David and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2010] AATA 818
•25 October 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 818
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/1973
GENERAL ADMINISTRATIVE DIVISION ) Re AMIR DAVID Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr R G Kenny, Senior Member Date25 October 2010
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
................[Sgd]..................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Pensions, benefits and allowances – Settlement of compensation claim – Lump-sum compensation payment includes component referable to lost earnings and capacity to earn – Imposition of preclusion period – Special circumstances not established – No part of settlement treated as not having been received – Preclusion period not shortened – Decision under review affirmed.
Social Security Administration Act ss 17, 1164, 1170, 1171, 1184K
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Director-General of Social Services v Hales (1983) 47 ALR 281
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Malesv Secretary, Department of Family and Community Services [1999] AATA 863
PGVK v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381
Rankin v Secretary, Department of Family and Community Services [1999] AATA 496Re Nguyen v Secretary, Department of Family and Community Services [2004] AATA 249; Re
Re Secretary, Department of Family and Community Services and Jones [2003] AATA 505
Re Secretary, Department of Family and Community Services and Peak [2003] AATA 1212
Re Secretary, Department of Family and Community Services and Spencer v [2004] AATA 248;
Re Stavrakis and Secretary, Department of Family and Community Services [2003] AATA 212
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Secretary, Department of Family and Community Services and Pearce [2003] AATA 972
Secretary, Department of Social Security v Smith (1991) 23 ALD 277REASONS FOR DECISION
25 October 2010 Mr R G Kenny, Senior Member BACKGROUND
1. On 18 March 2008, Amir David entered into a Deed of Release (“the Deed”) in which he agreed to accept a sum of money in final settlement of a common law claim against his former employer in respect of a work-related injury which he incurred on 9 March 2001. On 2 December 2002, 10 June 2005 and 2 November 2007, he received lump sum payments of $24,000, $25,075 and $15,000, respectively. On 11 February 2010, a Centrelink delegate determined that, as a result of Mr David’s receipt of those monies, he was subject to a preclusion period from 19 March 2008 until 21 October 2014. The effect of that decision was that Mr David was precluded from receiving all forms of income support payments under the Social Security Act 1991 (Cth) (“the Act”) during the preclusion period. This included disability support pension for which he completed a claim form on 11 February 2010.
2. The decision to impose the preclusion period was affirmed by an authorised review officer on 5 March 2010 and, in turn, by the Social Security Appeals Tribunal (“SSAT”) on 16 April 2010.
ISSUES AND LEGISLATION
3. Where a person receives certain compensation monies which include a component referable to lost earnings or lost capacity to earn, provision is made for the imposition of a period during which income support payments under the Act are precluded. Mr David was concerned that all four of his payments would be aggregated in calculating his preclusion period. He also considered that it was inappropriate for Centrelink to utilise the income cut out amount that it did when calculating the preclusion period. This was, he contended, because it far exceeded the payments he received during the final years of his compensation payments. He also contended that some part of the payment that he received should be disregarded so that the preclusion period would be shortened.
4. The provisions of the Act, in so far as relevant, read:
Sect 17 Compensation recovery definitions
(1) In this Act, unless the contrary intention appears:
compensation has the meaning given by subsection (2).
…
compensation affected payment means:
…
(a) a disability support pension; or
…
compensation part, in relation to a lump sum compensation payment, has the meaning given by subsections (3) and (4).
…
income cut‑out amount, in relation to a person who has received a compensation payment, means the amount worked out using the formula in subsection (8), as in force at the time when the compensation was received.
…
periodic payments period means:
(a)the period to which a periodic compensation payment, or a series of periodic compensation payments, relates; or
(b)in the case of a payment of arrears of periodic compensation payments—the period to which those payments would have related if they had not been made by way of an arrears payment.
…
Compensation
(2)Subject to subsection (2B), for the purposes of this Act, compensation means:
(a) a payment of damages; or
(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d) any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
…
Compensation part of a lump sum
(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
…
(4A)For the purposes of this Act, a payment of arrears of periodic compensation payments is not a lump sum compensation payment.
Receives compensation
(5)A person receives compensation whether he or she receives it directly or whether another person receives it, on behalf of, or at the direction of the first person.
…
(8)For the purposes of the definition of income cut‑out amount in subsection (1), the formula is as follows:
where:
maximum basic rate means the amount specified in column 3 of item 1 of the table in point 1064‑B1.
ordinary free area limit means the amount specified in column 3 of item 1 in Table E‑1 in point 1064‑E4.
point 1064‑BA3 amount means the pension supplement amount worked out under point 1064‑BA3 for a person who is not a member of a couple:
(a)whether or not the person for whom the income cut‑out amount is being worked out is a member of a couple; and
(b)whether or not that point applies to the person for whom the income cut‑out amount is being worked out.
Sect 1163 Interpretation
(1)In a provision of this Part (other than section 1164), a reference to the payment or receipt of periodic compensation payments includes a reference to the payment or receipt, as the case may be, of arrears of periodic compensation payments.
(2) A reference in this Part to periodic compensation payments is a reference to:
(a) a periodic compensation payment; or
(b)if 2 or more periodic compensation payments relate to the same period, those payments.
(3)In this Part, a reference to a person’s partner receiving or claiming a compensation affected payment includes a reference to the partner receiving or claiming a compensation affected pension within the meaning of the Veterans’ Entitlements Act.
Sect 1169 Compensation affected payment not payable during lump sum preclusion period
(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.
(2) In this section:
lump sum compensation payment does not include a lump sum payment:
(a) to which section 1164 applies; or
(b) that relates only to arrears of periodic compensation payments.
Sect 1170 Lump sum preclusion period
(1)Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a)begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(2)If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a)begins on the first day on which the person’s periodic compensation payment is a reduced payment because of that choice; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(3)If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a)begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
(5)If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
Sect 1171 Deemed lump sum payment arising from separate payments
(1) If:
(a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and
(b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act and the Administration Act:
(c)the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;
(d) the single payment is taken to have been received by the person:
(i)on the day on which he or she received the last of the multiple payments; or
(ii)if the multiple payments were all received on the same day, on that day.
(2)A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.
Sect 1184K Secretary may disregard some payments
(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.
EVIDENCE
5. In his evidence, Mr David conceded that his damages totalled $514,075. However, he was obliged to pay $90,000 of this to his solicitor in costs. This meant that, in addition to the three initial payments of $24,000, $25,075 and $15,000, he received only $360,000 of the final payment of $450,000. This has now been expended by him. For 26 weeks after the accident, he received workers’ compensation payments. These equated with 85% of his pre-accident weekly wage which had been in excess of $1,000. When the six months ended, he then received a much reduced but indexed payment in the order of $270 per week until the final settlement. He was unable to cope on the reduced payment but, because he was unwilling to reduce the style of living which he had enjoyed prior to his accident, he was able to manage only by borrowing money. This was mainly from his brothers. He used the initial payments of $24,000, $25,075 and $15,000 to repay some of those loans. He went for a holiday and travelled to various places in Australia including Melbourne, Sydney and Cairns. Mr David also said that, in 2001, he underwent triple bypass surgery and that, within a week of realising that his weekly payment would be reduced, he suffered an onset of symptoms associated with his heart condition.
6. By the time that Mr David received his final payment in March 2008, he had been made aware that a preclusion period would be imposed on him and he understood that this would preclude payments of Centrelink benefits for a period. However, he did not compromise his style of living and so continued to spend money as before. He also decided to commence a business in concreting work. In May 2008, he purchased a suitable truck for $27,000 and a range of concreting equipment for approximately $10,000. He engaged workmen. He was able to secure only two jobs because his venture was at the time of the economic downturn. Each of his jobs resulted in losses because of problems that he faced with from work for the pouring of the concrete. He was forced to sell his truck and the equipment in mid 2009 when his money was running out. This left him with a down-graded car and about $4,000 in cash.
7. Mr David had not engaged in gambling prior to his accident. After he received his compensation payments, he began playing poker machines. He had an initial win of some $5,700 but, thereafter, he routinely lost money at various gambling venues including hotels and clubs as well as casinos on the Gold Coast, in Brisbane and in Sydney. He usually frequented these places with friends but often went on his own, staying all day and into the night at a venue and withdrawing money through an ATM. He did not consume alcohol during this time. He did not really recognise that he was depleting his account until, by about mid 2009, he realised that he was in danger of expending all of his money on gambling and he resolved to cease. He involved himself in the work of a church and was able to stop playing the poker machines. He did not engage in other forms of gambling and has not been involved with poker machines since mid 2009. He also found that distracting himself through use of the internet had also assisted him in staying away from the temptations of gambling.
8. Mr David developed a friendship with Karen Bailey who assisted him from time to time after his money had been spent. She provided him with food and accommodation in her role as a person who was involved in the organisation of cheap accommodation for people in need. Ms Bailey gave evidence to the SSAT and agreed that, after Mr David received his settlement monies, he paid her the sum of $140,000 by way of what she described as a generous repayment to her. In her evidence, she also advised that, if a room became available and Mr David was in need of accommodation, she would provide him with food and lodging without cost.
9. Mr David is not married and has no dependants. Currently, he is living with his brother from whom he has borrowed substantially. He currently owes him approximately $10,000. He said that he has other debts including approximately $1,900 in unpaid motor vehicle fines in relation to which he has been advised that non-payment will result in the loss of his driver licence. He said that he has difficulty finding money to purchase fuel for his car. He has a mobile phone which his brother funds for him at $30 per month. Mr David also referred to debts he still has from his failed concrete business. These included $1,400 to ASIC because of his intention to employ workers at the time he started -as well as $900 to a concrete supplier. He considers himself to be unemployable because of the continuing effects of his injuries which impacts upon his shoulders, back and hands.
10. Mr David’s statements for his account with Credit Union Australia (CUA) were in evidence. These reveal a withdrawal in the amount of $140,000 on 1 August 2008. The stated purpose is “house deposit”. Mr David identified this as the payment to Ms Bailey. He said that CUA always required a reason for withdrawals and he said that he told CUA it was for a house loan purely for convenience. After the withdrawal, the account balance was $27,147.84. He said that he had another account and that, at that stage, his balance was approximately $93,000.
SUBMISSIONS
11. I have noted Mr David’s concerns about the aggregation by Centrelink of all four of his compensation payments as well as Centrelink’s use of the income cut out amount of $745.38. Also, he submitted that at least some of the compensation monies he received should be disregarded. In essence, he submitted that he had been a taxpayer for many years and that it was time for the public purse to assist him in his time of need. I have also considered his health, his inability to obtain employment and his financial situation. For the respondent, Bob Hamilton submitted that the scheme under the Act was designed to prevent persons who had been compensated for future loss of earnings and who, like Mr David was the author of his own misfortune, from gaining access to scarce public monies in the form of Centrelink payments. He submitted that the statutory formula had been properly applied in calculating the preclusion period and that there were no special circumstances to justify the exercise of the discretion to disregard any of the monies paid to Mr David.
CONSIDERATION
12. As noted above, Mr David challenged aspects of the procedure whereby the formula under the provisions of the Act were applied. Mr David received four separate payments and the requirement to aggregate separate lump sum payments is provided for in s 1171 of the Act. An exception to this aggregation is set out in s 1164 of the Act but I am satisfied that this is not applicable to Mr David’s situation. The formula in s 1170 of the Act was applied correctly to the aggregate of his payments. I have noted Mr David’s concern that the income cut-out amount utilised was not in accordance with his own earning level. However, I am satisfied that the amount used in applying the statutory formula was in accordance with the definition of income cut-out amount set out in s 17(8) of the Act. I am also satisfied that the calculation of the length of a preclusion period has been properly made in the decision under review.
13. The purpose of the provisions relating to preclusion periods has been the subject of judicial comment. They have been described as operating 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[1].
[1] Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281-282.
14. Similarly, they have been described as a safeguard against “double dipping” in that:
People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source[2].
[2] Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 148.
15. Those considerations must be kept in mind when determining, for the purposes of applying s 1184K(1) of the Act, whether or not special circumstances exist in a given case. The issue of special circumstances arises in various parts of the Act. In the context of other aspects of the Act, it was observed that what is required is:
… something to distinguish ... [the] … 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[3].
[3] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545.
16. That observation is equally applicable to s 1184K(1) of the Act. Accordingly, there must be something about the applicant’s situation which makes it “unusual” or “uncommon” such that it distinguishes it from the ordinary or usual case.[4]
[4] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 at [33]..
17. I note Mr David’s evidence that he was given advice by his solicitor about the preclusion period. Accordingly, he was well aware of the need for him to preserve those funds to cater for his future needs. Much of his money, on his evidence, was lost in gambling. There have been cases where financial hardship brought about through gambling losses has been found to satisfy the terms of s 1184K(1) of the Act. With many of these, there existed a psychiatric condition which compelled the gambling[5] or state of intoxication during which the gambling occurred[6]. There is no evidence of any underlying pathological basis for Mr David’s continuation of gambling. Indeed, his evidence was that, when he realised what was happening, he ceased and has been able to maintain that position albeit through the support of his Church group. I am satisfied that his gambling losses do not amount to a special circumstance under s 1184K(1) of the Act[7].
[5] Re Secretary, Department of Family and Community Services v Spencer [2004] AATA 248; Nguyen v Secretary, Department of Family and Community Services [2004] AATA 249; Pearce v Secretary, Department of Family and Community Services [2003] AATA 972.
[6] Malesv Secretary, Department of Family and Community Services [1999] AATA 863.
[7] See Rankin v Secretary, Department of Family and Community Services [1999] AATA 496; Re Secretary, Department of Family and Community Services v Peak [2003] AATA 1212; Re Secretary, Department of Family and Community Services v Jones [2003] AATA 505; and Re Stavrakis v Secretary, Department of Family and Community Services [2003] AATA 212 at [19].
18. It was submitted that financial hardship is a relevant consideration in this matter. This will not generally constitute a special circumstance unless the financial hardship goes beyond straitened circumstances and is truly exceptional[8]. On Mr David’s evidence, a substantial amount of his money was gifted to friends. This included the amount of $140,000 to Ms Bailey. No reasonable explanation was given for his doing this. Ms Bailey did not give evidence but she is recorded as having advised the SSAT that it was a generous sum. Unfortunately, Mr David’s generosity has served to leave him without funds of his own. Despite that, I have noted that he has the support of Ms Bailey, should he need it, in respect of food and lodgings. Mr David claimed that he owes debts to members of his family, people with whom he did business and to various statutory authorities. There was no material before the Tribunal to substantiate any of these debts. I am satisfied that these matters are not such that he should be able to obtain income support payments from the Commonwealth.
[8] Director-General of Social Services v Hales (1983) 47 ALR 281 at 321.
19. The breadth of the discretion in s 1184K(1) of the Act is such as to accommodate health problems and an inability to return to work. Mr David described himself as being unable to obtain employment because of his shoulder, back and hand problems. His evidence was that those consequences are directly related to the injuries for which he was compensated. It is not an unusual or uncommon consequence that the compensated conditions would lead to the outcomes described by Mr David[9] and I am satisfied that they are not sufficient in order to enliven the discretion under s 1184K(1) of the Act.
[9] See PGVK v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2008) AATA 381
20. When considering the discretion in s 1184K(1) of the Act, all relevant circumstances are to be taken into account[10]. He has the assurance of food and lodgings should he need that support. Of significance in this matter is the unsatisfactory state of aspects of Mr David’s evidence. In particular, there is no supportive material relating to debts to his family, to statutory authorities or to business associates.
[10] Davis v Secretary, Department of Family and Community Services [2004] AATA 84.
21. I am satisfied that there are no circumstances, either individually or in conjunction with each other, that are special such as to meet the requirements of s 1184K(1) of the Act.
DECISION
22. The Tribunal affirms the decision under review.
I certify that the 22 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member
Signed: ................[Sgd].........................................................
Kate Slack, Research AssociateDate/s of Hearing 31 August 2010 and 19 October 2010
Date of Decision 25 October 2010
Applicant was self-represented
Solicitor for the Respondent Mr Robert Hamilton, departmental advocate
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