Adams and Department of Family and Community Services - [2001] AATA 13

DECISION AND REASONS FOR DECISION [2001] AATA 13

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2000/664

GENERAL ADMINISTRATIVE DIVISION       )
           Re      JOHN ADAMS
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Dr J D Campbell, Member

Date12 January 2001
PlaceSydney

Decision The Tribunal affirms the decision under review.

[Sgd] Dr J D Campbell
Member
CATCHWORDS
Social Security – lump sum compensation payment – preclusion period – special circumstances – employment capacity – health – financial – exercise of discretion

Social Security Act 1991 sections 17, 1165, 1184

Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985)
Re Green and Secretary, Department of Social Security (1990) 21 ALD 772
Kulakov and Secretary, Department of Social Security (1991) 63 SSR 879
Secretary, Department of Social Security and Barry (AAT 10320, 28 July 1995)
Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990)
Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745
Secretary, Department of Social Security and A H Sam (AAT 9699, 6 July 1994)
Re Hajar and Secretary Department of Social Security (1988) 16 ALD 716
Re Lukic and Secretary, Department of Social Security (AAT 6944, 6 May 1991)

REASONS FOR DECISION

Dr J D Campbell, Member

Mr John Adams ("the Applicant") in this matter seeks a review of the decision of the Social Security Appeals Tribunal ("the SSAT") dated 27 March 2000, which affirmed the decision dated 11 August 1999 made by a Centrelink delegate of the Secretary of the Department of Family and Community Services ("the Respondent") to impose a preclusion period on the Applicant from 1 August 1998 to 14 May 2004. This latter decision was reviewed by an authorised review officer and affirmed in a decision dated 20 January 2000.
A hearing was held on 30 August 2000 before the Tribunal at which the Applicant was represented by Ms S Koller, a solicitor from the Welfare Rights Centre. The Respondent was represented by Ms Collis, an advocate from the advocacy and administrative law section of Centrelink. The Applicant gave oral evidence before the Tribunal and the Tribunal reviewed further material submitted by the Respondent on 13 September 2000 and the Applicant on 24 October 2000.
The following material was placed in evidence before the Tribunal:
Exhibit No.   Description
T1–T10 pp1-70        Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975.
A1      Medical reports of Miss Schellenberger dated 5 September 1995, 10 July 1996 and 2 June 1998.
A2      Applicant's statement of facts and contentions dated 29 August 2000.
A3      Respondent's statement of facts and contentions dated 29 August 2000.

Issues

The relevant issues between the parties in this matter are:
(1) whether the decision to impose a compensation preclusion period from 1 August 1998 to 14 May 2004 was correct; and
(2) if so, whether there are any special circumstances in which the receipt of part or all of the compensation should be disregarded.

Legislation

The relevant legislation in this matter is the Social Security Act 1991 ("the Act") and in particular sections 17, 1165 and 1184.

Background

The Applicant was born in 1951, being the eldest of six children. He left school at age 11 to work picking vegetables in order to assist his mother financially. The Applicant never returned to school and has worked in a range of positions, including saw milling and tyre fitting, with his main work activity being steel fixing.
On 11 November 1994 the Applicant suffered a work-related spine injury for which he received weekly compensation payments until 31 July 1998 (T2). On 10 October 1998 the Applicant received $250,000 in settlement of the compensation claim, with the final amount received by the Applicant being $200,000.
On 3 August 1999 the Applicant lodged a claim for disability support pension in which the Applicant disclosed his earlier weekly compensation payments and the lump sum compensation paid on 1 August 1998 (T4, P43). On 11 August 1999 the Respondent advised the Applicant of a preclusion period commencing 1 August 1998 and ending on 14 May 2004, during which time the Applicant would not be able to receive any social security income support payments, with the exception being payments made for children (T7, P47).
In a file note dated 12 August 1999 an officer from the Respondent noted a request from the Applicant to waive the preclusion period. In support of his request the Applicant had provided bank statements, invoices for goods and services purchased from the lump sum payment and advice that he had received no written communication from his solicitor handling the claim regarding restrictions on the use of the lump sum payment. Despite this it was stated in a Centrelink file note that the Applicant "has a vague recollection of something about 6 years but could not expand on that"(T8 P50).
The decision to impose the preclusion period was subject to an internal review, with the earlier decision being affirmed and this was conveyed to the Applicant in a letter dated 26 August 2000 (T58, P105).
The Applicant lodged a claim for newstart allowance on 10 December 1999 (T60) and on 16 December 1999 requested a reconsideration of the decision imposing the preclusion period as he had no money, no income and was unemployed. The decision to impose the preclusion period was affirmed after the review and the Applicant was advised of this in a letter dated 20 January 2000 (T67). This decision was further reviewed and affirmed by the SSAT in their decision of 27 March 2000 (T2).
Applicant's evidence
The Applicant told the Tribunal that he was born in 1951, stayed at school until age 12 and left to work picking vegetables, later working in a saw-mill and as a tyre fitter. He further stated that he joined the building industry in 1975 and that between 1975 and 1994 he worked "all over the place" in concrete reinforcement activities.
The Applicant indicated that in 1994 he was earning $500 - $1100 per week after tax and that he had no outstanding debts when he was injured at work on 11 November. He further stated that after the work injury he suffered much pain, underwent a cervical spine fusion operation and has experienced little improvement since the operation. During this period the Applicant stated that he has noticed he has become much slower in doing things, that he has a tendency to forget and finds it hard to concentrate. Further the Applicant stated that he continues to experience pain for which he takes medication. He has increased the amount of alcohol consumed and has smoked marijuana on occasions.
The Applicant stated that he received his compensation settlements in October 1998 and at that time he was living with his mother in Canberra. Further the Applicant indicated that over the ensuing months he bought a house, furniture, a boat and a vehicle, as well as renovating the house and landscaping the grounds at his newly purchased home. The Applicant stated that he was told about a preclusion period at the time of the compensation settlement and that it would be for a period of six years, but in turn he did not see this as a problem as he believed he would be able to work.
In further evidence the Applicant indicated that he worked in a sawmill for three months, but the sawmill operator was unable to obtain insurance for him and he therefore had to cease his employment there. He also worked picking beans at $100 - $120 a day, but this was very sporadic work. In addition to these activities he attempted to sell fishing material that he had made.
The Applicant indicated that he had to back trade his first boat because of its inherent deficiencies and that he acquired a further boat, trailer and a jeep. The Applicant further stated that he was apprehended for a number of offences, resulting in a period of confinement and the loss of his licence until year 2016.
In relation to health issues, the Applicant stated that beside the neck problem he has experienced niggling pains in his hands, shoulders and feet for a few years and that he is currently being treated for this with dexamethasone, and his neck pain with a TENS machine. The Applicant also stated that he has always had difficulty with forms and needs assistance in their completion.
The Applicant indicated that he has no money, is in debt and is relying on charities to provide food. In order to live he has sold some furniture and some tools and his assets are his refurbished house, some furniture, a boat, trailer and an unregistered jeep. The Applicant stated that he has a continuing desire to undertake appropriate work, but expects to experience problems in this regard because of difficulties with insurance.
In response to questions in cross-examination the Applicant indicated that he had been a heavy drinker for many years, commencing at age 15, consuming up to 20 schooners a day. Despite this heavy consumption of alcohol, it never resulted in the Applicant missing a day's work. Further in reply to the Respondent the Applicant indicated that his home was of three bedrooms and that he had received some rent from a lodger for four months late last year.
Submissions: The Applicant
The Applicant's solicitor submitted to the Tribunal that there was no contention with the process and calculations associated with either the imposition or length of the preclusion period and that the issue in this matter was essentially whether the Applicant's circumstances constituted "special circumstances" which if found to exist, would allow the Tribunal to consider exercising a discretion under section 1184 of the Act to treat all or part of the compensation as not having been made.
Ms Koller submitted that the Applicant is suffering financial hardship and that this has arisen as a consequence of a changed expectation in relation to his work capacity. This has arisen from a continued deterioration in the Applicant's health status arising from his compensation injury and its continuing deterioration, his pseudogout affecting hands, feet and shoulders and an earlier episode of hepatitis. More particularly Ms Koller submits that the Applicant spent his compensation lump sum in the first 12 months, this being a period during which the Applicant believed that he had a continuing work capacity. Ms Koller also submitted that the Applicant also has difficulty with form completion, which may be indicative of further underlying learning difficulties.
Submissions: The Respondent
The Respondent submitted that the Applicant's particular circumstances did not constitute special circumstances in that his current financial circumstances were solely due to his own actions. It was submitted that within a period of eight months from the receipt of his lump sum compensation payment he had made a series of discretionary purchases including a house, boat, motor vehicle and furniture. He had also undertaken significant expenditure in relation to house refurbishment, which together had all but exhausted his cash resources. The Respondent submitted that the Applicant, while ready cash resources are non-existent, has assets which can be exchanged for cash and as such the Applicant's financial circumstances can be considered to be no more than tightened.
Further the Respondent contends that despite the Applicant's health conditions, namely the cervical spine condition, the pseudogout and a difficulty in dealing with forms, the Applicant continues to possess a capacity to undertake particular employment and certainly continues to participate in a lifestyle that he has created within his area of residence.
In such circumstances the Respondent contends that to shorten the preclusion period would frustrate the object of the legislation as the circumstances cannot be considered to be "special" because there is nothing in the Applicant's circumstances which could be considered unusual, uncommon or exceptional.
Consideration and Findings
The Tribunal, in reviewing the Applicant's lump sum compensation payment of $250,000 which arose as a result a of settlement on 1 August 1998 against the statutory framework contained within sections 17 and 1165 of the Act, finds that the length of the preclusion period, its date of commencement and cessation have been correctly detailed. The Tribunal notes in this matter that the Applicant is satisfied that the preclusion period has been correctly established, with the Applicant's preclusion period concluding on 14 May 2004.
In turning to the consideration of the evidence, the Tribunal notes the nature and effect of the Applicant's neck injury and in particular the reports of his assessing surgeon, Miss Schellenberger, where she details the history of his injury in November 1994, the cervical fusion undertake in March 1995, continuing symptoms of left sided neck pain, and his inability to work since late November 1995. On this first report of 5 September 1995, Miss Schellenberger concludes:
"…
Currently Mr Adams is totally disabled from all employment. Should improvement occur naturally in time which is unlikely, he maybe [sic] able to consider return to light sedentary work of a part-time nature…"
(Exhibit A1)
The Applicant was reviewed by Miss Schellenberger on 10 July 1996, and again she reported that he was no better and that at present he is totally disabled from all employment. In her report of 2 June 1998 Dr Schellenberger opined that "he is capable of returning to light part-time work" involving restriction of heavy lifting and carrying and tasks involving prolonged positioning of the neck (Exhibit A1).
In a report dated 16 October 2000 Dr Doust, the Applicant's general practitioner, details that the Applicant suffers from intermittent attacks of pseudogout requiring treatment with cortico steroids and anti inflammatories. Dr Doust further reported that the Applicant shows no signs of depressive illness, albeit that he demonstrates a depressed mood because of his circumstances and medical problems. It was further stated that the Applicant has been treated for hepatitis A and that his main complaint on his last two visits in November 1999 and September 2000 was in relation to hand pain.
In a treating doctor's report dated 5 August 1999 associated with the lodgement of an application for disability support pension, Dr Doust detailed the Applicant's medical conditions as a cervical spine disorder causing pain, disablement and pseudogout. Dr Doust considered the cervical condition to be long term and fluctuating with the pseudogout temporary and stable. He considered that it would be one to two years before the Applicant would be able to return to any form of part-time or full-time work and that this would be assisted by vocational training and rehabilitation.
In his application for newstart allowance on 10 December 1999, the Applicant detailed the history of his last employment as being from April 1999 to July 1999 and that he left this full-time work activity because of a shortage of work.
The Tribunal, in considering the Applicant's financial circumstances notes again that there is essentially no disagreement between the parties as to the quantum of the lump sum and its expenditure basically within an eight to ten month period after receipt of that lump sum. Further there is no disagreement on the specifics of the expenditure, which has involved significant expenditure on a house, house renovation, landscaping, furniture, two boats, a trailer, two vehicles and money expended on fishing material for resale.
Further the Tribunal observes that the Applicant states that his cash reserves are non-existent; that he receives assistance from charities and that he is loathe to dispose of his remaining assets, which include his house, a boat, an unregistered vehicle and a limited amount of furniture. Further the Tribunal notes that the Applicant lives alone, used to rent premises or live with his mother prior to the house purchase and is seeking employment within his capacity to work.
In considering all the evidence, the Tribunal makes the following findings of fact:
a. that the Applicant is a single man, aged 49, who lives alone in a home on the south coast and who has worked for many years in heavy labouring industries;
b. that the Applicant suffered a work-related injury in November 1994, underwent fixation of his cervical spine in 1995 and on 1 August 1998 a settlement of his worker's compensation claim occurred;
c. that a lump sum compensation payment of $250,000 was paid to the Applicant on 10 October 1998, with an amount of $50,000 being paid to the solicitor;
d. that the Applicant was made aware at the time of payment of his lump sum compensation payment by his then solicitor that there would be a preclusion period of six years, during which time he would be unable to receive any social security income support payment;
e. that the Applicant, while aware of his preclusion period, believed at or around the time of settlement that he would be able to undertake employment to supplement his lump sum payment;
f. that within a period of ten months of receipt of his lump sum payment, the Applicant essentially exhausted his payment when purchasing a house, a boat, an exchanged boat, motor vehicle, furniture, fishing material, trailer and refurbishing the house and landscaping the grounds of his new home;
g. that the Applicant does suffer from ongoing symptomology, intermittent pseudogout and some evidence of a learning difficulty;
h. that the Applicant still has a capacity for employment, but his work ability is restricted by his medical disabilities;
i. that the Applicant continues to live in his home, continues to socialise as best he is able, has no source of income nor cash reserves and receives assistance from various charities; and
j. that the Applicant continues to own particular assets including a house, boat, some furniture and furnishings, unregistered and non-functioning motor vehicles and a trailer, with all such assets being purchased from the lump sum payment.
In considering these facts against the statutory framework nominated in section 1184 of the Act which states:

"1184.(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."

The Tribunal must consider whether the facts which have been found to exist and the circumstances of this matter are of such a nature and effect for the Tribunal to find that they constitute special circumstances.

In turning to the question of what constitutes special circumstances the Tribunal notes the following decisions:
In Re Beadle and Director General of Social Security (1984) 6 ALD 1 Toohey J stated:
"…
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend on the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
…"

In Re Green and Secretary, Department of Social Security (1990) 21 ALD 772, the Tribunal listed particular factors which should be taken into account in considering whether special circumstances apply, namely:

"…

"Hardship is a relevant consideration" but regard must be had to the way in which the hardship arose.

There must exist "factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes."
The decision-maker must have regard to whether, by exercising the discretion in a particular case, he/she will be "achieving or frustrating ends or objects which are comfortable with the scope and purpose of the Social Security Act.
…"

In turning to the specifics of this matter the Tribunal observes that the Applicant does have an available cash difficulty, and has had this difficulty for a period of some eighteen months during which time he has realised some assets, spent some months in prison and received some assistance from friends and charities. The Tribunal accepts the Applicant's position that he is finding it hard to make ends meet and that he has difficulty securing any form of employment. The Tribunal does note however that the Applicant still owns a number of significant assets, which include a renovated and refurbished home, a boat and trailer and at least one motor vehicle. The Tribunal understands that the Applicant does not wish for personal reasons to sell these assets, but nevertheless has considerable difficulty in concluding that the Applicant is experiencing exceptional financial hardship when clearly some or all of the assets could be sold. In this regard the Tribunal notes the findings in the following earlier cases:

In Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985) it was stated:
"…
"While the Tribunal appreciates that the Applicant has no income and his liquid assets are rapidly declining, he does possess a house valued at $94,000, a car valued by him at $14,000 and other fixed assets to the value of $16,000…"

In Re Hajar and Secretary Department of Social Security (1988) 16 ALD 716, the following statement was made at paragraph 45:
"On the question of hardship, I find it impossible to ignore the existence of the house, which is valued at approximately $175,000, which is free of encumbrances."

In Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990) it was stated:
"…
The Respondent contended that he was perfectly entitled to have expended his settlement moneys in providing his family with a home and no-one, least of all this Tribunal, would dispute that. However, that is not the issue – it is the fact that the Respondent, having disposed of his settlement moneys, now seeks support from the community. The emotional attachment of the respondent and his wife to the family home was obvious and their reluctance even to think of selling it understandable. However, the Tribunal must take that home into account in deciding whether the Respondent is in a position of exceptional financial hardship. While the Respondent has assets of such value he can never be so regarded.
…"

In Re Lukic and Secretary, Department of Social Security (AAT 6944, 6 May 1991) the following passage dealt with a similar issue:
"…
If Mr and Mrs Lukic were to sell the house on which they expended some $80,000 of the settlement of moneys, they would be in the same position as they were before the receipt of those moneys. That is, they would be living in rented accommodation, and would have money on which to live. Prior to the receipt of the settlement moneys, their living expenses were met by their pensions. If they were to sell their house, their living expenses would be met out of the proceeds of the house; that is, in effect, out of the settlement moneys. That is the intention of the legislation. It is for them to decide whether or not to do this or to obtain other financial support on which to live until 27 July 1992.
…
Even if we were wholly satisfied that the other matters on which Mr Lukic relies were established, we could not find that the circumstances were "special" in terms of section 156. Whether or not Mr and Mrs Lukic are able to work, and whether or not they were aware of the preclusion period, they have the settlement moneys (presently in the form of a house) with which to support themselves."

In considering the Applicant's financial circumstances the Tribunal, in noting that the Applicant had expended his lump sum compensation settlement in the manner that he did; that the majority of items purchased were of a discretionary nature; that the expenditure was undertaken over a very short time frame without consideration for future financial well-being; that he still retains a number of unencumbered assets which amount to more than 50 per cent of the net settlement proceeds and that he was aware of the length, notice and effect of his preclusion period, finds that the Applicant's financial circumstances do not constitute special circumstances.
In considering the Applicant's other circumstances, namely his nominated medical conditions involving his neck, his intermittent pseudogout and a difficulty with form reading and completion, the Tribunal acknowledges that his neck condition does limit the range of employment which the Applicant can undertake. Nevertheless the Tribunal has found after a consideration of the medical evidence that the Applicant does have a capacity to work and that he is apparently desirous to work, but is having difficulty in securing appropriate employment in his particular environment.
The Tribunal's attention was directed to a number of cases in which particular circumstance situations had been discovered and special circumstances been found to exist. Such situations included consideration of educational background, work experience, age, employment market barriers, genuine attempts to exploit work capacity, psychological, cultural, mental health and subsequent health circumstances. The Tribunal in considering the specific circumstances of this matter also noted findings in Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464 that ill health alone is not enough to be a special circumstance; the acknowledgment made by the presiding member in Re Secretary, Department of Social Security and Vys (1995) 40 ALD 745 where it was stated that "it must be acknowledged that there is nothing special or unusual about recipients of disability support pension being in ill health"; and finally in Re Kulakou and Secretary Department of Social Security (1991) 63 SSR 879, when it was stated:
"…
It was submitted further that as the Applicant was unable to gain employment due to ill health he was not in a position to take out a loan as he would not be capable of servicing it. The Applicant's chances of gaining employment were quite remote due to his medical condition, age, and inability to speak the English language. There is no dispute between the parties and it is agreed that the Applicant is entitled to receive an Invalid Pension on medical grounds and that such pension would be paid if it were not for the preclusion period. However, the Tribunal is satisfied and so finds that on the basis of the decision in Re Bolton (supra) ill health alone cannot be held as a special circumstance.
…"

The Tribunal, in considering the Applicant's age, medical conditions, his work capacity, finds that there is nothing unusual, uncommon or exceptional in the particular circumstances nominated and accordingly finds that special circumstances do not exist.
Further the Tribunal, in considering all the Applicant's nominated circumstances, including his financial situation, those nominated in paragraph 40 and the Applicant's difficulty in securing work, finds that they do not constitute special circumstances. Accordingly the Tribunal is not in a position to consider whether the discretion nominated in section 1184 of the Act should be exercised.
Determination
The Tribunal affirms the decision under review.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for the decision herein of Dr J D Campbell.
Signed:         .....................................................................................
  Associate
Date/s of Hearing  30 August 2000
Date of Decision  12 January 2001
Solicitor for the Applicant         Ms S Koller
Advocate for the Respondent Ms C Collis