Belinda Shaw and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2012] AATA 214

[2012] AATA 214 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2011/2076
Re	Belinda Shaw
APPLICANT
And	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT

DECISION

Tribunal	Senior Member J F Toohey
Date	16 April 2012
Place	Sydney

The Tribunal affirms the decision under review.

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

Senior Member J F Toohey

CATCHWORDS

CATCHWORDS – SOCIAL SECURITY – lump sum compensation payment – preclusion period applied by Centrelink – bulk of lump sum paid off mortgage – substantial equity in property – whether special circumstances by reason of which the preclusion period should be reduced or waived – decision under review affirmed

LEGISLATION

Social Security Act 1991

CASES

Director-General of Social Security v Hales (1983) 47 ALR 281

Groth v Secretary, Department of Social Security (1995) 40 ALD 541 
Re Appleby and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 173 
Re Arena and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 494
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Re Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 1028
Re Secretary, Department of Employment and Workplace Relations and McCulloch [2007] AATA 1452
Re Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Waters [2011] AATA 666
Re Szczerban and Secretary, Department of Family and Community Services [2003] AATA 823

REASONS FOR DECISION

Senior Member J F Toohey

BACKGROUND

1. Belinda Shaw was injured at work in 2005.  She returned to work after surgery and obtained a promotion which increased her salary.  In 2006, she bought a house for $520,000.  In 2007, her injury was aggravated, leaving her very seriously injured and permanently unable to work.

2. In 2009, Ms Shaw received lump sum compensation payments of $5,600 and $26,400.  She received weekly compensation payments until her claim was finally settled in August 2010 by way of a lump sum payment of $440,000 inclusive of costs of around $40,000.

3. By the time her compensation claim was settled, Ms Shaw was in considerable financial difficulty.  She was struggling to meet her mortgage payments and had mounting credit card debts.   She relied on the care of her elderly parents, who are aged pensioners, and who moved into her home to care for her. 

4. In consultation with her parents, Ms Shaw decided the most important thing was to secure a roof over their heads.  Of the $400,000 she received in September 2010, she put $394,000 towards her mortgage, leaving what she thought would be a manageable balance of $30,000.  As far as she can recall, the balance of $6,000 went towards her credit card and repaying loans from family and friends, as well as general living expenses.  Her expectations were undoubtedly unrealistic, but she thought that, with her parents paying the mortgage repayments and bills from their pension, they would all manage.

5. In November 2010, Ms Shaw lodged a claim with Centrelink for a disability support pension.  Centrelink rejected her claim on the basis that, as her compensation payment included a component for future economic loss, a preclusion period applied during which she was not entitled to receive a social security payment. 

6. Applying the formula in s 1170 the Social Security Act 1991 (the Act), Centrelink calculated the preclusion period to run from 4 September 2010, when Ms Shaw received the last of her weekly compensation payments, to 1 July 2016.  The Social Security Appeals Tribunal (SSAT) affirmed that decision, and agreed with Centrelink that there are no special circumstances by reason of which the preclusion period should not apply.

7. Ms Shaw asks that the discretion in s 1184K of the Act, by which a preclusion period may be reduced or waived in special circumstances, be exercised in her favour.

THE ISSUE

1. There is no dispute that the total of $472,000 which Ms Shaw received by way of compensation included payment in settlement of a claim for damages for lost earnings or earning capacity and so is subject to a preclusion period: ss 17(1)(a), 17(2)(c) and 1169(1) of the Act.  There is no argument with Centrelink’s calculation that the preclusion period extends to 1 July 2016.

2. The sole issue in this case is whether there are special circumstances by reason of which some or all of the preclusion period applying to Ms Shaw should be waived.

RELEVANT LEGISLATION

1. Section 1184K(1) of the Act provides that the Secretary may treat the whole or part of a compensation payment as not having been made if the Secretary thinks it is appropriate to do so in the special circumstances of the case.

2. The Act does not define “special circumstances” and gives no guidance as to its meaning in s 1184K.  It has been observed many times by the Courts and this tribunal that the expression is “by its very nature incapable of precise or exhaustive definition” and will depend on the particular case.  “[The circumstances] … need not be unique, but they must have a particular quality of unusualness that permits them to be described as special”: Re Beadle and Director General of Social Security (1984) 6 ALD 1 per Toohey J (at 3).

3. In an appeal against the Tribunal's decision in Re Beadle (above), the Full Court of the Federal Court said:

   We do not think it is possible to lay down precise limits or precise rules.  The matter is one of 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.

4. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 Kiefel J observed (at 545):

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

5. Financial hardship alone does not constitute special circumstances; something more will be required.  As Sheppard J observed in Director-General of Social Security v Hales (1983) 47 ALR 281 (at 321):

   The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common: they will be impecunious and in straitened circumstances.

6. Underpinning the compensation preclusion provisions is the principle that persons who are unable to work because of a compensable injury should be supported by statutory compensation schemes and insurers, and not compensated twice for loss of earnings by support from the social security system for the same period: see Re Szczerban and Secretary, Department of Family and Community Services [2003] AATA 823 at [13].

ARE THERE SPECIAL CIRCUMSTANCES IN MS SHAW’S CASE?

1. Ms Shaw gave evidence before the Tribunal by telephone.  She spoke frankly and without exaggeration, and I accept her evidence. 

2. Ms Shaw’s recollection of the events surrounding the settlement of her claim is hazy.  At the time, she was taking heavy painkillers, including Oxycontin, for her chronic, severe pain.  She found the legal proceedings overwhelming and expected her claim to settle for considerably more than it did.  She recalls being at the mediation at which settlement was reached but she cannot recall details of the agreement itself. 

3. Ms Shaw cannot recall, but does not dispute, that Centrelink wrote to her in May 2009 and December 2009, when she received the first two lump sum payments, advising that neither was subject to a preclusion period but that, if she received a further lump sum payment, a preclusion period might apply.  She cannot recall, but does not dispute, that Centrelink wrote to her and to her solicitors, in September 2010 advising of a preclusion period from 4 September 2010 to 1 July 2016.  Copies of these letters are before the Tribunal. 

4. Ms Shaw cannot recall her solicitor advising her about the preclusion period but she thinks he probably did.  She says it was his area of expertise and he was very thorough, and she believes he gave her the best advice he could, but she is not sure that she was fully aware of its implications.

5. When she received the lump sum in September 2010, Ms Shaw says, her thoughts were on how to achieve some financial security for herself and her elderly parents who had taken on the task of caring for her.  She was under pressure from her banks over her mounting debts.  She and her parents did not seek any financial advice; they focussed on how to make the mortgage manageable so they could keep a roof over their heads.  Selling the house and renting was not an option in the tight rental market at the time, and given her negligible employment prospects.  They thought if her parents paid rent to cover the small mortgage and the bills, they would somehow all manage.   

6. Ms Shaw concedes that her expectations might have been unrealistic.  She did not set aside money for the future medical, hospital, pharmaceutical, rehabilitation or other out of pocket expenses that the lump sum was to cover.  Other than the $170 in rent which her parents pay each week and which goes to the mortgage, she now finds herself without any income for the next three years.  She estimates her credit card debt to be around $50,000.  She was not entirely clear, but it appears the redraw facility attached to her mortgage has been suspended or withdrawn because of her mounting debt. 

CONSIDERATION

1. In a number of cases the Tribunal has determined that the circumstances of people who have paid a lump sum compensation payment towards some or all of their mortgage are not “special” because they hold a valuable, realisable asset: see, for example, Re Secretary, Department of Employment and Workplace Relations and McCulloch [2007] AATA 1452; Re Arena and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 494; Re Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Waters [2011] AATA 666. See also Re Secretary, Department of Education, Employment and Workplace Relations [2010] AATA 1028; and Re Appleby and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2011] AATA 173 in which the Tribunal considered cases in which the applicant had, in effect, built up a “nest egg” by paying a lump sum into superannuation.

2. There can be no suggestion in this case that Ms Shaw has squandered her money or been excessive in her spending.  She was not motivated, in paying off most of her mortgage, by a desire for profit from property investment.  I accept without reservation that she made the best decision she thought she could at the time to ensure some security for herself and her parents who, she says, bear a heavy burden of caring for her and worrying about all their futures.  I accept that she now finds herself in very difficult financial circumstances.

3. The fact remains, however, that Ms Shaw has very substantial equity in her home.  She is unsure of its current value but it is reasonable to assume that it has at least held its value since she bought it, if not increased.  With a remaining mortgage of approximately $30,000, it is close to unencumbered.  I understand why selling her home is not an option Ms Shaw is willing to consider, and why her future would feel precarious without the security it provides her and her parents, but it is an option that is open to her.  Moreover, even though it does not meet all her debts, she has financial assistance, albeit limited, from her parents.

4. I have no doubt that Ms Shaw and her parents reached the best decision they could at the time and it is unfortunate they did not have the benefit of financial advice.  However, I do not think it can be said that there is anything unfair, unintended or unjust about the circumstances she now finds herself in.

5. It is not clear to me why Ms Shaw has not sought independent advice, for instance from a financial counsellor, about how she might better arrange her finances.  It may be possible, for instance, to renegotiate her mortgage and her current debts, given her straitened circumstances. It would be in her interests to seek such advice.

CONCLUSION

1. I am not satisfied that special circumstances exist by reason of which the some or all of Ms Shaw’s compensation payment should be treated as not having been made.  I affirm the decision under review.

I certify that the preceding 27 (twenty seven) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey.

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

Associate

Dated  16 April 2012

Date(s) of hearing	11 April 2012
Applicant	In person
Solicitors for the Respondent	George Lozynsky, Centrelink Program Litigation & Review Branch