Bergan and Secretary, Department of Social Services
[2014] AATA 109
•28 February 2014
[2014] AATA 109
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/2927
Re
Rodney Bergan
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member A K Britton
Date 28 February 2014 Place Sydney The decision made by the Social Security Appeals Tribunal on 16 May 2013 is set aside and remitted to the Secretary for reconsideration under s 43(1)(c)(ii) of the Administrative Appeals Tribunal Act 1975 (Cth) in accordance with the recommendations made by the Tribunal.
........................[SGD]................................................
Senior Member A K Britton
CATCHWORDS
SOCIAL SECURITY – Disability support pension – Compensation preclusion period – Lump sum preclusion period – Whether special circumstances exist – Health problems – Reduced cognitive function and decision-making capacity – Ongoing expenses – If so, whether discretion should be exercised to treat compensation payment as not being made — Whether assets can be realised
LEGISLATION
Conveyancing Act 1919 (NSW)) – s 66G
Social Security Act 1991 (Cth) – ss 1169; 1184K(1)
CASES
Boscolo v Secretary, Department of Social Security (1999) FCR 531
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary to the Department of Family & Community Services v Allan (2001) 116 FCR 1Secretary Department of Social Security v Hodgson (1992) 37 FCR 32
SECONDARY MATERIALS
Wechsler Abbreviated Scale of Intelligence, 2001
Guide to Social Security Law, 2014
REASONS FOR DECISION
Senior Member A K Britton
28 February 2014
In 2004 while working as a garbage collector, Mr Rodney Bergan was injured at work and sustained head, facial, shoulder and knee injuries. His employer accepted liability for those injuries and he was awarded compensation for lost income (to November 2009) and lump-sum compensation of $650,000 (gross). In October 2010 Mr Bergan lodged a claim for disability support pension (DSP) alleging he was in dire financial circumstances having spent all of the compensation money he had received. Centrelink refused that claim contending that by the operation of s 1169 of the Social Security Act1991 (Cth) (the Act), as a consequence of receiving lump-sum compensation, Mr Bergan was ineligible for DSP or any other social security payment, for the duration of the “preclusion period”, calculated as being 1 November 2009 to 27 November 2018.
The Act confers on the Secretary and Tribunal acting as substitute decision-maker, the power to reduce the preclusion period if it thinks it appropriate to do so in the “special circumstances” of the case (s 1184K of the Act). Mr Bergan seeks review of the decision made by a Centrelink Authorised Review Officer, and affirmed by the Social Security Appeals Tribunal (SSAT), not to exercise that discretionary power.
There is no issue that the preclusion period has been correctly calculated. The issues I must decide are whether “special circumstances” exist within the meaning of s 1184K(1) of the Act and, if so, whether it is appropriate to exercise the discretionary power to treat the whole or part of the compensation payment as not having been made to Mr Bergan.
Mr Bergan’s current financial position
In these proceedings Mr Bergan claimed that apart from his home he holds no assets of any value. He claimed that by October 2012 he had spent the entirety of his compensation payments and was unable to support himself. He says that since that time he has relied on the generosity of his parents, whose only source of income is the age pension. He claims to be deeply ashamed of the situation he is now in.
How did Mr Bergan spend the compensation payments?
Mr Bergan is a poor historian and could account for only a small proportion of the funds spent in the period between receiving the first lump-sum payment (January 2009) and finding himself with no funds (October 2012).
The following overview, which is summarised in the table below, is taken largely from Mr Bergan’s bank records, which were tendered in these proceedings by the respondent Secretary.
Income and Expenditure: September 2009 to October 2011
Date
Debit
Credit
January 2009
$72,000
First lump sum (workers’ compensation)
January 2009 – November 2009
$350
Weekly workers’ compensation payments
January 2009 – January 2010
$10,800
Monthly mortgage repayments
November 2009
$329,000
Second lump sum (workers’ compensation)
January 2010
$138,000
Repayment of home loan
September 2011
$240,000
Sale of investment property
November 2009 – September 2011
$29,000
Rental income
October 2011
$84,000
Purchase of Land Cruiser vehicle
Total
$232,800
$670,000
Balance
$437,000
In January 2009 an amount of $72,000 for lump sum compensation was deposited into Mr Bergan’s bank account. Ten months later a further $329,000 was deposited. In the intervening period between receiving those payments, Mr Bergan also received compensation for loss of income of approximately $350 per week, reducing to about $130 per week in April 2009. Payments for loss of income ceased in November 2009.
In November 2009 when he received the final lump-sum compensation payment of $329,000 Mr Bergan had just under $5000 in his savings account. Shortly after receiving that payment, Mr Bergan paid out the balance of the mortgage on his home, $138,000.
In September 2011 Mr Bergan received about $240,000 (net) from the sale of an investment property in Queensland. Prior to receiving that amount Mr Bergan had about $200 in his savings account. In October 2011 Mr Bergan purchased a Land Cruiser vehicle for $84,000.
When Mr Bergan applied for DSP in October 2012, the balance in his savings was close to nil. He also had a number of unpaid bills and his phone, electricity and water services had been, or were about to be, disconnected.
Apart from discharging the mortgage and purchasing the Land Cruiser, it is unclear from Mr Bergan’s bank records how he spent his money, in the period January 2009 to October 2012. Of the $440,000 which is unaccounted for, Mr Bergan claims that in addition to regular living expenses, he spent:
·An unknown amount on renovations to his home
·$80,000 on power tools and various items purchased at the hardware store, Bunnings.
He also disclosed in these proceedings that he spent some money on prostitutes.
Is the Land Cruiser a realisable asset?
In these proceedings an issue arose about the current value of the Land Cruiser purchased by Mr Bergan in October 2011. In May 2013 in proceedings before the SSAT, it was argued that it would be unreasonable to require Mr Bergan to dispose of the Land Cruiser and to use the funds to support himself, as it was used to transport his young niece who “meant everything” to him and was of great significance to Mr Bergan.
In these proceedings Mr Bergan testified that it was his understanding that the Land Cruiser had been sold to pay for legal fees incurred by members of his family, in unsuccessfully defending a charge of “reckless wounding”. He claimed that while serving a three month custodial sentence for a conviction for that offence he reluctantly signed papers authorising one of his brothers to sell the Land Cruiser. On his account he was told that the proceeds from the sale of the vehicle would be used to reimburse those members of his family who had paid his legal costs. Mr Bergan testified that he was not told the sale price of the vehicle or the amount of legal fees incurred and these matters had been looked after by his family. I expressed my concern about the lack of evidence about the Land Cruiser and the purported legal fees and urged Mr Bergan to make further enquiries and report back to the Tribunal.
In a statutory declaration made 16 January 2014, Mr Bergan declared that after making enquiries he had discovered that the vehicle had not been sold and was now uninsured, unregistered and had a flat battery. In a letter to the Tribunal enclosing that declaration, Mr Bergan’s representative in these proceedings, Ms Daykin of the Central Coast Disability Network, stated that she was informed by Mr Bergan that: members of his family refused his request to provide a statement about the Land Cruiser; it was only after badgering his brother that he learnt that it had not been sold; the vehicle was now parked at a waterfront location with a “for sale” sign; the vehicle appeared to have extensive rust damage and could not be started; he did not have the funds to have the vehicle repaired or transported.
Mr Bergan also declared that his legal costs in the criminal proceedings were $9000 and had been paid for by family and friends. He stated that over the past 18 months his bills and day-to-day living expenses had been paid for by family and friends.
Mr Bergan’s residential property interests Res?
Mr Bergan is the owner of a property on the Central Coast of NSW. In December 2013 a local real estate agent estimated the sale price of the property to be between $350,000 and $370,000. Mr Bergan claims that the property is owned by him and his two brothers. He claims that apart from a short period where one of his brothers lived in the property, he has lived there alone.
According to Mr Bergan his brothers made no contributions to the discharge of the mortgage in January 2010 or repairs undertaken to the property.
Mr Bergan’s decision–making capacity
Ms Daykin submits that Mr Bergan has limited decision-making capacity, pointing to, among other things, the opinion of psychologist Kathryn Wakeley.
In July 2013 Ms Wakeley assessed Mr Bergan at the request of his solicitors retained in the criminal proceedings for the purpose of preparing a pre-sentence report. On testing, Ms Wakeley concluded that Mr Bergan’s IQ placed him at the “extremely low” end of the range and at the lowest 0.1 percentile of the population as measured under the Wechsler Abbreviated Scale of Intelligence, 2001, a widely recognised tool used to measure intelligence in adults. In her opinion the work accident had affected all facets of Mr Bergan’s life and had led to difficulties in his social and interpersonal relationships, mental health problems, suicide attempts and considerable deterioration in his quality of life. In her opinion, Mr Bergan had probably been functioning at below average intelligence before the accident and there had been a further decline after the accident. In her opinion it was unclear whether this further decline was the result of brain damage caused by the work accident. She thought that severe depression and other mental health problems were likely to have contributed to Mr Bergan’s low level of intellectual functioning.
Ms Wakeley recorded that Mr Bergan was highly dependent on his parents for emotional, practical and monetary support and did not appear to be able to function completely independently. She wrote:
The client reported sharing a very close relationship with his mother and father. He appeared to be very attached to his parents and dependent upon them for practical and emotional support … Rodney’s mother confirmed he is very dependent upon them and has been this way since his accident … Although he resides independently and is able to maintain his general self-care, Rodney’s mother said they check in on him regularly and often attend his home to assist with general cleaning and chores.
Mr Bergan came under the care of psychologist Helen Clifton in 2005. He saw her weekly until April 2009 and possibly longer. In a progress report prepared at the request of solicitors retained in respect of Mr Bergan’s workers compensation claim, Ms Clifton opined that Mr Bergan reported a “wide range of posttraumatic stress disorder (PTSD) symptoms, which included anger, irritability, anxiety and depression”. She noted that he has suicidal ideation. In her opinion he was “caught up in a downward cycle of helplessness”.
In 2013 Mr Bergan was referred by his GP to psychologist Martin Carnvale for treatment. In a report dated 9 May 2013 Mr Carnvale stated that on testing, Mr Bergan showed “extremely severe levels” of depression and anxiety. In Mr Carnvale’s opinion Mr Bergan is facing a “number of challenges”, including his financial situation, which are contributing to his poor state of mental health. Mr Carnvale wrote that Mr Bergan probably didn’t understand the ramifications of spending his compensation money.
In a report dated 8 May 2013 Mr Bergan’s GP, Dr Paul Roberts, stated that Mr Bergan suffered from “an anxiety disorder – PTSD”.
ARE THERE “SPECIAL CIRCUMSTANCES” THAT MAKE IT APPROPRIATE TO REDUCE THE PRECLUSION PERIOD?
The effect of section 1184K is to give the Tribunal the power to reduce the preclusion period to which Mr Bergan is subjected:
Secretary may disregard some payments
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 appropriate to do so in the special circumstances of the case.
The term “special circumstances” is contained in a number of provisions within the Act and has been the subject of exhaustive consideration by the AAT and the Federal Court. The Federal Court has consistently declined to adopt a prescriptive formula to the use of the term (See for example, Boscolo v Secretary, Department of Social Security (1999) FCR 531, per French J at 535). Nonetheless the Court has emphasised that special circumstances require that there be “something which distinguishes [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541 at 545. In Secretary Department of Social Security v Hodgson [1992] FCA 338; (1992) 37 FCR 32 at 42, Hill J cautioned that this requirement should not be interpreted as imposing a requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”.
Section 1184K requires two separate but interrelated issues to be addressed — whether “special circumstances” exist in Mr Bergan’s case and, if so, whether the discretion to treat some or all of his compensation payments as not having been made, should be exercised.
Do special circumstances exist?
It is argued for Mr Bergan that a combination of factors establish special circumstances. These include Mr Bergan’s multiple health problems; reduced cognitive function and decision-making capacity; inability to support himself through the balance of the preclusion period and the limited means available to his family to provide financial assistance. In addition it is submitted that it is not an option for Mr Bergan to dispose of his share of the house because his brothers do not have the resources to buy out his share. While conceded that Mr Bergan had been notified by Centrelink that he was subject to a ten year preclusion period, it is contended that because of his intellectual ability he did not fully understand what that meant.
The Secretary argues that Mr Bergan has significant assets, including a share in an unencumbered residential property valued at around $350,000, which, if disposed of, could be used to support himself for the balance of the preclusion period. Further the Secretary submits that Ms Wakeley’s opinion that Mr Bergan suffers a significant intellectual disability is at odds with his proven ability to arrange renovations to his property, organise the discharge of a mortgage and purchase an investment property and motor vehicle.
I accept Mr Bergan’s claim that he is deeply ashamed that because of his actions he is forced to turn to his pensioner parents for financial support. I also agree with the submission made for the Secretary that Ms Wakeley’s assessment, placing Mr Bergan at the bottom one percentile of the population in terms of intelligence, cannot be accepted. While uncontradicted by other expert opinion, Ms Wakeley’s opinion is at odds with what is known about Mr Bergan — a person who can live independently with the support of his parents; read and write, albeit with some difficulty; drive a car; organise the discharge of a mortgage; and, purchase and sell an investment property. According to Ms Wakeley, Mr Bergan’s IQ score was between 51 and 60. My understanding is that a person with an IQ score of between 50 and 70, is regarded as having a mild intellectual disability. (American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders, 4th ed, Text Revision 2000 (DSM-IV), p 49 ) Based on my observations of Mr Bergan and the available material, I think it probable that Mr Bergan has a mild not profound intellectual disability, as suggested by Ms Wakeley. In my opinion a combination of that disability and multiple mental health problems has left Mr Bergan with impaired decision-making capacity.
Mr Bergan’s inability to account for the $440,000 he spent over three and a half years is troubling. I do not agree however with the Secretary’s submission that the recent evidence relating to the Land Cruiser necessarily brings into question Mr Bergan’s credit. Given his level of intelligence I think it unlikely that Mr Bergan would be capable of inventing the account he gave in these proceedings of having signed over the vehicle to his brother. Nonetheless this evidence raises doubts about the reliability of other parts of his evidence.
On the available evidence I think it unlikely given Mr Bergan’s limited intelligence and impaired decision-making capacity that he has hidden the compensation money received in an effort to bolster his application for a reduction in the preclusion period. Nonetheless the inescapable conclusion is that most of that money was spent in a reckless fashion.
Mr Bergan is clearly the maker of his current predicament. Nonetheless he is now without funds to support himself and unless a decision is made under s 1184K of the Act, this will continue for another five years. Having regard to all the evidence, in particular that relating to Mr Bergan’s intellectual disability, mental health problems and impaired decision–making capacity together with his current financial circumstances, I find that special circumstances are established. The more difficult question is whether the power conferred by s 1184K of the Act, to treat some or all of Mr Bergan’s lump sum compensation payments as not having been made, should be exercised.
Should the power to treat some or all of Mr Bergan’s lump sum compensation payments as not having been made be exercised?
The Guide to Social Security Law (the Guide) provides direction to decision makers on the application of the “special circumstances” discretion. The Tribunal is not bound to apply the policy expressed in the Guide, but will usually do so unless there are cogent reasons in a particular case for not doing so (see Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60).
The Guide states (at 4.13.1.30):
It is a fundamental principle of the social security system that people who are unable to work because of a compensable injury are prevented from receiving income support from both the social security and compensation systems for the same period. These rules are designed to ensure that people who find themselves in this situation receive income support from those with the primary responsibility to provide the support i.e. statutory compensation schemes and insurers.
The Guide also states (at 4.13.4.10):
When special circumstances should generally NOT be applied
Each case must be examined on its own merits by the delegate but as a general rule, special circumstances would NOT usually be applied where:
the person has sufficient liquid assets to support themselves, and their family if applicable, for the duration of the preclusion period , or
the person acquired realisable assets AFTER the person was advised of the preclusion period, and there is no impediment to the realisation of those assets, or
…
The Secretary makes the powerful argument that while Mr Bergan holds significant assets, a decision to exercise the power conferred by s 1184K would offend the “basic policy” underlying s 1169 of the Act. As Heerey J commented in Secretary to the Department of Family & Community Services v Allan [2001] FCA 1160; (2001) 116 FCR 1 at 2, the object of that policy is to suspend social security benefits where recipients have received compensation for loss of earnings to avoid “double dipping”.
In my opinion it would be inappropriate to exercise the power conferred by s 1184K while he continues to own the Land Cruiser. The more difficult question is whether that power should be exercised in circumstances where Mr Bergan continues to hold an interest in the property where he currently resides.
There is little evidence about the nature of that interest. The only evidence to support Mr Bergan’s claim that he holds a one third interest in the property is a notice issued by Sydney Water to him and his two brothers. It is unknown whether Mr Bergan holds his interest as a joint tenant or tenant in common, and, if the latter, the proportion of his interest. The submission, that without the consent of his brothers Mr Bergan would be prevented from realising his interest, cannot be accepted. While not the subject of submissions I understand that if, as Mr Bergan suspects, his brothers refused to consent to the sale of the property, it would be open to him, if his interest is held as a joint tenant, to apply to the Supreme Court for the sale of the property, and on its sale he would be entitled to his share of the proceeds of the sale (s 66G of the Conveyancing Act 1919 (NSW)). Alternatively if his interest is held as a tenant in common, he could dispose of his share without the need for his brothers’ consent.
While I do not accept the proposition that it would not be possible for Mr Bergan to realise his interest in the property, the issue remains whether it is appropriate to exercise the power conferred by s 1184K while he continues to hold that interest. While the Secretary is properly concerned to discourage “double dipping”, Ms Daykin’s argument that on the history to date if the property were to be sold it is likely that the proceeds of the sale would quickly evaporate leaving Mr Bergan without both income and accommodation, is a powerful one.
I have decided that before a final decision is made on whether the power conferred by s 1184K should be exercised that further information is required. I have decided in these circumstances that the most appropriate course is to set aside the decision under review and remit it to the Secretary for reconsideration after obtaining further information about Mr Bergan’s interest in the property and the Land Cruiser.
I recommend that if Mr Bergan provides to the Secretary satisfactory evidence about his claim to hold a one third share in the property, that the power conferred by s 1184K be exercised. That recommendation assumes that the Land Cruiser has been sold at arms for market value. I also recommend that any decision about the amount of time by which the preclusion period is to be reduced, should factor in the amount received for the sale of the vehicle, or, if the evidence raises doubts about whether a fair market price has been achieved, a reasonable estimate of that price.
Before a further decision is made under s 1184K Mr Bergan must provide to the Secretary satisfactory evidence about the nature of his interest in the property and the steps taken to dispose of the Land Cruiser. I appreciate that Mr Bergan may find it difficult to organise the sale of the vehicle, especially if, as he now claims, it is in a state of disrepair. I recommend that the Secretary refer Mr Bergan to appropriate services to obtain assistance with this task. I also recommend that Mr Bergan be referred to a financial counselling service to obtain advice about managing his financial affairs and whether it might be in his best interests to appoint an appropriate person to undertake that task.
I certify that the preceding 43 (forty-three) paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton .........................[SGD]...............................................
Associate
Dated 28 February 2014
Date(s) of hearing 9 January 2014 Date final submissions received 25 February 2014 Advocate for the Applicant Central Coast Disability Network Solicitors for the Respondent Department of Human Services, Program Litigation and Review
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