Coulson and Secretary, Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2002] AATA 820

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2002/448

GENERAL ADMINISTRATIVE DIVISION       )
           Re      GREGORY COULSON
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Ms J Cowdroy, Member

Date20 September 2002
PlaceBrisbane

Decision The Tribunal affirms the decision under review.

.................…(Sgd)...................
Ms J Cowdroy
Member
CATCHWORDS
SOCIAL SECURITY – lump sum compensation payment – application of statutory formula – compensation payment for personal injury received while in receipt of pension payments – statutory objectives in utilisation of formula - whether special circumstances exist – financial hardship

Social Security Act 1991

Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67

Re Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

REASONS FOR DECISION

20 September 2002 Ms J Cowdroy, Member
Background to the Application

By decision dated 29 April 2002, the Social Security Appeals Tribunal ("the Tribunal") affirmed a decision made by Centrelink on 30 November 2001 to raise and recover an amount of $10,267.29. The matter was heard on 2 September 2002. The applicant appeared in person. The respondent was represented by Mr S Letch. The matter was decided on the basis of the T-documents, the oral evidence of the applicant and the submissions of both parties.
Applicant's Case
Mr Coulson was involved in a motor vehicle accident in April 2000. He sustained soft tissue injuries to his upper and lower back areas and an injury to his right elbow. An action for compensation for personal injuries arising out of the accident was settled for $60,000. Of this amount, $6000 was paid for legal fees. Whilst the Department and the Tribunal had treated fifty per cent of $60,000 as the component for economic loss, he had only received $54,000, most of which he contended represented compensation for pain and suffering.
He has been in a wheelchair for over twenty years due to back injuries. At the time of the motor vehicle accident in 2000, he was unemployed. He last worked on a full time basis prior to 1991 in clerical duties. He had been employed on a part time basis for about six months in 1998/99. He has been in receipt of disability support pension since 1991.
Because he was not employed at the time of the accident, he argued that the economic loss factor was considerably less than that would have been the case had he been employed. He referred to discussions between the solicitors for both parties prior to the settlement of his claim, which utilised various figures in respect to the component for economic loss, commencing at $20,000, and reducing to a figure of $12,000.
After the debt of $10,267.29 had been repaid to Centrelink, there was approximately $43,000 remaining. He paid that amount on his home mortgage. Since that time, he has used the re-draw facility on his mortgage to purchase a vehicle for $10,000 and outlaid $2,000 for the cost of concreting around his clothes line in order to give him better access. He has a credit card debt of about $1,000. The house is valued at $110,000 and the mortgage is $72,000. The mortgage repayments are approximately $700 per month.
Mr Coulson referred to the possible future need of cortisone injections to his elbow. He values his independence. If he was not able to fully use his arms, his independence would be impugned. He keeps well by undertaking hydrotherapy three times weekly, which costs $3.60 per session. He does not take medication. He finds neck and lower back massages are beneficial to his mobility, however as they cost $60, he is not able to afford them regularly. He intended to consult a deep muscle relaxant therapist this week, as he believes that weekly treatment of that nature would be beneficial.
The applicant has about $150 in the bank and apart from his house and car, he has no other assets. He argued that the figure used in calculated the economic loss component of his lump sum compensation payment was unreasonable. He referred to the uncertainty of his health, and in particular, the need to have monies available to meet the cost of future medical treatment.
Mr Coulson submitted that all the authorities cited by the respondent were consistent with his contention that the fifty per cent rule was a "broad brush" approach and not tailored to individual circumstances. He disagreed with the manner in which the law had been applied. He referred to recent hospitalisation for a brain haemorrhage but did not elaborate on this aspect.
Respondent's Case
Mr Letch referred to s 17(3) of the Social Security Act 1991 (the Act) which, when applied to the applicant's circumstances results in a determination that fifty per cent of the $60,000 received by the applicant is "the compensation part of a lump sum compensation payment". This was so, despite the fact that legal fees of $6,000 reduced the amount the applicant received to $54,000.
The Tribunal was referred to Secretary, Department of Family and CommunityServices v Chamberlain [2002] FCA 67, in which Kiefel J discussed the application of the statutory formula of fifty per cent of a compensation payment to be regarded as the component for economic loss. In that case, of an amount of $31,500, $3,500 was attributed to loss of earnings to the date of settlement and future loss. By the application of the statutory formula, Mrs Chamberlain repaid Centrelink more than double the amount she actually received for economic loss.
Kiefel J acknowledged that the assumption made in respect to the fifty per cent component and the end result may operate in an arbitrary manner. She acknowledged that the statutory assumption operated unjustly in some cases, however, simply because the application of the formula was unfair, it cannot, of itself, amount to special circumstances.
Kiefel J set aside the decision of the Administrative Appeals Tribunal which found special circumstances existed and the matter was remitted for further consideration. Mr McCabe, Member, heard the matter (Re Chamberlain and Secretary, Department of Family and Community Services[2002] AATA 487) and despite evidence of ill-health and financial hardship, special circumstances were not found to have been established.
The Tribunal was also referred to the matter of Secretary,Department of Social Security v Hulls (1991) 22 ALD 570. Despite the fact that the applicant's entitlement to disability support pension is based on a different disability to that which precipitated the compensation payment, s 1160 of the Act states that the compensation recovery provisions still apply.
In respect to the applicant's contention that he needed funds for future medical expenses, this was not an uncommon state of affairs for those who receive lump sum compensation payments.
Consideration
It is not in dispute that Mr Coulson settled a personal injuries claim for $60,000. The combination of ss 17 and 1170 of the Act states, in effect that the applicant is precluded from receiving disability support pension for a period known as the "lump sum preclusion period". The period is calculated by dividing the compensation part of the lump sum payment by the relevant divisor figure. According to s 17(3)(a)(ii) of the Act, the compensation part of a lump sum compensation payment is fifty per cent where the claim was settled.
The applicant submitted that it is unjust to adopt fifty per cent of $60,000 as the compensation part of his lump sum payment for two reasons. Firstly, he received only $54,000, the remainder of the payment being used to meet legal expenses. Secondly, he referred to the rationale behind what is referred to as "the fifty per cent rule", in that it is intended to represent the economic loss component of the payment. As he was not working at the time of the injury in respect to which he received the lump sum, and discussions between solicitors revolved around an economic loss of component of somewhere between $12,000-$20,000, it was unfair to require strict application of the rule, as it produced an unjust result.
In Hulls, O'Loughlin J held that it was commonplace for claims of compensation to be settled on the basis of a global sum, leaving the claimant to meet their own liability for legal costs, consequently the finder of fact could not, as a matter of course, have regard to legal costs in applying the statutory formula, nor could they be invoked as a matter of course in making a finding as to the existence or otherwise of special circumstances. In respect to the second part of the applicant's argument, this Tribunal is bound to apply the formula that the legislation has created, even though it may consider it operates in an arbitrary manner.
Consequently, applying the formula, I find that there is a lump sum preclusion period of fifty-two weeks from 26 April 2000 to 24 April 2001. During that period the applicant received $10,267.29 in the form of disability support payments. Pursuant to s 1178 of the Act, such a sum is liable to be paid by the applicant to the Commonwealth.
This leaves consideration of whether there are any special circumstances which may affect the whole of part of the debt. Section 1184(K) is relevant. It states:
"1184K(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."
The term "special circumstances" has been considered by the Tribunal and other forums on numerous occasions. In this context the decision of Re Beadleand Director-General of Social Security (1984) 6 ALD 1 has been much quoted as the benchmark in respect to the interpretation of those words. In that case the Tribunal said:
"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 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."
The Tribunal considered the applicant's evidence, which the Tribunal accepts, that (i) legal costs reduced the amount of the payment and (ii) that less than fifty per cent of the payment was for economic loss. However, those factors are present in many cases involving a compensation payment and judicial pronouncements are to the effect that these cannot amount to a special circumstance.
In respect to other considerations, the Tribunal considered that the applicant's injury was likely to have had more effect on him, in terms of loss of mobility, than other recipients of lump sum payments, given that he was already confined to a wheelchair at the time of the injury. However, I am not convinced that this of its own, is sufficient to place his circumstances out of the ordinary or usual case. His financial circumstances, although not buoyant, do not constitute hardship. Although he is anxious to retain funds for future medical treatment, there is no evidence that this is likely to be required in the immediate future, or even in the long term.
Ultimately, the Tribunal determines that there were no special circumstances which would warrant treating any part of the compensation payment as not having been made.   In those circumstances, the Tribunal affirms the decision under review.
I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of Ms J Cowdroy, Member
Signed:         Sarah Oliver
  Associate
Date of Hearing  2 September 2002
Date of Decision  20 September 2002
The Applicant Appeared in Person
Solicitor for the Respondent    Mr Letch, Departmental Advocate

[2002] AATA 820

20 September 2002

Key Legal Topics

Areas of Law

Social Security Law

Legal Concepts

Lump Sum Compensation Payment

Statutory Interpretation

Special Circumstances