Christopher Adams and Secretary, Department of Education, Employment and Workplace Relations
[2013] AATA 560
[2013] AATA 560
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/4904
Re
Christopher Adams
APPLICANT
And
Secretary, Department of Education, Employment and Workplace Relations
RESPONDENT
DECISION
Tribunal Deputy President K Bean
Date 9 August 2013 Place Adelaide The decision under review is affirmed.
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Deputy President K Bean
CATCHWORDS
SOCIAL SECURITY - Newstart Allowance - Receipt of arrears of weekly compensation payments in respect of period during which applicant receiving Newstart Allowance - Whether amount recovered from arrears lump sum correctly determined and calculated - Whether "special circumstances" such that part of compensation should be treated as not having been paid - Decision under review affirmed.
LEGISLATION
Social Security Act 1991, ss 1173(1) - (4) and 1184K
CASES
Angelakis v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9
Venables and Secretary, Department of Social Security (1988) 15 ALD 180
SECONDARY MATERIAL
Sutherland P and Anforth A, Social Security and Family Assistance Law (3rd ed, The Federation Press, 2013)
REASONS FOR DECISION
Deputy President K Bean
9 August 2013
INTRODUCTION
The applicant, Mr Adams, was working for a company known as Amcor Glass in November 2009 when he sustained a significant injury to his right arm in the course of his employment. Unfortunately, it then took over two years for Mr Adams’ workers’ compensation claim to be resolved and for him to be paid arrears of weekly compensation payments. As he had no other means of support, during that two-year period Mr Adams was obliged to live on Newstart Allowance (NSA), which resulted in him suffering severe financial hardship.
In January 2012, Mr Adams was finally paid a lump sum of $41,386.58 in respect of arrears of weekly compensation payments for the period 11 November 2009 to 10 August 2011, and penalty interest of $6,775.51. However, $22,914.21 of that amount was deducted by Centrelink by way of repayment of NSA payments he had received during the relevant period, and a significant amount was also deducted by the Australian Tax Office (ATO), with the result that Mr Adams ultimately only received approximately $13,000.00.
As a result of decisions by the Social Security Appeals Tribunal (SSAT), the amount Mr Adams was required to repay to Centrelink was later reduced to $22,486.02 on the basis that the original repayment amount had been incorrectly determined. However in the decision the subject of this application,[1] the SSAT subsequently determined that there were no “special circumstances” which justified further reduction of the repayment amount.
[1] T2/3.
Mr Adams has now sought review of that decision by this Tribunal, contending that by reason of special circumstances, at least part of the compensation paid to him should be treated as if it had not been paid, and some proportion of the amount recovered from his settlement by Centrelink should be refunded to him.
Before identifying the issues which arise from Mr Adams’ application with more precision, and addressing those issues, I will first outline the applicable statutory framework.
THE STATUTORY FRAMEWORK
The Social Security Act 1991 (Cth) (the Act) contains a number of provisions directed toward recovery of amounts which have been paid by way of social security payments where the recipient of those payments subsequently receives a lump sum by way of compensation (including an amount attributable to economic loss) or arrears of weekly compensation payments. It also contains provisions designed to preclude those who have received compensation for economic loss from receiving social security payments during the period for which they have received compensation. The principle underlying these provisions is that where a person receives compensation for lost earnings or lost capacity to earn, they should rely on that compensation rather than seeking, or being permitted to retain, income support by way of social security payments.
Accordingly, in general terms the legislation provides that where a person has received compensation for economic loss, they should exhaust that compensation before being entitled to income support by way of social security payments. Similarly, where a person receives compensation for economic loss and social security payments in respect of the same period, they should repay the amount they have received in social security payments once they have received their compensation lump sum or arrears of income maintenance.
Consistently with this framework, and the principles which underpin it, with respect to weekly income maintenance payments or “periodic compensation payments” and arrears of such payments, s 1173 of the Act relevantly provides as follows:
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.
A “compensation affected payment” is defined by s 17 of the Act to include NSA. Therefore where a person who falls within the terms of sub-s 1173(4) receives arrears of weekly compensation payments with respect to a period during which they were receiving NSA, the arrears are treated as “ordinary income” for the purposes of the Act. This has the consequence that if the arrears are calculated by reference to a weekly rate which is higher than the income “cut off” amount for entitlement to NSA, the recipient of those arrears is required to repay the whole of the amount they received by way of NSA during that period.
However, the Act also contains a provision which allows for compensation paid to a recipient to be treated as if it had not been paid in certain circumstances. That provision is s 1184K, which relevantly provides as follows:
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.
ISSUES
Having regard to the relevant facts and the applicable legislative regime therefore, the issues which arise for my determination are as follows:
(a)whether the amount recovered from Mr Adams’ compensation settlement by Centrelink has been correctly determined and calculated; and
(b)whether any part of the compensation paid to Mr Adams should be treated as if it had not been paid by reason of “special circumstances” within the meaning of s 1184K.
I propose to address each of these issues in turn below.
WAS THE AMOUNT RECOVERED FROM MR ADAMS’ SETTLEMENT CORRECTLY RECOVERED?
As alluded to above, there is no dispute between the parties that in or around January 2012, Mr Adams was paid compensation in the form of arrears of income maintenance for the period 11 November 2009 to 10 August 2011, totalling $41,386.58. He was also awarded penalty interest of $6,775.51.[2] I have also alluded above to the reduced repayment amount determined by the SSAT, of $22,486.02, which I am satisfied was correctly determined by reference to the lump sum of $41,386.58 only, and not the penalty interest amount.
[2] T2/4.
At the hearing, an issue arose as to whether s 1173 of the Act had been correctly applied to Mr Adams. In particular, an issue arose as to whether Mr Adams had been receiving NSA at the time of his injury and therefore whether s 1173(4) was applicable to him, or whether the repayment amount should have been calculated by reference to s 1173(1).
Mr Adams indicated at the hearing that he did not believe he was receiving NSA at the time of his injury on 11 November 2009. However, the respondent submitted that Mr Adams was receiving NSA between February 2009 and 8 August 2012,[3] and I have concluded that this is borne out by the contemporaneous records.[4]
[3] Respondent’s written submissions dated 19 April 2013.
[4] T10/78 – 89.
As I am therefore satisfied that Mr Adams was in receipt of NSA at the time of his injury, I am also satisfied that s 1173(4) is applicable to him and has been correctly applied to his circumstances. Further it is also clear that, when regard is had to the arrears he received with respect to the relevant period, 11 November 2009 to 10 August 2011, Mr Adams’ “ordinary income” during that period either exceeded or was only just below the income cut-off amount for NSA. That follows from the fact that he received an amount of $41,386.58 in respect of 638 days which equates to $908.17 per fortnight, the income cut-off amount during the relevant period having been between $853.34 and $949.67 per fortnight.[5]
[5] T5/46.
I am accordingly satisfied that Mr Adams had only a minimal entitlement to NSA between 11 November 2009 and 10 August 2011. I am also satisfied that Mr Adams was overpaid NSA payments in the total amount of $22,486.02 during that period, and that that amount was therefore correctly recovered from his compensation settlement.[6]
[6] T3/19.
The only remaining issue therefore is whether there are “special circumstances” within the meaning of s 1184K of the Act pursuant to which all or part of the compensation paid to Mr Adams should be treated as if it had not been paid.
ARE THERE “SPECIAL CIRCUMSTANCES” PURSUANT TO S 1184K SUCH THAT PART OF MR ADAMS’ COMPENSATION SHOULD BE TREATED AS NOT HAVING BEEN PAID?
Evidence and Contentions
There were a number of matters put forward by Mr Adams in support of his contention that part of the compensation paid to him should be treated as not having been paid, with the result that his repayment amount would be reduced.
Mr Adams said that being on NSA had cost him quite a lot of money, due to the associated job seeking obligations. He said he had spent money on petrol and phone calls in order to meet his NSA obligations, even though he was subsequently paid workers’ compensation for the whole of the relevant period on the basis that he was incapacitated for work. He said it was unfair that he was required to bear these extra expenses associated with receipt of NSA, effectively because of the delay in receiving his workers’ compensation entitlements. He also relied on the fact that it had taken him two years to receive his correct workers’ compensation entitlements, which he said had caused him considerable hardship. He further said he had felt under pressure to settle his workers’ compensation matter at the time he did because of the delay which had occurred, and the hardship this had caused him. He said his arrears had been calculated on the basis of $545.00 per week, whereas in fact he had been receiving in the vicinity of $800.00 per week at the time he was injured. He said that in retrospect, he should have continued to pursue the matter in an attempt to obtain a higher amount by way of weekly compensation payments, however at the time the matter was settled, he felt that he had little option but to accept the offer which had been made by the insurer.
Mr Adams also said that at the time he agreed to resolve the matter for a lump sum of $41,386.58, together with penalty interest, he had no idea that he would only receive a very small proportion of the amount which was paid by the workers’ compensation insurer. As alluded to above, he said that in addition to the amount deducted by Centrelink, approximately $11,000.00 had been deducted by the ATO. He said that in the end he only received approximately $13,000.00 out of the total settlement amount.
Mr Adams also elaborated on the hardship he had experienced while waiting for his compensation matter to be resolved, explaining that during the two years when he was living on NSA, he had been forced to live with his brother, and was reduced to “living on $2.00’s worth of chips”. He also said that during this period he took out a $20,000.00 personal loan in order to attempt to manage his situation and also assist his daughter and his ex-partner, for whom he felt responsible. He explained that $10,000.00 of this amount had been used to roll over his other debts, $6,000.00 had been used to buy a car for his daughter and $4,000.00 had been used to buy a car for his ex-partner, who by that time lived in Townsville. Mr Adams explained that he had a total of five children altogether, with the younger two, aged 10 and 7, residing with his ex-partner in Townsville.
Mr Adams also indicated in the course of his evidence that in addition to his claim for workers’ compensation, he had instructed his solicitors to lodge a common law personal injury action against his former employer seeking damages in respect of his November 2009 injury. He said he understood that a Statement of Claim had been lodged approximately six months prior to the hearing in this matter, which took place in March 2013. I note that Mr Adams’ evidence in this respect was consistent with references in the Centrelink records to his lawyers having advised Centrelink of his “common law case” on 31 May 2011.[7]
[7] T5/50.
As to his current situation, Mr Adams said that, fortunately, things had markedly improved for him in the last two years. He said approximately two years ago he secured a truck driving job with Capaldi Transport which was secure, and he had been in a better situation since then. Having said that however, he said he also had a lot of ongoing expenses and liabilities, many of which were related to contributing to the support of his children and ex-partner. He said he was also still paying $120.00 per week toward the repayment of the $20,000.00 personal loan. He observed that he tended “to go backwards” and that money tended to come “in one hand and out the other”. He said that he always put his children first and as a result had very little money left to spend on himself. He also said that he lived in a rented house and the only thing he owned was his car, which he thought was worth approximately $1,500.00.
Under cross-examination, Mr Adams acknowledged that, whilst he had a lot of expenses, he was “fine” now, in the sense that he was no longer experiencing financial hardship. However, he maintained that he had definitely experienced severe hardship during the two years he spent waiting for his arrears of workers’ compensation payments. He also said that at the time he settled his workers’ compensation matter, he believed that if he settled for less, then less would be taken out of his settlement by Centrelink. He said if he had understood the true position, he would not have settled his workers’ compensation matter at the time he did.
As to how he had used the $13,000.00 he ultimately received from his compensation lump sum, Mr Adams’ evidence before me was consistent with what he told the SSAT as follows:
He explained that he used the $13,000 to take his children on a trip to visit their other two siblings in Townsville. He explained at the hearing that he provided his three older children with gifts of $1,000 each and his two youngest children with $500 each. He also provided his ex-wife $3,000 in cash. He said the balance of funds of approximately $3,000 was spent shopping on clothing, prescription glasses, and a new 3-DS computer game console for the children as he considers “they got nothing for two years”. He also said that he flew his eldest daughter to visit her two siblings in Townsville, and return to Adelaide. He said the cost of this was between $2,500 and $3,000 for air fares and other travel expenses.[8]
[8] T2/10, [44].
Consideration
I formed the impression at the hearing of this matter that Mr Adams was a man of great personal integrity, and I have no hesitation in accepting his evidence. The only issue therefore is whether the matters he has put forward constitute “special circumstances” within the meaning of s 1184K of the Act.
I have little difficulty in accepting that there are a number of aspects of Mr Adams’ circumstances which are or were unfortunate and/or unfair. I consider he makes a legitimate point when he says that he did not “belong” on NSA, as he had an entitlement to workers’ compensation payments. I also accept that he incurred expenses through being on NSA, which he would not have incurred if his workers’ compensation payments had commenced earlier, and that there is a degree of unfairness in him having been forced to incur these expenses whilst he was already attempting to live on a much lower amount than he would have been receiving if he had been receiving workers’ compensation payments.
I also accept that, on the face of things, it appears that Mr Adams may have been “under-compensated” in the sense that he was ultimately paid weekly compensation at a rate substantially less than the wage he was receiving when he was injured. I further accept that Mr Adams felt under pressure to accept the offer which was made by the insurer and, although he was legally represented at that time, he did not fully appreciate some of the consequences of resolving the matter on the terms which he did, rather than pursuing the matter further. I also accept that he did not know how much would be deducted from the settlement by Centrelink or by the ATO. I further accept that Mr Adams endured significant financial hardship during the two years he was attempting to live on NSA, and that he was forced to go into an increased level of debt during this period.
On the other hand however, I also note that none of the matters relied on by Mr Adams are especially unusual or uncommon. Unfortunately, it is not especially unusual for workers to experience a significant delay before their workers’ compensation entitlements are finalised, and for them to be required to meet the obligations associated with receiving NSA in the meantime. Equally, it is not especially unusual for workers’ compensation claimants to feel under some pressure to compromise their claim rather than proceed to a final hearing, or to experience financial hardship during the period while they are waiting for their workers’ compensation claim to be resolved.
It is highly regrettable that, although he was legally represented at the time he settled his workers’ compensation matter, Mr Adams clearly had an inadequate understanding of the deductions which would be made from his settlement, and some previous Tribunal decisions have concluded that the receipt of deficient or incorrect legal advice can be relevant to whether there are “special circumstances”.[9] It has also been accepted in some cases that an applicant’s lack of knowledge that deductions will be made from their settlement may be relevant, “whatever the cause of that lack of knowledge”[10].
[9] Sutherland P and Anforth A, Social Security and Family Assistance Law (3rd ed, The Federation Press, 2013) pp 572 – 573.
[10] Venables and Secretary, Department of Social Security (1988) 15 ALD 180.
However, it is unclear on the evidence before me to what extent the legal advice Mr Adams received was incorrect or inadequate. Mr Adams acknowledged in his oral evidence that he was told that he would have to pay some amount back to Centrelink, although he says he was not aware of how much. He also says he made an assumption that if he settled his claim for less, less would be deducted by Centrelink. However he did not appear to attribute that assumption to his lawyers. There is also documentary material before me indicating that letters were sent by Centrelink in July 2011, both to Mr Adams’ lawyers, Mahony’s, and to Mr Adams himself, advising them to contact Centrelink if the claim settled.[11] It is unclear whether that letter also advised of any means by which the “payback” figure could be ascertained before the matter was settled.
[11] T5/50 – 51.
Therefore, whilst I accept on the evidence that at the time he settled his claim, Mr Adams was not aware of the exact amount which would be deducted from his settlement amount by Centrelink, it is unclear what inquiries were made by him, or on his behalf, to attempt to establish this amount. It is also unclear whether he was given any broad indication of the amount which would need to be repaid. Further, to the extent Mr Adams made an assumption that the less he settled his claim for, the less he would be required to repay, I am not satisfied that that assumption was based on any legal or other advice he was given. In addition, whilst Mr Adams says he would not have settled his claim for the amount he did if he had known the true Centrelink “payback” amount, it is unclear what the outcome would have been if he had not settled when he did, and whether and to what extent this would have led to any “net” improvement in his position.
With respect to the amount deducted by the ATO, doing the best I can on the material before me, it appears that the ATO deducted in the vicinity of $11,000.00 from Mr Adams’ settlement, as his arrears of compensation were calculated on a “gross” basis and this amount represented the tax payable on the arrears.[12] Therefore, whilst Mr Adams was clearly surprised by how much was deducted by the ATO, as his arrears were calculated on a gross basis,[13] there was nothing unusual or untoward about tax being deducted from the arrears. As with the Centrelink “payback” amount, it is also not clear that if Mr Adams had not settled when he did because of the amount of tax which would be deducted from his settlement, he would have ended up in a better position. Of course, if he had been paid a higher amount in arrears, more tax would inevitably have been deducted.
[12] See Exhibit 5.
[13] T6/56.
In these circumstances, I have concluded that Mr Adams’ inadequate understanding of what amounts would be deducted from his settlement militates less strongly in favour of the existence of “special circumstances” than it would have if, for example, it was clear he had been misled, and that he would have been better off if he had not settled his compensation claim at the time or on the terms on which he did.
The fact that Mr Adams may have been “under-compensated” is clearly a matter which could contribute to his circumstances being “special” in the relevant sense. However, I have very little information before me as to the circumstances surrounding the settlement and it is therefore difficult for me to be satisfied that Mr Adams would have received more by way of compensation if he had proceeded with his action, rather than settling it when he did. In addition, it is highly relevant in this context that Mr Adams is still pursuing a common law action against his employer and/or workers’ compensation insurer. This clearly raises the possibility that he will in fact receive more by way of compensation in the future, and if Mr Adams does receive further compensation in the form of common law damages, this is likely to have the consequence that the amount deducted from his 2012 settlement by Centrelink will be a lower proportion of his overall compensation settlement than it currently is. Of course in the event that any further compensation payment to Mr Adams gave rise to a further repayment amount under the Act, it would be open to him to rely on s 1184K in that context, having regard to the amount already repaid to Centrelink, and the total compensation he had ultimately received.
In making an overall assessment of Mr Adams’ circumstances, it is also relevant for me to take into account that when he did receive approximately $13,000.00 from the lump sum settlement, he spent most of that money on items which could be described as discretionary rather than on necessities. I mean no criticism of him for the way he spent this money, which is entirely understandable. Indeed, it reflects very well upon him that he spent almost all of that money on his children and ex-partner, and I accept that he regarded it as extremely important for his older children to travel to Townsville to see their mother and younger siblings. However, it is nevertheless relevant in assessing Mr Adams’ overall circumstances and whether they warrant reduction of his repayment amount that essentially all of this money was spent on items other than essentials such as food, bills and rent.
In the event, after carefully considering the evidence and weighing the competing considerations, I have concluded that Mr Adams’ circumstances are not sufficiently unusual or uncommon and nor do they involve sufficient hardship or injustice such as to constitute “special circumstances” in the relevant sense.[14] In reaching that conclusion, I have had regard in particular to the fact that, as Mr Adams himself acknowledged, he is no longer in financial hardship as he has fortunately been able to obtain a secure full-time job which allows him to satisfactorily support himself and his family. I have also had regard to the fact that Mr Adams is still pursuing a personal injury action for damages against his employer and/or insurer, which may well result in the payment of further compensation to him, such that the repayment amount will represent a lower proportion of his overall compensation settlement than it does at present. I have also taken into account the fact that, unlike many applicants, the compensation provisions of the Act have not operated in a particularly unfair or arbitrary way with respect to Mr Adams, as the period during which he has been found not to be entitled to NSA precisely coincides with the period in respect of which he has received workers’ compensation payments. To that extent, he is in a much better situation than many other workers’ compensation recipients, who in some cases must serve a compensation preclusion period calculated by reference to a settlement which is mostly composed of general damages rather than compensation for economic loss. Further, Mr Adams’ repayment amount has already been paid, and therefore has no ongoing direct impact on his financial situation.
[14] See Angelakis v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9, [26] – [35]; Sutherland P, above n.9, pp 554 – 558 and following.
It is extremely unfortunate that Mr Adams was effectively forced into financial hardship whilst he was waiting for his workers’ compensation settlement, and that he did not fully appreciate the implications of resolving his workers’ compensation matter in the manner and at the time which he did, or anticipate the very large deductions which were made from it. However, I have decided that on balance, and whether they are considered individually or taken as a whole, the matters I have referred to do not render Mr Adams’ circumstances “special” in the relevant sense such as to justify treating part of his compensation as if it had not been paid pursuant to s 1184K.
For completeness, I should add that in my view, s 1237AAD of the Act, which allows for waiver of a debt in “special circumstances”, is not applicable to this matter. That is because, on my understanding, the repayment amount was recovered directly from Mr Adams’ compensation payer, rather than a debt being raised against Mr Adams.[15] However, even if s 1237AAD had been applicable, for the reasons I have given in relation to s 1184K, I would not have been satisfied that any part of Mr Adams’ debt should be waived by reason of “special circumstances”.
[15] See ss 1184 and 1184A of the Act; see also ss 1222A and 1184I of the Act.
CONCLUSION
For the reasons given above, I am satisfied that the amount ultimately recovered from Mr Adams’ compensation settlement by Centrelink was correctly recovered. Further, as I am not satisfied that there are “special circumstances” within the meaning of s 1184K of the Act such as to justify treating part of Mr Adams’ compensation payment as if it had not been paid, I have concluded that the decision under review was correct and that I should affirm that decision.
DECISION
The decision under review is affirmed.
I certify that the preceding 41 (forty-one) paragraphs are a true copy of the reasons for the decision herein of Deputy President K Bean ..... [Sgd] .....
Associate
Dated 9 August 2013
Date of hearing 28 March 2013 Date final submissions received 19 April 2013 Applicant In person Advocate for the Respondent Mr Andrew Parker
Program & Litigation Review Branch, Dept of Human Services
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