Nicholls and Secretary, Department of Family and Community Servic Es
[2003] AATA 341
•14 April 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 341
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2002/1147
GENERAL ADMINISTRATIVE DIVISION ) Re MARY NICHOLLS Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr S. Webb Date14 April 2003
PlaceSydney
Decision The Tribunal determines the decision under review is set aside and the matter is remitted to the Respondent with the following direction:
The correct rate of Mrs Nicholls’ Parenting Payment is to be calculated from 20 September 2001 in accordance with the proper construction of section 1174 and on the basis that Mr Nicholls was not qualified for a compensation affected payment during the periodic payments period in consequence of which his periodic compensation payments are to be treated as ordinary income for the purpose of the Parenting Payment (partnered) income test.
[SGD] Mr S Webb (Member)
CATCHWORDS
SOCIAL SECURITY - Partner Parenting Payment - receipt of periodic compensation payments by partner – statutory interpretation – whether qualified for a compensation affected payment - income test - whether calculation correct - special circumstances - whether incorrect advice - whether outcome is unfair, unintended or unjust
LEGISLATION
Social Security Act 1991 sections 17, 23, 503, 593, 601, 603C, 1068B, 1160, 1161, 1173, 1174, 1184K
Family and Community Services Legislation (Simplification and Other Measures) Bill 2001- Senator the Hon Amanda Vanstone Minister for Family and Community Services Second Reading Speech Hansard Wednesday, 20 June 2001 at p 24704
Family and Community Services Legislation (Simplification and Other Measures) Bill 2001 Explanatory Memorandum
AUTHORITIES
Re Secretary, Department of Family and Community Services and Woolrich (2000) AATA 943
Re Keighley and Secretary, Department of Family and Community Services (2000) AATA 231
Re Secretary, Department of Social Security and Smallacombe (1991) 23 ALD 141
Re Zaccardi and Secretary, Department of Social Security (1995) 40 ALD 760
Re Secretary, Department of Family and Community Services and Duarte (2000) 4(7) SSR 86
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Ellis [1997] FCA 214
Secretary, Department of Family & Community Services v Allan [2001] FCA 1160
REASONS FOR DECISION
14 April 2003 Mr S. Webb 1. This is an application by Mrs Mary Nicholls (“the Applicant”) for review of a decision by the Social Security Appeals Tribunal (“SSAT”) on 16 May 2002 to affirm a decision by an authorised review officer (“ARO”) on 9 March 2002. The ARO affirmed the decision of a delegate of the Secretary, Department of Family and Community Services (“the Respondent”) on 22 February 2002 to cancel Mrs Nicholls’ Parenting Payment.
2. A hearing before the Tribunal was held in Wagga Wagga on 3 February 2003, at which the self represented Applicant gave evidence. The Respondent was represented by Ms Cheryl Collis from the Administrative Law section at Centrelink.
3. The following material was placed into evidence before the Tribunal:
Exhibit
Description
Date
Exhibit A1
The Applicant’s Statement of Facts and Contentions
24 January 2003
Exhibit A2
Comparative Calculator for Partnered Compensation Recipients
Exhibit A3
Compensation Simplification Act – an overview
Exhibit R1
The Respondent’s Statement of Facts and Contentions
6 December 2002
Exhibit R2
Centrelink computer record concerning Mr John Nicholls
31 January 2003
Exhibit R3
Centrelink computer record concerning Allowance / Benefit History, Mr John Nicholls
31 January 2003
Exhibit R4
Centrelink letter to Mrs Mary Nicholls
22 October 2001
Exhibit R5
Appendix C – Customer Compensation – Submission to Delegate approval
19 December 2001
Exhibit R6
Centrelink letter to Mrs Mary Nicholls
21 November 2001
Exhibit R7
Comparative Calculator for Partnered Compensation Recipients
4. By agreement of the parties, supplementary submissions were tendered after the hearing and were taken into evidence.
Exhibit A4
Submission by the Applicant
24 February 2003
Exhibit R8
Submission by the Respondent
13 February 2002 [sic – 2003]
5. The relevant issue in this matter is whether the Respondent’s decision to cancel the Applicant’s Parenting Payment under the amended compensation provisions of the Social Security Act 1991 that came into force on 20 September 2001 was correct.
legislation
6. The relevant legislation in this matter is the Social Security Act 1991 (“the Act”) and in particular sections 17, 503, 593, 601, 603C, 1068B, 1173, 1174 and 1184K.
background
7. The Applicant has been receiving a Parenting Payment and Family Allowance since the birth of her first child in 1991.
8. On 20 September 2001 amendments to the compensation recovery provisions of the Act came into force and the Applicant’s Parenting Payment was cancelled, whereupon the Applicant has pursued her rights of appeal.
evidence
9. Mrs Nicholls told the Tribunal her husband worked as a loader driver in a local timber mill and injured his shoulder at work on 19 February 1997. She stated that he continued to work thereafter until the timber mill closed on 22 October 1997 and received a lump sum redundancy payment in January 1998.
10. She told the Tribunal Mr Nicholls claimed and was granted a Newstart Allowance which he received until 13 April 1998, during which time he engaged in casual farm work within medical restrictions. She recalled he underwent a surgical procedure on 14 April 1998 in consequence of his injury. The surgery, she stated, was a failure and he underwent further surgery on 2 September 1998 and 1 December 1998 without significant improvement.
11. Mrs Nicholls gave evidence that her husband’s periodic workers compensation payments commenced on the date of his first operation on 14 April 1998. She gave evidence that he continued to work on the farm on a casual basis throughout the compensation period, in consequence of which his wages were deducted from his periodic compensation payments. She told the Tribunal her husband’s periodic compensation payments ceased and he received a lump sum compensation payment in settlement of his claim in March 2002. She stated that Mr Nicholls found full time employment on 25 March 2002.
12. She told the Tribunal that Centrelink had not provided any forewarning or adequate explanation for the cancellation of her Parenting Payment. She said she only became aware of the problem when her Parenting Payment was not paid into her bank account when it was due on 4 October 2001. Mrs Nicholls gave evidence that she received a letter from Centrelink on 27 August 2001 that suggested her Parenting Payment may increase. She told the Tribunal she received another letter from Centrelink on 19 September 2001 informing her of a payment in the amount of $5.61 without any indication her Parenting Payment would be cancelled on 20 September 2001, as subsequently occurred. Mrs Nicholls stated she received a letter dated 22 October 2001 informing her that her Parenting Payment had been cancelled “because you and your partner’s combined income is above the allowable limit” (Exhibit T4, folio 17).
13. Mrs Nicholls told the Tribunal she contacted Centrelink by telephone and was told she was entitled to Parenting Payment. She stated Centrelink sent her some explanatory documents (Exhibit A3), which were “double dutch” and she did not understand. She gave evidence that on 11 October 2001 she was told Centrelink was experiencing computer problems calculating Parenting Payments under the new arrangements, in consequence of which her Parenting Payment had been cancelled in error. She gave evidence that a Centrelink officer told her a “work around” had been found which required her husband to claim a Newstart Allowance. She stated she was told her husband would not receive a Newstart Allowance but his claim would enable the computer to properly calculate her Parenting Payment. She explained (T6, folio 21):
“John wasn’t on Newstart, so the computer applied all of his w/comp weekly payment against my social security benefits. To enable the computer to get over it’s software problem, John (who isn’t on Newstart, just the award wage of $473.50 via w/comp) had to apply, and be rejected, for Newstart, at a one hour interview in Wagga Wagga, one hours drive from here.”
Mrs Nicholls stated that she believed the Centrelink officer and was told she should be receiving parenting payment in the amount of $72.50 per fortnight.
14. Mrs Nicholls stated that Mr Nicholls complied with Centrelink’s advice and lodged a claim for Newstart Allowance on 22 October 2001, on which day together they attended a Centrelink interview in Wagga Wagga. She gave evidence that Mr Nicholls’ claim for a Newstart Allowance was immediately rejected on account of his receipt of periodic compensation payments of $473.50 per week. Mrs Nicholls told the Tribunal she reapplied for Parenting Payment on the same day and was again told that Parenting Payment in the amount of $72.50 would be paid into her bank account. She stated that the next day, 23 October 2001, she received a telephone call from a Centrelink Officer informing her that she would not be receiving Parenting Payment and offering an apology. Mrs Nicholls told the Tribunal she was subsequently advised by Centrelink staff to complain and seek compensation for the out of pocket expenses she incurred attending the interview, which she did and was reimbursed an amount of $20.
15. Mrs Nicholls told the Tribunal she resides with her husband and three young children in a small village 75 kilometres from Wagga Wagga. She informed the Tribunal that the family is not extravagant and is able to live with reasonable comfort on the poverty line. She said they own the house in which they live and reduce outgoings by growing their own vegetables and milk. She gave evidence that her husband is in constant pain, but she and her children are in good health.
submissions and findings
16. The Tribunal makes the following findings of fact that are not in dispute between the parties:
(a)Mr Nicholls, the Applicant’s husband, was injured at work on 19 February 1997.
(b)At the date of his injury Mr Nicholls was not qualified for or receiving a “compensation affected payment” as defined at subsection 17(1) of the Act.
(c)Mr Nicholls ceased employment on 22 October 1997 and subsequently qualified for and received Newstart Allowance until 13 April 1998.
(d)Mr Nicholls underwent surgical procedures in consequence of his injury on 14 April 1998, 2 August 1998 and 1 December 1998.
(e)Mr Nicholls received periodic compensation payments in consequence of his injury at work from 14 April 1998 to March 2002, whereupon the periodic payments were commuted to a lump sum payment.
(f)The weekly amount of periodic compensation payment to Mr Nicholls was $460.50 on 20 September 2001 and increased to $473.50 on or about 20 October 2001.
(g)During the period 14 April 1998 to March 2002 Mr Nicholls was partially incapacitated for work and was employed from time to time on a casual basis performing light farm duties.
(h)Mrs Nicholls was qualified for and received family assistance payments throughout this period and received Parenting Payment until 20 September 2001.
(i)Mrs Nicholls, her husband and three children live in a rural hamlet on a property that they own without encumbrance.
(j)Mr Nicholls has been in full time employment since 25 March 2002, but was off work for two months following a work related vehicle accident in July 2002.
the law
17. It is not in dispute that the Applicant was receiving Parenting Payment, being a compensation affected payment, at the date of her husband’s accident at work on 19 February 1997. In consequence, pursuant to section 1168 of the Act which was then in force, Mr Nicholls’ periodic compensation payments were treated as “ordinary income” and were not subject to the dollar for dollar deduction rule which otherwise would have applied. The term “ordinary income” is defined at subsection 8(1) of the Act to mean income that is not maintenance income or an exempt lump sum.
18. The amendments that came into force with the passage into law of the Family and Community Services Legislation (Simplification and Other Measures) Act 2001 (“the Simplification Act”) on 20 September 2001 had the effect of removing the dollar for dollar exemption which had, up to that date, applied under old section 1168 of the Act, in cases where the partner of a compensation recipient was receiving a compensation affected payment at the requisite time but the compensation recipient was not.
19. The Simplification Act introduced, inter alia, new sections 1173 and 1174, as follows:
“Section 1173
Effect of periodic compensation payments on rate of person’s compensation affected payment
(1) If:
(a) a person receives periodic compensation payments; and
(b) the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and
(c) the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;
the rate of the person’s compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).
(2) The person’s daily rate of compensation affected payment is reduced by the amount of the person’s daily rate of periodic compensation.
(3) The reference in subsection (2) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.
(4) If:
(a) a person receives periodic compensation payments; and
(b) at the time of the event that gave rise to the entitlement of the person to compensation, the person was qualified for, and was receiving, a compensation affected payment; and
(c) the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;
the periodic compensation payments are to be treated as ordinary income of the person for the purposes of this Act.
Section 1174
Effect of periodic compensation payments on rate of partner’s compensation affected payment
(1) If:
(a) a person receives periodic compensation payments; and
(b) the person is a member of a couple; and
(c) the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and
(d) the person is qualified for a compensation affected payment in relation to a day or days in the periodic payments period but, solely because of the operation of this Part, does not, or would not, receive the payment; 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).
(2) The reference in subsection (1) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.
(3) For the purposes of subsection (1):
(a) the amount that would, apart from this section, be the amount of the partner’s ordinary income in relation to the day or days referred to in paragraph (1)(e) is to be increased by the excess amount; and
(b) the increased amount is to be taken to be the amount of the partner’s ordinary income in relation to that day or those days, as the case may be.”
20. Significantly, the event that gives rise to a person's entitlement to compensation is defined at subsection 17(5A) of the Act as follows:
“17(5A) For the purposes of subsection (2B) of this section and Part 3.14, the event that gives rise to a person's entitlement to compensation for a disease, injury or condition is:
(a) if the disease, injury or condition was caused by an accident—the accident; or
(b) in any other case—the disease, injury or condition first becoming apparent;
and is not, for example, the decision or settlement under which the compensation is payable.”
21. The term “compensation affected payment” is defined at subsection 17(1) of the Act.
“"compensation affected payment" means:
(aa) an age pension; or
(a) a disability support pension; or
(b) a parenting payment; or
(c) a social security benefit; or
(e) a disability support wife pension; or
(f) a carer payment; or
(g) a special needs disability support pension; or
(h) a special needs disability support wife pension; or
(i) mature age allowance; or
(j) mature age partner allowance; or
(k) a former payment type;”
“Social security benefit” is defined at subsection 23(1) of the Act:
““social security benefit” means:
(aa) widow allowance; or
(aab) youth allowance; or
(aac) austudy payment; or
(a) newstart allowance; or
(c) sickness allowance; or
(d) special benefit; or
(e) partner allowance; or
(ea) a mature age allowance under Part 2.12B; or
(f) benefit PP (partnered); or
(g) parenting allowance (other than non-benefit allowance).”
22. The central issue in contention in this case concerns the calculation of the correct rate of Mrs Nicholls’ Parenting Payment following commencement of the Simplification Act. As Mrs Nicholls’ husband was in receipt of periodic compensation payments it is necessary to consider the operation of sections 1173 and 1174 of the Act.
23. Section 1173 sets out the effect of a person’s periodic compensation payments on the rate of the person’s compensation affected payment. The section is to be applied if a person who is receiving periodic compensation payments receives or claims a compensation affected payment during the periodic payments period. Subsections 1173(1) and (2) have the effect of reducing a compensation recipient’s rate of compensation affected payment by the rate of their periodic compensation payments on a dollar for dollar basis. Subsection 1173(4) provides that periodic compensation payments are to be treated as the ordinary income of the person in cases where the person was qualified for and receiving a compensation affected payment at the time of the event that gave rise to the compensation.
24. Section 1174 applies in cases where the partner of a person who is receiving periodic compensation payments receives or claims a compensation affected payment during the periodic payments period. Section 1174 sets out the effect of a person’s periodic compensation payments on the rate of their partner’s compensation affected payment. The section has the effect of increasing the partner’s ordinary income by the amount the compensation recipient’s rate of periodic compensation payments exceeds the rate of the compensation affected payment for which that person is qualified during the periodic payment period (“the excess amount”) in certain circumstances that are specified in conjunctive paragraphs (a) to (e) at subsection 1173(1). Each of the paragraphs 1174(1)(a) to (e) must be satisfied for the section to have operative force.
25. There is no dispute between the parties that paragraphs 1174(1)(a), (b), (c), and (e) are satisfied in the circumstances. The interpretation and application of paragraph 1174(1)(d) is in contention.
26. The paragraph is comprised of two conjoined limbs, both of which must be satisfied if the paragraph is to have operative force. The first limb requires that the compensation recipient is qualified for a compensation affected payment. The second limb requires that the compensation recipient does not, or would not, receive the payment solely because of the operation of Part 3.14, which concerns compensation recovery.
27. Thus, in the first instance, the compensation recipient must be qualified for a compensation affected payment on one or more days during the periodic payments period. If the compensation recipient is not so qualified the paragraph, and hence the section, does not apply. In the second instance, if the compensation recipient is qualified for a compensation affected payment, then it is necessary to determine whether he or she does not, or would not, receive the payment solely because of the operation of Part 3.14 of the Act.
28. The first limb of the paragraph is a question of fact, whereby the qualification requirements for compensation affected payments that are set out in the relevant Divisions of the Act must be considered.
29. The second limb of the paragraph is exclusive of any cause for non-receipt of a payment other than the operation of Part 3.14. The deliberate inclusion of the word “solely” requires that the operation of the Part must be the sole cause, and not one of a multitude of causes, of the non-receipt of the payment. If the non-receipt is caused by factors other than the operation of the Part, the second limb of the paragraph is not satisfied and the section will not apply.
30. The inclusion of the subjunctive negative “would not” denotes that the second limb of the paragraph is intended to operate in the hypothetical frame. Thus, the paragraph requires a decision maker to consider not only whether the person does not receive the payment for which he or she is qualified, in actuality, but also whether, hypothetically, the person would not receive the payment solely because of the operation of the Part. The statutory hypothesis is limited in its scope, however, to consideration whether a payment would not be received by operation of the Part and does not extend to the predeterminative question of qualification for a compensation affected payment in the first limb of the paragraph. It is clear, however, that the scope of the statutory hypothesis extends to include the hypothetical lodgement of a claim for a compensation affected payment by a person, thereby permitting the enlivenment of section 1173 for the hypothetical purpose.
31. In the case at hand, the Respondent submitted that “[t]he law has been correctly ennunciated [sic] and applied by the SSAT in paragraphs 24-27 of their decision” (Exhibit R8, p2). The Tribunal notes the SSAT stated at pars 24 to 27 of its decision (T2, folio 7):
“24. Under section 1173(1):
[subsection quoted]
Subsection (2) provides that the person’s compensation affected payment is to be reduced by one dollar for each dollar of compensation received.
25. It is apparent that subsection 1173(1) does not apply to a person who does not claim or receive a compensation affected payment during the periodic payments period.. That term is defined in subsection 17(1) as the period to which the periodic payments relate, ie., the period for which they were paid. Thus it was only when Mr Nicholls applied for a newstart allowance, on Centrelink’s advice, that section 1173(1) applied to him.
26. Section 1174(1) of the Act provides:
[subsection quoted]
27. Paragraph 1174(1)(d) applies in this case because Mr Nicholls’ newstart allowance entitlement, which he claimed in 2001, was reduced to nil under section 1173. Had he not claimed the allowance at that time, paragraph (d) would still have applied because he would not have been entitled to receive payment due to the operation of Part 3.14, which includes section 1173….”
32. The Tribunal agrees with the SSAT’s finding that section 1173 applied to Mr Nicholls in consequence of his claim for a Newstart Allowance, with the effect that the rate of the Allowance so claimed was reduced on a dollar for dollar basis by the rate of his periodic compensation payments.
33. Paragraph 1174(1)(d), however, requires consideration of the actual or hypothetical effect of the operation of Part 3.14 upon the rate of a compensation affected payment for which the compensation recipient is qualified.
34. This being the case, it is not correct to assume that paragraph 1174(1)(d) is satisfied because Mr Nicholls lodged a claim for a compensation affected payment and the rate of that payment was reduced to nil by the operation of section 1173. There is nothing in section 1173 that requires a decision maker to establish that a person claiming a compensation affected payment during the periodic payments period is qualified for that payment. It is sufficient for the purposes of paragraph 1173(1)(c) that the compensation recipient claims or receives the payment. Paragraph 1174(1)(d), however, requires the compensation recipient to be qualified for the payment that he or she is actually or hypothetically prevented from receiving by operation of the Part alone. The qualification of a person for a compensation affected payment cannot be assumed for the purpose of the paragraph, but is a question of fact.
35. There is no evidence before the Tribunal that the SSAT considered whether or not Mr Nicholls was qualified for a Newstart Allowance or any other compensation affected payment during the periodic payments period for the purposes of section 1174 of the Act.
36. The Tribunal notes the Respondent’s submission that the approach adopted by the SSAT, which is contended for by the Respondent, reflects policy advice provided by the Department of Family and Community Services. Departmental policy advice, however, is not binding on the Tribunal. The Respondent states (Exhibit R8, p1):
“The Department of Family and Community Services (FaCS) provided Centrelink with two quite different policy interpretations about the new legislation and in particular the effect of S1174 on partner’s of compensation recipients. The second policy interpretation followed internal FaCS legal advice concerning the meaning of Part 3.14. This second advice was obtained during the process of implementing the new legislation in September 2001. Centrelink is obliged to implement FaCS policy. Centrelink now follows the later policy advice which is the same as the legislative interpretation made by the SSAT in it’s decision.
The Document “Compensation Simplification Act – an overview” [Exhibit A3] was prepared and (vetted by FaCS) and [sic] presented to a Conference of Centrelink Compensation Team Leaders on 15 Aug 2001. The paper was subsequently circulated to assist staff, and was purely intended as an internal working document, not for Public release. The paper explains the original FaCS policy interpretation of the current Part 3.14. The paper does not reflect current FaCS Policy at paragraphs 4, 6, 7 and was superseded by the policy change and legislation contained in s1174.” [original emphasis]
Paragraphs 4, 6 and 7 of the document entitled “Compensation Simplification Act – an overview” state (Exhibit A3, p1):
“Because income testing varies according to the payment type and whether both partners claim there are 11 different outcomes. Sometimes the compensation recipient will be better off not claiming particularly if their partner is a pensioner and their periodic compensation is higher than what they would otherwise qualify for before imposing the direct deductions. Regardless the change means many partners who could not previously be paid will now be able to reclaim and receive some payment.
…
FaCS has decided that partners of compensation recipients receiving saved compensation affected payments will have any excess compensation used to increase their income if the compensation recipient claims and is qualified for a CAP. i.e. These couples will be subject to the direct deduction/excess compensation assessment.
If only the partner claims a CAP and the compensation recipient does not then the periodic compensation will simply be assessed as ordinary income.”
37. On 11 March 2002, the ARO recorded the approach to be adopted in this matter (T13, folio 40):
“On 20 September 2001 legislative changes, in reference to the rewrite of Part 3.14 of the Act, meant new sections, 1173 and 1174, needed to be considered in relation to Mr and Mrs Nicholls’ circumstances. Section 1173(1) does not have an exemption clause in relation to the partner of a compensation recipient being on payment. Accordingly, these sections are applicable which means the periodic payments of compensation are assessable as a direct deduction against any possible social security entitlement Mr Nicholls may have (including if unclaimed) and the excess is taken as ordinary income in relation to Mrs Nicholls’ payments.”
The approach adopted is given further explanation by the ARO’s decision in this matter on 9 March 2002 (T13, folio 46):
“…
· Your husband’s fortnightly compensation payments were initially treated as ordinary income for the purposes of determining your social security entitlement. However, on 20 September 2001 changes were made to social security law which affected the method of assessing the compensation. From this date your husband’s compensation became a direct deduction against any social security entitlement he may have been due (including if unclaimed) and the ‘excess’ was treated as ordinary income in the assessment of your Parenting Payment which was sufficient to cancel your entitlement.
Social Security compensation legislation is now very specific that periodic payments of compensation are to be treated as a direct deduction from a person’s social security entitlement if the person was not in receipt of a social security payment when the event which gave rise to the compensation occurred. The only exception to this rule is contained in section 1184K of the SSA. This allows for all or part of a compensation payment to not apply if there are “special circumstances” in a particular case.
…
Compensation for lost [sic] of earnings is awarded to replace lost wages or lost earnings capacity. Social Security payments are also an income support payment. A person cannot receive a wage replacement more than once for the same period.”
38. The question whether this approach was intended by the legislature must be addressed.
39. The intention of the Parliament is clearly enunciated in the Second Reading Speech of the Minister for Family and Community Services (Senate Hansard, 20 June 2001, p 24704):
“Currently, if a person gets a compensation affected payment, which are defined in the Act, then they lose one dollar for every dollar of periodic compensation received. If this amount is reduced to zero then any excess compensation counts against their partner’s compensation affected payment dollar for dollar.
In future, if a person’s partner’s periodic compensation has to be taken into account in working out the person’s income for social security purposes, it will be treated as ordinary income of the person.
It is expected that this measure will result in an increase in the amount of social security pensions and benefits paid to couples with low levels of income derived largely, or solely, from compensation payments.”
The policy underlying section 1174 is set out in the Explanatory Memorandum for Family and Community Services Legislation (Simplification and Other Measures) Bill 2001 at page 6:
“This section provides for the effect of periodic compensation payments on the rate of a partner’s compensation [sic – affected] payment. The “dollar for dollar” reduction rule has been replaced by a new rule that provides that the amount by which the daily rate of periodic compensation payable to the person (ie the compensation recipient) exceeds the daily rate of the compensation affected payment payable to the person is to be treated as ordinary income of the person’s partner for the purposes of the Act.”
40. The Tribunal notes the nexus between receipt of periodic compensation payments and the rate of compensation affected payment that is payable to a person that is clearly expressed in both the Minister’s Second Reading Speech and the Explanatory Memorandum is given expression in the departmental advice that was circulated to Centrelink staff on 9 October 2001 (Exhibit A3, p3):
“…
· If the partner of the PPP customer has claimed a compensation affected payment (CAP) in the past and had their payment either CANcelled or REJected for reason “CMP” then only an excess amount will pass across to affect the rate of the PPP customer as income. The amount of that excess will depend upon whether the compensation payments are treated as income or as direct deduction against the comp recipient.
· However if the partner either has never claimed a CAP, or they have claimed but the CAN or REJ reason is other than “CMP” then the whole amount of the compensation will pass across and affect the PPP customer as income.
The policy of checking for “CMP” as the CAN or REJ reason was aimed at ensuring the compensation recipient would have qualified for a CAP, and the sole reason the payment is not payable is due to the compensation amounts.”
41. In the Respondent’s submission (Exhibit R8, p1), this approach was foregone in September 2001 and was superseded by the second departmental legal advice and the legislation, whereafter the approach adopted is consistent with that adopted by the SSAT in this matter. It is curious that the “original advice” (Exhibit A3) was still being circulated to Centrelink staff on 9 October 2001, after passage into law of the amending legislation.
42. The approach contended for by the Respondent relies upon the statutory hypothesis in the second limb of paragraph 1174(1)(d) over riding the requirement that the compensation recipient is qualified for a compensation affected payment as comprehended by the first limb of the paragraph and the effective substance of subsection 1174(1). The operative effect of this approach is to apply the direct deduction rule in cases where the partner of a compensation recipient claims or receives a compensation affected payment and the compensation recipient was not qualified for and receiving a compensation affected payment at the time of the event that gave rise to the compensation, on the basis that the compensation recipient would be prevented from receiving a compensation affected payment because of the operation of section 1173 of the Act if he or she was qualified whether or not such a payment has been claimed.
43. The Tribunal turns to consider the statutory construction of Part 3.14, which deals with compensation recovery under the Act. The general effect of the Part is set out in section 1160 in the following terms:
“Section 1160
General effect of Part(1) This Part operates in certain specified circumstances to do one or more of the following:
(a) reduce a person's compensation affected payment;
(b) render a person's compensation affected payment not payable;
(c) require the repayment of some or all of a person's compensation affected payment;
because of the receipt of compensation by the person or the person's partner.
(2) This Part applies whether or not there is any connection between the circumstances that give rise to the person's qualification for the compensation affected payment and the circumstances that give rise to the receipt of compensation by the person or the person's partner. “
44. The effect of the section is to limit the operation of the Part to “certain specified circumstances”. Section 1161 sets out the circumstances in which the Part will affect compensation affected payment, in the following relevant terms:
“Section 1161
Application of Part(1) Subject to subsections (2) to (7), payments of a compensation affected payment are affected under this Part if:
(a) whether the compensation was received before or after the commencement of this Part, the compensation affected payment is:
(i) a newstart allowance in relation to which, under Subdivision BA of Division 1 of Part 2.12, the recipient of the allowance is not required to satisfy the activity test; or
…
(b) in the case of any other kind of compensation affected payment, the compensation was received on or after 1 May 1987 and the claim for the compensation affected payment was made on or after 1 May 1987.”
45. Paragraph 1161(1)(b) has application in the case at hand. It is clear, therefore, that the Part may apply to a person in Mrs Nicholls’ circumstances in the event her husband falls within the terms of section 1174 which requires that Mr Nicholls must be both qualified for a compensation affected payment and not able to receive that payment solely because of the operation of the Part. It is not for the Tribunal to explain the policy underlying provisions of the Act. It can be seen, however, that the construction of the section reflects the underlying intention of the Part to prevent “double dipping”.
46. The Tribunal finds no justification for the approach contended for by the Respondent in the explanatory material placed before the Parliament on introduction of the Simplification Act or in the construction of Part 3.14 of the Act. The statutory construction is clear. Section 1174 of the Act has operative force only if paragraphs 1174(1)(a) to (e) are each satisfied. Paragraph 1174(1)(d) requires that the compensation recipient is qualified for a compensation affected payment during the periodic payments period but does not or would not receive that payment solely because of the operation of the Part. The section is to operate within its terms. The payment that would not be received, to which the statutory hypothesis relates, is the payment for which the compensation recipient is qualified for. The paragraph is thus anchored upon a factual finding whereby the hypothetical frame is narrowed from the open ended consideration of possibilities to the consideration of specific circumstances concerning the compensation affected payment for which the person is qualified, regardless whether the person claims or receives that payment. It follows that section 1174 has no operative force in the case of a compensation recipient who is not qualified for a compensation affected payment.
47. The paragraph requires a decision maker to answer the question, is the compensation recipient qualified for a compensation affected payment but actually or hypothetically prevented, by sole operation of the Part, from receiving that payment? The hypothetical question would the compensation recipient receive the payment under the Part if he or she was qualified for the payment is not an appropriate question within the terms of the section.
48. Considering all the evidence, the Tribunal is satisfied the approach adopted by Centrelink and the SSAT in the present case is not consistent with the clear intention of the Parliament and is contrary to the statutory construction of Part 3.14 and section 1174 in particular. Section 1174 can have no operative force in the case of a compensation recipient who is not qualified for a compensation affected payment on one or more days during the periodic payments period even if the other requirements of the section are satisfied.
consideration of the issues and findings
49. Turning to the case at hand, the question whether Mr Nicholls was qualified for a compensation affected payment on one or more days during the periodic payments period is determinative of Mrs Nicholls’ appeal. If the Tribunal finds he was qualified for a compensation affected payment but did not or would not have received the payment solely because of the operation of Part 3.14, paragraph 1174(1)(d) will be satisfied and the excess amount will, in consequence, be treated as ordinary income of Mrs Nicholls for the purpose of calculating the rate of her Parenting Payment, in which case the SSAT decision may stand despite the misapprehension of section 1174. If, however, the Tribunal finds that Mr Nicholls was not qualified for a compensation affected payment, section 1174 will not be enlivened and Mr Nicholls periodic compensation payments will be treated as ordinary income for the purpose of calculating the correct rate of Mrs Nicholls’ Parenting Payment, in which case the SSAT decision must be set aside.
was mr nicholls qualified for a compensation affected payment on one or more days during the periodic payments period?
50. The event that gave rise to Mr Nicholls’ entitlement to compensation is the accident he suffered at work on 19 February 1997 and the Tribunal so finds. The Tribunal has found as a fact that subsequent surgery was unsuccessful. There is no evidence, however, that the surgical procedures were in any way causative of Mr Nicholls’ injury for the purposes for subsection 17(5A) of the Act.
51. Mrs Nicholls gave evidence, which was unchallenged and the Tribunal accepts, that her husband commenced receiving periodic compensation payments on 14 April 1998 and continued to receive such payments until March 2002, whereupon a lump sum compensation payment in settlement of his compensation claim was agreed. The Tribunal finds the periodic payments period, which is defined at subsection 17(1) of the Act, commenced on 14 April 1998 and concluded on or about 25 March 2002.
52. The Tribunal accepts that Mr Nicholls continued to work for a period after the accident until 22 October 1997, on which date he was made redundant because his employer ceased trading. The Tribunal accepts Mrs Nicholls’ submission that her husband ceased work because he was made redundant and not because of his injury. It is a fact that Mr Nicholls was unemployed thereafter and received a Newstart Allowance until 13 April 1998. Mrs Nicholls gave evidence, which was not challenged, that her husband was not fully incapacitated by his injury and worked on a farm performing light duties on a casual part time basis during the periodic payments period and the Tribunal so finds.
53. Mrs Nicholls submitted that Centrelink erroneously advised her husband, who was receiving periodic compensation payments at the time, to apply for a Newstart Allowance which he did on 22 October 2001. The Tribunal accepts that Centrelink advised his claim was necessary, in consequence of a computing problem, for the assessment of Mrs Nicholls’ Parenting Payment rate, but was not expected to result in payment of a Newstart Allowance. Mr Nicholls’ claim for a Newstart Allowance and related Centrelink documentation is not in evidence before the Tribunal. The Tribunal accepts as a fact, however, that Mr Nicholls did lodge a claim for a Newstart Allowance on 22 October 2001.
54. Ms Collis submitted that Mr Nicholls’ claim fell within the terms of new subsection 1173(1), with the effect that the rate of compensation affected payment, being the Newstart Allowance he had applied for, was reduced, on a dollar for dollar basis, by the rate of his periodic compensation. The Tribunal accepts this submission and finds, as the rate of Mr Nicholls’ periodic compensation exceeded the maximum rate of Newstart Allowance, no Newstart Allowance was payable pursuant to section 1173 of the Act. There is, however, no evidence before the Tribunal that Centrelink determined whether or not Mr Nicholls was qualified for Newstart Allowance. Mr Nicholls’ claim and Centrelink’s consequent assessment appears, on its face and on the evidence before the Tribunal, as an exercise conducted for the sole purpose of calculating the rate of Mrs Nicholls’ Parenting Payment. Ms Collis submitted (Exhibit R8, p1):
“The reason Mr Nicholls was asked to claim Newstart was to work around computer system difficulties. Centrelink’s systems were developed to the original FaCS policy. The system currently does not calculate a partners [sic] rate correctly unless the compensation recipient is showing as cancelled due to the receipt of periodic compensation. An alternative would have been to strike a manual rate. The SSAT is correct in saying the presence or absence of the Newstart claim makes no difference to the rate correctly payable to Mrs Nicholls.”
55. This being the case and in absence of evidence to the contrary, the inference may be drawn that the question of Mr Nicholls’ qualification for a Newstart Allowance was not properly considered or ascertained in response to the claim he lodged on 22 October 2001. There is insufficient evidence before the Tribunal, however, to make any findings on this point.
56. Mrs Nicholls submitted that her husband was not qualified for a compensation affected payment during the periodic payments period. In her submission, Mrs Nicholls noted the Respondent had come to the same conclusion at paragraph 4 of the Respondent’s Statement of Facts and Contentions (Exhibit R1, p2):
“ … In this case, section 1173(1) was applicable since the applicant’s partner was not qualified for a compensation affected payment during the periodic payments period.” (emphasis added)
57. For a person to qualify for a compensation affected payment, the person must satisfy the qualification requirements for the respective payments that are set out in relevant Divisions of the Act. The payment in question in this matter is Newstart Allowance and it is to the qualification requirements for Newstart Allowance that the Tribunal now turns.
58. The qualification requirements for Newstart Allowance are set out at Subdivision A of Division 1 of Part 2.12 of the Act. Subsection 593(1) relevantly states:
“Section 593
Qualification for newstart allowance(1) Subject to sections 596, 596A, 597 and 598, a person is qualified for a newstart allowance in respect of a period if:
(a) the person satisfies the Secretary that:
(i) throughout the period the person is unemployed; or
(ii) the person is a CDEP Scheme participant in respect of the period; and
(b) in the case of a person to whom subparagraph (a)(i) applies—throughout the period, or for each period within the period, the person:
(i) satisfies the activity test; or
(ii) is not required to satisfy the activity test; and
(c) if subsection 604(1) applies to the person, at all times (if any) during the period when the person is not a party to a Newstart Activity Agreement, the person is prepared to enter into such an agreement; and
(d) if subsection 604(1) applies to the person, at all times during the period when the person is a party to a Newstart Activity Agreement, the person is prepared to enter into another such agreement instead of the existing agreement; and
(e) if the person is required by the Secretary to enter into a Newstart Activity Agreement in relation to the period, the person enters into that agreement; and
(f) while the agreement is in force, the person satisfies the Secretary that the person is taking reasonable steps to comply with the terms of the agreement; and
(g) throughout the period the person:
(i) subject to subsection (2B), is at least 21 years of age and has not reached the pension age; and
(ii) is an Australian resident or is exempt from the residence requirement within the meaning of subsection 7(7); and
(i) the person was not in receipt of a youth allowance during the period.”
59. The requirements for satisfaction of the Activity test are set out at section 601 of the Act, as follows:
“Section 601
Activity test
(1) Subject to subsections (1A) and (3), a person satisfies the activity test in respect of a period if the person satisfies the Secretary that, throughout the period, the person is:
(a) actively seeking; and
(b) willing to undertake;
paid work in Australia, other than paid work that is unsuitable to be undertaken by the person.”
The Act, however, provides exemption from the Activity Test for incapacitated persons in certain specific circumstances that are set out at section 603C:
“Section 603C
Incapacitated person not required to satisfy activity test
(1) Subject to this Subdivision, a person is not required to satisfy the activity test in respect of a period if:
(a) throughout the period the person is incapacitated for work because of sickness or an accident; and
(b) the incapacity is caused wholly, or virtually wholly, by a medical condition arising from the sickness or accident; and
(c) the incapacity is, or is likely to be, of a temporary nature; and
(d) if this Subdivision had not been enacted and paragraphs 593(1)(b), (c), (d) and (e) were disregarded, the person would qualify for newstart allowance; and
(e) the person has, whether before or after the commencement of this section, given the Secretary a certificate of a medical practitioner, in a form approved by the Secretary, stating:
(i) the medical practitioner's diagnosis; and
(ii) the medical practitioner's prognosis; and
(iii) that the person is incapacitated for work; and
(iv) the period for which the person is incapacitated for work; and
(f) the Secretary is satisfied that the incapacity has not been brought about with a view to obtaining an exemption from the activity test.
(2) In this section:
work, in relation to a person, means work (whether full-time, part-time, permanent or casual) that:
(a) is of a kind that the person could, in the Secretary's opinion, be reasonably expected to do; and
(b) is for at least 8 hours per week at award wages or above.”
60. It is clear that in order to qualify for a Newstart Allowance a person must, at the minimum, satisfy the Secretary that he or she is unemployed and satisfies the activity test, unless otherwise exempt. There is no evidence before the Tribunal that Mr Nicholls satisfied the Secretary in relation to these matters, or that he was qualified for a compensation affected payment on one or more days during the periodic compensation period.
61. This being the case, the Tribunal accepts Mrs Nicholls’ submission and the concession in the Respondent’s Statement of Facts and Contentions (Exhibit R1, p2) that Mr Nicholls was not qualified for a compensation affect payment during the operative period and so finds.
62. This being the case, the Tribunal finds that Mr Nicholls did not satisfy the factual requirement of the first limb of paragraph 1174(1)(d) of the Act, with the effect that section 1174 does not, therefore, apply for the purpose of calculating the rate of Mrs Nicholls’ Parenting Payment.
63. It follows that the decision under review must be set aside and the matter remitted to the Respondent for determination of the correct rate of Mrs Nicholls’ Parenting Payment.
64. This being the case, it is not strictly necessary to consider Mrs Nicholls’ submission that the cancellation of her Parenting Payment was unfair in the circumstances. It is, however, relevant to consider some of the matters raised in submissions by the parties.
65. Mrs Nicholls submitted that the effect of Centrelink’s interpretation of the legislation is unfair and discriminatory. It was her submission that Centrelink had not given fair notice or forewarning of the changes that came into effect on 20 September 2001 and had provided erroneous information that was misleading. Ms Collis conceded that Centrelink had given incorrect information. Relying on the cases of Re Secretary, Department of Family and Community Services and Woolrich (2000) AATA 943 and Re Keighley and Secretary, Department of Family and Community Services (2000) AATA 231, Ms Collis contended that “even if the effect of the legislative provision may be harsh or unjust, the Tribunal is bound by the clear intention of the Parliament”.. The Tribunal agrees with this submission, noting it would be inappropriate to employ the discretionary provisions for relief from the effects of the Act in certain cases to subvert the intention of the legislature as enacted.
66. In the present case, however, the Tribunal has found error in the interpretation and application of section 1174 of the Act as enacted and clearly intended by the Parliament. Thus, the cases of Woolrich and Keighley (supra) are distinguished.
67. Directing the Tribunal to the cases of Re Secretary, Department of Social Security and Smallacombe (1991) 23 ALD 141 and Re Zaccardi and Secretary, Department of Social Security (1995) 40 ALD 760, Ms Collis submitted that the differential treatment of ordinary income and compensation payments was a deliberate expression of Parliamentary intent which is binding on the Tribunal. The Tribunal agrees with the approach adopted in Re Zaccardi whereby the ordinary operation of Part 3.14 was not found to constitute special circumstances. The present case is distinguished, however, as error has been found in the interpretation and application of section 1174, which cannot be accepted as within the ordinary operation of the Act.
68. Relying on the case of Re Secretary, Department of Family and Community Services and Duarte (2000) 4(7) SSR 86, Ms Collis submitted that it was not unusual, uncommon or exceptional for Centrelink to provide incorrect information to a customer. In case of Re Duarte (supra) the SSAT noted the difficulty of finding, in the circumstances of that case, that the administrative errors and tardiness of Centrelink, by their very occurrence, were unusual, uncommon or exceptional. In the present case, Centrelink’s errors included administrative errors and tardiness that are essentially hinged upon the incorrect operation of section 1174 of the Act outside its terms. The case of Re Duarte (supra) is clearly distinguished from the present case on the facts.
69. In the present case, the Tribunal does not accept that Centrelink’s incorrect interpretation and application of section 1174 is in any way usual, common or unexceptional. Centrelink’s error caused the cancellation of Mrs Nicholls’ Parenting Payment. Centrelink’s subsequent advice caused Mr Nicholls to lodge a claim for Newstart Allowance which otherwise he would not have lodged. This action on the part of Mr Nicholls was within the scope of section 1173 of the Act and may have led to a finding that he was qualified for a compensation affected payment within the terms of section 1174 of the Act, thereby potentially affecting the rate of Mrs Nicholls’ Parenting Payment in accordance with the proper application of the section. The Tribunal finds that Centrelink's errors, albeit deriving from policy advice provided by the Department, are exceptional and the cause of consequences that are unfair, unintended and unjust.
70. This being the case and being mindful of the authorities (Groth v Secretary, Department of Social Security (1995) 40 ALD 541; Secretary, Department of Social Security v Ellis [1997] FCA 214; Secretary, Department of Family and Community Services v Allan [2001] FCA 1160), had it been necessary, the Tribunal would have found special circumstances within the meaning of section 1184K of the Act.
71. Thus, in any event the decision under review must be set aside and the matter remitted to the Respondent to correctly calculate the rate of Mrs Nicholls’ Parenting Payment from 20 September 2001.
72. The Tribunal determines the decision under review is set aside and the matter is remitted to the Respondent with the following direction:
The correct rate of Mrs Nicholls’ Parenting Payment is to be calculated from 20 September 2001 in accordance with the proper construction of section 1174 and on the basis that Mr Nicholls was not qualified for a compensation affected payment during the periodic payments period in consequence of which his periodic compensation payments are to be treated as ordinary income for the purpose of the Parenting Payment (partnered) income test.
I certify that the 72 preceding paragraphs are a true copy of the reasons for the decision herein of Mr S. Webb
Signed: .......................................................................................
AssociateDate of Hearing 3 February 2003
Date of Decision 14 April 2003Advocate for the Applicant Self-Represented
Advocate for the Respondent Ms C Collis
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