Avanessian and Secretary, Department of Family and Community Services

[2004] AATA 840

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 840

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2004/459

GENERAL ADMINISTRATIVE DIVISION		)
Re		Aslan Avanessian

Applicant

And Secretary, Department of Family and Community Services

Respondent

DECISION

Tribunal Robin Hunt, Senior Member

Date11 August 2004

PlaceSydney

Decision The Tribunal sets aside the decision under review and substitutes a decision that the length of the preclusion period should be reduced by thirty months.

..............................................

Robin Hunt   Senior Member

CATCHWORDS

Compensation payment – lump sum – arbitrated award replaced by settlement agreement - preclusion period – application of preclusion period – special circumstances – applicant and wife suffering illness – cultural reasons for uses of payment -  period reduced

Social Security Act 1991 ss 17(4), 1184K

Secretary, Department of Family and Community Services v Chamberlain (2002) 68 ALD 357

Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464

Re Secretary, Department of Social Security and Gibala (1989) 17 ALD 441

Re Minda and Secretary, Department of Social Security (AAT 4969, 10 March 1989)

Re Secretary, Department of Social Security and VXY (1993) 30 ALD 681

Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745

Comcare v A’Hearn (1993) 119 ALR 88

Re Secretary, Department of Social Security and Hickman (1996) 43 ALD 75

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

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

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

Re Woods and Secretary, Department of Family and Community Services (2002) 68 ALD 241

Re Silberberg and Secretary, Department of Family and Community Services [2003] AATA 687

Re Maloney and Secretary, Department of Family and Community Services [2002] AATA 320

Re Secretary, Department of Social Security and Schipp (AAT 10370, 21 August 1995)

Secretary, Department of Social Security v Thompson (1994) 53 FCR 580

Re Secretary, Department of Social Security and Ah Sam (AAT 9699, 25 August 1994)

REASONS FOR DECISION

11 August 2004 Robin Hunt, Senior Member         

1. It is common ground that Mr Avanessian was injured at work on 23 September 1999 when he was aged 64 and quite fit. He became unable to continue working and, when he turned 65 on 12 April 2000, he claimed and received the age pension. In the meantime, he sued for damages and received periodic compensation payments until they ceased on 22 April 2001. These payments were treated as income for social security law purposes. On 11 March 2003, an arbitrator made an award of $227,906 that included $20,000 for economic loss buffer plus costs. Centrelink determined that, in consequence of section 17(4) of the Social Security Act 1991 (“the Act”), no debt to Centrelink or any preclusion period for a pension payment arose. Mr Avanessian obtained advice from Centrelink to this effect through his solicitor. However, both parties were dissatisfied with the award and Mr Avanessian appealed. His appeal was settled on 20 August 2003 for an award of $230,000 made up of $180,000 plus $50,000 costs. The settlement resulted in Centrelink claiming a repayment and a preclusion period as section 17(4) of the Act no longer protected Mr Avanessian. Centrelink advised Mr Avanessian of the compensation charge and preclusion period on 19 March 2003 and Mr Avanessian sought review. The Social Security Appeals Tribunal (“the SSAT”) concluded that the preclusion period was correctly imposed and that Mr Avanessian must repay the age pension he received after 22 April 2001. The Tribunal has found that the preclusion period should be shortened for the reasons set out below.

2. The settlement resulted in a net amount to Mr Avanessian of $126,652.24 after the Centrelink compensation charge, legal costs and other disbursements. In addition, because of the 50% rule applicable to settlement of damages claims, the period during which Mr Avanessian is precluded from receipt of social security benefits is from 23 April 2001 to 14 November 2004. Centrelink argued and the SSAT found that no special circumstances existed in Mr Avanessian’s case in which any part of the compensation he received should be disregarded. The discretion available under section 1184K of the Act was not exercised in Mr Avanessian’s favour by Centrelink or the SSAT as they found that, although he was left with insufficient funds, his hardship had been self induced.

3.      Mr Avanessian’s wife, Ms Anait Oganesian, appeared on behalf of her husband at a Tribunal hearing on 22 July 2004, presenting arguments and giving oral evidence. Mr Avanessian’s treating psychiatrist provided a medical certificate certifying that Mr Avanessian was unfit to appear because of a severe depression which caused him to become very agitated very easily. The Tribunal telephoned Mr Avanessian and took brief oral evidence from Mr Avanessian to the effect that he wished to leave decisions about his future to his wife.

4.      Ms Oganesian told the Tribunal that she and Mr Avanessian had believed that no part of the damages award settlement would have to be repaid to Centrelink and  that there would be no effect on Mr Avanessian’s old age pension entitlement. The solicitors acting for them in connection with the compensation proceedings had given them advice to this effect and had told them that the settlement was for Mr Avanessian’s injuries only and not for loss of income. Before the Tribunal and forming part of the “T Documents” are copies of letters from Mr Avanessian’s solicitors giving this advice and also referring to advice from Centrelink that there would be no preclusion or repayment required.  From the later correspondence it is apparent that the solicitors did not realise that the Centrelink estimate could be relied upon only for the arbitrated award and that they should have asked for further information if the award were varied.

5.      Ms Oganesian gave her evidence in a convincing manner and I accept her evidence as the truth. She accounted for the dispersal of the bulk of the settlement monies remaining after repayment to Centrelink. She produced letters and accounts from the community housing organisation that provides accommodation to Ms Oganesian and her husband. Rent was recalculated at $190.80 per fortnight after the compensation payment was taken into account (Exhibit A5 and T60). Another document showed that their rent was calculated on the basis of Mr Avanessian’s old age pension as well as her carer allowance, although Mr Avanessian was not actually receiving the pension (Exhibit A8). Ms Oganesian also detailed the additional expenses incurred for their accommodation such as gardening and maintenance fees and electricity. She also detailed heavy pharmaceutical expenses and provided receipts at the hearing. The advocate for Centrelink conceded at the hearing that these expenses actually amounted to more than Ms Oganesian had claimed in her estimate of income and expenses furnished to the Tribunal (T58, 141).

6.      Some of the events which ate into the balance of the compensation award received were the illness and death of her father in Armenia, a visit to Australia from a relative whom Ms Oganesian felt obliged to entertain and to reciprocate with the giving of presents, dental and medical expenses and repayment of loans from her daughter.

7.      Although Centrelink had records to show that Ms Oganesian’s daughter had not earned any income for some of the period of the loans she advanced to Ms Oganesian, Ms Oganesian was able to explain how her daughter obtained a large sum of money free of interest. She explained that her daughter belonged to a group of acquaintances who all contributed a regular amount to a shared fund. Each member of the group was entitled to a turn at receiving a large lump sum from the fund and repaid it over a lengthy period. She said her daughter also had accumulated personal savings and gave them to her parents. Ms Oganesian gave evidence that she repaid the money out of the award and gave her daughter an additional $30,000, which was the balance left after payment of pre-existing debts and expenses. Ms Oganesian, when asked why she gave away this money, countered that she saw this as her best option for the future. Her daughter had always done what she could to assist her and for Ms Oganesian to help her daughter now would enable her daughter to establish herself financially.

8.      Ms Oganesian further explained that she spent an unusual amount on food and grooming. She told the Tribunal that not only her husband had health problems. She was unwell also. She had serious dental problems which needed urgent attention and had been able to pay for temporary treatment only. She had an extremely high cholesterol level and had to be careful with her own diet as well as her husband’s. This meant she had to buy the most expensive cuts of meat and other produce. She further explained that because her husband was confined to the house all day and had limited mobility and suffered from severe depression, she placed a lot of importance on taking him on excursions such as a trip on the Manly ferry or a short stroll to the local shops. When they went on such trips, Ms Oganesian made sure her husband sat in the open or in an open area where he could see some activity. She would buy coffee and cake while they sat. In this way she found something to occupy her husband.

9.      From the oral evidence of Ms Oganesian it was plain that the consequences of Mr Avanessian’s accident were more severe and long term than might have been expected. Ms Oganesian described distressing and harmful symptoms of behaviour exhibited by her husband. Mr Avanesian received less as a result of the settlement than he would have received under the arbitration. This is because of additional costs. The reduced amount received by Mr Avanessian under the damages settlement together with the  debts already incurred by him and his wife led to the rapid disappearance of the award. This has meant that Mr Avanessian has not been receiving the treatment he needs for either his physical problems or his depressive condition. Ms Oganesian has not been able to obtain expensive dental treatment for herself and is managing with temporary repairs. The couple also receive no concession fares for travel or other benefits given to social security pension recipients. Centrelink records show that Ms Oganesian receives a carer allowance of $533.92 every fortnight and was paid the one-off carer bonuses totalling $1,600 on 18 June 2004. Rent is $190.80 per fortnight (T60, 145). These amounts are not in dispute.

10. Part 3.14 of the Act provides for compensation affected social security payments to be reduced and to become payable or not. Mr Avanessian’s compensation affected age pension payment is not payable until 4 November 2004 if the strict legislative formulae are followed. Subsection 1184K(1) of the Act allows the Secretary (or the Tribunal in the present instance) to treat the whole or part of a compensation payment as not having been made if the Secretary thinks it appropriate in the special circumstances of a particular case. The Federal Court has given some guidance as to what are special circumstances. In Secretary, Department of Family and Community Services v Chamberlain (2002) 68 ALD 357, Keifel J pointed out that the decision-maker is not required to consider what component of a settlement relates to economic loss. Therefore, the Tribunal has not examined whether, as Mr Avanessian claims, all of the award covered compensation for injury rather than economic loss or only past loss of earnings rather than future loss of earnings.

11.     In Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464, DP Todd suggested that a global assessment of the circumstances was appropriate. I have followed these decisions in turning my mind to the overall amount of the settlement and in considering the joint income of the couple involved, noting that Ms Oganesian receives a carer allowance for looking after her husband, the applicant. Ms Oganesian has given strong evidence that her carer allowance, the only present source of income for the couple, falls well short of their requirements in order to maintain a reasonable living standard and obtain necessary health care.

12.     Centrelink has argued that it is not the fault of the Secretary that the couple are in this position. This is largely true as Mr Avanessian had a specialist accredited solicitor acting for him whom he might have expected to provide the correct advice. However, the solicitor has apparently not understood the effect of reaching a settlement and has relied on the Centrelink advice furnished in connection with the original arbitrated award. This has meant that Mr Avanessian has also relied on the outdated Centrelink advice in agreeing to the terms of the settlement and arranging his financial affairs.

13.     Additional factors may influence a Tribunal decision apart form reliance on negligent advice. The Tribunal has listed factors for and against exercising the discretion for special circumstances in Re Secretary, Department of Social Security and Gibala (1989) 17 ALD 441. Factors against exercising the discretion include the existence of a considerable amount of invested capital, that there are no pressing financial obligations and prevention of double dipping. These factors are not present in this case except to the extent of $30,000 given to the daughter. This is a small sum compared to the likely continuing medical and other essential expenses for the couple as a result of Mr Avanessian’s injuries. Factors for exercising the discretion include frankness of disclosure, failure by the Department to advise of the preclusion provisions, good faith of the applicant including failure of his or her solicitor to advise, and the health of the applicant. It is clear that these three factors have occurred in Mr Avanessian’s case. The Tribunal notes that several other cases indicate that failure by solicitors to advise of a preclusion period is NOT a persuasive factor in establishing special circumstances. However, in Re Minda and Secretary, Department of Social Security (AAT 4969, 10 March 1989), the Tribunal left open the possibility of it being relevant in some cases. In a later case, Re Secretary, Department of Social Security and VXY (1993) 30 ALD 681, the Tribunal considered earlier decisions of the Tribunal against taking negligent advice into account was not appropriate. The Tribunal in that case observed that it was unrealistic to expect an applicant in poor financial situation to take action against a negligent solicitor. See at 30 ALD 689. Again, in Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745, the Tribunal emphatically viewed incorrect legal advice as a factor. Similarly, the Full Court held in Comcare v A’Hearn (1993) 119 ALR 88, that inexcusable delay by a solicitor should not be visited on the applicant. These situations are analogous to visiting the negligence of a solicitor’s advice on an applicant. Also see Re Secretary, Department of Social Security and Hickman (1996) 43 ALD 75 where the Tribunal observed that it is not always clear whether advice has been misleading or has been misunderstood.

14. The advocate for the Secretary has pointed out that the Tribunal should have regard to all the circumstances in which this situation has come about. The advocate for Centrelink also expressed his disappointment that Mr Avanessian had given away $30,000 of his damages and then sought assistance from the public purse. He conceded that the Tribunal might disregard part of the award if it was appropriate to do so bearing in mind that there must be special circumstances and that the special circumstances must be something more than hardship. He argued that a person needs to be in unusual, uncommon or exceptional circumstances to justify consideration under section 1184K of the Act. See Re Secretary, Department of Social Security and Bolton and ReBeadle and Director General of Social Security (1984) 6 ALD 1 at 3.

15.     The Federal Court approved of the approach of the Tribunal in Beadle v Director General of Social Security (1985) 60 ALR 225 and further noted that it would place less emphasis on the dictionary definition of ‘special’. Beadlev Director General of Social Security (1985) is also authority for the proposition that whether a person is misled by a departmental officer or whether unfair or inappropriate circumstances arise through the negligence of a third party, these factors may be special circumstances. Although Centrelink advised the solicitor for Mr Avanessian that he need not repay the social security payments received up to the time of the arbitrated award, the advice was no longer correct once the parties rejected the award and reached a settlement. It was the responsibility of Mr Avanessian’s solicitor to correctly advise him of the legal position. It would have been open to them to seek further information from Centrelink. However, the obligation of the solicitor or professional adviser may not entirely absolve Centrelink from blame for the misunderstanding. The Secretary must be aware that applicants rely on advice furnished by his Department and that there is potential for a misunderstanding where no caveat is attached to an estimate of liability in particular cases. In any event, the Full Federal Court in Beadle v Director General of Social Security (1985) drew no distinction between a misunderstanding caused by the department in question and a third party.

16.     Further, while Centrelink has submitted that self-induced financial hardship should not be considered special circumstances for reduction of the preclusion period, further evidence of the reasons for the use of the settlement monies came to light during the Tribunal hearing. Ms Oganesian accounted for the necessary or reasonable distribution of most of the award apart from $30,000 which was gifted to the daughter. This means that, of the net amount received by Mr Avanessian, that is, $126,652.24, almost $100,000 was disbursed in ways that were not reckless, self induced or entirely inappropriate. Only $30,000 or thereabouts was a self-induced deprivation. Mr Avanessian’s condition has deteriorated seriously and he is unlikely to improve greatly due to his age and especially if he cannot afford treatment. The suffering of Mr Avanessian and his wife is now something out of the ordinary and to prolong it unduly would be unjust. Therefore, as the couple are now suffering extreme hardship, I have decided that the preclusion period should be reduced. See Groth v Department of Social Security (1995) 40 ALD 541 at 545 as to the relevance of significant disability and the need for medications and treatments and whether it is likely there will be any significant improvement.

17.     Further, ill health resulting in increased medical costs and an incapacity to engage in paid employment has been considered relevant to finding special circumstances in a number of Tribunal cases. See recent examples, Re Woods and Secretary, Department of Family and Community Services (2002) 68 ALD 241, Re Silberberg and Secretary, Department of Family and Community Services [2003] AATA 687 and Re Maloneyand Secretary, Department of Family and Community Services [2002] AATA 320. In Silberberg and Secretary, Department of Family and Community Services (2003), the Tribunal took the deteriorating health of the wife into account and I consider this circumstance a relevant factor in the present case. It is part of the duty of the Tribunal to consider the health of Ms Oganesian when investigating the situation of the couple involved, as the Centrelink advocate urged. In addition, Ms Oganesian’s evidence was that Mr Avanessian is suffering from severe depression. Medical evidence produced to the Tribunal supports this. In a similar way to the view of the Tribunal in Re Secretary, Department of Social Security and Schipp (AAT 10370, 21 August 1995) Mr Avanessian does not any longer have the ability to appreciate the value of money or how to spend it wisely. I find this is a factor to be taken into account as a special circumstance. Mr Avanessian told the Tribunal that he would leave decisions as to his future and how to deal with his finances to his wife. He was unable to attend the hearing in person due to his severe depression and the agitation discussion of such issues causes him.

18.     A further factor pertinent to this case is the presence of cultural perceptions. Ms Oganessan explained some of the use of the settlement monies in ways not common or always seen as essential in Australia. She gave evidence that she had to do the right thing by her guest from Armenia and reciprocate gifts with her own gifts. She also thought it important to provide for the future through a gift to her daughter of the remainder of the award, then being $30,000. While disposing of the award in this fashion and thereby putting a burden on the public purse is not acceptable by Australian standards, social conditioning or the value system of an individual may be taken into account as part of the special circumstances. See Secretary, Department of Social Security v Thompson (1994) 53 FCR 580 and Re Secretary, Department of Social Security and Ah Sam (AAT 9699, 25 August 1994).

19.     Mr Avanessian is presently precluded from receipt of social security benefits from 23 April 2001 to 14 November 2004, that is, for approximately 42 months months. Considering that he was left with approximately one quarter of his award after deductions and preclusions, I have decided that his preclusion should be reduced to a similar degree and find the period should be reduced by 30 months. Accordingly, I set aside the decision under review and substitute a decision that the length of the preclusion period be shortened.

DECISION

20.     The Tribunal sets aside the decision under review and substitutes a decision that the length of the preclusion period should be reduced by thirty months.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Robin Hunt, Senior Member

Signed:         .....................................................................................
  Associate

Date of hearing  22 July 2004
Date of decision  11 August 2004
Representative for the applicant    Ms Anait Oganessian
Advocate for the respondent     John Kenny, Centrelink Advocate