Coxon and Department of Family and Community Services

[2001] AATA 294

DECISION AND REASONS FOR DECISION [2001] AATA 294

ADMINISTRATIVE APPEALS TRIBUNAL)
  Nº V00/1495
GENERAL ADMINISTRATIVE  DIVISION)

Re:            RICHARD COXON

Applicant

And:         SECRETARY TO THE
  DEPARTMENT OF FAMILY AND
  COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       Mrs H.E. Hallowes, Senior Member
Date:             11 April 2001
Place:            Melbourne

Decision:The decision under review is affirmed.

(sgd) H.E. Hallowes
  Senior Member
  SOCIAL SECURITY  — disability support pension/newstart allowance — lump sum compensation payment — preclusion period — compensation divisor — whether special circumstances
Social Security Act 1991 ss.17, 1165, 1184
Social Security Act 1947 s.156
Secretary, Department of Social Security v Smith (1991) 23 ALD 277
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745

Re Giannekas and Secretary to the Department of Family and Community Services

[2001] AATA 236

REASONS FOR DECISION

11 April 2001  Mrs H.E. Hallowes, Senior Member

1. Mr Coxon, who represented himself at the hearing, seeks review of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 1 November 2000.   The SSAT affirmed a decision of a delegate of the Secretary, which in turn had been affirmed on review by the delegate and by an authorised review officer ('ARO"), that Mr Coxon is precluded from being paid a compensation affected payment under the Social Security Act 1991 ("the Act") between 27 November 1999, the day after his weekly compensation payments ceased, and 4 June 2004.

2. It is clear from the documents, lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("the documents"), which the Tribunal had before it, and what Mr Coxon told the Tribunal at the hearing, that the solicitor who represented him in his compensation proceedings did not draw his attention to relevant provisions under the Act with respect to preclusion periods when he was considering whether to accept a settlement of his compensation claim following his receipt of weekly compensation payments. However, the Tribunal is satisfied that the Secretary had advised Mr Coxon, by letters dated 3 August 1998 and 9 November 1998, that any lump sum compensation payment he received may preclude him from receiving social security payments under the Act in the future. He was also advised how a preclusion period is calculated. By letter dated 3 August 1998, Mr Coxon was advised:

   Any compensation you receive may also stop you from receiving social security payments in the future.
   . . .
   HOW THE CHARGE AND PRECLUSION PERIOD ARE CALCULATED
   The preclusion period is calculated by dividing that part of the lump sum payment deemed to be for economic loss (in most cases this will be 50 per cent of the lump sum) by the amount above which no pension is payable to a single person under the income test (currently $410.00 a week).    . . .

By letter dated 9 November 1998, he was further advised:

If you receive any payment of weekly compensation or a lump sum compensation payment, some or all of the social security payment paid to you since the date of injury may have to be paid back to us.  
Any compensation you receive may also stop you from receiving social security payments in the future.
. . .
The preclusion period is calculated by dividing that part of the lump sum payment deemed to be for economic loss (in most cases this will be 50 per cent of the lump sum) by the amount above which no pension is payable to a single person under the income test (currently $412.70 a week).

1. The documents disclose that Mr Coxon was born on 16 September 1942; that he was injured in April 1997 and that he was paid periodic payments of compensation until 26 November 1999. He accepted a lump sum of $200,000 in settlement of his claim on 28 February 2000. A Final Charge Calculation sheet indicates that the compensation divisor used to calculate Mr Coxon's preclusion period was $422.90 per week, which, when divided into the economic loss amount of the settlement, resulted in a preclusion period of 236 weeks. The reasons for decision of the SSAT set out subsection 17(3) of the Act, which provides how to work out the compensation part of a lump sum compensation payment and the Tribunal will not set out that section here. It will set out the meaning of "income cut-out amount" under subsection 17(1) of the Act, which provides:

   17(1)       In this Act, unless the contrary intention appears:

   "income cut-out amount" the amount worked out using the following formula:

   (Maximum basic           Pharmaceutical amount  )             Ordinary free

   2        (       rate             +      for a single person        )     +      area limit

   ____________________________________________________________

   52

   where:
   "maximum basic rate" means the amount specified in column 3 of item 1 in Table B in point 1064-B1.
   "pharmaceutical amount for a single person" means the amount specified in column 3 of item 1 in the Pharmaceutical Allowance Amount Table in point 1064-C8.
   "ordinary free area limit" means the amount specified in column 3 of item 1 in Table E-1 in point 1064-E4.       

and subsection 1165(8) of the Act, which provides, how to calculate the number of weeks in a preclusion period:

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-amount

Note 1:  For compensation part of lump sum, see section 17.
Note 2:  For income cut-out amount, see section 17. 

In calculating the preclusion period on 23 March 2000 the delegate used a compensation divisor of $422.90.   In the letter sent to Mr Coxon's solicitor on 23 March 2000, it was noted that the amount above, which no pension was payable to a single person under the income test, was currently $428.40 per week, which the Tribunal understands to be the compensation divisor which came into effect on 20 March 2000.   Four hundred and twenty-two dollars and ninety cents was the compensation divisor in effect on the day after the last day of Mr Coxon's periodic payment period, 26 November 1999.   Subsection 1165(5) provides:

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).

Note:   For periodic payments period see section 17.

Ms R. Bradley, an advocate with Centrelink, who appeared for the Secretary at the hearing, told the Tribunal that it is the Department of Family and Community Services' ("the department") policy to apply the compensation divisor in effect on the last day of the periodic payment period, rather than the compensation divisor in effect on the day on which a person claims a compensation affected payment (see subsections 1165(2), (2AA)), or the compensation divisor in effect at the date of decision.

1. The documents include a treating doctor's report, lodged with Centrelink on 21 June 2000, which discloses that Mr Coxon had suffered a crushing injury to the fingers of his right hand, the effects of which were likely to remain long term.   This had resulted in Mr Coxon having substantially diminished dexterity, greatly reduced speed and co-ordination in lifting, carrying and moving objects, and difficulty for him in alternating between tasks.   Mr Coxon advised that he had no strength in both his hands and that he suffered from industrial deafness and he was unable to sleep due to stress.  

2. Mr A. Berger, hand and upper limb surgeon, reported on 23 October 1997 that Mr Coxon had caught his right hand in an injection moulder which resulted in a crushing injury to the fingers of his right hand.   In his opinion the injury had a significant effect on Mr Coxon's right hand function, causing difficulties with most daily activities and which would limit Mr Coxon's ability to gain further employment.   Mr C. Rubinstein, plastic and reconstructive surgeon, reported, amongst other things, on 10 June 1999, that Mr Coxon could no longer write, use tools such as screwdrivers, participate in bowling, which he used to enjoy, and that he had difficulty shaving.  

3. The documents record that Mr Coxon lodged a claim for a payment for people with disabilities —

• Disability Support Pension

• Sickness Allowance

• Newstart Allowance

• Youth Allowance

on 21 June 2000. A decision was made on that day, "dsp rejected". A file note indicates Mr Coxon advised that he had bought a house and he had a $15,000 mortgage to be repaid and he had no money left. He asked for his circumstances to be considered under section 1184 of the Act, which provides:

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.

1184(2)    If:

(a)a person receives or claims a compensation affected payment; and

(b)the person's partner receives compensation; and

(c)the set of circumstances giving rise to the compensation are not related to the set of circumstances that give rise to the person's receipt of or claim for the compensation affected payment;

the fact that those 2 sets of circumstances are unrelated does not in itself constitute special circumstances for the purposes of subsection (1).

Note:Subsection (2) is in response to comments made in the decision of the Administrative Appeals Tribunal in Re Secretary, Department of Social Security and Lee (S92/155) to the effect that the Social Security Act is aimed at reducing pensions in situations where a social security recipient's entitlement is somehow connected with the fact that the recipient's partner is in receipt of compensation payments and not wages.

1. Mr Coxon told the Tribunal that he had claimed NSA which is recorded in a text on the department's computer on 11 May 2000.   He now has a cleaning position, carrying out his duties for three hours each night and his wife is paid DSP as she has acute emphysema and she experiences difficulty in walking.   Mr Coxon told the Tribunal, if he had known that he would be precluded from being paid a social security payment, he would not have purchased his house.   Although his house is fully paid for, he has debts of approximately $15,000 to $16,000.   Mr Coxon said that he had never owned a home before.   He had been saving towards that goal.   If he had remained in rented premises and not purchased his home, his wife may have been entitled to rent assistance.   On the other hand, any income derived from investing the compensation settlement moneys would have been taken into account in determining the rate of pension payable to Mrs Coxon.

2. Ms Bradley put to the Tribunal that there are no special circumstances in this case such that the Tribunal should treat the whole or part of the compensation payment as not having been made.   She noted Mr Coxon's earnings and that his wife is in receipt of $289.82 per fortnight wife pension.   It was further Ms Bradley's contention that the introduction of the goods and services tax ("GST"), which resulted in a considerable increase in the compensation divisor on 1 July 2000 ($543.63), was not in itself a special circumstance.  

3. The failure of a person's solicitor to advise of the existence of a preclusion period is not a factor which is persuasive or determinative in exercising the discretion under section 1184 of the Act (see Re Bolton and Secretary, Department of Social Security (1989) 80 ALD 464, although the Tribunal in Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745 said that it may be a circumstance within the meaning of section 1184). In any event, the Tribunal is satisfied that Mr Coxon had been advised by the Secretary that he may have to repay any social security payment or be subject to a preclusion period.

4. Ms Bradley contended that the change in the compensation divisor on 1 July 2000 was not in itself a special circumstance which should persuade the Tribunal to exercise its discretion and that, in any event, the income cut-out amount is twice the maximum basic rate of pension, the introduction of the GST having a gradual effect on the cost of living.   In Re Giannekas and Secretary to the Department of Family and Community Services [2001] AATA 236 (decided 23 March 2001) the Tribunal noted compensation divisors in effect since 1994 and, with the insertion into the Act of the new lump sum preclusion period on 20 March 1997, that the compensation divisor had dropped from $571.90, which then represented average weekly earnings, the compensation divisor until 20 March, to $402.20. With the introduction of the GST on 1 July 2000, the compensation divisor increased from $428.40 to $543.63, presumably, at least in part, to assist people with respect to any effect the introduction of the GST may have on the cost of living. In that matter the Tribunal was advised that, on 20 March 2001, the compensation divisor rose to $562.75.

5. In Secretary, Department of Social Security v Smith (1991) 23 ALD 277 the Federal Court considered section 156 of the Social Security Act 1947 (the equivalent of section 1184) and said, at pages 281-282:

   . . .
   The arbitrary nature of the provisions of s 152 would have been quite apparent to the legislature. The "50% rule" in s 152(2)(c)(i), and the other provisions to which I have referred, are intended to operate together as a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures. As I observed in Banks (at ALR 613; AAR 46), it is in the very nature of an arbitrary provision that it can entail a degree of unfairness in a particular case. The scheme of Pt XVII recognises that perfect matching of eligibilities by dollar amounts or by periods of time for pension and for payments by way of compensation in respect of an incapacity for work is impracticable. 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 Pt 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. Before the 1988 amendment there were other provisions in Pt XVII the strict application of which could operate in an arbitrary way. By its terms the discretion given by s 156 may be exercised where the secretary (or a body standing in the place of the secretary on appeal) "considers it appropriate to do so in the special circumstances of the case". These are wide words intended, as the Tribunal in Ivovic, supra, pointed out, "to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case".   

If it is the department's policy to apply the compensation divisor in effect on the last day of the periodic payment period, a matter this Tribunal had not previously been advised, that policy should be applied so that there is consistency in decision-making.   However, if a degree of unfairness arises because of changes in rates of pensions which leaves behind those customers, locked into a lengthy preclusion period, that fact may add its measure to other circumstances such that it may be appropriate to treat part of a compensation payment as not having been made. 

1. Considering Mr Coxon's circumstances as a whole however, the Tribunal is satisfied that it should not exercise its discretion in Mr Coxon's favour. He has managed to find some employment. His wife is in receipt of a social security payment. Although he has considerable debt, he is probably in a position to borrow further against his house, which may be increasing in value. The injury to his right hand has made life very difficult for him, but that circumstance does not take his case out of the range of circumstances for many people who suffer injury and who must live with ongoing disability under reduced financial circumstances. Although there may be an increase in the cost of living as a result of the introduction of the GST in July 2000, the impact on Mr Coxon of any increase is not such, at this time, that the Tribunal considers it should estimate what his preclusion period would be if the present compensation divisor was used to calculate a preclusion period taking into account the remaining amount of Mr Coxon's lump sum compensation. Mr Coxon's period of preclusion does not cease until June 2004. This is a long time. If his circumstances change and he finds himself unable to work, to raise further borrowings against his house or, if he ceases to be a member of a couple, he may consider again seeking the exercise of the discretion under section 1184.

2. It is for these reasons the decision under review will be affirmed.

   I certify that the thirteen [13] preceding paragraphs are a true copy of the reasons for the decision herein of
   Mrs H.E. Hallowes, Senior Member

   (sgd)       Catherine Thomas
                 Personal Assistant

   Date of Hearing:  27.02.01
   Date of Decision:  11.04.01
   Solicitor for the Applicant:           NIL — IN PERSON
   Solicitor for the Respondent:       Ms R. Bradley, Advocate with Centrelink