18 Just before the settlement money was paid, on 15 July 2004 Keddies wrote to Rankin and Nathan confirming that the amount of $108,415.13 was acceptable to Ms Vukelic. The letter also said, "we kindly ask the cheques be drawn in our client's favour as follows: $108,415.13 less statutory charges and $3742.55 interest" (emphasis added). The proper inference from Keddies' use of the expression "less statutory charges" in this letter is that Keddies expected deductions on account of either or both of any income tax payable and Centrelink recoveries.
19 Despite Centrelink's communications with Glad and Ms Vukelic about its charge, Glad erroneously did not deduct the amount charged from its next payment to Ms Vukelic. On 27 July 2004 GIO paid the final amount of $78,449.98 net of tax as now ordered by the Commission by consent. This total erroneously included the $63,603.12 over which Centrelink had a charge. Were Centrelink's charge deducted at the time she would only have received a net sum of $14,846.86 (being $78,449.98 - $63,603.12). GIO says that this overpayment occurred due to an administrative oversight of the GIO Claims Officer responsible for the claim at the time.
20 Mr Nenad Babic, a GIO recovery officer, explained how the administrative oversight occurred both in affidavit and oral evidence. He deposed to the operation of the GIO's weekly compensation payment system in which payments made to recipients such as Ms Vukelic needed to be entered into the GIO's computer system as separate entries for each period in which a different statutory rate applied. Tax was then normally calculated and deducted from the amounts to be paid to injured employees such as Ms Vukelic. He analysed the GIO's computer system in respect of Ms Vukelic's payments. He inferred from that analysis that income tax was calculated and deducted from her payments. He says that this explained the payment of $78,449.98 rather than the ultimately agreed gross settlement sum of $108,666.69. He says that an amount should also have been deducted from the payments to be made to Ms Vukelic for the Centrelink charge. The GIO computer system has no record of that deduction having been made. His conclusion from analysing the business records is that he believes that the GIO Claims Officer responsible for Ms Vukelic's claim overlooked the further deductions for the Centrelink charge. His conclusion is that by reason of what he describes as "an administrative oversight" GIO did not make payment of the amount of $63,603.12 to Centrelink out of the weekly compensation payments payable to Ms Vukelic in July 2004 and that instead GIO mistakenly paid the full amount to Ms Vukelic.
21 Ms Vukelic cross-examined Mr Babic on the first day of hearing. Mr Babic explained that it was clear that "GIO made a technical mistake at that time paying the full amount". Mr Babic made clear that he was not the GIO Claims Officer in charge of the file at the time that these errors occurred. When asked to explain why recovery action was not initiated until April 2005, Mr Babic explained that the decision to pursue the matter further was triggered by a letter from the Australian Government Solicitor seeking recovery of the money from GIO.
22 Indeed there was a gap of about seven months. On 18 March 2005, when neither GIO nor Ms Vukelic had paid the Commonwealth, the Australian Government Solicitor sent a letter to GIO requesting payment to the Commonwealth of the debt owing to the Commonwealth, pursuant to the Social Security Act. On or about 18 April 2005, GIO paid the sum of $63,603.12 to the Commonwealth in response to this demand and in satisfaction of the notice of charge.
23 Once the Commonwealth was paid, GIO informed Ms Vukelic's former solicitors Keddies of the mistake that it had made and demanded payment of $63,603.12. GIO's solicitors also issued a demand for payment on 28 April 2005 direct to Ms Vukelic pointing out to her that,
"You will recall that a Centrelink charge in the sum of $63,603.12 was notified to yourself and your solicitor was Keddies, and our client after proceedings for weekly compensation were determined by the Workers Compensation Commission. Our client advises us that it deducted taxation but under the mistake failed to deduct the charge when preparing the cheques to you for arrears of weekly compensation. Our client is obliged under the Social Security Act 1991 to pay the charge amount to the Commonwealth in any event. However, your client has effectively received $63,603.12 more than you were entitled to, and that our client's expense. This letter is to serve as a demand that you pay $63,603.12 to our client within 14 days of the date of this letter. If payment is not received within that time, our client will commence proceedings to recover same without further notice. Such proceedings will seek interest and costs."
24 Ms Vukelic apparently did not reply to this letter. She was still receiving workers compensation payments from GIO. So the company's solicitors Rankin and Nathan wrote her another letter, enclosing the letter of 28 April 2005. This letter referred to the fact that proceedings had been commenced in the District Court for recovery of the sum of $63,603.12. The letter pointed out that as Rankin and Nathan had been unable to locate Ms Vukelic after exhaustive attempts, that they would recommend that GIO discontinue payments of weekly compensation on the basis that GIO would be "unable to substantiate that [Ms Vukelic was] still alive". She was asked to treat that correspondence as notice under section 54 of the Workers Compensation Act of the proposed determination or reduction of weekly compensation payments to her. Ms Vukelic was found. She appeared at both hearing days of these proceedings.
25 GIO seeks recovery of the sum of $63,603.12 from the defendant. The issues in this case are whether GIO has a right to restitution of this sum and what defences to the claim are available to Ms Vukelic.
Legal Principles and their Application to GIO's Case