Sekhon v Secretary, Department of Family and Community Services [2003] FCAFC 190 | Case summary

SELWAY J: 26 The question arising in this appeal is whether the primary judge was correct in holding that a decision by the respondent to pursue the repayment of pension and allowances from the appellant was 'solely attributable to administrative error'. It was accepted that, but for an administrative error the respondent would have sought to recover the amount of the overpayment from an insurer, not directly from the appellant, but that the appellant was nevertheless potentially liable to repay the moneys under the statutory scheme. For the reasons given below, I am of the view that the primary judge was correct and that the appeal must be dismissed. 27 The factual background to these proceedings is not disputed: (a) On 18 May 1989, the appellant was struck by an automobile whilst walking home from work. She suffered a variety of injuries and disabilities. (b) As a result of her injuries the appellant was unable to return to full time work until 13 September 1990. She ceased that work on 23 October 1992. (c) On 17 February 1993, the appellant claimed and was granted a 'job search allowance' under the Social Security Act 1991 (Cth) ('the Act'). (d) On 5 May 1994, the appellant was granted a Disability Support Pension pursuant to the Act. (e) In the interim the appellant had instituted legal proceedings seeking damages in relation to her injuries and disabilities caused by the motor vehicle accident. (f) On 26 February 1993, the respondent wrote to the appellant and her solicitors advising that some of the social security payments she was then receiving may have to be repaid. Similar letters were written to the appellant and her solicitors on 3 May 1994, in relation to the prospective payments of the disability pension. (g) On 17 February 1993, the respondent wrote to the Government Insurance Office ('GIO'), the insurer of the driver of the motor vehicle, drawing attention to the requirement under the Act for the insurer to pay to the respondent all or part of any lump sum compensation for which GIO might be liable to pay the respondent. A similar letter was again written to GIO on 3 May 1994, in relation to the disability pension. (h) Further details of the amount to be paid to the respondent out of any settlement of the appellant's claim arising from the motor vehicle accident were provided to the appellant's solicitors in September 1994, September 1995 and in March 1998. (i) The appellant's compensation claim was settled on 26 June 1998. The gross lump sum payable to the appellant was $469,568. An appeal was instituted, but was subsequently withdrawn. The final verdict was entered on 17 December 1998. (j) The lump sum payable to the appellant included amounts for past and for future loss of earnings. (k) On 1 October 1998, the respondent advised both GIO (including, for this purpose, its successor) and the appellant's solicitor that no amounts were repayable under the Act. (l) It is accepted by all parties that this advice given by the respondent on 1 October 1998, was issued and given in error. (m) By reason of the compensation the appellant had received, her pension payments ceased on 1 April 1999. (n) Leaving aside the effect of the letters of 1 October 1998, it is accepted by all parties that, following the cessation of pension payments, the amount that could have been recovered by the respondent under the Act up to the date of such cessation was $50,681.95. (o) On 25 June 1999, the respondent sought to recover the amount of $50,681.95 from GIO pursuant to s 1179 of the Act and advised the appellant that it was seeking to do so. GIO responded to the respondent on 5 July 1999, that in reliance upon the previous advice of the respondent it had already paid the full amount due under the judgment to the appellant. (p) The appellant has fully spent the lump sum payment. She did so on the understanding that it was her money to do with what she wished and that she would not in the future have to repay any of it to the respondent or anyone else. (q) On 3 October 2000, the respondent wrote to the appellant seeking payment of the amount of $50,681.95. (r) The appellant sought an initial administrative review of that decision. In response the respondent wrote to the appellant on 8 November 2000, affirming the decision and confirming that the appellant was liable to pay $50,681.95 pursuant to s 1166 of the Act. (s) After an initial administrative review failed to give the appellant any relief, the appellant sought a review of the decision by the Administrative Appeals Tribunal ('the Tribunal'). 28 Before considering how the Tribunal, and subsequently the primary judge, dealt with the issues it is sensible to set out the relevant statutory provisions. As discussed below, the case turns on the meaning of s 1237A of the Act. Section 1237A of the Act imposes a duty upon the respondent to waive the right of recovery conferred by other provisions of the Act in relation to a debt or part of a debt that is 'attributable solely to an administrative error made by the Commonwealth'. It provides: '1237A(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. 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). 1237A(1A) Subsection (1) only applies if: (a) the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or (b) if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period; whichever is the later. Underestimating value of property 1237A(2) If: (a) a debt arose because the debtor or the debtor's partner underestimated the value of particular property of the debtor or partner; and (b) the estimate was made in good faith; and (c) the value of the property was not able to be easily determined when the estimate was made; the Secretary must waive the right to recover the proportion of the debt attributable to the underestimate. Proportion of a debt 1237A(3) For the purposes of this section, a proportion of a debt may be 100% of the debt.' 29 For the purposes of s 1237A the relevant 'debt' is a debt recoverable by the Commonwealth under Part 5.2 of the Act: see s 1235(1) of the Act. That Part includes s 1166 of the Act which creates a debt to the Commonwealth in relation to a person who receives a relevant lump sum by way of compensation for loss of earnings (such as damages for loss of income as a result of a traffic accident). Section 1166(1) of the Act provides: '1166(1) If: (a) a person receives a lump sum compensation payment; and (b) the person receives payments of a compensation affected 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.' 'Compensation' is defined in s 17(2) of the Act to include damages payable 'wholly or partly in respect of lost earnings or lost capacity to earn'. 'Compensation affected payment' is defined in s 17(1) of the Act to include 'a disability support pension' and a 'former payment type'. The latter phrase is itself defined in s 17(1) to include a job search allowance. On the face of it the pre-conditions to the power of the respondent to issue the notice dated 8 November 2000 to the appellant under s 1166(1) of the Act were satisfied. On the face of it the issue of the notice meant that the respondent was liable to pay to the Commonwealth the amount specified in the notice, namely $50,681.95. 30 Mention also needs to be made of the obligations of GIO. Those obligations are also contained in Pt 5.2 of the Act. Section 1179(1) and (2) of the Act provide: '1179(1) If: (a) an insurer is liable, under a contract of insurance, to indemnify a compensation payer against any liability arising from a person's claim for compensation wholly or partly in respect of the person's lost earnings or lost capacity to earn; and (b) the person receives or claims a compensation affected payment for the periodic payments period or the lump sum preclusion period; the Secretary may give written notice to the insurer that the Secretary proposes to recover the amount specified in the notice from the insurer. 1179(2) If an insurer is given notice under subsection (1), the insurer is liable to pay to the Commonwealth the amount specified in the notice.' On the face of it the pre-conditions for the respondent to issue the notice dated 25 June 1999, to GIO under s 1179(1) of the Act were satisfied. The issue of the notice meant that GIO was liable to pay the Commonwealth the amount specified in the notice, namely $50,681.95. It is accepted that the Commonwealth has not sought to recover those moneys from GIO. 31 The Administrative Appeals Tribunal delivered its decision on 27 September 2002. It concluded that the debt due from the appellant should be waived pursuant to s 1237A of the Act. There were a number of steps in the reasoning of the Tribunal: (a) The liability of GIO and of the appellant to make any payment to the respondent was a statutory obligation arising under and in accordance with the Act. The obligation arose, and only arose, by reason of compliance with s 1179 of the Act (in the case of GIO) and s 1166 of the Act (in the case of the appellant). (b) The respondent intended to recover the money from GIO, not from the appellant. (c) The letter of 1 October 1998 to GIO, advising that no moneys were repayable was solely the result of 'administrative error'. (d) GIO had paid the whole of the compensation to the appellant without deduction by reason of the erroneous advice from the Department of Family and Community Services ('the Department'). (e) The appellant received the relevant compensation moneys 'in good faith' in that, in light of the letters sent by the respondent on 1 October 1998, the appellant reasonably believed that there was no present obligation upon GIO or likely future obligation upon the appellant to repay any of the money to the respondent. (f) The actions of GIO in making the lump sum payment to the appellant without any deductions raised 'questions about the statutory force of the subsequent recovery notices [on GIO] in light of estoppel considerations'. (g) In light of those questions the respondent sought to recover the moneys from the appellant instead of GIO. (h) The letter of 8 November 2000, from the respondent to the appellant constituted a relevant notice for the purpose of s 1166 of the Act. (i) The sole reason why the respondent sought the repayment from the appellant rather than GIO was because of 'questions' about whether GIO was liable to make any payment in light of the letter of 1 October 1998. Consequently the appellant's liability to the Commonwealth 'arises solely from the administrative error of the Commonwealth'. (j) Consequently s 1237A of the Act was applicable. The debt must be waived. 32 The respondent instituted an 'appeal' in this Court pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). The issue raised in the proceedings is whether the Tribunal correctly interpreted s 1237A of the Act and, in particular, whether the Tribunal was correct in concluding that the debt was attributable solely to an administrative error by the Department. 33 The primary judge found that the Tribunal had fallen into error. His Honour found: '…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. … 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…above, the giving of the notice was not itself an administrative error. 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. 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.' The primary judge set aside the decision of the Tribunal and remitted the matter back to the Tribunal. The primary judge noted that even though s 1237A of the Act had no application, other provisions in relation to waiver might still have application. He drew attention, for example, to s 1237AAD of the Act which gives the respondent a discretion to waive the debt in certain circumstances. 34 The appellant appeals from that decision. The appellant says that the Tribunal was correct. The appellant says that once it is accepted that 'but for' the administrative error involved in sending the letter of 1 October 1998 to GIO then it necessarily follows that the 'debt' due by the appellant (rather than GIO) is 'attributable solely' to that administrative error. 35 The ordinary or usual interpretation of the phrase 'attributable solely to' is that it refers to the single or sole cause of the relevant act or event. The word 'attributable' means 'capable of being attributed'. It involves an objective assessment of causation. The words 'a debt attributable solely to an administrative error' can be paraphrased as meaning that the only cause that objectively can be ascribed to the relevant debt is an administrative error. An example of this ordinary use of the equivalent phrase 'solely attributable to' can be seen, for example, in Jahazi v Minister for Immigration and Ethnic Affairs (1996) 61 FCR 293 at 299-300 where the Court said: '…whether a particular causal connection between persecution and membership of a group attracts Convention protection will be resolved not merely by the logic of causality but as a matter of evaluation which has regard to the policy of the Convention. While it is not necessary that the fear of persecution be solely attributable to membership of a relevant social group, a decision-maker can have regard to the extent to which membership of the relevant group is a factor in the risk of persecution.' (emphasis added) 36 This is the meaning of the phrase which the primary judge purported to adopt and apply. He drew attention to the fact that the decision to issue the notice was a discretionary decision. This necessarily means that there was more involved in that decision than merely identifying that the pre-conditions for making it had been met. Although there was no evidence before either the Tribunal or the primary judge identifying the reasons for that discretionary decision, nevertheless the primary judge was correct to conclude that 'the giving of the notice was not itself an administrative error', or at least there was no evidence that it was. Implicit within this conclusion is an acceptance by the primary judge not only that the legal pre-conditions for the issue of the notice were present, but also that there was no administrative error in respect of the policy considerations involved in that discretionary decision. Plainly enough the respondents have concluded not only that the pre-conditions specified in s 1166 of the Act have been met, but also that as a matter of policy the debt should be recovered from the appellant. 37 The appellant says that this approach is in error. The appellant says that the approach has the result that s 1237A has no work to do. If the creation of a debt under s 1166 can be viewed as a relevant 'cause' for the purposes of s 1237A then s 1237A will never have any operation because the existence of the debt is a pre-condition for the operation of that section. This is obviously correct. It was so held in a similar context in Dranichnikov v Centrelink [2003] FCAFC 133 at [61]. But the primary judge did not make this error. He did not hold that it was sufficient that the Commonwealth had created a debt and this was its purpose. As already noted the primary judge looked behind the issue of the notice under s 1166. That is the significance of his finding that 'the giving of the notice…was not an administrative error.' So far as is known there was nothing inadvertent or mistaken about the exercise of the discretion to issue the notice under s 1166 of the Act. There was no obligation under the Act to recover any amount from anyone. A policy decision was made to recover moneys from the appellant. Certainly the background to that decision was that moneys could not be recovered from the insurer because of an administrative error. But that does not mean that the discretionary decision was attributable solely to that error. There was necessarily another consideration. Should the debt be recovered from the appellant? That decision was yes. Given that s 1166 of the Act gives a discretion the considerations in relation to that decision (assuming it to be valid) were necessarily more extensive than the fact that the pre-conditions had been complied with and that the debt could not be recovered from the insurer. It required the consideration of matters of policy. There is no suggestion that those matters of policy involved any administrative error. Indeed the matters of policy would not seem to have been identified before the Tribunal. But the fact that those matters of policy were necessarily considered necessarily means that the resulting debt was not 'attributed solely' to administrative error. 38 The appellant goes further and says that in considering whether a debt is 'attributable solely to administrative error' it is not permissible to look merely to the reasons for the exercise of the discretion to issue the notice under s 1166 of the Act. The appellant says that if there was any administrative error involved in the exercise of the discretion to give the notice under s 1166 of the Act then the notice was ultra vires and the resultant debt was invalid. Consequently, the appellant says, to read s 1237A as permitting consideration of the reasons for the exercise of the discretion when, if administrative error was involved, the debt would not exist is to give the section no meaning. As already remarked, in this case there is no reason to assume that the exercise of the discretion to issue the notice under s 1166 involved an administrative error. Indeed the primary judge expressly held that it did not. Certainly it was not established that it did. 39 But even if an administrative error had been identified, not every administrative error results in invalidity. In each instance it is a question of statutory interpretation to determine whether the error is a 'jurisdictional' error or not: see Project Blue Sky v Australian Broadcasting Tribunal (1998) 194 CLR 355 at 389-393. In this case the pre-conditions to the issue of a notice under s 1166 are the receipt of a lump sum compensation payment and the receipt of a compensation affected payment for the lump sum preclusion period. If these pre-conditions do not exist then the notice would be invalid. But obviously there could be other administrative errors which would not result in invalidity. For example, where the relevant notice under s 1166 of the Act is issued for the wrong amount because of some administrative error (see, for example, Dranichnikov v Centrelink [2003] FCAFC 133 at [62] and [73] and Jazazievska v Secretary Department of Family and Community Services [2000] FCA 1484) or where the amount due has already been recovered from another party but a notice is nevertheless issued through administrative error (to use the example suggested by the primary judge) then the debt would still be valid and effective notwithstanding the obvious administrative error. This does not mean that the debt is required to be paid. There are a variety of actions that could be taken. For example, there could be an application for merit review of the decision to issue the notice. And, as the primary judge acknowledged, where the exercise of discretion to issue the notice is affected solely by administrative error then the debt is required to be waived under s 1237A. 40 On the interpretation adopted by the primary judge it is true that where the amount due has been correctly calculated and that amount has not already been recovered from some other source and the notice under s 1166 of the Act is directed to an appropriate party it is difficult to conceive how the issue of the notice could be 'solely attributable' to some administrative error. Although it is ultimately a matter for evidence it could be expected that at least one of the reasons for issuing the notice in those circumstances was the policy decision that it was fair and reasonable that the person to whom it was directed should pay it. On this approach the issue of the notice creating the debt in such circumstances would not be 'attributable solely to an administrative error' even if (as here) an administrative error was a cause of the respondent seeking to recover from one party rather than another. 41 The appellant suggests an alternative interpretation of s 1237A to that adopted by the primary judge. The appellant says that instead of considering what were the causes of the exercise of the discretion to issue the notice under s 1166, the appropriate inquiry is to identify all of the factual circumstances that led to the issue of that notice. The appellant says that in order to determine if the debt is 'attributable to' a preceding act or event the Court should apply the 'but for' test. Having done so then a number of potential causes can be identified. In this case they might include that the appellant had an accident; that the appellant made a civil claim; that the appellant received a benefit and so on. The decision to issue the notice could properly be said to be attributable to each of these causes. However, the appellant says that all causes but one must be excluded, because those other causes can be seen as pre-conditions to the issue of a notice under s 1166 of the Act. The one cause that was not a pre-condition was the administrative error not to seek to recover the payment from the insurer. This being the one remaining cause for the purpose of the Act, the issue of the notice was 'attributable solely' to that cause. 42 The fundamental mistake in this reasoning is the premise - that in determining whether a debt is solely attributable to administrative error you cannot look to the reasons for the exercise of the discretion to issue a notice. This has been discussed above. True it is that the mere creation of a debt cannot be a relevant cause and it is necessary to consider the reasons and basis for the creation of the debt. But this does not mean that those reasons cannot themselves be an appropriate 'cause'. 43 Further, it is inappropriate to use a 'but for' test to determine a sole cause. A 'but for' test is a test to determine a cause - it is not a test for determining the sole cause: see the comparison drawn by Callinan J between the 'but for' test and 'solely caused' in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 192 ALR 1 at 51-52 [210]. Indeed, even as a test to determine a cause, it is too broad for some purposes such as to establish causation in tort: see Gummow and Kirby JJ in Tame v New South Wales (2002) 191 ALR 449 at 501 [211]. 44 Ultimately the submissions of the appellant rest primarily on the apparent unfairness of the ordinary reading of the relevant phrase. The appellant points to the breadth of the power in s 1166 of the Act to create a debt. Plainly enough that power could be exercised in circumstances where the moneys referred to in the notice, or at least the amount of those moneys, were not fairly moneys due to the Commonwealth. It is obvious in these circumstances that the usual meaning of the phrase 'attributable solely to' in s 1237A, if that section is looked at in isolation, could work a substantial injustice. Indeed, the appellant says that this case is an example of such an injustice. If the Department had handled this matter competently the Commonwealth would have received the money from GIO; GIO would never have paid it to the appellant and she would never have spent it. She would not now be faced with a claim that she cannot meet. 45 But s 1237A is one provision amongst several which is designed to secure some fairness under the Act, notwithstanding the breadth of the recovery powers within it. As the second reading speech of the Parliamentary Secretary, Mr Sciacca, in the House of Representatives on 29 September 1993, at 1336 ff makes clear, s 1237A replaced a provision that was even more 'unfair' because the claimant had to establish also that the repayment would cause financial hardship. But this does not mean that s 1237A should be read as if it, by itself, is intended to achieve a fair result in every case. For example, even on the approach suggested by the appellant it is clear that s 1237A does not apply if the notice is issued within six weeks of the payment (see s 1237A(1A) of the Act). On the face of it, even if the notice is issued solely due to an administrative error and even if the money has already been received from an insurer or from a compensation provider s 1237(1A) has the effect that there is no obligation to waive the debt under s 1237A(1) of the Act. Similarly, the debt cannot be waived under s 1237A of the Act if the payment is received other than 'in good faith' no matter that the debt is solely the result of administrative error. Plainly enough, s 1237A, considered by itself, is not able to achieve a fair outcome in such cases. But there are other provisions of the Act that may have application. The primary judge drew attention to s 1237AAD of the Act. Other provisions may have application in particular cases. For example, there is also a power to write off debts in s 1236 of the Act. And the exercise by the respondent of the discretions under these provisions (and indeed, under s 1166) is subject to merit review by the Administrative Appeals Tribunal. 46 Once it is perceived that s 1237A will not achieve a fair outcome in all cases and that other provisions also have a role then there seems no reason to depart from the usual and ordinary meaning of the words 'attributable solely to' in s 1237A. This is the meaning adopted by the primary judge. This necessarily precludes the alternative interpretations suggested by the appellant. 47 On the other hand, to adopt the interpretation suggested by the appellant would have the effect that whenever there had been an administrative error by which recovery was sought by one person rather than another then the debt would need to be waived even in circumstances where the debt was fairly payable and there was no argument (as there is in this case) that the behaviour of the Commonwealth was, in all the circumstances, unfair. For example, if the Commonwealth, as a result of administrative error failed to follow its usual procedure to inform the insurer that it would be seeking repayment from the insurer then, on the appellant's argument, the debt subsequently created against the appellant would have to be waived if the relevant notice is issued outside of the six week period even if the appellant had obtained all of the money and had not yet spent it. Such a result would seem to be neither fair nor consistent with the apparent statutory purpose. 48 The primary judge remitted the matter back to the Tribunal to consider whether any of the other relevant provisions of the Act might have application. Even that may not be an end of the matter. There may still be issues as to how equitable and legal principles might operate in the circumstances of this case against the background of the statutory scheme. None of these issues arise on this appeal and nothing in these reasons should be understood as making any comment concerning them. 49 Consequently, the appeal will be dismissed. 50 The primary judge ordered the respondent to pay the appellant's costs at first instance even though the respondent was successful before him. The reasons for this were the relatively small amount of the costs, the interests of the respondent in having the legal issue determined and the accepted fact that the whole controversy stemmed from errors by the Department. These reasons still apply, but with less force where it is the appellant who has been unsuccessful in her appeal. In the circumstances the appropriate course is for each party to bear their own costs of this appeal. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Selway

Sekhon v Secretary, Department of Family and Community Services

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