Social Security Act 1991 s 1237A, 1237AAD

Jazazievska v Secretary, Department of Family and Community Services [ 2000] FCA 1484

Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] FCA 1565; (1997) 152 ALR 127

Haggerty and Secretary, Department of Education, Training and Youth Affairs, [2000] FCA 1287

1. The applicant applies to review a decision made by the Social Security Appeals Tribunal ("SSAT") on 15 November 2002.

2. The SSAT was then reviewing four decisions made by Centrelink, two of which related to alleged overpayments of parenting allowance and two alleged overpayments of parenting payment (Parenting allowance was replaced by Parenting Payment on 20 March 1998).

3. The alleged debts with respect to parenting allowance occurred by way of overpayment between 7 December 1995 and 12 March 1998 in the sum of $13,318.40 and between 26 February 1998 to 12 March 1998 in the sum of $196.40.

4. The alleged debt with respect to parenting payment occurred by way of overpayment between 26 March 1998 and 21 May 1998 in the sum of $757 and between 26 March 1998 and 18 June 1998 in the sum of $949.90.

5. The above four periods clearly indicate - by reference to the respective dates - that there was some overlap in either the payments made or in the calculations. Nonetheless, it was learnt at the hearing that considerable repayments have been made by Mrs Chapman with respect to the two periods of parenting payment and the one period of parenting allowance between 26 February 1998 and 12 March 1998. With respect to the remaining period of parenting allowance being 7 December 1995 to 12 March 1998, repayments have been made by withholdings from current benefits and at the date of hearing the sum of $9,754.63 remained outstanding.

6. The SSAT affirmed the four decisions made by the Centrelink save that with respect to the period of alleged overpayment of parenting allowance between 7 December 1995 and 12 March 1998 that period was varied and it was decided that the debt commenced from 1 January 1996.

7. The hearing of the application was conducted at Eaglehawk on 2 April 2003. Mrs Chapman appeared without legal representation but with the assistance of her husband. Mr Huttner, a Centrelink advocate, appeared on behalf of the respondent.

8. The facts may be briefly summarised as follows-

9. Prior to November 1995, Mr and Mrs Chapman were unemployed. Mr Chapman received Newstart allowance and Mrs Chapman received parenting allowance. In November 1995 Mr Chapman obtained employment and commenced to earn salary.

10. Mrs Chapman said that her husband advised the Department of Social Security ("DSS") (being the predecessor of the respondent), of his return to work and his payments ceased. However payments of parenting allowance continued to be paid to Mrs Chapman at the same rate that was being paid prior to Mr Chapman commencing to earn income. Letters were also received from the DSS advising that the salary of Mr Chapman was $11.73 per fortnight.

11. In February or March of 1998, Mrs Chapman commenced employment as a part-time cleaner. She acknowledged that she did not notify Centrelink that she commenced employment. However, she fractured her leg approximately two weeks after she commenced employment and did not thereafter work. Mr Chapman undertook the part time cleaning and it is believed that salary thereafter was paid to Mrs Chapman as if she had been undertaking the work. That employment ceased on 10 July 1998. Mrs Chapman said that this was the only employment that she had held during the relevant periods of alleged overpayment. Mr Chapman remained employed elsewhere on a full-time basis earning salary whilst he was also undertaking the part time cleaning work.

12. Mrs Chapman acknowledged that she received a number of letters from DSS concerning her obligations to notify events or changes in circumstances, but because of the repetition in letters being received advising of her husband's salary at $11.73 per fortnight, she reached the stage of opening them and then throwing them away, without contacting the DSS.

13. She said that at all times she acted in good faith.

14. In cross-examination Mrs Chapman said that she had been in receipt of parenting allowance for about two years prior to November 1995. She said that she was not aware that that payment was means tested by reference to income that she or her husband may have earnt. She said that her husband did notify the respondent in November 1995 of his return to work but thereafter letters were received notifying her that the rate of parenting allowance being paid was calculated by reference to income earned by her husband of $11.73 per fortnight. She said the letters contained information which was obviously incorrect. She was aware that her husband notified the DSS and asked it to correct the information that was held, nonetheless, she agreed that all letters were addressed to her and she did not telephone or contact the DSS personally. She said that her husband is a qualified accountant and he did "all the bookwork". She said that it "did not occur to me that I should ring".

15. By reason of DSS continuing to send letters addressed to her containing incorrect information as to her husband's salary, Mrs Chapman said that she assumed that administrative error was occurring. She said her husband had previously notified the DSS that he was working and the extent of his salary. She also said that she "hates ringing" the "Department" because "I got put onto a robot man and waited for an hour". This apparently was referable to other experiences that she had had with the DSS or Centrelink, where she had made enquiry concerning allowances payable to her children as students.

16. Mrs Chapman confirmed that she had "no idea" of whether parenting allowance would be adjusted by reference to her husband's income and said that she presently has "no idea" whether payments are adjusted for that reason. She said she did not receive any literature or information from the DSS concerning the manner in which benefits were calculated and whilst she was aware of reporting obligations when a person returns to work, she said that she knew that her husband had telephoned the DSS and notified it of his return to work and the salary that he was earning. Mrs Chapman also said that she did speak with her accountant concerning benefits that had been received (in the context of whether she had any income tax liability) and was told by the accountant that persons are entitled to benefits when their spouse is earning.

17. Mr Chapman gave evidence and said that at November 1995 he and Mrs Chapman "did everything that we could" to notify the Department of his return to work and the errors in the data that was held, as was obvious from the letters that were subsequently received.

18. Mr Chapman said that when he first approached Centrelink, concerning the alleged debt that had been raised, he and Mrs Chapman were both shocked and very upset because Mrs Chapman was then threatened with prosecution and the potential of being gaoled. He said that he did everything to ensure that those events would not occur and offered to negotiate with the Centrelink "to keep my wife out of jail". Later, when the "emotional trauma" had "worn off", he realised that he and his wife had done all that they possibly could to notify Centrelink that errors had been made by it and that they had been treated unfairly.

19. Mr Chapman said that because the DSS had been notified of his return to work and the income that he was earning (and therefore a change in their joint circumstances) he and Mrs Chapman held the belief that there was nothing further that they needed to do. He said letters that were received recording his income at $11.73 per fortnight were regarded as being absurd. He said it was obvious that the DSS had not correctly processed the information that had been given to it by him. Certainly his payments had ceased, consistent with his notification, however errors continued to be made by the DSS with respect to the salary that he was earning as was obvious from the letters that were subsequently received.

20. In cross-examination Mr Chapman acknowledged that the letters forwarded by the DSS were addressed to his wife and she was obliged as the recipient of a benefit to notify of changed circumstances. He said that he notified the DSS of the change in his circumstances and understood that Mrs Chapman's records would be adjusted accordingly. Mr Chapman said that if Centrelink is capable of conducting a data match exercise between its records and the records of the Australian Taxation Office, it was also capable of running a data match exercise between his entitlements and the entitlements of his wife. It followed, he said, that because the DSS was apparently capable of ending his benefits when he notified of his return to work and the salary that he was earning, it was also capable of adjusting Mrs Chapman's rate of benefit.

21. Mr Chapman was then shown some forms completed by the Commonwealth Employment Service, which apparently recorded his return to work in November 1995. Whilst it was acknowledged that the Commonwealth Employment Service was not the paying agency for the benefits paid to Mrs Chapman, Mr Chapman said that the Commonwealth Employment Service had not been paying him Newstart allowance, rather, that payment had been made by the DSS which cancelled his benefits when it received notification of his return to work.

22. Mr Chapman said that he understood that the DSS does need to know of the combined income of married persons when calculating benefits and is also aware that parenting allowance is means tested. Nonetheless, he said that he did not have any belief or expectation that his return to work and his subsequent receipt of income would affect the rate of parenting allowance to his wife because he was not aware - despite means testing - of the threshold levels of income which may or may not affect the rate of benefits. He said that when payments continued to be made to his wife at the same rate that were being made prior to his return to work, he assumed that his wife was being paid a benefit to which she was entitled. That is to say, because he was aware that benefits are means tested, he assumed that the DSS would have adjusted - if appropriate - the rate of payment made to his wife and by reason of that payment continuing to be made at the rate prior to his return to work, he assumed that she was receiving her correct entitlement..

23. When asked why he did not write a letter or send a fax to the DSS (as opposed to making telephone calls) Mr Chapman said that he and his wife had been living in Lake Boga and had moved to Bendigo when he took up work in November 1995 with the City Bendigo.. He said that he had not previously worked as an accountant in local government. He said most of his time was taken up concentrating on the changes in work practices. Nonetheless it was his case that because the DSS was of the belief (apparently) that he was in receipt of $11.73 per fortnight which was patently absurd, it was also capable of writing to him to confirm the accuracy of the data that it held. He also said that the respondent "had no trouble ringing me and requesting an interview when they alleged an overpayment".

24. Section 1237A of the Social Security Act 1991 provides that the Secretary of the respondent "must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt".

25. Section 1237AAD provides that the Secretary may waive the right to recover all or part of the debt if the Secretary is satisfied that the debt did not result in whole or in part from the debtor or another person knowingly "making a false statement or false representation or failing or omitting to comply with a provision of the 1991 Act or the 1947 Act and there are special circumstances (other than financial hardship alone) that make it desirable to waive."

26. It is to be noted from the above two sections that s.1237A directs the Secretary to waive the debt or part of it, if it is attributable solely to administrative error made by the Commonwealth and where the debtor received the payment in good faith. Section 1237AAD gives the Secretary a discretion to waive the debt in whole or part if it did not result in whole or part from the debtor or another person making a false statement or failing or omitting to comply with the provisions of the current or former act and where there are special circumstances making it desirable to waive.

27. The frustration's of Mr and Mrs Chapman that were apparent at the hearing are to be understood when an examination of the documents lodged by the respondent pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 are considered.

28. At pages 195 - 197 inclusive of the T-documents are three letters received by Mr Chapman. On 30 November 1995, he received a letter from the Commonwealth Employment Service in Swan Hill advising him that his job search allowance had been cancelled from 25 November1995 because he had returned to work. On 12 December 1995 he received a letter from the Department of Social Security also advising him that job search allowance had been cancelled because he had advised that he had returned to work. On 11 December 1995 the Commonwealth Employment Service wrote to Mr Chapman and advised him that his job search allowance "will start again from 25 November 1995". The letter of 11 December 1995 was obviously an error and the letters of 30 November 1995 and 12 December 1995 are duplications, although forwarded by both the Commonwealth Employment Service and by the Department of Social Security.

29. The letter from the DSS to Mr Chapman originated at the same office that wrote a number of letters to Mrs Chapman commencing on 3 November 1995 found at pages 20-56 of the T-documents. The first letter (relevantly) received was on 3 November 1995 advising Mrs Chapman that she will be paid $280.20 per fortnight as parenting allowance commencing on 9 November 1995. The letter records that the fortnightly income adopted by the DSS "to work out your entitlement" is $11.73. The letter also records "the fortnightly income we have used for your partner is $11.73". The letter directs her to contact the DSS if her personal income "goes over $11.73 a fortnight" or Mr Chapman's personal income "goes over $11.73". Letters in identical terms were sent to Mrs Chapman on 17 November 1995, 1 December 1995, 11 December 1995, 15 December 1995, 1 January 1996 and 12 January 1996. (It is not known whether this was the entirety of the letters received or whether these were included in the T-documents as a representative sample).

30. On 21 March 1998 Mrs Chapman commenced to receive a number of letters concerning parenting payment advising that she would be paid at $290.10 per fortnight commencing 26 March 1998. These letters record that her entitlement was being calculated against her income of $8.07 per fortnight, however she was obliged to notify Centrelink if her "personal income goes over $60 a fortnight". She was also obliged to notify Centrelink if Mr Chapman's "total personal income goes over $8.07 a fortnight"..

31. Mrs Chapman commenced employment with D & D Martin Family Trust trading as Jonelle Pty Ltd on 26 February 1998 (refer page 45 and 51). Mrs Chapman did not notify Centrelink of her return to work (refer para 11 earlier). To the extent that she acknowledged that she did not notify Centrelink of her return to work and by reason of income that she continued to receive whilst receiving parenting payment, I am obliged to find as a fact that payments made by Centrelink were by way of overpayment because Mrs Chapman either did not have an entitlement or did not have an entitlement to the benefit that she in fact did receive. It follows that those payments were not received in good faith. It follows, with respect to payments made beyond 26 February 1998, there is a debt due to the Commonwealth and there is no power in these circumstances for the Secretary to waive that debt.

32. Accordingly, the remainder of this decision concerns the payments of parenting allowance made before 26 February 1998.

33. To the extent that Mrs Chapman particularly was concerned about her reputation being tarnished by the allegations made against and the threat of prosecution, it does not follow that a person who receives a benefit to which they were not entitled has acted fraudulently or dishonestly (refer Jazazievska v Secretary, Department of Family and Community Services [2000] FCA 1484..) It is also noted from page 117 of the T-documents that a Departmental Officer prepared a memorandum concerning the potential of prosecution. In that memorandum it is acknowledged that Mr Chapman did notify the Department of his return to work and his benefits were cancelled. The officer recorded that payments nonetheless continued to be paid to Mrs Chapman and "her PGA should have been reduced back to basic rate automatically by the system - but was not, due to system fault".

34. An examination of the correspondence received by Mr and Mrs Chapman (particularly Mrs Chapman) and the memorandum found at page 117 clearly satisfy me that there was administrative error made by the DSS in the payments that it made to Mrs Chapman beyond November 1995. A "system fault" might be an explanation for the payments that were made beyond November 1995 but "the system" must surely operate only after it receives certain information. For "the system" to generate a number of letters containing information which was factually incorrect, must be referable to the information which is processed or fed into it by Departmental staff. I would have thought - as did Mr and Mrs Chapman - that processing an entitlement to Mrs Chapman based on partner income of $11.73 was manifestly incorrect when the DSS knew that Mr Chapman had returned to work, had had his Newstart allowance cancelled and was receiving an income based on full-time employment. Nonetheless the DSS continued to make payments to Mrs Chapman, apparently at the maximum rate.

35. But having regard to the legislation referred to above, waiver can only be implemented if the debt can be attributed solely to an administrative error made by the Commonwealth, if the beneficiary received those payments in good faith (s 1237A).

36. In Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] FCA 1565; (1997) 152 ALR 127 Finn J in the Federal Court examined an equivalent provision under the Student and Youth Assistance Act 1973. His Honour recorded that the reference to "good faith" was a reference to the "particular state of affairs that exists at the time a payment (or payments) is received" as opposed to whether the beneficiary acted in good faith towards the DSS. Later, in a further examination of the concept of "good faith" and the "burden imposed upon debtor attempting to have the debt waived" His Honour recorded-

"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 monies received as his or her own - that person does not receive the payment in good faith. Absence such knowledge or reason to know the receipt would be in good faith".

37. In Jazazievska (refer earlier) Cooper J discussed the concept of "wilful blindness" in the context of examining whether a persons conduct can amount to good faith. His Honour, decided-

"a person does not act in good faith where the person turns a blind eye to circumstances which raise doubt as to the entitlement of the person to receive and retain the payment or refuses to make reasonable enquiries where doubt exists ...."

38. In Haggerty and Secretary, Department of Education, Training and Youth Affairs, [2000] FCA 1287 French J. decided (although giving a different emphasis to the decision in Prince) decided-

"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".

39. In the present case Mrs Chapman received a number of letters from the DSS which contained information which was obviously incorrect. The contents of the letters should have given her a sufficient clue or put her on notice that the administration of her benefits was fundamentally flawed. She acknowledged that the contents of the letters with respect to the rate of income of her husband was absurd but she did not telephone the respondent or write either by letter, email or facsimile. She did not attend a social security office personally. She was obliged under the recipient notification obligations to notify the DSS and she did not. I would have thought that Mrs Chapman would have been suspicious of her entitlement to receive a benefit at the same rate that was being paid before her husband commenced to earn a full time income.

40. Whilst Mr Chapman made representations to the DSS concerning his status as a welfare recipient, Mrs Chapman did not. There was no attempt made by her to rectify the error in the respondent's records which would have surely brought to the respondent's attention that it was paying a benefit that it was not liable to pay or was paying at a rate in excess of what it was required to pay.

41. It follows, from the preceding paragraphs, that waiver of the debt cannot be permitted because the debt is not attributable to sole error on the part of the Commonwealth. I again emphasise that none of this decision should be understood by Mrs Chapman as suggesting any dishonesty or fraud on her part. She was obliged as a recipient to put the DSS on notice of events recorded in the letters that she received and she did not. As the recipient of monies from the public purse she had a duty to comply and bring obvious errors to the attention of the respondent or to notify it of a change of circumstances. In all of these circumstances I cannot find that the payments made after November 1995 were received in good faith. Section 1237A therefore cannot be satisfied.

42. Section 1237AAD gives the Secretary a discretion to waive in limited circumstances only, none of which in my view apply in the present case. There was a failure to comply with the 1991 Act, namely a failure to notify changed circumstances. Additionally, absent any false statement or representation or failure to comply, there must also be special circumstances, other than financial hardship, that make it "desirable" to waive. The debt is not insignificant, it is money to which Mrs Chapman did not have an entitlement and she has had the benefit of it. There are no special circumstances that would make it desirable to waive the debt.

43. The decisions under review as varied by the SSAT in the circumstances will be affirmed.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of