FEDERAL COURT OF AUSTRALIA Secretary, Department of Social Security v Edwards [1999] FCA 1383 ADMINISTRATIVE LAW – dismissal of appeal from decision of Administrative Appeals Tribunal. SOCIAL SECURITY – creation of, and joint and several liability for, debt due to Commonwealth - where partner of respondent pleaded guilty to contraventions of s 1347 Social Security Act 1991, and amounts of various social security benefits paid to partner of respondent as a result of these contraventions became a debt due by partner of respondent to Commonwealth, by virtue of s 1224(1) Social Security Act 1991 - where respondent convicted of charges that he was, contrary to s 5 Crimes Act 1914, knowingly concerned in commission of offences by another person – where respondent made jointly and severally liable for the debt of his partner by virtue of s 1224AB Social Security Act 1991. SOCIAL SECURITY – waiver of debt due by respondent to Commonwealth –applicable waiver provision the repealed provision s 1237(3) Social Security Act 1991 rather than the subsequently enacted provision s 1237AA – effect of operation of s 8 Acts Interpretation Act 1901 – effect of operation of s 1236A(1) Social Security Act 1991 – whether respondent "convicted of an offence that gave rise to a proportion of a debt" – whether Magistrates Court, in sentencing respondent for breaches of s 5 Crimes Act 1914, "indicated that it imposed a longer custodial sentence on the person because the person was unable… to pay the debt". Social Security Act 1991 s 39(1A), s 1224(1), s 1224AB, s 1236A(1), s 1237(3), s 1237AA Crimes Act 1914 s 5, s 17A Acts Interpretation Act 1901 s 8 SECRETARY, DEPARTMENT OF SOCIAL SECURITY v RUPERT FINLAY EDWARDS QG 70 OF 1998 SPENDER J 8 OCTOBER 1999 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 70 OF 1998 ON APPEAL FROM THE GENERAL DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY A SENIOR MEMBER BETWEEN: SECRETARY, DEPARTMENT OF SOCIAL SECURITY Applicant AND: RUPERT FINLAY EDWARDS Respondent JUDGE: SPENDER J DATE OF ORDER: 8 OCTOBER 1999 WHERE MADE: BRISBANE THE COURT ORDERS THAT: The application be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY QG 70 OF 1998 ON APPEAL FROM THE GENERAL DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL CONSTITUTED BY A SENIOR MEMBER BETWEEN: SECRETARY, DEPARTMENT OF SOCIAL SECURITY Applicant AND: RUPERT FINLAY EDWARDS Respondent JUDGE: SPENDER J DATE: 8 OCTOBER 1999 PLACE: BRISBANE REASONS FOR JUDGMENT 1 This is an appeal from a decision of the Administrative Appeals Tribunal ('AAT') which affirmed the majority decision of the Social Security Appeals Tribunal ('SSAT') that, whilst the respondent, Dr Edwards, owes a debt to the Commonwealth, the Secretary, Department of Social Security is obliged to waive the debt. 2 Between 1 September 1992 and 4 May 1995, Ms Nanette Lorraine Roberts received Job Search Allowance, Sickness Allowance and Disability Support Pension. During this time, Ms Roberts and the respondent, Dr Edwards, lived together as if husband and wife, Ms Roberts worked from time to time as a receptionist at a medical practice operated by the respondent, and the respondent furnished Ms Roberts with medical certificates which allowed her to obtain some of her social security benefits. 3 Ms Roberts pleaded guilty on 14 September 1995 at the Southport Magistrates Court to contraventions of s 1347 of the Social Security Act 1991 ('the Act'), in that she knowingly obtained payment of social security benefits, which were not payable to her. She was convicted and sentenced to nine months' imprisonment with a non-parole period of two months. Total restitution of $25,426.34 was ordered against her. 4 The overpayment to Ms Roberts comprised three parts: (i) the period 1 September 1992 to 23 November 1992, during which Ms Roberts was in receipt of Job Search Allowance; (ii) the period 24 November 1992 to 24 August 1994, during which Ms Roberts was in receipt of Sickness Allowance; and (iii) the period 25 August 1994 to 4 May 1995, during which Ms Roberts was in receipt of Disability Support Pension. 5 On 9 November 1995, the respondent, according to the Certificate of Conviction, was convicted in the Southport Magistrates Court of three charges that he was, contrary to s 5 of the Crimes Act 1914, knowingly concerned in the commission of offences by Ms Roberts, her offences identified as being that between 1 September 1992 and 23 November 1992, at the Gold Coast, she knowingly obtained payment of an allowance, namely, Job Search Allowance, which was not payable at all; that between 24 November 1992 and 24 August 1994, at the Gold Coast, she knowingly obtained payment of an allowance, namely, Sickness Allowance, which was not payable at all; and that between 25 August 1994 and 4 May 1995, at the Gold Coast, she knowingly obtained payment of an allowance, namely, Disability Support Pension, that was not payable at all. 6 Ms Roberts, on such material as is before me, apparently was charged with, and pleaded guilty to, seventy-one charges concerning the overpayments made in each of the three categories of allowance referred to above. It may be that Dr Edwards was, contrary to the Certificate of Conviction, convicted of being knowingly concerned in those seventy-one charges, and his offences have been "consolidated" in the manner indicated in the Certificate of Conviction. Nothing turns on this on this application, the parties conducting their case on the basis that Dr Edwards was convicted pursuant to s 5 of the Crimes Act of being knowingly concerned in the offences by Ms Roberts that resulted in her being paid $25,426.34, to which she was not entitled. 7 At some time before November 1996, Dr Edwards had applied for, and was granted, a Newstart Allowance payment. However, the Department of Social Security ("DSS") withheld part of this payment, to the extent of $40.40 per fortnight, on an ongoing basis. This amount was used to recover the debt which the Department asserts Dr Edwards owes, and which, it says, has not been, and is not required to be, waived. 8 On 4 November 1996 the respondent made a statement to the DSS in the following terms: "I have been advised by Darryl Rigby an Authorised Review Officer with the Department of Social Security that he has reviewed my case and I am eligible for a Disability Support Pension. He also advised me that I should not be liable for the repayment of a debt as co-debtor. The legal issue of my co-debtor status was being investigated by Greg Singleton and I was informed that I would be advised in writing that I was not liable for the debt and the repayments I have made would be refunded by the Department of Social Security. I have not received any written advice and the deductions are still being made from my Newstart payments. As I have been informed that I am not liable for this debt as I was not found guilty of a federal offence I want to know why the deductions for the debt have not stopped and why I have not received a refund of the monies I have already paid." 9 On 6 December 1996, a delegate of the Secretary of the DSS wrote to the respondent to inform him of the delegate's decision to continue recovery action. The letter stated in part: "Section 1224AB of the Social Security Act states that if a person is liable to repay a debt under Section 1224 (misrepresentation or breach), and another person is convicted of an offence in relation to that debt under section 5, 7A or 86 of the Crimes Act 1914, then the recipient and the other person are jointly and severally liable to repay the debt. As you were prosecuted under Section 5 of the Crimes Act 1914 for being knowingly concerned you are therefore required to jointly refund the overpayment your partner incurred." 10 On the same day, 6 December 1996, the respondent sought review of this decision by an Authorised Review Officer. The decision of the review officer was communicated to the respondent by letter of 30 January 1997. It affirmed the decision to recover the debt by way of withholding from Dr Edwards' social security benefit, which was now Disability Support Pension ("DSP"), rather than Newstart allowance. 11 The respondent then appealed to the SSAT on 14 February 1997. On 29 July 1997, the SSAT (by majority: B Henry, Presiding Member, and A Brands, with P Pyburne dissenting) set aside the decision of the review officer, and substituted a decision that, although the respondent owed a debt to the Commonwealth under s1224AB of the Social Security Act 1991, that debt must be waived. 12 The majority of the Tribunal stated in its reasons for decision: "The Magistrate stated that in sentencing Dr Edwards he had regard to his inability to repay the debt. He then proceeded to sentence him to twelve months imprisonment subject to a direction that he would be released after four months upon entering into a recognisance, and noted that there was no purpose in [making] an order for restitution. In the view of the Tribunal it is implicit in the Magistrates' (sic) sentencing remarks that the length of the custodial sentence imposed upon Dr Edwards was formulated having regard to his inability to repay the debt. Given the comments made by the Magistrate, the Tribunal fails to see how that factor could have influenced the sentence other than to increase the length of the custodial sentence which the Magistrate would otherwise have imposed." 13 The applicant then appealed to the AAT. On 23 July 1998, the AAT, constituted by Senior Member D.W. Muller, affirmed the decision of the SSAT. In his reasons for decision, Senior Member Muller stated: "As to subsection 1237AA(1)(b), it is my view that during the sentencing procedure the Stipendiary magistrate indicated that he was taking into account, the fact that Mr. Edwards was not in a position to repay the debt. The Magistrate would not have said those words, had he intended that they have no consequence at all. The Magistrate was not making an idle observation nor merely engaging in friendly conversation. The only consequence that could arise from such an observation was an increase in penalty. The only penalty was imprisonment. He was thereby indicating that he was imposing a longer sentence than he otherwise would have because of the inability to repay the debt. The majority of the Social Security Appeals Tribunal were correct in their assessment of the situation." 14 On 13 July 1998 the applicant filed a notice of appeal in this Court, pursuant to section 44 of the Administrative Appeals Tribunal Act 1975, appealing from the decision of the Administrative Appeals Tribunal. 15 The notice of appeal asserted two grounds. First: "…that the Tribunal erred in construing and applying section 1237AA(1)(a) as to conclude that the Respondent was convicted of an offence which gave rise to a debt for the purposes of the subsection…". Secondly, that the Tribunal: "…erred in its construction of section 1237AA(1)(b) and its application of the subsection to the facts by deducing from the sentencing Magistrate's reference to having taken into consideration the fact that there was no possibility of repayment, that the Magistrate was thereby indicating that he was imposing a longer sentence than he otherwise would have because of the inability to pay the debt…"; and: "… erred in failing to take into account:- (A) the sentencing Magistrate's reference, after listing factors to be taken into account, to his belief that a term of imprisonment was justified; (B)the Magistrate's obligation, pursuant to section 17A(2) of the Crimes Act 1914, to state his reasons for a decision that no other sentence than imprisonment was appropriate." 16 The provisions of the Act and of the Crimes Act have suffered repeal and amendment from 1992 to the present. It appears that neither the SSAT nor the AAT, in determining the issue of liability and the issue of waiver, directed attention to the question of which version of the relevant statutory law applied to the circumstances of the respondent. 17 At the time of the sentencing of Dr Edwards, 9 November 1995, s 17A of the Crimes Act 1914 provided: "17A (1) A court shall not pass a sentence of imprisonment on any person for a federal offence, or for an offence against the law of an external Territory that is prescribed for the purposes of this section, unless the court, after having considered all other available sentences, is satisfied that no other sentence is appropriate in all the circumstances of the case. (2) Where a court passes a sentence of imprisonment on a person for a federal offence, or for an offence against the law of an external Territory that is prescribed for the purposes of this section, the court: (a) shall state the reasons for its decision that no other sentence is appropriate; and (b) shall cause those reasons to be entered in the records of the court." (3) The failure of a court to comply with the provisions of this section does not invalidate any sentence. (4) This section applies subject to any contrary intention in the law creating the offence." 18 Payments to Ms Roberts spanned the period from 1 September 1992 to 4 May 1995. During that period, s 1244(1) of the Act had minor variations, but in substance it was in the same terms as it was from 20 September 1993 to 28 September 1995, namely: "1224.(1) If: (a) an amount has been paid to a recipient by way of social security payment under this Act or the 1947 Act; and (b) the amount was paid because the recipient or another person: (i) made a false statement or a false representation; or (ii) failed or omitted to comply with provisions of this Act or the 1947 Act; the amount so paid is a debt due by the recipient to the Commonwealth." 19 It is not disputed that the amount which Ms Roberts wrongfully obtained from the Department became a debt due by her to the Commonwealth. 20 At all relevant times and, in particular, on 9 November 1995, the date of the convictions of the respondent, s 1224AB(1) provided: "1224AB(1) If: (a) a recipient is liable to pay a debt under section 1224 because the recipient contravened this Act; and (b) another person is convicted of an offence under section 5, 7A or 86 of the Crimes Act 1914 in relation to that contravention; the recipient and the other person are jointly and severally liable to pay the debt. Note 1: Subsection (1) does not create a new debt. It extends liability for a debt that has already arisen under section 1224 to a person who is convicted of certain offences. Note 2: In recovering a debt, the Department may have regard to any view expressed by a court as to the responsibility of a person to pay the debt. (2) A debt that arises under section 1224 for which a person is liable because of subsection (1) is recoverable by the Commonwealth by means of: (a) if the person is receiving a social security payment - deductions; or (b) if section 1234A applies to another person who is receiving a social security payment - deductions from that other person's social security payment; or (c) legal proceedings; or (d) garnishee notice. Note 1: For 'deductions' see sections 1231 and 1234A. Note 2: For 'legal proceedings' see section 1232." 21 This section was inserted by Act No 121 of 1993 and was effective from 1 January 1994 and at all material times. 22 Section 1237(3), which deals with waiver of debt, was also inserted by Act No 121 of 1993 and was effective from 24 December 1993 until 31 December 1995. Section 1237 relevantly provided: "(1) The Secretary may, on behalf of the Commonwealth, decide to waive the Commonwealth's right to recover the whole of a debt from a person but only in accordance with this section. … Conviction of offence (3) The Secretary must waive if: (a) a person is convicted of an offence; and (b) in sentencing the court indicated that it imposed a longer custodial sentence on the person because the person was unable or unwilling to pay the debt." 23 Section 8 of the Acts Interpretation Act 1901 relevantly provides: "Where an Act repeals in the whole or in part a former Act, then unless the contrary intention appears the repeal shall not: … (c) affect any right privilege obligation or liability acquired accrued or incurred under any Act so repealed…" 24 Section 8 in my opinion has a significance in this case, because s 1237AA(1) came into operation on 1 January 1996. Schedule 3 to the Social Security Legislation Amendment (Carer Pension and Other Measures) Act 1995, (Act No 143 of 1995), by virtue of s 2(4) of that Act, repealed ss 1237 and 1237A, and inserted a new s 1237 and s 1237A, while at the same time inserting a completely new section, s 1237AA, which section relevantly provided: "1237AA.(1) If: (a) a debtor has been convicted of an offence that gave rise to a proportion of a debt; and (b) the court indicated in sentencing the debtor that it imposed a longer custodial sentence on the debtor because he or she was unable to or unwilling to pay the debt; the Secretary must waive the right to recover the proportion of the debt that arose in connection with the offence. (2) For the purposes of this section, a proportion of a debt may be 100% of the debt." 25 The same Act repealed s 1236A and substituted a new s 1236A, which became effective on 1 January 1996 and which provides: "1236A.(1) Sections 1237, 1237A, 1237AA, 1237AAA, 1237AAB, 1237AAC and 1237AAD apply to: (a) debts arising on or after 1 January 1996; and (b) the amounts of debts arising before 1 January 1996 that were outstanding at the start of that day. (2) Section 1237AB applies to all debts, whenever incurred, owed to the Commonwealth and arising under this Act or under the Social Security Act 1947." 26 Section 39(1A) was inserted by Act No 116 of 1991, effective 1 July 1991. It provided: "1(A) For the purposes of this Act, a Note is to be taken to be part of: (a) if the Note immediately follows a section that does not contain subsections - the section; or (b) if the Note immediately follows a subsection - the subsection; or (c) if the Note immediately follows a point in a Rate Calculator - the point; or (d) if the Note immediately follows a Step in a Method Statement and is aligned with the text of the Step - the Step; or (e) if the Note immediately follows a Table - the Table; or (f) if the Note immediately follows a paragraph and is aligned with the text of the paragraph - the paragraph." 27 By Act No 104 of 1995 sub-paragraphs (g) and (h) were added to s 39(1A) as follows: "; or (g) if the Note immediately follows a clause in a Schedule - the clause in the Schedule; or (g) if the Note immediately follows a subclause in a Schedule - the subclause in the Schedule." 28 The first ground of appeal on behalf of the Secretary depends on the difference between s 1237(3) of the Act, which was the provision that applied at the date of Dr Edwards' convictions, and s 1237AA(1), and on the conclusion that the question of waiver depends on the proper application of s 1237AA(1). In my opinion, because of the application of s 8 of the Acts Interpretation Act, the obligation on the Secretary to waive is governed by s 1237(3), as that section was at the date of Dr Edwards' convictions. 29 Even if that conclusion be wrong, and s 1237AA was the relevant statutory provision, in my opinion Dr Edwards had "been convicted of an offence that gave rise to a proportion of a debt" and the relevant question would be exactly the same, namely, whether the court indicated in sentencing that it imposed a longer custodial sentence on the debtor because he was unable to pay the debt. 30 The submission on behalf of the Secretary that s 1237AA applies, asserts that it was not the conviction of Dr Edwards that gave rise to the debt. This submission depends on Note 1 to s 1224AB, namely: " Note 1: Subsection (1) does not create a new debt. It extends liability for a debt that has already arisen under section 1224 to a person who is convicted of certain offences." The submission is that the debt arose on the conviction of Ms Roberts and that, when Dr Edwards was convicted under s 5 of the Crimes Act in relation to Ms Roberts' contravention, that "offence", or the conviction for that offence, did not "give rise to a proportion of a debt", but merely extended the liability for the debt owed by Ms Roberts to Dr Edwards. 31 In my opinion, the joint and several liability created by s 1224AB has the effect that Dr Edwards is also liable for the debt which, until his conviction, Ms Roberts was solely liable. The debt owed by Dr Edwards to the Commonwealth came into existence only on his conviction pursuant to s 5 of the Crimes Act on 9 November 1995. 32 In my opinion, Dr Edwards would be within s 1237AA(1)(a) if, contrary to my view, that section had a relevant application in the circumstances of his case. If that provision were the provision that governed his circumstances, the submission on behalf of the Secretary would have the effect that the waiver provisions could never apply to a person who became jointly and severally liable on his conviction pursuant to s 5 of the Crimes Act. Dr Edwards is the "other person" in s 1224AB(1)(b). In my opinion, the obligation by Dr Edwards to pay money to the Commonwealth arose on his conviction for offences under s 5 of the Crimes Act in relation to contraventions of s 1347 by Ms Roberts. 33 The second ground argued on behalf of the Secretary disputes the finding by the majority of the SSAT and the AAT that the Magistrates Court, in sentencing Dr Edwards, "indicated that it imposed a longer custodial sentence on the person because the person was unable…to pay the debt". This requires a consideration of what the court said when it passed sentence on Dr Edwards. The submission on behalf of the Secretary is that in making the remarks it did, the court was merely indicating why it imposed a sentence of imprisonment. 34 The difficulty with the proffered explanation that it was the requirements of s 17A which explain the remarks of the Magistrates Court, made when it imposed the sentences, is that it is clear that the Magistrates Court failed to observe the obligations imposed by that section. It cannot be disputed that there was a failure to comply with the obligations of s 17A(2)(a). In my opinion the court did not have the requirements of s 17A of the Crimes Act in mind at all in passing sentence. 35 The magistrate said: "There's no doubt about the fact that I must take into consideration…the fact that there has been absolutely no possibility of repayment… I propose to order that you are sentenced to twelve months' imprisonment…" 36 As I have indicated, the majority of the SSAT said: "In the view of the Tribunal it is implicit in the Magistrates' (sic) sentencing remarks that the length of the custodial sentence imposed upon Dr Edwards was formulated having regard to his inability to repay the debt. Given the comments made by the Magistrate, the Tribunal fails to see how that factor could have influenced the sentence other than to increase the length of the custodial sentence which the magistrate would otherwise have imposed." 37 Under the heading "Findings of Fact" the majority of the Tribunal said: "In the Tribunal's view the Magistrate's sentencing remarks imply that Dr Edwards' inability to repay the debt led him to increase the length of the custodial sentence imposed. Applying the approach outlined in Re Truscott [1995 22 AAR 172], the Tribunal considers that the indication referred to in s 1237AA(1)(b) is present in the Magistrate's sentencing remarks." 38 The AAT stated its conclusion (set out earlier) even more forthrightly: "…it is my view that during the sentencing procedure the Stipendiary magistrate indicated that he was taking into account, the fact that Mr. Edwards was not in a position to repay the debt…The only consequence that could arise from such an observation was an increase in penalty. The only penalty was imprisonment. He was thereby indicating that he was imposing a longer sentence than he otherwise would have because of the inability to pay the debt…" 39 In my opinion, the conclusion that the Magistrates Court indicated that it imposed a longer custodial sentence because Dr Edwards was unable to pay the debt, was a conclusion well open to the SSAT and to the AAT. Where a court says that a factor in imposing a sentence of twelve months' imprisonment was the inability of the person to pay the debt, the court is indicating that, if that circumstance were not present, the term of imprisonment (if indeed there be any at all) would be shorter than twelve months. In my opinion, the Magistrates Court indicated in sentencing Dr Edwards that it imposed a longer custodial sentence on him because he was unable to pay the debt. 40 For the above reasons, the application should be dismissed. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Spender. Associate: Dated: 8 October 1999 Counsel for the Applicant: Ms C Holmes Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr D O'Gorman Solicitor for the Respondent: Carne & Herd Date of Hearing: 3 February 1999 Date of Judgment: 8 October 1999