Editors --- "Overpayment: delay in raising debt; lack of evidence; waiver; special circumstances" [2010] SocSecRpr 7; (2010) 12(1) Social Security Reporter, Article 7

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Overpayment: delay in raising debt; lack of evidence; waiver; special circumstances

SECRETARY TO THE DEEWR and SALANGSANG

(2010/55)

Decided: 27th January 2010 by M.J Carstairs

Background

Mr and Mrs Salangsang were in receipt of sickness allowance (SA) and parenting payment (PP) at the relevant time. In 2007 Centrelink raised 3 overpayments:

• for SA paid to Mrs Salangsang between 8 December 2003 and 14 March 2004 (the ‘SA debt’);

• for PP paid to Mr Salangsang between 8 April 1999 and 24 July 2001 (the ‘first PP debt’); and

• for PP paid to Mr Salangsang between 4 January 2002 and 17 June 2004 (the ‘second PP debt’).

Mrs Salangsang had worked part-time for the Noosa Shire Council (‘the employer’) since 1997 and throughout the period of these debts. Her income was variable. Mr Salangsang did not work during this period. The 3 overpayments were raised following a review of all their payments from 1999 onwards.

The issues

The issues before the Tribunal were, in respect of each of the overpayments, whether the Salangsangs owed a debt to the Commonwealth; and, if so, whether the debt should be recovered.

Background information

Mrs Salangsang’s evidence was that they regularly updated Centrelink about their earnings and so they should not have been overpaid. Although the original decision maker said there was only one occasion (on 13 May 2002) when they notified Centrelink of their income during the course of the review process more evidence was found after Mrs. Salangsang insisted that she had provided information on several other occasions. As a result the Tribunal formed the view that Mrs Salangsang was honest in her belief that she had regularly updated Centrelink about her circumstances during the relevant period.

The sickness allowance debt

The SA debt related to a period of about three months after Mrs Salangsang had surgery at the end of 2003. She had exhausted her sick leave and believed she would not be paid wages. The Tribunal found that a Centrelink officer assisted her to complete the SA claim form and then Centrelink followed up with telephone calls to verify matters with her employer. The Tribunal noted that a file note of a telephone call to the employer confirmed that Mrs Salangsang had last worked on 5 December 2003, that she had no sick leave entitlements and that she would be returning to work.

After only a month on leave, Mrs Salangsang started working from home. Centrelink continued to pay her SA as if she was not receiving any salary. They sent her several notices telling her that she needed to let them know if she commenced work. She did not respond to these.

Mrs Salangsang gave evidence that she went to Centrelink in January 2004 to advise them she was working from home. There was no record of that contact and the Tribunal was satisfied she did not tell Centrelink when she went back to work.

The Tribunal was satisfied that this debt was correctly raised under s.1223 of the Act and was correctly calculated.

The Tribunal noted that a penalty amount of 10% ($168.45) had been added to the debt amount. The Tribunal considered that the penalty had been applied correctly in accordance with s.1228B of the Act as Mrs Salangsang had no reasonable excuse for not providing correct information about her earnings.

The Tribunal decided that it was not appropriate to waive any part of the SA debt as it did not arise from administrative error on Centrelink’s part and there were no ‘special circumstances’.

Those decisions do not embrace the conclusion that the ‘administrative expediency’ purpose of the s. 17(3)(a) provision precludes disparity (between the ‘compensation part’ of a settlement payment and the amount that was actually received for work incapacity) from being relevant to an assessment of ‘special circumstances’. The cases favoured the view that a particular result may be unfair because ‘it could not be justified by the practical expediency of the arbitrary nature of the provisions’;

(h) the Secretary’s emphasis on the importance of the compensation part of the formula in s.17(3) (a) is inconsistent with previous Federal Court decisions. Those decisions had recognised the ‘double dipping’ objective of the legislation, and decided that there was no statutory justification for reading the s.1184K(1) discretion as subject to any implied limitation because of a supposed primacy of the 50% ‘compensation part’ provision in s.17(3)(a);

(i) the s.1184K discretion evidences a legislative recognition that cases may arise where the degree of unfairness produced by inflexible application of the ‘compensation part’ formula is ‘outside that which could be justified by the practical expediency of the arbitrary nature of the provisions’;

(j) the inclusion of s.1184K is inconsistent with the uncritical acceptance of the Secretary’s contention that compensation payments are indivisible;

(k) the potential complexity involved in applying the ‘special circumstances’ criterion is readily apparent. Maintaining the intended balance between giving effect to the intended efficacy of the ‘compensation part’ formula, and proper application of the discretion requires informed, but ultimately, impressionistic assessment.

The AAT concluded that there were special circumstances in Topp’s case that warranted the exercise of the discretion in s.1184K so as to treat the whole of his compensation payment as not having been made. The principal basis for the finding was that Topp’s settlement payment did not include compensation for any part of his statutory preclusion period. Further the Tribunal took into account Topp’s financial situation, in particular that his notional income derived from the settlement fund balance invested on term deposit, was quite insufficient to meet his ordinary expenses and special disability needs.

The first parenting payment debt

The Tribunal noted that there was very little documentation relating to this debt and commented that a debt should only be raised after such a lengthy delay on the clearest of evidence. The Tribunal noted that there was confusion about the provision under which the debt had been raised. It found that s.1223 of the Act (before it was amended on 1 July 2001) was the appropriate provision.

The Tribunal noted that the difficulties presented by the wording of s.1223 of the Act (pre-amendment) had been commented upon in previous Tribunal decisions. The Tribunal requested and was provided with a copy of Mr Salangsang’s claim for PP lodged in December 1998. On the form Mr Salangsang had informed Centrelink that his wife worked part-time and earned $534 per fortnight and he provided proof of her earnings from the employer.

Centrelink had sent four notices to Mr Salangsang during, or just before, the start of the debt period. Those notices told Mr Salangsang that he needed to keep Centrelink advised of a number of things, including if his or his wife’s income went above a certain amount (the amounts differed in each notice).

The Tribunal noted that the Salangsangs must have provided some financial information, as Mr Salangsang’s rate of PP changed from time to time but there was no evidence what information was provided or when it was provided. The Tribunal accepted Mrs Salangsang’s evidence that they provided anything that Centrelink requested when it was requested. The Tribunal found there was no evidence that Mr and Mrs Salangsang had been dishonest, or that they deliberately withheld information from Centrelink. The Tribunal considered that any misreporting of income was inadvertent. The Tribunal considered that they were not without fault as they were not in the habit of reading Centrelink letters but that this did not outweigh the deficiencies of the case presented against them.

The Tribunal concluded that it was not possible to establish with any certainty the amount of this debt. Further the delay of many years in raising the debt put Mr Salangsang at a real disadvantage in contesting its correctness. The Tribunal noted that questions of waiver involved discretions which addressed, amongst other things, how the debts occurred and a recipient’s actions at the time. It agreed with the view expressed in McLean and Secretary Department of Family and Community Services [2003] AATA 321:

...the difficulties faced by the applicant in meeting an allegation of debt after the elapse of six years should be taken into account in considering whether special circumstances exist. The substantial delay present in this case meant that the applicant could not access any records including payslips, about the income declared by her and the forms completed by her had long since been destroyed.

In the end the Tribunal concluded that there was insufficient evidence to establish the amount of any debt but that in any case recovery of the debt should be waived under s.1237AAD on the grounds of special circumstances which included Centrelink’s significant delay in raising the debt (and the decision to raise a debt in circumstances where there was not proper evidence to support this), the family’s financial circumstances and their significant other responsibilities in their role as carers.

The second parenting payment debt

The Tribunal noted that there was evidence relating to the calculation of the second PP debt. The amended version of s.1223 of the Act applied, which allowed over-payments, regardless of how they arose, to be recovered as debts.

During the second PP debt period Mrs Salangsang earned about $61,085 whereas Centrelink records reflected her earning about $35,789. The Tribunal noted that Centrelink had information about Mrs Salangsang’s net rather than gross income at the start of the second debt period. There were a few notices sent to Mr Salangsang during the second PP debt period but only one after his wife returned to work. The Tribunal was satisfied that Mr Salangsang did not inform Centrelink of the numerous changes in Mrs Salangsang’s income. The Tribunal also noted that Mrs Salangsang mistakenly believed that she was required to report net earnings.

As a result of the under-reporting and misreporting of income the Tribunal was satisfied that Mr Salangsang was overpaid PP.

There were no grounds for waiver based on administrative error. The Tribunal considered whether the debt could be waived based on special circumstances as it considered that Mr and Mrs Salangsang did not knowingly misrepresent their affairs or knowingly fail to comply with the Act.

The Tribunal agreed with the comments of Sheppard J in Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 (at 323) that the starting point was that the public ought to be able to expect that any money paid in excess of entitlements would be recovered. However in this case the Tribunal considered there were special circumstances and described these as the size of the debt, and the impact that its recovery (which would require with-holdings from their income support payments over a long period) would have on a very low income family, their family and caring responsibilities, the fact that they were honest and their mistakes inadvertent, only one notice had been issued to Mr Salangsang after Mrs Salangsang returned to work which could have alerted him to the fact that Centrelink was not taking his wife’s earnings into account, the stress and ill health having the debts had caused them, and the administrative errors that contributed to the debt period extending as long as it did. In particular when Mrs Salangsang’s SA ceased in March 2004 (she reported earnings) that information ought to have ‘found its way to Mr Salang-sang’s PP file’ to avoid the overpayment.

The Tribunal stated that the discretion for special circumstances should not be exercised lightly, but that it ought to be exercised where the justice of the case required it. The Tribunal considered it was appropriate to waive recovery of that part of the debt relating to the period from

26 March 2004 when Mrs Salangsang’s SA had been cancelled and Centrelink knew, or ought to have known, that she was back at work.

Formal decision

The decision under review with respect to the SA debt was affirmed. The decision under review with respect to the first PP debt was set aside and a decision was made to waive the debt on the grounds of special circumstances. The decision under review in relation to the second PP debt was varied by waiving that part of the debt that was incurred after 26 March 2004.

[C.E.]