Abdel-Fadeel and Secretary, Department of Family and Community Se Rvices

[2004] AATA 161

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 161

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   N2003/1161

GENERAL ADMINISTRATIVE  DIVISION		)
Re		Robina Abdel-Fadeel

Applicant

And Secretary, Department of Family and Community Services

Respondent

DECISION

Tribunal Mr RP Handley, Deputy President

Date18 February 2004

PlaceSydney

Decision The Tribunal sets aside the decision under review and substitutes a new decision to treat that part of the compensation payment representing the last six months of the lump sum preclusion period from 2 February 2004 to 2 August 2004 as not having been made.

...............................................

RP Handley
  Deputy President 

CATCHWORDS

SOCIAL SECURITY  – compensation for work related injury including future loss of earnings – more then one lump sum payment in relation to an injury from the same event is to be treated as one lump sum compensation payment – preclusion period – application of the 50% formula – special circumstances – examination of the Applicant’s circumstances – examination of the Applicant’s compensation award and expenses related thereto – examination of the Applicant’s ongoing expenses, ongoing health problems and financial circumstances – held divorce and property settlement and health problems unrelated to compensation award seen as special circumstances – held decision of the Respondent set aside – decision substituted to treat that part of the compensation payment representing the last six  months of the lump sum preclusion period as not having been made.

Social Security Act 1991 ss 17, 17(1), (2), (2B), 17(3)17(3), 1165(7), 1165(8), 1170(4), 1184K(1)

Beadle v Director-General of Social Security (1985) 60 ALR 225
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security and Banks (1990) 23 FCR 416
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Willis and Secretary, Department of Family and Community Services [2002] AATA 267
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

REASONS FOR DECISION

February 2004	Mr RP Handley, Deputy President
Summary

1.      Ms Abdel-Fadeel was injured in an accident at work for which she received compensation, including for future wage loss, in the sum of $190,500.  Centrelink therefore imposed a lump sum preclusion period of 169 weeks from 8 May 2001 to 2 August 2004, precluding her from receiving social security payments, including age pension, during this period.  This decision was affirmed by the Social Security Appeals Tribunal (“SSAT”) on 30 June 2003.  This is the decision to be reviewed by the Tribunal.

Background

2.      The Applicant, Robina Abdel-Fadeel, was born on 10 July 1939 and is aged 64.   Ms Abdel-Fadeel was formerly married to Mohamed Mostafa Abdel-Fadeel, their divorce becoming absolute on 18 April 2003 (T p36).

3.      On 20 February 1993, Ms Abdel-Fadeel suffered an injury to her lower back whilst at work.   She received lump sum compensation payments in respect of her injuries in the amounts of $79,200 and $24,300 in 1996 and $87,000 on 7 May 2001, a total of $190,500.  Until 7 May 2001 she was also receiving Workers Compensation payments.

4.      On 11 December 2002, the Respondent decided to preclude Ms Abdel-Fadeel from receiving compensation affected payments from 8 May 2001 to 2 August 2004, being a preclusion period of 169 weeks.  The preclusion period was calculated pursuant to the Social Security Act 1991 (“the Act”) (T p13) by adding together the three payments received by her, taking 50% of the total, and then dividing this by the then correct income cut-out amount, being $562.75 (T p31), to give a figure for the preclusion period of 169 weeks commencing from the day after she received her final periodic compensation payment.  Ms Abdel-Fadeel was informed of the preclusion period by letter of 11 December 2002 (T p16).

5.      On 16 December 2002, Ms Abdel-Fadeel requested a review of the decision which was confirmed on 29 January 2003.  The decision was also affirmed by an Authorised Review Officer on 4 March 2003 and by the SSAT on 30 June 2003.  On 22 July 2003, Ms Abdel-Fadeel lodged an application for review by this Tribunal.

6. At the hearing, the Applicant represented herself and the Respondent was represented by Emerson Thistlethwaite, Advocate, of Centrelink.. The evidence before the Tribunal comprised the documents produced pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (“the T Documents”). Ms Abdel-Fadeel gave oral evidence.

Applicable Legislation

7. The relevant provisions of the Act, subsections 17(2), 17(3) and 1165(8), pursuant to which the preclusion period was calculated, are set out below. Essentially, Ms Abdel-Fadeel challenges the length of the preclusion period.

17(2) Subject to subsection (2B), for the purposes of this Act, compensation means:

(a)        a payment of damages; or

(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d)      any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

17(2)(B)         For the purposes of this Act, if:

(a)a person received more than one lump sum payment, whether simultaneously or at different times, in relation to one or more injuries arising from the same event; and

(b)at least one of the payments is made wholly or partly in respect of lost earnings or lost capacity to earn;

the person is taken to receive one lump sum compensation payment, made wholly or partly in respect of lost earnings or lost capacity to earn, of an amount equal to the sum of those lump sum payments.

17(3) Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:

(a)      50% of the payment if the following circumstances apply:

(i) the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and

(ii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or

(ab)     50% of the payment if the following circumstances apply:

(i) the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and

(ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and

(iii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or

(b) if those circumstances do not apply—so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn, or both.

8. The lump sum preclusion period is calculated in accordance with the formula which is now set out in s 1170(4) of the Act but which used to be set out in s 1165(8). The formula itself remains unchanged and provides for the number of weeks in the lump sum preclusion period to be worked out using the formula:

Compensation part of lump sum ¸ Income cut-out amount

9.      Section 1184K(1), gives the Secretary a discretion to disregard the whole or part of a  payment:                   

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.

Evidence

10.     Ms Abdel-Fadeel said that on the day of the settlement she was advised by her barrister to expect a preclusion period of about 75 weeks.  He did the calculations while he was with her.  She had been previously advised by her solicitor to expect a preclusion period of 69 weeks.  Ms Abdel-Fadeel could not understand why the Department added the 1996 compensation payments, which had no element of lost earnings or lost capacity to earn, to the 2001 settlement.  She waited until after 75 weeks had passed before applying for an age pension on 5 November 2002 and was shocked when Centrelink precluded her from receiving age pension for a period of 169 weeks.

11.     Ms Abdel-Fadeel said she was burgled on the night of 7 January 2004, during the course of which the burglars scattered her papers everywhere and she has not been able to locate her file of papers from 2001.  She asked her solicitors whether they still had her file but was told it had been archived.  Thus, she is not aware of whether her solicitors sought an estimate of the likely preclusion period from the Department and, if so, what information was given by her solicitors to the Department as the basis for the estimate.  The Tribunal adjourned the hearing for a short time to enable Mr Thistlethwaite to search Centrelink’s on-line database to see whether the Department had any record of an estimate given to Ms Abdel-Fadeel’s solicitors, but he was unable to locate any reference to such an estimate.

12.     Ms Abdel-Fadeel said it was fortunate that by 2001 she had not spent any significant part of the compensation she received in 1996.  Apart from paying for some medical expenses, she still had the greater part invested with the Commonwealth Bank.  She said the Health Insurance Commission (“HIC”) charges and her medical expenses had been paid from the 1996 settlement but not legal expenses which were paid directly by the GIO.   Similarly with the 2001 settlement, she had to pay a HIC charge of $8,700 but there was no reduction for legal expenses which, again, were paid directly by the GIO to her solicitors.

13.     Ms Abdel-Fadeel said she had treatment for bowel cancer in 1998.  In 1999, she had a final operation to straighten her back as a result of which she lost the use of her legs for a while.  Even now, she has difficulty walking.  After her 1999 operation, her relationship with her husband deteriorated and for the last 12 to 18 months they had separate bedrooms.  From 1999, he did not work and she supported him and paid all the household bills until their divorce.  Eventually, Ms Abdel-Fadeel initiated divorce proceedings and then discovered her husband had already “taken another wife” in Egypt.  In her view, the marriage had irretrievably broken down by September/October 2002.  They continued to live in the same house after that time, although separately, and her husband spent most of the time overseas.

14.     In the divorce settlement, Ms Abdel-Fadeel bought out her husband’s half share in the house for $155,000.  He was also permitted to keep his superannuation, their car, and any money he had in the bank including $60,000 in a joint savings account.  Ms Abdel-Fadeel settled for her half-share in the house plus the furniture which she said was hers anyway.   She did not have any superannuation and had no other investments except those from her compensation settlement, together with about $6,000 in a bank account, and 500 Telstra and 500 Coles shares.  An investment property in Queensland which she and her husband co-owned with Ms Abdel-Fadeel’s sister and her husband has subsequently been sold with each of the four receiving about $43,000.  This occurred mid 2003.  Ms Abdel-Fadeel said following her divorce settlement, she paid legal fees of about $6,000 and it was necessary for her to buy a car so that she could attend medical appointments.  On 1 September 2003, she bought an inexpensive small car – a Hyundai Getz, for which she paid $15,785, including on road costs, and a further $437.23 for comprehensive insurance. 

15.     Ms Abdel-Fadeel said she has a lot of medical expenses.  She is currently being treated for skin cancers.  So far in the last 12 months, this has entailed three visits at $45 each plus four sachets of ointment at $18 each and ongoing costs.  She is also seeing a Neurologist, Dr Rob McGrath, in Wollongong at a cost of $52 per visit after the Medicare rebate.  In September 2003, she had carpal tunnel surgery.  Because of her medical fund membership, she only had to pay the first $200 of hospital fees.

16.     In about November 2002, Ms Abdel-Fadeel started experiencing panic attacks again.  She had previously experienced these in 1999 but they stopped after treatment.  When they re-occurred in about November 2002, she immediately sought treatment and is now taking Xanax medication which largely controls the attacks.  Ms Abdel-Fadeel now has a Healthcare card so the cost of medication is about $3.80 per prescription.  She has regular six monthly bowel check-ups either at the Cancer Clinic or the hospital.  On 10 March 2004, she is going into hospital for a “rectacycle” to correct a prolapse of the bowel.  She will probably have to pay the gap of $50 per day in respect of hospital fees.

17.     Because of her difficulty walking, Ms Abdel-Fadeel has had a number of falls.  She has recently had the Illawarra Housing Trust install handrails in her house at a cost of $91 and a further step constructed at a cost of $88.  She has also had to pay for repairs and maintenance to her house: $1,020 for new roller doors, $935 for air vents, and $175 for anti-termite spraying and traps.  She paid $1,930 to have a reverse cycle air-conditioner installed and $1,164 for new blinds.  The gutters for the roof of the house are leaking badly.  So far she has had one quotation for replacement of the gutters stipulating a cost of $3,190.  She is awaiting two further quotes.  Following the burglary on 7 January 2004, she is having a burglar alarm fitted through the NRMA at a cost of $1,482 and new sensor lights and an extra phone socket installed in her bedroom at a cost of $700.

18.      Otherwise, Ms Abdel-Fadeel has all the usual household expenses. Her house and contents insurance is $667 per annum.  Currently, she has $14,000 left in the bank.  She still has her 500 Coles shares.   She has sold the Telstra shares.  The $14,000 will not last her until August 2004 given pending expenses – particularly, those to secure her home and to replace the gutters.  Ms Abdel-Fadeel said she believes she has been responsible with her compensation money but has been affected by unforeseen circumstances, particularly those resulting from her divorce.  Even if she only had a pension card, this would assist her in so far as she could pay such expenses as property rates and car registration at the reduced pensioner rate.

Consideration of the Law and Findings

19. The first issue for the Tribunal to determine is whether the provisions of the Act have been correctly applied in determining the compensation part of Ms Abdel-Fadeel’s lump sum compensation payment. The Tribunal notes that she received three separate lump sums: $79,200 and $24,300.00 paid on 16 July 1996; and $87,000 paid on 7 May 2001 (T p13). The payment of $87,000 was in commutation of her weekly workers compensation payments in respect of lost capacity to earn. Section 17(2)(B) provides for aggregation where a person receives more than one lump sum compensation payment from one or more injuries arising from the same incident or event and at least one of the lump sum compensation payments is made wholly or partly in respect of loss of earnings or lost capacity to earn. Ms Abdel-Fadeel’s lump sum compensation payment is therefore an aggregate of the 1996 and 2001 lump sum payments, totalling $190,500.

20. As has been recognised in a number of Federal Court decisions, the 50% formula set out in s 17(3) of the Act was designed to overcome the need to dissect a lump sum settlement and prevent manipulation of the components of a settlement: Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 422 (Von Doussa J). As the Court recognised in Secretary, Department of Social Security vHulls (1991) 22 ALD 570, the arbitrariness of the application of the formula can be addressed under s 1184K(1) where the application of the formula would create an injustice.

21. Thus, it is clear that, for example, the amount of $8,700 refunded to HIC from Ms Abdel-Fadeel’s 2001 compensation payment cannot be used to reduce the total compensation amount of $190,500: the whole of the $190,500 must be taken into consideration in applying the 50% formula in s 17(3). The compensation part of Ms Abdel-Fadeel’s lump sum compensation payment is, therefore, $95,250.

22. The preclusion period that applies in respect of “compensation affected payments”, which include age pension, is calculated pursuant to s 1170(4), formerly s 1165(8), by dividing the compensation part of the lump sum by the income cut-out amount. The “income cut-out amount” at the relevant time, worked out in accordance with the formula in s 17(1), was $562.75. Thus, the preclusion period is calculated by dividing $95,250 by $562.75, giving a figure of 169 weeks. The Tribunal therefore finds that the preclusion period was calculated correctly.

23. The second issue for the Tribunal is whether, pursuant to s 1184K(1), there are special circumstances which justify the exercise of the Secretary’s discretion to treat the whole or part of the compensation settlement as not having been made. Although the Act provides no guidance as to the meaning of “special circumstances”, this has been the subject of statutory interpretation by the Federal Court and the Tribunal.

24.      The leading case is probably Beadle v Director-General of Social Security (1985) 60 ALR 225, a decision of the Full Federal Court. In Beadle (supra), the Court did not think it possible to lay down precise limits or precise rules. It would depend on the circumstances of the particular case as to whether they constituted special circumstances. Moreover, even though the phrase “special circumstances” lacks precision, it “is sufficiently understood in our view not to require judicial gloss” (at 228). The Court affirmed the decision of the Tribunal under review in that case, Re Beadle and Director-General of Social Security (1984) 6 ALD 1, in which the Tribunal, whilst acknowledging that the phrase “special circumstances” is “incapable of precise and exhaustive definition”, said, nevertheless, that the circumstances “must have a particular quality of unusualness that permits them to be described as special” (at 3).

25.      In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Kiefel J, after referring to the Federal Court’s decision in Beadle (supra 1985), observed that special circumstances:

would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case… it would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.

26.      The Tribunal finds, relying on Ms Abdel-Fadeel’s evidence, that her financial situation has been affected adversely by unforeseen circumstances, arising since the settlement of her claim on 7 May 2001, namely her divorce and property settlement.  As a consequence, Ms Abdel-Fadeel bought out her husband’s share in her house ($155,000) and bought a small car ($15,785) since her ex-husband was awarded their car in the property settlement and she needs a car to attend medical appointments.  This has been Ms Abdel-Fadeel’s most significant expenditure since her compensation settlement. There has been other relatively minor expenditure associated with the repair and maintenance of her house and with her health, in part in relation to the aftermath of her treatment for bowel cancer in 1998.  There are also minor recent expenses to address security concerns following the robbery at her house on 7 January 2004.

27.     In the Tribunal’s opinion, Ms Abdel-Fadeel’s management of her lump sum compensation has been entirely responsible.  She received incorrect advice at the time of settlement in May 2001 as to the likely term of the preclusion period.  There is no evidence to indicate whether that advice, from her lawyers, was negligent although they do not appear to have obtained an estimate of the likely preclusion period from the Department.  It may have been assumed that only the payment of $87,000 in May 2001 would be taken into account in calculating the preclusion period.

28.     As at date of the hearing on 2 February 2004, despite Ms Abdel-Fadeel’s careful management, she only had $14,000 left of her compensation settlement.  Her only other investment is her 500 Coles shares.  The Tribunal notes that she has sold her 500 Telstra shares and her share of the co-owned investment property in Queensland has been realised (netting Ms Abdel-Fadeel $43,000), these proceeds being subsumed in the expenditure detailed above. Ms Abdel-Fadeel has forthcoming expenditure of approximately $5,400 in respect of her house for security work and new gutters.  She also has ongoing medical expenses in respect of medical conditions which are unrelated to the compensation settlement.

29.     While Ms Abdel-Fadeel is not yet in financial hardship, the residue of her compensation settlement will run out shortly, due largely to the unforeseen consequences of her divorce.   In the Tribunal’s opinion, her current circumstances are sufficiently unusual to permit them to be described as “special” and to justify treating that part of the lump sum compensation payment representing the last six months of the preclusion period from 2 February 2004 to 2 August 2004, as not being made.

30.      The Tribunal therefore sets aside the decision and substitutes a new decision to that effect.

I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RP Handley, Deputy President

Signed:         .......................................................................................
  Associate

Date of Hearing  2 February 2004
Date of Decision  18 February 2004
Representative for the Applicant               Self-represented
Representative for the Respondent          Mr E Thistlethwaite, Advocate