Brimley and Secretary, Department of Education, Employment and Workplace Relations
[2008] AATA 250
•31 March 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 250
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/2304
GENERAL ADMINISTRATIVE DIVISION ) Re MARK BRIMLEY Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Ms Robin Hunt, Senior Member Date31 March 2008
PlaceSydney
Decision
The decision of the Social Security Appeals Tribunal made on 4 May 2007 is set aside and substituted is the decision to treat the whole of the compensation payment received by the applicant for the period 13 June 2005 to 13 July 2006 as not having been made for the purposes of the debt arising from parenting payments made to the applicant’s wife.
..................[Sgd]....................
Ms Robin Hunt
Senior Member
CATCHWORDS
SOCIAL SECURITY – Parenting Payment (Partnered) – compensation affected payment – recovery of overpayment – debt owed to Commonwealth – special circumstances – decision set aside
Social Security Act 1991 ss 17, 23, 1068B, 1174, 1184K
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 44 AAR 436
Clark v Secretary, Department of Employment and Workplace Relations (2007) 161 FCR 451
Haidar v Secretary, Department of Social Security (1998) 28 AAR 288
Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281
Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090
Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Re Secretary, Department of Employment and Workplace Relations and Annette Lorraine Ellis-Howe [2007] AATA 1415
Secretary, Department of Family and Community Services vChamberlain (2002) 116 FCR 348
Secretary, Department of Social Security v Smith (1991) 30 FCR 56REASONS FOR DECISION
31 March 2008 Ms Robin Hunt, Senior Member summary
1. Mr Mark Brimley, the applicant, is a young family man who ceased work for a time as the result of an injury in December 2004. With reduced income, Mr and Mrs Brimley soon encountered financial difficulties and were unable to keep up their mortgage payments. At the same time, they were expecting the birth of their first child. When the child was born, Mrs Brimley received the parenting payment for a time. Centrelink subsequently required re-payment when Mr Brimley received compensation from his former employer’s insurer. Mr Brimley sought review of the decision that there are no special circumstances in his case that make recovery of the parenting payment unjust or inappropriate under the Social Security Act 1991 (the Act).
2. After considering all the evidence and submissions, I have found that special circumstances exist in Mr Brimley’s case which justify exercise of discretion under subsection 1184K(1) in his favour as to recovery of the parenting payment debt contested. This means one aspect of the decision under review is set aside.
reviewable decision
3. The applicant seeks review of a decision of the Social Security Appeals Tribunal (SSAT) made on 4 May 2007. The SSAT affirmed a decision of an Authorised Review Officer of Centrelink made on 31 October 2006 upholding the initial decision of a Centrelink officer made on 13 September 2006 to recover a debt resulting from an ‘overpayment’ of $16,073.23 to Mr Brimley. He is not contesting that part of the reviewable decision concerning recovery of other amounts paid to him while he was awaiting compensation. Mr Brimley is contesting only that part of the debt which pertains to payments made to his wife of parenting allowance. The amount in question is $6,626.58.
background
4. The background to this matter is not disputed. Mr Brimley was working for an employer when he was injured on 14 December 2004. He settled his compensation claim for psychiatric injury on 13 July 2006 for $22,423.03. He and his wife received certain social security payments during the period before his compensation claim was settled. The insurer informed Centrelink on 13 September 2006 that Mr Brimley would receive arrears of compensation by way of weekly payments for the period of 13 June 2005 to 13 July 2006.
5. During most of the period before his compensation claim was settled, Mr Brimley received either sickness benefit payments or newstart allowance. Mr Brimley’s social security benefits and allowances totalled $9,446.65. As well, his wife received parenting payment. She also earned a modest income from casual employment for part of the period. Mrs Brimley’s parenting payments totalled $6,626.58.
6. On 13 September 2006, Centrelink decided that Mr and Mrs Brimley were not entitled to the previous Centrelink payments because they subsequently received compensation payments in arrears for the period. Centrelink then raised a debt for $16,073.23. On the same day, Centrelink issued a compensation recovery notice to the insurer for $16,073.23.
issue
7. I must decide what effect Mr Brimley’s receipt of arrears of weekly compensation payments have in respect to the parenting payments his wife received between 13 June 2005 and 13 July 2006. Assuming there is a debt to the Commonwealth for the amount of the parenting payment, I must decide whether special circumstances exist that justify the exercise of discretion to treat the whole or part of the compensation payment as not having been made so that Mrs Brimley’s parenting payment, being a compensation affected payment, is not recoverable. Mr Brimley is not contesting Centrelink’s calculation of the debt amounts. Nor is he contesting the decision to recover the amount of sickness benefits and newstart allowance paid to him in the same period.
evidence and consideration
8. Mr Brimley is aged 38, having been born on 23 May 1969. At the tribunal hearing, Mr Brimley gave oral evidence and explained that he suffered an injury due to circumstances at work in the lead up to 14 December 2004. Mr Brimley stopped work when he was injured and the family relied on social security payments until he started to receive compensation payments. Later, he and his wife were able to return to work but still managed on a very modest income.
9. Mr Brimley’s solicitor made a statement of facts, issues and contentions in which he set out a scale of Mr Brimley’s workers’ compensation payments. These payments were $397.00 per week from 13 June 2005 to 30 September 2005. This was based on $334.10 for himself as a totally incapacitated worker plus an allowance of $62.90 for one dependent child.
10. The compensation payments increased to $405.10 per week, from 1 October 2005 to 31 March 2006, again based on a main component for a totally incapacitated worker plus an allowance for one dependent child. For the remainder of the period, 1 April 2006 to 13 July 2006, compensation payments increased to $413.40. At no time did these compensation payments include any amount for Mrs Brimley as a dependent spouse because she had part time employment, even though this was a poorly paid position.
11. By comparison with the situation after his injury and the birth of their child, Mr Brimley’s statement set out that he and his wife had a weekly income of $832.96. Mr Brimley was earning $699.96 with an employer superannuation contribution of $63 and Mrs Brimley’s earnings were approximately $70 to $75 per week. He calculated that, if he had not been injured, the combined family income would have been $48,929.92, including superannuation, during the period they relied on social security payments. The couple had been able to service their mortgage before the injury and the birth of their son. Mr Brimley gave evidence that they were paying $200 per week, until May 2005, when they became unable to service the debt, due to the changes in their circumstances. The mortgage debt was only $10,000 at this time and they were able to come to an arrangement with the lender.
12. When Mr Brimley ceased to work, on 14 December 2004, Mrs Brimley still had a part time job until the baby was born. During the period 13 June 2005 to 13 July 2006, she earned a total of $3,505.00, or an average income of approximately $75 per week. Mrs Brimley gave birth to a son, Brock, on 13 June 2005. She commenced receiving parenting payments from that date.
13. Between 13 June 2005 and 13 July 2006, the couple were dependent on social security payments and had no other income apart from Mrs Brimley’s earnings of $3,505.00, averaged at $75 per week over 12 months. It was only when the compensation settlement was reached that they received compensation payments, in arrears, to cover the period during which they had already received social security assistance. Centrelink calculated past economic loss for recovery purposes at $22,423.03, according to the request for compensation recovery notice dated 9 August 2006.
14. A month before Brock was born, in May 2005, Mr Brimley had ceased making his usual mortgage payments. This was because the couple had insufficient income and Mrs Brimley was close to the date when she would give birth. After Brock was born, in June 2005, Mrs Brimley returned to work in a casual position a few weeks later, in August 2005. She was able to work only a few weeks before she stopped again because someone had to look after Brock and Mr Brimley had started a course. In January 2007, Mr Brimley began an apprenticeship as a carpenter.
Is there a debt?
15. Subsection 1174(1) of the Act applies where the partner of a person receiving a periodic payment of compensation receives a compensation affected payment. The section provides, in part:
(1) If:
(a) a person receives periodic compensation payments; and
(b) the person is a member of a couple; and
(c) …;
(d) …
(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).
16. As can be seen, section 1174 sets out the effect a person’s periodic compensation payments have on the rate of their partner’s entitlements. Subsection 1174(1), paragraphs (a) to (e), therefore, applies to this case. Mr and Mrs Brimley are affected by this provision as Mrs Brimley was receiving parenting payment at a time later covered by back-dated receipt of Mr Brimley’s compensation payments. Mr Brimley had claimed compensation as mentioned in subsection 1174(1) paragraph (e).
17. The parenting payment Mrs Brimley received is one of many social security payments included in the definition of ‘compensation affected payment’ contained in subsection 17(1) of the Act and is specified in paragraph (b) of the definition. Therefore, Mrs Brimley was the recipient of a compensation affected parenting payment for the duration of the period taken into account by Centrelink. In consequence, the excess of the compensation payment is treated as ordinary income of the partner for the purposes of section 17 and results in Mrs Brimley being overpaid for the period once the arrears were received and taken into account. This means the debt of $6,626.58, raised by Centrelink, did arise as the SSAT affirmed.
Are there special circumstances justifying waiver?
18. Once a debt to the Commonwealth exists it may be written off or waived in some circumstances. The applicant has asked for consideration of special circumstances under subsection 1184K(1) that might permit waiver of the debt. Section 1184K of the Act is a discretionary provision which allows the Secretary or the tribunal to disregard some payments of compensation in special circumstances and reads, in part:
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.
19. Mr Brimley contends there are “special circumstances” in his case that make it appropriate to treat his compensation payments as not having been made. He accepts that the effect of the compensation provisions in the Act is to apply a preclusion period in respect of his compensation payments for the period and that this, in turn, creates a debt in respect of the amount of the parenting payments for the period from 13 June 2005 to 13 July 2006. The next issue for my determination, therefore, is whether it is appropriate in the special circumstances of this case to treat the whole or part of the lump sum workers' compensation payment as not having been made, pursuant to subsection 1184K(1) of the Act. As I have already said, Mr Brimley is making this argument only in respect to the parenting payment and not as to the other allowances he received in the same period.
20. The phrase ‘special circumstances’ is not defined in the Act. The Macquarie dictionary gives several meanings of “special”, beginning with “of a distinct or particular character” and a range of other meanings including “different from what is usual or ordinary”. It also gives as meanings, “extraordinary” and ”exceptional”. All of these meanings suggest some more than ordinarily difficult situation is required in order to dispense with the debt.
21. The phrase ‘special circumstances’ also has been considered by the Federal Court and by the tribunal in the context of the compensation preclusion period as well as in other situations. In order to be special, several decisions have stated the circumstances must be out of the ordinary and different from the circumstances in which other persons who apply for social security assistance are placed. The discretionary power conferred by subsection 1184K(1) of the Act, in particular, has been considered in cases such as Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61 at pp N96-N97; Secretary, Department of Social Security v Smith (1991) 30 FCR 56 at 58–63; Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 296–297.
22. Recently, as the respondent pointed out, the tribunal held that the tenor of those decisions is that, before it may become appropriate to exercise discretionary power in a particular case, there must be special circumstances which render the application of the relevant “compensation recovery” provisions in Pt 3.14 of the Act, unjust, unfair, unreasonable or otherwise inappropriate, having regard to the purpose and object of Pt 3.14 of the Act (Re Secretary, Department of Employment and Workplace Relations and Annette Lorraine Ellis-Howe [2007] AATA 1415). I agree with this broad expression of principles for the application of the discretion and note that the Ellis-Howe case also concerned parenting payments but that the recipient of the payments was the recipient of the compensation that made those payments “compensation affected”. The present case concerns parenting payments affected by the partner’s receipt of compensation subsequent to the parenting payments.
23. The respondent contends that recovery of the debt in this case is not unjust, unfair, unreasonable or inappropriate for the following reasons:
(a)the applicant received arrears of weekly compensation for the compensation period totalling an amount of $22,423.03;
(b)the applicant began a full-time apprenticeship in carpentry in January 2007 earning $360 per week plus overtime;
(c)the applicant and his wife own their home (subject to a mortgage debt of approximately $10,000).
24. I accept that all of these circumstances exist in the present case but I do not consider that they are the end of the matter. In identifying any circumstances that are special in Mr Brimley’s case, I further note that Mr Brimley did not receive the compensation payments during the period when his wife received the parenting payments but in arrears. This late payment has caused great difficulty for the couple as the parenting money is long gone, spent on essentials at the time of receipt, and they still have only a small income and a child to support as well.
25. During the time Mrs Brimley was receiving the parenting payments, their only other income was the social security assistance Mr Brimley was receiving and which he has conceded he must repay. The couple was unable to retain any portion of their income and already could not meet all their usual commitments during the period. They were reliant in the full sense of the word on social security payments. There is no evidence to suggest that Mr and Mrs Brimley were in any way extravagant and spendthrift. Despite being good money managers, as demonstrated before the injury, they accumulated some debt in addition to the social security debts during the time their income was reduced.
26. At the time covered by the arrears of compensation, Mr Brimley’s income, which was never substantial, was further reduced to the extent that he could not keep up his mortgage payments although he had managed to make these payments before his injury. In addition, his wife took almost no time off work although she gave birth to their son. She returned to work shortly after the birth in order to try to make ends meet.
27. In my view, the situation of the Brimley family was unusual and out of the ordinary not only because Mr Brimley was injured, which was the circumstance that led to his ultimately receiving compensation, but this coincided with the birth of their son not long afterwards. The birth put more financial pressure on the couple at an already difficult time. Mrs Brimley had to give up work for a while, as someone had to care for the baby and this further reduced their income. Mr Brimley calculates that the family income over the period was reduced by about $30,000 and they had to use the money they usually put towards reduction of the mortgage to meet essential living expenses. They were left in a situation where they could not manage financially although they had done so before the injury and the birth.
28. In Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152 at [27] Justice Downes expressed the view that both hardship and unfairness can form the basis of exercising the discretion under s 1184K of the Act. I note that, in order to qualify as special circumstances, financial hardship must be beyond ‘straitened’ circumstances and be truly exceptional. For example, see Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690. In the present case, the effect on Mr Brimley and his wife of the collection of the debt gives rise to both hardship and unfairness although their financial situation is not exceptional when compared to that of many social security recipients.
29. Besanko J, in Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 44 AAR 436, expressed the view there is a danger that the test of “special circumstances” will be overstated if the word “exceptional” is emphasised. There is less risk of overstatement if the words “unusual” or “uncommon” are emphasised. Noting this danger, I have concentrated on the uncommon circumstances arising in this case and the unfair aspect.
30. Unfairness stems from the application of the rule in section 1174 that takes a different base income from the norm in applying other provisions of the Act. Had Mr Brimley still been earning active income rather than receiving compensation, his income might not have brought about the result which came about due to the operation of section 1174. Subsection 1174(1) is inconsistent with the treatment of income in section 1068B as to the manner in which the rate of parenting payment is taken into account. The formula in section 1068B for calculating the rate of parenting payment involves an income test using ordinary income to work out the person's income reduction. By contrast, subsection 1174(1) applies a “spill over” of the person’s income which is counted as excess over income received by the partner. If calculations pursuant to section 1068B were made on the presumption that the weekly compensation payments were ordinary income, Mrs Brimley claims she would still have been entitled to parenting payments, even if reduced by the application of the formula used in section 1068B.
31. The solicitor for Mr Brimley tendered a copy of a table of maximum weekly benefits payable under the Workers Compensation Act 1987 (NSW) which shows that the benefits payable increase for each dependent. He argued that section 1174 was predicated on a recipient of workers’ compensation receiving a component for a dependent spouse which Mr Brimley did not receive although his wife was his dependent except for a very small and irregular income of up to $75 per week. Mr Brimley’s lost earnings for which he was being compensated would not have precluded him from receiving parenting payments. There is no room for this inconsistency to be taken into account in section 1174. This has not been contradicted by the respondent and has an unfair outcome in Mr Brimley’s case even though the legislative provision is clear.
32. I also note that, although the award made allowance for the dependent child, no award was made for Mrs Brimley because of the income she had been earning. This was so although her income was very little and ceased altogether for a few weeks due to her pregnancy and the birth of her son and again when her husband started his apprenticeship.
33. The respondent drew my attention to the judgment of Lindgren J in Clark v Secretary, Department of Employment and Workplace Relations (2007) 161 FCR 451 at [75]:
The expression “special circumstances” in s 1184K does not embrace the circumstance that the 50% rule will yield a preclusion period beginning on a certain date that will or may be excessive, even grossly excessive, having regard to the component included in a lump sum settlement for loss of earnings or of earning capacity, to the age of the injured person, and perhaps to other circumstances.
34. I am bound by Justice Lindgren’s view that “even a grossly excessive preclusion period”, having regard to a component for loss of earnings, is not embraced in the expression “special circumstances”. Justice Lindgren is particular about the preclusion possibly being excessive due to the loss of earnings component and age not being special circumstances but does not elaborate on what other circumstances are possibly not special.
35. It was put to me by the Secretary’s counsel that Lindgren J held that unfairness in the application of the Act cannot be a special circumstance. In this respect, I acknowledge that His Honour did approve the words of Keifel J in Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348 at [34-35] where Keifel J noted the statute has selected a methodology which may operate in an arbitrary way and that this does not alter the objective or change the way it must be read. However, the view that an arbitrary effect cannot be a special circumstance in any situation is not universally held or was not so held in 2000.
36. In Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281, Justice Mansfield held otherwise. Having read the judgment of Justice Lindgren, I note that he has referred to some previous decided cases but not to Kirkbright. Mansfield J found, in the case of Kirkbright, that the tribunal had fallen into error when it held, as a matter of law, that unfairness in the application of the Act in the particular circumstances could not comprise “special circumstances”. Justice Mansfield rejected this argument. Justice Mansfield further noted that proposition was not supported by authorities and cited several cases that coincided with his opinion. His Honour was considering the effect of strict application of a rule about earning capacity and the effect on sole parent pension payments. His Honour found strict application failed to have regard to the role of the former section 1184 in the Act and to its plain words. Mansfield J added:
It is but another way of putting the proposition that injustice or unfairness by the strict application of the Act can not of itself amount to a special circumstance for the purposes of s 1184. That is a proposition which, as I have noted, has been rejected by a number of decisions of the Court as far back as Smith and Beadle. It has also been rejected more recently by R D Nicholson J in Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090.
Factors other than the arbitrary effect of the legislation
37. I have already found Mr Brimley’s financial circumstances alone may not be so unusual as to warrant the exercise in his favour of the discretion pursuant to section 1184K of the Act. However, there are other difficulties facing Mr Brimley as well. There are a number of factors which combine to lead me to the conclusion that the special circumstances of this case make it appropriate to treat the whole of the compensation payments as not having been made. These include the unforeseen demand to repay the parenting payments.
38. The records of Centrelink before me include an entry [at T3, 10], made on 9 June 2005, that a compensation claim was pending in Mr Brimley’s case. The note recorded that Mr Brimley’s injury was depression and that weekly payments of compensation had been paid for a period since the injury on 14 December 2004. GIO advised the status of the claim for compensation as at 9 June 2005 was ‘declined” and a Centrelink officer gave a “clearance result” to pay Mr Brimley under section 17 and Pt 3.14 of the Act. There is no record of any discussion with Mr Brimley or his wife about the possible effect on their social security payments if they achieved a reversal of the GIO decision to cease compensation payments.
39. Further on, Centrelink updated the entries about the compensation claim, on 13 September 2006, to record that the GIO had now agreed to pay Mr Brimley compensation for the period over which Centrelink now requires recovery of the social security payments. The record shows notices were issued to Mr Brimley in September 2006 about the effect of the intended payments and that he rang on 19 September 2006 to enquire about the charge Centrelink had raised. Copies of the notices to Mr Brimley are not included in the tribunal documents furnished by Centrelink. The note on 19 September 2006 records that Mr Brimley could not understand the cancellation of his payments or that “the over flow affects his partner”. It is apparent from this record that no one had previously explained to Mr Brimley what might occur if he later received compensation for the same period as he was receiving social security assistance. He was still confused after making his enquiry on 19 September 2006.
40. The applicant did not appreciate that acceptance of the settlement offer would operate to disentitle his wife from receiving parenting payments. There is no record or evidence of receipt of any advice from Centrelink or other sources that this consequence would arise. In my view, it was reasonable for Mr Brimley to assume there would not be any such consequence. It was not until after the event that Centrelink concluded that the amount would have to be repaid. This highlights the difficulties associated with determining the consequences for the parenting payment at any earlier time. It was not possible to make any calculation until well after the event because the compensation payments were made in arrears. Mr Brimley had no reason to be alarmed or to seek further advice before accepting the settlement offer for compensation for his injury.
41. There is no suggestion that Mr and Mrs Brimley had any knowledge of how the legislative provisions operate. Nor do they have any adverse history of debt with Centrelink. On the contrary, Mr Brimley has submitted willingly to repaying the debt resulting from the personal social security assistance he received during the same period his wife received the parenting payment.
42. In addition, the applicant is not better off having received the compensation. He is not double dipping or placing an unusual burden on the taxpayer. He is content to repay his newstart allowance. As already mentioned, similar income earned rather than received by way of compensation would not have prevented the parenting payment.
43. Further, I consider that Mr and Mrs Brimley faced significant financial hardship during the period when the parenting payment was made. While recipients of social security are often in straitened circumstances, it was reasonable for Mr and Mrs Brimley to spend the parenting money during the period. They had no alternative, being already unable to meet their usual commitments. Also, Mr Brimley was suffering a psychiatric injury during the critical period and was put under further strain. The evidence before me suggests Mr and Mrs Brimley continue to suffer financial hardship although this is not dire.
44. I consider that the combination of these factors takes this case out of the usual or ordinary case and leads to the conclusion that repayment of the parenting payment is unfair and would cause unusual hardship. It follows, in my view, that it is appropriate to treat the whole of the workers' compensation as not having been made in the special circumstances of this case so far as the parenting payment debt is concerned.
DECISION
45. The decision of the Social Security Appeals Tribunal made on 4 May 2007 is set aside and substituted is the decision to treat the whole of the compensation payment received by the applicant for the period 13 June 2005 to 13 July 2006 as not having been made for the purposes of the debt arising from parenting payments made to the applicant’s wife.
I certify that the 45 preceding paragraphs are a true copy of the reasons for the decision herein of Ms Robin Hunt, Senior Member
Signed: .......................[Sgd].............................
Jennifer Wong, AssociateDate of Hearing: 3 December 2007
Date of Decision: 31 March 2008
Counsel for the Applicant: Mr Tony EdwardsSolicitor for the Applicant: Mr Phillip Young, Adams Leyland Lawyers
Counsel for the Respondent: Mr James Hmelnitsky
Solicitor for the Respondent: Ms Brin Anniwell, Australian Government Solicitor
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