Cheryl Clarke and Secretary, Department of Social Services
[2015] AATA 165
•20 March 2015
[2015] AATA 165
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/4799
Re
Cheryl Clarke
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Senior Member J F Toohey
Date 20 March 2015 Place Sydney The decision under review is set aside and in its place the Tribunal decides that, with effect from the date of this decision, the compensation payment should be treated as not having been made.
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Senior Member J F Toohey
CATCHWORDS – social security – disability support pension – compensation affected payment – preclusion period – whether preclusion period correctly calculated – whether special circumstances – decision under review set aside
Legislation
Social Security Act 1991 ss 17(1)(a), 17(2), 17(3), 17(4), 17(8), 1170(1), 1170(4), 1170(5), 1184K
Social Security (Administration) Act 1999 s 196
Cases
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth and Secretary Department of Social Security (1995) FCA 1708
Re Ivovic and Director General of Social Security (1981) 3 ALN N95
Re Krzywak and Department of Social Security (1988) 15 ALD 690
REASONS FOR DECISION
Senior Member J F Toohey
Background
In December 2007, Ms Cheryl Clarke suffered a serious injury at work. On 12 December 2011, she received a lump sum payment of $775,000 in settlement of her workers compensation claim. After deducting the amount of weekly compensation paid by the insurer pending finalisation of her claim, Ms Clarke received a lump sum of $687,680.47.
In July 2013, Ms Clarke applied for Newstart Allowance. For reasons which do not matter here, her claim was refused. Around the same time, Ms Clarke applied for a Disability Support Pension (DSP). Her claim was refused on the ground that, the lump sum payment having been partly in respect of lost earnings or earning capacity, it was compensation within the meaning of s 17(2) of the Social Security Act 1991 (the SS Act) and a lump sum preclusion period applied during which Ms Clarke was not entitled to a compensation affected payment.
DSP is a compensation affected payment: s 17(1).
Applying the formula in s 1170 of the SS Act, Centrelink calculated that Ms Clarke was subject to a preclusion period of 417 weeks from 16 December 2011 to 13 December 2019.
Centrelink also decided there were no special circumstances in Ms Clarke’s case that warranted reducing the preclusion period.
In July 2014, the Social Security Appeals Tribunal (SSAT) affirmed Centrelink’s decision, with a minor variation to the start and end dates of the preclusion period.
Ms Clarke seeks review of the SSAT’s decision. It is not in dispute that the lump sum compensation payment she received was compensation for the purposes of the Act. Nor is it in dispute that the preclusion period has now been calculated correctly (see below). The question is whether there are special circumstances that mean that all or any of the preclusion period should not apply.
How is a preclusion period calculated?
A preclusion period is calculated on a lump sum compensation payment after deducting the amount of any weekly compensation payments repaid to an employer or insurer: s 17(4)
As it applies to Ms Clarke, s 17(3) of the SS Act provides that the compensation part of a lump sum compensation payment is 50 per cent of the payment.
A lump sum preclusion period is calculated according to a formula in sub-sections 1170(4) and (5) in the Act. The compensation part of the lump sum is divided by the income cut out amount which is a weekly amount calculated according to a formula in s 17(8). The amount varies from time to time; in Ms Clarke’s case, it was $823.80.
After deducting $87,319.53 for repayment to the insurer, Ms Clarke’s lump sum compensation payment for the purposes of calculating the preclusion period was $687,680.47. Applying s 17(3), the preclusion period was calculated on the sum of $343,840.23.
Applying the formula in s 1170, the preclusion period to which Ms Clarke is subject is 417 weeks (after rounding down to the nearest whole number: s 1170(5) of the Act).
I am satisfied that Centrelink has correctly calculated the length of the preclusion period applying to Ms Clarke.
When does the preclusion period start and end?
At various stages of the original decision and review, the precise start and end dates of Ms Clarke’s preclusion period have been calculated differently. The original decision maker and the authorised review officer calculated the period as from 16 December 2011 to 13 December 2019. The SSAT found the period to be from 7 December 2011 to 13 December 2019. In these proceedings, Centrelink says the period commences on 17 December 2011 and ends on 14 December 2019.
I am satisfied this last calculation is correct. A preclusion period begins on the day following the last day of periodic payments and ends at the end of the number of weeks worked out in accordance with the formula above: s 1170(1). Advice to Centrelink from Allianz Australia Workers Compensation (NSW) Ltd, the insurer who paid Ms Clarke’s periodic payments, shows that the last day of periodic payments to her was 16 December 2011. This results in a preclusion period starting on 17 December 2011 and ending on 14 December 2019.
The meaning of special circumstances
Section 1184K of the Act provides that the Secretary (and so the Tribunal) may treat the whole or part of a compensation payment as not having been made if it thinks it appropriate to do so in the special circumstances of the case.
The meaning of special circumstances has been considered on many occasions in decisions that are well-known. The exercise of the discretion requires circumstances that, while not necessarily unique, are “unusual, uncommon, or exceptional” and 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; see also Groth and Secretary Department of Social Security (1995) FCA 1708.
Merely because a person faces financial hardship is not sufficient to constitute special circumstances. If it were, the policy underlying the imposition of a preclusion period, which is to prevent persons who have received compensation in respect of lost earning or earning capacity from spending that money and then looking to the tax payer to support them, would be undermined.
In a number of cases, the Tribunal has said that financial hardship must go beyond "straitened" and be truly exceptional (see, for example, Re Krzywak and Department of Social Security (1988) 15 ALD 690). That said, decision-makers must be “prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate”: Re Ivovic and Director General of Social Security (1981) 3 ALN N95.
Ms Clarke’s circumstances
Ms Clarke is aged 52. She has three adult children and 19 grandchildren. Before she met her (now former) partner in 2009, she had been single for 16 years and was living in Housing Commission accommodation. Her life was not easy but she had been in stable housing for many years and relatively stable employment. She was working as a cleaner when she suffered the injury to her knee that led to her compensation payment. She can no longer work as a cleaner.
Ms Clarke and her former partner, Mr John Gatt, formed a relationship in 2009. At the end of 2011, around the time she received her lump sum compensation, they started living together in a house he owned jointly with his former wife. Ms Clarke thought it made more sense financially to lend Mr Gatt the money to finalise a property settlement with his wife and move in with him and repair the house, than for her to buy a separate property. She gave evidence that, after 16 years on her own, she finally trusted someone, and the prospect of owning a home with Mr Gatt where her grandchildren could come and stay was very appealing. Given subsequent events, she now recognises how romantic her vision was.
Had Ms Clarke bought her own property, as she was financially able to do at the time, it is most unlikely she would be in the position she is now in.
After payment of legal fees, Ms Clarke received a net amount of $500,700 from her compensation payment. It is not entirely clear exactly where all of that amount went but, as best as she can recall, Ms Clarke paid the following approximate amounts:
(i)$290,000 loan to Mr Gatt to finalise the property settlement with his wife;
(ii)$25,000 on repairs to the house;
(iii)$30,000 to pay expenses for Mr Gatt’s truck and trucking business;
(iv)$31,000 to buy a motor vehicle (which she has sold in late 2013 to pay for legal and general living expenses);
(v)$30,000 to buy furniture;
(vi)$25,000 to her son for his wife’s funeral and for legal expenses in relation to child custody matters;
(vii)$10,000 to her daughter to pay off debts.
In early 2012, Ms Clarke lent Mr Gatt the money to finalise his property settlement and pay other debts. The house they were living in was transferred to him pursuant to Family Court orders on 22 March 2012. The plan was that they would continue to live in the house together.
The terms of the agreement between Mr Gatt and his wife are not clear. It is not clear how much, if any, equity there was in the property when it was transferred to him but it is reasonable to think there was at least some; he does not appear to have gained anything else on account of the money paid to his former partner. Figures below suggest there may have been approximately $70,000 equity in the property at the end of 2014.
Ms Clarke gave evidence, which I accept, that Mr Gatt agreed he would repay the loan and transfer his house to her. She registered a caveat over the property to secure her interest. A letter from her former solicitors on 21 August 2013, after the relationship with Mr Gatt ended, confirms they were in the process of filing proceedings in the Federal Circuit Court for the transfer of the property to her.
About three weeks after Ms Clarke received her compensation payment, Mr Gatt, who had a trucking business of sorts, stopped working. She gave evidence that he claimed to have some kind of breakdown once matters with his former wife were finalised, but she doubted his claim. At any rate, she continued to pay all the household bills including the mortgage repayments, and she paid expenses relating to Mr Gatt’s business.
Ms Clarke and Mr Gatt were to be married in July 2013 but separated approximately three weeks before the wedding. She says he left once her money started to run out and she stopped giving him money. At that time she had about $30,000 left from her compensation payment which she used for living expenses.
A letter from Pastor Chris Dalton of Hawkesbury Church dated 8 July 2014 shows that, up until July 2013, Ms Clarke attended church weekly with her “many grandchildren”. She was “working furiously renovating a house she’d co-purchased with her partner, planning to marry in the near future [and] all seemed rosy”. (It is not correct that she had bought the property jointly with Mr Gatt but it doesn’t matter). Pastor Dalton stated that the relationship broke down unexpectedly, leaving Ms Clarke with no means of support, her funds having been exhausted on the renovations and Mr Gatt’s business truck; the church stepped in to help her “nearly weekly” with food, power, clothes and bills. She could no longer afford to have her grandchildren visit regularly and was devastated by this; she had been desperate on many occasions and, without the church’s help, she could never have coped.
Ms Clarke says her circumstances have not improved since then and have in fact deteriorated.
The authorised review officer’s decision
At the time of the authorised review officer’s decision on 28 August 2013, the officer stated that she took into account that Ms Clarke had a realisable asset in her motor vehicle and this would provide her with adequate funds to support herself pending the outcome of the proceedings against Mr Gatt in the Federal Circuit Court. In those circumstances, the officer determined, there were no special circumstances that meant the preclusion period should be shortened at that time. Subsequently, Ms Clarke sold the vehicle for $20,000. The officer’s decision seems entirely reasonable in the circumstances at the time.
The SSAT’s decision
The SSAT’s decision in July 2014 shows that Ms Clarke had “some equity” in the home but appeared to have taken out a commercial mortgage to buy it at a time when she had no income to service the loan herself. It is not clear there was in fact any equity in the property but, given the complicated transactions surrounding it, it is not surprising that it appeared this way to the SSAT.
The SSAT noted that internet searches on onthehouse.com.au showed the property was sold on 24 May 2006 for $265,000 and again on 3 November 2007 for $340,000. Other real estate websites indicated the median house price for three-bedroom homes in Windsor was $460,000 and for four-bedroom homes $605,000. (It is reasonable to assume, if it was in bad repair, that its value fell on the lower side of the median).
The SSAT said it was not without sympathy for Ms Clarke’s plight; she appeared always to have had the best of intentions but she had made extremely poor choices in spending her funds and she appeared to have been taken advantage of by Mr Gatt. However, it could see no justification in the taxpayer being called upon effectively to subsidise the purchase of a large asset - her home - which she would not otherwise have acquired. Again, this approach seems reasonable on what was known of Ms Clarke’s circumstances at the time.
The SSAT also decided Ms Clarke had “some residual work capacity” in child care as demonstrated by the fact that she had undertaken some babysitting and had registered an ABN for this purpose, and her care for her grandchildren.
Arrangements in respect of the property
In November 2013, the Federal Circuit Court ordered the transfer of Mr Gatt’s property to Ms Clarke on her payment to him of $15,000. It is not clear what this amount represented.
It is not easy to follow what happened from this point. Ms Clarke gave evidence in person at a hearing of the Tribunal and by telephone at a resumed hearing. She seemed to have a good understanding of what had happened but it was still difficult to make sense of the various transactions concerning the property. Documents provided to the Tribunal by Centrelink shed some light on events, and Centrelink has made further inquiries and obtained some further information in the course of these proceedings in an effort to clarify various transactions, but aspects remain confusing.
Correspondence dated 5 December 2014 to the Department of Human Services from Lyons and Lyons, solicitors, shows that, at the time of the Court orders, Mr Gatt’s property was subject to a mortgage in favour of a private mortgagee, MKM Capital Pty Ltd (MKM). The mortgage was in arrears and MKM had obtained judgment for the debt and for possession of the property. Ms Clarke did not have the funds to cover the arrears or the $15,000 to pay Mr Gatt. MKM would not allow the transfer to proceed until the arrears were paid and was at the point of taking possession of the property.
Ms Clarke found herself in a position where the orders for the transfer could not be given effect.
Ms Clarke gave evidence that the pastor at her church introduced her to Mr Graeme Atkinson, the Secretary of MIH Property Solutions Pty Ltd (MIH), who offered to help. Lyons and Lyons, who acted for MIH, advised in their letter of 5 December 2014 that discussions between MIH, Ms Clarke, the sheriff and MKM led to agreement “that the writ would lie in office to give MIH the opportunity to factor a settlement and this was achieved”.
Lyons and Lyons’ letter shows that MIH renegotiated the mortgage with MKM. Mr Atkinson paid $157,000 by cheque to cover the arrears on the property, various costs, and the money due to Mr Gatt. In return, MKM lent Ms Clarke approximately $185,000, being the amount remaining owing on the property and it was transferred to her subject to a new mortgage to secure the loan. As security for the payments it was making on her behalf, Ms Clarke granted MIH an equitable mortgage, and MIH registered a caveat against her title. Second and third caveats were registered by another lender from whom she obtained a personal loan and by the solicitor who acted for her in the proceedings against Mr Gatt.
On 4 April 2014, Ms Clarke and representatives of MIH signed a Deed of Equitable Mortgage by which MIH agreed to lend Ms Clarke money interest free on terms including that she pay “all rates, taxes, utility charges, insurance premiums, mortgage and other liens, encumbrances, mortgage or payments …”, that she keep the property fully insured, and that she repay the debt fully on any sale. Parties “mutually agreed and consented to” terms including that Ms Clarke appoint MIH her attorney for all dealings in the property and pay all MIH’s “legal, accountancy and other reasonably required fees for professional services” associated with dealings with the property.
Asked why she gave MIH a power of attorney in relation to the property, Ms Clarke said she only found out the significance of the power she had given Mr Atkinson recently when they had “a bit of a falling out”. She says he told her it was “paperwork” so that he could “do things around the house” and, had she known what it meant, she would not have signed it. She says people take advantage of her because of her lack of education and her dyslexia.
On 8 April 2014, Ms Clarke and representatives of MIH signed an “Acknowledgment and Disclosure Statement” which stated that the mortgage was “presently in arrears for about $130,000” and Ms Clarke “estimated the current market value of the property at about $380,000”. MKM agreed to transfer title to her and to take a new mortgage to secure “an amount of about $185,000”.
According to the Acknowledgment and Disclosure Statement, the extent of Ms Clarke’s “debt relevant to the property at present” was:
a. mortgage arrears of $157,000, including $15,000 to be paid to John William Gatt
b. Legal costs for Cheryl Ann Clarke of $16,000
c. Three months’ rent for Cheryl Ann Clarke $5920
d. Insurance premium $1815
e. $4000 to clear her gas, electricity, council rate and water rate accounts.
The Acknowledgment and Disclosure Statement acknowledged that MKM would grant Ms Clarke a loan if MIH paid “the amounts approximated” as well as her rent for three months from the date she vacated the property; the maximum MIH would pay was $185,000 “as an inducement to [MKM] to grant the new mortgage over the title to you”. Ms Clarke would sign documents including the power of attorney to enable them to sell the property, and a “transfer of title document for property, blank as to buyer and price”.
The agreement was that Ms Clarke would give MIH vacant possession on 8 April 2014 and MIH could, but was not obliged to, renovate the property with a view to leasing or selling it “without recourse to you”. When the property was sold, the mortgage to MKM would be discharged and the net proceeds of the sale “will be ours to keep and you will not and cannot make any claim against us for the whole or any part of the proceeds of sale”.
The benefits to Ms Clarke were described in the Acknowledgment and Disclosure Statement as:
(a)You will be rid of the property
(b)You will not incur holding costs or agent’s commission in respect of the property.
(c)You are finalizing the aftermath of the Federal Court litigation by disposing of the property on advantageous terms and incurring no debt.
In May 2014, Ms Clarke and her son, Bruce, who was living with her, moved out of the house and into a rental property; the rent was $390 per week. A receipt provided by MIH shows payment of $6630 being for 14 weeks rent and four weeks bond.
Ms Clarke’s loan repayments to MKM were $554.83 each fortnight. She gave evidence that, at the time, she thought they were manageable because Bruce was working part-time, she earned some money from occasional babysitting, and MIH was paying her rent. She believed she could meet the rent after her house was sold although, given their incomes, that was hardly realistic.
According to Ms Clarke, Mr Atkinson told her that MIH would take about three months to renovate the property and then sell it; MIH would spend $20,000 to $30,000 on repairs and any profit would be split three ways between her, Mr Atkinson and his business partner. She expected her share might be around $20,000. She says as time went on and more extensive renovations were underway, she told Mr Atkinson she wanted them finished and the house put on the market. In the meantime, she had paid the insurance on the property and the rates. She says she stopped paying the utilities when the renovations took months longer than expected.
After renovations, the property was sold in December 2014. Receipts provided by Mr Atkinson show MIH continued paying Ms Clarke’s rent payments to 8 January 2015 when the sale of the property was finalised.
Sale of the property
A contract for sale was signed by purchasers and Mr Atkinson as Ms Clarke’s attorney on 21 November 2014. The sale price was $680,000. According to Lyons and Lyons letter of 5 December 2014, MIH had expended “about $175,000” on renovations and the indicative split of the proceeds of sale would be:
1. First mortgagee (MKM) $224,500.00
2. Equitable mortgage (MIH) $185,000
3. Second Caveat $12,000 (relating to a personal loan taken out by Ms Clarke)
4. Third caveat $4,000 (registered by another solicitor on account of unpaid legal costs)
5. Remaining balance MIH
It is not clear how the figure of $224,500 owing to MKM was arrived at. It does not appear to reconcile with other documents including a letter dated 18 December 2014 from Lyons and Lyons to solicitors (apparently for the purchasers) asking them to advance the balance of the purchase price of $612,603.74 as follows:
Hawkesbury City Council $1012.50
Sydney Water $287.40
Barclay Finance $18342.55
MKM Capital Pty Ltd $197748.04
Michael Vassili (solicitor) $9860.05
The Messina Trust $2680.00
MIH Property Solutions Pty Ltd $382673.20As these figures did not appear to account for the entire purchase price, the Secretary made further inquiries at the Tribunal’s request. A copy of a letter dated 22 December 2014 shows that the balance comprised the deposit of $68,000 which, after deduction of sales commissions and GST, left $57,800 which was paid “to vendors”. Mr Atkinson confirmed to the Tribunal that it was paid to MIH.
Inquiries by the Secretary
Because it was so difficult to understand fully the various transactions concerning the property and to reconcile various figures, the Tribunal asked the Secretary to make further inquiries in an effort to better understand Ms Clarke’s circumstances. The Secretary issued notices pursuant to s 196 of the Social Security (Administration) Act 1999 to MKM, Lyons and Lyons, and MIH making specific inquiries. Only Mr Atkinson responded. No reply was received from MKM despite follow up emails on behalf of the Secretary, and the only response from Lyons and Lyons was in the form of an email from Mr Atkinson stating he was replying on their behalf. That response seems unusual. Attempts on behalf of the Secretary to obtain information from Mr Jackson at Lyons and Lyons were unsuccessful. That is plainly unsatisfactory.
Mr Atkinson’s email response to the Secretary’s notice asking if he had receipts for the $175,000 spent on renovations was to the effect that he had no idea where that figure came from. He could not shed light on why Lyons and Lyons cited that amount in their letter of 5 December 2014. Nor could he explain why Mr Gatt was to be paid $17,500 from the settlement monies when the Statement of Acknowledgement and Disclosure stated he was owed $15,000.
Asked about Ms Clarke’s claim that he told her any profit from the sale would be divided three ways, Mr Atkinson gave evidence that “originally”, before MIH decided to renovate the house, that was the deal. It is not clear why it should have changed once the renovations were undertaken. What is clear is that MIH made a substantial profit from the sale. Mr Atkinson maintains it was not great and would be reduced considerably after tax. However, according to Lyons and Lyons’s second letter, approximately $382,673 went to MIH from the proceeds of the sale. With the balance of $57,800 from the deposit, a total of $440,473 went to MIH. Allowing $157,000 to Mr Atkinson on account of his original cheque, the balance was $283,473. Even if I were accepted that MIH spent $175,000 on the renovation, the profit was $108,473. As Mr Atkinson has no idea where Lyons and Lyons obtained that figure, it seems reasonable to conclude that considerably less than that was expended, and the profit would have been that much greater. Mr Atkinson gave evidence that any profit would be reduced by tax but he still estimated he and his partner would gain approximately $40,000 each from the sale.
Ms Clarke gave evidence that she did not understand the Statement of Acknowledgment and Disclosure document before signing it. She maintains no one explained it to her. She said only Mr Atkinson, his wife and his business partner, and Pastor Mann from the church, who witnessed the document, were present. Giving evidence, Mr Atkinson agreed this was so but he maintained that all three explained it fully to Ms Clarke before signing. Asked whether he knew if she had any independent legal advice before signing, he said he did not. Asked if he thought to suggest she obtain legal advice, he said he had not.
I asked Mr Atkinson whether any consideration was given to any capital gains (CGT) or other taxation implications for Ms Clarke and he said he and his partner would bear any CGT. It is not clear whether she would be subject to CGT but Mr Atkinson’s response suggests that no thought was actually given to the matter at the time.
When I asked Mr Atkinson what he knew of Ms Clarke’s financial circumstances at the time, he said he understood they were grave and she was about to be turned out of her home. He saw the benefit of the arrangement to her was that she would be debt-free. He thought she had very little income. He seemed genuinely surprised to learn that she had no income other than from occasional babysitting, and that she is subject to a preclusion period until 2019.
It is still not clear to me what arrears were owing on the property in November 2013 and whether there was any equity in it. According to the Acknowledgment and Disclosure Statement, on 8 April 2014 the mortgage was “presently in arrears for about $130,000”. That amount was covered by Mr Atkinson’s cheque which enabled the transfer to Ms Clarke to proceed (which he gave evidence also went to pay Mr Gatt and other costs). Assuming the property was worth $380,000 as stated on the Statement of Acknowledgment and Disclosure, and taking into account the new mortgage of $185,000, it appears there was equity of approximately $65,000.
I accept that Mr Atkinson was trying to help Ms Clarke. I accept that she may have been desperate to hold on to the property even if that was unrealistic. I accept that she was in an impossible situation and had had no hope of acquiring the property without financial assistance.
All that said, it is hard to see how Ms Clarke was ever going to benefit from the arrangement with MIH. At the time of Court orders in November 2013 and at the time of entering the agreement with MIH her own debts were relatively small. The Statement of Acknowledgment and Disclosure suggests they were about $20,000. Mr Atkinson says she was about to be homeless because MKM was about to take possession of the property but the agreement with MIH only forestalled that happening. Ms Clarke was never going to live in the home because it was to be sold, whether renovated by MIH or not. I accept her evidence that she believed she would share in the profit of the sale; it made no sense for her to enter the agreement at all otherwise.
Ms Clarke does not appear to have had the benefit of sound legal or financial advice. She might be no worse off now on account of the arrangement with MIH but she is no better. It is difficult to escape the conclusion that the only real beneficiaries of the arrangement were Mr Atkinson and his partner.
Are there special circumstances that mean any or all of the preclusion period should not apply?
The Secretary submits, correctly, that Ms Clarke was put on notice, in writing, by Centrelink that her compensation payment made her liable to a preclusion period during which time she could not receive any compensation affected payment. The Secretary submits that she treated the payment as a windfall and was reckless in the manner in which she spent it.
In my opinion, there are special circumstances in this case that warrant the exercise of the discretion so as to waive the preclusion period as of the date of this decision.
Ms Clarke impressed me as a truthful person and I accept her evidence. She does not dispute that she was on notice that she was liable to a preclusion period. However, she says, she gave the preclusion period little thought because it never occurred to her that Mr Gatt would leave her when they were planning to marry; she saw her future with him and thought she would never have to call on a social security payment except maybe in her old age. Mr Atkinson says she was “swindled” by Mr Gatt who apparently had no further interest in the relationship once she stopped making payments for him.
It is indisputable that Ms Clarke spent approximately $500,000 in less than two years but I do not agree that her spending was reckless. I accept that it was her decision to make payments to, and for, Mr Gatt. However, her strong desire for a relationship made her vulnerable to exploitation, and she was further vulnerable because of her strong desire to provide for her grandchildren. A measure of her vulnerability was that she paid $290,000 to his former wife, and she agreed to an arrangement with MIH without the benefit of sound legal or financial advice. I am satisfied that her lack of education, her functional illiteracy and dyslexia played a large part in the situation she is now in.
Ms Clarke’s current circumstances are extreme. She has been without income since her money ran out in mid to late 2013. Since MIH stopped paying her rent in January 2015, she has been unable to meet the payments.
Until recently Ms Clarke lived with her son, Bruce whose wife was killed in a car accident about two years ago. In May 2014, Bruce sustained severe head injuries during a home invasion. He has been unable to work since and Ms Clarke had been his carer. He was receiving Newstart Allowance and Ms Clarke understands he has applied for DSP and his application is currently being considered by Centrelink. She has another son who has been in gaol and was due for release recently. She has a daughter who has two disabled children.
Bruce’s three children previously spent every second weekend with Ms Clarke and Bruce pursuant to an order for shared custody with their maternal grandparents but she says they cannot come when she cannot afford to buy food or drink for them. She also helps care for her other grandchildren.
Ms Clarke describes some of her 19 grandchildren as “feral”. She wants to provide them with better care and support in her home than their parents provide. Her bank statements show she has opened bank accounts for each grandchild. The account balances are minimal but they are evidence of her concern to provide for them despite her own straitened circumstances. It is a matter of deep distress to Ms Clarke that she cannot help her grandchildren and she fears for their future.
Ms Clarke gave evidence at a resumed hearing this week that Bruce has recently had to go into rehabilitation, I understand for a drug problem. Out of concern for her grandchildren, she said she told Bruce he had to leave the house. The terms of his access to the children include that he not use drugs and that visits be supervised by Ms Clarke. Before he left, Ms Clarke and Bruce both lived on his Newstart Allowance. Their rent was in arrears and she was managing with the help of her church. She says Bruce’s “dole has been cancelled”. The result of him leaving the house is that she has been left without any income but she says she had no alternative as she did not want her grandchildren to be around him while he was on drugs. It is a measure of her commitment to her grandchildren that she prefers him to leave the house and leave her without income rather than not have the grandchildren.
Pastor Jo Korman from Ms Clarke’s church gave evidence by telephone that the church has provided Ms Clarke with food frequently over the past two years. They have provided emergency relief funds and rent assistance but these are meant to be one-off payments. Asked what help the church could provide if Ms Clarke were evicted, Pastor Korman said the church has funds from Mission Australia which are available as loans to help families sustain tenancies but they have to be repaid; as Ms Clarke has no income, this assistance would not help.
Before the home invasion, Ms Clarke earned some money from babysitting local children in her home. She says their parents do not want them to be cared for in her home because of the possibility of a further invasion and this income has dried up. Mr Misrachi for the Secretary asked Ms Clarke whether she could resume babysitting now that Bruce has left the house. She says she cannot start advertising and looking for business without a secure tenancy and even then it would take her some time to build up any business. I accept what she says.
Besides her rent, Ms Clarke has substantial mounting debts for utilities and the like that she has no way of paying. Her rent is in arrears again and she has been served notice of proceedings in the NSW Civil and Administrative Tribunal and is to appear in that tribunal on 30 March 2015. As she has no prospect of continuing to pay her rent, eviction appears inevitable. She has a health care card but cannot afford medication or to see a psychologist as has been recommended. She cannot obtain a concession card and has to pay full price for public transport. When she cannot pay for public transport, she has to walk which is very difficult for her because of the knee injury which was the subject of her compensation payment. She will almost certainly become homeless before long. If that happens she will have no way of helping care for her grandchildren and they will suffer as well.
In my view, the combination of Ms Clarke’s vulnerability to exploitation as demonstrated by the way she has spent most of her compensation payment, her lack of education and functional illiteracy, and the extremely straitened financial situation she is now in, amounts to special circumstances and the discretion should be exercised in her favour.
The decision under review is set aside and in its place the Tribunal decides that, with effect from the date of this decision, the compensation payment should be treated as not having been made.
80. I certify that the preceding 79 (seventy-nine) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey.
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AssociateDated 20 March 2015
Date(s) of hearings
10 December 2014, 12 February 2015 & 17 March 2015
Representatives for the Applicant
Self represented
Representatives for the Respondent
Mr Stefan Misrachi, Government Lawyer
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