Appleby and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2011] AATA 173

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 173

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/4519

GENERAL ADMINISTRATIVE  DIVISION		)
Re		ROBERT BRUCE APPLEBY

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Ms A F Cunningham (Senior Member)

Date18 March 2011

PlaceHobart

Decision The decision under review is affirmed.

[Sgd Ms A F Cunningham]

Senior Member

CATCHWORDS

SOCIAL SECURITY - disability support pension - receipt of lump sum compensation in settlement of claim - preclusion period imposed - significant expenditure and depletion of compensation monies by applicant - early release of superannuation funds deposited from compensation monies - special circumstances found not to exist - decision under review affirmed

Social Security Act 1991, ss 17(1) 17(2) 17(3), Part 2.13, Part 3.14, ss 1169(1), 1170(4), 1170(5)

Guide to the Social Security Law - 4.13.4.10

Re Beadle v Director-General of Social Security (1984) 6 ALD 1

Beadle v Director-General of Social Security (1985) 60 ALR 225

Re Ivovic and Director-General of Social Security (1981) 3 ALN (N95)

Re Drake (No 2) (1979) 2 ALD 634

Watsemwa and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 1028 

REASONS FOR DECISION

18 March 2011 Ms A F Cunningham (Senior Member)   

1.      The applicant, Robert Appleby, was injured in the course of his employment in May 2000 and was paid weekly workers' compensation until he settled his claim on 22 December 2006 for a total amount of $400,000.00.  Mr Appleby received a net amount of $350,000.00 after deduction of legal costs on 31 January 2007.  He claimed disability support pension (DSP) on 9 February 2009 which was rejected by Centrelink on the basis of a compensation preclusion period commencing 13 January 2007 until 1 June 2012.

2.      Mr Appleby sought a review of Centrelink's decision on the basis of claimed financial difficulties.  On 28 July 2010 an authorised review officer varied the decision by shortening the compensation preclusion period to end on 1 February 2012.  This decision was affirmed by the Social Security Appeals Tribunal (SSAT) on 10 September 2010.  Mr Appleby now seeks a review of the decision by the Administrative Appeals Tribunal. 

3.      Mr Appleby represented himself at the hearing and gave oral evidence.  A support person made an oral submission on his behalf at the conclusion of the evidence.  Mr Sparkes appeared on behalf of the respondent and tendered the T Documents in evidence. 

issue

4.      The issue to be determined by the Tribunal is whether the applicant is subject to a lump sum preclusion period, and if so, whether there are special circumstances that would warrant treating the whole or part of the compensation payment as not having been made. 

the evidence

5.      It was Mr Appleby's evidence that he contracted Q Fever whilst working at an abattoir in Victoria on around 28 June 2000 and was off work for some three weeks.  The diagnosis of his condition was not made for six weeks and he was placed on antibiotic medication.  He continued to work spasmodically until around March 2001 but when it became evident that he was no longer able to work, he returned to Tasmania in April 2001 and has not worked since.  He understands that Q Fever is a life long condition.

6.      After receiving his lump sum compensation payment of $350,000.00.  Mr Appleby deposited the monies into his Commonwealth Bank account. 

7.      Mr Appleby confirmed a number of purchases which are detailed in a Statement of Expenditure and Circumstances completed by him on 22 May 2010 and contained in the T Documents at T6.  Those purchases included a new car for $60,000.00 on 26 February 2007, two televisions in around April 2008 for a total sum of $4,699.00, two recliner chairs for $2,700.00, two recliner massage chairs for $2,000.00, bed ensemble for $2,000.00, washing machine for $750.00, computer for $1,700.00, Retravision whitegoods for $1,000.00.  The list also included loan repayments, cash gifts to his children and the repayment of a $10,000.00 loan to his father. 

8.      Mr Appleby stated that he subsequently saw an investment advisor who advised him to invest $100,000.00 and deposit $70,000.00 into a superannuation fund. 

9.      Mr Appleby confirmed during cross-examination that he had been advised by his lawyer at Slater and Gordon that there would be a period of time during which he would be unable to access Centrelink benefits.  He said that he was not aware of the exact period of time until he received the advice in writing from Centrelink.   A copy of this advice is contained in the T Documents at T12 dated 18 January 2007.  The letter states that on the basis of an entitlement to lump sum compensation of $400,000.00, Mr Appleby's preclusion period starts on 13 January 2007 and ends on 1 June 2012.  Accordingly he would not be able to receive Centrelink payments (except for payments made for children, carer allowance, mobility allowance, bereavement allowance, health care card and family tax benefit) during the period 13 January 2007 until 1 June 2012.  The letter states that from that date he would need to lodge a new claim. 

10.     Mr Appleby did not dispute that he had been made aware of the preclusion period and agreed that he had engaged in a reckless expenditure of his compensation monies.  He contends however, that he had no previous experience with having such a large amount of money and now regrets his excessive expenditure.

11.     It was Mr Appleby's evidence that he resides with his wife in rented accommodation in George Town, Tasmania.  His current source of income is from a carer's payment in the sum of $110.00 per fortnight.  His wife has suffered from ill health for some time and receives a disability support pension in the sum of $539.80 per fortnight. 

12.     Copies of Mr and Mrs Appleby's cash investment account with the Commonwealth Bank into which the compensation monies were deposited in January 2007 were contained in the T Documents at T6.  On the day following the deposit, Mr Appleby withdrew the sum of $17,000.00 which he said was used to repay a loan to his father of $10,000.00 and gift his son the sum of $7,000.00 for the purchase of a motor vehicle. 

13.     Mr Appleby could not recall what he did with the $11,100.00 withdrawn on 2 February, nor $4,000.00 which was withdrawn on 5 February 2007.  On 8 February 2007 he withdrew $2,720.00 to purchase a set of recliner chairs but could not remember the withdrawal of $2,000.00 on the same day and further withdrawals each of $1,000.00 on 12 and 13 February.  The statement reveals that between 31 January 2007 and 15 February 2007 a total of $43,285.39 had been withdrawn from the account.  Between 16 February 2007 and 15 March 2007 the total withdrawals/debits were $75,421.19, which included the sum of $60,000.00 on 26 February to purchase a VE8 commodore motor vehicle.  It was Mr Appleby's evidence that he sold the vehicle approximately three years later for $33,000.00 and purchased another commodore at a cost of $18,000.00. 

14.     The statement shows that by 7 May 2007 the closing balance in the account was $203,514.96.  On 8 May Mr Appleby withdrew $70,000.00 which he deposited in a superannuation fund with Colonial First State and $100,000.00 in an investment account with Colonial First State.  This reduced the balance in the Commonwealth Bank account to $30,430.47.   The balance in the account eleven months later on 15 April 2008, was $218.01.  Mr Appleby confirmed his evidence given to the SSAT that by May 2010 he had fully expended the $100,000.00 deposited in the investment account with Colonial First State.  He pointed out however, that this included investment losses sustained during that period which he originally thought was in the order of $45,000.00 but which were subsequently calculated at around $23,000.00.

15.     The Colonial First State superannuation summary report at T6 shows a closing balance of $79,521.60 as at 30 June 2010 which comprised the $70,000.00 deposited by Mr Appleby from his compensation funds together with $20,545.26 which he rolled over from a previous superannuation account. 

16.     Since the delivery of the SSAT decision Mr Appleby was able to obtain an early release of some of his superannuation funds on the basis of the contents of two medical reports.  He withdrew the sum of $30,000.00 which was used to pay a credit card debt of $8,500.00, a loan to his wife's sister in the sum of $2,000.00, $2,000.00 to his father for another loan and other outstanding accounts.  He understands that approximately $17,000.00 of the $30,000.00 withdrawn still remains unspent. 

17.     It was Mr Appleby's evidence that he now has no outstanding credit card or other major accounts.  In his income and assets declaration completed on 30 January 2010, Mr Appleby had estimated the current market value of his household contents and personal effects jointly owned by himself and his wife at $50,000.00 and the current market value of his Holden Commodore vehicle at $18,000.00.

18.     Tendered in evidence was an income and expenses statement dated 6 December 2010 which had been provided on Mr Appleby's behalf. In cross-examination Mr Appleby agreed that the total annual expenditure could be reduced by the sum of $7,300.00 on account of debts and loans that he had since repaid.  This would accordingly reduce the couple's annual expenditure as stated to around $22,700.00, although Mr Appleby advised that he expects his rental commitment of $198.00 per fortnight to increase shortly and his wife has since purchased a mobile phone which costs $25.00 per week.  The couple's joint fortnightly income is currently $639.00 which leaves a shortfall between expenditure and income of just under $290.00 per fortnight on the basis of the expenditure as outlined in Mr Appleby's statement.  This sum equates to around $7,500.00 per annum.

the legislation

19. The qualification and payability provisions which are applicable to a disability support pension are contained in Part 2.3 of the Social Security Act 1991 (the Act). Part 3.14 of the Act relates to compensation recovery. Specifically section 1169(1) provides that a compensation affected payment is not payable during a lump sum preclusion period. A disability support pension is included in the definition of "compensation affected payment" in subsection 17(1) of the Act. The term compensation is defined in subsection 17(2) and includes a payment made in settlement of a claim for damages that is made wholly or partly in respect of lost earnings or lost income earning capacity. I am satisfied on the basis of the documentary evidence tendered that the compensation payment received by Mr Appleby constitutes compensation within the meaning of this definition.

20.     Subsection 17(3) provides that for the purposes of the Act the compensation part of a lump sum compensation payment is 50% of the payment.  In accordance with section 1170 Mr Appleby's lump sum preclusion period would commence on 13 January 2007 being the day after his periodic compensation payments ceased.  The number of weeks for the lump sum preclusion period is calculated in accordance with subsections 1170(4) and (5) of the Act, that is by dividing the total compensation payment of $400,000.00 by 50%.  The number of weeks is calculated in accordance with the formula prescribed in subsection 1170(4) that is, by dividing the compensation part of lump sum by the income cut-out amount.  The income cut-out amount for pension payments at the time of the applicant's settlement was $711.38 per fortnight which in accordance with the formula results in a lump sum preclusion period of 281 fortnights or 562 weeks.  The result being that the lump sum preclusion period commences on 13 January 2007 and concludes on 1 June 2012.  This end date was subsequently reduced by the ARO to 1 February 2012 in consideration of the investment losses suffered by Mr Appleby amounting to special circumstances.  Mr Sparkes informed me that the respondent does not dispute this adjustment. 

21.     I accordingly accept the lump sum preclusion period as calculated by the respondent commencing on 13 January 2007 and concluding on 1 February 2012.

special circumstances

22.     Under section 1184K of the Act the whole or part of a compensation payment can be treated as not having been made or not liable to be made where it is considered that special circumstances exist.  The phrase "special circumstances" has been judiciously accepted as those that are unusual or uncommon which, taken globally, take a case out of the normal run of cases and where the application of the law would be unjust, unreasonable or otherwise inappropriate.  (Re Beadle v Director-General of Social Security (1984) 6 ALD 1, Beadle v Director-General of Social Security (1985) 60 ALR 225, Re Ivovic and Director-General of Social Security (1981) 3 ALN N95).

23.     I was referred to the Guide to the Social Security Law and in particular at 4.13.4.10 where it is stated:

"When special circumstances should generally NOT be applied

Each case must be examined on its own merits by the delegate but as a general rule, special circumstances would NOT usually be applied where:

·the person has sufficient liquid assets to support themselves, and their family if applicable, for the duration of the preclusion period, or

·the person acquired realisable assets AFTER the person was advised of the preclusion period, and there is no impediment to the realisation of those assets, or

·the person's periodic compensation payments are reduced due to the effects of taxation laws, and this is the only grounds for consideration ..."

24.     It is acceptable for the Tribunal to have regard to policy guidelines such as those contained in the Social Security Guide where they do not appear to conflict with the applicable legislation or produce an unjust decision in the circumstances of the particular case.  (Re Drake (No 2) (1979) 2 ALD 634 at 645).

25.     Mr Sparkes submitted on behalf of the respondent that there are no special circumstances in this case that would justify treating any part of the compensation payment as not having been made.  He argued that Mr Appleby was made aware prior to receipt of his compensation monies that any social security pension payments would be subject to a preclusion period but he nevertheless embarked upon a reckless pattern of expenditure without regard to his future needs.  Mr Sparkes contended that there was nothing unusual or uncommon about Mr Appleby's circumstances particularly now that he has been granted early access to his superannuation entitlements on the basis of his permanent incapacity. 

26.     I accept the submissions made by Mr Sparkes with reference to a number of authorities as outlined in the Secretary's Statement of Facts and Contentions that there is no reason in the circumstances of this case to treat Mr Appleby's legal expenses of $50,000.00 as a special circumstance.

27.     To date Mr Appleby has only withdrawn $30,000.00 from this superannuation fund of which $17,000.00 remains unspent.  It was submitted on Mr Appleby's behalf that he does not wish to draw further from his superannuation funds because of the uncertainty of his health and that of his wife who has been recently diagnosed with emphysema. 

28.     Although some $20,000.00 was rolled over from a previous fund, the balance of the monies remaining in the superannuation fund were deposited from Mr Appleby's lump sum compensation entitlement.  This money was paid to Mr Appleby on account of a projected lost capacity to earn an income and should be used for that purpose.  As Mr Sparkes correctly submitted, it is not appropriate to quarantine a part of those funds as "a nest egg" for Mr Appleby to use in the future and pay him a social security pension in the meantime. 

29.     In Watsemwa and Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 1028 it was stated:

"The purpose of workers' compensation is not to provide an injured employee with a nest egg for the future".

30.     It was Mr Appleby's decision to deposit a portion of those funds in a superannuation fund on the advice of a financial advisor.  This would appear to have been appropriate advice in the circumstances when Mr Appleby still had over $200,000.00 from the total $350,000.00 remaining in his Commonwealth Bank account.

discussion

31.     Despite the advice submitted by Centrelink as to the effect and duration of the lump sum preclusion period, Mr Appleby seems to have made no appropriate provision for the financial support of himself and his wife during the preclusion period.  Some three years prior to the conclusion of the preclusion period, Mr Appleby submitted a claim for DSP having expended the bulk of his compensation monies.  Within six months of receipt of the monies, Mr Appleby had already spent around $160,000.00. 

32.     Mr Appleby has approximately $17,000.00 remaining from his superannuation withdrawal and further access to the balance of his superannuation funds of around $50,000.00.  The difference between Mr Appleby's current income and expenditure is around $7,500.00 per annum.  There is less than eleven months remaining of the lump sum preclusion period (as adjusted by the ARO).  Mr Appleby confirmed that he has no significant outstanding debts. 

33.     Given the difference between his annual income and estimated annual expenditure of some $7,500.00 and his evidence that he has $17,000.00 remaining of the funds withdrawn from his superannuation account, there is no basis upon which it could be considered that his circumstances are so unusual or uncommon such as to constitute "special circumstances" within the meaning of section 1184 such as to justify the exercise of the discretion to treat any part of his lump sum compensation as not having been made.  Whilst Mr Appleby may be reluctant to further deplete his superannuation funds it is not appropriate that he be paid a social security benefit when any part of the compensation payment funds remains accessible to him during the calculated preclusion period.  To do so would effectively mean that Mr Appleby would be compensated twice during this period by the lump sum compensation award and the payment of a tax payer funded pension.  The purpose of the lump sum compensation payment was to provide a source of funds to Mr Appleby for his inability to earn an income in the future.

34.     Mr Sparkes referred to the job capacity assessment report submitted on 17 December 2010 and conceded that Mr Appleby is medically entitled to a DSP in accordance with the applicable provisions under the Act.  However for the reasons outlined above I am not satisfied that Mr Appleby's current circumstances amount to special circumstances within the meaning of section 1184K of the Act and as interpreted by the Courts and the Tribunal.  Any entitlement to DSP is subject to the imposed preclusion period which will end on 1 February 2012.  Accordingly the decision under review is affirmed.

I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member)

Signed:    R Hunt (Administrative Assistant)

Date/s of Hearing  9 February 2011
Date of Decision  18 March 2011
Solicitor for the Applicant          Applicant on his own behalf
Solicitor for the Respondent     Mr B Sparkes, Centrelink Advocacy Branch