Antonio Fernandes and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2012] AATA 614

[2012] AATA  614

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2011/4182
Re	Antonio Fernandes
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT

DECISION

Tribunal

Senior Member A K Britton

Date

Date of oral decision

27 August 2012

27 August 2012

Date of written reasons

13 September 2012

Place

Sydney

DECISION

For the reasons given orally at the conclusion of the hearing of this matter:

1. The calculation of the compensation charge is remitted to the Secretary for reconsideration. In undertaking that task, the Secretary is to have regard to Exhibit A1 (the note from Allianz to the Applicant’s solicitors dated 6 January 2011).
2. The balance of the decision under review is affirmed.
3. After having made his decision about the remitted matter, the Secretary must write to Mr Fernandes and outline his view about the basis of the discrepancy between the compensation charge as calculated by the Secretary and the compensation charge recorded in Exhibit A1.

.......................[SGD].................................................

Senior Member A K Britton

CATCHWORDS

SOCIAL SECURITY – compensation charge – periodic compensation - calculation of compensation-affected payment – application remitted to Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

SOCIAL SECURITY – application of Social Security Act1991 (Cth) s 1173 (4) – applicant in receipt of compensation-affected payment at the time of the event that gives rise to the entitlement to compensation – whether discretionary power can be exercised in the circumstances

LEGISLATION

Social Security Act1991 (Cth) - s 1173 (1), 1173 (4), 1184K (1)

CASES

Secretary, the Department of Family and Community Services v Allan [2001] FCA 1160

SECONDARY MATERIALS

Guide to Social Security Law, Version 1.189 - Released 10 August 2012

WRITTEN REASONS FOR DECISION REVISED FROM THE TRANSCRIPT

Senior Member A K Britton

13 September 2012

1. Mr Antonio Fernandes seeks review of a decision made by the Secretary and affirmed by the Social Security Appeals Tribunal (SSAT) that he was liable to a compensation charge in the sum of $28,565.54.  After the SSAT handed down its decision in September last year, Allianz, Mr Fernandes’ former employer’s insurer, paid to Centrelink the sum of $28,565.54 and notified Mr Fernandes that it intended to take steps to recover that amount from him. Apparently Allianz is awaiting the outcome of these proceedings before taking any action.

2. Two issues fall for determination.  Firstly, whether the amount recovered by Centrelink from Allianz (the compensation charge) was correctly calculated, and secondly, whether, the discretionary power to treat the whole or part of that payment as not having been made (to Mr Fernandes) should be exercised.

   Was the compensation charge correctly calculated?

3. Section 1173 of the Social Security Act 1991 (Cth) (the Act) provides that if a person, receives “periodic compensation payments” the rate of any “compensation-affected payment” payable to them will be affected. Throughout the relevant period, 3 November 2009 to 1 January 2011, Allianz made “periodic compensation payments” to Mr Fernandes, and he also received “compensation-affected payments”, namely Newstart Allowance (to 28 January 2009) and disability support pension (DSP) (to 1 January 2011).

4. Section 1173 sets out two methods by which a “compensation-affected payment” will be affected by the payment of “periodic compensation payments”. Which method applies is determined by whether the person was in receipt of DSP or Newstart Allowance (or any other compensation-affected payment) at the time of “the event” that gave rise to their entitlement to compensation.

5. If, the person was not receiving a compensation-affected payment at the time of the event that gave rise to the entitlement to compensation, then any compensation-affected payment they might be qualified to receive, will be reduced, on a dollar-for-dollar basis by the amount of any periodic compensation payment (s 117(1) of the Act).  On the other hand, if, at the time of the event that gave rise to the entitlement for compensation, the person was receiving a compensation-affected payment, any periodic compensation payment is treated as ordinary income for the purpose of calculating the rate of any compensation-affected payment (s 117(4) of the Act). 

6. At the time of the event that gave rise to Mr Fernandes’s entitlement to compensation, a work injury in January 1998, he was not receiving any compensation-affected payment. He had been receiving Newstart Allowance shortly before the work accident occurred (but was not receiving Newstart at the time the accident occurred).

7. Mr Fernandes prepared and provided to the Tribunal a detailed document which compared (i) the rate of Newstart Allowance and DSP he actually received after deduction after the s 1117(1) had been applied, with (ii) the rate of Newstart Allowance and DSP he would have received had the compensation he received been treated as ordinary income (s 117(4) of the Act).  It reveals that that Mr Fernandes is about $160 worse off each fortnight as a result of the reduction of his pension entitlements on a dollar-for-dollar basis (by the amount of compensation received) than he would have been had his compensation payments been treated as ordinary income.

8. There is no argument that if Mr Fernandes’s compensation payments were treated as ordinary income he would have received a higher rate of Newstart Allowance and DSP.  As I understand from Mr Slattery’s submission today, while he is unable to confirm if the figures on which Mr Fernandes relied are correct, he accepts the proposition that the reduction of a pension entitlement on a dollar-for-dollar basis leads to a less favourable outcome for the recipient than had their compensation been treated as ordinary income.

9. Mr Fernandes contends that there is no rational basis for the differential treatment enshrined in s 1173 of the Act and that it is discriminatory. He notes that had he continued to receive Newstart Allowance at the time of the work injury he would have been much better off. There can be no disagreement that, but for the unfortunate timing, Mr Fernandes would have received a higher rate of Newstart Allowance and DSP after the work injury.

10. That said, the Act makes clear the rate of compensation affected payment payable to a person (if any) is determined by, among other things, whether they were receiving a compensation affected payment at the time of the event which gave rise to their entitlement to compensation. Section 1173 dos not confer a discretionary power which would allow me to decide to treat Mr Fernandes’s compensation payments as ordinary income. It may well be, as Mr Fernandes contends, that the provision is discriminatory in nature, but that is not a matter that can be taken into account in this application. So with one caveat, to which I will return, I find that the amount of $28,565.54, or the charge, has been correctly calculated.

    Can the compensation payment be treated as not having been paid?

11. The real issue raised in this case, I think, is whether the discretionary power conferred by s 1184K (1) of the Act to treat the whole or part of Mr Fernandes’s compensation payment as not having been paid can be exercised in the special circumstances of this case. 

12. The term “special circumstances” has been the subject of exhaustive consideration both by this Tribunal and the Federal Court. The Federal Court has consistently emphasised that the phrase denotes a requirement that there be something which distinguishes the claimant’s case from others to take it out of the usual or ordinary case.  There is no requirement for the person to prove that their circumstances are extremely unusual, uncommon or exceptional, but nonetheless there must be something which distinguishes their case from the usual or ordinary case.  As Heerey J pointed out in Secretary, the Department of Family and Community Services v Allan [2001] FCA 1160 at [1], the basic policy underlying s 1173 of the Act and similar provisions which suspend social security benefits when a person is receiving compensation for loss of earnings, is to avoid “double dipping”.

13. In determining whether special circumstances exist, I must also have regard to the policy developed by the Secretary. The Guide to Social Security Law provides some guidance on how the provision ought to be applied, and I have taken this into account in my decision. 

14. Mr Fernandes has outlined his financial circumstances in today’s proceedings.  He receives $875 (net) per fortnight.  This figure, of course, is prior to any deduction that will be made in respect of the compensation charge. At this point Mr Fernandes has no debts and has carefully managed his money.  He has a number of significant expenses, apart from the usual day-to-day expenses: rent, mobile phone, power, internet connection, and the like.  He has educational expenses of about $1000 per annum. He also has future dental expenses of at least $1000 and possibly up to $5000 if he finds he is ineligible for government assistance.  He currently has about $64,000 in savings.

15. There can be no argument that a person living in Sydney on $875 per fortnight, in the private-rental market, is in a difficult financial situation. I accept that Mr Fernandes needs to manage his finances extremely carefully. 

16. I note Mr Fernandes’s argument about what he sees as the inherent unfairness of s 1173, which, in effect, as he correctly points out, treats more favourably those persons who were in receipt of a pension or equivalent at the time of the event that gave rise to the entitlement to compensation. My task today is not to decide whether the law should be reformed, but to apply the law as it stands. The argument about the so-called discriminatory quality of s 1173 is not relevant to a determination of whether or not special circumstances exist.

17. As stated, I accept that Mr Fernandes faces difficult financial circumstances, particularly when Allianz moves to deduct an amount in respect of the charge. However I could not be satisfied that his circumstances could be described as “special” given the meaning consistently applied to that term by the Federal Court and this Tribunal.  To repeat what I said earlier, I cannot be satisfied that Mr Fernandes’s circumstances can be distinguished from other persons who are in receipt of social security benefits.  I acknowledge that all persons receiving social security benefits face considerable difficulties in making ends meet, as does Mr Fernandes.  I am not satisfied that, in his case, special circumstances are established.

    Calculation of the charge

18. Returning to the issue of whether the compensation charge has been correctly calculated, as Mr Fernandes pointed out, there is an apparent discrepancy between the charge calculated by Centrelink of $28,564.54 and the note to Mr Fernandes’s solicitor from Allianz, which refers to an amount of $27,181.60 (Exhibit A1).

19. The reason for that discrepancy is unclear.  It may be that Allianz underpaid Mr Fernandes. Equally it may be that the correct charge is $27,181.60. On the material before me, I am unable to determine this issue. I have therefore decided that the appropriate course is to remit the calculation of the charge to the Secretary, and I recommend that the Secretary have regard to, in undertaking that exercise, the Allianz note to Mr Fernandes’ solicitor (exhibit A1).  When that task has been undertaken, I request that the Secretary write to Mr Fernandes and explain the reason for this apparent discrepancy and whether, in his opinion, the charge has been correctly calculated.

I certify that the preceding 19 (nineteen) paragraphs are a true copy of the reasons for the decision herein of

.........[sgd]...............................................................

Associate

Dated 13 September 2012

Date of hearing

Date of oral decision

27 August 2012

27 August 2012

Date final submissions received

Date of written reasons

27 August 2012

13 September 2012

Applicant

In person

Advocate for the Respondent

Bernard Slattery