Apps and Secretary, Department of Employment and Workplace Relations

[2007] AATA 1636

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1636

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/0216

GENERAL ADMINISTRATIVE DIVISION		)
Re		STEPHEN APPS

Applicant

And SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Ms N. Isenberg, Senior Member

Date7 August 2007

PlaceWollongong  

Decision The decision under review is affirmed.

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

Ms N. Isenberg

Senior Member

CATCHWORDS

SOCIAL SECURITY – lump sum workers’ compensation payment – preclusion period – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made – decision under review is affirmed

LEGISLATION

Social Security Act 1991 – sections 17, 1169, 1170 and 1184K

CASE LAW

Haidar v Secretary, Department of Social Security (1998) 52 ALD 255

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Secretary, Department of Social Security v Ellis (1997) 46 ALD 1

Re Magallanes and Secretary, Department of Social Security (1995) AAT 10044, 3 March 1995

Re Beus and Secretary, Department of Social Security (1992) AAT 8000, 4 June 1992

Re Secretary, Department of Social Security and Norman [1998] AATA 444

REASONS FOR DECISION

7 August 2007 Ms N. Isenberg, Senior Member

DECISION UNDER REVIEW

1.      The decision under review is the decision made by a Centrelink Authorised Review Officer (“ARO”) on 25 October 2006 to end Mr Apps’ compensation preclusion period on 25 December 2007 instead of 25 August 2010. This decision was affirmed by the Social Security Appeals Tribunal (“the SSAT”) on 8 January 2007.

BACKGROUND

2.        Mr Apps sustained a work injury on 31 May 1999.  On 23 August 2004 he settled a workers’ compensation claim for a lump sum payment of $470,000, inclusive of wages or periodic weekly compensation payments for the period 1 June 1999 to 1 September 2004 totalling $64,998.15. 

3.        On 8 October 2004, Centrelink decided that Mr Apps was subject to a lump sum preclusion period for the period 2 September 2004 to 25 August 2010.  When Mr Apps claimed that he had no money for food, rent and bills, an ARO reduced the preclusion period to 25 December 2007, in a decision dated 25 October 2006.

4.        Mr Apps seeks review of that decision because he again has no money.

ISSUE BEFORE THE TRIBUNAL

5.        There was no dispute that if the statutory formula were applied to Mr Apps’ circumstances, the preclusion period would commence on 2 September 2004 and cease on 25 August 2010. 

6. It was agreed between the parties that the central issue in this matter was the application of section 1184K of the Social Security Act 1991 (“the Act”); that is, whether there are any “special circumstances” in Mr Apps’ case to further reduce the length of the preclusion period from the reduction already allowed, namely to some date before 25 December 2007.

LEGISLATION

7. Section 17 of the Act sets out definitions of various terms used in calculating the preclusion period. Subsection 17(1) defines a ‘'compensation affected payment'’ to include a pension, benefit or allowance.  Subsection 17(2) defines ‘'compensation'’, and requires that the payment, which includes a lump sum or series of periodic payments, to be "made wholly or partly in respect of lost earnings or lost capacity to earn". The preclusion period is calculated by reference to what is called the ‘‘compensation part’’ of a lump sum compensation payment. Subsection 17(3) defines the ‘‘compensation part’’ as being equivalent to 50 per cent of the lump sum compensation payment.  As the settlement in this matter was for $470,000, the compensation part is $202,500, after deducting $64,998.15 for “workers compensation payback” pursuant to subsection 17(4) of the Act.

8. Section 1169 of the Act provides that where a lump sum payment has been made, a pension, benefit or allowance (that is, a “compensation affected payment”) is not payable during a lump sum preclusion period.

9. Section 1170 of the Act provides that the length of the preclusion period is to be calculated by a formula that takes into consideration the amount of the lump sum compensation payment. The formula, set out in subsection 1170(4), is as follows:

1170(4) The number of weeks in the lump sum preclusion period in relation to

a person is the number worked out using the formula:

10.      In applying the statutory formula, the compensation part of the lump sum payment ($202,500) is divided by the ‘‘income cut-out amount’’ (also known as the divisor and defined in subsection 17(1) of the Act), and represents the amount of weekly earnings at which the single rate of pension is no longer payable. When making the calculations, the divisor used is the one that applied on the day the compensation claim was settled. At the date of the Applicant’s settlement, the “income cut-out amount” was $648.50.  Therefore, in applying the formula, the lump sum preclusion period should be calculated as:

$202,500 divided by $648.50 = 312 weeks; that is, from 2 September 2004 to 25 August 2010.

This period was, however, reduced by the decision made by the ARO on 25 October 2006, so as to conclude on 25 December 2007.

11. Section 1184K of the Act provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard the whole or part of the compensation payment in “special circumstances”.

EVIDENCE

12.      I had before me documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-Documents"), which I took into evidence.

13.      In addition, the following documents were tendered:

·     A Centrelink Social Work Report, dated 6 July 2007;

·     The Applicant’s account details from City Coast Credit Union;

·     A letter from Storage King in relation to storage of the Applicant’s possessions, dated 3 July 2007; and

·     An invoice from Storage King, dated 3 July 2007.

14.      Mr Apps said that he only received about $260,000 from the settlement monies.  His solicitor had told him that it had to last him for 5 years.

15.      Initially he went on a holiday to Queensland, spending about $10,000.  He repaid some debts, such as $20,000 that was outstanding to his solicitor, and other debts associated with his family law application.  Mr Apps also bought a car each for himself, and his mother and sister.

16.      Mr Apps additionally spent $70,000 purchasing a truck, and outlaid for associated expenses including registration, insurance and the like.  It had been his intention to operate a trucking business, but after 12 months he found that it was not viable. He sold the truck at a loss in January 2006, for $47,000. 

17.      In about February 2006, he went into a “hobby-shed” with two friends.  The intention was to buy old cars and do them up.  He paid all the expenses for the business, including purchasing the vehicles and paying the $900 monthly rent. During that period, he resumed a “$1500 a day” drug habit.  He would finance this by driving the drug dealer around in his car. By July 2006 he was out of money, and could no longer afford the rent on the “hobby-shed”.

18.      By August 2006, Mr Apps was $800 behind in the rent for his flat. He was evicted, and lived on the streets or with friends. 

19.      At one stage he spent $18,000 purchasing drugs, hoping to “make some money”. Instead, he used all the drugs himself. He also spent between $5,000 and $6,000 on poker machines.

20.      In September 2006, he was admitted to a psychiatric unit because he threatened suicide.

21.      He sold his car in November 2006 for $13,000.  Following discussions with the ARO, he was made aware that the proceeds from the car were to last him until December 2007.

22.      As he could no longer finance his drug habit by driving, Mr Apps spent most of the proceeds of sale for the car on drugs.  His tendered credit union records show that the car funds were spent in about 3 weeks.  He said that he spent the money on drugs, and was also giving a friend $200 per fortnight for rent.  He said that during that period he was under the influence of drugs, was depressed, and not thinking rationally. 

23.      On Boxing Day 2006, when he realised that he had “lost everything”, he decided to give up drugs.  He spent a week in a detoxification clinic, and then went to stay with his mother in Cowra for four weeks.  During that time he was still withdrawing from drugs, and was abusive towards his mother.  He was unable to contribute to his upkeep, and his mother, who lives in Housing Commission accommodation and is a pensioner herself, could not afford to support him.  He enquired about employment, but because of his neck, arm and shoulder conditions (which include some numbness) his employment opportunities were limited. In any event, on his evidence, there was not a great deal of work available in Cowra. 

24.      Mr Apps returned to the Wollongong area. He is now staying in a men’s shelter, where he is expected to “pay his way” if he can.  However, even if he cannot “pay his way” he said he is still able to remain there.  He does not like staying at the shelter because theft and drug use are rife.

25.      He has a child from a previous relationship who he has not seen.  He cannot afford to pursue his claim for access to the child.  Legal Aid has declined assistance because his case is “unwinnable” given his drug history.

26.      His only assets are the clothes he has at the shelter, and some old white goods in storage and “in hoc”. 

27.      He said that he looks for work at Centrelink, but as he no longer has a car, his prospects are geographically limited.  He is obliged to disclose his physical limitations in job applications.  Because he has no income, he said he would not be able to finance travel to job interviews, and because he receives no Centrelink benefits, he cannot get subsidised travel. He also does not receive subsidised rental or pharmaceutical benefits, and he said that he cannot afford to buy pain killers.

28.      While in Cowra he had been suicidal, although his attempts did not require hospitalisation.  Occasionally, he still has suicidal thoughts.

29.      He gave evidence that “nobody wants to help him”.  However, he conceded that he has not followed the suggestion of the social worker made in August 2006 that he approach Creditworthy regarding his debt issues.  He is considering Bankruptcy, but has not pursued this either.

30.      He volunteered in his evidence that he had lied to the ARO when asked whether he was still using drugs.

DISCUSSION AND FINDINGS

31.      In coming to the correct and preferable decision, I took into account all the evidence, submissions, case law and relevant legislation.

32. It was the Respondent’s position that there are no special circumstances in Mr Apps’ case to warrant an exercise of the discretion (beyond the decision to reduce the preclusion period to 25 December 2007) to disregard parts of the compensation payments pursuant to section 1184K of the Act.

33. Section 1184K is a way of alleviating the harshness of the statutory provision in cases where there are special circumstances. Special circumstances do not have to be statistically “extreme” or “unique”; it is sufficient if there is something that takes the matter out of the usual ordinary case (see Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).

34.      A person’s circumstances must be looked at in their entirety in order to determine whether they may be described as unusual, uncommon or exceptional: Re Magallanes and Secretary, Department of Social Security (1995) AAT 10044.  This view was also expressed in Beus and Secretary, Department of Social Security (1992) AAT 8000, 4 June 1992.

35.      Since 2004, Mr Apps has received net compensation payments totalling $261,439.   Mr Apps, on his evidence, was aware that those funds were to last him for at least five years.  Nevertheless, by August 2006 all the money was gone.  In Re Secretary, Department of Social Security and Norman [1998] AATA 444 at paragraph 15, the Tribunal found it inappropriate to exercise the “special circumstances” discretion where, despite knowledge of the preclusion period, Mr Norman had “in fact not managed the expenditure of his funds in accordance with either their intended purpose or the spirit of the Social Security Act.” In a somewhat similar finding to that made by the ARO in this matter, the Tribunal noted that if Mr Norman sold his remaining asset (his home unit), he would have sufficient funds for his support for the length of the preclusion period.  The Tribunal further found at paragraph 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. “

36.      As to Mr Apps’ contention that nobody wants to help him, I noted that he had been in contact with the Centrelink Social Workers on no less than 19 occasions between August 2006 and January 2007 according to the Centrelink Social Work Report.  The report dated 3 July 2007 shows a history of offers of support throughout that period, specifically stating that Mr Apps was “frequently advised that the offer of support was available” and that if he came to the Centrelink Social Work Centre, he would be seen as a “priority walk-in (meaning a set appointment time was not required so as to be as responsive as possible to his particular needs)”. 

37.      He was advised in August 2006 to consult Creditworthy, but did not pursue that course, and has still not done so.  At that time he was also advised to see his doctor in relation to substance abuse.  In September 2006, Mr Apps was referred to a psychiatrist, and a follow up appointment was booked to ensure that he continued to receive ongoing support. In October 2006, he declined referral to the men’s shelter. However, he did accept the referral to Warilla Baptist Church in November 2006, where he was provided with assistance by a support person associated with the Church. Mr Apps was offered food in November 2006, but declined. At that stage, he was still being provided with support counselling in relation to his “personal, family and relationship issues.”

38.      He was referred to the Department of Housing and other welfare agencies to assist with his housing arrangements; assisted in contacting Welfare Rights at Illawarra Legal Service for legal advice in relation to his SSAT appeal; and provided with much assistance in bringing his appeal to the ARO resulting in the reduction of the preclusion period.

39.      He reported to the Social Worker in November 2006 that he had sold his car and was looking for employment.  He said he was in a positive state of mind.  However, this was clearly untrue, as at the time Mr Apps was still abusing drugs, and his attendance at the detoxification clinic was only arranged by the Social Worker in January 2007.

40.      In January 2007, after completing his week at the detoxification clinic, Mr Apps told the Social Worker that he was going to look for work in Queensland if he was unsuccessful in finding employment closer to his home.  This was untrue, as Mr Apps told me during his evidence that he had no intention of going to Queensland, because he was unable to get there.

41.      I have come to the view that a further reduction in the preclusion period is not appropriate in the circumstances.  Mr Apps spent his whole settlement in a very limited period of time, despite being fully aware of the preclusion period.  Furthermore, he ignored the ARO’s advice to use the proceeds of the car sale to support himself for the balance of the reduced preclusion period.  When he spoke to the ARO in October 2006, he said that he had not been using drugs for two months.  This was clearly untrue as his evidence was that he had continued abusing drugs at least until Boxing Day 2006.  The decision of the ARO represented an opportunity for Mr Apps to make appropriate use of his money. He did not do this, instead using the money to mostly purchase drugs.

42.      In reducing the preclusion period, the ARO noted that “in framing the compensation legislation Parliament would not have intended for people to end up “on the street””. The SSAT said it was unable to sympathise that Mr Apps “now has no stable accommodation, income or disposable asset”.  I am concerned that he must now rely on welfare agencies if he does not make strong endeavours to join the job market. Although I acknowledge that Mr Apps did endeavour to start a business, albeit without success, he has nonetheless, since that time, acted irresponsibly with the knowledge that the preclusion period was to last, at first until 2010, and then until the end of 2007. 

DECISION

43.      The decision under review is affirmed.

I certify that the 43 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member

Signed:         [Skye Owen]
  Associate

Date of Hearing  11 July 2007
Date of Decision  7 August 2007         
Appearance for Applicant  Self-represented

Advocate for the Respondent                    Ms P. Lee of Centrelink Legal Services