COLIN SHOVAN and SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
[2009] AATA 748
•29 September 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 748
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/2887
GENERAL ADMINISTRATIVE DIVISION ) Re COLIN SHOVAN Applicant
And
SECRETARY, DEPARTMENT OF EDUCATION, EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Deputy President D G Jarvis Date29 September 2009
PlaceAdelaide
Decision The Tribunal sets aside the decision under review, and in place of that decision decides that such part of the compensation payment received by the applicant shall be treated as not having been made as shall result in the preclusion period ending on 31 May 2010 instead of 24 March 2011.
D G Jarvis
(Signed)
Deputy President
CATCHWORDS
SOCIAL SECURITY - Disability support pension - preclusion period as a result of lump sum compensation payment - expenditure on medical treatment rendering applicant able to seek employment - special circumstances warrant treating part of compensation moneys as not having been paid - decision under review set aside and preclusion period reduced.
Social Security Act 1991 (Cth), s 1184K(1)
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Haidar v Secretary, Department of Social Security (1998) 52 ALD 255
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152
Re Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339
Riddell v Secretary, Department of Social Security (1993) 42 FCR 443
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
REASONS FOR DECISION
29 September 2009 Deputy President D G Jarvis 1. The applicant, Colin Shovan, claimed compensation in respect of injuries he sustained in an accident at work in 1999. In 2004 he was awarded $80,256.23, and in 2006 a further amount of $17,699.47, in each case for his injuries. Neither award included any amount for economic loss. In January 2008 he settled his compensation claim for $148,000, of which $147,500 was to redeem liability to pay weekly income maintenance.
2. An officer of Centrelink, the statutory authority to which the Secretary has delegated certain of his powers, then decided to impose a lump sum compensation preclusion period commencing on 1 February 2008 and ending on 24 March 2011, a period of 164 weeks. This preclusion period was based on Mr Shovan having received one lump sum compensation payment of $245,955.70.
3. Mr Shovan requested a review of Centrelink’s decision, and the decision was later affirmed, and later again, it was affirmed by an Authorised Review Officer (ARO).
4. On 1 April this year Mr Shovan applied for Newstart allowance. His application was refused because he was still subject to the preclusion period. Mr Shovan also requested a review of this decision, and it was later affirmed by an ARO and by the Social Security Appeals Tribunal (SSAT).
5. Mr Shovan has applied to this tribunal for a review of the decision of the SSAT.
Issue before the Tribunal
6. The issue before the tribunal is whether special circumstances exist which make it appropriate to treat the whole or part of the compensation payment as not having been made, thus waiving or reducing the preclusion period to which Mr Shovan is subject.
Background
7. Mr Shovan is nearly 52 years of age. He was injured in the course of his employment at Peter Lehmann Wines in the Barossa Valley. Both arms were crushed in the accident. His injuries also resulted in dermatitis developing on his hands.
8. Mr Shovan said that after the final payment of compensation had been resolved, his solicitor introduced him to a financial advisor in the solicitor’s office. Mr Shovan said that he only had a very short conversation with the financial advisor, in which he told the advisor that he proposed to purchase a car and a caravan, and was advised in effect that there would then be insufficient money there for him to be subject to a preclusion period.
9. In a letter dated 28 February 2008, Centrelink advised Mr Shovan of the preclusion period that applied in consequence of the settlement of his compensation claim. A Centrelink financial services officer, Jock O’Sullivan, gave evidence that after that, on 12 March 2008, he spoke to Mr Shovan, who said that he had purchased a caravan for $38,000 and a motor vehicle for $52,000. Mr O’Sullivan said that during this conversation he advised Mr Shovan that he only had $45,000 to live on over the three-year preclusion period. Mr Shovan could not recall this conversation, but he did not dispute it. He also said that at that time, he thought that he would be able to manage on his remaining funds for the remainder of the preclusion period.
10. Mr Shovan confirmed in evidence that he had purchased a motor vehicle and a caravan. He paid $38,000 for the caravan on 8 February 2008. There were faults with the caravan. He later returned it, and was given a replacement caravan and a refund of $4,000. He said that before purchasing the vehicle, he made inquiries from the RAA and the police as to what kind of vehicle would be suitable for towing the caravan, and was advised to purchase a Nissan 4.2 diesel. He also said that he decided to buy a vehicle in good condition so that it would last him the rest of his life. He confirmed that the vehicle cost $52,000, including stamp duty and other costs.
11. He then went to live in his caravan at Waikerie in the Riverland of South Australia. After a time he moved to Charlton and then to Murrayville in Victoria, because the caravan rental was cheaper there.
12. A couple of months or so after he had received his compensation payment, he decided to try to get his arms fixed using alternative medicines and treatment. He had heard about a rugby player who had been assisted by such treatment. He went to Bendigo and obtained Chinese herbal medicine, and also went to a hypnotherapist there. He also returned to a psychologist who had been treating him in Adelaide, and had further treatment from her.
13. I endeavoured to obtain particulars of these and other expenses that Mr Shovan had incurred after the commencement of the preclusion period. His resulting evidence was tentative and hesitant, but he mentioned the following items, in each case referring to approximate figures:
·child support $600
·repaying hire purchase commitments and
other debts for items he had purchased
for his old car $2,000·herbal medicines $2,000
·hypnotherapist $2,000
· various utensils and dishes and other
items needed for his caravan $2,000
·solicitors’ costs in connection with a
restraining order case $1,800 - $2,000
·vehicle registration expenses $607
14. He also paid for insurance of $36.40 per month, and for servicing his vehicle. In addition, he said that he repaid “a lot of debt”, being money he had previously borrowed for food and rent. He said further that he had incurred the costs of the hypnotherapist and the psychologist, and ongoing costs to obtain medication to assist with his pain, sleeping difficulties and dermatitis, and that he had had ongoing living expenses, including rent for his caravan, food and running his car. These costs included travelling to Bendigo and Adelaide on a number of occasions to obtain herbal medicines and treatment. He said that he was unable to produce evidence of the cost of the treatment he had obtained for his arms, because he had paid cash. He also said in effect that he did not want to get the relevant people “involved” with Centrelink because he did not want Centrelink to “destroy” them too. In the period since he received his final compensation payment he has also received an economic stimulus strategy payment of $900 from the Government, and also a tax refund of approximately $1,600.
15. Mr Shovan gave evidence that in about March this year, he told a Mr Neil Johnson from Centrelink that he had no money, and that Mr Johnson told him that he had to sell his car and his caravan and move to the city to rent a house. Mr Shovan said that he then said his caravan was not an asset, and was in fact his home. Mr Johnson, who was called by the Secretary, gave evidence that he had no independent recollection of a conversation with Mr Shovan, but made reference to the terms of the decision he had made when, in his capacity as an ARO, he refused to reduce the preclusion period after Mr Shovan had claimed Newstart allowance. This decision referred to information that he had been given by Mr Shovan. Mr Johnson denied that he told Mr Shovan to sell his car and caravan and rent a house in the city, but agreed that he might have asked Mr Shovan whether he had considered selling his car and his caravan.
16. I do not think that anything turns on the different versions of the conversation between Mr Shovan and Mr Johnson. Mr Shovan did later sell his vehicle for $30,000 on 27 August 2009. Mr Shovan said that the buyer had previously agreed to pay him $35,000, but later reduced the price to $30,000 after realising that Mr Shovan was in financial difficulties.
17. Mr Shovan gave evidence that from the proceeds of sale of the car he repaid money he had borrowed from other persons, and now had about $10,000 in a bank account, and about $15,000 in cash which he had kept to buy another vehicle. He described the type of vehicle that he is looking for, which again was a vehicle that would be suitable for towing his caravan.
18. Earlier this year Mr Shovan registered with an employment agency in the Riverland. He obtained a job at an abattoir in Victoria, through his brother, but after only a few days’ work, was told that he was no longer required. He said that it cost him more to travel to the place of work than he earned in the few days he worked there. He also said that shortly before the hearing, he had had an opportunity to obtain a full-time job at Waikerie, but had been unable to travel there because he had sold his car, and so he missed that position.
19. Apart from his employment with Peter Lehmann Wines, Mr Shovan said that he had previously worked as a truck driver for country councils, as a kangaroo shooter, and as a welder working on railway lines in Whyalla. His past work has all been based in the country. He said that he intends to continue to look for work in the country, but is not sure whether he will be able to obtain a full-time position based in a country town, or whether he will have to accept seasonal or short-term work where he would need to travel from place to place.
20. Mr Shovan said that he was most reluctant to sell his caravan, because this was his home. He said that if he were to rent a house in the city, he would have to buy furniture, and furthermore, the cost of rent would undoubtedly be considerably more than the rent he is paying for his caravan park at Murrayville, which he said is $52.00 per week.
Legislative Scheme
21. Part 3.14 of the Social Security Act 1991 (Cth) (“Act”) provides for the effect of compensation recovery on certain social security benefits. Section 1160(1) of the Act provides for the general effect of that Part of the Act. It provides as follows.
“1160(1)This Part operates in certain specified circumstances to do one or more of the following:
(a) reduce a person’s compensation affected payment;
(b) render a person’s compensation affected payment not payable;
(c)require the repayment of some or all of a person’s compensation affected payment;
because of the receipt of compensation by the person or the person’s partner.”
22. Section 1169(1) of the Act provides in effect that a compensation affected payment is not payable during a lump sum preclusion period. It provides as follows.
“1169(1) If:
(a)a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.”
23. Section 17(2) of the Act defines “compensation”. This includes a payment of damages “that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”.
24. Section 17(1) of the Act defines the expression “compensation affected payment”, and a disability support pension (DSP) is included in that definition.
25. Subsection 1170(3) provides relevantly that the lump sum preclusion period is the period that begins on the day on which the loss of earnings or loss of earning capacity began, and ends at the end of the number of weeks worked out pursuant to the statutory formula referred to in subsections 1170(4) and (5). That formula refers to the “compensation part of lump sum”.
26. Section 17(3) of the Act provides an artificial statutory formula for determining the “compensation part of a lump sum compensation payment”. It provides relevantly as follows.
“17(3)Subject to subsection (4), 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 judgment being entered in respect of the settlement or otherwise; or … .”
27. The above provisions must, however, be read subject to section 1184K of the Act. That section authorises the Secretary (and this tribunal, standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment in certain circumstances. Subsection 1184K(1) provides as follows.
“1184K(1)For the purposes of this Part, the Secretary may treat the whole or part of the 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.”
Parties’ Contentions
28. Mr Shovan submitted that he should not be required to sell his caravan, which was his home, and that he needed to retain the sum of approximately $15,000 to buy another suitable vehicle, and was clearly most concerned about his financial circumstances. He said that he wanted a “little help” from Centrelink, and that this would then enable him to obtain employment.
29. In her helpful submissions, the advocate representing Centrelink, Ms Okmasich, contended that there was insufficient evidence before me to justify a finding that Mr Shovan is currently experiencing financial hardship, and that special circumstances do not exist in the present matter by reason of any financial hardship. She pointed out that since he sold his car, Mr Shovan has $25,000 remaining, and that at the rate of DSP, current at the date of the hearing, namely $569.80 per fortnight, the sum of $25,000 would last for about 44 fortnights, that is from the date of the hearing until 5 April 2011, which is later than the end of the preclusion period.
30. Ms Okmasich further observed that after he had purchased the car and caravan, Mr Shovan had funds remaining of approximately $45,000. She pointed out that he had not provided evidence of the medical expenses he had incurred since then, despite being requested for this information, and that, according to his evidence, his estimate of the amounts he had spent on medical and other expenses since then was about $12,000, and the difference of approximately $33,000 had not been adequately explained. She contended that in view of these matters, it was not appropriate to exercise the discretion to reduce the preclusion period by reference to special circumstances, and that nothing out of the ordinary had been revealed that would justify any such reduction.
Consideration
31. I must now consider whether special circumstances exist that would make it appropriate for me to treat the whole or part of the compensation payment as not having been made, and so reduce the preclusion period.
32. The concept of what constitutes “special circumstances” has been discussed in many cases in the Federal Court and in this tribunal. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 the tribunal was dealing with an application under a different section of the Act which also, however, involved a consideration of whether special circumstances existed. Toohey J said (at page 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.”
33. In the same case on appeal ((1985) 7 ALD 670), a Full Federal Court (Bowen CJ, Fisher and Lockhart JJ) said, at 675, that it was “in broad agreement with the approach of the Tribunal”, and reiterated the need to avoid limiting the scope of what might constitute special circumstances when it explained, at 674:
“We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.”
34. In a later case, Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court’s decision in Beadle, observed at 545 that special circumstances:
“… would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary 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.”
35. The flexibility of the concept of special circumstances was referred to in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443, where a Full Court of the Federal Court (Neaves, Burchett and O’Loughlin JJ) said, at page 450:
“Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.”
36. In a similar vein Heerey J, in Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147, said at [17]:
“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances … ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances.” (References omitted).
37. The purpose of the “special circumstances” provision was explained (in the context of a similar section, namely s 1237AAD of the Act, ) by French J (as he then was) in Secretary, Department of Social Security v Hales (1998) 82 FCR 154, when he said, at page 162:
“The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt.”
His Honour also said, at page 162:
“The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it.”
38. Finally, I refer to Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 at 263, where Hill J discussed the predecessor of section 1184K of the Act, and agreed with an earlier observation by von Doussa J to the effect that in that section an attempt was made to balance on the one hand finite budgetary allocations against the interests of the recipient of the payment. His Honour continued:
“Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments.
However, the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184, therefore, provided the means whereby the secretary or, in the event ultimately of an appeal to the Administrative Appeals Tribunal, that tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances. The question of what constitutes special circumstances has been the subject of a number of decisions of this court. It suffices here to say no more than that something is required which would take the matter out of the usual ordinary case …”.
39. It has been decided by this tribunal that if a person has received a compensation payment but has been reckless or imprudent in spending the amount received, the person’s resulting financial difficulties should not be regarded as special circumstances. A number of decisions to this effect are discussed by Senior Member Cunningham in Re Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339. The rationale for such decisions is that it is inappropriate for persons who have received appropriate compensation for their economic loss to be supported from public moneys when their necessitous circumstances are the result of their own conduct in inappropriately dissipating the compensation they have received.
40. In the present matter I do not think that it was unreasonable for Mr Shovan to have purchased the vehicle and caravan. I take into account his antecedents. He is a person who has spent virtually the whole of his working life living and working in the country. It is likely that if he is now able to return to work, he will need to be able to move from place to place. A vehicle and caravan will give him the flexibility to be able to do so. Further, he is able to live for very little expense in his caravan; it is, as he says, his home. The vehicle that he purchased was relatively expensive, but even after he had purchased the car and the caravan, he still had funds of approximately $45,000 remaining, and with careful management, that amount would have supported him until the end of the preclusion period. Further, I think that it was reasonable for him to have taken a longer-term view, and to have purchased a suitable vehicle that would be in good working order for many years, to enable him to tow his caravan from place to place as circumstances demanded, taking into account that he had retained sufficient funds to last until the end of the preclusion period.
41. I think that it was also reasonable for Mr Shovan to have expended part of his compensation moneys on further medical treatment, even if this involved alternative treatment and medications, rather than mainstream medical treatment. This is especially so when, as events have transpired, the treatment has been successful. Although he did not produce documentary evidence of the relevant costs, he gave sworn evidence of his estimated expenditure.
42. In some cases, special circumstances have been found to exist where a person has been given incorrect legal or financial advice. I referred above to Mr Shovan’s evidence as to the advice he received from the financial advisor in his lawyer’s office. I note that the account that he is reported to have given to the SSAT differs somewhat from the evidence he gave before me. However that may be, I accept the evidence of Mr O’Sullivan that Mr Shovan was given appropriate financial advice by Centrelink on 12 March 2008. Any deficiency in the advice he received from his own financial advisor was therefore not relevant after that.
43. It is of concern that Mr Shovan has not provided a satisfactory explanation as to how he expended the balance of $45,000 that he had as at March 2008, after he had purchased the caravan and motor vehicle. As I have said, he was vague when he was asked to give particulars of his expenditure and to estimate the costs of the various treatment and medications he has obtained, and of other items of expenditure.
44. Notwithstanding this unsatisfactory aspect of Mr Shovan’s case, I think that on balance, having regard to his particular situation, his expenditure of the compensation he received could not be said to be reckless or imprudent.
45. I am mindful that in this matter, unlike the position in many cases that come before this tribunal, the statutory formula has worked to Mr Shovan’s advantage, because his compensation for economic loss exceeded 50% of the lump sum payment he received.
46. Nevertheless, it is to Mr Shovan’s credit that he has incurred expense and undergone treatment to put himself in a position where he now feels well enough to return to work, notwithstanding that he apparently received very serious injuries in the accident that gave rise to his compensation claim. He is now actively seeking employment, whereas if he had not expended funds on medical treatment it is likely that he would have been dependent on a disability support pension at some stage after the expiration of the preclusion period. Further, he has now sold his vehicle in order to obtain funds for his ordinary living expenses. Although for the reasons referred to above I think that his purchase of the vehicle was not unreasonable, its forced sale has resulted in a loss of some $22,000 in less than eighteen months, and he will now have to acquire a replacement vehicle which is likely to be less reliable and not last as long. He needs this cheaper replacement vehicle so that he will be in a position to look for and obtain work, and I think that it would be reasonable for him to expend part of his remaining funds for this purpose. His evidence that this would cost about $15,000 was not contested. Of course, if he now obtains employment, the balance of the preclusion period is likely to become irrelevant, depending on the duration of his employment and the level of income he earns. I also note that the funds that would remain if he purchases a vehicle for $15,000 would be exhausted on ordinary living expenses well before the expiry of the preclusion period in March 2011.
47. I think that the circumstances referred to in the preceding paragraph are somewhat out of the ordinary and justify the exercise of my discretion under s 1184K of the Act.
48. I have a broad discretion as to the extent to which the preclusion period should be reduced. In many cases of this sort, there does not appear to be any scientific basis for the exercise of this discretion, and it has been suggested that this is a matter for intuitive judgment. Nevertheless, I think that Mr Shovan should be required to support himself for the time being from the compensation funds remaining from the sale of his vehicle, except for the estimated costs of buying another vehicle. Having regard to all of the circumstances of this matter, I think that it would be reasonable to treat so much of the compensation as not having been paid as would reduce the preclusion period so that it will end on 31 May 2010.
Decision
49. The tribunal sets aside the decision under review, and in place of that decision decides that such part of the compensation payment received by the applicant shall be treated as not having been made as shall result in the preclusion period ending on 31 May 2010 instead of 24 March 2011.
I certify that the 49 preceding paragraphs are
a true copy of the reasons for the decision
herein of Deputy President D G JarvisSigned: .....................................................................................
B Bills Admin AssistantDate/s of Hearing 9 September 2009
Date of Decision 29 September 2009
Applicant In person by telephone
Advocate for the Respondent Ms J Okmasich
Centrelink Legal Services Branch
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