Allan and Secretary to the Department of Family and Community Services

[2001] AATA 271

DECISION AND REASONS FOR DECISION [2001] AATA 271

ADMINISTRATIVE APPEALS TRIBUNAL)
  Nº V00/845
GENERAL ADMINISTRATIVE  DIVISION)

Re:              THOMAS ALLAN

Applicant

And:            SECRETARY TO THE
  DEPARTMENT OF FAMILY AND
  COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       Mrs H.E. Hallowes, Senior Member
Date:             4 April 2001

Place:Melbourne

Decision:The decision under review is varied in the special circumstances of the matter to provide that that part of Mr Allan's lump sum compensation payment, which would end his preclusion period on 1 July 2003, is to be treated as not having been made.

(sgd) H.E. Hallowes
  Senior Member
SOCIAL SECURITY — disability support pension — lump sum compensation payment — new lump sum preclusion period — income cut-out amount — prior claims for compensation affected payments — date at which preclusion period may be calculated — not a member of a couple — whether special circumstances
PROCEDURE — ability to participate at the hearing
Administrative Appeals Tribunal Act 1975 ss.33, 34B, 35A, 37
Social Security Act 1991 ss.17, 1165, 1184
Zandieh-Nadem and Another v Secretary, Department of Family and Community Services
[2000] FCA 1422
Re Stephens and Secretary to the Department of Family and Community Services
[2001] AATA 108
Re Secretary, Department of Family and Community Services and Norman
      (AAT 13005, 22 June 1998)
Re Zandieh-Nadem and Secretary to the Department of Family and Community Services
(2000) 59 ALD 557

REASONS FOR DECISION

4 April 2001  Mrs H.E. Hallowes, Senior Member

1. On 11 July 2000 Mr Allan sought review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 2 February 2000.   The SSAT advised that it was affirming a decision of a delegate of the Secretary made on 10 November 1999, which had been affirmed by an authorised review officer ("ARO") on 23 November 1999, that disability support pension ("DSP") was not payable to Mr Allan following his claim for that pension, which he had lodged on 8 November 1999.   Payment of a compensation affected payment under the Social Security Act 1991 ("the Act") was precluded from 14 March 1998 to 20 February 2004 due to Mr Allan's receipt of a lump sum compensation payment.

2. It appears from the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the documents") ("the AAT Act") that Mr Allan again claimed DSP on 22 May 2000. Mr Allan was advised on 23 May 2000 that DSP was not payable to him. This decision was affirmed by an ARO on 14 June 2000. By letter dated 11 July 2000, the ARO wrote to Mr Allan advising that he had reconsidered the decision, noting that he had previously reviewed the matter and sent letters to Mr Allan dated 13 October 1998 and 23 November 1999. As he had already explained how Mr Allan's compensation lump sum payment precluded him from being paid a compensation affected social security payment (including DSP) until 20 February 2004, the ARO restricted his further consideration to the issue of special circumstances under section 1184 of the Act.

3. Mr Allan's application for review was lodged with the Tribunal by Mr W. Weidner, a community welfare worker, on his behalf.   Mr Weidner asked if it would be possible for the hearing to be held in Ballarat, the closest provincial centre to Mr Allan's home.   Mr Weidner advised, in a covering letter, that Mr Allan's situation was complex and that his formal way of dealing with a crisis was to deny the existence of any problem.   Chronic pain, addiction to prescribed analgesic drugs, denial, combined with embarrassment and natural optimism were, in Mr Weidner's opinion, unhelpful and barriers to Mr Allan confronting real issues.   It was not clear to the Tribunal why this matter was not listed for hearing in Ballarat as requested, the Tribunal noting in Re Stephens and Secretary to the Department of Family and Community Services [2001] AATA 108, decided 14 February 2001, that the Tribunal tries to assist applicants from rural areas by arranging to hear their applications by telephone or video-link (section 35A of the AAT Act) or by listing the case to be heard in the town close to an applicant's home. The procedures of the Tribunal are within its discretion (section 33, AAT Act).

4. On the day before the matter was to be heard in Melbourne Mr Allan telephoned the Tribunal requesting that the matter be heard on the papers as Mr Weidner had provided further information to the Tribunal and there was no other matter he wanted to put to the Tribunal. Section 34B of the AAT Act provides that, if the parties consent and the Tribunal is satisfied that issues for determination can be adequately determined in the absence of the parties, the Tribunal may review the decision considering documents and other material lodged without holding a hearing. Being so satisfied, the Tribunal considered the matter under section 34B.

5. As well as the documents and the further information provided to it by Mr Weidner, the Tribunal had before it a statement of facts and contentions, together with additional documents lodged by Ms K. Cunningham, an advocate with Centrelink, who had carriage of the matter for the Secretary. The index to the documents records that the document indexed as T9 is a claim for DSP (pages 144-145). It was lodged at Centrelink by Mr Allan on 8 November 1999, and includes details with respect to Mr Allan. There is nothing on the face of the document to indicate that it is a claim for DSP. The following document, T10, is a printout of a computer text, dated 15 November 1999, headed "Reconsideration of Decision", beneath which appears the words "Payment type: DSP Decision: C/P". There does not appear to be a copy of the decision Mr Allan sought to have reviewed, made on or before that date, with respect to DSP. A letter to Mr Allan dated 18 November 1999 noted that, by letter "received on 15 November 1999", Mr Allan had requested a review of a decision. No copy of Mr Allan's letter was amongst the documents. By letter dated 19 November 1999, Mr Allan was advised by a delegate of the Secretary that details were correct and she had decided not to change her decision which "means that the preclusion period will remain from 14 March 1998 to 20 February 2004". The delegate referred to section 1184 of the Act, which provides:

   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.      

6. It is apparent from the letter to Mr Allan by the ARO, dated 23 November 1999, that Mr Allan had been paid a compensation lump sum of $250,000.00 on 3 March 1998, having been paid weekly compensation payments until 13 March 1998. The ARO referred to the relevant legislation, including definitions in subsection 17(1) of the Act, and subsections 1165(5), (8) and (9) which "tells how to calculate and determine the effect of compensation upon a person's social security entitlement". The Tribunal is satisfied that those provisions do not tell when the calculation of a preclusion period is to be determined, although subsection 1165(5) of the Act provides for the beginning and the end of the period. The ARO took into account information Mr Allan had given to the SSAT at an earlier hearing on 10 November 1998. A copy of that decision of the SSAT was provided to the Tribunal by Ms Cunningham as part of the additional documents she lodged. The ARO noted that "The cut-out point at the time of your settlement was $403.20 per week" and it was also noted that subsection 1165(5) provided that the period of preclusion commenced on the day after Mr Allan ceased to be paid periodic compensation payments, 13 March 1998.

7. In Re Stephens, Mr Stephens was in a similar situation to Mr Allan, having been paid a compensation lump sum of $243,650.00 in October 1997. A decision had been made to preclude Mr Stephens from receiving a compensation affected payment for the period 9 May 1998 to 20 February 2004. The preclusion period was later varied to end on 11 August 2003 as the preclusion period must begin as provided under section 1165 of the Act and, for reasons set out in its decision, the Tribunal further varied the end of the preclusion period to 1 July 2001 in the special circumstances of the case. The compensation divisor in Mr Stephens's case was also the sum of $403.20 which came into effect on 1 July 1997. In paragraphs 22 and 23 of its reasons for decision, the Tribunal said:

   22.         When the Tribunal asked Ms D'Cunha to apply the formula in subsection 17(1) to Mr Stephens's matter, to demonstrate how the sum of $403.20, applied by the ARO was arrived at, she was unable to do so.   She explained that the figures which are used are stored in the department's computer.   She provided the following table.

   Compensation Divisor (CMDV)

Effective Date Amount          Effective Date Amount          
1 JUL 2000     $543.63         24 APR 1996  $559.20         
20 MAR 2000  $428.40         29 FEB 1996   $554.50         
20 SEP 2000   $422.90         8 FEB 1996     $555.00         
1 JUL 1999     $417.80         16 NOV 1995  $551.30         
20 MAR 1999  $416.80         26 OCT 1995  $552.20         
20 SEP 1998   $412.70         17 AUG 1995  $548.50         
20 MAR 1998  $410.70         27 JUL 1995    $547.60         
1 JUL 1997     $403.20         18 MAY 1995  $544.40         
20 MAR 1997  $402.20         27 APR 1995  $544.60         
27 FEB 1997   $571.90         2 MAR 1995    $543.40         
6 FEB 1997     $572.10         9 FEB 1995     $543.20         
14 NOV 1996  $569.20         6 DEC 1994    $539.90         
24 OCT 1996  $566.70         10 NOV 1994  $541.00         
16 AUG 1996  $564.60         18 AUG 1994  $530.70         
25 JUL 1996    $563.60         28 JUL 1994    $530.50         
17 MAY 1996  $558.40         19 MAY 1994  $529.00         

23. As the definition of "income cut-out amount" was only inserted into the Act under Schedule 12 of Act Nº 84 of 1996, which came into effect on 20 March 1997, the Tribunal was perplexed as to why the figures in the table went back to 19 May 1994 and why there was no consistency in the dates when the amounts changed. Ms D'Cunha explained that the income cut-out amount is normally recalculated every March and September following CPI reviews but she said that it may also be recalculated if one of the other variables in the formula changes. She undertook to provide the Tribunal with a calculation of the income cut-out amount done on 1 July 1997 which was applied to Mr Stephens. Presumably, the figures in the table before 20 March 1997 represent average weekly earnings (originally average male weekly earnings). At no stage did the divisor figure drop below $529.00, in effect in May 1994, until 20 March 1997 when, following the above amendments to the Act, provisions with respect to new lump sum preclusion periods were inserted, affecting the length of preclusion period for those receiving a lump sum compensation payment after 20 March 1997. It is indeed unfortunate for Mr Stephens that his solicitors did not settle his compensation claim before 20 March 1997. At that date the divisor figure with respect to new lump sum preclusion periods became $402.20, being recalculated as $403.20 on 1 July 1997, the figure used to calculate Mr Stephens's preclusion period. There has been a gradual increase in the divisor figure, no doubt reflecting cost of living adjustments until 1 July 2000 when the divisor figure jumped to $552.63, to compensate those on low incomes for the introduction of the goods and services tax ("GST") and the effect of the introduction of that tax on their cost of living.

The Tribunal went on to note that those who received their lump sum compensation payment before 20 March 1997 were still subject to an average weekly earnings divisor. When Mr Stephens's preclusion period was estimated he had not claimed a compensation affected payment, nor was he being paid one. The Tribunal notes paragraphs 1165(1)(a) and (1A)(a) of the Act, which provide:

1165(1)        Where:

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

. . . 

1165(1A)     If:

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

. . .

1. The Tribunal was also advised in Re Stephens that, on 1 July 2000, the pension income test was amended such that ". . . the taper rate reduced from 50c to 40c in every dollar earned above the free income limit". However, this amendment has not as yet been reflected in the formula for income cut-out amount, which is set out in subsection 17(1) of the Act, and which provides that "income cut-out amount" means:

   the amount worked out using the following formula:
     (Maximum basic         Pharmaceutical amount )        Ordinary free

   2        (        rate          +      for a single person     )    +      area limit
             ____________________________________________________________

   52

   where:
   "maximum basic rate" means the amount specified in column 3 of item 1 in Table B in point 1064-B1.  

Mr Stephens, like Mr Allan, does not have a partner to take advantage of the amending legislative provisions that the new lump sum preclusion period would only be applied to a compensation recipient and not to his or her partner, although it continues to apply to those whose partners received a lump sum compensation payment before 20 March 1997.   The Tribunal included the effect of the goods and services tax ("GST") on Mr Stephens's cost of living as one of the special circumstances in his matter which led the Tribunal to treat part of his compensation payment as not having been made.  

1. Mr Allan had apparently told the ARO that he spent his compensation by

• buying a house and 12 acres of land for $145,000.00,

• buying a car for $10,000.00,

• paying solicitor's fees, $25,000.00,

• repaying accumulated debts of $30,000.00,

• paying fees to Casanova Kennels in respect of looking after his seven cats for seven months, $10,000.00, and

• expenses of general living expenses and things needed around the house, $30,000.00.

The ARO advised Mr Allan that, if he was in financial hardship, there were options available to him such as selling his house and land.  

1. When lodging his claim for DSP on 22 May 2000, Mr Allan advised that he suffered chronic lower back pain, hepatitis C and opiate addiction.   He indicated that, at all time, he had difficulty sitting, standing and walking, lifting and bending.   He also finds it hard to concentrate, to remember things and to interact with others.   It is difficult for him to manage his own affairs and care for himself.   His treating doctor's report bore out Mr Allan's contentions, his treating doctor ticking boxes which indicate that Mr Allan's conditions are long term.   
   Paragraphs 11 to 13 are subject to a section 35 Order - confidentiality

2. In again reviewing Mr Allan's circumstances, on 11 July 2000 (see paragraph 1 above) the ARO further advised Mr Allan that:

   Based on a financial level of support required of $403.20 per week, as used in the compensation preclusion period calculation, an amount of $76,608 would be required to provide you with a sufficient livelihood until the preclusion period expires, in approximately 190 weeks time, on 20 February 2004 (ie $403.20 x 190 = $76,608).
   Accordingly, while the exact amount of what you would be left with after selling your property and paying back the bank loan is not known, it would be enough to provide you with a sufficient livelihood, based on $403.20 per week, for a consideration [sic] period of time.   

3. In a written submission to the Tribunal on Mr Allan's behalf, Mr Weidner advised, on 14 November 2000, that Mr Allan was awaiting confirmation of the sale of his property.   Mr Weidner expressed his concern that recipients of lump sum compensation payments may not fully understand the provisions with respect to preclusion periods.   He made suggestions he would like the Secretary to consider such that the "trauma which has occurred for those such as Mr Allan" may be avoided.   He reflected on the effect on a person of chronic pain and the path it may lead those such as Mr Allan down.  

4. In providing a closing submission to the Tribunal Ms Cunningham provided a copy of a contract note for the sale of Mr Allan's property for $147,000.00 and an advice from Mr Weidner that a bank was owed approximately $83,000.00.   From the additional documents lodged by Ms Cunningham, it appears that, until at least 12 May 1999, Mr Allan may have been working as a truck driver, his "last week's pay" by Midbeach Holdings being $409.20.   It also appears from information provided by the Victorian WorkCover Authority that Mr Allan was injured in August 1993; that he was paid weekly compensation from 2 August 1993 to 13 March 1998.   The further documentation suggests that Mr Allan was able to obtain employment after his weekly compensation payments ceased, although the Tribunal has some doubt about this.  

5. In a written submission by Ms Cunningham she suggested that Mr Allan had spent his lump sum compensation payment recklessly.   Figures obtained with respect to his bank accounts disclose that, between 13 March 1998 and 17 November 1999, Mr Allan spent approximately $307,000.00.   She referred to the decision of the Tribunal in Re Secretary, Department of Family and Community Services and Norman (AAT 13005, 22 June 1998) in which Deputy President Barnett said, amongst other things:

   18. It is not an unusual circumstance that a person to whom a preclusion period is applied spends their funds in a way which is unwise. That is frequently the impetus for them seeking relief through sec. 1184. Financial hardship alone will not of itself constitute special circumstances under this section (See Director-General of Social Services v Hales (1993) 47 ALR 281). The provisions in the Act are there to ensure that money received in place of income as part of the Worker's Compensation system is not also paid by way of Social Security benefits. (See, for example, Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797 at 798. This prevention of double dipping reflects the idea that the money is there to provide a person with income, not capital for investment.

She noted that, even if Mr Allan had difficulty in budgeting large sums of money, he had been advised by Centrelink that it provided financial services to customers to improve their standard of living by using their own money to their best advantage.  

1. Ms Cunningham divided the sum of approximately $59,000.00 Mr Allan would have left following the sale of his house and, after repaying the bank, by the income cut-out amount which had been applied in his case, $403.20, which pointed to Mr Allan having sufficient funds to support himself for a further 146 weeks ending on 11 October 2003, although she noted that Mr Allan's preclusion period, pursuant to the decision under review, ends on 20 February 2004.   She also noted that the SSAT had recorded on 10 November 1998, that Mr Allan had advised the SSAT he had no further funds in the bank and that his only income was $60.00 a week paid by the person with whom he shared his house, whereas his bank statements disclosed, at that time, that he had $21,762.00 in the bank and that he had withdrawn the sum of $500.00 on the day of the hearing before the SSAT.   Neither of the statements with respect to Mr Allan's bank accounts, which were before the Tribunal, covering the period from October 1998 to 25 September 2000, record deposits of any wages Mr Allan may have been paid, although the bank provided a document, signed by "A. Moore" for Midbeach Holdings, dated 12 May 1999, suggesting Mr Allan had been paid "$32,100.00 during the past year".

1. As Mr Allan's treating doctor was not called to give evidence, the Tribunal will not draw the conclusions put by Ms Cunningham in her final submissions that Mr Weidner's suggestion Mr Allan has a psychological or psychiatric condition, which affects his ability to process information and to think logically, is not supported by the evidence.

2. It appears from the evidence before the Tribunal that the treatment Mr Allan sought for his cervical and lumbar back conditions probably played some part in his addiction to drugs, which has cost him dearly, if he fits within the 10 per cent to 15 per cent of patients using pain-killers who become dependent (see Mr Somerfield's report).   On the other hand, there is also evidence before the Tribunal that Mr Allan has not always been truthful with respect to the information he has supplied in respect of his income and assets.  

3. Many customers of Centrelink who have been paid compensation following injury suffer pain as a result of their compensable condition and ongoing disability.   Others find that they are unable to manage their financial affairs on receiving a lump sum payment, having, in the past, only been in receipt of regular weekly income.   Those factors cannot be considered special such that the decision-maker should exercise his or her discretion in the customer's favour, because not to do so would lead to an injustice.   However, in Re Zandieh-Nadem and Secretary to the Department of Family and Community Services (2000) 59 ALD 557, at page 565, the Tribunal was moved to say "What is to happen to Mr Zandieh-Nadem and Mrs Mahdavi-Shahandashti the tribunal does not know". In Zandieh-Nadem and Another v Secretary, Department of Family & Community Services [2000] FCA 1422 (decided 11 October 2000) Conti J said that such concluding remarks invited a closer search for a generous construction of section 739A of the Act, the relevant provision in that matter.

4. It appears to the Tribunal that Mr Allan will continue to depend on Mr Weidner and medical practitioners to assist him with the control of his addiction, an addiction the Tribunal is satisfied was contributed to by his compensable injury (paragraph 12 above).   His addiction is a factor which makes Mr Allan's circumstances uncommon.   Having lost his home, the decision under review provides that he must find food and shelter through his own resources, including the funds he has following the sale of his house and land, to survive until 20 February 2004.   It is important that he be given some hope for the future.   The compensation divisor used to determine Mr Allan's preclusion period was $403.20, which came into effect on 1 July 1997.   Three years later the compensation divisor became $543.63.   That figure will, doubtless, rise between now and February 2004.   One of the special circumstances the Tribunal took into account in Re Stephens, under subsection 1184(1) of the Act, was the effect of the GST on the cost of living after 1 July 2000. Unlike Mr Stephens, Mr Allan made claims for a compensation affected payment under the Act (8 November 1999 and 22 May 2000 for DSP), by which time the compensation divisors were for $417.80 and $428.40. The Tribunal has decided that a generous construction of the Act would enable it to accept the figure of $59,000.00, referred to by Ms Cunningham in her submission, with respect to the remaining funds Mr Allan has which should be available to him for his support following the sale of his property on 18 December 2000. Doubtless, Mr Allan had some other expenses, as well as the repayment of his loan to the bank to meet following the sale of his property and the Tribunal has decided that it should exercise its discretion under subsection 1184(1) of the Act.

5. The Tribunal has calculated how long Mr Allan would be precluded from being entitled to be paid a compensation affected payment using the compensation divisor in effect when he claimed DSP on 22 May 2000 (approximately 138 weeks) and the compensation divisor in effect on 18 December 2000 when Mr Allan sold his house (approximately 107 weeks). These calculations point to Mr Allan being precluded from being paid a compensation affected payment under the Act until some time between January and August 2003. In light of Mr Allan's special circumstances, the Tribunal will exercise its discretion by varying the decision under review such that Mr Allan is precluded from being paid a compensation affected payment under the Act until 1 July 2003. This decision may give him some hope for the future, it reflects the increase which has occurred in the cost of living and which may rise in the future and acknowledges the chronic pain, the treatment of which has unfortunately led to his addiction.

6. It is for these reasons that the decision will vary the decision under review.

   I certify that the twenty-four [24] preceding paragraphs are a true copy of the reasons for the decision herein of 
   Mrs H.E. Hallowes, Senior Member

   (sgd)       Catherine Thomas
                 Personal Assistant

   Date of Hearing:  Decided on Papers
   Date of Decision:  04.04.01
   Solicitor for the Applicant:           NIL — IN PERSON
   Solicitor for the Respondent:       Ms K. Cunningham, Departmental Advocate