Editors --- "Lump sum compensation; preclusion period; special circumstances" [2007] SocSecRpr 46; (2007) 9(4) Social Security Reporter, Article 4

• ATHERDEN and SECRETARY TO THE DEWR
• Background
• Issue
• Discussion
• Formal decision

---

Lump sum compensation; preclusion period; special circumstances

ATHERDEN and SECRETARY TO THE DEWR

(2007/1860)

Decided: 12th October 2007 by L. R. Tovey

Background

The SSAT affirmed a decision of the delegate of the Secretary to impose a 6 week compensation preclusion period in relation to parenting payments received by Atherden in consequence of his receipt of a lump sum compensation payment under the Workers’ Compensation and Injury Management Act 1981(WA) in the amount of $8010. Atherden appealed.

Issue

Atherden accepted that the effect of Division 3 Part 3.14 of the Social Security Act 1991 (‘the Act’) was to impose a preclusion period in respect of his parenting payments but argued that s.1184K(1) was applicable to his circumstances.

Section 1184K(1) of the Act provides that:

‘For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:

(a) not having been made; or

(b) not liable to be made;

if the Secretary thinks it is appropriate to do so in the special circumstances of the case.’

Discussion

The Tribunal observed that perhaps taken in isolation, none of the factors it considered would of itself constitute special circumstances which would lead it to treat the whole or part of the lump sum payment as not having been made. There was however an accumulation of factors which when considered in combination allowed the conclusion that the strict application of Part 3.14 of the Act would cause unusual hardship and unfairness to him and therefore allow his circumstances to be characterised as outside of the usual or ordinary.

Atherden did not appreciate that acceptance of the offer from the insurer of a total redemption would operate to disentitle him from receiving parenting payments. Rather, he was of the view that the receipt of the lump sum of $8900 would have little or no effect on his Centrelink payments and in light of the advice which he had received from Centrelink on 26May 2006, that was a reasonable assumption for him to have made. If he had appreciated the true effect of the receipt of the lump sum payment, he would not have accepted the $8900 offered in full settlement of his claim but would have accepted only his Second Schedule entitlement under the Workers’ Compensation and Injury Management Act. The advice given by Centrelink to the effect that receipt of the lump sum would have little or no effect on his parenting payments was no doubt based on its appreciation, from information supplied by Atherden, that the payment related to residual disability with no component for loss of earning capacity. On that assumption the advice was correct. However, he was not told that the advice he received was dependant on that assumption. The effect of acceptance of a lump sum on his future entitlement to parenting payments was a matter which he should reasonably have taken into account when deciding whether or not to accept the settlement offer. The failure to advise him of that possibility deprived him of the opportunity to consider that factor. There was an element of unfairness in the application of the preclusion period to him in those circumstances. If he had accepted only payment of$5106.20, being his Second Schedule entitlement, he would have continued to receive both weekly payments of workers compensation and parenting payments, together with his family benefits.

Atherden faced significant financial hardship during the preclusion period. The Tribunal recognised that recipients of social security are commonly impecunious and in straitened circumstances but reasoned that while the lump sum payment provided additional income to Atherden, he reasonably spent that money well prior to the end of the preclusion period and in the latter part of the preclusion period he was unable to afford food for himself and his son, relying on assistance from his family and a church group.

The Tribunal took account of the emotional strain under which Atherden was suffering during the preclusion period due to his ill health, the problems which his son was having which led to him being taken out of school for a period and the contemporaneous death of Atherden’s father. These matters had indirectly increased the financial strain to which Atherden was subject.

Finally the lost earnings for which he was being compensated would not have operated to preclude him from receiving parenting payments. It was not a case where the parenting payments were a substitute for lost income which was the subject of the compensation payment. While not itself a special circumstance, the Tribunal considered it a relevant matter to take into account when considering the cumulative effect of his circumstances.

Formal decision

The Tribunal set aside the decision of the SSAT and substituted a decision to:

(a) set aside the decision of DEWR to cancel Atherden’s parenting payments and apply a 6 week lump sum preclusion period; and

(b) treat the whole of the compensation payment received by him as not having been made.

[I.T.]