Frugtniet v Secretary, Department of Social Services

Tribunal's decision 6 On 28 March 2019, the Tribunal affirmed the decision of the Social Services and Child Support Division of the Tribunal, which had in turn affirmed the decision of the delegate of the Secretary, to apply the family tax benefit payments due to the appellant to his parenting payment debt: Frugtniet and Secretary, Department of Social Services (Social services second review) [2019] AATA 547. 7 The Tribunal's conclusion that the criteria under s 84A of the Administration Act were satisfied was summarised in the following passages of the Tribunal's reasons: 64. Section 84A of the [Administration Act] provides, not for recovery of family assistance payments, but for recovery of other debts; in this case a debt under the Social Security Act for overpayment of parenting payments. But more importantly, it stands to the benefit of the Applicant by providing a means to reduce his obligation to repay the debt due to the Respondent by application and setting off with the family tax benefit payments. 65. Set off provisions such as this, and set off under the general law, provide for a rational efficiency in circumstances where a person is presented with a debt claim by another person, that first person may assert a corresponding debt due from that other person in order to have the first debt reduced without having to pay first the full amount of the first debt. 66. The necessary application, then, is, first, to determine what the Applicant has by reason of the failure by the Respondent to give notice under the Data-matching Act. In this case it is an entitlement to a benefit, being family tax benefit payments. That entitlement is to be paid $19,665.85 by the Respondent in family tax benefit payments. 67. Second, it is determined that Applicant has an obligation to pay the Respondent $65,620.02 as a debt due to the Respondent for overpayments of parenting payments. The inverse is also true, that is the Respondent has an entitlement to be repaid that amount. 68. Third, the requirements of s 84A(1) of the [Administration Act] are satisfied, being: (a) the Applicant is entitled to an amount of family assistance; and (b) a debt is owed by the Applicant, being a debt due by the Applicant to the Commonwealth under the Social Security Act 1991. 69. Fourth, the requirements of s 84A(2) of the [Administration Act] give power to the Respondent to determine that the whole or a part of the entitlement is to be set off against the debt. The Respondent has made that determination.

Appeal to this Court 8 The appellant appealed the Tribunal's decision to this Court pursuant to s 44 of the AAT Act on 23 April 2019. The hearing of the appeal was held on 24 September 2019. The appellant represented himself and the Secretary was represented by Mr Eskerie, a solicitor. Both the appellant and the Secretary and filed written submissions in support of their respective cases. 9 Before turning to the issues on appeal, there is one other procedural matter of note. On 13 September 2019, 11 days prior to the hearing of this appeal, the appellant filed an originating application under ss 39B(1) and 39B(1A)(c) of the Judiciary Act 1903 (Cth). That initiated a separate proceeding in this Court - VID 1006 of 2019. The originating application in that proceeding (s 39B application), and a supporting affidavit sworn by the appellant, largely traversed the factual background the subject of this appeal. According to correspondence between the appellant and the Registry, the purpose of the s 39B application was "to avoid any jurisdictional objection" in relation to this proceeding - VID 417 of 2019. 10 Given the similarities between the proceedings, my chambers communicated to the parties that I intended to hear both proceedings on 24 September 2019. However, at the hearing of this appeal, Mr Eskerie noted that one aspect of the relief sought in the appellant's s 39B application went beyond the matters that were before the Tribunal in making the decision now under appeal. In light of the distinction between the proceedings, the appellant requested a deferral of the consideration of his s 39B application. As a result, I adjourned the s 39B application in proceeding VID 1006 of 2019 sine die pending the determination of the appeal in VID 417 of 2019. In doing so, I made clear to the appellant that he would not be able to re-agitate in his s 39B application the matters the subject of this appeal. The appellant agreed to the adjournment of his s 39B application on this basis.

Issues on appeal 11 The appellant's notice of appeal set out the following three "questions of law": (a) Whether the Tribunal erred in its interpretation and construction of the provisions of A New Tax System (Family Assistance) Act 1999 (Cth), A New Tax System (Family Assistance) (Administration) Act 1999 (Cth), Data-Matching Program (Assistance and Tax) Act 1990 (Cth), Social Security Act 1991 (Cth). (b) Whether the Tribunal erred in affirming the decision of the Secretary which was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made. (c) Whether the Tribunal erred in law in that procedures that were required by law to be observed in connection with the making of the decision to withhold family tax payments for the period 2004 to 2011 were not observed, so that the decision was otherwise contrary to law. 12 The appellant further stated in the notice of appeal that the Tribunal did not apply the correct legal test and "misapplied the legal principles which govern the proper statutory construction to s 84A Family Assistance Administration Act to set off amounts withheld from the Appellant's family tax benefit payments against the parenting payment debt". 13 Based on the stated "questions of law", and the "grounds relied on" otherwise set out in the appellant's notice of appeal, the Secretary addressed the appeal on the basis that the appellant's argument that Tribunal had misapplied s 84A of the Administration Act was confined to the following issues: (1) the Secretary failed to provide proper notice in accordance with s 11 of the Data-Matching Program (Assistance and Tax) Act 1990 (Cth) (Data-Matching Act) and was therefore not entitled to withhold payments of family tax benefit to repay a Newstart debt; (2) the Secretary failed to commence action within 12 months of receiving the information from the matching agency, as required by s 10(3) of the Data-Matching Act; (3) because the payments were unlawfully withheld they could not be applied to the appellant's parenting payment debt under s 84A of the Administration Act; (4) section 84A only applies to current entitlements and not past entitlements of family assistance; and (5) the Secretary was "statute barred" on the basis that the Secretary had not taken action within the six year limitation period to recover his Newstart debt and therefore there was no longer any debt. 14 In addition to these matters, the appellant further contended at the hearing that the Secretary had determined that the withheld family tax benefit could be applied against the determination by the Secretary under s 84A was for an improper purpose.

Failure to comply with the Data-Matching Act 15 The appellant submits that the Secretary failed to comply with the Data-Matching Act by: (1) failing to provide the notice required in s 11 in connection with the withholding of family tax benefit payments; and (2) failing to commence action to recover the Newstart debt within 12 months of receiving the information from the matching agency in accordance with s 10(3). 16 The appellant's submissions are misconceived and do not reveal any error of law in the Tribunal's decision. 17 As to the first issue, the appellant submits that the Secretary's failure to provide notice in accordance with s 11 of the Data-Matching Act meant the Secretary was not entitled to apply that money to his parenting payment debt. This reasoning conflates two distinct issues. 18 The Secretary accepted before the Tribunal that s 11 of the Data-Matching Act had not been satisfied prior to 22 December 2004 (when the Secretary began withholding parts of the appellant's family tax benefit payments). A decision to that effect was made in October 2016 and was noted by the Tribunal. 19 The Tribunal accepted the Secretary's admission that the payments should not have been withheld given the failure to provide notice. However, the Tribunal correctly identified that the effect of this was that the appellant had an entitlement to be paid family tax benefit for the period to which the withheld payments related. 20 The further issue before the Tribunal, as considered below, was the offsetting against the appellant's parenting payment debt of the family tax benefit payments due to him. That offsetting decision did not rely on data-matching information and s 11 of the Data-Matching Act. The action taken in response to the information obtained through the data-matching program was solely in relation to the raising of the Newstart debt. 21 As to the second issue, being whether the Secretary took action to recover the Newstart debt within the timeframe specified in s 10(3) of the Data-Matching Act, this assertion had already been addressed in the Tribunal's 2004 decision: Frugtniet and Secretary, Department of Family and Community Services [2004] AATA 996. In that decision, the Tribunal concluded as follows at [37]: …The evidence is that, in respect of the debt in question, the respondent received information under the data matching cycle on or about 8 August 2001. It sent a notice to Mr Frugtniet pursuant to s 11 of the Data-Matching Act on the same day. It therefore cannot be said that the Respondent failure (sic) to take action within 12 months of the date that it received information from the data matching agency. 22 In any event, the decision relevant to this appeal concerns the offsetting of the family tax benefit payments due against the appellant's parenting-payment debt. The Data-Matching Act has no relevance to that decision.

Application of s 84A of the Administration Act 23 For the following reasons, there was no legal error in the manner in which the Tribunal applied s 84A of the Administration Act. 24 As a starting point, the failure to provide notice in accordance with s 11 of the Data-Matching Act in relation to the Newstart debt did not prevent the Department from using the withheld money to offset the appellant's parenting payment debt in accordance with s 84A. In this regard, it should be noted that: (1) the appellant's parenting payment debt arose due to a determination made by the Secretary that he was a member of a couple for the period 4 May 2011 to 17 February 2015, not as a result of information received through data-matching; and (2) the appellant's legal challenge to that determination was unsuccessful, resulting in a decision by the Social Services and Child Support Division of the Tribunal affirming the Secretary's decision that the appellant owed the debt and that it could not be written off or waived (although it was subsequently recalculated). 25 The parties contested whether the amount owing to the appellant in relation to withheld family tax benefit payment was an amount to which he was "entitled" for the purposes of s 84A(1)(a) of the Administration Act. The Secretary submits that the Tribunal properly characterised the amount owing to the appellant as an "entitlement" in the ordinary sense of the word. 26 The appellant contended, in contrast, that s 84A of the Administration Act only applied to current entitlements, but not past entitlements, to family assistance. The nub of the appellant's argument appeared to be that s 84A should be construed such that the offsetting mechanism would only apply where the debt owed by the person (for the purposes of s 84A(1)(b)) pre-existed the person's entitlement to an amount of family assistance (for the purposes of s 84A(1)(a)). For example, in accordance with the appellant's interpretation, if a person owed a relevant debt to the Commonwealth, and subsequently became eligible for a family assistance payment, the Secretary would be entitled to determine to reduce the amount of that payment to the extent of the debt owed. However, if the person was "entitled to an amount of family assistance", and then subsequently became relevantly indebted to the Commonwealth, the Secretary was not entitled to determine that these amounts be offset. 27 In support of this contended interpretation, the appellant relied on the explanatory memorandum to the Act that introduced s 84A into the Administration Act. Section 84A was inserted by item 82 of Sch 2 of the A New Tax System (Family Assistance and Related Measures) Act 2000 (Cth) (Amending Act). The explanatory memorandum to the Amending Act relevantly expressed the following: Item 82 also inserts new section 84A. The new provision is based on existing section 227 of the FA Admin Act. Section 227 is essentially a method of debt recovery and is therefore moved from its present location to Division 3 of Part 4 (methods of recovery). New section 84A applies to a person who is entitled to an arrears payment of family assistance and to a debt owed by the person that is recoverable under new section 84A or is a debt under the Social Security Act. 28 The appellant in particular highlighted the phrase "an arrears payment of family assistance" in this passage and argued that the withheld family tax benefit payment owed to him did not fall within the concept of "arrears". 29 The Administration Act does not contain a definition of the term "entitled". Neither does the A New Tax System (Family Assistance) Act 1999 (Cth), which is relevant because the Administration Act adopts defined expressions in that Act: s 3(2) of the Administration Act. 30 The Macquarie Dictionary relevantly defines the verb "entitle" as "to give (a person or thing) a title, right, or claim to something; furnish with grounds for laying claim". Whatever the precise ambit of the concept of a person being "entitled", s 84A(1)(a) of the Administration Act anticipates that a person may possess, pursuant to the relevant statutory framework, a legal right to payment of an amount of family assistance, which includes family tax benefit. 31 Although the factual background is complex, the amount owed to the appellant relates to amounts of family tax benefit that was incorrectly withheld by the Secretary in repayment of a separate debt owed by the appellant in relation to his Newstart allowance. The result is that the appellant was entitled to the amounts of family tax benefit when they arose, and he remains entitled to those amounts today. To the extent that the appellant claims that the withheld amount was not, as at the date of the Tribunal's decision, an amount of family assistance to which he was "entitled", such a contention is misconceived. 32 Nothing in the ordinary meaning of s 84A(1)(a) provides support for the appellant's contention. As the Tribunal found, the proper characterisation of the family tax benefit payments due to the appellant is that they represent his entitlement "to an amount of family assistance". To hold otherwise would entail reading into the language of s 84A an exclusion that does not arise on the ordinary reading of the provision. 33 The statutory text of s 84A is paramount. As the joint judgment of Hayne, Heydon, Crennan and Kiefel JJ explained in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (NT) [2009] HCA 41; 239 CLR 27 (Alcan) at [47], the clear meaning of the text cannot be displaced by historical considerations or extrinsic materials, and the language actually used in the statute provides the surest guide to legislative intention. See also Modules v Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union known as the Australian Manufacturing Workers Union [2019] FCAFC 138 at [134] per Bromberg and Rangiah JJ. That said, the joint judgment in Alcan also recognised at [47] that the meaning of the text may require consideration of the context, which includes the "general purpose and policy" of a provision. 34 There is nothing in the policy underpinning s 84A to support an alteration to its ordinary meaning. The evident object of s 84A is to enable the recovery of debts owed to the Commonwealth where there is an ability to do so through offsetting of entitlements. The appellant's contention undermines this object, and otherwise derives no support from the purpose or policy of the provision. Consistently with the policy of the Secretary's department, as reflected in the Family Assistance Guide (currently available at https://guides.dss.gov.au/family-assistance-guide), s 84A applies to all entitlements to family tax benefit payments (including arrears payments). In particular, section 7.2.3 relevantly expresses the following: FTB arrears payments An FTB arrears payment is a lump sum amount that arises when a reassessment of an individual's entitlement (1.1.E.30) occurs with retrospective effect. This can occur when an individual provides some additional information or does something that gives rise to additional entitlement (for example, resolving their non-lodger status and having a prohibition on instalment payments lifted). These arrears amounts can be used in their entirety in debt offsetting. Act reference: FA(Admin)Act section 84A Setting off FA against debt owed 35 The existence of other features of the Administration Act assist to refute the appellant's contended interpretation of s 84A. The first is s 66 of the Administration Act, which provides that a range of payments under Commonwealth legislation, including of family tax benefit, are "absolutely inalienable" except for certain exceptions. Those exceptions, as listed in s 66(2), include "section 84A (about setting off a person's entitlement to family assistance against a debt of the person)". This exception supports an inference that Parliament contemplated s 84A as operating to enable the offsetting of a debt against a range of payments of "family assistance". 36 The second feature is s 84 of the Administration Act, which is entitled "Deductions from debtor's family tax benefit". The terms of this provision operates in a similar manner to s 84A, but instead expressly provide that certain debts owed by a person to the Commonwealth may "be deducted from instalments of family tax benefit to which the person is entitled". This provision clearly contemplates that a relevant debt owed to the Commonwealth may reduce the instalments of family tax benefit until the debt is repaid. What is relevant for current purposes is that, should the appellant's interpretation of s 84A be accepted, s 84A would have little work to do in addition to s 84. A more reasonable interpretation is that s 84A was inserted by the Amending Act to operate in a manner beyond that already contemplated by s 84. 37 In light of these principles and interpretation, the explanatory memorandum to the Amending Act does not assist the appellant. The meaning of s 84A is clear. And its literal interpretation conforms with its underlying purpose. However, for the sake of completeness, I do not view the description of s 84A in the explanatory memorandum to the Amending Act, as extracted above at [27], as inconsistent with the interpretation I have accepted. According to the Macquarie Dictionary, the relevant definition of "arrears" is "that which is behind in payment; a debt which remains unpaid, through due". That is apt to describe the amount of withheld family tax benefit now owing to the appellant. 38 Accordingly, the Tribunal did not err in is application of s 84A of the Administration Act.

Improper purpose 39 The appellant contended at the hearing that the Secretary had determined that the withheld family tax benefit could be applied against the parenting payment debt and in so doing acted for an improper purpose. However, this contention was largely unparticularised and, when I asked the appellant to identify the improper purpose, he stated that "the improper purpose is that it should not have been done". The gist of the appellant's argument appeared to be that the family tax benefit was designed to benefit his children and the Secretary should not have determined to offset his parenting payment debt instead. 40 In support of his contention, the appellant requested that I review certain documents that were before the Tribunal. The documents largely comprised correspondence from the Department to the appellant and records of phone conversations between the Department and the appellant in 2016 and 2017. 41 Having read the relevant documents raised by the appellant, I do not identify any basis for concluding that the determination of the Secretary for the purposes of s 84A(2) of the Administration Act was for an improper purpose.

Limitation period 42 The appellant submitted that the Secretary: (a) failed to recover the Newstart debt within the six-year limitation period; and (b) the expiration of the limitation period resulted in there being "no debt". 43 However, these submissions are misconceived in circumstances where the limitation period referred to has been repealed and did not apply to the debt in question. 44 The Budget Savings (Omnibus) Act 2016 (Cth) (Omnibus Act) removed the relevant sections of the Administration Act that imposed a six-year limitation on debt recovery. Prior to its repeal pursuant to the Omnibus Act, s 86(1) of the Administration Act provided as follows: Subject to subsections (3), (4) and (5), action under section 84, 84A or 87A for the recovery of a debt is not to be commenced after the end of the period of 6 years starting on the first day on which an officer becomes aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt. 45 The Omnibus Act inserted into the Administration Act a new s 96B, which provides as follows: For the purposes of this Part, legal proceedings, or any action under a provision of this Part, for the recovery of a debt may be commenced or taken at any time. 46 Item 39 of Sch 13 of the Omnibus Act provides that this amendment, amongst others, applied in relation to debts arising after the commencement of that item (being 1 January 2017) and any debt that arose before the commencement of the item, to the extent that the debt was outstanding immediately before the commencement. 47 Given that the Newstart debt arose and remained outstanding immediately before 1 January 2017, the former six-year limitation period did not apply to the recovery of that debt.

Conclusion 48 The appellant's notice of appeal does not identify any error of law in the decision of the Tribunal. Accordingly, the appeal will be dismissed with costs. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Anderson.

APPENDIX Date Event 27 March 2001 The Secretary obtained a data match review from the Australian Taxation Office in accordance with the Data-Matching Act. 11 February 2002 The Secretary advised the appellant that for the period 21 August 1998 to 6 July 2000, he had been overpaid Newstart allowance in the sum of $19,665.85. 24 September 2004 The Tribunal set aside, ultimately, the decision of the Secretary on 11 February 2002 and found that the debt had been correctly raised, but the decision to recover the debt was incorrect as the Secretary had not strictly complied with s 11 of the Data-Matching Act. 25 October 2004 The Secretary advised the appellant that he would be repaid the amounts that had been withheld to date, but that the Secretary intended to seek recovery of the Newstart debt. 22 December 2004 The Secretary began withholding part of the appellant's family tax benefit payments in repayment of the Newstart debt. 9 April 2008 The appellant was granted parenting payments (single rate). 28 July 2011 The appellant's Newstart debt was repaid (through withholding part of his family tax benefit payments). 24 August 2012 The appellant's parenting payment was cancelled and the appellant was transferred back to a Newstart allowance. 12 December 2012 The appellant advised the Secretary of a change in his circumstances and he was granted parenting payment with effect from 7 December 2011. 19 May 2015 The Secretary determined that the appellant owed a debt in the sum of $65,557.46 for parenting payment received during the period 4 May 2011 to 17 February 2015 on the basis that the appellant was a member of a couple in accordance with s 4(2) of the Social Security Act. 1 June 2015 An authorised review officer (ARO) set aside a decision to suspend the appellant's parenting payment and in substitution cancelled his parenting payment. 30 September 2015 An ARO varied the decision regarding the appellant's parenting payment debt and found that it was in the sum of $66,349.27 for the period 4 May 2011 to 17 February 2015. 15 February 2016 The Social Services and Child Support Division of the Tribunal (Specialist Division) affirmed the decisions of the ARO dated 1 June 2015 and 30 September 2015. 31 October 2016 The Secretary determined that the withholdings made between 22 December 2004 and 28 July 2011 should not have been made due to the failure to provide notice under s 11 of the Data-Matching Act. 7 December 2016 The Secretary made a decision that recovery of the Newstart debt should not have commenced. The Secretary reversed the recovery and transferred the sum of $19,665.85 towards the appellant's parenting payment debt. 3 February 2017 An ARO affirmed the decision dated 7 December 2016. 8 March 2017 The appellant lodged an extension of time to seek review of the Tribunal's decision dated 15 February 2016. 8 March 2017 The appellant lodged an application for review with the Specialist Division of the ARO's decision dated 3 February 2017. 10 and 19 April 2017 The General Division of the Tribunal heard the application for an extension of time and made an oral decision to refuse the application. 27 September 2017 The Secretary amended the parenting payment debt to $34,097.41. 18 October 2017 The Specialist Division affirmed the decision of the ARO dated 3 February 2017. 19 October 2017 The Federal Court dismissed the appellant's appeal from the decision of the General Division of the Tribunal dated 19 April 2017. 24 October 2017 The appellant lodged an application for review with the General Division of the Tribunal regarding the Specialist Division's decision dated 18 October 2017. 16 November 2018 The Federal Court dismissed the appellant's application for an extension of time regarding the Federal Court's decision dated 19 October 2017.