Editors --- "Compensation: effect of compensation arrears on partner's parenting payment; special circumstances" [2008] SocSecRpr 25; (2008) 10(2) Social Security Reporter, Article 7

• BRIMLEY and SECRETARY TO THE DEEWR
• Background
• Legislation
• Evidence
• Discussion
• Decision

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Compensation: effect of compensation arrears on partner’s parenting payment; special circumstances

BRIMLEY and SECRETARY TO THE DEEWR

(2008/250)

Decided: 31st March 2008 by R. Hunt

Background

Brimley stopped work in December2004 as a result of a workplace injury. He received sickness allowance and then newstart allowance following the injury, before eventually returning to work. His wife also received parenting payment following the birth of their first child in June2005.

A compensation claim relating to Brimley’s workplace injury was originally declined by the insurer in June 2005, and was eventually settled on 13 July 2006. On 13 September 2006the insurer advised Centrelink that Brimley would receive arrears of compensation by way of weekly payments for the period 13June 2005 to 13 July 2006 amounting to $22,423.03. On the same day Centrelink decided that Brimley and his wife were not entitled to the social security payments made to them during the period for which Brimley received arrears of weekly compensation. Centrelink raised a debt against Brimley in the amount of $9446.65 and $6626.58 against his wife.

Brimley appealed to the AAT. He argued that special circumstances existed in his case, such as to justify the exercise of discretion to treat the whole or part of the compensation payments as not having been made, so that his wife’s parenting payment debt would not be recoverable. Brimley did not argue that his own debt should not be recovered.

Legislation

Section 1174(1) of the Social Security Act (‘the Act’) relates to the effect that periodic compensation payments received by a person have on the rate of social security payments payable to the person’s partner. That section relevantly states:

(1) If:

(a) a person receives periodic compensation payments; and

(b) the person is a member of a couple; and...

(e) the person’s partner receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the amount (if any) by which the daily rate of periodic compensation payable to the person exceeds the daily rate of the compensation affected payment for which the person is qualified in relation to a day or days in the periodic payments period, (the excess amount) is to be treated as ordinary income of the person’s partner for the purpose of the calculation of the amount of the compensation affected payment referred to in paragraph (e).

Section 1184K of the Act provides that the Secretary may disregard the whole or part of a compensation payment in some circumstances:

1184K.(1) 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.

1184K.(2) If:

(a) a person or a person’s partner receives or claims a compensation affected payment; and

(b) the person receives compensation; and

(c) the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s or the person’s partner’s receipt of, or claim for, the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).

Evidence

Evidence was given of the calculation of the periodic compensation paid to Brimley. The evidence was that the compensation payments were based on a main component for a totally incapacitated worker plus an allowance for one dependent child. At no time did the payments include an amount for his wife as a dependent spouse, as she had part-time employment during some of the period, albeit in a low-paid position. Between 13 June and 13 July 2006 her earnings averaged $75 per week.

Brimley gave evidence of his income prior to his accident, and his family’s income and expenses during the period he and his family were reliant upon social security payments. Brimley also gave evidence that he began a carpentry apprenticeship in January 2007 and was earning $360 per week plus overtime.

Discussion

The Tribunal decided that s.1174of the Act applied in this case, as Mrs Brimley received parenting payment at a time covered by Brimley’s arrears payments of periodic compensation. Section 17of the Act provides that parenting payment is included in the definition of a ‘compensation affected payment’ for the purposes of the Act. The consequence of this was that the excess of compensation payment after its application to Brimley’s entitlement to his social security payments, which were also ‘compensation affected payments’, was to be treated as income for the purposes of working out Mrs Brimley’s rate of payment. The Tribunal was satisfied that the recalculation of Mrs Brimley’s payment after the application of s.1174resulted in a parenting payment debt of $6,626.58.

The Tribunal then considered whether there were special circumstances in Brimley’s case, such as to justify the exercise ofs.1184K. The Tribunal considered the decision in Secretary to the DEEWR and Ellis-Howe (2007])AATA 1415 (7 June 2007) and earlier Tribunal decisions on the nature of the discretion in s. 1184K. It decided that the broad expression of principles in those cases was that circumstances needed to be such that the application of the relevant compensation recovery provisions in the Act would be ‘unjust, unfair, unreasonable or otherwise inappropriate, having regard to the purpose and object of Pt 3.14 of the Act’. (Reasons, para.22)

The Tribunal took into account that Brimley did not receive the compensation payments during the period when his wife received parenting payment, but much later. The Tribunal also noted that the late payment of the compensation caused great financial difficulties for the couple.

The Tribunal considered the situation of Brimley’s family unusual and out of the ordinary as Brimley’s injury coincided with the birth of their son soon afterwards. The birth put more financial pressure on the couple. The Tribunal was of the opinion that the recovery of Mrs Brimley’s debt would give rise to both ‘hardship and unfairness’, even though their financial situation was not exceptional when compared to that of many social security recipients. The Tribunal noted that the family’s financial circumstances alone were not so unusual as to warrant the exercise of the discretion in s.1184K on their own. However, when taken together with two further factors, the Tribunal decided it was appropriate to exercise the discretion in Brimley’s case.

Firstly, the Tribunal considered the ‘unfairness’ arising from the application of the rule in s.1174, which treats compensation income very differently to ordinary income from employment. The Tribunal also noted that the compensation payments made to Brimley did not include a component for a dependent spouse, even though his wife’s income was very small and irregular. It was noted that s.1174did not take such situations into account in a fair manner.

The Tribunal considered the question of whether ‘unfairness’ arising from the application of the Act could be a special circumstance. The Tribunal paid particular attention to the case of Kirkbright v Secretary of Family and Community Services[2000] FCA 1876; (2000) 106 FCR 281. In that case Mansfield J found that the Tribunal had fallen into error when it held that unfairness in the application of the Act in the particular circumstances of Kirkbright’s case could not comprise ‘special circumstances’. This led to the Tribunal’s conclusion in Brimley’s case that ‘unfairness’ arising from the application of the Act could be a special circumstance.

Secondly, the Tribunal considered the fact that Brimley and his family were not warned that Mrs Brimley’s social security payments might be recovered if Brimley received compensation, to be a special circumstance. There was no evidence of any discussion with Brimley or his wife about the possible effect on their social security payments if they later received arrears of periodic compensation. Centrelink at no stage advised Brimley or his wife that she would owe a debt as a consequence of Brimley receiving arrears of compensation. It was therefore reasonable for Brimley to assume that such a consequence would not arise, so he had no reason to seek further advice before accepting the settlement offer for compensation.

The Tribunal considered that the combination of these factors took this case out of the usual or ordinary case and concluded that repayment of the parenting payment debt was unfair, and would cause unusual hardship.

Decision

The decision of the SSAT was set aside. A substituted decision was made to treat the whole of the compensation payment as not having been made for the purposes of the debt arising from Mrs Brimley’s parenting payments.

[D.A.]