Editors --- "Disability support pension debt: sole administrative error and good faith" [2006] SocSecRpr 21; (2006) 8(2) Social Security Reporter, Article 10

• WARD and SECRETARY TO THE DEWR
• Background
• The issue
• The decision of the AAT
• Formal decision

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Disability support pension debt: sole administrative error and good faith

WARD and SECRETARY TO THE DEWR

(2006/187)

Decided: 3rd March 2006 by P. E. Hack

Background

Centrelink raised two disability support pension (DSP) debts against Ward totalling $19,640.28 for the period 9 July 1998 to 18 November2003.

Ward had been receiving DSP for a number of years and had undertaken studies and completed an honours degree in psychology in 1998. Ward was able to obtain some limited employment tutoring through Universities in Brisbane and he also had the idea of setting up a consultancy specialising in counselling.

The Tribunal accepted that he discussed this idea with a Centrelink officer in October 1999, but he did not have a clear recollection of the conversation. His evidence was that he told Centrelink that he would write off expenses in his counselling business against his tutoring income and that the officer agreed. There was a file note on Ward’s Centrelink file to the effect that Ward was ‘commencing self-employment... working from home compiling workbooks for students from Griffith uni ... will provide details of gross income and expenses every 3 months ... will not workover xmas’.

It was agreed at the hearing that if this advice had been given it was incorrect, because as the Act operates, Ward could only offset expenses from a consultancy business against income from that business, not from an unrelated activity.

The Tribunal accepted that Ward had genuinely but mistakenly understood that for the purposes of informing Centrelink of earnings he could bring into account expenses incurred by him in pursuit of his idea to set up a consultancy business. Centrelink’s file contained a number of instances where Ward notified Centrelink of his gross income and expenses in particular periods.

Ward did not commence his own business until late March 2000 and a note dated 29 February 2000 makes reference to Mr Ward ‘hoping to start on 19/3/00’.

Ward had also notified Centrelink by letter dated 21 March 2003 that he had obtained a considerable increase in tutoring hours and he believed his gross casual pay would amount to$909 per week. The letter also advised that he had no guarantee of that work continuing into the second university semester. Despite that notification he continued to be paid DSP at the full rate.

The issue

The existence and the amount of the debts and the facts of the case were not in dispute, the only issue being whether there were grounds for waiver under s.1237A(1) of the Act, after the date Ward notified of his income of $909 per week. Section 1237A(1) provides that the Secretary must waive the right to recover the proportion of the debt attributable solely to administrative error on the part of the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that debt.

The main issue was whether Ward had received incorrect payments in ‘good faith’, that is, whether Ward knew, or ought to have known, that he was not entitled to receive DSP.

The decision of the AAT

The Tribunal specifically referred to the passage in Pledger v Secretary, Department of Family and Community Services [2002] FCA 1576:

What seems to emerge from these authorities is that whether a payment has been received in good faith can only be determined after a careful consideration of the actual state of mind of the recipient of that payment. In that sense the test is entirely subjective, and not objective.

(Reasons, para.34)

Ward’s evidence was that having informed Centrelink about his employment and income, he anticipated that his employer would deposit his earnings directly into his bank account and he expected that the DSP would cease. He generally checked on his bank account only by transactions through an automatic teller machine and the balances shown. When he saw $1500 to $1600 in his account he assumed that that sum had been paid by the University.

The Tribunal accepted this evidence and concluded that:

(a) Ward was unaware at any relevant time that he had, in fact, been paid by Centrelink;

(b) he had no reason to believe that the funds that he accessed in his account were the result of wrongful payment by Centrelink;

(c) at the time he accessed the funds he believed, on reasonable grounds, that the funds in his account were funds paid in by the University as salary;

(d) having notified Centrelink by letter of 21 March 2003 of his income, he expected that Centrelink would suspend his fortnightly payments; and,

(e) he received the payments in good faith.

The Tribunal considered that what distinguished this case from Secretary, Department of Education, Employment, Training and Youth Affairs v Prince [1997] FCA 1565; (1998) 152 ALR 127 was that at the time of receiving the DSP to which Ward had no entitlement, he was expecting to receive payments from his employer to which he had entitlement. The payments he received matched this expectation and therefore when he received the DSP payments he had no reason to suspect that what he had received was other than the payment from his employer to which he had a plain entitlement.

Formal decision

The Tribunal set aside that part of the decision under review relating to payments for the period from 26 March 2003 to 3 June 2003and decided that the debt should be waived pursuant to section 1237A of the Act and otherwise affirmed the decisions under review.

[S.P.]