Esber v Commonwealth [1992] HCA 20; (1992) 106 ALR 577 Hooi v Brophy (1984) 52 ALR 710 Jin v Secretary, Department of Social Security (1994) 36 ALD 168 Patti-Mae Lee v Secretary, Department of Social Security (1996) 139 ALR 57 Secretary, Department of Social Security and Hill (1996) 40 ALD 687

Representative for Applicants: Mr R Loftus Welfare Rights

1. On 11 March, 1996, the applicants, Mr Clifford James Callaghan and Mrs June Thelma Callaghan, applied for review of a decision of the Social Security Appeals Tribunal ("the SSAT") dated 29 January, 1996. As the SSAT did not notify Mr and Mrs Callaghan of its decision until some time on or after 12 February, 1996 when it prepared its reasons, they lodged their application to the tribunal within the time allowed under section 29 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act").

2. The SSAT had affirmed an earlier decision made on 28 September, 1995 by a delegate of the Secretary of the Department of Social Security ("the Secretary") and affirmed by an Authorised Review Officer ("ARO") on 13 November, 1995. The decision was to raise and recover an overpayment of sickness allowance amounting to $589.38 from Mr Callaghan and partner allowance amounting to $2,979.55 from Mrs Callaghan.

3. At the hearing, Mr and Mrs Callaghan were represented by Mr Loftus of the Welfare Rights Centre and the Secretary by Mr McQuinlan, an Advocate in his Department. The documents lodged pursuant to section 37 of the AAT Act ("the T documents") were admitted in evidence together with AUSTUDY claim forms lodged by Mrs Callaghan. Both Mrs Callaghan and her husband, Mr Clifford Callaghan, gave oral evidence in support of their application.

4. As Mr and Mrs Callaghan agreed that they had received an overpayment and as they did not dispute the amount of the overpayment, the only issue in this case was whether the debt, or part of it, should be waived.

5. On the basis of Mr Callaghan's evidence, I find that he is a carpenter who was in full time employment when he was diagnosed with a malignant tumour in his lung in February, 1994. He stopped his work on 1 March, 1994. In April, 1994, he underwent an operation at the Prince Charles Hospital to remove the lung and remained in hospital for 23 days. After his discharge, he could walk but was still in quite a lot of pain. He had to walk to increase his lung capacity and he could shower and care for his personal needs but could do little else. His wife cared for him otherwise and he employed a man to cut the lawn and collect the rubbish.

6. The pain in his chest persisted and in August, 1994 he was still very short of breath. His health is still a worry.

7. Mrs Callaghan applied for AUSTUDY benefits from the Department of Employment, Education, Training and Youth Affairs ("DEETYA") when she completed and signed a form on 5 August, 1994 and lodged it on 1 September, 1994 (Exhibit 2). Notes were attached to the form but they were not part of the evidence in this case.

8. She applied in relation to a course for a Certificate in Office Procedures to be conducted by the Logan Business Academy. She applied initially for AUSTUDY benefits for the period from 8 August, 1994, when she started the course, until 31 December, 1994.

9. The form Mrs Callaghan completed asked whether her spouse received, among others, a pension, benefit or allowance from the Department. Mr Callaghan, who completed and signed that part of the form, had ticked the box marked "yes", noted that it was for the period 13 April, 1994 until 26 August, 1994 and stated that it was sickness allowance.

10. On 30 December, 1994, Mrs Callaghan completed an AUSTUDY continuing application form for the remainder of her course from 1 January, 1995 until 27 January, 1995. That form states clearly at the head of the form that it was to be returned to DEETYA. Mr Callaghan again showed on the form that he was in receipt of a sickness allowance.

11. From time to time the Department sent Mr Callaghan sickness allowance review forms. One such form was signed and completed by both of them on 4 November, 1994 and lodged with the Department on 17 November, 1994. Mr Callaghan showed that he had returned to work on 29 August, 1994 on a part time basis. At question 10 of the form, he had ticked the box marked "no" in response to whether he or his partner received money from ". any other government department (such as the Department of Veterans' Affairs ... . any other source" (T documents, page 59) Mr Callaghan responded in the same way when he competed his form on 31 January, 1995 (T documents, page 58).

12. Mr Callaghan said that he recalled receiving letters advising him of the changes in rates of sickness allowance payable to him. He also recalled seeing, at least on one occasion, a notice attached to those letters. That notice was issued pursuant to section 727 of the Social Security Act 1991 ("the 1991 Act"). The opening paragraph of such a notice attached to letters written to Mr Callaghan on 19 April, 1994 and 14 December, 1994 reads: "The authority for the notification requirements listed below and on the front of this notice is in Section 727 of the Social Security Act. The rate of your allowance may need to be varied if certain events or changes of circumstances occur. For this reason you are required to tell the Department of Social Security within 7 days if any of the following occur, or if you know in advance if they are likely to occur. Please have this letter with you if you telephone or call at any of our offices. If you are paid too much allowance because you fail to tell Social Security when you are required to do so, the overpayment may be recovered from you. There are also penalties for not telling Social Security when required to do so. THE CHANGES YOU MUST TELL SOCIAL SECURITY ABOUT ARE... (PLEASE NOTE THAT PARTNER INCLUDES A DE FACTO PARTNER) (T documents, page 36)

13. A list of specific circumstances follows. That list includes the following: "you, or your partner start to receive, or stop receiving income, or if your income or your partner's income changes from the amount last notified." (T documents, page 36)

14. Later in the document, there appears a paragraph headed in bold capital letters "WHAT IS INCOME". That paragraph begins by stating that "Income includes ..." and then lists a number of items including "... government assistance (for example payments under the Austudy scheme)" (T documents, page 36).

15. Both Mr and Mrs Callaghan said that they had not realised that the Department and the body paying AUSTUDY benefits were different departments. They both gave evidence of the financial hardship which they found themselves in when Mr Callaghan became ill and could not work. They had to sell the house as they had used all of their savings when neither could work. Mrs Callaghan could not work as she was caring for Mr Callaghan.

16. Mrs Callaghan said that she had to find work to support them. She had gone to an office of the Commonwealth Employment Service ("the CES") to look for work. Although she had worked in offices for some 30 years, the CES recommended that she undertook an office course. The CES also recommended that she approach AUSTUDY for assistance.

17. She drove her husband to the Department's offices to enable him to lodge his sickness allowance review form. She took her AUSTUDY application form with her. On arriving at the Department's offices, she was told that she would have to take her AUSTUDY form upstairs. When she arrived upstairs, she was told that a couple of documents were missing and that she would have to fetch them. At no time was she told that she was dealing with a department different from that paying sickness allowance. There were signs in various places but they did not seem to apply to them, she said. They all seemed to apply to tertiary students. She and her husband thought that the whole building was devoted to social welfare.

18. Mr McQuinlan suggested to Mrs Callaghan that perhaps she should have realised that the department and DEETYA are different departments when the AUSTUDY form asked for information about pensions received from the department. She replied that a lot of the questions did not make sense. It was her belief that the AUSTUDY office would know everything from the computer.

19. She and her husband were not then aware that she could not receive both partner allowance and AUSTUDY benefits. Mrs Callaghan said that she understood that what she received as AUSTUDY and what her husband received as sickness allowance were one and the same thing. That was so even though she understood that the sickness allowance payments were split between her and Mr Callaghan. She was never aware that she was receiving two payments.

20. Mrs Callaghan said that the payments from sickness allowance and AUSTUDY were both direct credited to their bank account. She went on to say that she had a husband to look after and never sat and studied the bank statements. They had a lot of financial worries at the time. When people are trying to live on nothing they do not look at the statements but just hope they can make it. They only look at the statements when a cheque bounces. Mrs Callaghan said that she and her husband have had a great number of financial worries since they lost their business in 1985 or 1986. When people have financial worries, she continued, they are more worried about making ends meet and getting a job than reading bank statements. There is plenty of junk mail that comes in the letter box. Although she did not regard bank statements as junk mail, she did not have time to read them.

21. At the time the delegate made his or her decision on 13 November, 1995 to recover the overpayment, the provisions of the Social Security Act 1991 ("the Act") relating to the waiver of debts were found in sections 1235 to 1237AB of Part 5.4. Section 1236A provided that sections 1237, 1237A and 1237AB applied to all debts owed to the Commonwealth and arising under either the Social Security Act 1991 ("the Act") or its predecessor the Social Security Act 1947. Section 1237 provided that the Secretary was required to waive the whole of the debt in certain circumstances specified in the section. The only circumstance of relevance in this case is that specified in sub- section 1237(2) in the following terms: "The Secretary must waive if: (a) the debt arose solely because of an administrative error made by the Commonwealth; and (b) the person received in good faith the payment of payments that gave rise to the debt."

22. Sections 1237A, relating to waiver of part of a debt, section 1237AB, relating to waiver of debts of a particular class, and section 1237B relating to penalty interest, are not relevant in this case.

23. The Social Security Legislation Amendment (Carer Pension and Other Measures) Act 1995 ("the 1995 Amendment Act") repealed sections 1237 and 1237A and substituted sections 1237 to 1237AAD, which came into operation on 1 January, 1996 (sub-section 2(4)). It also repealed section 1236A, which provided for the application of the other sections. In its place it enacted a new section 1236A, which provided that: "(1) Sections 1237, 1237A, 1237AA, 1237AAB, 1237AAC and 1237AAD apply to: (a) debts arising on or after 1 January 1996; and (b) the amounts of debts arising before 1 January 1996 that were outstanding at the start of that day. (2) Section 1237AB applies to all debts, whenever incurred, owed to the Commonwealth and arising under this Act or under the Social Security Act 1947."

24. Sub-section 1237(1) provides that the Secretary may waive the Commonwealth's right to recover the whole or part of a debt from a debtor only in the circumstances described in sections 1237A to 1237AAD. These sections are concerned with the specific situations in which the Secretary either may or is required to waive a debt. If these provisions apply, it was agreed that only section 1237AAD is relevant. That provides: "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 representation; or (ii) failing or omitting to comply with a provision of this Act or the 1947 Act; and (b) there are special circumstances (other than financial hardship alone) that make it desirable to waive; and (c) it is more appropriate to waive than to write off the debt or part of the debt."

25. Section 1237AB is the only section in Part 5.4 to which sub- section 1237(1) does not apply. It provides that the Secretary may waive debts that are included in a class of debts specified by the Minister by a notice published in the Commonwealth Government Gazette. There is no suggestion in this case that the debt is included within such a class.

26. On behalf of Mrs Callaghan, Mr Loftus submitted that I should consider her application in light of the more liberal provisions of section 1237AAD as it is currently drafted. Mr McQuinlan said that, although the Department considered that was the correct view, the judgement of the majority of the Full Court of the Federal Court in Patti-Mae Lee V Secretary, Department of Social Security (1996) 139 ALR 57, Cooper and Moore JJ, Davies J dissenting) had thrown some doubt upon that conclusion. If it is appropriate to apply Lee to the facts of this case, the provisions of the Act prior in force at the time the decision to raise and recover the overpayment must be applied i.e. the provisions in force prior to the 1995 Amendment Act.

27. In the Lee case, Ms Lee was in receipt of a sole parent's pension. She failed to advise the Department of Secretary ("the Department") that, as from 23 April, 1992, maintenance payable by her child's father had increased from $20 to $80 per week. She advised the Department on 15 April, 1993. On that day, her local Member of Parliament wrote to the Department advising it that Ms Lee had been ill during the previous twelve months and her resulting confusion had led to her failure to advise the Department. In light of her situation, he asked that it not seek to recover any overpayment. The amounts of Ms Lee's payments were not adjusted until 31 December, 1993 with regard to the increase of Ms Lee's maintenance payments.

28. On 30 November, 1993, a delegate of the Secretary calculated that Ms Lee had been overpaid for the period from 21 May, 1992 to 15 April, 1993. This was followed by a decision on 13 December, 1993 that the amount of the overpayment was a debt owed to the Commonwealth and should be recovered. The decision was affirmed on 9 February, 1994 when the amount of the overpayment was increased as the period of the overpayment was increased. The decision was also affirmed by a subsequent decision of the SSAT on 15 March, 1994.

29. The waiver provisions of the Act were amended by the Social Security (Budget and Other Measures) Legislation Amendment Act 1993 ("the 1993 Amendment Act") with effect from 24 December, 1993. One of the issues for consideration by the Federal Court was whether the waiver provisions should have been applied by this tribunal in reviewing the SSAT's decision in the form in which they were enacted on 13 December, 1993 or in their form at the date of its review. Applying the provisions of paragraphs 8(c) and (e) of the Acts Interpretation Act 1901 and the language of the High Court in Esber v Commonwealth [1992] HCA 20; (1992) 106 ALR 577, Cooper and Moore JJ concluded that Ms Lee had had a right to have her claim to have her debt waived determined in her favour if the delegate had wrongly refused her claim. That right arose at the time, Cooper J said, the decision for the application for a waiver was made on 13 December, 1993 unless there was something in the amending provisions to the Act that revealed an intention to alter Ms Lee's right. Moore J reached a similar conclusion after analysing the review processes that had been undertaken. He found that Ms Lee had asked the ARO to review the delegate's decision before the 1993 Amendment Act had come into force.

30. In the Lee case, the majority found that the amendments made by the 1993 Amendment Act had not, as Cooper J expressed it, "... evinced and intention to abrogate substantive rights given by the ordinary principles of administrative law and the Act in respect of an operative decision of the Secretary or a delegate to refuse waiver where that decision was made prior to 24 December, 1994 (sic). In respect of this limited category of cases I differ from O'Loughlin J in Kratochvil as to the continued right to have the review conducted in accordance with the provisions of the repealed s 1237. For the reasons which I have given above, I do not consider that the new ss 1237 and 1237A, as a matter of statutory construction, operate retrospectively. Additionally, on and from 24 December 1993 the sections are capable of having a rational operation in respect of all pending and future applications for waiver where the Secretary or a delegate has not made an operative decision, without the need to abrogate any rights vested in an applicant in consequence of a prior operative decision. There is nothing, in my view, to displace the general principle against construing the new sections retrospectively or to indicate that the legislature intended to abrogate accrued rights. I have come to this conclusion without reference to the explanatory memorandum accompanying the 1993 Act. However, reference to the memorandum does not disclose any legislative intention to abrogate any accrued rights in respect of decisions given by the Secretary prior to the commencement date. ... The explanatory memorandum is consistent with my view as to the operation of the new sections as a matter of statutory construction. That is, decisions as to waiver by the Secretary or a delegate made after the commencement date are to be made under the new sections and those sections apply to all debts whenever incurred. Section 1236A is to avoid any argument that debts incurred prior to 24 December 1993 could not be waived because the 1993 Act only operated in respect of debts incurred after that date or alternatively, that any power to waive the prior debts remained in the Secretary under the repealed section." (pages 72- 73)

31. Davies J reached a different conclusion but I am bound by the judgements of the majority and of the majority of the High Court in Esber. Whether I apply the reasoning of the majority in Lee or of the majority in Esber as interpreted by a tribunal of which I was a member in Jin and Secretary, Department of Social Security (1994) 36 ALD 168, the conclusion is the same. I must determine when the decision whether or not to waive the debt was first made (or, if the reasoning of Moore J is applied, the date on which the application for review was made to the ARO). That is a question of fact. I am then bound to apply the waiver provisions in force at that date unless the 1995 Amendment Act intended that its provisions should apply and that any accrued rights should be altered.

Have the general principles been altered by the 1995 Amendment Act?

32. The 1995 Amendment Act repealed section 1236A (see paragraph 22 above) in the form in which it was considered by the Federal Court in Lee. The new section it substituted is in different terms from that it replaced (see paragraph 20 above). It is in much more precise terms. It specifically applies to debts arising on or after 1 January, 1996 and to the "amounts of debts" that arose before that day but were still outstanding when that day began.

33. In light of that specific direction, I have concluded that the sections substituted by the 1995 Amendment Act apply to that part of a debt which arose before 1 January, 1996 and which has neither been waived or paid before that date i.e. that part which is still outstanding at that day. Where waiver has been considered and refused prior to that date in respect of the amount of the debt still outstanding, the effect of section 1236A is to vary what would otherwise be the right of the debtor to have the waiver reviewed according to the Act as it stood prior to 1 January, 1996. It is the substance of the 1995 Amendment Act and of the new sub-section 1236A and their difference from the 1993 Amendment Act and of the previous section 1236A which leads to a conclusion different from that reached by the majority in the Lee case.

35. What of a debt, or part of a debt, which has been paid before 1 January, 1996 and in respect of which waiver was refused before that date? Section 1236A as presently enacted would not apply to it for it is not a debt that arose after 1 January, 1996 and, because it has been paid, it would not be an amount of a debt that arose before that day but was still outstanding at the start of that day. Applying the principles enunciated by the majority in Lee and Esber, the debtor would, in such a situation, have the right to have the waiver considered according to the law in force at the date the waiver was first considered (or the application for internal review was made in the case of Moore J). There is no indication in the 1995 Amendment Act or in the provisions it introduced in the Act that it was intended to affect rights accrued under the repealed legislation in respect of such debts. I do not read its omission to refer to debts incurred before 1 January, 1996 but no longer outstanding as at that date as an indication of any such intention. This conclusion may appear to be at odds with the Tribunal's view expressed in Re Secretary, Department of Social Security and Hill (1996) 40 ALD 687. In this case, Senior Member Dwyer was concerned only with the operation of section 1236A in force at 1 January, 1996 and had no need to consider whether, as in this case, any rights had been accrued before that date.

35. As I do not have details of any repayments made by Mr and Mrs Callaghan, I must consider first whether a decision was made refusing waiver of any part of the debts that may have been paid before 1 January, 1996. If it was considered and refused, then re- consideration of that decision must be according to the law as it applied before 1 January, 1996. If the debts, or part of them, were outstanding at 1 January, 1996 then the current law is applicable to those debts or those parts of them.

36. As I have said, whether a decision was made with respect to waiver is a question of fact. It cannot be determined by reference simply to the date on which there was a decision that a person has been overpaid or even to the date on which a decision to raise an overpayment was made. Consideration may or may not have been given to whether or not the debt should be waived. In Lee's case it was found that waiver had been considered when the decision to raise the overpayment was made but it cannot always be assumed that will be the case. Frequently, no thought will have been given to the issue until it is raised by the person himself or herself or by either the ARO, the SSAT or this tribunal on review. Whether waiver has been considered and a decision made upon it depends not simply upon the decision itself but the circumstances leading to that decision. This was the approach adopted in the Lee case and also in Secretary, Department of Social Security v Hodgson [1992] FCA 338; (1992) 108 ALR 322.

37. In this case, the Department compared its records with those of the Department of Employment, Education, Training and Youth Affairs ("DEETYA"). It found that DEETYA's records showed that Mrs Callaghan had been paid AUSTUDY from August, 1994 while the Department paid Mr Callaghan paid a sickness allowance for her. The Department wrote to Mr Callaghan on 31 March, 1995 asking him if its information was correct and, if so, whether there was some other information to explain the discrepancy.

38. Mrs Callaghan responded in a letter dated 7 April, 1995 by writing: "After having been out of work for 21 months and having been on the books at the CES, we were starting to get desperate financially, as I could not get employment and my husband due to his health was unable to work, so I finally approached the CES department for help in finding work. They recommended I attend a course in Office Procedures to update my skills, and at their recommendation I filled out the forms they advised me were necessary, for attendance at the course, Austudy, and any thing else they recommended, as I had never been in this situation before I did not know the procedures, and took their advice and guidance as to what I signed and as to what I was entitled. I also believed that as they had been trained to do their job, I did not need to question their recommendations as to what I was entitled to and what I was receiving, as my case worker knew exactly what I was receiving, and also knew that my husband had had major surgery and was on a Sickness Benefit as I explained every detail to her. As we have been through a rough period, having had to sell our house, and use all of our savings before we approached CES for help, I look forward to your advice on this matter." (T documents, page 62)

39. This letter was followed by a Data-matching Program Review conducted on 28 June, 1995 (T documents, page 64). The form and the information it contained gave no indication that any consideration was given to gathering information relevant to a subsequent consideration of whether waiver would be appropriate.

40. On 25 September, 1995, a form was completed in order to calculate the over or under payment involved (T documents, page 67). Apart from a calculation of the amount of the overpayment, notations were made that the overpayment had occurred because of an "omission" and by "force of law". There were also notations that the "client" had been advised and an adjusting letter sent. Again, there was no mention of waiver or of any information indicating that it was either under consideration at that stage or intended to be considered at some stage in the future.

41. The letter to Mrs Callaghan was dated 28 September, 1995 and advised her of the amount of the debt that she owed. It went on to ask her to contact the Department if she did not agree that she had a debt or that the debt should be recovered (T documents, page 71). This is the first indication that consideration might be given to the debt's not being recovered. A similar letter setting out similar information was sent on the same day to Mr Callaghan (T documents, pages 74-76).

42. Mrs Callaghan wrote to the Department on 6 October, 1995 to make an appointment for an interview. The interview took place and Mrs Callaghan explained her belief that social security and AUSTUDY benefits are paid by the one Department. It was decided on 22 October, 1995 that the decision "stands" for Mrs Callaghan had failed to advise the Department of her AUSTUDY payments (T documents, page 79).

43. There then followed a review by the ARO. In his letter to Mr Callaghan dated 13 November, 1995, the ARO gave his reasons for finding that there had been an overpayment and that it should be recovered. He continued by writing: "I appreciate that your failure to advise of your AUSTUDY may have been due to a misunderstanding. However, this is not something I can take into account when deciding, from an administrative perspective, if an overpayment should be recovered." (T documents, page 84)

44. Taken in the context of the letter of 28 September, 1995 and Mrs Callaghan's response explaining how the overpayment occurred, I find that the ARO's letter indicates that he had considered whether or not the debt should be waived. He has clearly considered whether the debt should be recovered and, in the circumstances of this case, that means that he has considered whether the debt should be waived. Should any part of the debts paid before 1 January, 1996 have been waived?

45. The short answer to this question is that it cannot be waived for the provisions of the Act then in force did not authorise it. The only provision that might have been applicable was sub-section 1237(2) but that does not apply for I am not satisfied that the Commonwealth has made any administrative error in this case. If it has, I am satisfied that the debt did not arise solely from it for Mr and Mrs Callaghan's failure to notify the Department of Social Security of Mrs Callaghan's AUSTUDY payments also contributed to it.

Should the debts outstanding on and after 1 January, 1996 be waived?

46. What is meant by "knowingly" when used in section 1237AAD set out in paragraph 24 above? I am not aware of its having been considered in this context although either it or the related word "knowing" have been considered in the context of other legislation including the Customs Act 1901, the Trade Practices Act 1974 and the Copyright Act 1968. It is clear from cases that the word "knowingly" is, unless the legislation specifies otherwise, understood to mean actual knowledge.

47. This is clear from a passage from the judgement of Matheson J in Hooi v Brophy (1984) 52 ALR 710. His Honour was considering whether the appellant had committed an offence under the Copyright Act 1968 by selling or letting for hire a video cassette when he knew the article to be infringing copyright. Matheson J of the South Australian Supreme Court said: "There is a useful discussion of the word 'knowledge' by Devlin J (as he then was), in Taylor's Central Garages (Extra) Ltd v Roper [1951] WN (Eng) 383 at 385. The alleged offence there considered bore no relationship to that in the case at Bar, but (at p 385) his Lordship said:- 'There are, I think, three degrees of knowledge which it may be relevant to consider in cases of this sort. The first is actual knowledge, and, of course, the justices may find it because they infer from it the nature of the act that was done, for no man can prove the state of another man's mind; and they may find it, of course, even if the defendant gives evidence to the contrary. They may disbelieve him, and think that that was his state of mind. They may feel that the evidence falls short of that, and, if they do, they have then to consider what might be described as knowledge of the second degree: they have to consider then whether what the defendant was doing was, as it has been called, shutting his eyes to any obvious means of knowledge. Various expressions may have been used to describe that state of mind. I do not think it necessary to look further, certainly not in cases of this type, than the expression used by Lord Hewart CJ, in a case under this section, Evans v Dell (1937) 53 TLR 310 at 313: ' ... the respondent deliberately refrained 'from making inquiries', the results of which he might not "care to have".' 'The third sort of knowledge is what is generally known in the law as constructive knowledge. It is what is encompassed by the words 'ought to have known' in the phrase 'know or ought to have known'. It does not mean actual knowledge at all: it means that the defendant had in effect the means of knowledge.' (my emphasis) In Vines v Djordjevitch [1955] HCA 19; [1955] Argus LR 431 ... the court said: The word 'knew' seems to have caused difficulties. The person who must 'know' is the person referred to in the main part of the sub-section as a person who could have obtained judgment against the driver. It is urged for the nominal defendant that the word 'knew' does not require an actual state of mind on his part; it is enough if the facts brought to his notice would satisfy a reasonable man that the identity of the car could not be established. For this reliance is placed upon what was said by O'Bryan J in Australian National Airways Pty Ltd v Vines [1950] VicLawRp 78; [1950] VLR 510 at 513-4; [1950] VicLawRp 78; [1950] Argus LR 967 at 970, though it is not certain that his Honour meant to go so far as to say that the ultimate fact was not the plaintiff's actual knowledge. Of course the plaintiff's state of knowledge must be judged from his means of knowledge, that is to say excepting any direct evidence of his own state of mind which the plaintiff may give if the tribunal of fact sees fit to prefer it to natural inferences from more objective facts. But when the proviso says 'knew' it is very difficult to substitute some external or objective fact for the state of mind that the word signifies as a matter of English. It goes without saying that a strong presumption of fact arises that knowledge exists of a fact, whether a negative or a positive fact, when the circumstances would convey to a reasonable man that the fact exists. But that is a different thing from saying that the plaintiff is conclusively presumed to know the fact. The distinction is of much importance in the present case where the plaintiff relies on her ignorance of the English language and of her environment and on the duration and extent of her incapacitation as countervailing the inference which otherwise would almost inevitably be drawn.' 'But I think the most helpful and relevant authority is RCA Corporation v Custom Cleared Sales Pty Ltd (1978) 19 ALR 123. In proceedings in the Supreme Court of New South Wales, the plaintiff sought to restrain the defendant from selling or, by way of trade, exposing for sale, infringing copies of a cassette known as "John Denver-Spirit". It established that such a cassette was sold in breach of its copyright at a shop run by the defendant company. However, the trial judge declined to make the injunction sought, because the plaintiff had not proved that the defendant knew at the time of the sale that the copy was an infringing one. At p 125, Hope, Reynolds and Hutley JJA, in a joint judgment said:- '... it is expedient to consider what the authorities establish is the meaning of knowledge in this context and how it may be proved. In our opinion, the knowledge which has to be proved is actual not constructive knowledge. In Van Dusen v Kritz [1963] 2 KB 176, a case in which the issue was when knowledge of infringement was acquired, the judgment proceeds on the basis that the knowledge must be actual. When the Copyright Act 1968 is concerned with imposing liability on the basis of knowledge which ought to have been acquired, it does so: eg s 115(3). Except where a party's own statements or gestures are relied upon, proof of knowledge is always a matter of inference, and the material from which the inference of the existence of actual knowledge can be inferred varies infinitely from case to case ...'. At p 126, their Honours said: 'A judge is entitled in inferring knowledge to use his assessment of the person with whom he is concerned; facts from which knowledge would readily be inferred in the case of an adult may well not be sufficient in the case of a child. It seems to us that the principle is more accurately put by saying that a court is entitled to infer knowledge on the part of a particular person on the assumption that such a person has the ordinary understanding expected of persons in his line of business, unless by his or other evidence it is convinced otherwise. In other words, the true position is that the court is not concerned with the knowledge of a reasonable man but is concerned with reasonable inferences to be drawn from a concrete situation as disclosed in the evidence as it affects the particular person whose knowledge is in issue. In inferring knowledge, a court is entitled to approach the matter in two stages; where opportunities for knowledge on the part of the particular person are proved and there is nothing to indicate that there are obstacles to the particular person acquiring the relevant knowledge, there is some evidence from which the court can conclude that such a person has the knowledge. However, this conclusion may be easily overturned by a denial on his part of the knowledge which the court accepts, or by a demonstration that he is properly excused from giving evidence of his actual knowledge.' (my emphasis)" (pages 712-715)

48. 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.

49. In this case, the emphasis of Mr and Mrs Callaghan's evidence was more upon their belief that the one department paid them than upon their state of mind in complying with their obligations under the Act. Mr Callaghan has acknowledged that he had received notices under section 727 of the Act and that he had read at least one of them. I am satisfied both on the material in the T documents and on his oral evidence that he received more than one of them and that he read the first one. On the basis of the notices themselves I am satisfied that they clearly set out his obligation to advise the department should his income, or that of Mrs Callaghan, change. I am also satisfied from the notice that it quite clearly stated that income included AUSTUDY benefits. Taking into account Mr Callaghan's knowledge of the notice and of his having read at least one of them, I find that he knew that he had an obligation to advise of a change in Mrs Callaghan's income. Therefore, when he failed to advise of the change he knowingly omitted to comply with a provision of the Act.

50. I am also satisfied that the sickness allowance review forms clearly asked for any other money that Mr and Mrs Callaghan were getting from "any other source". Taken in the context of the form, this must surely have meant any money obtained, such as earnings or the sickness allowance the subject of the review, that had not been mentioned on the form. They omitted to mention the AUSTUDY benefits being paid to Mrs Callaghan. I am satisfied that they knowingly omitted to do so in the sense that they knew that Mrs Callaghan received the AUSTUDY benefits and they omitted to include them. Knowingly omitting them is something different from fraudulently omitting them and I draw the distinction in this case.

51. I am also satisfied that they knew that they had to include the information to comply with the Act. While the sickness allowance claim form does not specifically say that the questions must be answered in order to comply with the Act, it does state at the beginning of the form that "Under section 698 of the Social Security Act 1991, if both forms are not returned your Sickness Allowance may not be payable. Section 728L authorises the suspension or cancellation of your Sickness Allowance if you do not return the forms." (T documents, page 48)

52. This is sufficient to put Mr and Mrs Callaghan on notice that they had to answer the questions on the form in order to comply with the Act. In view of my finding that they had known that they had omitted to include the AUSTUDY benefits, they knowingly omitted to comply with a provision of the Act.

54. It follows that the debt cannot be waived in accordance with section 1237AAD for each of its three paragraphs must be satisfied. There is, therefore, no need to consider whether there are special circumstances in this case.

55. For the reasons I have given, I affirm the decision of the Social Security Appeals Tribunal dated 29 January, 1996.