Secretary, Department of Family & Community Services v Sekhon

Federal Court of Australia|2003-02-14|Before: Wilcox J

REASONS FOR JUDGMENT WILCOX J: 1 This is an application by way of appeal, under s 44 of the Administrative Appeals Tribunal Act 1975 ("AAT Act"), from a decision of the Administrative Appeals Tribunal ("the Tribunal"). 2 The appeal is brought by the Secretary of the Department of Family and Community Services ("the Department"). It concerns the attempt by the Department to recover from the respondent, Harminder Kaur Sekhon, a compensation debt of $50,681.95, which arose out of the respondent's receipt of a lump sum compensation payment. The payment included damages in respect of loss of earnings during a period within which she received social security payments from the Department. During part of the period with which the case is concerned the Department acted through Centrelink. It is convenient to use that name to cover the relevant activities of both the Department itself and Centrelink. 3 The Tribunal held the applicant's right to recover the compensation debt was waived by force of s 1237A of the Social Security Act 1991 ("the Act"). It also made an order varying the start and end dates of the preclusion period. No complaint is made about the latter order. The only issue before the Court is whether the Tribunal erred in law in its interpretation and application of s 1237A of the Act.

The facts 4 On 18 May 1989, the respondent was injured in a car accident whilst walking home from her work with Westpac Bank. The respondent returned to work but ceased working for Westpac on 23 October 1992. She made a claim for damages in the District Court. 5 The respondent applied for social security assistance and received Job Search Allowance payments from 17 February 1993 and Disability Support Pension payments from 5 May 1994 (together, "Social Security Payments"). At the commencement of both series of payments, Centrelink wrote to the respondent, and her solicitors, advising that, should she receive a compensation payment, some or all of the payments may have to be repaid and a preclusion period may apply. Formal notices, pursuant to s 1177 of the Act, were issued to the Government Insurance Office of NSW ("GIO"). GIO was apparently the insurer of the person or persons against whom the damages claim was brought. 6 On two occasions, in August 1994 and September 1995, the respondent's solicitors wrote to Centrelink requesting details of the Social Security Payments. The requested information was supplied. 7 On 23 February 1998 the respondent's solicitors submitted an Estimate of Social Security Charge/Preclusion form to Centrelink. This document contained an estimate of the charge amount ($39,860.45) that Centrelink might claim. On 2 March 1998 Centrelink wrote a letter confirming that figure. 8 On 26 June 1998, judgment was given in the respondent's favour, in the District Court, for the sum of $469,568. But an appeal was lodged. 9 On 29 September, GIO advised Centrelink of the judgment. On 1 October 1998, Centrelink replied to GIO by facsimile, advising that: "…the Department has no charge under Part XVII of the Social Security Act 1947 and/or Part 3.14 of the [Act]." (original emphasis). 10 This information was confirmed by Centrelink, on the following day, by letters to both GIO and the respondent's solicitors. In the former letter, Centrelink revoked its preliminary notice, given under s 1177 of the Act, thus effectively releasing GIO from any further liability to it in relation to the case. In the latter letter, it said: "After consideration of the terms of settlement of the claim, it has been determined that, under part 3.14 of the [Act], Centrelink's charge … is Nil." 11 The appeal against the damages award was withdrawn. A final verdict was entered on 17 December 1998, awarding the respondent $497,568.99 (including interest), a portion of which ($17,666.17) was paid to her previous employer in repayment of wages. Relying on Centrelink's "nil charge advice", GIO made no deduction on account of Centrelink and paid the balance of the verdict moneys to the respondent's solicitors. After making other deductions, the solicitors paid to the respondent the balance ($370,818.74) in three instalments in early 1999. 12 On 13 April 1999, the respondent advised Centrelink of her receipt of the compensation monies. 13 Social Security Payments ceased on 1 April 1999. 14 After calculating $245,020.82 as the relevant amount Centrelink fixed the preclusion period as 593 weeks, from 14 September 1990 to 24 January 2002. 15 On 25 June 1999, by applying the charge period of 17 February 1993 to 1 April 1999, and by totaling the Social Security Payments, an amount of $50,681.95 was raised by Centrelink as a compensation charge. Centrelink immediately notified the respondent of that fact. Its letter advised the respondent that it had "asked NSW INSURANCE MINISTERIAL CORP" (apparently the successor of GIO in respect of some liabilities) "to repay $50,681.95 to Centrelink before they pay you the rest of your compensation payment". 16 On 5 July 1999, GIO responded that the settlement monies had already been paid to the respondent, relying on Centrelink's nil charge advice. 17 After a further letter to NSW Ministerial Corp, requesting payment, Centrelink abandoned this approach. It decided to seek payment from the respondent. On 3 October 2000, Centrelink sent to the respondent a letter of demand. 18 The respondent sought review of Centrelink's decision to seek payment from her. However, on 8 November 2000, Centrelink advised that one of the applicant's delegates had affirmed the decision to recover the charge from her. 19 The respondent unsuccessfully sought review by an Authorised Review Officer. Upon a further application for review, before the Social Security Appeals Tribunal ("the SSAT"), she was successful. The SSAT held: "[T]hat the Secretary must waive the recovery of the overpayments to Mrs Sekhon of the sums of $15,242.15 and $35,439.80 [totaling $50,681.95], pursuant to section 1237A of the [Act]." 20 The applicant then sought review by the Tribunal of the SSAT decision. 21 Before the Tribunal, there were two issues. (a) Did the applicant raise a debt of $50,681.95 by the respondent to the Commonwealth? (b) If so, did s 1237A or, alternatively, s 1184, s 1236 or s 1237AAD of the Act require the applicant to waive the debt or treat the Social Security Payments as not having been made? The Tribunal's reasoning

(1) Was a debt to the applicant raised? 22 The Tribunal referred to ss 1166 and 1225 of the Act. It is desirable to set them out. 23 Section 1166 relevantly provides: "1166(1) If: (a) a person receives a lump sum compensation payment; and (b) the person receives payments of compensation affect payment for the lump sum preclusion period; the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice. 24 Section 1225(1) reads: "1225(1) If a person is liable to pay a compensation debt, that debt is a debt to the Commonwealth." 25 Section 23 defines "compensation debt" as "an amount that a person is liable to pay to the Commonwealth because of a notice by the Secretary under section 1166 or 1170 of this Act…" 26 After reviewing these provisions, the Tribunal said: "…where a person receives both compensation affected payment, as defined in subsection 17(1) of the Act [ie the Social Security Payments], and compensation as part of a lump sum, as defined in subsection 17(2) of the Act, a debt to the Commonwealth may be raised pursuant to section 1225. … Thus, a compensation debt is raised by notice of the Secretary determining the liability of a person to pay the amount specified in the notice, whereby repayment is required to satisfy the determination of the Secretary. … The Tribunal notes that there is no condition applying to the grant of compensation affected payments that requires the payments to be repaid on receipt of a lump sum compensation award. The compensation recovery provisions under Part 3.14 of the Act confer discretion in the Secretary to determine liability and raise a debt to the Commonwealth in such circumstances. Accordingly, the Tribunal finds that the Respondent did not accrue a liability to repay the Commonwealth merely because she was paid compensation affected payments. The payment of lump sum compensation for loss of earnings, of itself, did not give rise to a debt to the Commonwealth for which the Respondent is liable." 27 The Tribunal found that Centrelink's letter to the respondent dated 8 November 2000 constituted a notice pursuant to s 1166. Accordingly, the Tribunal held, "on 8 November 2000 Centrelink raised a debt to the Commonwealth pursuant to section 1225 of the Act in the amount of $50,681.95 for which the Respondent is liable pursuant to section 1166 of the Act." 28 This conclusion is not challenged in the present appeal.

(2) Did s 1237A of the Act require the waiver of the debt? 29 Section 1237A(1) of the Act relevantly provides: "(1) 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." Subsection (1A) is irrelevant to this case 30 In dealing with the issue whether the debt was "attributable solely to an administrative error made by the Commonwealth", the Tribunal referred to the history of the matter and commented: "…the Secretary intended, in the first instance, to recover a debt from the insurer pursuant to section 1226 of the Act. However, on settlement of the Respondent's compensation claim, Centrelink determined a 'Nil charge' and released the insurer from liability for repaying a debt to the Commonwealth. Centrelink's intention to raise and recover the debt from the insurer, in accordance with usual practice and the relevant statutory procedures, had failed through its own error. The Tribunal has found that the error released the insurer from liability and authorised the release of compensation moneys to the Respondent. On the evidence before the Tribunal this is the reason Centrelink sought to make the Respondent liable for the debt, and there is no other. It is significant that the insurer and the Respondent complied with their responsibilities under the Act, informing Centrelink of the compensation claim and providing information as required. It is clear that the matter would have been properly resolved in accordance with the intention of the Act and the original intention of the Secretary to recover the debt from the insurer had Centrelink's administrative errors not occurred. The Tribunal finds that the Respondent's liability for the repaying the Commonwealth, and hence her debt in the amount of $50,681.95, arises solely from the administrative error of the Commonwealth." 31 The Tribunal went on to find the respondent received the lump sum payment in good faith, believing no compensation charge would apply. Accordingly, the Tribunal held that s 1237A applied; the applicant was obliged to waive the right to recover the debt.

(3) Sections 1184, 1236 and 1237AAD of the Act 32 These provisions all specify circumstances under which the applicant (and, therefore, the Tribunal on review) may waive or write off the debt. It is not necessary to set them out. The Tribunal did not consider the respondent's circumstances warranted an order for relief under s 1184. No point was raised before me regarding that conclusion. Although the Tribunal received a deal of evidence that was relevant to its discretions under ss 1236 and 1237AAD, as it found in favour of the respondent under s 1237A, the Tribunal did not find it necessary to consider the application of either of those sections.

The applicant's submissions 33 The notice of appeal filed on behalf of the applicant contained two grounds: "(i) Section 1237A of the Act is not attracted where it has been determined that a 'compensation affected payment' is not payable for a period. Any error made by the Applicant cannot thereafter give rise to a debt and that debt cannot be solely attributable to an administrative error. (ii) The Tribunal, having determined that a debt to the Commonwealth was raised against the Respondent, pursuant to section 1166 and 1225 of the Act, confused the creation of the debt with the errors in the administrative steps taken to recover that debt." 34 In elaborating these grounds, Mr John Wallace, counsel for the applicant, accepted that Centrelink officers made administrative errors, in connection with Ms Sekhon's case, including twice indicating that Centrelink had no charge against the compensation expected to be received by her. However, he contended the source of the debt owed by the respondent to the Commonwealth was not those errors, or either of them, but Centrelink's letter to the respondent of 8 November 2000. He argued s 1237A can have no application to a debt raised by the giving of a notice under s 1166 of the Act. He said s 1237A can apply only to circumstances such as an inadvertent payment (or overpayment) of benefits to an applicant.

The respondent's submissions 35 Mr Matthew Smith, counsel for the respondent, submitted that the application of s 1237A is not limited to mistaken payments, or overpayments, by the Commonwealth. He pointed out that, in Part 5.4 of the Act (which includes s 1237A), the word "debts" includes "a debt recoverable by the Commonwealth under Part 5.2 [of the Act]". Section 1225 (which is in Part 5.2 of the Act) makes "compensation debts" due to the Commonwealth. That term is defined (by s 23) in such a manner as to include an amount that a person is liable to pay because of a notice given under s 1166. Accordingly, he said, the Tribunal was correct in undertaking the "causal investigation required by s 1237A" (by virtue of the words "that is attributable solely") into "why the Secretary in fact decided to exercise his discretion to make the [respondent liable]". Mr Smith argued the Tribunal resolved that question by finding the only reason was because Centrelink, through administrative error, had failed to recover the debt from GIO. Conclusions 36 I accept that s 1237A is likely to apply most frequently to cases where the relevant administrative error consists of a payment of an amount of money to which the recipient is not properly entitled. However, I agree with Mr Smith that the possible application of the section is not restricted to such cases. It is significant that s 1235 refers, in general terms, to debts recoverable under Part 5.2. These include debts recoverable by reason of a notice given under s 1166. 37 Contrary to the submission of Mr Wallace, it is possible to imagine a case in which a debt created under s 1166 is attributable solely to an administrative error made by the Commonwealth. For example, assume that, in the present case, a notice had been given to GIO requiring it to pay to Centrelink an amount of money equal to the compensation debt and GIO had paid that amount to Centrelink; but, nevertheless, through some misunderstanding, the Secretary had given a notice under s 1166, and thereby erroneously created a debt. 38 However, I cannot accept the respondent's argument (and the Tribunal's conclusion) that, in the present case, the debt is attributable solely to an administrative error by Centrelink. 39 I note the Tribunal's factual finding that Centrelink made a number of administrative errors in the handling of Ms Sekhon's case. Importantly, those errors included telling both GIO and Ms Sekhon's solicitors that Centrelink had a "nil charge", when the fact was that a liability would arise if Ms Sekhon's damages claim was settled on the basis that had been disclosed to Centrelink by them. I do not disagree with the Tribunal's criticism of these errors. But it is another matter - and one of law - whether, on those facts, the debt created by the Secretary under s 1166 against Ms Sekhon was "attributable solely" to an administrative error made by the Commonwealth. 40 The Tribunal resolved that issue against Centrelink by the reasoning set out in para 30 above. The Tribunal held Centrelink's intention to recover the compensation debt from GIO "failed through its own error". That much may be accepted. It may also be accepted that this failure was the only reason why Centrelink sought to make Ms Sekhon directly liable for the debt, by taking advantage of s 1166 of the Act. In other words, but for the error, the Secretary would not have created the debt. 41 However, it seems to me, the Tribunal failed to consider the significance of the inclusion, in s 1237A(1), of the word "solely". For the subsection to have effect, the "proportion" of the debt - in this case, it is common ground, that would be the whole of it - must be "attributable solely" to administrative error. It is not enough that, in the absence of administrative error, the debt would not have arisen. Administrative error must be the sole cause, not merely one of multiple causes. 42 The debt in the present case was fundamentally attributable to two circumstances. First, Ms Sekhon had received both a lump sum payment and compensation affected payments for the lump sum preclusion period. These receipts exposed Ms Sekhon to potential liability for repayment of the Social Security Payments, whether by a deduction by GIO from her damages payment or by a notice under s 1166. The receipts also satisfied the preconditions of exercise of the Secretary's s 1166 power. Second, the Secretary made a discretionary decision to exercise that power, by giving the requisite notice. Unlike the hypothetical situation postulated in para 37 above, the giving of the notice was not itself an administrative error. 43 No doubt it is true that, in the present case, the Secretary would not have given the notice if GIO had already paid the compensation debt to Centrelink. Consequently, but for the errors that allowed GIO to pay the full amount of the damages to Ms Sekhon, without any deduction in favour of Centrelink, the Secretary would not have created the debt. The errors, therefore, contributed to the creation of the debt. But other factors also contributed, not least that the relevant payments gave rise to a potential liability of Ms Sekhon to Centrelink. 44 I respectfully feel that the Tribunal fell into error in disposing of the matter by reference to s 1237A(1) of the Act. The case did not fall within that subsection. However, this does not mean the Secretary will necessarily prevail. There remain other issues, not least those arising under s 1237AAD, as to which Mr Wallace made the passing comment that Ms Sekhon "would appear to have a strong case". Whether she does so or not is a matter to be determined by the Tribunal. The appropriate course is for me to set aside the decision of the Tribunal and remit the matter to it for further hearing and determination according to law. 45 Mr Wallace suggested that, if the matter was remitted to the Tribunal, I should make a direction that, for the purposes of the further hearing, the Tribunal be differently constituted. Mr Smith opposed that suggestion. 46 There are occasions upon which it is desirable for the Court to make such a direction. This is not one of them. It is not suggested that any member of the Tribunal who heard this case lacks objectivity or competence. No findings have been made on the outstanding issues. I see no need to force upon the parties, and the Tribunal as an institution, the burden of re-hearing the evidence. If the Tribunal is constituted, for the purpose of the further hearing, by members who sat on the earlier hearing, it is probable the outstanding issues can be quickly and economically addressed, perhaps even by written submissions. 47 Having said that, I do not propose to make a direction that the Tribunal be constituted for the purposes of the rehearing by the same members as previously. I know nothing of their availability. The constitution of the Tribunal should be determined by the President. I simply record my view that there could be no valid objection if some or all of the previous members were used again. 48 Mr Wallace volunteered that, even if his client was successful, it would be inappropriate for me to order Ms Sekhon to pay Centrelink's costs. His reason was not only that the problem stemmed from errors made by Centrelink; more importantly, the Secretary had brought the matter to the Court only because he thought the Tribunal's decision established an incorrect precedent on a matter of general importance. In other words, the case was brought to the Court in the wider public interest. 49 Mr Smith contended that, under these circumstances, I should go further. Not only should I decline to order Ms Sekhon to pay Centrelink's costs, if it was successful, I should order Centrelink to pay Ms Sekhon's costs. 50 It is an unusual step to order a successful party to pay the costs of an unsuccessful party. However, it is not unusual for the High Court of Australia to grant special leave to appeal to a party (especially a public authority) only on the basis that it undertakes to consent to an order that it pay the opponent's costs in any event. The usual reason for imposing that condition is that it is urged the wider public interest requires there be further consideration of the point at issue. The rationale is not much different to the reason why the applicant brought this matter to the Court. The practice of the High Court provides a useful analogy. 51 After giving the matter careful thought, I have decided to accede to Mr Smith's submission on costs. The amount at issue in this proceeding is comparatively small, in relation to the legal costs of the proceeding, even though significant to Ms Sekhon. The whole controversy stemmed from errors by Centrelink. It may be desirable, in the general public interest, to determine whether errors such as those made in the present case can give rise to an automatic waiver under s 1237A; but I do not see why Ms Sekhon should be put to expense in relation to that determination. I certify that the preceding fifty-one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.

Counsel for the Applicant: Mr J Wallace Solicitor for the Applicant: Sparke Helmore Counsel for the Respondent: Mr M Smith Solicitor for the Respondent: Legal Aid Commission of New South Wales Date of Hearing: 30 January 2003

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