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

[2008] AATA 494

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 494

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/4915

GENERAL ADMINISTRATIVE   DIVISION		)
Re		FREDA ARENA

Applicant

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

Respondent

DECISION

Tribunal Dr R. McRae, Member

Date19 June 2008

PlaceMelbourne

Decision The Tribunal affirms the decision under review.

...................[Sgd]......................

Dr R McRae
  Member

SOCIAL SECURITY – compensation preclusion period – workplace injury compensation payment – payment used to pay outstanding debt – whether severe financial hardship exists – whether unavoidable or reasonable expenditure was present – whether to disregard compensation in preclusion period calculation

Social Security Act 1991 ss 17, 19C, 1169, 1170, 1178, 1184K, 1237AAD

Angelakos v Secretary, Department of Employment & Workplace Relations [2007] FCA 25

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

Dranichnikov v Centrelink [2003] FCAFC 133

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

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

Re Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693

Re Green and Secretary, Department of Social Security (1990) 21 ALD 772

Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126

REASONS FOR DECISION

19 June 2008 Dr R. McRae, Member       

1.     On 22 December 2006 Ms Freda Arena (the Applicant) settled a workers’ compensation claim for a work injury sustained on 1 July 2002, during her part-time employment.  She was paid weekly compensation to 22 December 2002.  She also received carer payment (CP) from Centrelink, from 28 March 2003 to 29 January 2007, under the Social Security Act 1991 (the Act) in relation to her incapacitated daughter.  Centrelink acts as the service delivery agency for the Secretary to the Department of Families, Housing, Community Services and Indigenous Affairs (the Respondent). 

2.     On 1 February 2007, a Centrelink officer decided to

·     impose a compensation preclusion period (CPP) from 23 December 2006 to 1 May 2009;

·     cancel the Applicant’s CP from 30 January 2007;

·     raise and recover $1,427.12 related to CP received for the period 23 December 2006 to 29 January 2007.

3.     On 20 April 2007 a Centrelink authorised review officer (ARO) affirmed this decision.  The Applicant then sought review of the decision by the Social Security Appeals Tribunal (SSAT).  On 3 September 2007 the SSAT affirmed the decision.  The Applicant now seeks a review of the SSAT decision by the Administrative Appeals Tribunal. 

4.     The issues for the Tribunal were whether a CPP applies to the Applicant, and if so, for what duration; and whether there are grounds for the CPP to be reduced.  The Tribunal’s decision is that the CPP applies to the Applicant from 23 December 2006 to 1 May 2009; and that there are no grounds for it to be reduced.  

5. The Applicant was self-represented. The Respondent was represented by Mr M. Todd, a Centrelink advocate. The Tribunal had before it documents lodged by the Respondent pursuant to s 37 of the Administrative Appeals Tribunal Act1975 (the T Documents). The Tribunal received two additional documents tendered by the Applicant: a letter dated 3 March 2008 from the office of the Minister for Human Services (Exhibit A1) and a letter dated 10 March 2008 from Ms Linda Stinton, Psychologist (Exhibit A2). 

Background

6.     The Applicant is a 55 year old woman, who lives with her son in her own home.  An invalid daughter lives in nearby rented accommodation.  The Applicant has an extensive medical history including renal carcinoma, which was detected as she was preparing to undergo renal donation to her daughter.  She was working in a part-time position when she injured her back on 1 July 2002.  She received a part pension and weekly compensation until a settlement, to which she agreed in writing, occurred on 22 December 2006. 

7.     On 21 December 2006 Centrelink advised the Applicant the CPP would likely be imposed until 30 April 2009.  This was confirmed on 22 January 2007.  She received $175,000.00 (approximately $128,572.88 net) on or about 19 February 2007 in settlement of her workers’ compensation claim.  She used some $80,000.00 of this money to pay out her mortgage after being advised of a CPP.  The house is valued at about $320,000.00.  Other expenditure included support for her invalid daughter living in a rented unit and provision of her daughter’s medications at some $300.00 per month.  She spent $12,000.00 on a car, deemed necessary by her to transport her daughter, some $4,500.00 on a scooter for her daughter, approximately $10,000.00 on personal surgery in the private sector and $10,000.00 in repayment of a debt to her son.  She possesses savings in the order of $3,500.00 (her son makes regular contributions) and has a redraw facility on her property.  She did not develop a financial plan upon receipt of the lump sum payment. 

Applicant’s Case

8.     The Applicant’s case is that the lump sum settlement she obtained was for pain and suffering only, so the CPP should not be imposed.  She had received legal advice that any payment would not affect her CP.  She is in difficult circumstances in that her daughter is seriously ill and requires a great deal of support.  She does not consider that her expenditure of her compensation payment was reckless.  The expenditure was the best and wisest [she] could have done. 

9.     Under cross-examination the Applicant conceded all points of ss 17, 1169, 1170 and 1178 of the Act in the decision of the SSAT (see below).  She stated that she had special circumstances such that the compensation payment should be disregarded. 

Respondent’s Case

10.     The Respondent’s case is that the CPP is imposed as mandated by legislation and is appropriate in the circumstances.  There are no grounds for waiver of the debt to the Commonwealth.  The Deed of Release, dated 21 December 2006, included the statement I also understand that I will be precluded from receiving Centrelink benefits for myself for approx 2&1/2 years. 

Legislation

11.     The relevant legislation:

17Compensation recovery definitions

(1)In this Act, unless the contrary intention appears:

…
compensation affected payment means:

…

(f)   a carer payment; or

…

(2)Subject to subsection (2B), for the purposes of this Act, compensation means:

(a)  a payment of damages; or

(b)  a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c)  a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d)  any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

(3)Subject to subsection (4), 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; or

…

19CSevere financial hardship definitions

(2)A person who is not a member of a couple and who makes a claim for … carer payment …

is in severe financial hardship if the value of the person’s liquid assets (within the meaning of subsection 14A(1)) is less than the fortnightly amount at the maximum payment rate of the payment, benefit, pension or allowance that would be payable to the person:

(f)   if the person’s claim were granted; and

(g)  in the case of a person to whom an income maintenance period applies, if that period did not apply.

Note:    For maximum payment rate see subsection (8).

(4)Unavoidable or reasonable expenditure, in relation to a person who is serving a … seasonal work preclusion period, …, includes, but is not limited to, the following expenditure:

(a)  the reasonable costs of living that the person is taken, under subsection (6) or (7), to have incurred in respect of:

…

(ii)if the person is subject to a seasonal work preclusion period—that part of the period that has expired; or

…

(b)  the costs of repairs to, or replacement of, essential whitegoods situated in the person’s home;

…

(f)   expenditure to buy replacement essential household goods because of loss of those goods through theft or natural disaster when the cost of replacement is not the subject of an insurance policy;

(g)  the costs of essential repairs to the person’s car or home;

(h)  premiums in respect of vehicle or home insurance;

(i)   expenses in respect of vehicle registration;

(j)   essential medical expenses;

(k)  any other costs that the Secretary determines are unavoidable or reasonable expenditure in the circumstances in relation to a person.

However, unavoidable or reasonable expenditure does not include any reasonable costs of living other than those referred to in paragraph (a).

1169Compensation affected payment not payable during lump sum preclusion period

(1)If:

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

(b)  the person receives a lump sum compensation payment;

the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.

…

1170Lump sum preclusion period

(1)Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:

(a)  begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and

(b)  ends at the end of the number of weeks worked out under subsections (4) and (5).

…

(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:

Compensation part of lump sum

Income cut-out amount

(5)If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.

1178Repayment of amount where both lump sum and payments of compensation affected payment have been received

(1)If:

(a)  a person receives a lump sum compensation payment; and

(b)  the person receives payments of a compensation affected payment in relation to a day or days in the lump sum preclusion period;

the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.

(2)The amount to be specified in the notice is the recoverable amount under section 1179.

1184KSecretary may disregard some payments

(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.

(2)If:

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

(b)  the person receives compensation; and

(c)  the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s … receipt of, or claim for, the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).

1237AADWaiver in special circumstances

The Secretary may waive the right to recover all or part of a debt if the Secretary is

satisfied that:

…

(b)  there are special circumstances (other than financial hardship alone) that make it desirable to waive; and

….

Considerations

12.   The CPP provisions are set out in s 17 of the Act.  CP is a compensation affected payment which is not payable during a lump sum preclusion period.  Social security claimants who have received payment for particular types of compensation are taken to have received income in assessing their entitlements.  Such claimants are expected to use such payments to support themselves.  Indeed the Applicant received a reminder of this in the letter from the office of the Minister for Human Services (Exhibit A1).  It states:

Social Security Law reflects the principle that if a person has received compensation for loss of income they should use that money to meet living expenses rather than receive taxpayer funded payments. 

13.  The CPP is determined according to the formula provided in sections 1170(4) and (5).  The devisor Income cut-out amount is defined in section 17(1) of the Act as an amount which is a function of a formula at the time the compensation was received. 

14.  Section 1178 of the Act provides that where a person receives a lump sum compensation and also receives a compensation affected payment in the lump sum preclusion period, the compensation affected payment becomes a debt to the Commonwealth which is recoverable. 

15.  Section 1184K of the Act allows the Secretary the discretion to disregard the whole or a part of a compensation payment if it considers it appropriate due to the presence of special circumstances.  It is plausible that every Applicant would consider their circumstances to fall within the boundary of being special.  The Applicant’s relevant circumstances are financial hardship, poor health and a perceived requirement to assist her invalid daughter in circumstances where she appears to have received incorrect legal advice. 

16.  Section 1237AAD of the Act also provides for waiver of the debt in special circumstances.  In Re Green and Secretary, Department of Social Security (1990) 21 ALD 772 the Tribunal stated that hardship is a relevant consideration, but regard must be given to the manner in which the hardship arose. The Tribunal stated that there must be factors which justify the making of an exception to the principle of liability established in the Act. Regard must be had as to whether exercise of the discretion achieves or frustrates objects which are within the scope and purpose of the Act.

17.  The Tribunal stated in Re Beadle v Director-General of Social Security (1984) 6 ALD 1 at paragraph 3

…an expression such as special circumstances is by its very nature incapable of precise or exhaustive definition.  The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. 

The Tribunal highlighted the context in which [the circumstances] occur.  The Full Federal Court considered the Tribunal’s decision in Beadle in Beadle v Director-General of Social Security (1985) 60 ALR 225 and did not subsequently endorse the words unusual, uncommon or exceptional. 

18.  Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 considered that:

…special circumstances … would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. … It would … follow that if … something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. 

Besanko J in Angelakos v Secretary, Department of Employment & Workplace Relations [2007] FCA 25 stated at [33] that:

… the test will be overstated if the word ‘exceptional’ is emphasised… less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised…there must be something that distinguishes the case from the ordinary or usual case…close attention must be given to the …context. 

Hill J in Dranichnikovv Centrelink [2003] FCAFC 133 at [66] stated that …To some extent the question whether there were special circumstances must depend on how it came about that the error occurred.  In Re Davy and Secretary, Department of Employment and Workplace Relations (2007) 94 ALD 693 the Tribunal stated that it is not appropriate for a person to exhaust a compensation lump sum payment in a short time in the expectation the taxpayer will then provide extra support.

Findings

19.  The Applicant is a devoted and caring mother who lives in her own house.  She is actively involved in the support of her invalid daughter.  She sustained an injury whilst undertaking part-time work on 1 July 2002.  She received CP from 28 March 2003 to 29 January 2007.  She received weekly compensation payments up to 22 December 2006.  

20.  The Applicant received a compensation payment of $175,000.00 on 21 December 2006.   This amount is compensation as defined under s 17(2) of the Act.  The compensation part of the lump sum is defined under s 17(3) of the Act as 50% of the payment, which is $87,500.00. 

21.  Under the provisions of s 1169(1) of the Act, a compensation affected payment is not payable to the Applicant during the lump sum preclusion period.  Under the provisions of s 1170(1) of the Act, the lump sum preclusion period commences on 23 December 2006.  Application of the formula in sections 1170(4) and (5) results in the lump sum preclusion period being 123 whole weeks, ceasing on 1 May 2009.  Thus no compensation affected payment may be paid to the Applicant until 1 May 2009, and it was correct to cancel the CP from 30 January 2007. 

22.  Under the provisions of s 1178 of the Act, a compensation affected payment paid during a lump sum preclusion period is recoverable by the Commonwealth.  Therefore, the Commonwealth is entitled to recover $1,427.12 from the Applicant. 

23.  As stated above, the Applicant spent the lump sum on a mortgage repayment of $80,000.00 on her own property, which is valued at $320,000.00 and which has a redraw facility available.  She owns an automobile, and has some $3,500.00 in a bank account.  She undertook such expenditure whilst receiving advice from Centrelink about the imposition of a CPP.  She has substantial access to means of financial support.

24.  The voluntary payment of mortgage debt is not unavoidable or reasonable expenditure in the context of the Act, the object of which is to provide social security.  The Tribunal notes that a system of high standard of free healthcare is available to all Australians; and the Applicant’s daughter may access health and social security benefits in her own right. 

25.  Therefore, the Applicant is not in severe financial hardship (as defined in s 19C(2) of the Act) through unavoidable or reasonable expenditure (as defined in s 19C(4) of the Act). 

Conclusion

26.  The Tribunal therefore concludes that the Applicant does not satisfy the requirements necessary to allow for disregarding any of the lump sum compensation received for the purposes of calculating the preclusion period. 

27.  The determined CPP is from 23 December 2006 to 1 May 2009. 

28.  The Commonwealth is entitled to recover $1,427.12 from the Applicant. 

Decision

29.  Accordingly, the decision of the Respondent to impose a CPP from 23 December 2006 until 1 May 2009 on the Applicant was the correct decision.  The Tribunal affirms the decision under review.

I certify that the twenty‑nine [29] preceding paragraphs are a true copy of the reasons for the decision of:

Dr R. McRae, Member

(sgd):     . . . . . . . . . . . . . . . . . . .

Clerk

Date of Hearing:  12 March 2008

Date of Decision:  19 June 2008

Advocate for the Applicant:           Self‑represented

Advocate for the Respondent:      Mr M. Todd, Centrelink Legal Services Branch