Beverley Lind and Secretary, Department of Social Services
[2014] AATA 680
•17 September 2014
[2014] AATA 680
Division GENERAL ADMINISTRATIVE DIVISION File Number
2014/3790
Re
Beverley Lind
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Dr M Denovan, Member
Date 17 September 2014 Place Brisbane The Tribunal affirms the decision under review.
......................[Sgd]..................................................
Dr M Denovan, Member
CATCHWORDS
SOCIAL SECURITY – Pensions, benefits and allowances – age pension payment – Compensation – statutory objectives – affected payment – Preclusion period – whether special circumstances exist – assessment of legal expenses – financial hardship – Decision under review affirmed.
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 23, 1169, 1170, 1184K
Social Security Amendment Act 1988 (Cth)
Workers Compensation Act 1987 (NSW) s 52
CASES
Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487
Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Deacon and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 88
Department of Social Security v Turner [1993] AATA 160
Dranichnikov v Centrelink (2003) 75 ALD 134
Fuller and Secretary Department of Family and Community Services [2004] AATA 615
Gulcan v Secretary, Department of Family & Community Services [2001] AATA 552
Kirkbright v Secretary, Department of Family & Community Services [2000] FCA 1876
Krywak v Secretary, Department of Social Security (1988) 15 ADL 690
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Secretary, Department of Family & Community Services v Kelava [2003] AATA 834
Secretary, Department of Social Security v Banks (1990) 23 FCR 416
Senna v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 240
REASONS FOR DECISION
Dr M Denovan, Member
17 September 2014
Ms Lind was living in New South Wales and working as a nurse, when in
December 2009 she was injured during a motor vehicle accident on the way to work. She sustained whiplash and, from that time on until she reached the age of 65, she was intermittently in receipt of workers compensation payments. When she turned 65 in August 2013, workers compensation deemed her retired and ceased paying her periodic payments.
In 2012 she became eligible for Centrelink payments, and was in receipt of those payments when she received a lump sum payment in August 2013, which was the settlement for her claim in relation to her injury. That sum was the second lump sum paid to Ms Lind in relation to this injury, and included an amount for future economic loss. The first lump sum payment made in February 2012, was for the sum of $6875.00, and did not include any component of future economic loss.
The Social SecurityAct1991 (Cth) (“the Act”) sets up a scheme whereby if a person receives compensation containing a component for past or future loss of income, then they must live off that compensation for a period of time. This period of time is called the “preclusion period”. The length of the preclusion period is determined by the amount of compensation received, and is set out in s 1170 of the Act. A person cannot be paid Centrelink payments, including age pension, during the preclusion period.
As a result of that lump sum payment, the respondent applied the statutory formula and determined that Ms Lind was precluded from receiving Centrelink payments for a period of approximately three years.
Ms Lind objects to the application of preclusion period. She appealed the decision unsuccessfully to both an Authorised Review Officer (“ARO”) and the Social Security Appeals Tribunal (“SSAT”). She applied to this Tribunal on 21 July 2014, and asks that I make a decision to the effect that the preclusion period not apply because there are special circumstances, pursuant to s 1184K. Ms Lind contends the application of the statutory formula had an unjust and unintended effect in that, due to the fact that she was of “retirement age” at the time the compensation lump sum payment was made, the amount she was awarded was for future economic loss, was subsequently only small. It is therefore unfair, she argues to prevent her from receiving age pension for a period of nearly three years after she received the lump sum payment. She also claims her poor health and straitened financial circumstances contribute to her circumstances being special. It is the respondent’s position that this is not a case where there are compelling reasons to exercise the discretion to waive the preclusion period on the finding that special circumstances exist, and nor does it have any similarity to the circumstances of other cases where the discretion has been exercised.
In the event I do not decide it appropriate to waive the preclusion period in full,
Mr Langenheim, Ms Lind’s representative, contends that the disability payment of $6,875.00 made on 3 February 2012 should not be included in the calculation of the lump sum, as when the payment was made, Centrelink deemed it did not attract a preclusion period. He also contends that the legal fees should be removed from the calculation, and referred me to the decision of the President of the Administrative Appeals Tribunal,
J Downes as he then was, in the matter of Fuller and Secretary Department of Family and Community Services.[1]
[1] [2004] AATA 615.
I have to decide whether there are special circumstances, which would allow some or all of the compensation payment to be disregarded, with the effect that the preclusion period be shortened or removed altogether.
BACKGROUND AND EVIDENCE
Mrs Lind commenced working as a nurse in Wommin Bay, Kingscliff in 2006. After her injury on 12 December 2009 she received weekly benefits and other compensation until she was certified fit for suitable duties on 29 January 2010. Subsequently, she found her symptoms to increase in severity over time despite the fact that she continued to receive ongoing treatment. Ms Lind made a claim for lump sum compensation for permanent impairment. It was determined that Ms Lind suffered five percent whole person impairment and was awarded $6,875 in February 2012. On 24 February 2012 the respondent notified Ms Lind that there was no resultant charge or preclusion period in relation to that payment.
Mrs Lind ceased accepting employment from the First Choice Nursing Agency
(“the agency”) in about February 2012, and about that time she moved from Coolangatta to Maryborough. She commenced receiving disability support pension (“DSP”) from
23 May 2012.
On 22 August 2012, the Workers Compensation Commission determined that Ms Lind was partly disabled and entitled to receive weekly payments of $261 with effect from
8 February 2012. The result was that Ms Lind was entitled to payments of arrears of periodic payments from 8 February 2012 to 29 August 2012. During this period Ms Lind had been in receipt of age pension. In a decision dated 6 September 2012, Centrelink raised a debt of $7,606.28. In effect, Mrs Lind’s age pension was reduced by the amount of weekly payments she received from the Workers’ Compensation Commission.
On 28 March 2013 Ms Lind was transferred from DSP to age pension.
When she turned 65 years old, on 30 August 2013, she was deemed retired for the purposes of the Workers Compensation Act 1987 (NSW).[2]
[2] Workers Compensation Act 1987 (NSW) s 52 which provides the definition for ‘retiring age’. Eligibility for ‘age pension’ indexed by year of birth is provided for at s 23(5C) of the Social Security Act 1991 (Cth).
On 9 September 2013 Mrs Lind settled her claim with NRMA Insurance for $275,000. That claim included a claim for loss of earning capacity. This sum was in addition to an impairment payment of $6,875 paid to the applicant on 3 February 2012. The total of the lump sum compensation payments was $281,875. Ms Lind received weekly compensation payments totalling $26,505.12 prior to the commencement of the preclusion period on 31 August, and that amount was repaid to workers compensation. From the settlement lump sum, $25,000 was used to pay legal fees.
In a decision dated 9 December 2013, Centrelink raised a debt of $5,644.78, and determined that the lost earnings or lost capacity to earn component of the settlement was $127,684.94. Centrelink further determined that this resulted in Ms Lind being subject to a preclusion period from 31 August 2013 to 3 June 2016. Social security payments were therefore not payable to Ms Lind for that period. On the same day, Centrelink sent
Ms Lind a letter notifying her of those decisions.
Ms Lind’s solicitors sought review of the Centrelink decision to impose a preclusion period. An ARO affirmed the decision on 18 March 2013, as did the SSAT on
2 July 2014. Ms Lind appealed to this Tribunal on 21 July 2014.
Ms Lind gave evidence at the hearing by telephone. Her legal representatives provided written facts issues and contentions. Attached were also a number of annexures including an explanation provided by Ms Lind as to how she used the settlement money. Ms Lind’s explanation reads as follows:
Total Settlement Figure $275,000.00
LESS
Worker’s Compensation Payback: $77.202.11
Legal fees: $25,000.00
Mortgage repayments to 31 May 2014: $35,617.40
…
Medicare Charge: $1,089.55
Centrelink Charge: $5,644.78
Council Rates: $5,900.00
Interest on unpaid Council Rates: $15,300.00
…
Maintenance and Repair of Home: $27,000.00
(including Pest Control, Painting,
electrical maintenance, locksmith,
shade for home, sheds, blinds)
…
Car (Second Hand Honda Accord) $18,580.00
…
Repaying loans from friends and family $21,000.00
…
Loan to family member $12,000.00
TOTAL: $244.333.84
TOTAL LESS EXPENSES $30,666.16
Ms Lind, during evidence in chief, said that she would have to sell her house if her appeal to this Tribunal was not successful, and as a consequence, she would be homeless. She said that were she to have the preclusion period waived she would try and hold on to the house. During cross-examination, Ms Lind admitted that her house has already been placed on the market; it has been on the market for approximately one and a half months. She said she has spent more than $30,000 on improvements with the intention of improving the property and increasing the value of her asset. She hoped to recuperate the money when the property sold. She said that she had replaced the fence on three sides of the property, the old one having been damaged by flooding. She has installed an air conditioner, installed two sheds, and painted the property both inside and outside. She purchased the house about one year prior to suffering the injury in the motor vehicle accident. She purchased the house for $149,000. The mortgage was initially $105,000, but has crept up and is currently $163,000. Ms Lind admitted to knowing about the preclusion period at the time she spent most of the money on the house improvements and maintenance. She said that the work needed to be done, and she thought she would improve the house, sell it, and then be cleared of the mortgage. It was initially listed for $253,000, but has recently been reduced to $249,000.
Ms Lind provided photocopies of various receipts, quotations, and invoices which she claimed are expenses she has incurred in maintaining and improving her home. Ms Lind also provided a rates notice and rates certificate for her property in support of her claim that she has spent a total of $21,200 on rates arrears and interest payments to
Fraser Coast Regional Council.
The house is in the Maryborough Central Business District (“CBD”). It is located a couple of streets away from the General Hospital, and the closest bus stop is a five minute walk away. Ms Lind claims it is a 20 minute drive to the closest shopping precinct. Ms Lind purchased a second hand car using some of the money she received in the lump sum. Her last car ‘blew up’ and she had to pay someone $50 to take it away. She received no money for it. She had to catch a bus during the four to five months when she did not own a car. She feels it was necessary to buy a good car, as this will be the last car she ever buys. She feels that she needed the particular type of car she purchased as it has a reversing camera, which is necessary as she has difficulty turning her neck. She claims to need a car because she has trouble walking, and she suffers from balance problems, and finds the 20 minute walk to the closest shopping precinct arduous. She also has trouble carrying things. She prefers to drive to Hervey Bay to shopping precinct as the facilities located there have more variety.
Ms Lind said that she has two daughters, both of whom live in Western Australia. She provides daily phone support to the younger daughter who suffers from bipolar disorder. In December 2013, Ms Lind told Centrelink she had $54,000 remaining in her bank. At the hearing she claims that was a mistake on her part. She claims she actually only had $40,000 at that point in time. Ms Lind has provided bank statements, which cover the period from 11 October 2013 to 31 October 2013 only. The balance as of 31 October was $60,480.45. Ms Lind claims her balance today is only about $2,000. She said she has no financial support from either friends or family, and without age pension, she has no source of income. Since her age pension has been stopped, her expenses have increased as she no longer has access to pension related discounts on her regular expenses such as rates and utilities. She has a personal loan from Pioneer credit, which she is still paying. She thinks the current outstanding balance is about $4,000. Her mortgage repayments are approximately $1,400 a month. She was unable to pay her mortgage after her accident, and her lawyer lent her money. She told me she repaid her lawyer from the lump sum she received. She has provided bank statements from her mortgagor, for the period
1 June 2013 to 31 May 2014 only.
Ms Lind said that after her accident she also borrowed $12,000 from a friend in Melbourne, and $9,000 from one of her daughters. She repaid both loans from the settlement sum. She also loaned her sister $12,000. She thought ‘long and hard’ about the decision to lend the money, as she knew she herself also needed the money; however she was swayed as her sister was facing repossession of her home.
Ms Lind claims to have recently been treated for a “TIA” (transient ischaemic attack), which is said was a small heart attack. She is booked in for a nuclear medicine test. According to Ms Lind, her doctor claims she suffered this ailment because she was under too much stress. She also suffers from depression but she does not want to take medication because she does not believe medication helps the problem. She has an ongoing problem in her neck for which she requires physiotherapy twice a month, at a cost of $80 per session.
CONSIDERATION
Are there special circumstances?
The legislation relevant to this application is contained in the Act. Section 1184(1) of the Act allows the Tribunal to treat the whole or part of the compensation payment as not having been made, or not liable to be made, if it considers it is appropriate to do so in the special circumstances of the case.
Whilst “special circumstances” are not defined in the Act, the approach to be taken in interpretation and application of the discretionary provisions has been dealt with by the Tribunal and the Federal Court in numerous circumstances.
In Re Beadle and Director-General of Social Security[3] it was said:
The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
[3] (1984) 6 ALD 1 at 3.
When considering the meaning of special circumstances in Dranichnikov v Centrelink,[4] the Full Federal Court observed:
what is required will be circumstances which distinguish the case in consideration from the usual case. There will be a requirement that the circumstances are such that takes the case out of the ordinary.
[4] (2003) 75 ALD 134 at 148 per Hill, Kiefel and Hely JJ.
For convenience I will consider separately each reason that Mr Langenheim has raised in support of the application for special circumstances, and then consider Ms Lind’s circumstances as a whole.
Application of the statutory formula results in an unfair and unintended result
Sections 17 and s 1169 together provide that age pension is affected by lump sum or periodic payments of compensation. A lump sum that includes an amount paid in respect of loss of earnings or loss of capacity to earn will result in a preclusion period. It is not in dispute that the lump sum payment to Ms Lind included such an amount. No information about the exact components of the lump sum is before the Tribunal.
Section 1171 states that multiple lump sum payments in respect to the same event are added together, provided one or more of those payments include some payment in respect to loss of earnings or loss of capacity to earn. The total of lump sum compensation received in this case is $281,875.
The preclusion period is calculated by subtracting the amount of weekly compensation payments, in this case $26,505.12, then dividing the remainder ($255,369.88) by 50%, and then dividing that amount by the ‘compensation divisor’, which in this case was $886.40. That gives the number of weeks pension payments cannot be paid due to the preclusion period. The correctness of the calculation of the preclusion period is not in dispute.
This so called “50% rule” was introduced by the Social Security Amendment Act 1988 (Cth) (Act No. 58 of 1988). The 1988 amendments were considered by Von Doussa J in Secretary, Department of Social Security v Banks[5] to have been inserted to overcome difficulties experienced by the Secretary under the earlier provisions. Prior to the amendment, the Secretary had been required to calculate the amount of economic loss paid in each case. His honour cited the Second Reading Speech on the bill, and concluded that the amendments were to prevent the abuse which had previously come about by settlements being manipulated to obscure the economic loss component of the compensation payment.
[5] (1990) 23 FCR 416 at [13].
The fundamental idea is that if a person was to receive money intended for them to live on for some period of time from a compensation payment and also receive Centrelink payments, then they would effectively be “double dipping”, or being paid twice. This would not be an appropriate or responsible use of taxpayer’s resources.
I agree with Mr Langenheim when he contends that common sense dictates that there is unlikely to be very much double dipping by Ms Lind who was 65 years old, and deemed retired at the time she was awarded lump sum compensation. This is because the component of economic loss for future income was likely to be only a small amount, and it is likely to have been a figure much less than legislative presumption of 50%. Logically then, a shorter preclusion period would be a fairer outcome.
There have been many cases in which the Tribunal has expressed the view that it is manifestly unjust to impose a long preclusion period on age pensioners: Re Secretary, Department of Family & Community Services and Kelava[6]; RE Gulcan and Secretary, Department of Family and Community Services[7]; and Senna and Secretary, Department of Family, Housing, Community Services and Indigenous Affairs.[8]
[6] [2003] AATA 834.
[7] [2001] AATA 552.
[8] [2008] AATA 240.
Mr Langenheim referred me to the decision of J Mansfield in Kirkbright v Secretary, Department of Family & Community Services.[9] In that matter, J Mansfield said that unfairness or injustice by the strict application of an Act can qualify as special circumstances.
[9] [2000] FCA 1876.
However, Chamberlain and Secretary, Department of Family and Community Services[10] has addressed the issue of preclusion periods and age pension, and is authority for the proposition that special circumstances cannot be made out where the amount of economic loss payment is less than the statute assumed. J Kiefel pointed out that this would be the case in many, if not most cases, where an applicant of social security who received a compensation payment is in receipt of age pension. In Chamberlain, Member McCabe, as he then was, said
Once the Tribunal has satisfied itself the statutory formula was correctly applied, the Tribunal is not otherwise interested in the Formula and whether or not it accurately reflects the true position…. It is irrelevant that an applicant may have been treated more favourably if the rule were modified to reflect the amount actually allocated in respect of economic loss in a given case. The Tribunal must instead focus on whether special circumstances exist following the application of the rule and the imposition of the preclusion rule.
[10] [2002] AATA 487.
I am bound by the Federal Court decision of Chamberlain, and therefore cannot regard any unfairness created by application of the statue as special circumstances.
Financial Hardship
Mr Langenheim correctly reminded me that a person does not have to exhaust all of their resources prior to being eligible for social security benefits during what would otherwise be deemed a preclusion period.[11]
[11] Kirkbright v Secretary, Department of Family & Community Services [2000] FCA 1876 at [19].
The cases that relate to financial hardship and special circumstances have established that it is not enough for an applicant to show that they are under financial pressure.[12] A person’s circumstances must be extreme and unusual.
[12] See Re Krywak v Secretary, Department of Social Security (1988) 15 ALD 690.
I make the following observations in relation to Ms Lind’s evidence about her financial situation.
a.
There is no documentary evidence which shows how much Ms Lind received of the lump sum. Ms Lind advised Centrelink that she received $135,000. When exactly she received this is not clear, however it would seem logical that it was sometime in September 2013. The payment of the lump sum was made to
Ms Lind’s solicitors in August 2013. The only bank statement before the Tribunal is for the period commencing 11 October 2013, some weeks after she received the balance of the lump sum. At that point in time, Ms Lind had just under $116,000 credit in her account. No recent bank statements were provided to support
Ms Lind’s claim that she was down to her last $2,000.
b.
Ms Lind claims to have paid council rates of $5,900, plus interest on unpaid Council rates of $15,300. An incomplete copy of only one rates notice is in evidence. It is for the 2011/2012 financial year, and indicates Ms Lind owed $15,298.84. There is no evidence Ms Lind has actually paid that amount from the compensation lump sum. I would expect that as that bill was issued approximately 15 months prior to her receipt of the lump sum, the figure of $15,300 would no longer be accurate. A document headed “Fraser Coast Regional Council Rates Certificate”, for the financial Period 1 July 2013 to 30 June 2014 indicates that an amount of $5,900 was paid during that period. As of
10 January 2014, the rates account was in credit by nearly $800. It is not clear if that $5,900 was a part payment of the $15,300, in lieu of it, or entirely unrelated.
c.
Of the documentation, Ms Lind provided receipts to support her claim that she has spent over $27,000 on maintenance and improvements to her home. Only a very limited number of these documents presented actually support her claim. Many of the documents provided prove that she obtained quotes, but do not prove that she engaged the contractors or paid for the work. Also, many of the receipts for work were for months, and in some cases years, prior to her receipt of the lump sum payment. By example, there is a quotation from “Outback Sheds Maryborough” for $7,102.68 for a carport. The quotation has the word
“payed [sic]” added in handwriting, however no tax invoice or receipt of payment has been provided. Receipts for painting of her house do not indicate the service provider’s name or trading details.
d.No evidence was tendered to support Ms Lind’s claim that she repaid existing loans to friends and family, and that she advanced her sister a loan of $12,000. Ms Lind indicated to the SSAT that this payment was made after she was made aware of the preclusion period. However, she told this Tribunal that the payments were made to her sister on 25 and 28 October, which was prior to her becoming aware of the preclusion period.
I accept that many of the above deficiencies in the evidence are due to combination of factors, including the likelihood that Ms Lind was unaware of what was necessary to establish her case, and her poor health may impair her ability to fully document all of her expenses. I accept that loans between friends and family are rarely put into writing. I accept that Ms Lind has put in excess of $30,000 towards improving her property. In doing so, she has clearly improved the value of her asset. The property, bought for $149,000 is currently on the market for $249,000. If Ms Lind achieves close to that price at sale, and the sale occurs in a timely manner, then it may be the case that she invested wisely in spending the money improving her property.
Although it would be preferable for Ms Lind to own her own home, it seems to me that whether or not a preclusion period is applied, it is impossible for Ms Lind to continue the $1,400 a month mortgage repayments, and other expenses related to owning her own home, when her only income is age pension. I note that even before she sustained her injury, she was having financial difficulties and was unable to pay the rates due on the property which were in arrears. Ms Lind was working, and renting the house out for at least three of those years, yet she did not keep up with the rate payments during that time. Ms Lind was in receipt of worker’s compensation payments estimated to be about 80% of her usual wage until early 2010, after which time she continued to work until
February 2012. After that time she was in receipt of age pension. Then Ms Lind had to borrow $21,000 from friends and family, and a further $18,000 from her solicitor to pay her mortgage repayments. Even with the benefit of these loans, her mortgage grew from $105,000 and is now $163,000. It is hard to image how, without the compensation payment, Ms Lind would have been able to repay the $15,300 owing for rates and interest payments associated with that debt. Ms Lind’s circumstances are very different to those of Mr Turner, in Department of Social Security v Turner.[13] Unlike Ms Lind,
Mr Turner was in a position to keep the family home, which he owned, only if the preclusion period was waived. The Tribunal considered relevant considerations regarding the welfare of Mr Turner, his wife and dependent children, and the cost of public housing for the family. Had Ms Lind not sustained her injury, and continued to work until the age of 65, I think it is likely she would still have found it difficult to meet all the ongoing costs associated with living in her own home. Most of these expenses are of an ongoing nature, and it is hard to imagine how Ms Lind would have coped after she turned 65, as she has been unable to pay her mortgage or her rates without borrowing money since she has been in receipt of DSP or age pension. I consider it likely that, but for the lump sum compensation, Ms Lind would have found herself in dire financial straits even sooner than she actually did.
[13] [1991] AATA 160.
Sadly, Ms Lind’s plight is neither unusual nor uncommon. It is difficult for elderly single people to make ends meet and most people in Ms Lind’s circumstances would find it impossible to continue to live in a home that required $1,400 mortgage repayments.
Ms Lind has used a significant proportion of her lump sum payment to pay for mortgage repayments, rates and maintenance and improvements to her home. Although this had led to a short-term shortage of cash, it could be said that this has been a sensible use of her money, as she has removed debts that she would otherwise need to repay, and improved the value of her assets. When Ms Lind’s house eventually sells, her assets will be liquefied. She also has the opportunity to sell her car and downgrade to a lesser model, or reduce her regular expenses even further by not replacing the car and relying on public transport, something that she was successfully doing for four to five months prior to the purchase of this car. I accept that her car was not an extravagant expense at the time, however continuing to hold the car, and having the additional costs of maintaining that car, may not be the best option under her current circumstances.
The money Ms Lind lent to her sister put towards her sisters mortgage may not be recoverable in the immediate future, however it is still an asset, and Ms Lind may be able to recover that money either when her sister’s home is sold, or when the equity in her sister’s house increases, her sister may be able to extend the mortgage.
Ms Lind had assets with a net value of approximately $45,000 when she purchased her house. After she sells her home, and pays sales commission, she will likely have assets of approximately $50,000 to 60,000. If she was to sell her car and her sister repays the loan, she would likely have additional assets of approximately $30,000. Whilst that is not very much, without ongoing expenses related to owning her own car and home, it would allow her to live on as much money as she would receive from age pension, even allowing for the expense of regular physiotherapy. It is common, and not unusual, for age pensioners to neither their own home nor a car. Compared other persons in a similar situation,
Ms Lind’s financial situation is not so unusual as to invoke the special circumstances discretion.
Ill health
Ill health of itself, does not amount to special circumstances, see Kulakov and Secretary, Department of Social Security.[14] No medical evidence has been lead in support of
Ms Lind’s claims that she suffers depression or stress induced heart or “TIA” problems. That being said, even if such medical evidence was available it would not, in my opinion, assist her case. Medical problems of the nature suffered by Ms Lind are common and not exceptional for aged pensioners.
[14] [1991] AATA 668.
Are there special circumstances when all factors are considered collectively?
Special circumstances must be considered from a holistic perspective, and whilst each consideration in itself may not be enough to evoke the special circumstances discretion, when viewed as a whole a person’s circumstances may well be special. When viewed collectively I do not think that Ms Lind’s circumstances are however sufficiently unusual or exceptional to qualify as special circumstances and enliven the discretion in the Act, which would allow me to effectively shorten the preclusion period. Sadly, many people in receipt of age pension find themselves with similar or even worse collective financial and health problems. Many of those people have also been denied access to social security payments after receiving a lump sum payment. Ms Lind’s circumstances are neither unusual nor exceptional and are not of the type which enlivens the discretionary provision of s 1184K in the Act.
Calculation of preclusion period, should legal costs and first lump sum payment is included in formula?
As stated above, Mr Langenheim contends that the first lump sum payment made in February 2012 should not be included because Centrelink sent Ms Lind notification to the effect that they sum would not attract a preclusion period.
The lump sum payment of $6875 paid by Ms Lind’s lawyers on her behalf, did not include any economic loss component. The lump sum payment made in August 2013 was made partly in respect of loss of earnings or loss of capacity to earn. As stated above, pursuant to the Act, all lump sum payments made in relation to the same accident, are added together to determine the total lump sum of compensation to be assessed. It is not necessary that every payment made to an individual has a component of economic loss. Provided that one of the payments is made then all payments made are assessable. I do not have access to the letter sent to Ms Lind after the February 2012 lump sum payment was received by her. I consider however that she was not given a blanket guarantee that the $6875 would never be used in the assessment of preclusion periods. The lack of preclusion period applied as the circumstances existed at the time the money was received. Circumstances changed when Ms Lind settled her claim, which included compensation for loss of earnings or loss of potential earnings. Whilst this may seem unfair, in that 50% of the first payment is now taken as being payment for economic loss and now affects her preclusion period, it is the usual practice and it is clearly the intention of the legislation.
Mr Langenheim contends that the inclusion of legal fees as part of the lump sum payment assessment in the preclusion period formulae results in an unfair and unjust result.
The legislation provides for the deduction of periodic compensation payments from the total lump sum received. There is no indication in the legislation that legal fees should also be removed from the calculation, and so I conclude that it is the intention of the legislation that those fees be included in the calculation.
In the matter of Fuller, J Downes, the then President of the AAT, considered the argument that legal costs included in settlement are not compensation. His honour reviewed the relevant case law and concluded that legal costs paid in relation to the event that gave rise to the compensation and were rightfully included in the total sum of compensation in the formulae for the preclusion period. His honour then considered the way in which the Department of Family and Community Services administers the relevant part of the legislation. He noted that when a settlement is reached inclusive of costs, the practice is for the total figure to be treated as the lump sum compensation payment. However, if a matter is settled on the basis that costs are to be paid subsequently after being assessed then the preclusion period is calculated without reference to the costs because, to do so, would result in hardship for the reason that the lump sum cannot be released until the preclusion period is calculated. J Downes assumed that in adopting this approach, the respondent must have been exercising the discretion conferred by s1184K. His honour found that where there is an unfairness arising out of the different way in which applicants are treated, and when there is a genuine assessment of costs, the applicant should be treated in the same way as an applicant who is a party to a settlement where costs are to be subsequently agreed. His honour remitted the matter the Secretary of the Department of Family and Community Services for consideration of whether, as a matter of fairness, preclusion periods should be determined without inclusion of legal costs; not just for the matter before the Judge, but for all similar cases.
In the matter of Deacon v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs[15], Deputy President Hack referred to the decision of Fuller, and held that the unfairness that arises out of the different ways of treating legal costs identified in Fuller amounts to a special circumstance that enlivens the discretion to treat all or part of the amount paid as having not been received. DP Hack held that the legal costs be treated as not having been made.
[15] [2009] AATA 88.
I agree that the practice identified by J Downes amounts to unfairness in that those claimants who are in a position to determine legal costs early are disadvantaged in that their preclusion periods will be longer than those claimants who’s legal fees are determined at a later date. I note that the decision of J Downes was ten years ago, and I am not aware is the practice of the Secretary in that decision is still continuing. I do not understand why such a practice would continue, as clearly there are many ways to avoid such discrepancy. Estimating legal costs and providing a provisional preclusion period would be one way to deal with the issue of delayed assessment of legal fees. If this practice is continuing, then there is an advantage to every person who delays the assessment of their legal costs. This unfairness applies to those claimants who have timely assessment of legal costs. Surely this would be a large number if not the majority of applicants, and in isolation, is certainly not unusual or special. I do not believe that such unfairness, in light of the comments of J Keifel in Chamberlin and Clark v Secretary, Department of Employment and Workplace Relations,[16] amounts to special circumstances. Given that I have no knowledge about the current practices of the Secretary in relation to this matter, and the fact that I consider legal costs are included in the lump sum used in the calculation of the preclusion period in many if not the majority of cases, I find that there are no special circumstances for treating the legal costs as not having been made in this case.
[16] [2007] FCA 1076.
CONCLUSION
For these reasons, I consider that there is no injustice or unfairness in Ms Lind serving the preclusion period as it has been determined by the respondent, and it is not appropriate that any of the lump sum compensation payment received by her be disregarded in calculating the preclusion period.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 57 (fifty -seven) paragraphs are a true copy of the reasons for the decision herein of Dr M Denovan, Member ..........................[Sgd]..............................................
Associate
Dated 17 September 2014
Date of hearing 26 August 2014 Applicant CBD Law Solicitors for the Respondent Department of Human Services
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