Cole- Herring and Secretary, Department of Social Services (Social services second review)

[2022] AATA 17

Cole- Herring and Secretary, Department of Social Services (Social services second review) [2022] AATA 17 (10 January 2022)

Division:GENERAL DIVISION

File Number(s):      2021/3422

Re:Emily R Cole- Herring

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

Decision

Tribunal:Senior Member M Griffin QC

Date:10 January 2022

Place:Sydney

The Tribunal decides that the review decision dated 30 April 2021 should be varied, in that the lump sum preclusion is for the period commencing 10 April 2014 and ending 25 August 2016, inclusive, and further and otherwise, the original decision under review is affirmed.

.................................[SGD].......................................

Senior Member M Griffin QC

Catchwords

DISABILITY SUPPORT PENSION – lump sum payment – disability payments – compensation affected payment – preclusion period – past and future economic loss – waiver of debt in special circumstances –  whether special circumstances exist – review decision varied

Legislation

Social Security Act 1991 (Cth): section 17, 1169, 1170, 1184, 1184A, 1184K

Cases

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25

Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541

Secondary Materials

Guide to Social Policy Law - Social Security Guide

REASONS FOR DECISION

Senior Member M Griffin QC

10 January 2022

1. The decision under review is the decision made by the Social Services and Child Support Division of this Tribunal (‘AAT1’) on 30 April 2021 to set aside the decision made by an Authorised Review Officer (‘ARO’) of Services Australia (‘the Agency’) dated 12 August 2020 and instead decide that Ms Cole-Herring was subject to a compensation preclusion period from 10 April 2014 to 1 September 2016 (‘the preclusion period’) in respect of a lump sum compensation payment received on 9 August 2019.

2. The issue in this application resolved into whether there are special circumstances in this case that would justify the disregarding of all, or part of, the compensation received pursuant to section 1184K of the Social Security Act 1991 (Cth) (‘the Act’).

   Facts

3. The following are the relevant facts as agreed between the parties:

4. The Applicant was born in 1988 and is currently 32 years old. She is unemployed and currently in receipt of a Disability Support Pension (‘DSP’).

5. The Applicant was diagnosed in November 2009 with Acute Lymphocytic Leukaemia.

6. As a result of the Leukaemia treatment, the Applicant obtained other health problems including requiring her to have bilateral knee replacements in 2011 and left hip replacements in 2012 and 2013.

7. As a result of the orthopaedic conditions, the Applicant developed a drug addiction to opioid drugs and illicit drugs.

8. On 10 April 2014, the Applicant was involved in a motor vehicle accident, the subject of these proceedings.

9. As a result of the motor vehicle accident, the Applicant suffered a 60 percent compression fracture of the vertebral body of T12 with a displacement fragment, some soft tissue injuries to her lower back, and possibly, a head injury causing a brief loss of consciousness.

10. The Applicant commenced proceedings in the District Court of New South Wales and after a defended hearing, a judgement was handed down by His Honour Judge Levy SC on 9 August 2019.

11. On or about 4 September 2019, NRMA Insurance Limited (‘NRMA’) lodged a form with the Respondent being a ‘Compensation Advice of Lump Sum Payments’ noting the gross lump sum amount of $492,195.48.

12. On or about 21 November 2019, the Respondent issued a Compensation Notice of Demand to NRMA seeking recovery under section 1184 of the Act in the amount of $76,725.58 which was subsequently paid from the judgment amount by NRMA to the Respondent.

13. On or about 27 May 2020, the Applicant applied for a review of the decision in relation to the compensation charge.

14. On or about 12 August 2020, the Respondent affirmed the decision under review.

15. On or about 12 March 2021, the Applicant applied to the Tribunal for a review of the decision.

16. On or about 30 April 2021, the Tribunal published its decision which set aside the decision for review and amended the preclusion period however did not find that special circumstances existed pursuant to section 1184K of the Act.

17. On or about 26 May 2021, the Applicant lodged a further Application for Review of Decision with the Tribunal.

    Submissions

18. The Applicant’s written submissions are summarised as follows: 

19. The Applicant’s case is unusual from the normal course of cases and His Honour in his judgement rightly commented as such in light of the ’residual effects of an earlier illness’.

20. The effects of her treatment from her prior condition led to her having a number of orthopaedic procedures. These procedures were very unusual for a person of the Applicant’s age. In fact, the Applicant’s treating Orthopaedic Surgeon commented that she ‘would be the youngest patient in whom I have had to do this procedure by a long chalk, but I don't think there are any other alternatives with such extensive damage. The good news is that bilateral knee replacements are likely to restore Emily's comfort and mobility, but the down side is the long-term issues of wear and the need for revision surgery’.

21. The Applicant contends that her ill-health (not related to the compensation event) should constitute a Special Circumstance, particularly in relation to the findings of His Honour and her treating Orthopaedic Surgeon in relation to the issues she has from her pre-existing condition. This ill-health, and the consequences surrounding it, are more severe than the majority of DSP recipients. 

22. His Honour in his judgment made a detailed review of the Applicant’s pre-accident condition as well as made findings that his view was that the Applicant would not have had any ability to earn an income prior to the birth of her child in August 2016.

23. As a result of the matters related to her pre-existing conditions, His Honour made an award for past economic loss of $10,000.00.

24. The Applicant contends that the commencement of the preclusion period from the date of the accident is not tenable in light of the above findings. 

25. The Applicant accepts that the purpose of the legislation is to ensure that she does not receive compensation for loss of income and at the same time receive benefits from the Respondent in respect of the same period. The Applicant contends that the benefits she received prior to at least August 2016 would be related to her pre-existing condition and not the compensable event. The fact that His Honour only provided a $10,000.00 buffer for past economic loss supports this contention.

26. The Applicant contends that the above matters establish that the circumstances of the Applicant’s case ‘are markedly different from the usual run of cases’ and that the circumstances have ‘a particular quality of unusualness that permits them to be described as special’.

27. In oral submissions at hearing, the Applicant’s Representative, at the invitation of the Tribunal, particularised the special circumstances relied upon, which severally and cumulatively, were those matters set out by the Applicant in the Statements of Facts, Issues and Contentions.

28. The Respondent’s submissions were to the effect that a preclusion period applied to the Applicant’s compensation payment that there was no reason for the decision-maker to consider that there were special circumstances in this case, thereby, reducing the length of the lump sum compensation preclusion period.

29. Both parties agreed that the proper calculation, according to the legislation, of the preclusion period was 124 weeks and that the sum involved was $61,085.29.

    The legislation

30. The parties commendably were able to agree on a number of factual matters and on the extent and operation of the legislation. As referred to above, the real question is whether there are special circumstances, in the Applicant’s case, leading to a modification of the operation of section 1184K of the Act.

31. Relevant policy is contained in the Social Security Guide (‘the Guide’). The Tribunal will usually apply policy guidelines unless there are cogent reasons for not doing so.

32. Section 1169 of the Act provides that where a person receives a compensation-affected payment and receives a lump sum compensation payment, the compensation-affected payment is not payable to that person during the lump sum preclusion period.

33. 'Compensation-affected payment' is defined at paragraph 17(1)(a) of the Act as including DSP.

34. Subsections 1170(3) - (5) of the Act explain how the lump sum preclusion period is calculated in the Applicant's circumstances.

35. 'Compensation part of lump sum compensation payment', in Ms Cole-Herring's circumstances, is relevantly defined at paragraph 17(3)(b) of the Act as being so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn, or both.

36. Section 1184 of the Act relevantly states that the Secretary can recover such amounts from an insurer who is liable to pay compensation.

37. Subsection 1184A(1) of the Act sets out the recoverable amount under section 1184 of the Act in the present circumstances, where lump sum compensation has been made, but not periodic compensation payments:

    1If a person receives compensation affected payments in relation to a day or days in a lump sum preclusion period, the recoverable amount under this section is equal to the smallest of the following amounts:

    (a)the sum of all compensation affected payments made to the person that relate to a day or days in a lump sum preclusion period;

    (b)the compensation part of the lump sum payment;

    (c)in the case of a compensation payer – the maximum amount that the compensation payer is liable to pay to the person in relation to the matter at any time after receiving:

    (i)     a notice under section 1182 in relation to the matter; or

    (ii)    if the compensation payer has not received a notice under section 1182 – the notice under section 1184 in relation to the matter;

    (d)in the case of an insurer – the maximum amount for which the insurer is liable to indemnify the compensation payer in relation to the matter at any time after receiving:

    (i)     a notice under section 1182 in relation to the matter; or

    (ii)    if the insurer has not received a notice under section 1182 – the notice under section 1184 in relation to the matter.

38. There is a discretion to treat compensation payment as not having been made.

39. Under section 1184K(1) of the Act, the Secretary may treat the whole or part of a compensation payment as not having been made or not liable to be made if the Secretary thinks it is appropriate to do so in the special circumstances of the case, thereby reducing the length of the lump sum compensation preclusion period.

40. The purpose of this provision is to enable the Secretary to exercise discretion to disregard the whole or part of a compensation payment in special circumstances; where the strict application of the Act would otherwise lead to an unfair or inappropriate result.

41. The Guide at Instruction [4.13.4.10]: Overview of the Application of the Special Circumstances Provisions notes that 'the special circumstances provisions should not be used to override this basic legislative intention of the compensation recovery provisions'.

42. The intended operation of the provisions is explained further at instruction [4.13.2.60] of the Guide:

    The compensation provisions of SSAct [Social Security Act 1991 (Cth)] Part 3.14 reflect the principle that if a person has been compensated for loss of income, they should use that money to live off rather than receive a taxpayer-funded payment. Lump sum compensation payments are treated on the basis that people who cannot work because of a compensable injury should NOT receive income support for the same period from both the:

    ·social security system, AND

    ·compensation systems.

    This reflects the view of successive Australian Governments that primary responsibility for the support of people who are incapacitated because of a compensable illness or injury rests with the relevant State or Territory compensation schemes, and not with taxpayer funded social security programs.

43. The term 'special circumstances', as used in section 1184K of the Act, is not defined in the Act, however it has been extensively considered in case law.

44. In Groth and Secretary Department of Social Security (1995) FCA 1708 where the Federal Court stated:

    .The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss...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...

45. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 where the Federal Court stated:

    ...        There is less overstatement if the words "unusual" or "uncommon" are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case...

46. The Guide, at Instruction [4.13.4.10], states that each case must be examined on its own merits and at Instruction [4.13.4.20] states that 'the discretionary nature of the special circumstances provisions makes it impossible to give a precise list of factors that should be taken into account when considering whether the provisions should be applied.'

    Discussion

47. The hearing resolved itself into the issue of what amounted to special circumstances in the Applicant’s case.

48. The Applicant’s representative particularised those special circumstances.

49. Either alone or in combination, the pre-existing condition of the Applicant who was on benefits and which condition was exacerbated as a result of treatment given for her condition of leukaemia and which resulted in severe damage orthopedically.

50. As a result of that treatment, the Applicant developed an addiction to opiate drugs prescribed for her treatment and also used illicit drugs, in particular, methamphetamine.

51. An award of damages was made which included a minimal sum of $10,000 for past economic loss which was referable in the Court’s view that the Applicant, but for the accident, was unable to earn or earn very little during the time between her accident and August 2016. The lack of earning capacity was said by the Court to result from her drug addiction, lack of suitable skills and the place where she was living.

52. These factors, either severally or in combination, it was said by the Applicant, led to ‘an unjust result’ because the operation of the legislation meant that the Applicant had to pay back a sum of money substantially greater than the presumed loss of income assessed by the Court. It was accepted that during this period the Applicant was paid, in the sense of received via the Social Security system, benefit payments as a result of her disability.

53. On the history of this matter, the Applicant has endured a very difficult time both medically and physically and quite obviously on the material, emotionally, from the time when her leukaemia commenced to be treated. The treatment for that leukaemia led to the condition diagnosed by Dr Brighton, a Hip and Knee surgeon, of an avascular episode causing extensive osteonecrosis at the end of both femora. That condition, through no fault of the Applicant, required substantial pain relief which, in turn, led to her addiction of opiates and an excursion into illicit drug use for the relief of severe pain.

54. Benefits were paid to the Applicant on account of that condition, although the Tribunal notes that the leukaemia itself has abated. The serious vehicle accident, the subject of the proceedings before the District Court of New South Wales, intervened, resulting in a payment by way of damages made to the Applicant and reduced by consideration of contributory negligence.

55. The complaint by the Applicant is essentially that in her circumstances and through no fault of her own, at a time when she was already entitled to disability benefits payments, she was also the victim of a motor vehicle accident for which she was properly compensated. The operation of the legislation that reduces her Court award is unfair in circumstances where she would have, but for the motor vehicle accident and injuries which followed, be entitled to those benefit payments.

56. It was submitted by the Applicant’s legal representative that this was not ‘double dipping’ to ameliorate the operation of the Act to provide for the Applicant to retain her full compensation payment.

57. There is no doubt that the Applicant’s circumstances and the argument she advances before this Tribunal is worthy of considerable sympathy.

58. The operation of the Act and the legislative intent of the provisions of the Act are perfectly clear.

59. The payment received by the Applicant is clearly a compensation-affected payment according to section 1169 of the Act and such compensation-affected payment is not payable to that person during the lump sum preclusion period, which the parties agree is between 10 April 2014 and 25 Aug 2016.

60. Coming now to the essence of the application, the question to be considered is whether the sum of money, the compensation-affected payment, may be ameliorated by reference to section 1184K, in that this Tribunal has power to treat the whole or part of a compensation-affected payment as not having been made or not liable to be made, if it is thought appropriate to do so in special circumstances of this particular case. This would have the effect of reducing the length of the lump sum compensation. In other words, this provision provides for the use of an exercise of discretion to disregard the whole or part of a compensation-affected payment in special circumstances where the strict application of the Act would otherwise lead to an unfair or inappropriate result.

61. For there to be ‘special circumstances’, although this phraseology is not defined, it is generally understood to mean something that would take this Applicant’s case out of the usual or ordinary type of case. As an adjunct to that, the Tribunal should consider whether there is something unfair, some unintended consequences or an unjust result which would occur if the provisions of the Act were allowed to apply.

62. The Guide at Instruction [4.13.4.10] states that each case must be examined on its own merits and that as a general rule, special circumstances would not usually be applied where the person has sufficient liquid assets to support themselves and their family, if applicable, for the duration of the preclusion period.

63. In the Tribunal’s opinion, there is no reason on the facts and circumstances in this case, to disregard or ignore the operation of the Guide.

64. On the balance in this case, there is no admissible evidence to suggest that the Applicant was, or is in, an impecunious state to bring into operation this aspect of the Guide. In fact, the Applicant at the time was receiving benefits. The operation of the Act, which is Commonwealth legislation, is entirely separate from the operation of State legislation which authorises Courts to make judgments in favour of persons for damages in particular circumstances. In the Tribunal’s opinion, the award of damages and the calculation pursuant to the Act are precisely what is authorised by this Commonwealth legislation.

65. Importantly, in all the facts and circumstances placed before the Tribunal and so capably argued by the Applicant’s legal representative, there is, however, nothing in the Tribunal’s opinion that distinguishes this case from many others. There are undoubtedly aspects of the case and the operation of the Commonwealth legislation which leads to some sympathy for the Applicant.

1. That, however, is not a foundation for the exercise of the discretion. The discretion is not at large but must be used only when special circumstances can be established to the satisfaction of the Tribunal.

2. In this case, there are no circumstances or factual matters which amount in combination or severally to what can be described properly, according to the legislation, as amounting to special circumstances.

   Order

3. In the event, the Tribunal decides that the decision should be varied in that the lump sum preclusion is for the period commencing 10 April 2014 and ending 25 Aug 2016, inclusive, and further and otherwise, the original decision under review is affirmed.

I certify that the preceding 68 (sixty- eight) paragraphs are a true copy of the reasons for the decision herein of Senior Member M Griffin

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Associate

Dated: 10 January 2022

Date of hearing:	29 November 2021
Solicitors for the Applicant:	Mr J Nasr
Solicitors for the Respondent:	Mr R Calaby