Editors --- "Debt: meaning of raise and recover" [2008] SocSecRpr 22; (2008) 10(2) Social Security Reporter, Article 4

• CONE and SECRETARY TO THE DEEWR
• Background
• The law and considerations
• Formal decision

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Debt: meaning of raise and recover

CONE and SECRETARY TO THE DEEWR

(2008/245)

Decided: 28th March 2008 by P. E. Hack

Background

In March 2007, Cone was receiving parenting payment single. She notified Centrelink on24 March 2007 of her marriage.

Centrelink should have commenced paying Cone parenting payment partnered but did not do so and as a result of this failure to act on Cone’s information she was paid at the higher single rate from 24 March 2007 to 2 May 2007.

Centrelink discovered the error in May 2007, and a decision was made on 9 May 2007 to raise and recover an overpayment in the amount of $423.15.

Another consequence of Centrelink’s failure to act on the information was that her rate of payment was also dependent on her spouse’s income.

Centrelink discovered that Cone’s earnings were not taken into account until June 2007when an authorised review officer reviewed the earlier decision and varied the amount of the debt to $1517.69 because of Cone’s earnings in the period between24 March 2007 and 2 May 2007.

The law and considerations

Section 1223(1) of the Social Security Act 1991 (the Act) provides that where a social security payment has been made and the recipient was not entitled, for any reason, to obtain that benefit, the amount is a debt due to the Commonwealth. Section 1223(1AB)of the Act provides that the person is taken not to have been entitled to obtain the benefit if the payment was made as a result of, amongst other things, administrative error.

Cone did not dispute that there was a debt, however she considered she should not have to repay it because it arose as a result of Centrelink not acting on information she provided.

Subsection 1237A(1) of the Act provides that the Secretary must waive the right to recover the proportion of a debt that is attributable solely to administrative error and the person received the payment in good faith. However s.1237A(1A)provides amongst other things that s.1237A(1) only applies if the debt is not raised within six weeks from the first payment that caused the debt.

The effect of s.1223(1) meant that there was a debt of $530.90.

The Department accepted that the debts were attributable solely to administrative error by Centrelink, however argued that s.1237A(1) of the Act did not operate in this case because it was excluded by s.1237A(1A) of the Act as the debt was raised within six weeks.

The Tribunal considered the word ‘debt’ is used in different senses in ss.1223(1) and 1237A(1A) of the Act. In s.1223(1) it describes the statutory debt that arises from the fact of a payment to which the recipient had no entitlement. However, unless and until it is recognised within Centrelink as an overpayment and acted upon there is no debt capable of being ‘raised’ in the sense that ‘debt’ is used in s.1237A(1A) of the Act (Director-General of Social Services v Hangan [1982] FCA 262; (1982) 70 FLR 212).

When used in s.1237A(1A) of the Act, the debt is the end product of the administrative process of recognising the fact of an overpayment, identifying the amount and ‘raising’ an entry in Centrelink records. The Tribunal considered it significant that s.1223 comes within Part 5.2 which deals with ‘Amounts recoverable under this Act’ and that s.1237A comes within Part 5.3,‘Methods of recovery’.

There were two occasions when Centrelink undertook the administrative process; on 9 May 2007when a debt of $423.15 was raised by administrative action and on 20 June 2007when the authorised review officer raised a debt of $1517.69. In the Tribunal’s view this indicated that there were two occasions when a debt was raised but the Department submitted that there was only one debt, followed by a review by an authorised review officer. That task was not one of making another decision but one of reviewing the decision already made on 9 May2007. The authorised review officer was not empowered to make an additional decision; the power conferred by s.135(1)(b) of the Social Security (Administration) Act 1999 on a review of the decision was limited to affirming the decision, varying it, or setting it aside and substituting anew decision. The Department submitted that the authorised review officer varied the original decision.

The Tribunal considered this analysis seemed to overlook the variety of administrative tasks involved in a decision to raise a debt. In Secretary, Department of Social Security v Alvaro [1994] FCA 1124; (1994) 50 FCR 213, it was recognised that a decision to ‘raise and recover’ a debt involves four separate processes:

• calculation and recognition of the recoverable debt i.e. the amount of the overpayment;

• a decision that action should be taken to recover it;

• a determination of the mechanism of recovery;

• the discretion to waive ought not be exercised.

The Tribunal said that when viewed in this light it was wrong to treat the decision of the authorised review officer as merely one involving a variation of the original decision of 9 May 2007. While the authorised review officer described his decision as a variation of the earlier decision in reality it involved a separate decision to ‘raise’ an additional debt of $1094.54. That decision involved the four elements raised earlier.

The result of this was that the debt of $423.15 was raised on 9 May 2007 within a period of 6 weeks from the first payment that caused the debt.

The Tribunal considered it was difficult as a matter of language to see how the debt could have arisen ‘because’ Cone complied with a notification, however if ‘because’ in s.1237A(1A)(b) of the Act is read in the sense of ‘after’, then the debt was raised within a period of six weeks from the end of the notification period. One of the matters that Cone was obliged to tell Centrelink was the fact of marriage and to notify within 14 days from the event. Therefore the notification period ended on 7 April 2007 and the debt was raised within six weeks of that date.

The Tribunal considered therefore that s.1237A(1A)of the Act operated to exclude the operation of s.1237A(1) and that the debt could not be waived under that subsection, even though the debt was solely the result of administrative error.

The Tribunal also considered that a different conclusion followed in relation to the other component of the overall debt, the additional amount of $1094.54 raised by the authorised review officer. That component of the debt was not raised within the period of six weeks from the first payment that caused the debt nor within six weeks from the end of the notification period and therefore it was necessary to consider the operation of s.1237A(1)of the Act in relation to this debt.

The subsection operates to require waiver where the debt is attributable solely to administrative error and the payment or payments were received in good faith. The first element was conceded by the Department.

‘Good faith’ in this context meant that the recipient did not know, and had no reason to know, that they were not entitled to the payments made. A finding of an absence of good faith does not involve any finding of bad faith or any element of wrongdoing, however the Tribunal found that Cone did not receive the payments in good faith because she knew that Centrelink had not acted upon her notification and knew that she was being paid at a higher rate than she was entitled to and she was increasingly frustrated by Centrelink’s failure to act. The result therefore was that the debt could not be waived under s.1237A of the Act.

The Tribunal then considered the waiver provision contained in s.1237AAD of the Act. The Department did not suggest that paragraphs (a) and(c) were not satisfied but considered whether paragraph (b) is satisfied, i.e. Whether there were ‘special circumstances’ (other than financial hardship)alone that made it desirable to waive the debt.

The Tribunal considered that ‘special circumstances’ was not capable of precise definition, but that it required that there be ‘something to distinguish Cone’s case from others, to take it out of the usual or ordinary case (Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541).

Cone submitted that the consistent failure of Centrelink to act on her notification and the fact that she had been deprived of an opportunity to receive another Centrelink benefit should constitute special circumstances.

The Tribunal accepted that Cone conscientiously met her notification obligations to Centrelink but also observed that Centrelink is a very large organisation dealing on a daily basis with thousands of people and therefore capable of error, which is recognised by the existence of s.1237A of the Act. Given that the Act expressly recognises the existence of the possibility of administrative error, the Tribunal was unable to conclude that the administrative error here amounted to circumstances that took Cone’s case out of the usual or ordinary case.

Although Cone was justifiably frustrated with what she saw as inefficiency, to give effect to that frustration by waiving repayment of an amount to which she had no entitlement would be to punish Centrelink for inefficiency rather than identifying special circumstances. It could not amount to special circumstances that Cone fully satisfied her obligations to report changes in circumstances. The system for social security payments operates on the assumption that there will be compliance with its requirements. On-compliance is penalised rather than compliance being rewarded.

Cone also submitted that the existence of the debt prevented her from receiving another benefit. The Department’s submissions satisfied the Tribunal that there was no absolute loss, but was a timing difference. The fact of the debt prevented Cone being paid family tax benefit in advance, but she was still entitled to that benefit in fortnightly payments. That did not, in the Tribunal’s view constitute special circumstances.

Formal decision

The Tribunal was satisfied that there was no basis on which the debt should be waived and therefore affirmed the decision under review.

[S.P.]