Editors --- "Debt recovery: duty of care" [2010] SocSecRpr 45; (2010) 12(3) Social Security Reporter, Article 11

• SECRETARY TO THE DFHCSIA and NOUREDDINE
• Background
• Issues
• The facts
• The law
• Consideration
• Formal decision

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Debt recovery: duty of care

SECRETARY TO THE DFHCSIA and NOUREDDINE

(2010/618)

Decided: 20th August 2010 by E. Fice

Background

Mr and Mrs Noureddine incurred social security debts because the asset value of a rental property owned by the couple had not been taken into account in calculating the rate and payability of their social security payments. The error arose despite details of the rental property being provided in a claim form lodged with Centrelink in 1994. This information had been coded in error by a Centrelink Customer Service Officer (CSO).

Issues

No issue was taken concerning the existence of the debt.

The Noureddines raised a number of issues concerning recoverability of the debt. First whether the debt should be written-off on the ground that the limitation period for recovery had passed and second whether the debt should be waived on the ground of administrative error or special circumstances.

The Noureddines also raised the issue of whether there had been a breach of duty by Centrelink. In response to this issue the AAT considered whether a statutory or common law duty of care arises with respect to the administration of the Social Security Act1991 (the Act).

The facts

Mr Noureddine received carer payment from 2001 to 2008. An initial debt amount of $30,689.10 was varied slightly by an Authorised Review Officer (ARO) to the amount of $30,585.94 for the period 26 September 2001 to 19 August 2008.

Mrs Noureddine received parenting payment from 1994 to 2008. A debt was raised in the amount of $71,116.06 for the period 6 December 2000 to 14 October 2008.

Inclusion of the rental property’s correct asset value would have seen the cut-off limit reached for both payments during the respective debt periods.

Numerous letters were sent to the Noureddines during the debt period requiring them to contact Centrelink if combined assets exceeded the stated asset limit. The value of the rental property was not initially above the asset limit, however at the point that it did appreciate above this limit and subsequently, the Noureddines did not disclose that change of circumstance to Centrelink.

In youth allowance claims in 2002, 2003 and 2006 the family’s asset values were expressed as $15,000, $30,000 and not stated respectively. A questionnaire completed by Mrs Noureddine in 2007 stated that she did not own any real estate apart from the home they lived in.

The law

With respect to recovery of a debt by deductions from a social security payment, s.1231(2A) of the Act provides that:

Subject to subsections (2C), (2D) and (2E), action under this section for the recovery of a debt or overpayment is not to be commenced after the end of the period of 6 years starting on the first day on which an officer becomes aware, or could reasonably be expected to have become aware, of the circumstances that gave rise to the debt.

Section 1232(2) of the Act imposes the same limitation regarding the commencement of legal proceedings to recover the debt. Sections 1236(1A)(a) and s.1236(1B) provides that a debt must be written off if the above limitation period has been reached.

Section 1237A(1) of the Act provides for waiver of the right to recovery of the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth and received in good faith.

Section 1237AAD of the Act provides for waiver of the right to recovery where there are special circumstances, however not where the debt results wholly or partly from the debtor or another person knowingly:

(i) making a false statement or a false representation; or

(ii) failing or omitting to comply with a provision of this Act, the Administration Act or the 1947 Act; ...

Consideration

The AAT considered that, because there were no occurrences which would have triggered a re-examination of the Noureddines' records, the limitation period did not commence until a CSO discovered the coding error on 27 October 2008.

The overpayment was considered to be caused by both the incorrect coding and the failure of the Noureddines to correct the error or to provide updated information as the value of the rental property appreciated over time. The debt could therefore not be waived on the ground of sole administrative error.

The AAT found that the Noured-dines were knowingly in breach of the Social Security (Administration) Act 1999 because they failed to respond to any of the notices issued under that Act in failing to provide updated information on the appreciated value of the rental property. Special circumstances waiver was therefore not available.

Finally the AAT reviewed a series of Federal Court decisions in the context of actions for breach of statutory duty.

In Scott and Anor v Secretary, Department of Social Security(2000) [2000] FCA 1241; 65 ALD 79 (Scott 2000) Beaumont and French JJ citing an earlier House of Lords decision in majority said, at 87:

[T]hat although welfare legislation affecting a particular area of activity does in fact provide protection to those individuals particularly affected by that activity, the legislation is not to be treated as being passed for the benefit of those individuals but for the benefit of society in general; so that the cases where a private right of action has been held to arise are all cases where the statutory duty has been very limited and specific as opposed to general administrative functions involving the exercise of administrative discretion.

In Scott v Pedler(2003) [2003] FCA 650; 74 ALD 424 Gray ACJ (Scott 2003) followed the majority judgment of Beaumont and French JJ in Scott 2000 considering that he was bound to hold that ‘no common law duty of care can co-exist with the statutory functions exercised by the respondents (who were officers of the Department of Social Security) under the Act’.

However Gray ACJ proceeded to consider and reject the opinion of Finkelstein J in Scott 2000 that ‘even if the statute that imposes the duty does not give rise to a statutory cause of action, the repository of the duty may nevertheless be liable for a breach of a common law duty of care’.

The AAT concluded that the Secretary did not owe any statutory or common law duty of care stating that:

[E]ven if Centrelink officers acted negligently, that is, they did not meet the requisite standard of care, where that can be rectified by one of the three appeal processes available to Centrelink applicants, the Secretary does not owe applicants a common law duty of care. Furthermore, the Act does not provide that the Secretary owes a duty of care to social security applicants.

Formal decision

The decision was affirmed.

[L.H]