SOCIAL SECURITY - Family allowance - overpayment - whether debt due to the Commonwealth may be waived for administrative error or for special circumstances

Social Security Act 1991: S.1237A, 1237AAD

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

Re Groth v Secretary, Department of Social Security (Unreported No. QG52/95 1 December 1995)

1. This is an application for a review of the decision of the Social Security Appeals Tribunal ("the SSAT) made on 31 August 1999 to raise and to recover an overpayment of Family Allowance of $906.70 for the period 3 July 1997 to 4 December 1998. The SSAT affirmed the decision of an Authorised Review Officer made on 26 July 1999.

2. In reaching its decision, the SSAT concluded that there were no grounds to waive the debt because of "special circumstances" or "administrative error".

3. The applicant represented herself at the hearing and gave evidence by telephone. The respondent was represented by Mr. S. Letch, a departmental advocate.

4. At the hearing the Tribunal had in evidence before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 - the 'T' documents (Exhibit 1).

5. The only issue for the Tribunal to decide was whether the overpayments of Family Allowance ("FA") received over the period 3 July 1997 to 4 June 1998 could be waived, in part or in full, because of "administrative error" or for "special circumstances".

6. The general facts were not in dispute and may be stated briefly.

* Mrs. Verrall was in receipt of Family allowance for her children;

* On 3 July 1997 Mrs. Verrall estimated her combined income for 1997/98 taxable year as $29,400;

* Mrs. Verrall was employed at a school during teaching term on a part-time, casual basis. Some of these activities involved volunteer work. On 8 October 1997 the balance of hours between her paid part-time and voluntary work changed;

* On 6 November 1997 Mrs. Verrall estimated her combined income for the 1997/98 taxable year as $29,835;

* Mrs. Verrall was paid Family allowance based on these estimated incomes; and

* Mrs. Verrall's actual combined income for 1997/98 was $37,322 which was more than 110% of her estimated income.

7. Mrs. Verrall's husband was retrenched in June 1998 and his termination payment (T19) had caused their actual combined income to exceed her estimated combined income.

8. The debt is currently being recovered from instalments of $14.40 per fortnight from Family payments. The outstanding balance at 10 February 2000 is $676.30.

9. Mrs. Verrall said that at all times she had complied with her statutory obligations as a social security recipient. Each time her income had changed because of her part-time work hours, she informed Centrelink. She said that a Centrelink officer had told her that she could have done nothing more to keep Centrelink informed, as she had done everything possible.

10. Mrs. Verrall said that there were exceptional circumstances in her case as her husband had been retrenched when he was one year short of his long service entitlements. Her husband had remained with this company during difficult periods when he accepted lower wages. However, he had no say in the actual date of his retrenchment but, along with other retrenched employees, had the date imposed upon him.

11. Mrs. Verrall stated that the retrenchment outcome has caused difficulties for their financial budget because the affects on their family allowance were not foreseen. Furthermore, the legislation was unfair as she would not have been in the current situation if the retrenchment had occurred on 1 July 1998.

12. Mrs. Verrall said that when her husband received his termination payment they both went to the Centrelink office at Palm Beach in early June (June 2 or 4, 1998) to make Centrelink aware of their situation; in addition, for her husband to apply for Newstart Allowance, Mrs. Verrall said that the Centrelink office was shown the termination payment notice (T17). She said that the officer would have been aware that she was receiving family allowance supplement and parenting payment. She said the Centrelink officer gave her no advice as to the affects of the termination payment on these entitlements. However, she said that she was uncertain whether she had raised this query at this time.

13. Mr. Letch, the departmental advocate, stated that there was no suggestion that Mrs. Verrall had done anything wrong. The rate of her Family Allowance entitlements were based on an estimate of income that she had provided. He said that Mrs. Verrall, at all times, had kept Centrelink informed of changes in her income. The debt was not due to fault on the part of Mrs. Verrall.

14. Mr. Letch submitted that there was no administrative error on the part of the Commonwealth. The debt arose because of the termination payment received following Mrs. Verrall's husband being retrenched in June 1998. Without the termination payments, Mrs. Verrall's estimates for combined income would have been correct.

15. With respect to waiver under the special circumstances provisions, Mr. Letch submitted:

* That there was no suggestion that Mrs. Verrall had 'knowingly' set out to defraud the system or to make a false representation or statement;

* That write off of the debt was not applicable because recovery could continue at the existing rate (para 8);

16. Furthermore, Mr. Letch contended that there were no 'special circumstances' because of the process the statutory scheme used to estimate family allowance entitlements. The basis of calculating Mrs. Verrall's family allowance entitlement were correct throughout the period ie. prior to the receipt of and immediately after, receipt of her husband's termination payment. Accordingly, he submitted that there were no 'special circumstances' because the correct payment was made to Mrs. Verrall in accordance with the legislation.

17. With respect to the Centrelink discussions ie. early June 1998 (para 12), Mr. Letch contended that, as advice was not sought about the impacts of the termination payment on family payments by a query from Mrs. Verrall, "special circumstances" did not apply.

18. Mr. Letch further contended that Centrelink's delay ie. in notifying Mrs. Verrall of the overpayment was regrettable - but the delay arose because the overpayment issue was first identified in Centrelink's data-matching program so causing Centrelink to "revisit Mrs. Verrall's entitlements".

19. Mr. Letch concluded by submitting that if Mr. Verrall had been retrenched in July 1998, then there would not have been the situation of family allowance overpayments arising for Mrs. Verrall in the 1997/98 financial year. However, if the termination payment had been made in July 1998, then Centrelink would have had to make corrections to Mrs. Verrall's Family Allowance entitlements for the 1998/99 financial year.

20. Mrs. Verrall emphasised that her family had not set out to defraud the Commonwealth or to do anything wrong. She contended that the outcome just did not seem right, as all the way through she had done everything, and more, to keep Centrelink informed of their combined income situation.

21. Mrs. Verrall said that if she had been informed by the Centrelink officer in June 1998, that her Family Allowance payments would be affected by her husband' termination payment, they would have kept some of the payment to repay the debt - or at least quizzed the basis of payment. The consequence of the Centrelink officer's failure to provide this advice was that her family has endured financial difficulty.

22. Mrs. Verrall concluded with the submission that the current $14.40 per fortnight recovery of the overpayment represented a "great deal for her family". Mrs. Verrall said that she was only working part-time and had become a tertiary student. Consequently, they now had to rely on friends and family, more so, than in the past.

23. The objective of the Tribunal is to review administrative decisions, not only on their merits, but in accordance with the law at all times. The relevant legislation is the Social Security Act 1991 ("the Act").

24. The first question to be considered relates to the credibility of Mrs. Verrall and the veracity of her account as to her dealings with Centrelink. I accept Mrs. Verrall acted honestly in all her dealings with Centrelink and her account to be consistent over time.

25. Section 1237 of the Act provides for circumstances where a debt due by a recipient of social security to the Commonwealth, may be waived:

"SECTION 1237A - WAIVER OF DEBT ARISING FROM ERROR

1237A(1) Administrative error. Subject to subsection (1A), the Secretary 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.

Note: Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).

SECTION 1237AAD - WAIVER IN SPECIAL CIRCUMSTANCES

1237AAD The Secretary may waiver the right to recover all or part of a debt if the

(a) the debt did not result wholly or partly from the debtor or another person knowingly:

(i) making a false statement or a false representation; or

(ii) failing or omitting to comply with a provision of 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."

26. With respect to waiver on the basis of administrative error, the Tribunal finds that there is no basis to waive the debt because there has been an administrative error made by the Commonwealth. The Tribunal finds that the Social Security entitlements Mrs. Verrall received over the period 3 July 1997 to 4 June 1998 were correctly calculated by Centrelink in accordance with the relevant statutory provision [ss. 838(4), 885 and 891].

27. The next question for the Tribunal to decide is whether the debt should be waived because of the 'special circumstances' provisions of the Act.

28. The leading case is Re Beadle v Director-General of Social Security (1984) 6 ALD 1 where the Tribunal said at page 3:

"An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual; uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."

29. The Tribunal concludes that the circumstances in which the overpayment of family allowance entitlements were paid to Mrs. Verrall were not sufficiently 'unusual', 'uncommon' or 'exceptional' to justify the description 'special circumstances'.

30. In Groth v Secretary, Department of Social Security (unreported, No. QG52/95), 1.12.95), Kiefel J. considered whether special circumstances applied in a case involving s.1184 of the Social Security act 1991. She endorsed the approach adopted by the Administrative Appeals Tribunal at first instance; namely, in determining whether a person's circumstances are "special" one should look at the effect upon the claimant if the waiver provision were not applied. If the consequence were one unintended by the legislation, or the effect on the person concerned were different from that which would be felt by others, then the circumstances may be special. The corollary holds true. Kiefel J. stated at paragraph 13:

"The Tribunal held that Mr. Groth's circumstances are not out of the ordinary when regard is had to those subject to the provisions of Part 3.14 which, as I have said, means simply that the section can be seen to have the same effect on him as it does to other persons qualified to receive such a pension. It went on to find that his circumstances and those of his family, although difficult, did not constitute hardship and they could not be said to be different from other pension recipients. There is, I consider, no error disclosed in this reasoning. In reality, as the Deputy President noted, the difficulty in which Mr. Groth is placed results from the level of pension set by the legislation and not because it has special consequences for him."

31. The Tribunal concludes that the effect of the termination payment on Mrs. Verrall's family allowance entitlements is not one intended by the legislation nor is the effect upon the applicant different from that which would be felt by others ie. Mrs. Verrall has endured the same consequence as any other social security recipient who receive an unintended lump sum payment eg. superannuation, retrenchment pay, long service leave... during the period social security entitlements are received, such that actual income for the financial year differs from their estimate. Whilst this conclusion may seem harsh, it would be fairer to say the outcome is unfortunate. The outcome is dependent on the legislation, but the legislation provides the Tribunal no discretion from which to depart. The Tribunal makes the observation that Mrs. Verrall's case, unfortunately, is not the first case before this Tribunal, where lump sum payments have created an equivalent problem for overpayments.

32. For all of the above reasons the Tribunal has no option other than to affirm the decision under review. However, because of the financial difficulties of Mrs. Verrall's family (see paragraph 22) and the beneficial nature of the legislation, the Tribunal directs that recovery of the debt be suspended for a period of twelve months from the date of this decision to facilitate financial stability in the Verrall household. From this date the recovery of overpayments should be determined on the basis of a Statement of Financial Circumstances prepared by Mrs. Verrall.

I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Dr E K Christie, Member

Signed: .....................................................................................