letter from Centrelink dated 28 June 2000, advising that her family tax benefit would be $301.98 per fortnight, and that this was based on an income of $4,900 per year (T3A/18). Ms Birgden considered that Centrelink probably received a question and answer form from her relevant to her family payments prior to this letter being written to her, and that this form contained the estimate of her own income of $4,900. She agreed that Centrelink incorrectly disregarded her husband's income.

22. Ms Birgden stated that at the same time as she received the letter of 28 June 2000, she received a health care card listing the whole family as her dependents. She wrote to Centrelink on 14 July 2000 querying this, and informing Centrelink that her husband was employed. On 2 August she received a letter in reply, requesting that another form be filled out with respect to income estimates. She said that she filled this form out and returned it to Centrelink.

23. The respondent said the Family Tax Benefit payments were continuing at a rate of $301.28 per fortnight when she received the letter dated 6 April 2001 (T4A/23). She stated that she filled out another form, containing her and her partner's correct income details, which she posted on 10 May 2001. Once this form was received, her payment details were immediately reduced.

24. Ms Birgden stated that she was not told until December 2001 that she had been overpaid Family Tax Benefit. She said that Centrelink initially denied receiving the respondent's correct financial details after 2 August. However, she stated that a Centrelink officer eventually did acknowledge that "there was evidence that information had been entered" on 17 August 2000. In cross-examination Ms Birgden stated that she did not consider it odd that she did not receive a letter of confirmation from Centrelink after she provided these new financial details.

25. Ms Birgden stated that she was not unduly perturbed by the income estimate of $4900 contained in the letter of 28 June (T3A/18). This was because Centrelink had frequently sent out correspondence before that date containing erroneous information, and that information had never affected the actual payments made to her.

26. Ms Birgden initially said that she had not received a letter referred to by Mr Underwood, dated 28 June 2000 (T3A/18), which stated that she had a duty to inform Centrelink if her combined income exceeded $73,000. She realised during cross-examination that she had received this letter. She had not initially recognised it due to differences in formatting between the copy she had received and the copy shown to her by Mr Underwood. The information referred to was on the back of this letter, but Ms Birgden said she had not noticed it or read it at the time she had received the letter. She said she "obviously didn't read all of the fine print." Ms Birgden stated that her and her partner's combined taxable income for that financial year was just over $73,000.

27. Ms Birgden repeated that in the year before the period in question, she had been receiving close to $200 per fortnight in combined benefits. All Centrelink payments were, she said, paid into a single Credit Union account which she accessed periodically to transfer into her overdraft. She only received four-monthly statements for this Credit Union account.

28. In cross-examination, Ms Birgden maintained that she did not think it was odd that she received over $220.00 more than the amount specified in the letter of 17 June 2000 with no explanation. Nor did she think it odd that her family tax benefit alone exceeded the combined totals of the three separate payments she had received in the first part of 2000. Also in cross-examination, Ms Birgden stated that she did not consider it odd that her payments increased after providing the correct income estimates (before 28 June 2000), which estimates were higher than those on which a lower payment had initially been calculated.

29. Ms Birgden stated that the Family Allowance and Child Disability Allowance had "permutated or been absorbed into other entities". The brochure "More help for Families" which she received advertised increases to family and child care payments.

30. Mr Underwood asked the respondent whether, in light of the fact that Centrelink could make errors in relation to her and her husband's income, she had considered that they could make an error in regard to entitlements. She said she had not, and would not have queried payment levels, whether they had been higher or lower than those to which she was entitled. All the respondent's evidence was that she was in the hands of Centrelink when it came to the calculation of her entitlements.

31. Ms Birgden rejected any suggestion that she should have calculated the amount of family tax benefit to which she was entitled. She stated that in some years preceding the period in question, and in the financial year after it, she received a table from Centrelink which outlined rates of payment for different levels of income and number of dependents. She said that she was not aware of receiving such a form in the 2000/2001 financial year. She said that she consequently had no way of being able to assess her level of entitlement on her own behalf. She therefore had no choice but to accept the assessment of payment level made by Centrelink. In fact she said that Centrelink forms specifically state that the applicant is to provide correct details, and Centrelink will then make the appropriate assessment of entitlement. She reiterated that she and her partner at all times attempted to assist Centrelink. They did everything in their power to give Centrelink correct information, and once they had been informed that the debt had been raised, they attempted to assist by suggesting Centrelink search their Tasmanian office for records.

32. Ms Birgden stated that she and her husband are, despite their income, suffering financial hardship. This is because of their son Laurence's severe cerebral palsy. They have large debts resulting from expenses relating to the care of their son, in particular from their attempts to provide suitable accommodation for him. She stated that they bought their present house, which was largely unsuitable for their needs, because it was next door to that of her parents, on whom she and her husband rely heavily for assistance in looking after Laurence. The respondent said that she and her husband could not re-finance their home to pay for refurbishment, and consequently their house is currently a "partly-demolished, partly-extended" dwelling. At present it is, she said, not fit accommodation for her disabled son or young daughter. Her husband has been working on the house on weekends for the past two years, because they cannot afford to pay tradesmen.

33. Ms Birgden stated that she currently works two different jobs, four days a week, to pay for necessities. She testified that her contract at Flinders University, finishes before the end of the year and she has been told not to expect it to be renewed. This contract accounts for three days work a week. She rates her chances of finding other work as poor.

34. The respondent stated that she had prepared a budget based on her and her partner's current income levels. She said that at the moment, they were left with only $5 per year to meet extraordinary expenses. This budget is based upon an estimated combined income of $73,000 per year, and takes into account the repayments of their debts, but does not take into account the deductions of $40 per fortnight that Centrelink has been making from her current payments. Nor does it take account of the fact that her employment with Flinders University is about to cease. Ms Birgden stated in cross-examination that the rate of repayment was negotiated between her partner and herself and Centrelink, being the amount they thought they could afford.

35. She stated that the Valuer-General has recently valued her and her partner's house at $110,000. The house is mortgaged for $170,000. Her husband has a personal loan of $24,500, and a credit card debt of $5,000. The respondent has a debt of $4,500.

36. The time Ms Birgden spends at work, and the time her husband spends renovating their house, place an extra burden on the rest of their family. Laurance, she said, is totally dependent, and requires full-time specialist minding. He cannot feed, wash, or clothe himself.

37. Ms Birgden reiterated that she and her husband are not well off. She stated that the issue of hardship is common in families with disabled children. Laurence's specialist equipment, bought to improve his quality of life, is very expensive. She said, for example, that the machine he uses to speak cost $18,000. Her family does not have private health cover, but she and her husband pay for some extra therapy for Laurence themselves. She stated that she and her husband very rarely go out and wear second-hand clothing.

38. Mr Underwood said that Ms Birgden was overpaid family tax benefit from 1 July 2000 to 30 June 2001 (T6/29). (The Tribunal notes that this conflicts with the respondent's evidence that after she submitted a new income estimate on 10 May 2001 (T16/53-54) her payments reduced immediately. This, however, does not affect the question before the Tribunal.) She was mistakenly paid at a rate of $301.98 per fortnight. The SSAT waived that part of the debt arising between 18 August 2000 and "mid-April" 2001 pursuant to s97 of the Act, finding that the debt had arisen solely due to administrative error. The applicant argued that that portion of the debt should not be waived pursuant to s97. Specifically, it contended that the respondent did not receive the overpayments "in good faith" (as required by s97(2)(a)), and that she would not suffer "severe financial hardship" if the debt were not waived (as required by s97(2)(b)).

39. Mr Underwood submitted that the letters of 17 June 2000 and 28 June 2000 contained incorrect income estimates. He submitted that the debt relating to the period 1 July 2000 to 17 August 2000 existed due to Ms Birgden's failure to respond to the correspondence of 28 June 2000, which informed her she was required to notify Centrelink if her combined income exceeded $73,000 (T3A/18). Mr Underwood argued that this failure to notify meant that the debt arising in this period was not solely attributable to administrative error.

40. The applicant conceded that the respondent provided correct financial details in August 2000 and that the debt thenceforth arose solely due to administrative error. Mr Underwood submitted that the period of sole administrative error ended when the respondent provided the fresh income estimate of 10 May 2001 (T16/53-54). The Department claimed that this estimate was for the 2001/2002 financial year. Consequently they were not relevant to the 2000/2001 financial year. From this the applicant concluded that from that date onwards the debt was no longer attributable to sole administrative error.

41. Mr Underwood submitted that in the letter of 17 June 2000 (T16/59) Ms Birgden was informed that she was entitled to a payment of $74.76 per fortnight, and that this level of payment was based on her having no income. She provided a new income estimate stating her income was higher. After this, he submitted, she must have expected her payment level to drop. At the least, after being told that based on an estimated income of zero, she was entitled to $74.76, Ms Birgden could not have believed that based on an income of $4,900 she was entitled to a payment of $301.98 per fortnight, and consequently she must have known that the letter of 28 June 2000 contained an error. When she provided another, higher, income estimate on 17 August 2000, she again must have expected her payment to drop. Consequently she could not have believed that she was entitled to the level of payment she received.

42. Mr Underwood argued that each time the respondent provided an income estimate, both between 17 and 28 June 2000 and between 2 and 17 August 2000, she should have expected her payments to drop. Furthermore, she received letters that incorrectly estimated her income and, Mr Underwood submitted, she should have queried this each time. He submitted that she should have checked this information, but instead "sat back" despite the fact that information on the forms was "patently wrong". Mr Underwood submitted that Centrelink provided information to people in part so they can check that it is correct. Ms Birgden, he said, had a responsibility to check that the information quoted by Centrelink was correct, but she failed to fulfil her obligation. Thus she could not have had a positive belief that she was entitled to the payments she received. On that basis, he said, the payments were not received in good faith.

43. Mr Underwood contended that the respondent knew that the family tax benefit was income tested. She knew the income stated was wrong. Consequently, she could not have believed she was entitled to what she received. Mr Underwood submitted that Ms Birgden showed in cross-examination that she was "overly willing to believe" she was entitled to what she received. With respect to mistakes in the letters received from Centrelink, she accepted some information provided, namely the income estimates, but not all of it, realising mistakes were present in income estimates.

44. Mr Underwood referred to a number of judgements that have discussed the question of when a payment is received in good faith. In Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] FCA 1565; (1997) 50 ALD 186 at 189 Finn J stated:

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....

In these circumstances it is appropriate that I express a view on one matter that might otherwise be thought to be a possible cause of complication in making a decision under s 289. It is this. 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 an 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.

45. In Haggerty v Department of Education, Training and Youth Affairs (2000) 21 AAR 529 at 534, French J, commenting on Prince, stated:

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.

46. Mr Underwood also referred to the decision of Deputy President Forgie in Re Trio and Secretary, Department of Family and Community Services [2002] AATA 865. He submitted that that matter was factually very similar to the one now before the Tribunal, and pointed the Tribunal towards the discussion of the authorities regarding good faith contained in the decision. Mrs Trio was overpaid Parenting Payment Partnered under the Social Security Act 1991. She contacted Centrelink to have her payment cancelled, but continued to receive payments. It was held that she did not receive these payments in good faith. Mr Underwood submitted that Ms Birgden similarly did not receive her overpayments in good faith as she must have known she was not entitled to the payments she received.

47. In his written submissions, Mr Underwood stated that a

"...person cannot receive the payment in good faith if there is an objective basis for believing that rate to be incorrect In this case the 17 June 2000 letter provides a positive belief only that Ms Birgden was eligible to receive $74.76 per fortnight, and no more than that. She could not receive any more than that amount in good faith. The letter of 28 June 2000 stated that her rate was calculated using income of $4,900 and thus provided an objective basis for a suspicion or belief that her rate was incorrect."

48. Mr Underwood also submitted that Ms Birgden would not suffer "severe financial hardship" if required to repay her debt to Centrelink. She thus fails to satisfy s97(2)(b) of the Act. He stated that while there is no determinative test for such hardship, the concept is generally understood. He submitted that the respondent and her partner have a combined income of over $73,000 per year. This is, he said, sufficient to meet the family's expenditure and service their debts. The family is not entitled to any income-assessed government payments. While this is not a binding test, it is a good indication that the respondent is not suffering financial hardship, let alone severe financial hardship. He submitted that at the very least, "severe" hardship would require an increasing level of indebtedness. Furthermore, in this case, he said, any financial hardship was due to renovations the respondent had undertaken on her house, and thus it could not be said that any resultant financial hardship would be caused by the recovery of the debt. For the waiver provision to apply, Mr Underwood said, the hardship must be due to the recovery of the debt.

49. Mr Underwood denied that the respondent was eligible for relief under s101 of the Act, which allows for waiver of a debt where "special circumstances" exist. He reiterated that the Secretary denied that financial hardship exists. He stated that the present level of recovery had been negotiated between the respondent and Centrelink. He implied that this demonstrated a capacity to repay the debt.

50. Mr Underwood conceded that the disability of the respondent's child presents an appalling situation. However, he said that this "of itself" was not a reason to waive recovery of the debt. The fact of the son's disability is, he said, sadly not "unusual" or "exceptional". The Commonwealth is already providing some financial assistance in the form of carer allowance, and this is likely to continue until her son qualifies for Disability Support Pension. The disability pre-exists the debt, and is not connected to it. It is likely to continue after the debt has gone.

51. Mr Underwood went on to address the question of whether administrative error could be a factor contributing to "special circumstances." He submitted that it could not. He stated that the applicant has conceded sole administrative error. But, he said, that error could have been rectified by the respondent, and that the only effort this would have required from the respondent was a telephone call. Mr Underwood further submitted that s97 of the Act specifically provided for instances where sole administrative error occurred. The fact that such error was addressed in a specific provision means, he said, that it cannot be a factor under s101 of the Act. He submitted that Parliament has not seen fit to leave administrative error to special circumstances, and that the way the Act is drafted means there must be a "exclusionary feature" between the two provisions.

52. In concluding, Mr Underwood submitted that any other person in the respondent's position would never have had the advantage of the extra monies received. The Tribunal should not allow her to receive more money than others in her circumstances. Consequently, he submitted that the debt should be recovered in full.

53. Ms Birgden submitted that the debt raised by Centrelink should be waived under s97 of the Act. She stated that it was due solely to administrative error, that she had received the payments in good faith and, and that she would suffer severe financial hardship if the debt were not waived.

54. The respondent referred to the case of Prince, on which the applicant sought to rely. She acknowledged the passage quoted above, and the passage quoted from Haggerty. However, she pointed to the further passage in Haggerty at , wherein French J stated:

"I do not take what his Honour said in that case as supporting the proposition that a person can be found to be receiving payments other than in good faith simply by reason of the fact that there are facts in existence which are known to the recipient sufficient to negative the recipient's entitlement. In my opinion that is not a sufficient criterion. Knowledge of relevant facts is not enough to generate reason to know of the lack of entitlement.... A waiver can only, in my opinion, be declined where there has been a receipt, without good faith, of monies mistakenly paid."

55. Ms Birgden stated that in the period in question she had always believed she was entitled to the payments she received from Centrelink. She submitted that, applying Haggerty, she therefore received the payments in good faith.

56. Ms Birgden submitted that her case could be factually distinguished from Trio. She stated that unlike Mrs Trio, she never applied to have her payment cancelled. Nor was she aware that she was receiving an incorrect level of payment. She received a letter telling her she would receive $301.98 per fortnight, and she received that amount. She had a positive belief that this information provided by Centrelink was correct.

57. Ms Birgden conceded that upon receipt of the letter of 6 April 2001, she was aware that she was not entitled to the level of family tax benefit payments she was receiving. Consequently, she conceded that she did not receive the overpayments in good faith following the receipt of that letter. Until that point, however, she maintains that she did not know that she was receiving monies to which she was not entitled.

58. Ms Birgden said that she did not use the information provided to her to calculate correctly her entitlement. She objected to the suggestion of the applicant that the onus was on her to so calculate her entitlement. She said that she had done her best, and provided Centrelink with her income estimate of three occasions. She was used to receiving incorrect information from Centrelink, which had never affected her levels of payment. Despite this, Ms Birgden submitted that she had always endeavoured to correct the errors of Centrelink when she perceived problems. In this case, she said she did not suspect there was a problem until she received the letter of 6 April 2001, and when she received this letter she quickly contacted the department. She conceded that from this point onwards she did not receive the overpayments in good faith within the meaning of s97 of the Act.

59. With respect to the issue of severe financial hardship, Ms Birgden referred to her evidence concerning her household budget. She said that this budget did not take account of extraordinary events, such as one-off dental bills, and it was a bare minimum. It did not, she said, make allowances for expenditure for Christmas or for holidays. She stated that anyone would find it hard to raise six or seven thousand dollars, but especially someone in her position. The fact that the money was already spent meant that, contra the submissions of Mr Underwood, the overpayment was more a problem than a bonus.

60. Ms Birgden submitted that her employment prospects were not good. Flinders University held out no hope of her contract being renewed. She was limited in the jobs she could undertake as the precarious nature of her son's health meant that she had to be able to "drop everything" when he became ill. Her son's condition, she said, greatly affects the family. He needs a lot of support, at school and at home. It is difficult in these circumstances for her to work at all.

61. She stated that the carer's payment of $80 per fortnight does not go far towards meeting her son's needs, and he misses out on a lot. She stated that her family is attempting to remedy this as much as they can. She submitted that her situation was such that repaying the debt would cause severe financial hardship.

62. Pursuant to the foregoing, Ms Birgden submitted that the debt should be waived pursuant to s97 of the Act. In the alternative, she argued that her position was such that it constitutes "special circumstances" under s101 of the Act, and that consequently the Tribunal should waive the debt.

63. There are few relevant facts in dispute in this matter. The applicant questioned Ms Birgden's assertions that she believed she was entitled to the payments she received. Ms Birgden impressed the Tribunal with her honesty and her preparation. The Tribunal accepts her evidence as presented above. This leaves as the only question before the Tribunal the application of the relevant law to the facts.

64. It is not disputed that the respondent was overpaid family tax benefit in 2000/2001 financial year. Nor is it disputed that this overpayment resulted in a debt owed by the respondent to the applicant. The only question before the Tribunal was whether the debt should be waived.

65. The applicant has conceded sole administrative error for a period commencing on 18 August 2000. Between 1 July 2000 and that date the applicant argued that the overpayment was not solely due to administrative error as the respondent had an obligation, which she did not meet, to inform Centrelink that her combined income was not correctly stated, and that it "went over" $73,000. The SSAT accepted this date of commencement, and the respondent did not challenge it. The Tribunal is satisfied that the letter of 28 June 2000 required Ms Birgden to provide a new income estimate, and until she did so the administrative error was not the sole cause of her overpayment. Therefore the Tribunal finds that the period of sole administrative error commenced on 18 August 2000.

66. The applicant variously stated that the time when sole administrative error ceased was "mid-April" 2001 and 10 May 2001. As it happened, the applicant conceded that she no longer received the overpayments in good faith after receiving the letter dated 6 April 2001. It is thus, for present purposes, unnecessary to inquire when the period of sole administrative error ended. It is enough to note that it continued until the receipt of that letter by the respondent. The respondent did not give evidence as to when that letter was received. The Tribunal therefore, making allowance for ordinary postal delivery, finds that the period in which the "sole administrative error" exception has been raised ends on 9 April 2001.

67. The next question is whether, in the period from 18 August 2000 to 9 April 2001, the respondent received the overpayments "in good faith". Mr Underwood for the applicant submitted that she did not. He submitted that the respondent had been told that, based on a nil income, she was entitled to a payment of $74.76 per fortnight. She provided new income details, and was then told that based on an income of $4,900, she was entitled to a payment of $301.98 per fortnight. She sent in yet another income estimate, quoting an income far above $4,900, yet her payments remained the same. According to Mr Underwood, Ms Birgden knew the payment was income assessed.

68. Mr Underwood submitted that each time Ms Birgden sent in new income estimates, which estimates were higher than the estimates quoted in Centrelink correspondence, she must have expected her payment levels to drop. Consequently, Ms Birgden knew or had reason to know that she was not entitled to the payment received. She could not have had a positive belief that she was entitled to the payments received. Consequently, she did not receive the payments in good faith. Furthermore, the incorrect incomes upon which the payment levels were calculated put Ms Birgden on notice that an error had been made and that she was not entitled to the level of payment she received.

69. It is true that in Prince, Finn J stated, at 189, that a person does not receive a payment in good faith "...if that person knows or has reason to know that he or she is not entitled to a payment received...." However, his remarks were clarified by French J in Haggerty, who stated, at 534,

"I do not take what his Honour said in that case as supporting the proposition that a person can be found to be receiving payments other than in good faith simply by reason of the fact that there are facts in existence which are known to the recipient sufficient to negative the recipient's entitlement. In my opinion that is not a sufficient criterion. Knowledge of relevant facts is not enough to generate reason to know of the lack of entitlement.

The criterion of receipt in good faith may be characterised as a positive one as counsel for the respondent submitted. That is not to say that a recipient of a mistaken payment must prove that he or she has considered the entitlement to the money and positively concluded that there is an entitlement. There is no question of an onus here to be met by the recipient who claims benefit of the mandatory waiver. Nor is there some twilight zone between good faith and want of good faith. A waiver can only, in my opinion, be declined where there has been a receipt, without good faith, of moneys mistakenly paid. This accords with the general approach taken by Finn J whose construction of the provision is related to the criteria for want of good faith.

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."

70. It is clear from this passage that it is not enough for the applicant to show that Ms Birgden should have known, or should have suspected, that she was not entitled to the payments received. The question is did she believe she was entitled to the payments received. It is clear that the same test was applied in Trio, wherein the Tribunal stated, at para 38, that "...good faith must be determined by reference to the state of mind of the recipient of the payment."

71. In Trio, the Tribunal went on to say, at para 38:

"What an imaginary recipient may have thought or done when receiving the payment in the circumstances of the recipient may be relevant. So, for example, what an imaginary recipient acting in good faith would have done if he or she had the state of mind of the recipient including his or her knowledge, beliefs, doubts and suspicions may be relevant. Would he or she have made a further enquiry? If so, the recipient who does not make that enquiry cannot be said to have received the payment in good faith. Although not addressed in any of the cases, it would seem that the imaginary recipient would be a person with the recipient's attributes and abilities."

72. Ms Birgden stated that she did not know she was not entitled to the overpayments. She did not suspect that she was being overpaid. Rather, she believed over the period in question that she was entitled to the payments received from Centrelink. She stated that her level of payments had frequently varied. She also stated that this was a new payment, and it was advertised as providing more assistance for families. She did notice errors in the information provided by Centrelink. She considered that these were in all probability insignificant, because she had encountered many such errors in her dealings with Centrelink and they had never made a difference to her payments. Nevertheless, she endeavoured to correct these errors whenever she noticed them.

73. Ms Birgden was impressive as a witness before the Tribunal. She presented as a sincere and honest woman, who did her best to assist the Tribunal, and who had impressive records of her dealings with Centrelink. The Tribunal accepts her statement that she believed she was entitled to the payments she received. This conclusion is only strengthened by the respondent's history, apparent from the evidence before the Tribunal, of correcting any errors of Centrelink that she perceived. The Tribunal is satisfied and so finds that Ms Birgden believed that she was entitled to family tax benefit from 18 August 2000 to 9 April 2001, and that she believed that Centrelink had correctly calculated the amount. It is satisfied that she did not suspect that she may have been in receipt of more than the amount to which she was entitled.

74. One further remark might be made with respect to the submission of the applicant to the effect that after receiving the correspondence of 17 June 2000 and 28 June 2000, and each time supplying higher income estimates, the respondent must have expected her payment level to drop. It is this. The information in both letters was clearly erroneous. The only conclusion that a reasonable person could draw from this information was that there was no clear connection between the income recorded by Centrelink in those letters and the entitlement supposedly calculated from the quoted income. If the calculation was incorrect, the conclusion that the entitlement quoted was too high did not necessarily follow. What followed was that an error had been made. All that the respondent could do in this situation was provide fresh income estimates. When she did so, and her payments remained unchanged, her conclusion that her family tax benefit was being calculated at the correct level could only be strengthened. The Tribunal is therefore satisfied, that even if some "imaginary person" test were to be applied, Ms Birgden's belief was reasonable given the foregoing and her previous experience with Centrelink.

75. In the matter of Trio, the Tribunal found that the respondent failed to receive payments in good faith because she had asked that the payment be cancelled. In so doing, she showed that she did not believe that she was entitled to the payment in question. Such is not the case here, as Ms Birgden honestly (and reasonably) believed she was entitled to what she received from Centrelink. Trio therefore does not aid the applicant.

76. For the foregoing reasons, the Tribunal is satisfied that Ms Birgden believed that she was entitled to the payments she received. Consequently, the Tribunal finds that Ms Birgden received the overpayments in the period between 18 August 2000 and 9 April 2001 in good faith, and hence satisfies s97(2)(a) of the Act.

77. The next question before the Tribunal is whether recovery of the debt would impose severe financial hardship on the respondent. Mr Underwood for the applicant submitted that it would not. He submitted that the respondent and her partner do not qualify for any income-tested Centrelink payments, and earn over $73,000 per year. They currently meet all their expenses and so their situation, were the debt not waived, would not be one of financial hardship, let alone severe financial hardship. No case law was cited on this point before the Tribunal. As the applicant noted, "severe financial hardship" has not been judicially defined, and probably no inflexible definition is desirable. The Tribunal notes that the respondent and her partner have incurred many expenses in caring for their son, and that her family lives very frugally. However, they are able to make ends meet. Their income exceeds what those relying solely on government payments receive. Recovery of the debt would occasion severe inconvenience, stress, and some financial hardship, but the Tribunal is unable to find that such hardship would be "severe" in the context of the Act. The Tribunal consequently cannot find that the respondent satisfies s97(2)(b) of the Act. Hence the Tribunal cannot waive the debt under s97 of the Act, and the decision of the SSAT must be set aside.

78. The question remains whether there are special circumstances which would allow the Tribunal to waive the debt under s101 of the Act. The meaning of the phrase "special circumstances" has been considered in relation to various provisions of social security legislation.

79. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal, with Wilson J presiding, considered whether there were special circumstances such as would allow the applicant, who lodged a claim more than six months after becoming eligible for handicapped child's allowance, to nevertheless have her entitlement backdated to the time of eligibility under the Social Security Act 1947. The Tribunal stated 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.... [T]he existence of "special circumstances" is to be determined from all the circumstances surrounding the application at the time it was made".

Special circumstances are assessed "in the entirety of the situation presented rather than in any one circumstance" (Re Beadle at 3).

80. The Tribunal stated, at 4, that "being misled by an officer of the Department or some other responsible person as to availability of such an allowance might... constitute special circumstances". The financial position of an applicant will generally not constitute special circumstances, but in a particular case, the Tribunal stated that an extraordinary expense may so qualify. However, the Tribunal concluded that:

"...it is not helpful to focus too closely on each particular circumstance of the applicant and ask whether it is special. Of itself if is unlikely to be special for there would be many in a similar situation. The question is whether, when the relevant circumstances are looked at in their entirety, they may fairly be described as unusual, uncommon or exceptional so as to warrant [relief under the section]" (at 4).

81. The decision of the Tribunal was upheld by the Full Court of the Federal Court in Beadle v Director-General of Social Security [1984] AATA 176; (1985) 60 ALR 225. The Court reiterated that the phrase "special circumstances", "although lacking precision is sufficiently understood in our view not to require judicial gloss" (at 228). It stated, at 228:

"Presumably in this context special circumstances must include events which would render the six months unfair or inappropriate."

The Court repeated the view expressed in the decision of the Tribunal that the receipt of incorrect advice from a departmental official might constitute special circumstances.

82. O'Loughlin J discussed the issue of "special circumstances" in Secretary, Department of Social Security v Hulls (1991) 22 ALD 570. The case concerned the preclusion period for the receipt of a pension under the Social Security Act 1947, following a compensation payment. He quoted with approval the following passage from Re Ivovic and Director-General of Social Services (1981) 2 ALN N95:

Whilst it would be unwise, if not impossible, to attempt to lay down any precise delineation of what may amount to "special circumstances" for the purposes of s115(4A) (cf, Re Norman (1986) 673 at 677 per Lopes LJ), the use of the word "special" is, we think, intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case (cf Ex parte Bucknell [1936] HCA 67; (1936) 56 CLR 221 at 224). Whilst we agree that hardship is a relevant consideration in the discretion conferred by s115(4A), we reject the submission by Mr Watkins (for the applicant) that we should ignore the circumstances out of which the alleged hardship is said to have arisen. The reference to special circumstances "by reasons of which" a person liable "should be released" requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes. In the exercise of the discretion which s115(4A) confers, the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the Social Services Act 1947_: cf_ Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492 at 505 per Dixon J. Thus whilst keeping the dominant principle of s115 in mind, he must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate" (pages 580-581 of Hulls_)._

83. In the case of Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541 the Federal Court considered a case where compensation payments had been treated as direct deductions and thus affected payments pursuant to the Social Security Act 1991. The Act allowed compensation payments to be treated differently where there were "special circumstances." The Court again stated that for special circumstances to exist, there must be present something out of ordinary, to distinguish a case from other cases. It stated, at 545, that

"It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary."

It is clear from the judgement of Groth that in determining whether circumstances are "special", one must look to all the circumstances in which they arise as well as the legislative context.

84. Turning to the present matter, there is no reason why the foregoing remarks concerning "special circumstances" should not be applicable to the interpretation of s101 of the Act. It is clear from the authorities that the circumstances as a whole must be taken into account. Consequently the submission of Mr Underwood that the respondent's son's disability "of itself" is not out of the ordinary is not of itself determinative. What is important is whether that fact together with all other relevant facts constitutes a situation sufficiently out of the ordinary run of cases.

85. It is convenient at this point to address Mr Underwood's submission that the administrative error was not an event that can be considered in deciding whether special circumstances are present. He stated that administrative error was dealt with in s97 of the Act, and that consequently that section must exhaust all occasions on which administrative error is relevant to waiver of a debt. Mr Underwood referred to no authorities in support of this proposition. In Re Bestel and Secretary, Department of Family and Community Services [1999] AATA 867, the Tribunal accepted this reasoning. In Re Coyne and Secretary, Department of Family and Community Services [2002] AATA 1156 the Tribunal rejected it. On balance, this Tribunal favours the latter approach.

86. It is clear that in the absence of other considerations, the fact that an overpayment was received due to sole administrative error would be highly relevant to the existence of "special circumstances". The authorities make it clear that all the circumstances surrounding a case should be considered together. The question is, does the existence of s97 preclude sole administrative error from being so considered under s101? Is s97 intended to deal exhaustively with sole administrative error?

87. It is clear that s97 is intended to be beneficial. It grants relief in the case of "sole administrative error." It does not bestow a discretion to waive a debt upon the Secretary, it states that in such a case the Secretary "must" waive the debt. On the other hand, s101 grants a discretion to the secretary. Where the requirements of the section are met, the Secretary "may" waive a debt. Special circumstances, as interpreted by this Tribunal and the Federal court, encompasses all relevant circumstances.

88. Where the legislature drafts an enactment containing a general provision, such as s101 of the Act, and a particular provision that falls within the ambit of the general provision, such as s97 of the Act, two interpretations are possible. One is that the particular provision is intended to deal exhaustively with its subject matter, and to excise, as it were, a specific scenario from the general provision, narrowing the scope of that provision. The other is that the particular provision is intended to operate in addition to the general provision, and to expand its scope in specific circumstances, or to guarantee a specific outcome when a particular set of facts arises.

89. Section 97 is clearly designed to afford an extra protection to those who receive overpayments through administrative error and through no fault of their own. In a case of sole administrative error where the payment was received in good faith, a recipient is entirely blameless in receiving an overpayment. In cases where the section applies, the recipient will not have even made an innocent mistake - they will have made no error at all. On the other hand, s101 applies in all cases where special circumstances exist, provided that the recipient did not knowingly make a false representation or statement, and did not knowingly fail to comply with a provision of the family assistance law. Thus it may offer relief to a recipient who makes an innocent mistake in their dealings with Centrelink. The provision allows all their circumstances to be taken into account in deciding whether a waiver is to be made. Section 97 makes no such allowance. The only circumstance relevant to that section is "severe financial hardship". The interpretation contended for by the applicant would have the result that a party who has done nothing at all wrong would be subject to a narrower provision than a party who has made a mistake, albeit an innocent one.

90. The better interpretation is that the purpose of s97 is to bestow extra protection on recipients of overpayment, not to narrow the protection in any way. A case where an overpayment has resulted from sole administrative error where the payments are received in good faith and repayment would cause severe financial hardship is a particular example of a case where special circumstances exist such that the legislature considered it imperative that waiver be made. Where all the requirements of s97 are not met, there is no inconsistency in allowing the factors it requires being considered in the context of s101. There is no indication that s97 is intended to be exhaustive of cases in which sole administrative error arises. The Tribunal therefore finds that where the requirements of s97 are not met, sole administrative error is a factor that can be considered under s101 of the Act.

91. In this case the respondent and her husband received an overpayment of family tax benefit. They received this money in good faith as a result of sole administrative error. Their situation is not such that it could be said that repayment of the debt would cause them "severe financial hardship" under the Act. However, it would cause them considerable financial difficulty and stress. These proceedings have evidently already caused Ms Birgden much stress. Ms Birgden's son suffers from severe cerebral palsy. She and her husband have incurred and continue to incur significant expenditure to meet his needs. Caring for their son imposes an enormous financial and emotional burden on them, and requires the devotion of a great deal of time on their part as well as on the part of the rest of their family to their son's care.

92. Unlike, for example, the case of Beadle, this is not a case where a benefit is being applied for which would result in a windfall payment. In this instance money has already been received and has already been spent. It has been both received and spent in good faith. - the money was spent to improve their son's quality of life. Having been spent, Ms Birgden testified that the money will now be very difficult to find. It is highly relevant that the overpayments were not spent on luxuries, and were not spent in a way that can be recovered by the respondent - they were not invested in assets that can be sold to recover the capital expended on them. The respondent testified that, despite the work that has already been done, her and her partner's house is currently valued at some $60,000 below the amount for which it is mortgaged. It has not been renovated to improve its value, but to improve its utility to their son.

93. Ms Birgden and her husband have not spent their money recklessly. On the contrary, the figures provided by Ms Birgden (oral evidence and T16/55-58) show that they budget very carefully. Their circumstances are in all probability about to become much more difficult, as Ms Birgden's employment with Flinder's University is about to cease. It is not surprising that when she and her husband found themselves in receipt of more government support than they previously had been, they, believing they were entitled to these monies, spent them on proceeding with house renovations or purchasing special equipment for their son sooner than they otherwise would have done.

94. Mr Underwood submitted that any hardship that the respondent and her family may suffer if recovery of the debt were made would be due to her expenditure on renovating her house, and not due to the recovery. This argument is specious, as the hardship will not be due to ongoing expenditure on the house. It will be due to the fact that monies are recovered which the respondent does not have, having already innocently spent them on her house. To find otherwise would be equivalent to finding in another case that hardship was due to a party's low income and therefore not due to the recovery of a debt.

95. Mr Underwood submitted that the Tribunal should not allow the respondent to receive more money than others in her position. It is clear that the policy behind the debt recovery provisions of the Act is that help should only be given to those who meet specified criteria. However, the purpose of s101 is to override this policy where special circumstances exist. The case law makes it clear that the question to be addressed is whether the circumstances are unusual enough for a party to be exempted from this general policy. The cases cited above also make it clear that where it would be unfair or unjust to recover a debt, the case will be sufficiently "exceptional".

96. In this case the Tribunal is satisfied that the respondent would be significantly worse off if the debt were recovered than if she had never received the money. She spent the money believing she was entitled to it. This misunderstanding was due to no fault of her own. The Tribunal is satisfied that it would be unfair for the respondent to be placed in this situation. It is accepted in equity that a person who makes a representation on which another relies to their detriment may be bound to their representation. The situation is similar here where the sole administrative error of the applicant led the respondent to believe she was entitled to the monies she received. Furthermore, The Full Court of the Federal Court in Beadle found that the receipt of wrong advice by a departmental officer might constitute "special circumstances." That too is similar to the present case. The overpayment was an incorrect representation to the respondent, which, were recovery of the debt to be made, would result in detriment.

97. When these factors are considered with the circumstances of the respondent's family, and in particular the needs of her son, the Tribunal is satisfied that her situation constitutes "special circumstances" under s101 of the Act. Furthermore, the debt did not result wholly or partly from the debtor or another person making a false statement or representation, or from her or another person failing or omitting to comply with a provision of the family assistance law.

98. Finally, it falls to the Tribunal to determine whether it is more appropriate to waive than write off the debt (s101(c) of the Act). On the one hand, the public is entitled to recover monies mistakenly paid. On the other, as counsel for the applicant stated in submissions, the condition of the respondent's son will continue indefinitely. The same emotional and financial pressures are likely to remain with the respondent's family indefinitely. On balance, the Tribunal finds that it is more appropriate to waive the debt.

99. It will be apparent from the foregoing that the administrative error and the good faith of the respondent were important factors in the Tribunal reaching its decision. Consequently, the time period for which the waiver should be made is the same as that for which both the sole administrative error and the respondent's good faith were present. That period, as stated previously, is from 18 August 2000 to 9 April 2001.

100. The decision of this Tribunal is in effect the same as that of the SSAT. However, the SSAT included its grounds in its decision, and those grounds have been rejected by this Tribunal. Furthermore, this Tribunal has slightly altered the dates for which the decision is effective. For the sake of clarity the decision of the SSAT is set aside and a new decision substituted in its place.

101. For the reasons given above, the decision of the Social Security Appeals Tribunal is set aside and the following substituted in its place:

i) Ms Birgden has incurred a family tax benefit debt of $7,247.37;

ii) of that amount, $1000.00 has been waived pursuant to a ministerial direction; and

iii) of the remainder, the amount incurred in the period from 18 August 2000 to 9 April 2001 is waived owing to the existence of special circumstances under s101 of the A New Tax System (Family Assistance)(Administration) Act 1999.

I certify that the 101 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member J.A Kiosoglous MBE

Solicitor for the Applicant Advocacy and Administrative Law Team, Centrelink