FEDERAL COURT OF AUSTRALIA Jordan v Secretary, Department of Family and Community Services [2004] FCA 1582 ADMINISTRATIVE LAW – Social Security Act 1991 (Cth) – s 1237A – applicant paid Newstart and NEIS benefits without reduction of Newstart – whether debt attributable solely to Commonwealth's administrative error ADMINISTRATIVE LAW – Social Security Act 1991 (Cth) – s 1237A – whether payments received in "good faith" ADMINISTRATIVE LAW – Social Security – proper quantification of debt Social Security Act 1991 (Cth) ss 593(1), 1068, 1187(1A), 1188, 1223(1), 1237A, 1237AAD Administrative Appeals Tribunal Act 1975 (Cth) ss 33(1), 44(1) Student and Youth Assistance Act 1973 (Cth) s 289(2) Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127 discussed Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529 referred to Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 cited NEVILLE JORDAN v SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES No S 131 of 2004 FINN J ADELAIDE 3 DECEMBER 2004 IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 131 OF 2004 BETWEEN: NEVILLE JORDAN APPLICANT AND: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES RESPONDENT JUDGE: FINN J DATE OF ORDER: 3 DECEMBER 2004 WHERE MADE: ADELAIDE THE COURT ORDERS THAT: 1. The application be allowed. 2. The decision of the Tribunal be set aside. 3. The matter be remitted to the Tribunal for the limited purpose of redetermining the proper quantification of Mr Jordan's debt to the Commonwealth in light of these reasons. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY S 131 OF 2004 BETWEEN: NEVILLE JORDAN APPLICANT AND: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES RESPONDENT JUDGE: FINN J DATE: 3 DECEMBER 2004 PLACE: ADELAIDE REASONS FOR JUDGMENT 1 The applicant, Neville Jordan, was in receipt of payments for two benefits under the Social Security Act 1991 (Cth) ("the Act") in circumstances in which one such benefit (i.e. a Newstart Allowance) was required by the Act to be, but was not in fact reduced by the amount paid for the other (i.e. the New Enterprise Incentive Scheme ("NEIS")): see ss 1187(1A) and 1188(1). He sought, unsuccessfully, before the Administrative Appeals Tribunal to avoid having to repay the overpayment received by relying upon the provisions of s 1237A(1) and s 1237AAD of the Act which, variously, require or empower the respondent Secretary to waive all or part of Mr Jordan's overpayment in specified circumstances. He now appeals to this Court under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) against the Tribunal's decision. 2 Mr Jordan who, as a lawyer, has had twenty years experience in a civil litigation practice, has represented himself. Though he has filed lengthy written submissions dealing for the most part with purely factual matters, his application in substance raises only two issues the most significant of which to him being whether, when he received both payments, he did so in "good faith" for the purposes of s 1237A(1). It is fair to say that, because he regards an adverse conclusion on this matter as impugning his integrity, he is prosecuting this appeal. To anticipate what I have to say, while I do not consider that the Tribunal has erred in its conclusion, I equally do not consider that a finding adverse to a person under s 1237A(1) necessarily attracts the stigma Mr Jordan assigns to such a finding. The Statutory Setting 3 I have already indicated that the Act requires the rate of any Newstart Allowance payable to be reduced by the amount of the NEIS payment: s 1187(1A) and s 1188(1). Insofar as presently relevant s 1223(1) of the Act deems the amount of any Newstart Allowance payments made to Mr Jordan to which he was not entitled to be a debt due to the Commonwealth. 4 The provisions of actual moment are, as I have foreshadowed, s 1237A and s 1237AAD. Section 1237A provides (inter alia) that: "(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." 5 Section 1237AAD provides: "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 a 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 Factual Setting 6 This can be described relatively shortly. 7 On 15 February 2002 Mr Jordan commenced to receive Newstart Allowance payments. He applied subsequently for payment under NEIS and these payments commenced on 13 May 2002. He previously had been in receipt of NEIS payments which ceased earlier in 2002. 8 On 22 May 2002 he lodged a further "Application for Payment of Newstart Allowance" form. The form, as I note below, was sent to him in error by Centrelink. The form as lodged did not disclose explicitly that he was in receipt of NEIS payments. It disclosed he was in full time self-employment but that the amount he had earned was "Nil". I should note in passing that there was evidence before the Tribunal from a Centrelink officer that there were circumstances in which a self employed person could legitimately be receiving a Newstart allowance. 9 When lodging his Newstart form on 22 May 2002, Mr Jordan orally informed Centrelink that he had rejoined the NEIS program. A Centrelink online document of that date records this as does a further internal Centrelink document of 6 June 2002. The NEIS scheme was administered by the Department of Employment and Workplace Relations. Centrelink does not make NEIS payments. It was conceded that because of Centrelink's administrative error (i.e. its failure to code the NEIS payments in May 2002) Mr Jordan continued to receive application forms for the Newstart allowance. 10 Further Newstart Allowance forms were lodged on (I infer) 5 June, 28 August, 11 September, 29 September, 9 October, 23 October and 6 November 2002. As with the 22 May form, none explicitly referred to NEIS payments and all disclosed that Mr Jordan was self employed but (save in one instance) had received no income. Mr Jordan's evidence was that he believed he raised with Centrelink that he was receiving NEIS payments on at least two, and as many as four, occasions and that on those occasions the official concerned consulted his file and confirmed he was on NEIS payments. 11 On 21 May 2002, i.e. the day before Mr Jordan lodged the first of the above Newstart forms, the Department of Employment and Workplace Relations wrote to him in relation to the reinstatement of the NEIS payments. That letter stated: "Please note that it is your responsibility to advise CENTRELINK of the recommencement of NEIS Allowance to avoid overpayment of a Centrelink Allowance." 12 The evidence Mr Jordan gave to the SSAT as noted by the Tribunal was that in June or July he "turned his mind" to the fact that extra money was coming in. The Tribunal noted that he also told the SSAT that he was not certain in his own mind that he could not receive Newstart Allowance and NEIS payments at the same time. 13 Before the Tribunal Mr Jordan indicated that between May and November 2002 he did not believe he was entitled to both payments. He equally asserted that "I'm lodging a Newstart form but I don't think I'm entitled to anything … I've disclosed facts on the form that would negate that entitlement." 14 In late November 2002 a Centrelink Officer rang Mr Jordan to clarify whether in fact he was receiving NEIS payments. Mr Jordan indicated he was. On 22 November the overpayment debt was raised for the period 13 May 2002 to 6 November 2002. The starting date was later varied to 28 May 2002. THe Tribunal's Reasons 15 The following encapsulates the burden of the Tribunal's reasons: "22. It is clear on the evidence that payments of Newstart Allowance would not have continued until 6 November 2002, had the applicant not completed each of the 'Application for Payment of Newstart Allowance' forms on a regular basis. 23. The applicant maintains that he did not realise that he was applying for Newstart Allowance, in addition to his NEIS payments; that he did not read the letters of advice which followed upon each application as he considered them the 'fine print' and confined them to the rubbish bin. In the light of his 20 years experience as a legal practitioner, this assertion is unconvincing. I do not accept his evidence that he did not understand that the 'Application for Payment of Newstart Allowance' forms he received between May and November 2002 were exactly that – applications for a benefit – a benefit which he received, and continued to receive, over a period of more than 5 months, until 6 November 2002. 24. I am satisfied on the evidence that an overpayment has arisen because the applicant failed to disclose that he was in receipt of NEIS payments; and that the overpayment is a debt due and payable to the Commonwealth. On 22 May 2002 the Department failed to code correctly the NEIS payments, and that administrative error led to the Department forwarding further 'Application for Payment of Newstart Allowance' forms; but had the applicant not completed the application forms, without disclosing the NEIS payments, Newstart Allowance would not have been paid to him, and the overpayment would not have arisen. It is clear in my view, therefore, that no proportion of the debt is attributable solely to an administrative error made by the Commonwealth, and that s 1237A(1) of the Act does not apply. 25. As I am satisfied on the evidence that there is no proportion of the debt that is attributable solely to administrative error made by the Commonwealth, it is not necessary to turn to the balance of the terms of s 1237A(1) of the Act; but had I been satisfied that a proportion of the debt was attributable solely to administrative error made by the Commonwealth, I would not have been satisfied on the whole of the evidence that the applicant received the payment in good faith. 26. Ms Ra, who has been a Centrelink officer for 28 years, gave evidence that she spoke to the applicant on 21 November 2002 and informed him that his receipt of NEIS payments precluded him from Newstart Allowance, and that he would have to repay any payments made to him from the date when NEIS was granted. He replied, to the effect, that it was not a lot of money, and given that the aim was to get him into self employment and that all the money had gone towards that end, it was not a problem. Ms Ra stated: 'The reason I recorded this was because from the tone of his voice and our conversation he seemed to have been aware that he was receiving more than his legal entitlement or at least there was little or no surprise in his voice.' [Exhibit R1] 27. I accept Ms Ra's evidence. I consider that the applicant either knew that he was not entitled to both payments, or was suspicious of the payments. He did not, in my view, receive those payments in good faith. 28. In relation to s 1237AAD of the Act. I am satisfied on the evidence that the debt resulted from the applicant failing to comply with the legislation by not disclosing his receipt of NEIS payments. Section 1237AAD(a)(ii) of the Act does not apply. I am of the view that the applicant's circumstances are not so exceptional, unusual or out of the ordinary as to be regarded as special circumstances; and it is not appropriate that the discretion provided in s 1237AAD(b) of the Act should be exercised in his favour. 29. For these reasons the Tribunal affirms the decision under review." The Present Application 16 Mr Jordan approached this "appeal" under a number of misconceptions. I note two of these. The first was that he was unaware of the "question of law" limitation imposed on this Court's jurisdiction by s 44(1) of the Administrative Appeals Tribunal Act ("the AAT Act"). In consequence I was invited, first, to engage in merits review and then later, when the limited character of this Court's jurisdiction was pointed out to him, to transform errors of fact into errors of law and questions of fact into questions of law. Secondly, he was unaware that the rules of evidence did not apply (see s 33(1) of the AAT Act), which resulted in irrelevant and inappropriate criticism of the Tribunal's reasons. 17 An effect of his misconceptions is that I have had to ascertain for myself from what he has advanced what might conceivably be a question of law that was arguable. There are only two matters that warrant mention in relation to Mr Jordan's contentions that he satisfied the requirements of s 1237A(1) of the Act. There is, as well, a distinct issue relating to the quantification of the debt said to be owing to the Commonwealth. 18 The first of the s 1237A(1) contentions is that the Tribunal erred in finding the overpayments were caused by his lodging of the Newstart Allowance applications. The second is that the Tribunal erred in finding that the payments were not received in good faith. It is necessary for Mr Jordan to make out both of these grounds because the s 1237A obligation only arises to the extent that (i) the proportion of the debt to be waived is "attributable solely to an administrative error made by the Commonwealth"; and (ii) the debtor received in good faith the payment that gave rise to that proportion of the debt. 19 Mr Jordan's first contention is that the overpayment was attributable solely to Centrelink's administrative error and that the Tribunal should have so found. He claims that he considered he was obliged to continue to lodge the Newstart application forms; that he did not understand he was effectively applying for Newstart payments as such, but only for whatever he may have happened to have been entitled to (and he raised the matter of an entitlement to rent assistance although his evidence was that he was not aware of any such entitlement when he lodged the applications); and that he had disclosed to Centrelink that he was in receipt of NEIS payments. 20 In my view, it clearly was open to the Tribunal to reach the finding it did in relation to the totality of the payments made to Mr Jordan. The Tribunal did not acquit the Department of administrative error. On the contrary. As I read the Tribunal's reasons, it found that the payments were not attributable solely to that error. They would not have been made had not Mr Jordan lodged the application forms which did not disclose the NEIS payments. Without those applications no payments would have been made so that no part of the debt was attributable solely to an administrative error of the Commonwealth. Put shortly, his action compounded the significance and consequence of the Commonwealth's administrative error. 21 It is fair to say that there is some infelicity in expression in the Tribunal's reasons in this regard. However, when one has regard to the "attribution" question posed by s 1237A(1), all that the Tribunal needed to find was that the applicant bore a responsibility for the overpayment. While the language used by the Tribunal in pars 24 and 28 of its reasons might be taken as suggesting that the applicant alone was responsible for the overpayment, read in context I consider that it was intended to convey no more than that the overpayment was not attributable solely to the Commonwealth's (i.e. Centrelink's) error. 22 I would emphasise as well in this that the Tribunal did not believe Mr Jordan's evidence that he did not understand that he was applying for a Newstart allowance. I would also add that the Tribunal had evidence before it that would justify a conclusion that a Centrelink officer processing his applications (filled out as they were) would not necessarily conclude that the application disclosed implicitly that he was in receipt of NEIS payments. 23 The Tribunal's conclusion made it strictly unnecessary for it to consider the second matter challenged by Mr Jordan – the "good faith" conclusion. 24 Mr Jordan's contention on this matter was enlarged upon at length in his oral submissions. He contends that to be found to have received money in bad faith you must know that the "money was there" in your account. And he claims, as factual matters (a) that he did not know that the payments were being made to him; (b) he did not know he was not entitled to them; and (c) the Tribunal made no finding that he knew the money was in his account. 25 This contention is untenable having regard to the Tribunal's findings on Mr Jordan's "knowledge" or "suspicion" to which I will refer. In Secretary, Department of Education, Employment, Training and Youth Affairs v Prince (1997) 152 ALR 127 I had to consider the proper construction of the provisions of s 289(2) of the Student and Youth Assistance Act 1973 (Cth). Section 1237A(1) is in relevantly identical terms to s 289(2). I had this to say of the use of the "good faith" formula (at 130): "The burden of the formula can vary significantly given the purpose it is intended to serve in a given setting. In one context it can focus inquiry upon a person's reason for action (eg as with the good faith duty of company directors); in another, to a person's state of knowledge when a particular event occurs. For my own part, I consider the burden of the formula in the s 289 setting to be obvious enough. Its concern is with the state of mind of a person concerning his or her receipt of the payment: if that person knows or has reason to know that he or she is not entitled to a payment received – ie is not entitled to use the moneys received as his or her own – that person does not receive the payment in good faith. Absent such knowledge or reason to know, the receipt would be in good faith. Given the conventional liability of a mistaken payee of money from consolidated revenue to repay that money irrespective of his or her belief as to an entitlement to it (ie the 'rule' in Auckland Harbour Board v R [1924] AC 318), the concession made to the mistaken payee by s 289 of the SYA Act does seem in all probability to be directed to a payee who receives the money (to put the matter positively) in the good faith belief that he or she is entitled to receive it. In other words the frame of the section is to exclude from the right to a waiver, a person who knows or has reason to know that he or she is not entitled to receive the payment. It would be surprising to find that the parliament intended otherwise." 26 I went on to consider the situation of a person who knew he or she was not entitled to receive a payment but who was unaware that a payment had been received. I said (at 131): "… can a receipt be otherwise than in good faith when the recipient is unaware that the payment has been received? The short answer to that in my view is 'yes'. Knowing that, in the relevant period, he had no entitlement to receive an Austudy payment, he was never in a position to be able to assert that any mistaken payment made to him was one to which he had an entitlement. Thus while he may have received a payment of which he was ignorant, he could not, in the sense that I have explained, have received it in good faith." 27 The Tribunal's reasoning on the question of good faith is understandably brief but was based on "the whole of the evidence": Reasons [25]. And it embodied the alternate findings that Mr Jordan "either knew that he was not entitled to both payments, or was suspicious of the payments". 28 The first of the above contingencies reflects my reasons in Prince; the second, French J's elaboration of my use in Prince of the formula "knows or has reason to know" in Haggerty v Department of Education, Training and Youth Affairs (2000) 31 AAR 529 at [16]: "Consistently with what his Honour said in the Prince case, want of good faith will arise where there is a positive belief that the payment has been made by mistake. It will also arise where there is a suspicion held by the recipient that he or she may not be entitled to the payment made or a doubt as to the entitlement coupled with some objective basis for such suspicion or doubt. The provision does not, however, authorise the imputation of want of good faith in any of the senses above described simply because there are in existence objective facts which would raise a belief or a doubt or a suspicion of non-entitlement in the mind of some imaginary recipient. That proposition is quite consistent with the view that the existence of such facts may support an inference that the recipient disbelieved or doubted or was suspicious about his or her entitlement. 'Reason to know' as Finn J used that term in Prince does not necessarily import a criterion of imputed as distinct from actual want of good faith as I have described it." Emphasis added. 29 There was ample evidence before the Tribunal that could have sustained either finding. I refer, for example, to the answer he gave to the Tribunal (part of which is referred to above) that he did not believe that between May and December he was entitled to both payments. 30 The Tribunal did not make a definitive finding on this matter nor did it make an actual finding on whether Mr Jordan was aware that the payments were being received (although a finding that he was is probably implicit in the above "suspicion" finding). But then the Tribunal had no need to make such findings given its finding on the "first limb" of s 1237A(1). 31 I am satisfied, then, that the Tribunal committed no error such as would vitiate its conclusion that s 1237A was inapplicable in the circumstances. However, there are two additional matters to which I need to refer, one of which is of some importance. The first relates to the proper calculation of the amount of Mr Jordan's debt to the Commonwealth. Even accepting that he was overpaid in respect of the Newstart Allowance because of his receipt of NEIS payments, Mr Jordan nonetheless contends (i) that he was entitled to, but did not receive, a rental assistance allowance which was payable to him as part of Newstart (see s 1068 of the Act, "Benefit Rate Calculator B") for some part of the period of overpayment; (ii) that allowance would not have been subject to any rate reduction under s 1188 of the Act because the Newstart Allowance received equalled in amount the NEIS payments received; and (iii) that it should in consequence have been brought into account in calculating his debt to the Commonwealth. 32 The premise of this contention is that, while not entitled to retain contemporaneous receipts of both the Newstart Allowance and NEIS payments: see s 1187(1A) and s 1188; a person in receipt of NEIS payments nonetheless remained eligible to receive such part of the Newstart Allowance benefit to which he or she remained entitled, notwithstanding rate reduction under s 1188 of the Act. 33 This is an issue which simply was not considered by the Tribunal though, as the respondent concedes, the question of residual entitlement of rent assistance for a period was relevant to the quantum of the debt owed and that that was one of the issues before the Tribunal. 34 The issue was raised before me although the full significance of it only became apparent in the supplementary submissions I requested be filed at the close of the hearing. It raises questions both of statutory construction and of fact. These questions centre upon whether, under the Act, a person in receipt of an NEIS payment could properly be said, as a matter either of law or, alternatively, of fact, to be "unemployed" for the purpose of satisfying the qualifying criteria for the Newstart Allowance: see s 593(1) of the Act. 35 Notwithstanding the submissions I have received on this matter, I am satisfied that these are not questions which are appropriate for me to determine as part of this application. They fall within the proper province of the Tribunal in the first instance and should be remitted to it. I should add that I imply no criticism of the Tribunal in failing to deal with this issue. It was put to it obscurely. 36 Distinctly, I was addressed at length on the proposals Mr Jordan made in two letters he wrote to Centrelink after he was served with notice of the overpayment debt. He considered that the Tribunal was obliged to take account of these matters in considering the good faith question but it ignored them. It is clear that these letters do not by any stretch of the imagination raise a "relevant consideration" in the sense described in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40. It is unnecessary to comment further on the Tribunal's disregard of them. 37 I will allow the application and order that the decision of the Tribunal be set aside and that the matter be remitted to the Tribunal for the limited purpose of redetermining the proper quantification of Mr Jordan's debt to the Commonwealth in light of these reasons. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. Associate: Dated: 3 December 2004 The applicant appeared in person. Counsel for the Respondent: Ms K Bean Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 20 September 2004 Date of Final Submissions: 5 November 2004 Date of Judgment: 3 December 2004