Coleman and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2010] AATA 718

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 718

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/1215

GENERAL ADMINISTRATIVE DIVISION		)
Re		Janice Coleman

Applicant

And Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

Respondent

DECISION

Tribunal Senior Member A K Britton

Date27 August 2010

PlaceSydney

Decision The Tribunal sets aside the decision under review and substitutes a decision that any compensation payments paid to Ms Coleman from the date of this decision to 27 December 2010 be treated as not having been made.

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

Senior Member

CATCHWORDS

SOCIAL SECURITY – aged pension – periodic compensation payments – effect on compensation-affected payments –

Social Security Act 1991 (Cth) — ss 17, 1173, 1184K
Workers Compensation Act 1987 (NSW) — s 33

Re Walker and  the Secretary of Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 609

REASONS FOR DECISION

27 August 2010 Senior Member A K Britton           

1.      Ms Janice Coleman has applied for review of a decision made by Centrelink and affirmed by the Social Security Appeals Tribunal to cancel her age pension with effect from 14 August 2009.

2.      Ms Coleman was granted the age pension in May 2003. At that time, she was receiving periodic compensation payments under the Workers Compensation Act1987 (NSW) (“the NSW Act”) — and had been since 1994 — in respect of injuries suffered while working as a cleaner in 1978 and 1994.

3.      Since the date her pension was granted, Ms Coleman has received workers compensation payments which currently stand at about $640 gross a fortnight. It is not in issue that since applying for the age pension in 2003, Ms Coleman has fully disclosed to Centrelink details about her finances and her workers compensation payments. Nor is it disputed that throughout this period, Centrelink advised Ms Coleman that the workers compensation payments would be treated as “ordinary income” and her rate of pension would be proportionately reduced.

4.      The decision to cancel Ms Coleman’s pension was made following Centrelink’s discovery that her pension rate had been incorrectly calculated. Prior to this discovery, her workers compensation payments were treated as “ordinary income”, not “compensation”. Under the Social Security Act 1991 (“the Act”), where an age pension recipient receives what is termed “ordinary income”, their pension rate is proportionately reduced. On the other hand, where they receive compensation, their rate of pension is reduced on a dollar for dollar basis. The effect of treating her workers compensation payment as compensation was to reduce Ms Coleman’s pension rate to nil.

5.      As canvassed with the parties today, there are three main issues that I am required to determine:

First, whether the periodic workers compensation payments made to Ms Coleman constitute compensation, within the meaning of the Act?

Second, if so, what if any effect does this have on Ms Coleman’s pension entitlement?

Third, if Ms Coleman’s pension is to be reduced, should the discretionary power conferred by s 1184K of the Act to treat some or all of her compensation payments as not having been made or not liable to be made, be exercised.

Do the workers compensation payments constitute compensation?

6. The age pension is defined by s 17 of the Act to be “a compensation-affected payment.” Compensation is defined as:

Any payment made wholly or partly in respect of lost earnings or lost capacity to earn.

7. The payments made to Ms Coleman by her former employer’s insurer, Allianz, are described by it as “weekly benefits made under the NSW Act”[1]. Neither party was able to provide the Tribunal with a copy of the settlement agreement, or order under which the payments were made. Under s 33 of the NSW Act:

If total or partial incapacity for work results from an injury, the compensation payable under the Act, shall include a weekly payment during that incapacity.

[1] T6, p.43

8. The term “weekly payment” is not defined by the NSW Act. However, read in its statutory context – that is, as part of Part II, Division 2 of the NSW Act, which addresses weekly compensation by way of income support – s 33 in my view should be taken to indicate that such payments are made in respect of economic incapacity, and therefore constitute lost income or compensation within the meaning of the Act.

Effect of treating workers compensation payments as “compensation”

9. If the criteria set out in s 1173 of the Act are met, the amount of the age pension is reduced on a dollar for dollar basis by the amount of compensation received. I am satisfied that the criteria of s 1173 have been met in this case. Firstly, Ms Coleman was not receiving the age pension or any other compensation-affected payment, at the time she began receiving compensation payments in 1994. Secondly, she received compensation affected payments in relation to a day where age pension payments had also been received.

10.     Accordingly, in my view, the revised calculation made by Centrelink in August 2009 which resulted in Ms Coleman’s rate of pension being reduced to nil was correct.  

Should the power conferred by s 1184K of the Act be exercised?

11. Section 1184K of the Act provides that the Secretary, and on review, this Tribunal, may treat the whole or part of the compensation payment as not having been made if they think it is appropriate to do so in the special circumstances of the case.

12.     I do not intend to detail the extensive case law on the meaning of the term “special circumstances” and the principles that apply to the application of the provision. Suffice to say that it is necessary that something which distinguishes Ms Coleman’s case from others – something which takes her case out of the usual or ordinary case – needs to be established. I adopt, for the purpose of these reasons, what I have said about the principles and the operation of the provision in  Re Walker and the Secretary of Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 609 at [14] to [17].

13.     Ms Coleman argued in these proceedings that there were a number of factors that separately, and in combination, constitute special circumstances. Firstly, she has now entered into a significant debt on the strength of incorrect information provided by Centrelink that she was entitled to receive the age pension, albeit at a reduced rate; secondly, her significant health problems and associated expenditure; and third, her current financial position, which includes a number of debts and the loss of the benefit of the health card.

14.     Turning first to the issue of the mortgage. In early 2008, Ms Coleman borrowed $120,000 to undertake extensive repairs to her property, which had not been repaired since her husband’s death in 1970. I accept her evidence that, being a fibro house, it was in urgent need of significant work, and, notwithstanding the absence of any documentary evidence in support, her claim that the costs of those repairs will be about $110,000.

15.     Some information about the terms of the loan or mortgage arrangement with Bluestone Equity Release has been provided by Ms Horan for the respondent Secretary. This indicates that Ms Coleman drew down an initial up-front payment of $30,000 and later $750 per month. It also indicates that under the terms of the Bluestone loan, a person can elect either to repay the loan during their lifetime, or to repay it upon their death or other nominated event.

16.     Ms Coleman’s testified that while she acknowledges that she has the option of not repaying the loan until her death, that she would not have entered into the loan arrangement if she thought she would be unable to meet the fortnightly repayments, which she claims are about $250. Her evidence is to the effect that she understands that the repayments would double every 10 years, and she would not want to leave her daughter in a position where, on her death, she would have nothing to inherit.

17.     On the material before me, I am satisfied that Ms Coleman has used the majority of the Bluestone loan to undertake repairs to her property, and that the remaining unspent $20,000 is money that will be used to repay the builder for final building works.

18.     Looking at the issue of medical expenses, Ms Coleman plainly has a serious medical condition — a brain tumour which, despite surgery, continues to grow and may require future treatment. Ms Coleman advises that she sees a vascular surgeon on an annual basis and is referred for MRI and CAT scans, and a vascular surgeon for an ultrasound every six months. She was unable to estimate what the expenses in respect of the MRI and the CAT scans were, but, she understands they will be significant. At this point in time –where, thankfully, Ms Coleman is not required to receive any additional treatment – there are no other significant medical expenses that she incurs.

19.     Centrelink contends that Ms Coleman’s circumstances could not be described as “special”, in that she is currently receiving compensation payments which exceed the weekly rate of the age pension. It also points to the policy objective underpinning the statutory provisions relevant to the treatment of compensation payments, which are designed to ensure that a person is not entitled to so-called “double dip” — that is, to receive compensation payments and also look to the taxpayer for support.

20.     I am satisfied that the circumstances that Ms Coleman finds herself in can be described as “special”, not because of her health related expenses, which while not insignificant, could not be described as giving rise to any expenditure out of the ordinary. My decision that her circumstances are special is based on the unusual position that has arisen, whereby Ms Coleman, having entered into a loan to undertake necessary repairs to her house, finds that she is unable on her reduced income to meet the fortnightly repayments she had intended to make at the time she took out the loan.

21.     As a result of the Secretary’s error, Ms Coleman has enjoyed a windfall of $57,000. Nonetheless, she is now in the difficult position of being unable to service a debt she would not have incurred had she known her pension rate had been miscalculated. Ms Coleman is in the fortunate position of having a number of options available to her. She could, for example, elect not to repay the loan during her lifetime and remain in the property. Alternatively, she could choose to sell the improved property, and move into a less expensive property and repay the loan in full.

22.     I appreciate given her age and the length of time she has lived in her current home that Ms Coleman may find the latter option difficult; however, she is not in the position of a person who having taken out an ordinary loan finds they are unable to meet their loan repayments and therefore has no option but to dispose of the property.

23.     The Secretary has already exercised his discretionary power to waive the debt owed by Ms Coleman, a decision which I agree is appropriate in the circumstances. In my view, it is appropriate to grant Ms Coleman one further indulgence, given the history to the revised calculation of her pension rate whereby without notice, she leant that she had effectively lost half her income. 

24.     As a consequence, she was unable to make any financial plans, and now finds herself in a position where she is unable to repay a number of recently incurred debts, such as property rates, which have increased as a result of the change in her pension status; a significant veterinary bill; and a Mastercard bill. The decision that I have already indicated that I intend to make will not cure Ms Coleman’s financial problems, but will give her a breathing space to allow her to repay some of those debts and then decide what, if any, action she should take in respect of the repayment of the $120,000 loan.

25.     For these reasons, I make the following decision: that the decision under review is set aside, and a decision substituted that the compensation payments received by Ms Coleman from today’s date until 17 December 2010 be treated as not being liable to be paid.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.

Signed: ....................................[SGD]....................................
  Associate to Senior Member Britton

Date of Hearing:  27 August 2010
Date of Decision:  27 August 2010
Date of Written Reasons:         21 September 2010
The applicant appeared in person.
Solicitor for the Respondent:     Centrelink Advocacy Section