Chessell; Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and

[2008] AATA 549

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 549

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/0118

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Applicant

And MARTIN CHESSELL

Respondent

DECISION

Tribunal Ms N Isenberg Senior Member

Date30 June 2008

PlaceSydney

Decision The Administrative Appeals Tribunal sets aside the decision under review and in substitution therefor reduces the amount of the compensation charge to $10,000.

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

Ms N Isenberg
  Senior Member

CATCHWORDS

SOCIAL SECURITY – lump sum workers compensation payment not able to be dissected – preclusion period – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made – unfairness of the strict application of the “50% rule” – special circumstances – decision under review set side.

Administrative Appeals Tribunal Act 1975 – section 40(1)

Social Security Act 1991 – sections 17, 1169, 1170, 1171, 1179 and 1184K

Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211

Secretary, Department of Social Security v Cunneen (1997) 149 ALR 665

Beadle v Director General of Social Security (1985) 7 ALD 670

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

Secretary, Department of Social Security v Smith (1991) 23 ALD 277

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

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

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

Re Ivocic and Director General of Social Security (1981) 3 ALN 95

Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531

Re Hajar and Secretary, Department of Social Security (1998) 16 ALD 716

Lajmanovska and Secretary, Department of Employment and Workplace Relations [2007] AATA 1655

REASONS FOR DECISION

30 June 2008 Ms N Isenberg, Senior Member

DECISION UNDER REVIEW

1.      The decision under review is the decision of the Social Security Appeals Tribunal (“SSAT”), dated 20 December 2006, which reviewed the decision of an Authorised Review Officer (“ARO”), dated 19 October 2006, to affirm an original decision, dated 30 August 2006, to recover a compensation charge in the amount of $14,431.88.

2. Prior to the hearing of this matter, Mr Chessell indicated to the Administrative Appeals Tribunal (“the Tribunal” and “the AAT”) that he would not be attending the hearing. Tribunal staff contacted Mr Chessell on a number of occasions to enquire whether he would prefer to attend the hearing by telephone, but Mr Chessell advised that he would not. Having examined the documents I was satisfied that Mr Chessell has received proper advice as to the date of the hearing and I therefore proceeded to hear the matter in his absence pursuant to subsection 40(1)(b) of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”).

3. In evidence before me were the documents lodged with the Tribunal pursuant to section 37 of the Act (“the T-docs”). I also had the following documents before me:

·Job Capacity Assessment Report dated 24 January 2008

·Letter to Legal Aid Commission from P.K. Simpson & Co Traffic Injury & Compensation Solicitors, dated 30 July 2007

·Letter to Centrelink from Legal Aid Commission, dated 7 August 2007

·Letter to Centrelink from Legal Aid Commission, dated 15 August 2007

·Letter to Centrelink from Legal Aid Commission, dated 17 August 2007

·Centrelink Computer Records relating to Mr Chessell’s Compensation Estimate/Charge dated 29 August 2007

·Statement of Mr Chessell, date stamped 26 October 2007

·Treating Doctor’s Report, completed by Dr Chan, dated 14 May 2003

BACKGROUND

4.      Mr Chessell injured his left ankle in a work accident in November 1999, and again in October 2000. Mr Chessell settled a workers compensation claim on or about 9 December 2002 under which he received a lump sum compensation payment in the amount of $25,000. The lump sum compensation payment was paid in the form of two cheques, each in the amount of $12,500.

5.      Mr Chessell was granted disability support pension (“DSP”) with effect from 28 July 2003. The last day Mr Chessell received weekly workers compensation was 19 July 2004.

6.      Mr Chessell settled another workers compensation claim in respect of the same event on 9 August 2006, receiving a lump sum compensation payment in the amount of $31,000. This lump sum compensation payment contains an amount of $3,100 in relation to weekly workers compensation payments.

7.      On 30 August 2006, Centrelink decided to impose a compensation preclusion period from 20 July 2004 to 27 June 2005 and to recover a compensation charge in the amount of $14,431.88. That decision was affirmed on internal review but, on 20 December 2006, the SSAT set aside the decision and sent the matter back to Centrelink for reconsideration in accordance with directions that $37,500 of the aggregated compensation lump sum is to be disregarded in the special circumstances of the case. The preclusion period, and hence the charge, were to be recalculated accordingly.

8.      After the present application for review was lodged, representations were made to Centrelink on Mr Chessell’s behalf by Legal Aid. However, Legal Aid ceased to act for Mr Chessell prior to the commencement of the hearing.

9.      Centrelink calculated the preclusion period and charge based on an aggregated lump sum compensation payment of $56,000.

ISSUE BEFORE THE TRIBUNAL

10.     The main issues for me to decide are:

·     How much compensation did Mr Chessell receive;

·     What amount of the lump sum compensation received by Mr Chessell should be classified as compensation affected payments;

·     What is the preclusion period; and

·     Are there special circumstances that provide the grounds for all or part of the compensation charge to be disregarded.

COMPENSATION AFFECTED PAYMENT

What was the lump sum Mr Chessell received?

11.     It was conceded that the SSAT had erroneously understood Mr Chessell to have received a total of $37,500 in respect of the first workers compensation settlement. Information provided by Legal Aid from Mr Chessell’s (former) solicitor, shows that Mr Chessell received two lump sum payments in respect of the first claim totalling only $25,000.

12.     Information about the second settlement was more problematic. The solicitors’ letters of 17 August 2006 and 30 July 2007 differed from each other and neither reflected the orders actually made. The orders show a total award in the amount of $33,500 (and that $3,100 related to lost earnings).

13. For the purposes of the calculation of the preclusion period these sums are added together: section 1171(1) of the Social Security Act 1991 (“the Act”). Therefore, Mr Chessell is taken to have received an aggregated lump sum compensation payment of $58,500.

Calculation of compensation part of lump sum

14. Section 17(3) of the Act provides that the “compensation part” of the lump sum payment, that is, the part to be used to calculate the preclusion period is, arbitrarily, 50% of the payment. Accordingly, the preclusion period should be calculated using 50% of $58,500 which is $29,250.

Calculation of the preclusion period

15. Section 1169 of the Act provides that recipients of lump sum affected compensation payments are not entitled to Centrelink benefits, such as DSP, during the lump sum preclusion period: section 17.

16. Under section 1170(1) of the Act, the lump sum preclusion period begins from the day following the last day the applicant received weekly workers compensation. The last day on which Mr Chessell received weekly workers compensation payment was 19 July 2004.

17. The preclusion period operates for the period calculated using the formula set out in section 1170(4) of the Act. The formula set out in section 1170(4) is as follows:

(4) The number of weeks in the lump sum preclusion period in relation to a person is

the number worked out using the formula:

Compensation part of lump sum

Income cut-out amount

18.     At the date of the settlement the income cut-out amount was $695.88. The compensation part of the lump sum ($29,250) divided by $695.88 is 42 weeks (rounded).

19.     This results in a preclusion period of 20 July 2004 (the day after his weekly workers compensation ceased) to 9 May 2005.

Calculation of the charge

20. The amount recoverable from Mr Chessell is calculated in accordance with section 1179 of the Act. Section 1179 of the Act states the recoverable amount is the lesser of the compensation part of the lump sum compensation payment ($29,250) or the sum of the payments of the compensation affected payment (here, DSP) made to the person in relation to a day or days in the lump sum preclusion period.

21.     I was informed that the DSP paid to Mr Chessell in relation to the preclusion period is $11,641.93, calculated on the basis of 40 weeks. Another two weeks DSP payments had been erroneously omitted. This, based on the 40 week figure was likely to be in the vicinity of $580. Therefore the compensation affected payment for 42 weeks is approximately $12,221.93.

22.     The lesser, therefore, is the DSP payments.

SPECIAL CIRCUMSTANCES

23. It is well established that section 1184K is designed specifically to enable the Secretary to ameliorate unfairness or injustice which results upon the strict application of the Act: Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211. In Secretary, Department of Social Security v Cunneen (1997) 149 ALR 665 at 673, it was specifically noted that:

…if the application of what is an essentially arbitrary rule produces genuine hardship, then, clearly, the Secretary may act under s 1184 [as it then was] to alleviate that hardship.

24.     The discretion to disregard the whole or part of a compensation payment can be exercised where the application of the usual rules would lead to a result that is unfair or inappropriate (see Beadle v Director General of Social Security (1985) 7 ALD 670 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570). The Federal Court in Secretary, Department of Social Security v Smith (1991) 30 FCR 56 held that it is appropriate for the discretion under section 1184K to be used where the arbitrary nature of the “50% rule” results in unfairness in a particular case.

25. Section 1184K is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. 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.

26.     In Re Ivovic and Director-General of Social Security (1981) 3 ALN 95 the Tribunal said:

The reference to special circumstances “by reason of which” a person liable “should be released” requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes ... Thus, whilst keeping the dominant principle of [recovery of a debt] in mind, [the decision maker] must nevertheless 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.

27.     In the Federal Court case of Boscolo v Secretary, Department of Social Security (1999) 90 FCR 531, French J stated regarding the requirement of “special circumstances”:

It is in essence instrumental, a direction to the decision-maker that the discretion it constrains is not lightly to be enlivened.... The core of the requirement for “special circumstances” or “special reasons” is that there be something unusual or different to take the matter the subject of the discretion out of the ordinary course.

28.     Mr Chessell had told the SSAT about a number of aspects of his circumstances which, he contended, were special. It was submitted on behalf of Centrelink that Mr Chessell’s circumstances are not unusual for a recipient of compensation and DSP.

Medical conditions

29.     Mr Chessell suffers from medical conditions that are not related to the injury for which he received compensation. He told the SSAT that he had a number of medical conditions including Attention Deficit Hyperactive Disorder (“ADHD”) which was diagnosed when he was in his early thirties. He also has depression and anxiety for which he has been prescribed Avanza and Temazepam, however he has ceased to take these medications because of adverse side-effects. Mr Chessell also told the SSAT that he was despondent as a result of his inability to work or to do activities he had previously been able to undertake.

30.     He apparently does not have the full use of one of his hands as he has had two fingers amputated. He also has a back injury, and as a result of the left ankle injury he now has problems with his right knee. He has been through a long period of uncertainty as to whether his physical injuries will allow him to work full-time in the future. He further stated that the symptoms of his ADHD are such that he has found it difficult to remain inactive and without work, although his injuries are such that he is precluded from a lot of physical activity.

31.     Mr Chessell had stated that his doctors have advised him against taking anti-depressant medication, because it would adversely impact on his ability to manage his ADHD. He has completed programs of Cognitive Behaviour Therapy (“CBT”) in the past, which were paid for by his insurance company. It is uncertain as yet whether he will need to undertake further CBT programs and if so, how he will be able to afford them.

32.     The extent of Mr Chessell’s disabilities was challenged on the basis that there was no medical evidence. I note however, that Mr Chessell’s medical conditions were sufficient for Centrelink to grant him DSP.

Financial position

33.     In evidence at the SSAT Mr Chessell outlined his current financial circumstances. He is currently in receipt of DSP and occasionally works as a casual forklift driver; however Mr Chessell told the SSAT that in order to get this work he had to lie about his injuries. He is currently living with his parents, and his financial contribution to the household is to pay for some food. He also has a HECS debt for two years of a university course that he has not completed.

34.     Mr Chessell said that he had been able to reduce his living expenses by living with his parents rent free; however, at the time of the SSAT hearing, he was still paying rent for share-accommodation in Lismore. Mr Chessell’s decision to continue paying rent in relation to a property he was not living in, rather than to provide notice to the landlord or find an alternative tenant, was a personal choice.

35.     Mr Chessell has the benefit of a health care card as a result of his DSP. Nonetheless, he has to pay $20 a month for medication.

36.     Mr Chessell’s HECS debt is of an unspecified amount, but possibly in the vicinity of $10,000, given that he has completed two years of university study.

37.     It was submitted on behalf of Centrelink that Mr Chessell’s financial position is better than that of other people who solely rely on income from income support payments.

Incorrect legal advice

38.     Mr Chessell told the SSAT that he received incorrect legal advice. He said he was told that the preclusion period would be calculated on $3,100. He said that “even the judge said so”.

39.     Generally, the AAT has taken the approach that inadequate or incorrect legal advice is not a persuasive factor in establishing special circumstances.

40.     In Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716, it was said that:

Misleading legal advice has been considered as a possible factor in special circumstances in other decisions. It seems to me however, that if this misleading advice has lead to a pecuniary loss, then recovery of this loss is a matter within the applicant’s power. There was no evidence that he had taken any necessary steps against his solicitor, asserting any right to damages for breach of contract or negligence. Hardship that can be resolved by actions of the complainant is not hardship at all.

41.     It was submitted on behalf of Centrelink that any incorrect legal advice received by Mr Chessell should be dealt with by asserting his rights against his solicitor, for example, by claiming damages in negligence.

Proportion of compensation for economic loss

42.     It was submitted on Mr Chessell’s behalf before the SSAT that the strict application of the legislation leads to an unfair result, as it is clear from the consent orders that Mr Chessell only received a very small amount of compensation for economic loss. His payment of $3,100 for arrears of periodic compensation payments represents only 10% of his total payment. The consent orders further state that the $3,100 component for arrears of periodic compensation payments relates to the period 20 July 2004 to 6 December 2004. The amount was calculated on the basis that Mr Chessell would have been entitled to $155 per week in compensation during that period. It was hypothesised that, if Mr Chessell had actually received $155 per week between 20 July 2004 and 6 December 2004, he would still have had a partial entitlement to Disability Support Pension during that period.

43.     The Guide to Social Security Law states at section 4.13.4.10 that special circumstances should never be applied where the only special circumstance is the perceived unfairness of the 50% rule.

44.     I was referred to Lajmanovska and Secretary, Department of Employment and Workplace Relations [2007] AATA 1655 at [36], the Tribunal said that:

On this basis, the policy guidelines clearly state that the unfair application of the 50% rules is not a ground giving rise to special circumstances. I am bound by policy unless I find cogent reasons to act otherwise. See the often cited judgment of Brennan J in Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634. I do not consider that there are valid reasons in the present case to overcome policy.

...

I accept that the amount... attributed to economic loss is a small portion of the settlement sum, but to dissect the lump sum is not appropriate.

45.     This view is further supported by the decision of O’Loughlin J in Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570 at 578. Justice O’Loughlin stated:

Once the mischief at which the amending legislation was aimed has been so clearly identified, it becomes apparent that the legislation prevents any dissection of the “lump sum”.

46.     The Secretary submits that Mr Chessell’s aggregate lump sum compensation payment should not be dissected and the application of the 50% rule should not be taken as a factor in the application of special circumstances.

Conclusion

47. The Secretary submitted that taking Mr Chessell’s position as a whole, his circumstances are not sufficiently unusual or different to other recipients of DSP to justify the application of section 1184K of the Act. I disagree.

48.     Mr Chessell appears to have health issues unrelated to his compensation claim. I found the most recent job capacity assessment (JCA) which was tendered, to be unhelpful. It failed to mention, Mr Chessell’s amputated fingers, his lower back condition or his ADHD. Additional conditions referred to in the consent orders were also not addressed. It is unclear the extent to which these conditions may have a continuing impact on his ability to work. Admirably though he appears to have been seeking some part-time work, but is hiding his physical limitations from his employers. I agree with the SSAT that he may be exposing himself to further injury.

49.     This is a matter where the strict application of the rule manifestly works unfairly because there is clear evidence as to the actual, compared to deemed, compensation component: $3,100 as against $29,250.

50.     While none of Mr Chessell’s circumstances amounted, alone, to “special circumstances” for the purposes of exercising the discretion under section 1184K, his circumstances in their totality, are, in my view, sufficiently “special” within the meaning of section 1184K of the Act so as to warrant treating part of his compensation payment as not having been made. Unlike the SSAT I do not consider his circumstances to be so special, to warrant the waiver of the whole charge. I have decided that it is appropriate to reduce the amount of the charge to $10,000.

DECISION

51.     The Administrative Appeals Tribunal sets aside the decision under review and in substitution therefor reduces the amount of the compensation charge to $10,000.

I certify that the 51 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member
Signed:.............[sgd].......................................................
  Associate

Date of Hearing  29 May 2008
Date of Decision  30 June 2008
Solicitor for the Applicant               Xuelin Teo
Appearance for the Respondent   No attendance