FEDERAL COURT OF AUSTRALIA

Preston v Secretary, Department of Family and Community Services

[2004] FCA 300

ADMINISTRATIVE LAW – judicial review – overpayment of family tax benefit – A New Tax System (Family Assistance)(Administration) Act 1999 (Cth), s 97 – whether applicant would suffer ‘severe financial hardship’ if required to repay overpayment – Tribunal’s consideration of applicant’s financial options – error of law – finding of fact where there is no evidence to justify that finding

ADMINISTRATIVE LAW – s 43(2B) Administrative Appeals Tribunal Act 1975 (Cth) – whether Tribunal breached obligation to give adequate reasons – appropriate remedy where reasons deficient

A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) ss 71, s 97

Administrative Appeals Tribunal Act 1975 (Cth) ss 44(1), 43(2B)

Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500 referred to

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 cited

Brackenberg v Comcare Australia (1995) 56 FCR 335 discussed

Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 referred to

Comcare Australia v Lees (1997) 151 ALR 647 discussed

Dornan v Riordan (1990) 95 ALR 451 discussed

Repatriation Commission v Hall (1988) 78 ALR 687 cited

Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6 referred to

Waterford v The Commonwealth of Australia (1987) 163 CLR 54 cited

NORA PRESTON V SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

A 29 OF 2003

STONE J

29 MARCH 2004

CANBERRA

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The decision of the Administrative Appeals Tribunal given on 30 September 2003 be set aside

3. The matter be remitted to the Administrative Appeals Tribunal for reconsideration in accordance with these reasons.

ON APPEAL FROM THE GENERAL ADMINISTRATIVE DIVISION OF THE ADMINISTRATIVE APPEALS TRIBUNAL

REASONS FOR JUDGMENT

1                     This is an appeal under s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) (‘AAT Act’) from a decision of the Administrative Appeals Tribunal (the ‘Tribunal’). The issue is the liability of the applicant to repay a Family Tax Benefit (‘FTB’) overpayment of $1,451.76. A delegate of the Secretary, Department of Family and Community Services (‘the Respondent’) determined on 9 May 2001 that the applicant was liable to refund the amount of the overpayment. That decision was affirmed sequentially by an authorised review officer, by the Social Security Appeals Tribunal (‘SSAT’) and, finally, by the Tribunal on 30 September 2003.

2                     In this appeal it is conceded that the applicant was not entitled to the payment. It therefore follows that the amount of the overpayment is a debt due to the Commonwealth; A New Tax System (Family Assistance) (Administration) Act 1999 (Cth) (‘FAA Act’) s 71. It is also conceded that the overpayment was made solely because of an administrative error on the part of the Department of Family and Community Services and that the applicant received it in good faith. In those circumstances the respondent is required to waive the debt if the applicant would suffer ‘severe financial hardship’ if it were not waived; FAA Act s 97.

background

3                     At the time of the overpayment the applicant was living in a three bedroom house with her daughter Rachel, her grandson, Gavin and a foster child, Candice. At the time of the hearing before the Tribunal, the applicant was living alone in the same house and in receipt of a Widow Allowance of $190.05 per week. Apparently the applicant has unencumbered legal title to the house, although before the Tribunal she claimed that by informal arrangement the property is co-owned by her parents and sister. The respondent has been recovering the FTB overpayment by deduction from the applicant’s pension at the rate of $5 per fortnight.

the tribunal’s decision

4                     Before the Tribunal the applicant claimed that she was in ‘severe financial difficulty’ and gave evidence concerning her financial circumstances. The Tribunal summarised this evidence as follows:

‘The Applicant … told the Tribunal that she relies on the Widow Pension for her sole income and receives an amount of $380.10 per fortnight. She stated that she is repaying a $7,000 loan to her parents, who paid out the first mortgage on the house in which she lives. Her evidence was that she jointly owns the house with her parents and her sister, who previously paid out a second mortgage on the property. She estimated her living costs as follows:

The Applicant's evidence was that she owes outstanding debts to her parents ($7,000.00), Optus ($245.96), Telstra ($88.30), ACTEWAGL ($49.00) and ACT rates ($289.35) that she cannot pay. She told the Tribunal that she is currently repaying the debt to Centrelink by withholding $5 per fortnight from her Widow Allowance. The Applicant informed the Tribunal that she could not afford to properly maintain her house, and had difficulty affording to pay for repairs to the hot water service and her washing machine. She stated that she never has any spare cash and often cannot afford to pay for heating in winter or sufficient food.

The Applicant gave evidence that her daughter and grandson stay in her house on a regular basis and each have [sic] a bedroom, even though they live in Nicholls. She stated that she helps her daughter financially when she can and pays for their food and other expenses when they stay with her. The Applicant contended that her financial situation on a Widow Allowance is made more difficult because she is not entitled to discounts in relation to rates, electricity, gas, car registration and other costs that other pensioners can access.

The Applicant stated that she had sought employment but without success. She told the Tribunal she applied for administrative and secretarial positions but could not compete with younger people. She gave evidence that her health is poor and she experiences pains but cannot afford to go to the doctor because the surgery no longer bulk bills.’

5                     The Tribunal stated that it found the applicant to be ‘a witness of truth who gave her evidence honestly and openly, without guile.’ Presumably therefore the Tribunal accepted the applicant’s evidence. Nevertheless the Tribunal was not satisfied that the applicant’s financial circumstances constituted severe financial hardship or that she would suffer severe financial hardship if the debt were not waived. Consequently the Tribunal held that the debt could not be waived under s 97 of the FAA Act.

6                     Much of the Tribunal’s decision relates to whether there was in fact an overpayment and, if so, whether the applicant received it in good faith. The Tribunal found that both of those propositions were established and, as previously noted, these issues are no longer in dispute between the parties. The Tribunal’s consideration and statement of its conclusion concerning the issue of financial hardship was extremely brief and may be quoted in full:

‘In this case, the Applicant’s sole income is the Widow Allowance, which is paid at the maximum rate of $380.10 per fortnight. She is the sole title- holder of the house in which she resides even though she claims that, by informal familial arrangement, the property is co-owned by her parents and sister. The financial details brought to light on the evidence indicate that the Applicant’s income of approximately $190 per week is sufficient to cover her essential living costs but is not sufficient to cover outstanding debts or the cost of repairs to the house or household equipment.

The Applicant’s options were considered during the hearing and it may be possible for her to take in a boarder or to sell the house and move into cheaper accommodation. The Applicant noted, however, that she would be reluctant to take in a boarder because her daughter and grandson may need to move into the house as they are currently living in one small room that is inadequate for their requirements. She also expressed concerns about her security and personal safety. The Applicant submitted that she would not be able to sell the house and buy cheaper accommodation because the house is very run down and would not command a high price.

The social security scheme is beneficial in character and the public interest is not served by driving people in the Applicant’s circumstances to destitution. The fact that the Applicant owns, at least in part, the house in which she lives does not preclude her from severe financial hardship. That the Applicant has options open to her is not in doubt and it is not for the Tribunal to determine whether she should sell her home or take in a boarder. It is clear however on the evidence that the Applicant receives the maximum rate of Widow Allowance and is managing to repay her debt at the rate of $5 per fortnight.

The Tribunal is not satisfied that the Applicant’s financial circumstances constitute severe financial hardship or that she will suffer severe financial hardship if the debt is not waived. It follows that the debt cannot be waived under section 97 of the Act.

This appeal

Legal Framework

7                     In this case the Tribunal made certain findings of fact and, on the basis of those findings, held that the imposition of a repayment arrangement would not cause the applicant ‘severe financial hardship’. The task of deciding whether on the facts it would cause severe financial hardship to the applicant to repay the FBT debt has been entrusted to the Tribunal. Under s 44(1) of the AAT Act this Court’s jurisdiction is limited to appeal on a question or questions of law. This imposes a significant constraint on the Court in reviewing decisions of the Tribunal, for a wrong finding of fact is not sufficient to show that there has been an error of law; Waterford v The Commonwealth of Australia (1987) 163 CLR 54 per Brennan J at 77. An appealable error of law must either arise on the facts as found by the Tribunal or it must vitiate those findings.

8                     In Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at 287 (‘Pozzolanic’) the Full Federal Court enunciated five propositions said to emerge from the cases which have considered the distinction between questions of law and questions of fact. The fifth proposition was stated thus:

‘The question whether facts fully found fall within the provision of a statutory enactment properly construed is generally a question of law.’ [emphasis added]

9                     In Sharp Corporation of Australia Pty Ltd v Collector of Customs (1995) 59 FCR 6 at 16, Hill J observed that the reason for the qualification, ‘generally’, is that this proposition is really, ‘two separate and related propositions’. His Honour explained:

‘The first of these rules is generally expressed as being that where the facts have been fully found or there is no dispute as to the facts and the question is whether those facts necessarily fall within the description of a word or phrase in a statute, that will be a question of law. … The rationale for this principle is clear enough. If only one meaning is open but a tribunal arrives at a different meaning, underlying the Tribunal’s conclusion must be an error of principle, that is to say, an error of law.

The second related principle is that where the facts found are capable of falling within or without the description used in the statute, the decision which side of the line they fall on will be a decision of fact and not law. Such a decision will generally involve weight being given to one or other element of the facts and so involve matters of degree.’

10                  It follows that this Court cannot interfere with the Tribunal’s assessment of whether the facts of the applicant’s financial situation would properly fall within the description of ‘severe financial hardship’ were the debt not waived. This conclusion is, however, subject to the fundamental proviso that the Tribunal’s process of fact finding is not contaminated by legal error such as failure to accord natural justice, making a finding of fact where there is no evidence for such a finding or failure to consider a material factor. In addition, the requirements of the AAT Act must be observed. Relevantly, s 43(2B) requires the Tribunal, where it gives written reasons for its decision, to include in those reasons, ‘its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.’

Tribunal’s alleged failure to take material fact into account

11                  In reviewing the decision of the SSAT, the Tribunal is obliged under s 97(2)(b) of the FAA Act to determine if the applicant would suffer severe financial hardship if the debt were not waived. The applicant submitted, and the respondent did not dispute, that this requires the Tribunal to take into account all aspects of her financial circumstances. Mr Anforth, counsel for the applicant referred to the Tribunal’s comment, quoted in context at [6] above, that the applicant’s income was sufficient to cover her ‘essential living costs’ but not to cover ‘outstanding debts or the cost of repairs to the house or household equipment’. Mr Anforth submitted that this comment sets up a dichotomy, the elements being ‘essential living costs’ and ‘outstanding debts,’ and shows that in determining the question of severe financial hardship the Tribunal took account only of the ‘essential living costs’ and did not take the outstanding debts into account. Mr Anforth submitted that the applicant’s outstanding debts were a material factor that the Tribunal was obliged to take into account and its failure to do so is an error of law.

12                  I do not accept this submission which smacks of subjecting the Tribunal’s reasons to inappropriately minute analysis with ‘an eye keenly attuned to the perception of error’; Pozzolanic at 287. As I read it, the statement referred to is the Tribunal’s summary of its conclusion as to the state of the applicant’s financial situation. The Tribunal then went on to decide, as it was required to do, whether that situation equated to severe financial hardship or would if the debt were not waived. Notably the applicant does not quarrel with the accuracy of the Tribunal’s conclusion as expressed in that comment. Indeed once it is seen that the Tribunal’s finding as to the options available to the applicant was the crucial finding it is not surprising that the Tribunal did not dwell on the applicant’s debts or her difficulty in meeting her essential living costs. Those difficulties became insignificant because of the financial options that the Tribunal had found were open to the applicant.

The finding that the applicant had options to alleviate her financial situation

13                  In her evidence concerning her financial position the applicant described how she was unable to afford to heat the house during winter, that she could not afford to visit a doctor and generally ate only twice a day. She described how she juggled her income so that she could pay something towards her debts which included a debt to her parents in respect of the amount advanced to discharge the house mortgage, as well as arrears in relation to rates, electricity and telephone services. Despite this the applicant said that, at least in some respects, for example electricity, she was falling further behind as she could not manage to pay the monthly bills.

14                  On the basis of the applicant’s evidence of her financial position the Tribunal found that her income was sufficient to cover ‘her essential living costs’ but not to cover ‘her outstanding debts or the costs of repairs to the house or household equipment’. Bearing in mind the comment of the Full Court in Repatriation Commission v Hall (1988) 78 ALR 687 at 694 that severe financial hardship does not require ‘proof of destitution’ it would not have been surprising had the Tribunal come to the conclusion that the phrase was apt to describe the applicant’s position. It is clear, however, from both the written reasons of the Tribunal and the transcript of the hearing, that the Tribunal was heavily influenced by its view that the applicant had available to her several options either of which was capable of relieving her financial difficulties and which therefore would protect her from ‘severe financial hardship’ should the FBT debt not be waived. The options to which the Tribunal referred were taking in a boarder or selling her home and moving to cheaper accommodation. The Tribunal found that the fact of these options ‘is not in doubt’. This finding is the crucial element in the Tribunal’s decision. It explains why the Tribunal was not concerned about the applicant’s inability to pay her debts or the privations that she claimed to endure (such as lack of food and inadequate heating) because of her financial situation. The Tribunal did not however, refer to any evidence on which it based this finding or describe the process of reasoning by which it arrived at this conclusion.

15                  There was evidence before the Tribunal that the applicant had clear legal title to a three-bedroom house in Kambah, an outlying suburb of Canberra. The applicant had submitted that her parents and sister had interests in the house. There was no explanation of how the sister’s interest arose but in relation to the parents the claim related to their contribution to the discharge of the previous mortgage. It does not, of course, follow that such a contribution would result in the applicant’s parents having an interest in the property. The possibility however, cannot be excluded. The applicant said that the arrangement was informal but this is not inconsistent with the parents having some equitable claim to the house. The applicant also stated that the house is old and has not been properly maintained and that she did not think it would get a good price were she to sell.

16                  There was no evidence before the Tribunal as to the availability of cheaper accommodation. Kambah is an outlying suburb. There may or may not be smaller and cheaper houses available there or in some other part of Canberra. It may be however that smaller housing is only readily available closer to the city where land could be expected to be more expensive. Similarly it may be that the applicant could attract a boarder or it may be that there is a plentiful supply of lodging in areas close to the city and that there is no call for lodgings in the area where the applicant lives. It is not possible to say which of these alternatives is correct as there was no evidence before the Tribunal on the issue. In my opinion the Tribunal concluded that these options to alleviate her financial position were open to the applicant without any evidence or other material to justify that conclusion. In doing so the Tribunal made an error of law that vitiates its finding of that material fact; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 355-6 per Mason CJ. For this reason alone the matter should be remitted to the Tribunal for reconsideration.

17                  Alternately the Tribunal’s reasons in respect of the options it found were available to the applicant might be criticised for failing to set out the basis of its finding and its reasoning processes as required under s 43(2B) of the AAT Act. In particular the Tribunal does not explain the chain of reasoning that led it to conclude that the options would alleviate the financial position of the applicant so payment of the debt would not cause severe financial hardship. This issue is discussed below at [18] et seq.

Failure to Give Adequate Reasons

18                  The applicant also submitted that, contrary to s 43(2B) of the AAT Act the Tribunal failed to include in its written reasons: ‘its findings on material questions of fact and a reference to the evidence or other material on which those findings were based.’ This is both a generalised complaint about the perfunctory nature of the Tribunal’s reasons and a more pointed allegation of error of law vitiating the Tribunal’s findings.

19                  In Comcare Australia v Lees (1997) 151 ALR 647 at 656 Finkelstein J commented on the importance of an obligation on a tribunal to give reasons for its decision, saying that it achieves a number of important objectives. His Honour continued:

‘It ensures that the person whose interests may be adversely affected by a decision is told why the decision has been made: Re Poyser and Mills’ Arbitration [1964] 2 QB 467 at 478. It enables the public to have confidence that the tribunal has gone about its task appropriately and fairly: Commonwealth v Pharmacy Guild of Australia (1989) 91 ALR 65 at 88. It allows a party who is dissatisfied with a decision to determine whether there has been some reviewable error made by the tribunal: Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500 at 507. It imposes an intellectual discipline on the tribunal making it more likely that its decisions will not be arbitrary or capricious. Finally, the giving of reasons furthers judicial and quasi-judicial accountability: see Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279.’

20                  In outlining the principles that must be born in mind in determining whether the obligation to give reasons has been discharged, Finkelstein J emphasised that perfection is not required. What is required is that ‘the reasons should be expressed in clear language so that they can be understood’ and ‘must set out those parts of the evidence which are important for the conclusions arrived at.’ These principles are not controversial; Ansett Transport Industries (Operations) Pty Ltd v Wraith (1983) 48 ALR 500. There is, however, some controversy as to the consequences that attend a failure to provide adequate reasons.

21                  In Dornan v Riordan (1990) 95 ALR 451 the Full Court (Sweeney, Davies and Burchett JJ) held that where a tribunal’s statement of its reasons for decision was so deficient that it was impossible for the court to ascertain if any error had occurred in the reasoning process, the proper order was that the decision of the tribunal should be set aside ab initio. In Comcare Australia v Lees Finkelstein J, although accepting that he was bound by the decision, strongly disagreed with this conclusion and explained his reason for this view at some length. Like his Honour, I also am bound by the decision in Dornan v Riordan and therefore it is not necessary for me to enter into the controversy.

22                  It was submitted for the applicant that it is impossible to discern the reasoning process by which the Tribunal reached the conclusion that the applicant would not suffer severe financial hardship. As already described the Tribunal found that the applicant’s income was only sufficient to cover her ‘essential’ living costs but was not sufficient to cover house or household equipment repairs nor would it extend to the repayment of any of her debts. Mr Anforth pointed to the fact that the Tribunal does not explain what it has included in essential living costs. The Tribunal noted the applicant’s evidence that she cannot afford to pay for heating in winter and often cannot afford to buy food but did not comment on that evidence or explain how this position is consistent with its ultimate conclusion. In the applicant’s submission the Tribunal’s explanation of its reasons is woefully inadequate and well short of what is required under s 43(2B) of the AAT Act.

23                  A similar issue arose in Brackenberg v Comcare Australia (1995) 56 FCR 335 (‘Brackenberg’)which concerned an application for compensation under the Commonwealth Employees’ Rehabilitation and Compensation Act 1988 (Cth) in respect of a whiplash injury the applicant suffered in a motor vehicle accident on the way to work. The Tribunal, in denying the application, had made findings about activities, including horse riding and scuba diving, that the applicant had been involved in since the accident but did not deal with the applicant’s evidence that she could only do these activities with the greatest difficulty. In considering an appeal from the Tribunal’s decision Sheppard J found that it had made an error of law in not dealing with this evidence. His Honour said at 349:

‘In the present case the findings of fact upon which the Tribunal relied appear clearly. That is in accordance with the obligation cast on the Tribunal by s 43(2B) of the Act. But what it fails to do is refer to the evidence on which those findings are based. Although the obligations to state the findings of fact and the evidence upon which those findings were based are related to the obligation to give reasons, they are independent and separate obligations. Furthermore, there is a real purpose in requiring a tribunal to refer to the evidence upon which its findings of fact are based. This enables a court dealing with an appeal on a question of law from the Tribunal to determine, more confidently than might otherwise be the case, whether or not the findings of fact made by the Tribunal were based upon evidence before it and were thus findings which were open to it to make. If they were not, an error of law would be disclosed.’

24                  A little further on in his judgment his Honour, at 351, addressed the deficiencies in the Tribunal’s reasons more specifically:

‘The findings made in respect of [the applicant’s] activities obviously played an important part in the reasoning process of the Tribunal. In my opinion the Tribunal was obliged to indicate quite clearly how it was that it made those findings notwithstanding the evidence given by the applicant about her difficulties … An informed reader might be forgiven for thinking that the Tribunal had overlooked the detail of the evidence and in this way misapplied it or misunderstood it. Then there needs to be brought into account the other obligation, that is the obligation to refer to the evidence upon which material findings of fact were based.

25                  The parallels between Brackenberg and the decision that is the subject of this appeal are obvious. The finding that options existed whereby the applicant might alleviate her financial position was a material finding made by the Tribunal and carries with it an obligation to refer to the evidence on which that finding was based. The Tribunal’s conclusion that the applicant could pay the FBT debt without severe financial hardship was based on that finding but the Tribunal does not explain the reasoning processes by which it came to that conclusion. As noted in [22] above, the Tribunal did not explain how it was treating the key aspects of the applicant’s evidence. In my view the Tribunal’s reasons do not comply with the requirements of s 43(2B) of the AAT Act and should be set aside.

26                  For these reasons the matter should be remitted to the Tribunal for reconsideration in accordance with these reasons. As neither party has sought costs I will not make an order as to costs.

Associate:

Dated: 29 March 2004