REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1                     The applicant, Mr Croker, stated orally today that he has discontinued this appeal from the decision of the Administrative Appeals Tribunal made on 2 July 2010.  I granted him leave to do so without filing a notice of discontinuance.  The appeal was filed on 30 July 2010, the last date that it could be brought by force of s 44(2A)(a) of the Administrative Appeals Tribunal Act 1975 (Cth).  The amount in question is $1,877.66.  Mr Croker had preserved his right to pursue an appeal because the Department of Finance and Deregulation had refused to make a decision on his application for an act of grace payment under s 33 of the Financial Management and Accountability Act 1997 (Cth).  Centrelink had written to the department in support of Mr Croker’s application for an act of grace payment as early as 3 June 2010.

2                     Centrelink had concluded that it had no power to pay Mr Croker a pensioner education supplement for the 15 months that elapsed after it had rejected his claim in April 2008 for a disability support pension and before the Social Security Appeals Tribunal determined, in June 2009, that he was entitled to be paid it.  The refusal of the Department of Finance and Deregulation, until 6 October 2010, to give any consideration to the exercise of its discretion under s 33 has resulted in the squandering of a large sum of taxpayers’ money for no apparent purpose, for the reasons that I will explain below.  That squandering has involved three hearings by this Court and the costs incurred by or on behalf of the Commonwealth through the Secretary, Department of Families, Housing, Community Services and Indigenous Affairs, using his department’s or Centrelink’s resources to defend the proceedings.

Background

3                     The Secretary has delegated his powers and functions in respect of s 1061PA, and many other provisions, of the Social Security Act 1991 (Cth) to the Chief Executive Officer of Centrelink pursuant to s 234 of the Social Security (Administration) Act 1999.  That delegation was made with the approval of the Minister for Human Services and arrangements made pursuant to s 7 of the Commonwealth Services Delivery Agency Act 1997 (Cth).  Thus, although the Secretary is the correct respondent in a formal sense, because of the delegation of his powers and functions to another agency, Centrelink, administered by another Department of State, he was somewhat removed from the day to day administration of s 1061PA of the Social Security Act.

4                     This appeal was from the decision of the tribunal on its review of a decision by a delegate of the Secretary to not pay Mr Croker, for the period prior to 15 June 2009, a pensioner education supplement under s 1061PA of the Social Security Act.  When the matter first came before me, I indicated, and the Secretary contended, that the notice of appeal did not raise appropriately any questions of law, in accordance with s 44(1) of the Administrative Appeals Tribunal Act.  Mr Croker filed an amended notice of appeal on 3 September 2010.  Consequently, on 17 September 2010, the Secretary filed a notice of motion seeking to have the appeal dismissed either pursuant to O 11 r 16 of the Federal Court Rules, as disclosing no reasonable cause of action, or alternatively, by an order for summary judgment under s 31A(2) of the Federal Court of Australia Act 1976 (Cth), on the basis that Mr Croker had no reasonable prospect of successfully prosecuting his appeal.

5                     When the motion was returned before me on 1 October 2010 it became clear that the amount at issue in the proceedings was very small.  At that time Mr Croker asserted that the amount at issue was about $5,000.  He tendered a letter dated 3 June 2010 from Centrelink to him.  This letter was written after the tribunal had reserved its decision on Mr Croker’s application for review on 14 May 2010.  The letter informed Mr Croker that Centrelink had written to the Department of Finance and Deregulation in respect of his application for an act of grace payment of a pensioner education supplement, or its equivalent, for the period 29  April 2008 to 19 June 2009.  After setting out the grounds on which the application for an act of grace payment had been made, Centrelink concluded its submission to the Department of Finance and Deregulation by stating that:

“We are of the opinion that this could reasonably be considered grounds to support Mr Croker’s … claim.”

The Tribunal’s decision

6                     The tribunal handed down its decision on 2 July 2010.  In substance, the tribunal reasoned that the terms of s 1061PA of the Social Security Act did not permit a payment of a pensioner educational supplement to be made to Mr Croker prior to the date on which he first communicated with Centrelink that he was undertaking a course of study while being qualified for a supplement.  This had come about because initially Mr Croker had applied to Centrelink for a disability support pension in early May 2008.  That claim had been rejected, but on 1 June 2009 the Social Security Appeals Tribunal had determined that the Secretary should be directed to pay that disability support pension to Mr Croker, backdated to 29 April 2008.  In essence, Mr Croker’s allegation was that, had he been paid the disability support pension from April 2008, he would have been entitled to, and would have made his claim for, the supplement from the same time.

The Secretary’s motion

7                     On the return of the motion filed by the Secretary on 1 October 2010 I inquired of the solicitor acting for the Secretary why it was that the application for the act of grace payment that had not yet been considered and determined despite Centrelink’s submission of 3 June 2010 in support of it.  I expressed concern that if Mr Croker were ultimately granted the benefit of the act of grace payment, he need not have been exposed to the risks and stress of this litigation and the Commonwealth need not have been exposed to the costs involved.  Those costs included what the Secretary would have to expend on solicitor/client costs, and costs associated with the use of public resources, first, of the tribunal, and, secondly, the Court to determine a claim where Centrelink considered there was a reasonable basis for an act of grace payment.  Accordingly, I ordered that the Secretary, personally, file and serve an affidavit by 7 October 2010 explaining his understanding as to the position with respect to the act of grace payment and the reasons, including any relevant legislation understood by him to apply, for the delay in its consideration.

The scheme for compensation for detriment caused by defective ddministration

8                     On 7 October 2010, Dr Jeffrey Harmer, the Secretary, swore an affidavit that fulsomely explained the matters that I ordered be elaborated.  Dr Harmer pointed out that act of grace payments were discretionary and were made under s 33 of the Financial Management and Accountability Act.  That section provides:

“33       Finance Minister may approve act of grace payments

(1)        If the Finance Minister considers it appropriate to do so because of special circumstances, he or she may authorise the making of any of the following payments to a person (even though the payment or payments would not otherwise be authorised by law or required to meet a legal liability):

(a)        one or more payments of an amount or amounts specified in the authorisation (or worked out in accordance with the authorisation);

(b)        periodical payments of an amount specified in the authorisation (or worked out in accordance with the authorisation), during a period specified in the authorisation (or worked out in accordance with the authorisation).

Note:    See also subparagraph 65(2)(a)(ia) (which allows regulations to be made about the Finance Minister considering a report from specified persons before authorising a total amount that is more than a specified amount).

(3)        Conditions may be attached to payments under this section. If a condition is breached, the payment may be recovered by the Commonwealth as a debt in a court of competent jurisdiction.

Note:    Act of grace payments under this section must be made from money appropriated by the Parliament. Generally, an act of grace payment can be debited against an Agency’s annual appropriation, providing that it relates to some matter that has arisen in the course of its administration.”

9                      Dr Harmer said that that Act is administered by the Minister for Finance and Deregulation, and that Minister, or her delegate, was the decision-maker for the purposes of the application for the act of grace payment that Mr Croker had made.  Dr Harmer said that to the best of his knowledge and belief, no officer of his department had been contacted by Mr Croker or the Department of Finance and Deregulation in relation to any act of grace payment request made by Mr Croker.

10                  A further affidavit by Simon Letch was filed on behalf of the Secretary.  Mr Letch, until earlier this year, was the manager of Centrelink’s customer compensation team and is now a more senior officer in the legal division of the Department of Human Services.  Mr Letch attached to his affidavit the Department of Finance and Deregulation’s finance circular number 2009/09, “Discretionary Compensation and Waiver of Debt Mechanisms” (“the s 33 Scheme”), together with a copy of a letter dated 3 June 2010 from Centrelink to Dr Guy Verney, the Branch Manager for Special Claims and Land Policy Branch of the Department of Finance and Deregulation, supporting Mr Croker’s request for the act of grace payment of $1,877.66.  That amount was, in fact, the full entitlement Mr Croker may have had to a pensioner education supplement for the period, the subject of his request.

11                  On the basis of his experience in his previous and current positions Mr Letch described his understanding of the approach of the Department of Finance and Deregulation in cases where a client of Centrelink asserted a legal entitlement to some form of payment, (whether through merits review by the Social Security Appeals Tribunal or the Administrative Appeals Tribunal, or in any legal proceeding in a Court, at the same time as making a request for an act of grace payment).  Mr Letch said that in such cases “… the Department of Finance and Deregulation would suspend the processing of the act of grace payment request” because it “… is regarded to be premature and inappropriate.  This approach also ensures that there is no risk of a claimant being able to “double-dip” by having an act of grace payment approved prior to achieving a successful outcome in a legal claim.”

The failure to consider Mr Croker’s Application

12                  After the tribunal gave its decision on 2 July 2010, Mr Croker received a letter from Dr Verney dated 22 July 2010.  That letter noted that on 5 July 2010 Mr Croker had advised Dr Verney that he was preparing an appeal to this Court and continued, in a vein that reflected Mr Letch’s understanding of the Department of Finance and Deregulation’s policy:

“Act of grace payments are discretionary compensation mechanisms generally available for matters relating to agencies, subject to the Financial Management and Accountability Act 1977.  Generally requests for an act of grace payment are not considered until all alternative avenues such as appeals to the court are exhausted.  As you are undertaking an alternative avenue to seek redress, I consider that it would be inappropriate to consider your request at this time.  Therefore, Finance will take no further action on your request.”  (emphasis added)

13                  Dr Verney’s letter invited Mr Croker to make a further request for the payment of an act of grace payment in the event that he were dissatisfied with the outcome of proceedings in the Court.  Unsurprisingly, in face of this perfunctory administrative refusal to consider his application at all, Mr Croker subsequently commenced the proceedings on 30 July.

14                  As a consequence of what occurred at the hearing and the orders that I made on 1 October 2010, Centrelink requested Dr Verney to review Mr Croker’s application, and he did so.  Dr Verney said that he was reviewing the application as delegate of the Minister for Finance and Deregulation under s 33 of the Financial Management and Accountability Act.  That Minister administers s 33.  Neither the Secretary nor Centrelink has any decision making or other role in the administration of s 33.

15                  In his letter of 6 October, Dr Verney said that he was satisfied that had measures been in place on or before 1 July 2009 that were now in place, it would be reasonable to expect that Mr Croker would have applied for a pensioner education supplement at that time.  He found that the application of the Social Security legislation had had an inequitable outcome in Mr Croker’s case as a result of the administrative practices that then applied.  On that basis Dr Verney approved an act of grace payment for $1,877.66 being equivalent to the pensioner education supplement.  However, he then said that having regard to the separation of the executive and the judiciary under the Constitution, he had made the payment conditional under s 33 of the Act on Mr Croker’s first withdrawing his application to the Court for a review of the tribunal’s decision of 2 July 2010.

The proceedings are discontinued

16                  During the course of the hearing today, the Secretary indicated that he would be prepared to withdraw, or not proceed on, his notice of motion and would not seek any order in respect of costs, if Mr Croker were prepared to discontinue the proceedings on the basis that the payment of the $1,877.66 finally determined Mr Croker’s rights in respect of his application to the tribunal that had been dismissed on 2 July 2010.

17                  In consequence, I granted leave to Mr Croker to discontinue the proceedings orally and made no order as to costs, but allowed him to seek leave to reinstate them if he were not paid the $1,877.66 on or before 22 October 2010.  The proceedings are therefore, for all intents and purposes, at an end, as I have no doubt that the Department of Finance and Deregulation will arrange for the payment it has promised, its condition having been fulfilled. 

The issues under s 33 of the Financial Management and Accountability Act

18                  The Minister for Finance and Deregulation has not appeared and is not able to explain her position or that taken by her delegate, Dr Verney in his letter of 22 July 2010. That position was consistent with what Mr Letch identified as the policy of that Department as to the administration of s 33 of the Financial Management and Accountability Act.  Dr Verney’s only explanation in his letter of 6 October of why, suddenly, after the matter had come before the Court and had received some critical attention from me on 1 October, he was in a position to depart from the emphatic refusal to consider Mr Croker’s request earlier, was because he had been requested by Centrelink to review Mr Croker’s application.

19                  The unsatisfactory aspect of what has occurred is that if the decision taken on 6 October by Dr Verney had been taken shortly after 3 June 2010 and communicated, first to Mr Croker, and potentially the tribunal, it would not have been necessary for the tribunal to further consider the matter or to deliver its decision on 2 July 2010.  That would have enabled the tribunal member to deal with other matters instead of writing and delivering her decision.

20                  Fundamentally, that means it would not have been necessary for Mr Croker to commence proceedings in this Court at all or, for the Court’s resources to be used to deal with the matter.  Moreover, if the Secretary’s contentions were correct, either his motion would have succeeded or the appeal would have been ultimately dismissed, and it is very likely that in those circumstances, Mr Croker would have been ordered to pay costs of a very substantial kind, far exceeding the sum of less than $2,000 that was in dispute. 

21                  It is well known that personal litigants are likely to feel stress and strain from being engaged in litigation:  cf  Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 214 [101] per Gummow, Hayne, Crennan, Kiefel and Bell JJ.  Saliently, their Honours observed, in the context of a rule of Court reflective of Pt VB of the Federal Court of Australia Act and a decision to adjourn a hearing, (Aon 239 CLR at 217 [113]-[114]):

“113     … It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings.

114       ... delay and costs are undesirable and ... delay has deleterious effects, not only upon the party to the proceedings in question, but to other litigants. The Rule's objectives, as to the timely disposal of cases and the limitation of cost, were to be applied in considering [the] application for amendment. It was significant that the effect of its delay in applying would be that a trial was lost and litigation substantially recommenced. It would impact upon other litigants seeking a resolution of their cases.”  (emphasis added)

22                  Those considerations and Pt VB reflect the public policy of the Parliament and the Court with respect to the administration of justice in this Court.  The initial refusal of Dr Verney to consider a claim for less than $2,000 until after it was fully litigated, was inappropriate and unjustifiable on any view.  There was no apparent cost-benefit in allowing the appeal to be filed without considering whether, if Mr Croker lost, he would be paid that very small sum in any event.  The proper use of resources of the Court was ignored by the blind refusal inherent in the application of the policy reflected in Dr Verney’s letter of 22 July 2010.

23                  Moreover, in cases involving applications for the payment of government benefits by persons such as pensioners or pension claimants, the ordinary stresses and strains of litigation can be expected to be even larger than in other litigation.  Usually persons who seek, or claim to be entitled to, pensions are among the most vulnerable members of our community, financially and otherwise.  So much is recognised by the fact that the Parliament has seen fit to exercise its powers to provide for payment of moneys to support them in living.  Suggestions by an agency of the Commonwealth, such as Centrelink, that there is a reasonable basis to make an act of grace payment in the exercise of discretion under s 33 of the Financial Management Account and Accountability Act must be approached intelligently and sensitively.  In such cases, the Minister for Finance and Deregulation or her delegate should consider the consequences of making a decision on a claim under s 33 immediately as opposed to requiring the person seeking the act of grace payment to pursue to the end any claim or legal proceeding brought or foreshadowed by him or her. 

24                  The Parliament has legislated to provide time limits for filing, for example, applications for review before a competent tribunal or for judicial review, or appeals, such as, under the Administrative Appeals Tribunal Act.  In my opinion, it is an unwise and inappropriate exercise of the discretion under s 33 of the Financial Management and Accountability Act, to apply a blanket policy of refusal to consider applications for an act of grace payment, whatever their merits or the circumstances, simply because a claimant indicates that he or she will or may file an application or appeal within the statutory time limit to preserve any rights he or she may have.  A blanket policy to refuse to consider an application under s 33 in those circumstances is hard to understand, particularly where the responsible officer, department or agency of the Commonwealth considers that there is a reasonable basis for such a payment.

25                  However, s 33(3) of that Act recognises, even if a person has commenced proceedings, conditions can be attached to offers of payment made under this section, so that the Commonwealth’s revenues will be protected from a person seeking to “double dip.”   So much was reflected in [23] of attachment A to the s 33 Scheme.  It stated that an act of grace payment is a mechanism of last resort and generally did not apply where it was reasonable to conclude that there was an available administrative review mechanism which had the capacity to provide a remedy for the defective administration.  However, as the footnote to that paragraph indicated;

“This does not mean that a claimant should be forced to pursue legal action in circumstances where that legal action is unlikely to succeed or where that legal action will not provide a remedy for the defective administration.”

26                  Here, not only was Centrelink of the view that there was a reasonable basis to make an act of grace payment but the Secretary also asserted, in his motion, that Mr Croker’s appeal from the tribunal’s decision to dismiss his application for review of the delegate’s decision, had no reasonable prospect of success.

27                  It is of some concern that public resources, including those of the Secretary and the Court, ought to have been engaged in litigation involving a very small sum of money where Centrelink as, the paying agency, considered that there was a reasonable basis to make an act of grace payment for no better reason than that Mr Croker had indicated three weeks beforehand that he would file an appeal within the time prescribed by the Parliament.

28                  It may be that the delegate ultimately might have decided that no act of grace payment should be made in the proper exercise of the discretion.  But, good public administration, one might think, should involve a timely, realistic and intelligent consideration of whether or not to grant applications under s 33 for very small sums of money by indigent persons when they are supported by the responsible instrumentality of the Commonwealth under the s 33 Scheme.

29                  Centrelink wrote to Dr Verney on 3 June 2010 stating that it considered that Mr Croker’s application had a reasonable basis.  Appropriate and prompt consideration of that claim, on or before Dr Verney’s letter of 22 July 2010 would have meant that, had he then come to the same decision he came to on 6 October 2010, Mr Croker would not have needed to commence the proceedings.  And, thus, Mr Croker would not have been subjected to the stress of the proceedings.  The Secretary would not have been put to the expense of defending them.  More importantly, the public resources of the Court would not have been diverted to deal with a very small claim that commonsense suggested ought to have been the subject of sensible efforts by the Commonwealth to resolve. 

30                  The change of position between Dr Verney’s letters of 22 July 2010 and 6 October 2010 has revealed that the Department of Finance and Deregulation is capable of taking commonsense positions and making decisions promptly and appropriately.  However, that only occurred here because Centrelink asked him to consider the matter as a result of the concerns I had raised in open Court on 1 October 2010 with the solicitor for the Secretary. In saying that, I am not suggesting, one way or the other, whether the act of grace payment should or should not have been made.  Rather, my concern is that a decision should have been made promptly after 3 June 2010, having regard to the fact that this litigation would have been unnecessary if Mr Croker had been told that he would be paid the amount he had sought.  It did not matter whether he was legally entitled to it under s 1061PA of the Social Security Act or would be given it as an act of grace under s 33 of the Financial Management and Accountability Act.

Request for the Minister to reconsider the policy under s 33

31                  I am of opinion that the general policy behind the blanket refusal to consider whether to make a payment under s 33 stated by Dr Verney on 22 July 2010, ought be carefully and fully examined by the Minister for Finance and Deregulation, in order that she assess, overall, whether this policy may cause, as it did in this matter, an apparent waste of public money and the time of this Court.  There has been a pointless use of the judicial resources of the Commonwealth, together with what, as a matter of commonsense,  could only be seen as a completely unsatisfactory financial outcome for the Commonwealth, because of the initial refusal to consider, and then the late consideration of, Mr Croker’s application.  This regrettable result should be avoided in the future. A more intelligent approach to consideration of s 33 requests will serve better to protect the interests of people in the community, such as pensioners, who are vulnerable, as well as of taxpayers, the tribunal and the Court, if it is not desired to run a test case over the issue the subject of the act of grace application.

32                  The overall financial impact on the Commonwealth of a decision not to consider whether to make an act of grace payment to a person who has a reasonable basis to seek it but who, nonetheless, may have a legal right to that sum, needs to be weighed against all the costs of involved in any administrative review and litigation that the person may initiate or prosecute.  Such a person should not feel forced to initiate or prosecute proceedings simply because he or she is uncertain whether the Department of Finance and Deregulation will make an act of grace payment that the respondent officer or body of Commonwealth has supported.  There is no apparent public benefit in a case like this in having the Court, or a tribunal, decide on a claim to a benefit when, if the respondent succeeded, the person would be paid an act of grace payment.  The scarce public resource of the Court should not be used unnecessarily (where there is no issue of principle involved) to decide from which side of the consolidated revenue fund the pensioner or claimant will be paid a small, but to him or her, important sum.

33                  A situation such as that which has occurred in these proceedings should be avoided in the future, if at all possible.  I will direct the Registrar to send a copy of these reasons to the Minister for Finance and Deregulation.

Associate:

Dated:         19 October 2010