Ciric and Secretary, Department of Family and Community Services
[2003] AATA 626
•12 May 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 626
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2002/962
GENERAL ADMINISTRATIVE DIVISION ) Re Bronco CIRIC Applicant
And
SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Professor T Sourdin, Member Date12 May 2003
PlaceSydney
Decision
The Tribunal affirms the decision under review.
[sgd] Professor T Sourdin, Member
CATCHWORDS:
Social Security – compensation lump sum - preclusion period – whether special circumstances – financial hardship – grounds for exercise of discretion.
Social Security Act (1991) ss 17, 1165, 1184
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 60 ALR 225
Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985)
Director-General of Social Services v Hales (1983) 47 ALR 281
Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Re Green and Secretary, Department of Social Security (1990) 21 ALD 772
Re Department of Social Security and Galea (1993) 35 ALD 749
Secretary, Department of Social Security and Hill (1995) 2(1) SSR 9
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Re Martin and SDSS (AAT 6482, 14 November 1990)
Re Department of Social Security and VXY (1993) 30 ALD 681
REASONS FOR DECISION
1.This is an application by Mr Bronco Ciric (“the Applicant”) for review of a decision of the Social Security Appeals Tribunal (“SSAT”) in respect of decision regarding the decision to impose a preclusion period preventing payment of Social Security benefits from 12 February 1999 and ending 25 December 2003. An authorised review officer (“ARO”) affirmed this original decision on 23 April 2002. The Social Security Appeals Tribunal (“the SSAT”) set aside this decision and substituted a new decision that the preclusion period ends on 25 December 2002. An application was lodged with the Administrative Appeals Tribunal (“the Tribunal”) on 4 July 2002.
2.The hearing of the application for review was held in Sydney on 12 May 2003. The Applicant was self-represented and Mr John Kenny of Centrelink represented the Respondent.
3.The Applicant provided oral evidence. The following written material was also placed in evidence before the Tribunal:
Exhibit Description Date T Docs
documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 Pages 1 - 221 A1 Covering letter to Centrelink 9 October 2002 A2 Certificate of Dr Edmund Lee 16 September 2002 A3 Commonwealth bank transaction statements 25 December 2001 to 30 May 2002 A4 Community credit union loan statements 18 August 1998 to 2 July 2002 R1 Respondent SOFC 19 March 2003 R2 Letter form Centrelink to Applicant 9 August 2002 issues
4.The issues before the Tribunal are as follows:
Whether there are any circumstances in which all or any part of the compensation awarded to the Applicant should be disregarded for the purposes of determining the preclusion period that operates preventing payment of social security benefits.
legislation
5.The relevant legislation is the Social Security Act 1991 (“the Act”) and in particular sections 17, 1165, and 1184.
“17(3) For the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a) 50% of the payment if the following circumstances apply:
(i) the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii) the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(a) 50% of the payment if the following circumstances apply:
(i) the payment represents that part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(b)if those circumstances do not apply – so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn.
…
1165(1A) If:
(a)a person receives or claims a compensation affected payment; and
(b)the person is not a member of a couple; and
(c)the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period.
…
1165(5) If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:
(a) begins on the day after the last day of the periodic payment period; and
(b) ends after the number of weeks worked out under subsections (8) and (9).
…
1165(8) If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
Income cut-out amount
1165(9) If the number worked out under subsection…(8) is not a whole number, the number is to be rounded down to the nearest whole number.
…
1184(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.”
background
6.On 25 October 1996, the Applicant sustained severe injuries at work after a fall down a flight of stairs. He received some ongoing weekly compensation payments that reduced by 50% after a period of six months. On 23 February 2000 his worker’s compensation claim was settled for an amount of $215,000, and his weekly compensation payments ceased. On 7 April 2000 a Centrelink decided that he would be precluded from receiving Social Security payments until 25 December 2003.
7.Following receipt of a compensation payment of $157,481.65 net (following deductions for legal and other costs – including a repayment to Centrelink), the Applicant repaid a number of loans (approximately $70,000), invested in shares and expended monies on gambling ($26,560) and living expenses. Mr Ciric also took two holidays to the Cook Islands. The Applicant lost monies in his share transactions (he invested $69,581.27 and sold the shares at a loss of $54,520.78). By mid 2001, the Applicant essentially had no funds or income. He borrowed money from family and friends from that time.
8.On 20 June 2002 the SSAT decided to set aside the decision and substituted a new decision that the preclusion period end on 25 December 2002. The SSAT stated that:
“27. The tribunal is satisfied that Mr Ciric is experiencing sever financial hardship, and, essentially this is the reason for his application for review……
…. 28. One matter that was not raised by Mr Ciric but which the tribunal considers relevant is the fact that the compensation divisor used to calculate his preclusion period in February 2000, $422.90, was substantially lower than the divisor that applied from July 2000, $543.63.From 1 July 2000 the new divisor took into account the effects of the goods and services Tax (GST). Use of the higher divisor would have resulted in a preclusion period more than one year shorter than the preclusion period that does apply….”
…..30. Centrelink has suggested that Mr Ciric’s spending was imprudent in the light of his knowledge that the preclusion period applied to him. The tribunal agrees with this description but nevertheless considers that there are special circumstances in his case, as set out above, that make it appropriate to reduce the preclusion period.”
oral evidence of the applicant
9.The Applicant was born on 3 August 1950. In his accident at work on 25 October 1996, he was left with disabilities in his neck, back and leg as well as urinary incontinence. He takes a range of medications that include painkillers and anti depressants. He is constantly in pain (which varies – he has ‘good and bad’ days) and is unable to walk more that a hundred metres without taking a break. He is unable to enjoy hobbies and described his current lifestyle as difficult. He is unable to afford to maintain his motor vehicle and this has meant further social restriction.
10.The Applicant described his state in the mornings as ‘confused’ and indicated that he found it hard to ‘focus’ as a result of his pain relieving medication regime. He said that he ‘ran out of money’ following his compensation payment as he had accrued debts by the time that his accident had occurred, he accrued further debts while receiving a reduced weekly compensation payment, and had made some bad investments. In addition, Mr Ciric described his gambling problem – “I was depressed and got stuck on the machines.” He admitted that he had “gambled some money away’ and indicated that he had been attracted to gambling on poker machines in Pubs and Clubs because he felt socially isolated following his accident. This social isolation occurred because he no longer had workplace contact and also because his medical condition limited any social activities.
11.The Applicant has not returned to work since the date of his accident. The SSAT has noted that as a result of his injuries, Mr Ciric is unlikely to return to work. Mr Ciric indicated that he has sought medical advice and that his current medical conditions are unlikely to be ameliorated by further medical treatment.
12.The applicant indicated that he had a number of personal debts to friends and family who had loaned him money in the period August 2001 to December 2002 when he had no income. From December 2002, his financial situation had improved as he was now receiving the Disability Support Pension. However, due to the debts he had incurred, approximately half of his pension was being used to repay them. He has been fortunate in securing accommodation through a friend, however, although he does not pay rent, he pays $4,000 - $5,000 per year for rates and contributes to maintenance costs and other payments (electricity, strata payments) in respect of the townhouse. He indicated that his money management approaches were unwise and that he had made a number of bad decisions in the past.
13.At the time of spending the lump sum, the Applicant understood that he would not be entitled to a disability pension until the end of 2004.
submissions
14.The Applicant submitted special circumstances existed that included his financial hardship and the circumstances surrounding the expenditure of his lump sum payment.
15.In written submissions, the Respondent contended that the preclusion period was correctly calculated pursuant to sections 17 and 1165 of the Act. In respect of the GST matters addressed in the SSAT decision, the Respondent considered that the “SSAT’s decision is well crafted to respond to GST factors.” In respect of other special circumstances the Respondent submitted that Mr Ciric did not act prudently with his monies and that his spending priorities were inappropriate. In relation to the Applicants expenditure on gambling the Respondent has noted that “Mr Ciric admits to gambling. However, there is no evidence that his behaviour was the result of an addiction or a psychological condition and beyond his control. He appears to have gambled by choice rather than psychological compulsion. Having regard to the purpose of the Section 1184K discretion – to address unusual, uncommon and exceptional situations and circumstances in which it would be unjust to enforce liabilities or preclusions for which the law normally provides – it would be inappropriate to relieve him from the consequences of his actions by the expenditure of further public monies.”
16.Whilst the Respondent conceded that the Act gives relief to the strict application of the compensation preclusion period by giving the Secretary a discretion to disregard the compensation payment in whole or part in ‘special circumstances’ in accordance with section 1184 of the Act, the Respondent did not consider that the discretion should be exercised in this matter (apart from the discretion exercised by the SSAT – referred to above). The authorities of Beadle v Director-General of Social Security (1985) 60 ALR 225, Beadle and Director-General of Social Security (1984) 6 ALD 1, Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 and Re Green and Secretary, Department of Social Security (1990) 21 ALD 772, suggest that the discretion should not be exercised after reference to a range of matters that may include a reference to the circumstances in which the hardship arose.
ISSUES
17.In considering the exercise of the discretion, it is clear that financial hardship must go beyond straitened circumstances and be truly exceptional see Secretary, Department of Social Security and Hill (1995) 2(1) SSR 9, Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716, Re Beadle (1984) (supra), Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985). In this matter, the SSAT accepted that Mr Ciric was experiencing severe financial hardship. However, this Tribunal accepts that regard could also be had to the way in which the hardship arose. The Respondent has contended that the Applicant had made a significant contribution to his own financial hardship by behaving in a wasteful manner. The Applicant has no assets at present, and at the hearing, the Respondent noted that the Applicant had always understood that the preclusion period was to operate.
18.The Tribunal first turns to consider whether the calculation of the preclusion period was correct. The Applicant’s payment falls within the definition of compensation in accordance with subsection 17(2) of the Act, which defines compensation as a payment of damages or a payment under a scheme of insurance or a payment in settlement of a claim for damages. As the compensation payment was received by way of a settlement, subsection 17(3) applies. For the purposes of the Act, the compensation part of a lump sum compensation payment is 50 per cent of the payment where the payment is made in settlement of a claim that is, in whole or in part, related to a disease, injury or condition.
19.The preclusion period in relation to this amount is calculated in accordance with section 1165 of the Act. In this regard, the Tribunal is satisfied that the approach of the SSAT was correct in relation to the SSAT consideration of the relevant divisor following the introduction of the GST.
20.The Tribunal now turns to consider whether there are in fact any additional special circumstances, which exist in the Applicant’s case. The case law on this issue is clear. In the leading case of Beadle (supra, 1985) the Full Federal Court held that it was not possible to lay down precise rules but rather, a consideration of special circumstances would depend upon the facts of the case. Further, even though the phrase ‘special circumstances’ lacks precision, it “is sufficiently understood in our view not to require judicial gloss”. In Re Beadle (supra, 1984), the Tribunal held that the phrase ‘special circumstances’ is “incapable of precise or exhaustive definition” but said that the circumstances:
“…must have a particular quality of unusualness that permits them to be described as special…the qualifying adjective looks to circumstances that are unusual, uncommon or exceptional”.
21.In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Kiefel J stated that special circumstances would require something “to take it out of the usual or ordinary case”. Further the court held that:
“Whilst we agree that hardship is a relevant consideration in the discretion conferred…we reject the submission…that we should ignore the circumstances out of which the alleged hardship is said to have arisen.”
22.In the Federal Court decision in Secretary, Department of Social Security v Hales (1998) 82 FCR 154, French J said of the “concept” of special circumstances that the evident purpose “…is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness”.
23.In considering whether the Applicant’s circumstances are unusual or uncommon, the Tribunal turns to consider the facts in evidence. The Tribunal considers that the Applicant’s claim of special circumstances relates to past and current financial hardship.
24.The Applicant’s current financial situation is undoubtedly difficult, but must be considered against the circumstances of others in a similar situation and be found to have an element which makes them exceptional, which sets them apart from the rest. Regard must be had to the fact that many claimants of social security benefits are in a difficult financial situation that is similar to that of the Applicant.
25.With regard to the Applicant’s financial hardship, the decision in Re Hajar (supra) is relevant:
“Here the applicant could not be said to be suffering from any real financial hardship that could in any way be regarded as special. He is making no contribution to the maintenance or support of his wife or children…His day-to-day living needs are modest and are financed by small borrowings from friends and family. This is a continuation of the way of life he had in financial matters from the time of his resignation until the time of his settlement. His borrowings, however, are much smaller as he no longer has a liability to meet his house payments, nor does he support his family. With the possible exception of his Adelaide brother, who bowed to his wife's insistence, none of his creditors appear to have been pressing. On the question of hardship, I find it impossible to ignore the existence of the house, which is valued at approximately $175,000 and which is free of encumbrances…It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it…”
26.The Tribunal accepts the Applicant’s comments about his expenditure. The Applicant was aware of the preclusion period when he began to dissipate his funds, including the purchase of shares and the expenditure on gambling, in the knowledge that he would not be entitled to receive a social security benefit for at least four years.
27.The issue is - are these circumstances exceptional? Do they lack the quality of unusualness which might justify the double advantage of receiving social security payments to supplement a compensation lump sum, the majority of which has been exhausted through the Applicant’s own choices. The Tribunal finds that the Applicant’s circumstances as detailed, do constitute special circumstances, however, the Tribunal supports the approach taken by the SSAT and considers that this approach was an adequate response to the special circumstances of the Applicant. In this regard, it is of note that in Re Beadle and Director-General of Social Security (1984) 6 ALD 1, where the Tribunal, comprising Toohey J, Presidential Member, Mr Wilkins and Dr Billings, Members, said, at p.3:
. . . An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”
28.As previously noted the requirement that the circumstances be unusual or out of the ordinary has been emphasised by the Federal Court in a number of later decisions. Justice Kiefel in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 said that a special circumstance for the purposes of s 1184 must be something that takes the matter "out of the usual or ordinary case". Her Honour said at p545:
...for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied.
29.Clearly, financial hardship alone may not be sufficient. Carr J in Secretary, Department of Social Security v Ellis (1997) 46 ALD 1 at p5 held that the Tribunal had not erred in finding that Mrs Ellis was suffering "extreme financial hardship." He then considered whether that was a "special circumstances". He said at p6:
In my opinion, the evidence to which the Tribunal referred which was before it, and had previously been led before the Social Security Appeals Tribunal, raised a strong prima facie case of circumstances which were so out of the ordinary as to amount to "special circumstances". If the truth of the matter is that these are ordinary circumstances to be found throughout Australia, then the applicant could quite easily have led that evidence by, for example, producing the statistics.
30.Another matter, which must be considered when deciding whether it is appropriate to exercise the special circumstance discretion in s 1184 of the Act, is that the discretion must be exercised in conformity with the objects of the Act. However, as O'Loughlin J explained, in Secretary, Department of Social Security v Hulls (1991) 22 ALD 570, that does not mean that the discretion cannot be used to alleviate the strict enforcement of certain provisions of the Act if otherwise their operation "would be unjust, unreasonable or otherwise inappropriate", or in the words of the Full Court in Beadle "unfair or inappropriate". O'Loughlin J, at 581, quoted with approval the following passage from the reasons for decision of the AAT in Re Ivovic & Director-General of Social Services (1981) 3 ALN N95:
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. In the exercise of the discretion which s 115(4A) confers, the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the Social Services Act 1947: cf Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J. Thus whilst keeping the dominant principle of s 115 in mind, he [sic] 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.
31.Similarly in Secretary, Department of Social Security v Smith (1991) 13 AAR 454 at p458-9 Von Doussa J said:
The appellant contends that the Tribunal exercised the discretion under s.156 in a way which is inconsistent with ss.152 and 153. The obligation to repay imposed on the respondent necessarily flowed from the terms of ss.152 and 153, and for this reason the result cannot be alleviated under s.156. It is argued that s.156 cannot have been intended to "re-write" the earlier provisions of Part XVII so as to permit an apparently unjust result reached under the earlier provisions to be overridden as the apparent injustice is the product of the legislation itself.
I am unable to accept this argument. The fallacy of the argument lies in its failure to read s.156 as part of the overall scheme enacted in Part XVII to provide for cases where a person becomes eligible to payments both under the Act and from an independent source by way of compensation that is in whole or in part in respect of an incapacity for work. The purpose of the scheme in Part XVII is discussed in Banks [(1990) 12 AAR 38] and Hull. The scheme was intended to avoid a person receiving double payments for an inability to exercise an earning capacity.
32.To eliminate difficulties which had arisen under earlier enactments which required the Secretary to form an opinion about how the amount of a payment by way of compensation was made up (see Banks at 95 ALR p 610, 12 AAR p 43) an arbitrary formula was adopted in sub.para.152 (2)(c)(i). This formula enables the compensation part of a lump sum payment made in settlement of a claim to be fixed with administrative ease. O'Loughlin J. observed in Hull at p p 22-23:
"This provision has the hallmarks of simplicity and certainty, leaving s.156 and its reference to 'special circumstances' to remedy those particular cases where the application of the arbitrary rule would create injustice."
33.Von Doussa J then went on to explain that it is "in the very nature of an arbitrary provision that it can entail a degree of unfairness in a particular case." He added at p459:
At the same time the legislature must have recognised that from time to time a case may arise where the degree of unfairness to a recipient of a payment by way of compensation would bring about an unreasonable or unjust result which was outside that which could be justified by the practical expediency of the arbitrary nature of the provisions in ss.152 and 153. Section 156 was enacted as part of the scheme under Part XVII before the "50% rule" was introduced by the Social Security Amendment Act 1988 (Cth), but this is no reason to construe s.156 as having no operation in respect of a case where the "50% rule" produces a clearly unjust result.
34.The Tribunal considers that one factor that is relevant in considering the exercise of the discretion, is a consideration of the circumstances in which the hardship arose (see Groth supra). However, this circumstance must be considered in the context of all the circumstances.
35.Here, the Tribunal finds that the circumstances were unusual – this occurred partly because of the impact of the introduction of the GST. However, the Tribunal considers that the SSAT approach to these circumstances was appropriate under the circumstances and considering how the monies received by Mr Ciric were dissipated.
CONCLUSION
36.Accordingly, the Tribunal affirms the decision of the SSAT.
I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Professor T Sourdin, Member
Signed: Niamh Kinchin
AssociateDates of Hearing 12 May 2003
Date of Decision 12 May 2003
Solicitor for Applicant Self RepresentedAdvocate for the Respondent Mr Kenny, Departmental Advocate
0
6
0