Arsenin and Secretary, Department of Social Services (Social services second review)

[2016] AATA 712

Arsenin and Secretary, Department of Social Services (Social services second review) [2016] AATA 712 (9 September 2016)

Division	GENERAL DIVISION
File Number	2016/0723
Re	Lazar Arsenin
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Senior Member J F Toohey
Date	9 September 2016
Date of written reasons	15 September 2016
Place	Sydney

The Tribunal affirms the decision under review.

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

Senior Member J F Toohey

CATCHWORDS

SOCIAL SECURITY – lump sum compensation – preclusion period – whether any of preclusion period should be waived – whether special circumstances – decision under review

LEGISLATION

Social Security Act 1991 ss 17, 1170, 1184K

CASES

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

Beadle v and Director-General of Social Security (1985) 7 ALD 670
Dranichnikov v Centrelink [2003] FCAFC 133
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Ivovic and Director-General of Social Services [1981] AATA 57

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

SECONDARY MATERIAL

Guide to Social Security Law

REASONS FOR DECISION

Senior Member J F Toohey

15 September 2016

Background

1. Mr Lazar Arsenin was injured in a motor vehicle accident in February 2007.  On 1 November 2011, his claim for compensation was settled and he received a gross lump sum payment of $585,000.

2. In December 2011, Centrelink advised Mr Arsenin that he would be subject to a “compensation preclusion period” from 8 November 2011 to 13 February 2017, during which time he would not be entitled to a social security payment.   Mr Arsenin asked Centrelink to review its decision.  On 16 December 2011, Centrelink affirmed the decision. 

3. In November 2012, Mr Arsenin applied for an age pension.  Centrelink rejected his application on the basis that the compensation preclusion period was still in effect.

4. On 7 December 2015, the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal affirmed Centrelink’s decision concerning Mr Arsenin’s claim for age pension.  Mr Arsenin seeks review of the SSCSD’s decision. 

5. These written reasons reflect reasons given orally at the conclusion of a hearing on 9 September 2016. 

   How is a preclusion period calculated?

6. The relevant legislation is in the Social Security Act 1991 (the Act). Mr Arsenin disagrees with the imposition of a preclusion period on him but he does not dispute the actual calculation of the period. I have set out the method of calculation for completeness.

7. If a lump sum payment, or periodic payments, is made wholly or partly in respect of lost earnings or earning capacity resulting from personal injury, it is compensation for the purposes of the Act: subsections 17(1) and 17(2)(a).  Mr Arsenin’s lump sum payment of $585,000 was made, in part, in respect of lost earnings.  It is therefore compensation for the purposes of the Act.

8. A person who receives compensation in respect of lost earnings or earning capacity is not entitled to a social security payment for a period known as a compensation preclusion period.  The preclusion period is calculated on the compensation part of the lump sum minus the amount of any weekly payments repaid to an employer or insurer.  The compensation part of the lump sum compensation payment is 50 per cent of the lump sum: subsection 17(3).

9. After deducting $131,566.51 for repayment to the insurer, Mr Arsenin’s compensation payment for the purposes of calculating the preclusion period was $453,433.49.  Of that, the compensation part was 50 per cent, or $226,716.75. 

10. The formula for calculating a lump sum preclusion period is in subsections 1170(4) and (5) in the Act.  The compensation part of the lump sum is divided by the income “cut out” amount, a figure that is itself calculated according to a formula that gives a weekly “cut out” figure: subsection 17(8).  At the time that Mr Arsenin’s preclusion period was calculated, the income “cut out” amount was calculated as being $823.80.  Applying this formula gave a figure of 275 weeks duration for the preclusion period (after rounding down to the nearest whole number: subsection 1170(5)).  On this basis, the preclusion period ends on 13 February 2017. 

11. I am satisfied that the calculation of the preclusion period is correct.

    The meaning of special circumstances

12. The Tribunal may treat the whole or part of a compensation payment as not having been made if it thinks it appropriate to do so in the special circumstances of the case: s 1184K.

13. The meaning of “special circumstances” in the Act has been considered on many occasions by the courts and by this tribunal.  It is commonly considered in the context of waiver of recovery of some or all of a debt but its meaning applies equally in the context of waiver of a preclusion period.

14. The expression “special circumstances” is “by its very nature incapable of precise or exhaustive definition”.  In Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal said it contemplates circumstances that are “unusual, uncommon or exceptional”. In Beadle v Director-General of Social Security (1985) 7 ALD 670 at 674, the Full Court said:

    We do not think it 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.

15. In Groth v  Secretary, Department of Social Security (1995) 40 ALD 541 at 545, the Court said there must be circumstances that distinguish the applicant’s case from others’ and take it “out of the usual or ordinary case”; see also Dranichnikov v Centrelink [2003] FCAFC 133.

16. In considering whether an applicant’s circumstances are “special”, it is relevant to consider the policy underlying the imposition of a preclusion period.  The decision-maker must have regard to whether, by exercising the discretion in a particular case, he or she will be “achieving or frustrating ends or objects which are conformable with the scope and purpose of [the Act]”: Re Ivovic and Director-General of Social Services [1981] AATA 57.

17. In Secretary, Department of Family & Community Services v Allan [2001] FCA 1160 at 1, Heerey J described the policy as designed so that “[p]eople should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source”.

18. The policy is based on the principle that a person who is compensated for loss of income as a result of an injury should use of that money to live on, rather than receive a taxpayer- funded payment:  Guide to Social Security Law at 4.13.2.60. 

    Are Mr Arsenin’s circumstances special?

19. In December 2015, when the SSCSD made its decision, Mr Arsenin had $32,283 remaining of his compensation money, on deposit at the bank.  He told the SSCSD that he had spent his payment as follows:

    ·$167,000 to pay off the mortgage on the family home, and a further $110,000 “on other things”

    ·$38,700 on a new car

    ·$8,800 on two large screen televisions

    ·$1,200 on oven than repairs

    ·$1,060 on a hi-fi unit

    ·approximately $3,900 on new furniture

20. The SSCSD decision shows that Mr Arsenin said that other expenses included: travel by him and his wife to Serbia twice, where they had not been for 38 years; new jewellery for his wife; repairs to a water heater and dishwasher, and new carpets in the family home.   He said he had shares worth about $8,300.

21. Mr Arsenin does not dispute the expenses as listed by the SSCSD.  He also told this Tribunal that he has had to spend $8,000 on a new air conditioner after his old air-conditioner broke down, and painting his house inside and out in 2012 cost approximately $10,000.  The car he bought was the first new car he had ever had.  He said he has bills to pay including for home insurance and power.  He feels he is being judged for the way he has spent his money. 

22. Mr Arsenin provided a copy of the statement of the bank account he holds jointly with his wife.  She receives an age pension and carer allowance totalling $782.20 each fortnight.  The statement shows that, on 29 May 2016, the balance in their account was $21,656; at 28 August 2016 the closing balance was $18,766.  This means that, in approximately five months since the SSCSD hearing, the balance had reduced by approximately $10,600, or $2,100 per month.  In the three months covered by the bank statement, the balance reduced by approximately $1,000 per month.  Even at the higher rate, the funds will last longer than the remaining five months of the preclusion period, at the end of which Mr Arsenin will be entitled to the age pension.

    Conclusion

23. I am not satisfied that there is anything about Mr Arsenin’s circumstances that takes them out of the ordinary and makes them “special”.  While his finances have dwindled over the time of the preclusion period, it is fair to say that he has spent his money on some items that others might consider unnecessary.  In any event, he has funds to cover the remainder of the preclusion period and more.

24. I am not satisfied that there are special circumstances by reason of which any of the preclusion period applying to Mr Arsenin should be waived. 

25. For these reasons I affirm the decision under review.

I certify that the preceding 25 (twenty -five) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey

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

Associate

Dated 15 September 2016

Date of hearing	9 September 2016
Applicant	In person
Solicitors for the Respondent	Department of Human Services