De Sousa and Department of Family and Community Services - [2002] AATA 391

DECISION AND REASONS FOR DECISION [2002] AATA 391

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/1457

GENERAL ADMINISTRATIVE DIVISION       )
           Re      JOAO DE SOUSA
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Ms N BELL

Date27 May 2002
PlaceSydney

Decision The determination under review is affirmed.

[SGD] Ms N Bell
Member
CATCHWORDS
Social Security – application for disability support pension – lump sum compensation payment – preclusion period imposed – whether preclusion period correctly imposed – whether special circumstances exist for exercise of discretion under section 1184 of the Social Security Act 1991 to disregard part or all of the compensation lump sum as not having been made

Social Security Act 1991 – sections 17, 1165 ,1184

Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

MS N BELL

This is an application by Mr Joao De Sousa ("the Applicant") for review of the decision of the Social Security Appeals Tribunal ("the SSAT") dated 27 June 2001 to affirm the decision of a Centrelink delegate to the Secretary, Department of Family and Community Services ("the Respondent") dated 15 December 2000 to impose a preclusion period from 23 September 1998 to 24 February 2004. The Respondent's decision was reviewed and affirmed by an authorised review officer on 3 May 2001.
At the hearing of this application the Applicant represented himself and spoke to the Tribunal through an interpreter in the Portugese language. The Respondent was represented by Ms Schuster.
The Tribunal and the parties experienced some difficulty with the accuracy of the interpreting of the Applicant's evidence at the hearing. The Tribunal decided that it would be unsafe to rely on the evidence of the Applicant as interpreted at the hearing and so, before proceeding to determine the application, the Applicant's evidence was reheard on another day and through another interpreter.
The Tribunal also had before it the following documentary evidence:

Exhibit         Description Date
TD 1 Documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975,T1-T21, pages 1-66
A1      Bundle of invoices relating to the Applicant's father's court case
R1      Respondent's Statement of Facts and Contentions     23 April 2002

Background

It is not in dispute that on 22 September 1998 the Applicant received, after arbitration, a lump sum award of $283,844.00. The Applicant repaid, from this amount, periodic payments of compensation that he had received earlier in the sum of $49,964.30. The award included amounts for past and future economic loss in the sum of $167,000.00 (see document T 5).
On 1 September 2000 the Applicant inquired of Centrelink about his eligibility for disability support pension and on 15 December 2000 the Respondent advised him of its decision to impose a preclusion period from 23 September 1998 to 24 February 2004.
Issues and Legislation
The issues to be considered in this application are whether a preclusion period from 23 September 1998 to 24 February 2004 was correctly imposed by the Respondent and, if so, whether it is appropriate, in the special circumstances of the case, to disregard any part or the whole of the compensation paid to the Applicant for the purposes of calculating the preclusion period.
The relevant legislation is sections 17, 1165 and 1184 of the Social Security Act 1991 ("the Act").
Applicant's evidence
The Applicant said that he did not receive all of the compensation claimed by the Respondent to have been received by him. He said he did not receive the $283,844.00 awarded to him in the arbitration but instead received a cheque from his solicitor for $142,827.00, a cheque for $27,118.35 for costs and a cheque for $19,423.36 from the Health Insurance Commission.
The Applicant said that he spent the money as follows:
Repayment of loans from family and friends  $25,000.00
Trip to Portugal to see father in law who was ill  $25,000.00
Toyota Landcruiser  $65,000.00
Orthopaedic bed  $3,900.00
Furniture and household goods  $7,000.00
Renovations on unit to accommodate back injury  $13,000.00
Legal fees for father's court case  $30,000.00
The Applicant said that the above items were purchased immediately or soon after he received his compensation moneys. He said that he also borrowed and repaid an amount of $19,597.07 from his friend, Mr Marcos in 2000.
In addition, the Applicant bought a house for $440,000.00 in May or June 2001 with the proceeds of the sale of his home unit at Brighton le Sands. He said he sold the unit for $255,000.00. The balance of the purchase price of the house was contributed by his father. The Applicant said he sold his unit and bought his house at the same time. He said the house is in his name and in the name of his wife, notwithstanding his father's substantial contribution to purchase price. He has an agreement with his father, however, that his father will live at the house with the Applicant and his wife for the rest of his life.
The Applicant said that he receives a pension from Portugal of approximately $48.00 per week together with a payment from Centrelink of approximately $40.00 per week for caring for his father. His father is very sick with cancer and the Applicant is currently looking for nursing home accommodation for him.
The Applicant said he has a Mercedes car that is registered but needs new tyres and some other, minor, repairs. He said he intends to sell his Mercedes and anticipates he will get about $5,000.00 or $6,000.00 for it. When asked whether he would consider selling his Toyota Landcruiser and replacing it with a less expensive vehicle, he said it has always been his dream to have a Landcruiser and, in any event, he was advised by his doctor to buy a four wheel drive car as this would benefit his back. The Applicant also said that he now rarely drives.
The Applicant said that his solicitor did not explain to him that after he received his compensation, he would not be able to get any social security payments. He said he went to Centrelink to claim a pension in about August or September 2000. At that time Centrelink rejected his claim for pension on the basis that he had received his compensation money and was precluded from receiving a pension. He said that if he had known about the preclusion period he would not have spent his compensation money.
The Applicant said he spends approximately $50.00 per month on medication and is assisted by therapeutic massage which costs him $45.00 for each massage. He can no longer afford to have the massage. He also wears orthopaedic shoes which cost him about $195.00 - $225.00.
The Applicant said his wife is receiving an age pension. He said she has "frozen shoulders" and cannot hold things in her hands. In addition she cannot sit for long periods because she has an injury to her coccyx. She is also very depressed and emotional.
Mr Marcos' evidence
Mr Marcos said he had known the Applicant for about 25 years as a business associate and family friend. He said he has given the Applicant financial help and help with his father, most recently in finding a nursing home for the Applicant's father. He said the Applicant owes him no money at the moment.
Mr Marcos said that the Applicant's solicitor had not explained to the Applicant about the preclusion period. He said he had suggested taking legal action against the solicitor but the Applicant does not have the funds to do so.
Mr Marcos said the Applicant is very depressed and has no interest in anything anymore. He said the Applicant's wife is ill but is able to care for herself.
Consideration
Section 17(2) of the Act provides:
"Compensation
17.(2) 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) that is:
(e)made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f)        made either within or outside Australia."
"Compensation", as defined in section 17(2) of the Act forms the basis of the calculation of any preclusion period under section 1165(7) of the Act using the "compensation part of a lump sum compensation payment" (as defined in section 17(3)) and the "income cut-out amount (as defined in section 17(8)).
Section 17(3) and (4) of the Act provides:
"Compensation part of a lump sum
17.(3) 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 judgement being entered in respect of the settlement or otherwise; or
(ab)     50% of the payment if the following circumstances apply:
(i)the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form or a lump sum; and
(ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii)the claim was settled, either by consent judgement being entered in respect of the settlement or otherwise; or
(b)if those circumstances do not apply—so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn.
17.(4) Where a person:
(a)       has received periodic compensation payments; and
(b)after receiving those payments, receives a lump sum compensation payment (in this subsection called the "LSP"); and
(c)because of receiving the LSP, becomes liable to repay an amount (in this subsection called the Repaid Periodic Compensation Payment—"RPCP") equal to the periodic compensation payments received;
then, for the purposes of subsection (3), the amount of the lump sum compensation payment is:
LSP – RPCP"

In the Applicant's case, an amount of $167,000.00 was awarded to him in respect of past and future economic loss (T5). He was required to repay an amount of weekly compensation in the sum of $49,964.30 (T5). Pursuant to section 17(3)(b) and 17(4) of the Act, the compensation part of the Applicant's lump sum compensation payment is therefore $117,035.70 ($167,000.00 - $49,964.30).
Section 17(8) of the Act provides:
"17.(8) For the purposes of the definition of income cut-out amount in subsection (1), the formula is as follows:
[Maximum basic rate +        Pharmaceutical amount for a single person] +        Ordinary free area limit
52
where:
maximum basic rate means the sum of the amount specified in column 3 of item 1 in Table B in point 1064-B1 and the amount of pension supplement worked out under point 1064-BA2 for a person who is not a member of a couple.
Note:   Point 1064-BA2 refers to maximum basic rate. Maximum basic rate depends on a person's family situation. The rate used here is the rate for a person who is not a member of a couple.
ordinary free area limit means the amount specified in column 3 of item 1 in Table E-1 in point 1064-E4.
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."
At the relevant time the income cut-out amount was $412.70
Section 1165(2AA) of the Act provides:
"1165.(2AA) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person is a member of a couple; and
(c)the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period."
The lump sum preclusion period is to be calculated in accordance with sections 1165(8) and (9) which provide:
"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-out amount

1165.(9)If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number."

The Respondent was therefore correct in calculating the length of the preclusion period as follows:
$117,035.70 (Compensation part of lump sum)
$412.70 (Income cut-out amount)
=283.58 weeks rounded down to 283 weeks
It remains for the Tribunal to consider whether the circumstances of the Applicant's case are so special as to warrant the disregarding of all or part of the compensation lump sum. Section 1184(1) of the Act provides:
"Secretary may disregard some payments
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."
The term "special circumstances" has been the subject of extensive comment by the Tribunal and by the Federal Court.
The decision of the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 is often quoted in relation to the interpretation of "special circumstances". In that decision, the Tribunal said at ALD 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."
The Tribunal accepts the Applicant's evidence that he did not learn of the preclusion period until he inquired about disability support pension on 1 September 2000. The Tribunal also accepts the Applicant's evidence that he sold his home unit and purchased his house in about June 2001, some eight months after he learned of the preclusion period. Prior to that he had spent some $168,000.00 on a trip to Portugal, and the purchase of a car, furniture, household goods, renovations, his father in law's legal fees and repayment of loans.
It is not in dispute that the Applicant is currently in receipt of a carer allowance payment of $85.30 per fortnight together with a Portugese pension currently valued at approximately $4,113.00 per year. He lives with his wife and his father, both of whom receive pensions.
The Tribunal also accepts the Applicant's evidence that he has diabetes and a back condition and that he requires a number of medications costing approximately $50.00 per month. The Tribunal also accepts that the Applicant's wife suffers from disabling conditions. The Tribunal notes, however, that the vast majority of people who receive compensation lump sums suffer from continuing ill health or conditions that require treatment or prevent paid work.
The Tribunal does not consider that the Applicant's circumstances are unusual, uncommon or exceptional except in so far as he is in a considerably more fortunate financial situation than many recipients of compensation who come before this Tribunal. He has a fully paid for house and receives some $6,300.00 per annum in Australian and Portugese income support payments. He is therefore not without income. He also has substantial assets, including 2 valuable motor vehicles. His decision to purchase his house was made some eight months after he had learned of the preclusion period and at that stage he could have isolated some of his funds for the purpose of supporting himself for the remainder of the preclusion period.
The Applicant raised a failure by his solicitor to advise him of the preclusion period prior to his settlement. While there may be some circumstances where such lack of legal advice may justify alteration of a preclusion period, I do not consider that this is justified in the circumstances of this case. There are other remedies available to the Applicant against his legal advisers.
It remains the case that the scope and purpose of the Act, in respect of the imposition of preclusion periods, is to avoid "double dipping" by receipt of both compensation and social security payments (see Groth v Secretary, Department of Social Security (1995) 40 ALD 541). In the Applicant's case there is no overriding issue of fairness or need sufficient to displace the operation of that purpose. There are steps the Applicant can take to ensure that he has an amount to live on, that is at least equal to the amount of pension he would receive, if not for the preclusion period. The Tribunal does not consider the Applicant's circumstances to be "special".
For these reasons, the Tribunal affirms the decision under review.
Determination
The determination under review is affirmed.

I certify that the 40 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Member
Signed: H. Sim        .....................................................................................
  Associate
Date/s of Hearing  1 and 16 May 2002
Date of Decision  27 May 2002
Representative l for the Applicant            Self represented
Advocate for the Respondent  Ms Schuster