[1992] FCA 489; (1992) 29 ALD 28

Social Security - s.246(1) of Social Security Act 1947 - alleged conspiracy to cause Department of Social Security to pay unemployment benefits into bank accounts in fictitious names - whether essential ingredient of s.246(1) that the Secretary demonstrate that money was in fact paid to party concerned - whether Tribunal applied requisite degree of satisfaction in finding the conspiracy proved.

Counsel and Solicitors Mr R. Henderson instructed by

The Court oders that:

1. Appeal allowed, with costs.

2. Set aside the decision of the Tribunal. In lieu thereof,

order that the matter be remitted to the Tribunal for

further decision, with or without the hearing of further

evidence.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

By s.246(1) of the Social Security Act 1947, it was provided, at material times, as follows:

"246.(1) Where, in consequence of a false statement or

representation, or in consequence of a failure or omission

to comply with any provision of this Act, an amount has been

paid by way of pension, allowance or benefit under this Act

which would not have been paid but for the false statement

or representation, failure or omission, the amount so paid

is a debt due to the Commonwealth."

2. By s.162(1) of the Act, it was provided as follows:

"162. (1) Where a person (in this subsection called the

'pensioner') is indebted to the Commonwealth under or as a

result of this Act, the Secretary may, by notice in writing

given to a person:

(a) by whom any money is due or accruing or may become due

to the pensioner;

(b) who holds or may subsequently hold money for or on

account of the pensioner;

(c) who holds or may subsequently hold money on account of

some other person for payment to the pensioner; or

(d) who has authority from some other person to pay money

to the pensioner.

require the person to whom the notice is given to pay to the

Commonwealth:

(e) an amount specified in the notice, not exceeding the

amount of the debt due by the pensioner under or as a

result of this Act or the amount of the money referred

to in the preceding paragraph that is applicable; or

(f) such amount as is specified in the notice out of each

payment that the person becomes liable from time to

time to make to the pensioner until that debt is

satisfied."

3. By a notice in writing to Westpac Banking Corporation dated 8 May 1989, purportedly given pursuant to s.162(1) of the Act, the Delegate of the Secretary of the Department of Social Security ("The Secretary") required Westpac "being a person -

a) by whom any money is due or accruing or may become due

to;

b) who holds or may subsequently hold money for or on

account of;

c) who holds or may subsequently hold money for or on

account of some other person for payment to; or

d) having authority from some other person to pay money

to

Michael Franciscus Kalwy (hereinafter referred to as the

'pensioner') now or previously of Milpera, a pensioner who

is indebted to the Commonwealth under or as a result of the

Act, to the amount of $99,999.99 (to) pay to the Director,

Department of Social Security an amount, of $99,999.99..."

4. Notices in similar terms were given to other financial institutions.

5. The Secretary alleged that the applicant, Mr Kalwy, who, at material times, was employed in the Department of Social Security, was a party to a conspiracy to defraud the Commonwealth by schemes summarised in the Secretary's statement of facts and contentions filed in the Tribunal as follows:

"3. The Commonwealth was defrauded...by means of a scheme

carried on by several persons, including among other

people, one Mario Gaudiello (then employed in the

Commonwealth Employment Service) who caused the

Department of Social Security (DSS) to pay

unemployment benefits into bank accounts in the names

of 'persons' who were not entitled to those benefits.

4. Four of the names used for the purposes of the scheme

by the persons carrying on the schemes were MICHAEL

BLISS, RAYMOND CONTI, ELIAS IBRAHIM AND MICHAEL

SEVINO.

5. The names of the 'persons' specified in paragraph 4

above together with their alleged addresses, and

details of their alleged bank accounts were written,

or caused to be inserted by various of the persons

involved in carrying on the scheme at various times

during the relevant period, in 'Application for

Unemployment Benefit' Forms (SU19a Forms) and

'Application for Continuation of Unemployment Benefit'

Forms (SU19b Forms). These SU19a and SU19b forms were

lodged, by various of the persons involved in carrying

on the scheme at various times during the relevant

period, with the Bankstown Office of the DSS whereupon

the SU19a and SU19b forms were processed in accordance

with the DSS' usual system for processing unemployment

benefit claim forms, with the result that amounts of

money, as set out in Schedule 1 hereto, were paid by

the DSS into the bank accounts details of which

appeared in the relevant forms.

6. The 'persons' named in paragraph 4 above are not and

never have been in existence, ie they are fictitious

persons."

6. On 2 August 1990, the Social Security Appeals Tribunal set aside the decision to issue the notices. On 13 March 1992 the Administrative Appeals Tribunal ("the Tribunal") constituted by Senior Member M.D. Allen, set aside the decision of the other Tribunal and remitted the matter to the Secretary "in order that it might take such action as it deems meet, including the issue of notices pursuant to Section 162 of the Social Security Act 1947 or any provision in substitution thereof, to recover the sum of $27,099.99 from the Respondent Michael Kalwy."

7. Mr Kalwy now appeals to this Court from the Tribunal's decision, on a question of law.

"6. The applicant (the Secretary) now seeks to prove, on

the balance of probabilities, that the Respondent (Mr

Kalwy) was involved in a conspiracy with Gaudiello to

defraud the Department of Social Security. If this

conspiracy is proved then S246 of the SSA clearly permits an

overpayment to be recovered from the Applicant. The amount

of that overpayment may be a sum certain but I accept the

submission of Ms Henderson, who appeared for the Applicant,

that where two or more have conspired together to defraud

they are each jointly and severally liable for the amounts

wrongly paid out to the conspirators. Cf Halsbury 4th Ed

Vol 12 para 1210 and R v Darby [1982] HCA 32; 40 ALR 594."

9. After analysing the evidence of Mr Gaudiello, which was relied upon by the Secretary, Mr Allen went on to say:

"11. ...Gaudiello's statements...remain as part of the

evidence but it is clear that no decision can be made

relying upon that evidence. I would only mention for

completeness that there was certainly no obligation in the

circumstances upon the Respondent to call Gaudiello nor can

any criticism be made regarding that failure.

12. The Applicant also called Michael Shaloub. As I

understand the Applicant's case it was not alleged in these

proceedings that the Respondent and Shaloub were

co-conspirators one with the other but that both were

conspirators in separate conspiracies with Gaudiello but

that each knew of the other's involvement with Gaudiello."

"21. Standing by itself the evidence of Shaloub discussed

above would not, after cross-examination, of itself be

sufficient to persuade me of the Respondent's guilt. There

is, however, one other piece of evidence in the Applicant's

case which I find compelling. That evidence is a tape

recording of a conversation between Gaudiello and Shaloub

made 26 April 1989."

11. In the course of this conversation, Mr Shaloub said: (inter alia)

"Where did that go...Bliss and all that. You went halves

with Kalwy. There's a lot of money there..."

12. Mr Allen went on to analyse the evidence given by Mr Kalwy and concluded:

"43. When the whole of the evidence before me is considered

I am satisfied that its cumulative effect is to persuade me,

on the balance of probabilities, that the Respondent did

conspire with Gaudiello to fraudulently obtain benefits from

the Department of Social Security to which he was not

entitled. That fraud being committed by making and

processing false claims in the fictitious names of Bliss,

Conti, Ibrahim and Sevino.

44. I am also satisfied that the Respondent is jointly and

severally liable with Gaudiello to refund the total amount

of false benefits paid to the names of Bliss, Conti, Ibrahim

and Sevino. I note that the Department has regarded the

Respondent as liable to refund only one half of that sum and

I see no reason to interfere with this determination."

13. Mr Kalwy has now appealed to this Court on what, he argued, are several questions of law. We turn first to the proper construction of s.246(1).

14. The principal argument on the appeal concerned the proper interpretation of s.246(1). In order to place the matter in context, reference should first be made to the legislative history of the provision.

15. By s.140(1) of the Social Security Act 1947, as it stood prior to its amendment in 1985, it was provided as follows:

"140.(1) Where, in consequence of a false statement or

representation, or in consequence of a failure or omission

to comply with any provision of this Act, an amount has been

paid by way of pension, allowance or benefit under this Act

which would not have been paid but for the false statement

or representation, failure or omission, the amount so paid

shall be recoverable in a court of competent jurisdiction

from the person to whom, or on whose account, the amount was

paid, or from the estate of that person, as a debt due to

the Commonwealth."

16. In 1985 (by Act No. 127), s.140(1) was amended by omitting the words:

"'shall be recoverable in a court of competent jurisdiction

from the person to whom, or on whose account, the amount was

paid, or from the estate of that person, as a debt due to

the Commonwealth' and substituting 'is a debt due to the

Commonwealth'."

17. The object of this amendment was explained in the Second Reading Speech as follows:

"The Bill also clarifies and rationalises the rules

concerning overpayments of social security pensions.

Specific rules will provide for the creation of a legally

recoverable debt if payment continues after the pensioner

ceases to qualify for the pension. In addition, specific

rules will provide for the creation of a legally recoverable

debt where the amount of pension to which a pensioner is

entitled is reduced, but the pensioner does not duly notify

the change in his or her circumstances."

18. By s.1224(1) of the Social Security Act 1991, it is now provided as follows:

"1224.(1) If:

(a) an amount has been paid to a recipient by way of

pension, benefit or allowance under this Act; and

(b) the amount was paid because the recipient or another

person:

(i) made a false statement or a false

representation; or

(ii) failed or omitted to comply with a provision of

this Act; and

(c) the amount has not been deducted from the recipient's

pension, benefit or allowance under section 1223;

the amount so paid is a debt due by the recipient to the

Commonwealth."

19. It appears from the passages in the reasoning of Mr Allen which we have cited that the Tribunal approached the matter on the footing that all the Secretary had to establish was that Mr Kalwy was a party to the conspiracy alleged. In our opinion, whilst this was a material matter to be taken into account by the Tribunal, at least by way of background, it was not the only matter which the Secretary had to establish in order to succeed before the Tribunal.

20. It will be recalled that s.246(1) provided, so far as is presently relevant, that where -

(i) in consequence of a false statement or representation;

(2) an amount has been paid by way of benefit;

(3) which would not have been paid but for the false statement or

representation,

- the amount so paid is a debt due to the Commonwealth.

21. It is true that s.246(1) did not, in terms, state by whom the debt was due. But, in our opinion, the necessary implication was that the debt was due by the person or persons to whom the benefit was paid. There is nothing in the previous legislative history, to which we have referred, to contradict this. Moreover, the subsequent legislative history (s.1224 of the 1991 legislation) explicitly confirms this interpretation.

22. The language of Dixon J. in Grain Elevators Board (Vict.) v Dunmunkle Corporation [1946] HCA 13; (1946) 73 CLR 70 (at 86) -

"Although the provision was passed too late to apply to the

present case, I think that it may be considered on the

question of interpretation."

23. In our opinion, the view taken by Parliament as to the legal meaning of a doubtful enactment may be treated as of persuasive, though not binding, authority (see Pearce and Geddes, Statutory Interpretation in Australia, 3rd ed. at 50-1; Bennion, Statutory Interpretation, at 553-4).

24. It follows, in our view, that it was an essential ingredient of the operation of s.246(1) in the present case that the Secretary demonstrate that the amounts in question were paid to Mr Kalwy. Only by identifying the recipient of the payments in question was it possible to have the statutory debt to the Commonwealth created in any effective sense. In our opinion, the Tribunal did not, in truth, address this question and failed to make any specific finding, positive or negative, on the point.

25. It is true that the Tribunal found that the bank accounts into which the amounts were paid were held in the names of fictitious persons. But it does not follow that it was not open to the Secretary to seek to trace the proceeds, or part of the proceeds, into the hands of Mr Kalwy, if that be the fact.

26. It is also true, as has been noted, that the Tribunal accepted the evidence that Mr Shaloub "went halves" with Mr Kalwy. There is some force in the submission now put on behalf of the Secretary that acceptance of this evidence was tantamount to a finding that Mr Kalwy had, in fact, received one-half of what was paid into the fictitious bank accounts. But, in our view, a positive and explicit finding on the point was required. None was made.

27. In this regard, it must be borne in mind that, in the Tribunal, Mr Kalwy had put the Secretary's allegation that he had received the proceeds of the bank accounts squarely in issue. In his statement of facts and contentions filed in the Tribunal, Mr Kalwy not only denied the conspiracy alleged but also, inter alia, contended as follows:

"5. There is no evidence to support the contention that

any of the monies allegedly paid by the Department of

Social Security on account of Messrs Bliss, Conti,

Ibrahim and/or Sevino were ever received by the

Respondent.

6. Alternatively, there is no basis upon which to

identify what amount of monies, if any, was ever

received by the Respondent on account of Messrs Bliss,

Conti, Ibrahim and/or Sevino."

28. There was before the Tribunal an internal Government submission dated 26 March 1990 addressed to the Department's Assistant Director, Debt Recovery, Attachment E, which was relied upon by the Secretary, as follows:

"Attachment E

MICHAEL KALWY OVERPAYMENT SUMMARY

Less share

with Guadiello

BLISS $13800.20 Less $6900.10 $6900.10

SEVINO $13413.20 Less $6706.60 $6706.60

CONTI $13393.20 Less $6696.60 $6696.60

IBRAHIM $13413.20 Less $6706.60 $6706.60

TOTAL $27009.90

CALCULATION BASIS: The calculation is based on Kalwy

receiving an equal share with Gaudiello in the

abovementioned claims from the first payment made in respect

of each in January 1988. Gaudiello's statement and comments

by Shaloub in tape recorded conversation indicate Kalwy and

Gaudiello shared in the proceeds of these claims from that date.

i.e. Bliss 19/12/87 to 24/3/89

Sevino 2/l/88 to 24/3/89

Conti 2/1/88 to 24/3/89

Ibrahim 2/1/88 to 24/3/89"

29. Although this document explained the basis of the claim made by the Secretary against Mr Kalwy, it was a self-serving statement which, of itself, could not be relied upon by the Secretary to establish that Mr Kalwy in fact actually received the monies in the bank account or some of those monies.

30. This necessary tracing exercise was not undertaken by the Tribunal in the findings it made. In our view, it was an error of law not to address this question which s.246(1), properly construed, required.

31. On this ground, we would set aside the decision of the Tribunal but remit the matter to it for further consideration in accordance with law.

32. As an independent ground of appeal, it was argued, on behalf of Mr Kalwy, that the Tribunal also erred in law by failing to apply the requisite degree of satisfaction in finding the conspiracy alleged to have been proved. Reliance was placed upon Re Letts (1984) 7 ALD 1 where Davies J. said (at 4):

"In addition, this Tribunal is not bound by the ordinary

rules of evidence (see s.33 Administrative Appeals Tribunal

Act 1975 (Cth)). Accordingly, the Tribunal may take into

account as evidence such of the transcript of the evidence

given at the trial as was tendered to the Tribunal. That

transcript shows that the clerk at the Midland Post Office

was not at the trial able positively to identify the

applicant as the person to whom each fortnight he gave the

social security pension cheque. The clerk, Mr P G

Schelfhout, gave this evidence at the trial:

Q. - For how long did this man Ryan collect the mail?

A. - It would have been at least a few months. I got

to . . . I got to know him so when he came in, I could

actually get the cheques out for him. I knew quite a

few of the customers at that stage, where I just had

to take the mail out for them, although I did know

them to be those persons.

Q.- Do you recognize the accused in court, or do you

recognize the man you know as Ryan anywhere here?

Just look carefully around.

A. - I couldn't say for sure.

But there was other evidence at the trial. Constable

Gregory positively identified the signatures on pension

cheques addressed to Mr Alan Ryan and appearing to be

endorsed by Mr Alan Ryan as having been endorsed with the

same handwriting as that of the applicant. I am therefore

satisfied that the applicant both sought an age pension in

the name of Alan Ryan and received the pension cheques

addressed to Mr Alan Ryan. What use the applicant made of

those moneys is not disclosed by the evidence before me.

However, I am satisfied that he received those moneys. For

the purposes of s 140(2), it is sufficient that my

satisfaction is satisfaction on the balance of

probabilities, though taking into account the serious nature

of the allegation made against the applicant (see Helton v

Allen...and Rejfek and Another v McElroy and Another...).

It is alleged that the applicant committed a criminal

offence. Such an allegation is a serious one and ought to

be well proved. Taking into account the nature of the

allegation, I am satisfied that the applicant claimed and

received payments by way of age pension totalling, in all,

$7007.90 to which he was not entitled."

33. We agree with this approach but are not persuaded, when the reasons of the Tribunal are read as a whole, that there was any departure from it in the present case. (3) Other grounds of appeal

34. Several other grounds of appeal were advanced on behalf of Mr Kalwy but, in our view, they lacked merit. For instance, it was sought to be argued that some of the material relied upon by the Tribunal was not "logically probative" of the conspiracy alleged. Short of the extremes of a "no evidence" position or a "perverse" decision situation, there are serious difficulties for this Court in entertaining such an argument (see Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321 per Mason C.J. at 356-7).

35. It was also urged, on behalf of Mr Kalwy, that the Tribunal denied him natural justice in several respects. In our view, there was no unfairness to Mr Kalwy in the way in which the proceedings before the Tribunal were conducted.

36. In the result, we would allow the appeal but remit the matter for further decision by the Tribunal, with or without the hearing of further evidence. There is no reason, in principle, why Mr Allen could not continue to deal with the matter. We make the following orders:

1. Appeal allowed, with costs.

2. Set aside the decision of the Tribunal. In lieu thereof, order

that the matter be remitted to the Tribunal for further decision,

with or without the hearing of further evidence.