BRIAN PASCOE and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2009] AATA 117

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 117

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/2564

GENERAL ADMINISTRATIVE DIVISION		)
Re		BRIAN PASCOE

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Ms N Isenberg, Senior Member

Date23 February 2009

PlaceSydney

Decision The decision under review is affirmed.

....................[Sgd]..........................

Ms N Isenberg
  Senior Member

CATCHWORDS  

Social Security – disability support pension – receipt of lump sum compensation – debt raised by centrelink due to compensation charge – whether debt arose due to an administrative error of the Commonwealth – whether special circumstances exist which make it appropriate to disregard some or all of the compensation payments – whether additional tax liability can be regarded as a special circumstance – whether poor health can be regarded as a special circumstance – the decision under review is affirmed.

LEGISLATION

Social Security Act 1991 – sections 1173, 1182, 1184D, 1184K and 1237A

Safety, Rehabilitation and Compensation Act 1988 – sections 24 and 27

CASE LAW

Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690

Re Secretary, Department of Social Security and Hill  (1995) 39 ALD 667

Haidar v Secretary, Department of Social Security (1998) 52 ALD 255

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

Secretary, Department of Social Security v Ellis (1997) 46 ALD 1

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

Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985).

Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126

REASONS FOR DECISION

23 February 2009 Ms N Isenberg       

BACKGROUND

1.      Mr Pascoe was injured in motor vehicle accidents in 2002 and 2003.  On 11 March 2006 Mr Pascoe applied for and was granted the Disability Support Pension (DSP). 

2.      In November 2006 Mr Pascoe received a lump sum settlement of $28,210 in respect of the 2003 accident.  In February 2007 settlement was reached in respect of the 2002 accident whereby an amount of $50,000 (less weekly workers compensation of $35 519.93 paid to Comcare up to 4 December 2005) was to be paid to Mr Pascoe. 

3.      In December 2006 Mr Pascoe received further compensation payments totalling $102,302.52.  Comcare was to pay ongoing weekly compensation payments but did not do so until December 2007 when, after agitation by Mr Pascoe, it paid lump sum arrears from 11 March 2006.  Comcare did not deduct any amount for repayment to Centrelink.

4.      On 6 February 2008 Centrelink was advised by Comcare that Mr Pascoe had received an arrears payment of workers compensation payments.  Centrelink decided to raise and recover a debt of $15,151.79, being the amount of DSP Mr Pascoe received during the period he was entitled to (and later, paid in arrears) workers compensation payments.  That decision was affirmed on internal review and by the SSAT.

STATUTORY SCHEME

5. Section 1173 of the Social Security Act 1991 (the Act) requires the reduction of Centrelink benefits (such as DSP) where periodic compensation payments are received.  The effect is that weekly compensation payments reduce Centrelink benefits on a dollar-for-dollar basis.

6. Usually, Centrelink communicates with solicitors so as to arrange notification of settlement payments to Centrelink beneficiaries. Similarly, it communicates with insurers (such as Comcare) under s 1182 of the Act that they must not make payments to a Centrelink beneficiary, effectively, without Centrelink approval: s 1184D. Centrelink also informs its beneficiaries that Centrelink payments may have to be repaid from settlement proceeds.

7. Section 1184K of the Act provides potential relief from the strict application of the legislation by giving a discretion to disregard the whole or part of the compensation payment in “special circumstances”.

8. Section 1237A of the Act provides that the Secretary must waive the right to recover debts which are attributable solely to administrative error on the part of the Commonwealth.

9.      The relevant provisions of Social Security Act 1991 (“the Act”) are attached as an annexure.

ISSUES

10.     Mr Pascoe did not dispute the debt but contended that he should not be obliged to repay it all because of the tax implications arising from the method by which it arose.  Therefore the remaining issues are:

·Did the debt occur solely because of an administrative error by the Commonwealth?

·Are there special circumstances that it make appropriate to disregard some or all of the compensation payment made to Mr Pascoe pursuant to section 1184K of the Act?

CONSIDERATION OF EVIDENCE AND FINDINGS

administrative error

11. For a debt to be waived under section 1237A, two conditions must be met, namely that the debt arose solely because of administrative error and, secondly, the payments were received in good faith.

12.     Mr Pascoe contended that an error was made by Comcare in paying him the whole amount of the periodic compensation payment in arrears, without first deducting money owed to Centrelink. 

13. Centrelink had been advised by Comcare that the payment of $102,302.52 was in relation to permanent impairment and non–economic loss pursuant to ss 24 and 27 of the Safety, Rehabilitation and Compensation Act 1988. While Centrelink had previously issued a notice under s 1182 of the Act to Comcare, that notice was revoked (under s 1184D) because payment of that kind does not attract a charge. Mr Pascoe was similarly advised. Only on enquiry with Comcare on 6 February 2008 did Centrelink ascertain that in December 2007 Mr Pascoe had been paid arrears of weekly compensation from 11 March 2006.

14.     After the matter was settled, for reasons which are unclear, Comcare had not paid Mr Pascoe his weekly compensation payments for 13 months and it was only after intervention by the Ombudsman that arrears were paid, according to Mr Pascoe, unannounced and without reference, into his bank account.  Comcare made no enquiries of Centrelink.

15.     At the time Centrelink revoked its notice to Comcare it was unaware that arrears would later have to be paid.  Relying on the revocation of the notice, Comcare paid Mr Pascoe in full.  Mr Pascoe, for his part, had enquired as to the impact on his DSP, and was told, correctly at the time having regard to the information available to Centrelink, that there would be none. 

16.     Centrelink contended, relying on Sekhon v Secretary, Department of Family and Community Services (2003) 132 FCR 126, that the debt arose by the operation of the legislation (as noted above in respect of the legislative scheme) irrespective of the failure of Comcare to deduct monies due to Centrelink from Mr Pascoe’s Comcare payments. This, unfortunately for Mr Pascoe, is correct: the debt results from Mr Pascoe having been paid weekly workers compensation payments (albeit in arrears) which relate to the period he received DSP payments. That is, the amount of $15,151.79 for Centrelink benefits paid to Mr Pascoe for the period during which he later received compensation payments was repayable to Centrelink, irrespective of when Mr Pascoe received those monies. The tax implications is another matter entirely, and one which is not relevant to the quantum of the debt, per se.

17.     I therefore find that the debt did not arise solely from an administrative error.

special circumstances

18.     Special circumstances do not have to be statistically “extreme” or “unique”, it is sufficient if there is something that takes the matter out of the usual ordinary case, (see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).

19.     There are some aspects of Mr Pascoe’s circumstances that could be arguably be regarded as special:

Additional tax liability

20.     This was Mr Pascoe’s major contention. Mr Pascoe provided some calculations whereby he estimated that the additional tax he paid was in the vicinity of $5000.  While he contended that calculation of the overpayment of tax was ‘not rocket science’, I was not altogether clear that this was absolutely accurate in the absence of verification by the ATO.  Nonetheless I was prepared to accept that the payment by Comcare of a large lump sum rather than regular weekly payments may have impacted upon the amount of tax he had to pay.  He has received some assurances from the ATO, and possibly also Comcare that this will be sorted out when his tax is next assessed, but he does not have confidence that this will occur.  Unfortunately for Mr Pascoe this is not a matter for the Tribunal to canvass in considering the issue of Mr Pascoe’s debt to Centrelink. 

21.     Having said that though, it can be taken into account as part of his circumstances in determining if I should exercise my discretion in waiving all or part of the debt.  I also observe in this context that Mr Pascoe was deprived of that compensation payment for some 13 months. 

Financial Circumstances

22.     Mr Pascoe is unable to work and told me that his wife has not worked for 1½ years.  Mrs Pascoe has not pursued litigation in respect of a motor vehicle accident in which she injured her back, nor has she applied for DSP herself.

23.     They live on approximately $28,000 (gross) per annum of which $12,000 is superannuation and the rest is paid by Comcare.  Their income only just covers expenses, which are generally paid by direct debit.  Currently $3,000 is owed on credit cards. 

24.     Mr and Mrs Pascoe own their own home, owing now only about $2,000 on the mortgage.  The family car is nearly 20 years old.  There are no other assets or investments.

25.     Their 2 children live at home and are both students receiving youth allowance and they occasionally make a minor contribution to household expenses.  The daughter has a part time job sufficient to fund petrol for her car and some of her living expenses.

Poor Health

26.     According to the information available to me Mr Pascoe suffers from a psychiatric condition and a back condition. 

27.     Mrs Pascoe worked in early childcare and her back condition precludes her from working.  She also has gynaecological problems which require surgical intervention and she has already been on a hospital waiting list for some months. 

28.     The unresolved situation about Mr Pascoe’s compensation payments has caused stress to all members of the family and Mr Pascoe, his wife and at least one of the children are, or have been, on anti-depressants.

29.     I accept that both Mr and Mrs Pascoe are in poor health and that the whole family is under some stress.  However, health issues do not necessarily constitute special circumstances: Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464, Re Groth and Secretary, Department of Social Security (1995) 40 ALD 541, Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985).  Invariably, recipients of compensation will have health problems, as will recipients of many of the Centrelink benefits.

30.     To qualify as "special circumstances", financial hardship must go beyond "straitened" circumstances and be truly exceptional: Re Secretary Department of Social Security and Hill (1995) 39 ALD 667. It is not enough for Mr Pascoe to show that he is under financial pressure: (Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 at 699-700; see also Secretary, Department of Social Security v Ellis (1997) 24 AAR 535 at 539-540 per Carr J. The circumstances must make the burden of repayment of the charge unusual or extreme.

31.     I accept that the Pascoe family is suffering some financial hardship and are living on a relatively low income.  The 2 children are not totally dependent, each receiving Centrelink assistance.  Mrs Pascoe may be able to claim DSP but has not done so. 

32.     On the other hand they own an (almost) unencumbered house in Port Macquarie. 

33.     The principle behind the legislative scheme in relation to compensation payments was that a person could not ‘double dip’ and be a recipient of both social security benefit and compensation payments at the same time. 

34. While I find Mr Pascoe’s circumstances to be difficult I do not regard them as sufficiently special so as to exercise the discretion under s 1184K.

35.     Having said that, I would encourage Mr Pascoe to continue his negotiations with Comcare and the ATO.

DECISION

36.     The Administrative Appeals Tribunal affirms the decision under review.

I certify that the  preceding 36 paragraphs are a true copy of the reasons for the decision herein of, Ms N Isenberg, Senior Member.

Signed:         [Sgd]
           Tim Ngui, Associate

Date of Hearing  28 January 2009
Date of Decision  23 February 2009
Representative for the Applicant              Self-represented

Representative for the Respondent          James Larcombe, Centrelink Legal
  Services and Procurement Branch

Annexure

1173  Effect of periodic compensation payments on rate of person’s compensation affected payment

(1)  If:

(a)  a person receives periodic compensation payments; and

(b)  the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and

(c)  the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the rate of the person’s compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).

(2)  The person’s daily rate of compensation affected payment is reduced by the amount of the person’s daily rate of periodic compensation.

(3)  The reference in subsection (2) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.

(4)  If:

(a)  a person receives periodic compensation payments; and

(b)  at the time of the event that gave rise to the entitlement of the person to compensation, the person was qualified for, and was receiving, a compensation affected payment; and

(c)  the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;

the periodic compensation payments are to be treated as ordinary income of the person for the purposes of this Act.

1182  Secretary may send preliminary notice to potential compensation payer or insurer

(1)  If:

(a)  a person (the claimant) makes a claim against another person (the potential compensation payer) for compensation; and

(b)  the claimant claims a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;

the Secretary may give written notice to the potential compensation payer that the Secretary may wish to recover an amount from the potential compensation payer.

(2)  If:

(a)  a person (the claimant) makes a claim against a person (the potential compensation payer) for compensation; and

(b)  the claimant claims a compensation affected payment for a day or days in the periodic payments period or the lump sum preclusion period, as the case may be; and

(c)  an insurer, under a contract of insurance, may be liable to indemnify the potential compensation payer against any liability arising from the claim for compensation;

the Secretary may give written notice to the insurer that the Secretary may wish to recover an amount from the insurer.

(3)  A notice must contain:

(a)  a statement of the potential compensation payer’s or insurer’s obligation under section 1183; and

(b)  a statement of the effect of section 1184D so far as it relates to the notice.

1184D  Offence to make compensation payment after receiving preliminary notice or recovery notice

(1)  If a person (the potential compensation payer) has been given a notice under section 1182 or 1184 in relation to the payment of compensation to a person, the potential compensation payer must not make the compensation payment to the person.

Penalty:  Imprisonment for 12 months.

(1A)  Subsection (1) does not apply if:

(a)  in the case of a notice under section 1182—the Secretary has given the potential compensation payer written notice that the notice under section 1182 is revoked; or

(b)  in the case of a notice under section 1184—the potential compensation payer has paid to the Commonwealth the amount specified in the notice; or

(c)  the Secretary has given the potential compensation payer written permission to pay the compensation.

(2)  If an insurer has been given a notice under section 1182 or 1184 in relation to the insurer’s liability to indemnify a compensation payer, the insurer must not make any payment to the compensation payer in relation to that liability.

Penalty:  Imprisonment for 12 months.

(2A)  Subsection (2) does not apply if:

(a)  in the case of a notice under section 1182—the Secretary has given the insurer written notice that the notice under section 1182 is revoked; or

(b)  in the case of a notice under section 1184—the insurer has paid to the Commonwealth the amount specified in the notice; or

(c)  the Secretary has given the insurer written permission to pay the amount.

(3)  Strict liability applies to an element of an offence against subsection (1) or (2) that:

(a)  a notice is a notice under section 1182; or

(b)  a notice is a notice under section 1184.

1184K  Secretary may disregard some payments

(1)  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 is appropriate to do so in the special circumstances of the case.

(2)  If:

(a)  a person or a person’s partner receives or claims a compensation affected payment; and

(b)  the person receives compensation; and

(c)  the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s or the person’s partner’s receipt of, or claim for, the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).

1237A  Waiver of debt arising from error

Administrative error

(1)  Subject to subsection (1A), the Secretary must waive the right to recover the proportion of a debt that is attributable solely to an administrative error made by the Commonwealth if the debtor received in good faith the payment or payments that gave rise to that proportion of the debt.

Note:          Subsection (1) does not allow waiver of a part of a debt that was caused partly by administrative error and partly by one or more other factors (such as error by the debtor).

(1A)  Subsection (1) only applies if:

(a)  the debt is not raised within a period of 6 weeks from the first payment that caused the debt; or

(b)  if the debt arose because a person has complied with a notification obligation, the debt is not raised within a period of 6 weeks from the end of the notification period;

whichever is the later.

Underestimating value of property

(2)  If:

(a)  a debt arose because the debtor or the debtor’s partner underestimated the value of particular property of the debtor or partner; and

(b)  the estimate was made in good faith; and

(c)  the value of the property was not able to be easily determined when the estimate was made;

the Secretary must waive the right to recover the proportion of the debt attributable to the underestimate.

Proportion of a debt

(3)  For the purposes of this section, a proportion of a debt may be 100% of the debt.