Editors --- "Overpayment: repayment of debt receipted twice and then refunded in error; whether amount refunded is a debt under the Social Security Act 1991?" [2008] SocSecRpr 15; (2008) 10(1) Social Security Reporter, Article 15

• SECRETARY TO THE DEEWR and TALBOT
• Background
• The issues
• Discussion and the law
• Formal decision

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Overpayment: repayment of debt receipted twice and then refunded in error; whether amount refunded is a debt under the Social Security Act 1991?

SECRETARY TO THE DEEWR and TALBOT

(2008/0084)

Decided: 1st February 2008 by S. A. Forgie

Background

Talbot was in receipt of parenting payment single (PPS). On 29 August 2003the DEEWR raised a debt of $2790.40 against Talbot on the basis that she had received income in the form of periodic compensation payments paid as a lump sum in 2003. The debt itself was not disputed. Talbot paid the full amount of the debt by bank cheque on 2 September2003 and was given a paper receipt for that amount. Centrelink’s computer records mistakenly recorded that it had received two amounts of $2790.40, first on 2 September 2003 and then on 16 September 2003. From that sum of $2790.40,Centrelink credited the sum of $1678.75 in satisfaction of other debts owed by Talbot. That left an amount of $1111.65, and on 9 February 2004 Centrelink credited that amount to Talbot’s account. In July 2006 DEEWR decided that the amount of $1678.75 was still recoverable and gave Talbot notice that she had been incorrectly refunded the $1111.65.

In April 2007 the SSAT set aside the decision. It did so on the basis that it could waive the amount of$1111.65 under s.1237A of the Social Security Act 2001 (the Act) as Centrelink paid Talbot that sum solely on the basis of its administrative error and Talbot had received it in good faith. The DEEWR sought a review by the AAT.

The issues

The relevant issues that had to be decided in this case were:

- whether the amount paid to Talbot was by way of a social security payment and whether it was a debt under the Act?; and

- if so, whether it could be waived under the Act?

Discussion and the law

The Tribunal had to determine whether the amount paid to Talbot was a social security payment recoverable under the Act. The starting point for this consideration wass.1222A (Part 5.2), which provides that:

1222A. If an amount has been paid by way of social security payment, or by way of fares allowance under the Social Security(Fares Allowance) Rules 1998, the amount is a debt due to the Commonwealth if, and only if:

(a) a provision of this Act, the 1947 Act, the Social Security (Fares Allowance) Rules 1998 or the Data-matching Program(Assistance and Tax) Act 1990 expressly provided that it was or expressly provides that it is, as the case may be; or

(b) the amount:

(i) should not have been paid; and

(ii) was paid before 1 January 1991; and

(iii) was not an amount to which subsection 245B(2)of the 1947 Act applied.

The Tribunal determined that s.1222A(a) must be considered in two steps. The first is to consider whether an amount has been paid ‘by way of social security payment’. Only if it has been paid in that way would it become a debt due to the Commonwealth. Once the payment has been characterised as a social security payment, the second step is to consider whether the Act ‘expressly provided that it was or expressly provides that it is, as the case may be.’

After examining a number of authorities the Tribunal noted that the meaning of ‘by way of’ would vary slightly according to its context. However:

‘[D]espite those variations, there will always be the quality of a connection, described by the expression ‘by way of’, between two designated ‘thing’ or ‘actions’. There will always be a need to find the essential characteristics of each of the two things or actions.

In the context of s.1222A(a), the designated ‘things ‘are the ‘amount[that] has been paid’ and a ‘social security payment’. It follows from that formulation that the amount must have been paid ‘as a form’ of as ‘as an instance or a form of’ a social security payment. As I have already mentioned, a ‘social security payment’ is defined. The amount must be ‘by way of’, and so an instance of or a form of, that social security payment as defined. (Reasons, paras. 28 & 29)

The Tribunal asked itself: were the amounts paid to Talbot, ‘paid as an instance of or a form of a Parenting Payment Single?’

The Tribunal decided that the amount of $1111.65 credited to Talbot’s bank account was credited on the basis that she had paid Centrelink too much in order to settle her debts. It was paid as a reimbursement of the amount that she had overpaid. It was not paid to Talbot by way of a social security payment. The Tribunal therefore held that the amount could not be a debt for the purposes of s.1222A.

The Tribunal next considered whether the amounts could be waived under the Act. Section 1237A(1) ands.1237AAD of the Act provide:

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.

1237AAD.The Secretary may waive the right to recover all or part of a debt if the Secretary is satisfied that

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

(i) making a false statement or 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.

The Tribunal said that each of the above sections refers to the word ‘debt’ and gives the Secretary power to waive a ‘debt’. It refers only to a debt as defined by s.1235, which provides:

1235. In this Part, ‘debt’ means:

(a) a debt recoverable by the Commonwealth underpart 5.2; or

(b) a debt under the 1947Act; or

(c) a debt due to the Commonwealth under a scheduled international social security agreement; or

(d) a debt under the Social Security (Fares Allowance) Rules 1998.

The Tribunal held that as the Secretary’s power to waive a debt relates only to a debt as defined in s.1235, the Secretary did not have power to waive recovery of the amounts of $1111.65 and $1678.75.

The Tribunal then considered whether there were other avenues for the Commonwealth to recover the amounts, such as under the common law (although noting it did not have the power to make such a decision). It suggested that if the amount paid by mistake to Talbot was a recoverable debt Talbot could seek that the Finance Minister waive recovery under s.34 of the Financial Management and Accountability Act 1997.

Formal decision

The Tribunal set aside the decision of the SSAT, and substituted it with a decision that the Secretary did not have the power under the Act or under the Social Security(Administration) Act 1999 to waive repayment of the sum of money mistakenly paid by the DEEWR to Talbot.

[J.F.]