Allen and Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2000] AATA 410

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/1094

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

DECISION

Tribunal Senior Member M D Allen

Date26 May 2000
PlaceSydney

Decision The decision under review is set aside and the Tribunal substitutes in lieu thereof its decision, namely: THAT the whole of the compensation payment made to the Applicant by virtue of the settlement sum of $200,000.00 in the matter of Clayton Keith Allen v Northern Hardwood Sawmills Pty Limited (In Liquidation) be treated as not having been made.

(Sgd)  M D ALLEN
  ..............................................
  Senior Member
CATCHWORDS
SOCIAL SECURITY - Preclusion period. Unauthorised disclosure of fact Applicant had received an award of common law damages led to proceedings by Applicant's ex-wife and destruction of capital needed to establish business. Whether this amounted to special circumstances. Compensation payment to be treated as not having been made.
Social Security Act 1991 - s17, subs1165(2AA), s1184 and s1312B
Privacy Act 1988 - s89 and s93
Secretary, Department of Social Security v Ellis 24 AAR 535

REASONS FOR DECISION

26 May 2000 Senior Member M D Allen

By application lodged 19 July 1999 the Applicant sought review of a decision by the Social Security Appeals Tribunal made 21 June 1999 affirming a prior determination by a delegate of the Respondent imposing a compensation preclusion period from 29 May 1997 to 22 November 2000.
The matter came on for hearing before me at Coffs Harbour on 15 March 2000. The Applicant represented himself and the Respondent was represented by Mr Slattery of Centrelink. Although unrepresented (apparently being denied legal aid for the hearing notwithstanding his impecuniosity), a comprehensive and well thought out submission was presented on his behalf, that submission having been prepared by a solicitor with the Legal Aid Office NSW at Coffs Harbour, Mr Batley.
In addition to the documents prepared for the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975, which documents were marked as T1 to T33, the following documents were taken in as exhibits on 15 March 2000, namely:
Exhibit A1   :    Applicant's Statement of Facts and Contentions
Exhibit A2:    Letter from Legal Aid NSW to Respondent dated 13 February 2000 plus annexure
Exhibit A3:    Three photographs of Applicant's property
Exhibit R1:    Respondent's Submission dated 9 March 2000.

As a result of matters which arose during the hearing, a letter was received by the Tribunal (with a copy to Centrelink) from a solicitor acting for the Applicant following a motor vehicle accident for which the Applicant is being held responsible. I have taken that letter in as an exhibit and it is marked as Exhibit A4.
Subsection 1165(2AA) reads:
"Person member of a couple — payment received on or after 20 March 1997. Subject to subsection (2B), if:
(a)a person receives or claims a compensation affected payment; and
(b)the person is a member of a couple; and
(c)the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period."

"Compensation affected payment" is defined in s17 of the Social Security Act 1991 as including a Social Security payment which in turn is defined in s23 of the Social Security Act as including a Newstart Allowance. The term "compensation payment" is defined in subs17(2) of the Social Security Act as including a payment of damages or a payment (without or without admission of liability) in settlement of a claim for damages that is made wholly or partly in respect of lost earnings or lost capacity to earn.

Subsection 17(3) states:
"[Compensation part of a lump sum compensation payment]   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, on or after 9 February 1988; 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, on or after 9 February 1988; 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."

The effect of the abovementioned provisions is ameliorated by subs1184(1) which reads:
"[Special circumstances] 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."

In this matter the Applicant was injured in a work accident on 29 March 1995. He settled a common law claim for damages and, as a result of the preclusion provisions of the Social Security Act 1991, one half of that sum was divided by 402.20 representing the amount of average weekly earnings thus giving a preclusion period of 248 weeks which represented the period 29 May 1997 to 27 February 2002.
As a result of a review by an Authorised Review Officer the preclusion period was reduced to 182 weeks, to end on 22 November 2000, and this is in effect the decision which was subject to review by this Tribunal.
The Applicant gave evidence that both he and his present wife understood that following the settlement of his common law damages claim against his former employer he would, for a period, be denied any Social Security payments.
As a result of this knowledge plus the fact his injury would render him unlikely to receive any offer of employment, he and his wife determined, in consultation with his father, to create a business.
The Applicant's father is an established Tea Tree farmer. Exhibit A2 in these proceedings contains a business plan drawn up by Mr Allen Snr and, having heard his evidence and that of the Applicant, I find that the Applicant would have had sufficient support from his father such that the proposed Tea Tree business would have been a viable business yielding a frugal but independent lifestyle to the Applicant and his wife.
In anticipation of setting up his business, the Applicant and his wife entered into a contract to purchase a property at Ramorie in Northern New South Wales which property had upon it a dilapidated residence and was suitable for the growing of Tea Trees.
The Applicant settled his common law claim on 27 May 1997. As a condition of that settlement he had no further entitlement to the payment of periodic worker's compensation. On 5 June 1997 he attended at the Grafton Office of Centrelink as he wished to receive Newstart Allowance for the period between the settlement of his claim and the actual disbursement of the settlement monies.
Unfortunately for the Applicant he was served at the Grafton Centrelink office by the mother of an Elizabeth Watkins who is the Applicant's former wife. Ms Watkins' mother, although an employee of Centrelink, disclosed to her daughter the fact that the Applicant was expecting a lump sum payment of common law damages. I was informed from the bar table that Ms Watkins' mother is now no longer an employee of Centrelink.
Although the Applicant was then paying $10 per week each for the two children of his marriage with Elizabeth Watkins, without notice to him Ms Watkins obtained, in the Magistrate's Court at Wagga Wagga on 10 June 1997, an order restraining the Applicant from receiving or disposing funds being any part of his damages claim.
Various negotiations then took place between solicitors acting for the Applicant, his former wife and the solicitors for the vendor of the Ramorie land. The Applicant was able to complete the purchase of that property and spent $19,000 of his settlement monies on the house in order to make it habitable.
On 2 April 1998 the Magistrate's Court at Wagga Wagga ordered the Applicant to pay the sum of $35,700.00 to his former wife as lump sum maintenance. On appeal to the Family Court this sum was reduced to $25,061.00 but the costs of the appeal amounted to $9,441.71.
The net result of the Family Law proceedings was that the lump sum maintenance ordered to be paid, plus legal costs, took what the Applicant had earmarked as capital to enable him to purchase Tea Trees and live on until the first of those trees started to show a return.
As is exemplified in Exhibit A2 the Applicant's evidence was that after planting 10,000 trees on nine acres in 1997, in 1998 more trees would have been planted and the 1997 plantings harvested bringing a net income of $16,350.00. In 1999 more plantings would have taken place and the earlier plantings would have yielded an income of $23,640.00. By the year 2000 the plantation should have yielded a net income of $31,500.00 after costs (including further plantings) had been taken into account. This scheme was destroyed as the lump sum maintenance order took the Applicant's capital and this order was a direct result of the unlawful disclosure of confidential information regarding his financial affairs by an employee of Centrelink.
Very properly, the Authorised Review Officer reviewing the Applicant's case took this matter into account and reduced the preclusion period by subtracting from the amount of $100,000.00 the sum of $30,847.00 thus reducing the preclusion period to 182 weeks. I note from the documents provided to me that, at T32, there was disagreement with this decision by certain Centrelink Officers. To my mind the decision and the reasons therefore were entirely correct being a proper course to mitigate damage. The Applicant, for his part, argues that he suffered much greater damage than allowed for by the Authorised Review Officer.
The Authorised Review Officer found, and I agree, that special circumstances existed in the Applicant's case so as to bring him within the purview of subs1184(1) of the Social Security Act. As to what constitutes "special circumstances", I refer to the judgment of Carr J in Secretary, Department of Social Security v Ellis 24 AAR 535 at 539, namely:
"In Beadle v Director-General of Social Security (1985) 7 ALD 670, a Full Court of this Court had to consider whether the Administrative Appeals Tribunal had erred in its interpretation of s 102(1)(a) of the Act which provided for an extension of time in which to claim a family allowance '… in special circumstances…'. At 673-674 the Full Court said:
'Presumably in this context special circumstance must include events which would render the six months unfair or inappropriate. … It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase 'special circumstances', although lacking precision, is sufficiently understood in our view not to require judicial gloss.'
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Kiefel J, after referring to Beadle, said:
'… for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only inquiry to be undertaken in this 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. The inquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied.'"

It is difficult to imagine anything more unfair or unjust than the unlawful disclosure of an employee of Centrelink of personal financial information which is then acted upon by the recipient of that information to detriment of the Centrelink client.

Section 89 of the Privacy Act 1998 states inter alia:
"Unless the contrary intention appears, a reference in this Part to an obligation of confidence is a reference to an obligation of confidence:
(a)to which an agency or a Commonwealth officer is subject, however the obligation arose; or
(b)…"

And s93 of that Act provides:

"(1)A confider may recover damages from a confidant in respect of a breach of an obligation of confidence with respect to personal information.
(2)Subsection (1) does not limit or restrict any other right that the confider has to relief in respect of the breach.
(3)Where an obligation of confidence exists with respect to personal information about a person other than the confider, whether the obligation arose under a contract or otherwise, the person to whom the information relates has the same rights against the confidant in respect of a breach or threatened breach of the obligation as the confider has."

Section 1312B of the Social Security Act 1991 reads:
"If:
(a)   a person intentionally:
(i)    …
(ii)   discloses to any other person; or
(iii) otherwise makes use of;
information; and
(b)the person is not authorised or required by or under this Act, the Child Care Payments Act 1997 or the Farm Household Support Act 1992 to make the record, disclosure or use of the information that is made by the person; and
(c)the person knows or ought reasonably to know that the information is protected information;
the person is guilty of an offence.
Penalty: Imprisonment for 2 years."

On the evidence, which I accept, the result of the disclosure of his damages settlement led to direct pecuniary loss by the Applicant and the subsequent and direct failure, by reason of that loss, to engage in a viable business and be self-supporting. This was aggravated in the Applicant's case as he has an injury to his left ankle which renders his employment prospects problematical at best and he has been left in the situation where the only income for himself and his wife and daughter is the wife's Social Security payments. The daughter is in secondary school with attendant costs.
In "Luntz – Assessment of Damages" Second Edition, paragraph 1.9.06 deals with the fact that damages are awarded for lost chances, for example, to exploit an earning capacity or to gain a benefit. At paragraph 5.2.04 the point is made that damages take into account increased earnings over a period, that is, in this case it is not only the deprivation of the sum of $30,847.00 that would be compensated but losses as a result of that loss of capital.
A similar point is made in "McGregor on Damages" Fifteenth Edition where at paragraph 72, the learned author states:
"Where the tort is one interfering with business relations loss of profits tends to become the basic loss. Indeed in the tort of inducement of breach of contract this type of loss is frequently inferred. And loss of profits has been awarded in the tort of injurious falsehood generally, in its particular common law variety of passing off, in the analogous actions for infringement of rights in statutorily protected property by way of trade marks, patents and copyright, and in actions arising out of the improper use of confidential information." (Tribunal's emphasis)

In my opinion, the Applicant would have a case in damages against the Respondent, the Respondent being vicariously liable for the disclosure of confidential information by its servant the Centrelink employee who is the Applicant's ex-mother-in-law. The Authorised Review Officer very properly recognised a special circumstance and sought to mitigate damage but, in my opinion, was too conservative in her approach.
The Applicant's current circumstances are set out in Exhibit A1, paragraphs 26 to 30 inclusive, which read:
"26.Mr Allen lives with his second wife Karen and stepdaughter Joeanne (born 8 November 1985). Mrs Allen receives extended family payment of $424.90 per fortnight ($212.45 per week). All this money is spent meeting the family's basic living expenses.
27.Mr and Mrs Allen were living beyond their means until the compensation money was exhausted. It was not used upon extravagant expenditure, only modest living costs. Details of their spending patterns are set out in a document filed in the maintenance proceedings (attachment 17). The family's needs are more than double their income. Excluding the amounts for entertainment and sundries, there is a shortfall of over $100 per week. The remaining living expenses are not discretionary and it is only by a reduction in their food budget that the family can meet the other expenses.
28.Mr and Mrs Allen and Joeanne live 35 kilometres from Grafton. It is essential for them to own and maintain a car to enable them to buy supplies, look for work and socialise.
29.Grafton is an area of high unemployment. Mr Allen was largely unemployed from 1985 to 1995. In view of his serious disabilities, Mr Allen has no realistic employment prospects.
30.Mr Allen became aware in 1998 that his ex-wife was told about his impending compensation payment following a deliberate breach of his privacy by an employee of Centrelink, his ex-wife's mother. Had the breach not occurred, Mr Allen would have been able to commence a tea tree plantation and had the opportunity to be self supporting. The breach has been confirmed (T29).

And the Applicant, in his evidence, deposed to the accuracy of the passages quoted above.

Other circumstances have also arisen to make the circumstances of the Applicant "special". I was informed at the hearing, and it is an indication of the Applicant's genuineness that he saw these circumstances as not being germane to his case, that currently he owes a debt of $10,510.50 for damages as a result of a motor vehicle accident which debt he cannot pay. The debt arose as the vehicle he was driving was uninsured. Just prior to the Third Party Property Insurance on his vehicle becoming due and payable, the Applicant and his wife's 21 year old son was drowned and the family had to decide between paying for the burial or reinsuring the car. In the event the car was uninsured when the Applicant was involved in the motor vehicle accident. No doubt, if the debt is pursued, the Applicant will be declared bankrupt. His solicitor's letter (Exhibit A4) concludes by stating:
"Mr. Allen has indicated he has no assets to liquidate to enable payment to be made, and has insufficient income to allow him to make any meaningful offer to pay by instalments. We fully expect Mr. Allen will lodge a petition in bankruptcy if a summons issues."

Attachment 2 to Exhibit A1 is a letter from the Applicant's treating orthopaedic surgeon which reveals that an arthrodesis would cost, on 1996 figures, the sum $5,000.00. Attachment 3 to Exhibit A1 is a further report by the Applicant's surgeon dated 23 April 1997 in which that surgeon (Dr G A Miller) opines:
"The fracture healed in a less than anatomical position and he has developed secondary degenerative changes in the region.
I again feel that he is not fit to perform any heavy manual work or that which requires him to be on his feet for long periods of time.
I believe that he would benefit from an arthrodesis of his left ankle. The timing will be up to the patient.
I would again estimate that he has a 35-40% permanent loss of use of his left lower limb below the level of the knee and a 10-15% permanent impairment of his back."

It is of course highly unlikely that anyone with this degree of incapacity, who has only manual labour to offer, would find an employer willing to employ him. He would also be at a disadvantage in seeking employment as he would now be regarded as a "worker's compensation risk".

Section 1184 of the Social Security Act simply refers to "the special circumstances of the case". This can be contrasted to s1237AAD of the Social Security Act which refers to the power to wave debts where "there are special circumstances (other than financial hardship alone) that make it desirable to waive." Of s1237AAD two points can be made, the first being that financial hardship can be taken into account along with other factors in assessing whether it is desirable to waive and, the second being that the difference in wording to s1184 implies that financial hardship is itself a special circumstance for the purposes of s1184.
I am satisfied that the Applicant's current financial hardship, caused by his lack of income, debts, inability to attract an employer and needed to maintain a child at secondary school whilst living in the country combined with the ongoing financial loss suffered by the unauthorised disclosure of confidential information by the former Centrelink employee which in turn led to the loss of his capital needed to establish a source of income, amount to special circumstances.
I therefore set aside the decision of the Social Security Appeals Tribunal and substitute in lieu thereof the Tribunal's decision, namely that the whole of the compensation payment made to the Applicant by virtue of the settlement sum of $200,000.00 in the matter of Clayton Keith Allen v Northern Hardwood Sawmills Pty Limited (In Liquidation) be treated as not having been made.
I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of:
Senior Member M D Allen
Signed:         Ivanka Mamic           .....................................................................................
  Associate
Date of Hearing  15 March 2000
Date of Decision  26 May 2000
Solicitor for the Applicant             Applicant self-represented
Advocate for the Respondent      Mr B Slattery, Centrelink

[2000] AATA 410

26 May 2000

Key Legal Topics

Areas of Law

Social Security Law

Legal Concepts

Social Security Act 1991

Compensatory Damages

Unauthorised Disclosure

Preclusion Period