Dee and Secretary, Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2002] AATA 195

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/507

GENERAL ADMINISTRATIVE DIVISION       )
           Re      Shirley Dee
  Applicant
           And    Secretary, Department of Family and Community Services
  Respondent

DECISION

Tribunal Ms SM Bullock, Senior Member

Date22 March 2002
PlaceSydney

Decision The Decision under review is set aside pursuant to section 43 of the Administrative Appeals Tribunal Act 1975. In substitution therefor, the Tribunal decides that: a) Pursuant to section 1184 of the Social Security Act 1991, in the special circumstances of Mrs Dee's case, that so much of the compensation payment apart from $3,120.00 be treated as not having been made; and,
b) The matter is remitted to the Respondent to calculate the appropriate preclusion period and refund to Mrs Dee any money owing to her as a consequence of the Tribunal's decision.

..............................................
Ms SM Bullock
Senior Member
CATCHWORDS
SOCIAL SECURITY - Compensation Affected Payment - 50 Per Cent Rule - Preclusion Period - Special Circumstances

LEGISLATION

Social Security Act 1947 (Cth) ss 152, 153,156
Social Security Act 1991 (Cth), sections 17, 1163, 1165, 1166, 1184

AUTHORITIES

Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Secretary, Department of Social Security v Banks (1990) 23 FCR 416
Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349
Re Secretary, Department of Social Security and McFetrish (AAT 12920, 7 May 1998)
Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 7 ALD 670
Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
Martinez v Secretary, Department of Social Security [2000] FCA 1090
Re Secretary, Department of Family and Community Services and Hooper [2001] AATA 243
Secretary, Department of Social Security v Thompson (1994) 53 FCR 580

REASONS FOR DECISION

22 March 2002 Ms SM Bullock, Senior Member

This is an application for review to the Administrative Appeals Tribunal ("the Tribunal"), by the Applicant, Mrs Shirley Dee, of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 22 March 2001 (T2) which affirmed a decision of an Authorised Review Officer ("ARO") dated 21 December 2000 (T14). The ARO's decision in turn affirmed a decision of a delegate of the Secretary, Department of Family and Community Services ("the Department") made on 20 September 2000 (T6,T7).

Mrs Dee requested that a decision in this matter be made upon the papers and this request was agreed to by the Respondent. The Tribunal took into evidence documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 ("T Documents", T1-T20) and the following exhibits:

EXHIBIT        DESCRIPTION        DATE
Exhibit A1     Applicant's Statement of Issues, prepared by Ms L Forbes, Solicitor, Welfare Rights Centre, Sydney       7 June 2001
Exhibit A2    Applicant's Statement of Facts and Contentions, prepared by Ms L Forbes, Solicitor, Welfare Rights Centre, Sydney    16 July 2001
Exhibit A3     Applicant's Statement        19 September 2001
Exhibit A4     Applicant's Submission     2 October 2001
Exhibit R1     Respondent's Statement of Issues          25 May 2001
Exhibit R2     Respondent's Statement of Facts and Contentions     23 September 2001

Issues

The issues in this matter are:

Whether or not a lump sum settlement received by Mrs Dee is a compensation payment within the meaning of subsection 17(2) of the Social Security Act 1991; and if so,
Whether or not the Applicant was correctly subject to a compensation preclusion period during the period 5 September 1996 to 20 February 1997; and if so,
Whether or not Centrelink was entitled to recover an amount of $4565.80 from the Applicant's Insurance Company, AMP General Insurance Limited, following the settlement of the Applicant's compensation claim; and if so,
Whether or not there are "special circumstances" in the Applicant's case whereby all or part of the compensation payment should be treated as not having been made.

Legislation

A decision in this matter requires consideration of the Social Security Act 1991 ("the Act").
Section 17 of the Act deals with compensation recovery definitions and as relevant states:
"17 Compensation recovery definitions
17(1) In this Act, unless the contrary intention appears:
average weekly earnings, in relation to an old lump sum preclusion period, means the amount:
(a) estimated as the average total weekly earnings, during a particular month, of all employees (all persons) in Australia; and
(b) last published by the Australian Statistician before the lump sum compensation payment became payable.
compensation has the meaning given by subsection (2).
Note: See also section 1163B.
compensation affected payment means:
(aa) an age pension; or
(a) a disability support pension; or
(b) a parenting payment; or
(c) a social security benefit; or
(e) a disability support wife pension; or
(f) a carer payment; or
(g) a special needs disability support pension; or
(h) a special needs disability support wife pension; or
(i) mature age allowance; or
(j) mature age partner allowance; or
(k) a former payment type.
compensation part, in relation to a lump sum compensation payment, has the meaning given by subsections (3) and (4).
compensation payer means:
(a) a person who is liable to make a compensation payment; or
(b) an authority of a State or Territory that has determined that it will make a payment by way of compensation to another person, whether or not the authority is liable to make the payment.
…
lump sum preclusion period means either an old lump sum preclusion period within the meaning given by subsections 1165(3) to (4) (inclusive) or a new lump sum preclusion period within the meaning given by subsections 1165(5) to (8) (inclusive), as the case requires.
payment for a period has the meaning given by subsection (7).
…
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.
Note: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law.
…
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 judgment 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 of 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 judgment 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.

…."

Part 3.14 of the Act deals with compensation recovery. Specifically, subsection 1163 (1) states:
"1163(1) If a person is or may be entitled to or receives compensation, payments of a compensation affected payment to the person or the person's partner might be affected under this Part.
Note: For compensation affected payment see subsection 17(1)."

Section 1165 of the Act provides that a pension, benefit or allowance is not payable to a person during a lump sum preclusion period and sets out the method for calculating the preclusion period.
Section 1166 of the Act provides that a person may have to repay an amount where both lump sum and compensation affected payments have been received. Specifically, subsection 1166(1) provides:
"1166(1) If:
(a) a person receives a lump sum compensation payment; and
(b) the person receives payments of a compensation affected payment for the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.
Note 2: A series of lump sum payments can be taken to be one lump sum compensation payment under subsection 17(2B). "
Section 1184 of the Act provides that in certain circumstances, the Secretary may disregard some payments of compensation in part or as a whole. Of specific relevance is subsection 1184(1) of the Act which states:
"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."

background

The following information is provided by way of background and the information contained within is not disputed.

In August 1996, Mrs Dee fell and fractured her pelvis. At the time, she was in receipt of a Sole Parent Pension and had been a recipient since about December 1995. Mrs Dee lodged a public liability claim in the District Court of New South Wales in respect of damages arising out of that injury.
Prior to her injury, Mrs Dee had been on leave without pay from her permanent employment with the Department of Education. This absence was on medical advice as Mrs Dee was suffering from an anxiety condition.
On 6 July 2000, Mrs Dee's solicitors, Reid and Reid, wrote to the Defendant's Solicitors, Hunt and Hunt, seeking to settle Mrs Dee's public liability claim in respect of the injury for the total amount of $29,782.00 proposing the following settlement (Exhibit A2):
"
1. Pain and suffering $25,000.00 2. Loss of wages $120.00 net/week X 26 weeks $ 3,120.00 3. Out of pocket expenses $ 1662.00
$29,782.00"
0n 11 September 2000, the matter was settled and Mrs Dee received $30, 000.00 (gross) in compensation (T4).
On 20 September 2000, Centrelink determined that Mrs Dee was liable to pay the Commonwealth $4,565.80 and advised the AMP Insurance Company of this prior to the compensation being released to Mrs Dee (T6,T7). This amount represented the quantum of Sole Parent Pension paid to Mrs Dee during the preclusion period which was from 5 September 1996 to 20 February 1997.
On 27 September 2000, Mrs Dee sought an internal review of Centrelink's decision (T8) and the decision was subsequently affirmed on 4 October 2000 (T9,T10).
On 21 December 2000, an ARO affirmed the original decision of a Departmental delegate (T14,T15).
On 7 February 2001, Mrs Dee lodged an appeal to the SSAT (T17) and on 22 March 2001, the SSAT affirmed the decision under review (T2) determining that there were no special circumstances to allow the exercise of the discretion contained within section 1184 of the Act. Accordingly, the SSAT determined that the decision to recover an amount of $4565.80 from a Sole Parent Pension was correct.
On 12 April 2001, Mrs Dee completed an application for review to the Tribunal (T1).

Evidence and submissions of Mrs Dee

In Mrs Dee's application for review to the Tribunal, she noted that in 1996 she was on leave with no pay from her permanent position because of severe symptoms of stress and anxiety. On medical advice, Mrs Dee was not to return to her employment until February 1997. Mrs Dee had been receiving a part Sole Parent Pension and was supplementing her income by working a few hours per week in the family shop. When Mrs Dee fell and fractured her pelvis on 29 August 1996, she was unable to work in the family business. (The Tribunal notes that Mrs Dee writes of her fall on 29 August 1996, yet there are other references in the material, including by her solicitors, to an injury on 25 August 1996.) Mrs Dee stated that her income from the family shop was reduced by $3,120.00 as a result of this accident (26 weeks @ $120.00 per week). At that time, Mrs Dee's Sole Parent Pension increased by $3.80 per fortnight. Mrs Dee maintains that this was the only true expense to Centrelink which occurred as a result of the accident. Years later, Mrs Dee made a claim for compensation which she wrote, was honestly and correctly characterised.
Mrs Dee wrote that she never considered the receipt of the Sole Parent Pension, except for the $3.80 increment, as related to the accident. She does not see it as correct to assume that the AMP should become her benefactor in place of Centrelink and she did not claim any compensation for wage loss apart from the $120.00 income she received from her employment at the family shop.
Mrs Dee further noted that four years after the accident, she received compensation from the Insurance Company in the amount of $30,000.00. Centrelink deemed that 50 per cent of this payment was for economic loss and as a consequence, she was required to refund 27 weeks overpayment totalling $4,565.80. The assumption was that the Insurance Company had compensated for wage loss after the accident or 27 weeks at $543.00 per week and Centrelink, having paid her $4565.80 during this period, also was entitled to have it refunded. Mrs Dee submitted that despite any legislation which attempts to legitimise this approach by the Department, it is clearly unfair and unjust. Mrs Dee asserts that her claim of $3,120.00 is "the true and honest amount of economic loss attributable to the accident " and this was reimbursed to her by the AMP. As she maintained in her application for review, the only legitimate refund to Centrelink should be 13 fortnightly payments of $3.80. Mrs Dee considers that any refund beyond this is the result of "pure opportunism by Centrelink".
If her application for review to the Tribunal is unsuccessful, Mrs Dee concluded that the end result of her honest and legitimate claim for economic loss will be a loss of $4565.80 to her and a gain of $4565.80 to Centrelink and a zero loss to the AMP. The loss of wages in the 27 week period after the accident was not attributable to the accident, but attributable to a pre-existing condition for which a doctor's certificate was provided. Mrs Dee maintains that $3,120.00 was the accurate loss of wages incurred as a result of the accident. Therefore, she concluded that the amount claimed for compensation and subsequently reimbursed, was simply overshadowed by reference to section 17 of the Act arising out of which $15,000.00 is deemed to be the economic loss component. The Department's decision to require Mrs Dee to repay $4565.00, as affirmed by the SSAT, is unfair and unjust. Mrs Dee wrote that if she had not suffered the painful accident, she would still have received Sole Parent Pension for the 27 week period from 29 August 1996 and Centrelink would not be $4565.80 in front. Referring to the SSAT's decision at paragraphs 35 and 36, Mrs Dee interpreted this to mean, "(W)e don't really care about the legitimacy or fairness of your claim for ecomic (sic) loss, If your current socioeconomic standing is good we see it fair to ignore the merits of the case and rule against your objection anyway" (T1).
Ms L Forbes, Solicitor with the Welfare Rights Centre, Sydney, submitted on Mrs Dee's behalf, that it is reasonable to accept that the component of Mrs Dee's settlement representing loss of earnings is quantifiable, and clearly not in the vicinity of $15,000, that is, 50 per cent of the $30,000.00 lump sum. Ms Forbes contended that given that it is reasonable to accept the amount of settlement representing payment for loss of earnings was $3120.00, it is unreasonable, in Mrs Dee's case, to apply the 50 per cent rule required by section 1165 of the Act. Ms Forbes further contended that section 1184 of the Act should be applied so as to treat Mrs Dee's actual and quantifiable loss of earnings as the component of the lump sum compensation representing economic loss.
Mrs Dee's solicitors, Reid and Reid, were able to quantify a specific amount of $3,120.00 in seeking to settle her public liability claim, being the amount she earned per week prior to the injury, multiplied by the number of weeks she was incapacitated for that work due to the injury. AMP has confirmed that $3,120.00 "… was the component of the overall settlement we eventually paid for economic loss" (T19).
Ms Forbes submitted that the application of the 50 per cent rule produces an unfair result in Mrs Dee's case. She suffered the fracture injury while on leave without pay from her permanent employment. The leave without pay had been necessary because of Mrs Dee's suffering from an anxiety condition. Mrs Dee made no claim in respect of any loss of earnings in respect of that permanent employment. The amount of earnings Mrs Dee lost by virtue of the compensable injury was thus quantifiable in her claim, and not disputed by the insurer. Accordingly, it is submitted that to regard 50 per cent of the $30,000.00 lump sum as the amount representing lost earnings produces an unfair result in the Applicant's respect.
Considering whether such unfairness can constitute "special circumstances " pursuant to section 1184 of the Act, Ms Forbes referred the Tribunal to the Federal Court decisions of Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281 and Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64. In those cases, the Federal Court followed Secretary, Department of Social Security v Smith (1991) 30 FCR 56 in determining that unfairness which is the product of the operation of the statutory scheme rather than of external factors, can comprise "special circumstances".
Ms Forbes contended that section 1184 of the Act can be applied to Mrs Dee's circumstances so as to have regard to the amount of $3,120.00 in respect of lost earnings, rather than the amount of $15,000.00 applicable under the 50 per cent rule. Having regard to the amount of $3,120.00 would redress what Mrs Dee contends to be unfairness in applying the 50 per cent rule in her case. Such an approach would place Mrs Dee in the position she would have been had her claim proceeded to Court and the amount sought by way of lost earnings been specified in an Award. Ms Forbes concluded that the amount of Mrs Dee's charge in respect of the lump sum settlement should be recalculated by refunding to Mrs Dee the difference between the amount recovered, being $4,565.80 and the amount recoverable in respect of a $3,120.00 economic loss component.

In response to the Respondent's Statement of Facts and Contentions, Mrs Dee submitted that her claim is not fraudulent. She noted that the purpose of the legislation is to prevent the "fraudulent break ups of lump sum payments to reduce the component of `economic loss'." Mrs Dee stated that her claim was an honest effort by her to be compensated for her injury and true economic loss. She reiterated that the 50 per cent rule does give rise to a very unfair outcome in her case. To maintain that the outcome in her particular case was unintended, is congruous with admitting that the legislation has no regard for what is fair or just, Mrs Dee submitted.
In relation to the concept of "special circumstances", Mrs Dee submitted that the vagueness of this term makes any judgments about such circumstances completely subjective. Mrs Dee submitted that in her opinion, the circumstances of her case do constitute special circumstances.
Mrs Dee contended that the purpose of a body such as the Tribunal is surely to look at the circumstances surrounding individual cases and to ensure that the outcome resulting from "blanket legislation", which is incapable of providing for the intricacies of individual cases, does not produce an unfair or unjust outcome to an individual as it has in her matter. Mrs Dee stated that she would never concede that an unfavourable outcome in this case has any merit based on what is "fair or just". Mrs Dee hoped that the verbosity to date of "legal waffling" can be dispensed with and a genuine judgment made.
Respondent's Submissions
Mr Slattery, for the Respondent, noted that there is no dispute between the parties as to the general operation of the compensation provisions, the calculation of the lump sum preclusion period and charge of $4,565.80. Mr Slattery submitted that the issue in dispute is whether the application of the "50 per cent rule" as expressed in subsection 17(2) of the Act gives rise to an unfair outcome whereby it is appropriate to find that there are " special circumstances" in the Applicant's case, pursuant to section 1184 of the Act, so as to treat all or part of the compensation payment as not having been made. Mr Slattery submitted that the application of the 50 per cent rule does not give rise to an unfair or unintended outcome for the Applicant and there are no special circumstances.
Mr Slattery noted that at paragraph 7 of Ms Forbes' submission, she argued that the component of Mrs Dee's settlement representing loss of earnings is quantifiable and clearly not in the vicinity of $15, 000.00, that is 50 per cent of the $30,000.00 lump sum. Mr Slattery submitted that the amount of $15,000.00 represents the "compensation part" of the compensation payment as defined in subsection 17(3) of the Act. This does not represent the loss of earnings. Mr Slattery further noted the claim of $3,200.00 as loss of earnings made by the Applicant in her compensation claim, representing $120.00 (net) per week times 26 weeks. Mr Slattery contended that once the compensation payment is defined as "compensation" for the purposes of the Act, and this is not in dispute, this payment is captured by the compensation provisions which determine, in the first instance, the length of the preclusion period which in this case is 27 weeks, from 5 September 1996 to 20 February 1997. The amount of "compensation affected" Social Security payment, that is the Sole Parent Pension, paid in this period was $4,565.80 (T6).
It is not explained, Mr Slattery submitted, why the net amount of $120.00 per week should be treated as the correct measure of economic loss. Mr Slattery contended that there is no support in the legislative scheme or the case law for this approach. The legislative provisions treat 50 per cent of the out of Court compensation settlement as the "compensation part "for the purposes of the Act. It is only where the normal operation of this provision gives rise to an unfair or unintended outcome, that section 1184 may be applied to treat all or part of the compensation as not having been made.
In relation to the 50 per cent rule, Mr Slattery noted that this has been considered by the Tribunal and the Federal Court on a number of occasions. In this regard, Mr Slattery submitted that it is a well established principle that where a compensation payment made with respect to lost earnings or lost earning capacity, the whole payment is treated as "compensation" for the purposes of subsection 17(2) of the Act.Mr Slattery referred the Tribunal to Secretary, Department of Social Security v Banks (1990) 23 FCR 416; Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349. In circumstances where the normal operation of the 50 per cent rule gives rise to an unfair or unintended result, the relief contained within section 1184 may be applied. Mr Slattery referred the Tribunal to Secretary, Department of Social Security v Smith (supra) and Kirkbright v Secretary, Department of Family and Community Services (supra).
Mr Slattery contended that it is not required that a person was in fact working at the time of the accident for the 50 per cent rule to be applied. Subsection 17(2) of the Act specifies that the test is whether the person has been compensated for lost earnings (that is, actual earnings) or lost capacity to earn. It is not a relevant consideration that the Applicant would have earned less in the preclusion period than the amount of the charge. In any event, the amount of $3,120.00 nominated as the actual loss by the Applicant is the net amount, before tax is to be deducted. The important issue to bear in mind, Mr Slattery submitted, is that the Applicant was paid the compensation affected Social Security payment for the same period during which she was paid compensation.In Re Secretary, Department of Social Security and and McFetrish (AAT 12920, 7 May 1998), an amount of $2000.00 had been claimed by Mrs McFetrish's solicitors as "economic loss" in a statement of claim for a gross compensation payment of $22,446.95. The claim was settled out of court for $23,000.00 before deductions. The Departmental charge was $3,113.06. At paragraph 14 of that case, the Tribunal wrote:
"14 I accept that the amount of $2000.00 attributed by the defendant's solicitors to future economic loss is a small portion of the settlement sum; but to dissect the lump sum is not appropriate as O'Loughlin J concluded in Secretary, Department of Social Security v Hulls and Others, 22 ALD 570 at 578:
'Once the mischief at which the amending legislation was aimed has been so clearly identified, it becomes apparent that the legislation prevents any dissection of the "lump sum". Although those words are not defined, I respectfully agree with what Von Doussa J said of them in Banks case: "They are not words of art. In the Macquarie Dictionary, a lump sum is defined as a sum including a number of items taken together or in the lump'."
The Tribunal in Re Secretary, Department of Social Security and McFetrish (supra) affirmed the decision that the full charge of $3,113.06 be recovered. Mr Slattery also referred the Tribunal to Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152.
Turning to the issue of special circumstances, Mr Slattery submitted that that the Respondent does not consider that the operation of the 50 per cent rule in the present case has given rise to an unfair or unintended result.
Mr Slattery submitted that the phrase "special circumstances " has been considered by the Tribunal and the Federal Court on a number of occasions. Mr Slattery referred the Tribunal to Re Beadle and Director-General of Social Security (1984) 6 ALD 1 in which Toohey J concluded:
"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 on 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 Full Federal Court in Beadle v Director-General of Social Security (1985) 7 ALD 670 generally approved the approach in Re Beadle and Director-General of Social Security (supra) and noted at page 228:
'…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 that 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."
In Secretary, Department of Social Security v Hulls and Others (1991) 22 ALD 570 the Federal Court commented on the meaning of special circumstances in the context of a compensation preclusion period and quoted with approval, the Tribunal's comments in Re Ivovic and Director-General of Social Services (1981) 3 ALN N95:
"Whilst we agree that hardship is a relevant consideration in the discretion conferred by s115(4A), we reject the submission by Mr Watkins (for the applicant) that we should ignore the circumstances out of which the alleged hardship is said to have arisen. The reference to special circumstances "by reason of which" a person liable "should be released" requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principal of liability which the Act otherwise establishes. In the exercise of the discretion which s115 (4A), confers, the decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are comfortable with the scope and purpose of the Social Services Act 1947:..Thus whilst keeping the dominant principle of s115 in mind, he must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by section would be unjust, unreasonable or otherwise inappropriate…."
Considering Mrs Dee's circumstances, Mr Slattery submitted that she is employed and owns her own home. At the time of the Respondent's written submissions dated 23 September 2001, Mrs Dee had a debt to "AGC" of $14,000.00. There were no other debts according to the findings of the SSAT. In relation to Mrs Dee's medical circumstances, while Mr Slattery noted that Mrs Dee's injuries may limit some types of employment, she was nevertheless employed in September 2001.
Mr Slattery noted Ms Forbes' reference to the question of whether information about the social security impact of compensation was discussed with Mrs Dee by her solicitor. While Mrs Dee may not have had a detailed understanding of these matters at the time of settlement, she acknowledged to the SSAT that she was aware of it.
In all the circumstances, Mr Slattery submitted that the recovery of $4,565.80 was based on the correct application of the compensation recovery provisions of the Act. Mr Slattery concluded that there are no special circumstances in Mrs Dee's case which would warrant any part of the compensation payment being disregarded.
findings
The Tribunal has come to a determination in this matter taking into account the documentary evidence, the submissions, the legislation and case law.
The first issue to be decided is whether or not the lump sum settlement received by Mrs Dee is a compensation payment within the meaning of subsection 17(2) of the Act. Specifically, as was noted in the SSAT decision and determined by this Tribunal, subsection 17(2) of the Act provides as relevant in this case, that compensation is the payment of damages as a lump sum of $30,000.00, made up wholly or partly of lost earnings or lost capacity to earn.
The Tribunal also finds that pursuant to subsection 17(1) of the Act, the Sole Parent Pension paid to Mrs Dee is a compensation affected payment.
Applying the 50 per cent rule, the Department calculated that $15,000 was deemed to be the compensation payment. This then provided the basis for the calculation of a 27 weeks preclusion period from 5 September 1996 to 20 February 1997.
Mrs Dee was receiving Sole Parent Pension prior to fracturing her pelvis in August 1996. She was then unable to work and her Sole Parent Pension increased by $3.80 per fortnight. During the preclusion period, Mrs Dee was receiving Sole Parent Pension, the total amount of which was $4,565.80, calculated from 27 weeks of Sole Parent Pension at $543.63 per week.
The Tribunal finds that the calculation of the preclusion period is correct and the quantum of the amount to be repaid on a strict application of the law is $4,565.80. The Tribunal notes that this calculation is not disputed. The issue for Mrs Dee is whether this amount should be recovered in view of Mrs Dee's special circumstances.
It is Mrs Dee's submission that the application of the 50 per cent rule is unfair in her case and should allow the discretion contained within section 1184 of the Act to be applied. Mrs Dee maintains that the true and fair cost of her economic loss was $3,120.00, representing a period of 26 weeks at $120.00 and not the $15,000.00 deemed by the Department arising out of the application of subsection 17(3) of the Act. Mrs Dee maintains that the receipt of her Sole Parent Pension was not anything to do with the accident. She would have received that pension regardless of whether or not she had an accident.
As has been noted previously in this decision, Von Doussa J has in a number of his Federal Court decisions discussed the purpose of the 50 per cent deeming rule. Von Doussa J noted that this rule is a broad attempt to balance the interests of the recipient of the compensation payment and the competing interests of others in the community whose needs must be met from a finite budget allocation for Social Security measures (see Secretary, Department of Social Security v Banks (supra); Secretary, Department of Social Security v Smith (supra). In Secretary, Department of Social Security v a'Beckett (supra), Von Doussa J also noted that it would be contrary to the object of the equivalent 1947 legislation to deprive a person otherwise entitled to a pension during a period when there was no coincidence, or presumed coincidence, between payments from the two sources. In such cases there would be no overlapping of benefit (at 26 FCR 359).
Clearly in Secretary, Department of Social Security v Smith (supra), the Federal Court specifically suggested that it was appropriate for the discretion contained within section 1184 of the Act to be used in cases where the arbitrary nature of the 50 per cent rule results in unfairness in a particular case. In that case, the Applicant had received Sickness Benefit for a period when he was suffering hepatitis. Mr Smith's lump sum compensation had been paid in relation to a back injury. Von Doussa J noted that the facts applicable to a particular person cannot be considered in isolation from the operation of the provisions of sections 152 and 153 of the Social Security Act 1947, the equivalent of section 17 of the Act. Von Doussa J further noted that section156 of the 1947 Act [section 1184 of the Act] contained a discretion which may be exercised where the Secretary, or a body standing in place of the Secretary on appeal, considers it appropriate to do so in the special circumstances of the case. As was noted in Re Ivovic and Director-General of Social Services (supra), "special circumstances" are wide words, so as to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case.
In Kertland v Secretary, Department of Family and Community Services (supra), the Federal Court found that the Transport Accident Act 1986 (Vic) had the effect of preventing the Applicant from receiving compensation for economic loss for a period of 18 months after he had suffered serious injuries in a road accident. In that case, it was open to Tribunal to find that special circumstances existed and the discretion contained within section 1184 should be exercised to protect the Applicant's social security benefits for the period during which she was precluded from receiving accident compensation by the Transport Accident Act 1986.
The circumstances of Mrs Dee's case are that she had been on unpaid leave for a matter unrelated to the accident she suffered in August 1996. She had, pre-accident, an entitlement to Sole Parent Pension which continued after the accident, although at an increased rate because of her inability to undertake any work post- accident.
In relation to Mrs Dee's circumstances, and relying only on documentary evidence, the SSAT found that at the time of its decision, Mr and Mrs Dee had a weekly income after tax of $850.00. They had no other debts apart from a debt to "AGC" of $14,000.00. The SSAT found, and the Tribunal agrees, that their financial position is not exceptional or out of the ordinary in terms of the application of Tribunal and Federal Court authorities in relation to what can fall within the broad term of "special circumstances", (see Re Beadle and Director-General of Social Security (supra); Groth v Secretary, Department of Social Security (1995) 40 ALD 541; Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).
Mrs Dee does suffer from residual pain and discomfort as a result of her August 1996 accident. These symptoms do not prevent her from engaging in employment over four days per week, nor, on the information available to the Tribunal, is there any ongoing medical management required.
Mrs Dee does not rely on her financial circumstances or her health as special circumstances but rather, the unfair and unjust consequences of the application of the 50 per cent rule to her individual case.
The Tribunal considers it well within the purview of section 1184 of the Act for unjust or unfair consequences of the application of legislation to be considered as special. Furthermore, in Ellis v Secretary, Department of Social Security (supra), it was considered appropriate to consider the lack of causal relationship between an injury and the benefit entitlement as a special circumstance. As was noted in Kirkbright v Secretary, Department of Family and Community Services (supra), the Tribunal in that matter had erred in its interpretation of the legislative intent of the amendments to section 1165 of the Act, as discussed in the Explanatory Memorandum to the Social Security Legislation Amendment (Budget and Other Measures) Bill 1996, Part 2 of Schedule 15.
The Tribunal concludes that even though in Mrs Dee's case, she does not have special circumstances in relation to her financial and health situation, this should not preclude consideration of the section 1184 discretion in relation to whether there is unfairness or an injustice arising out of the strict application of the legislation. In my view, and as concluded by Mansfield J in Kirkbright v Secretary, Department of Family and Community Services (supra) and by von Doussa in Secretary, Department of Social Security v Smith (supra), section 1184 (or its 1947 equivalent) is designed to enable decision-makers to ameliorate unfairness or injustice arising out of the strict application of the legislation. Mansfield J further concluded in Kirkbright v Secretary, Department of Family and Community Services (supra) that the absence of other special circumstances such as financial or health matters, cannot by itself preclude the application of the special circumstances provision. This conclusion is supported by the authorities of Beadle v Director-General of Social Security (supra) and more recently, Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090.

The Tribunal also notes the line of authority discussing the intention of the legislation to prevent the dissection of lump sums. This requirement must be considered against the clear intention contained within section 1184 of the Act, to deal with any possible unintended consequences as a result of the application of legislation. In Mrs Dee's case, it is contended that the unfairness lies in the application of what has been widely reported in the authorities as the arbitrary nature of the 50 per cent rule.
The Tribunal asks itself whether or not it is fair and just that Mrs Dee be expected to repay to the Commonwealth an amount of $4,565.80 paid to her by way of Sole Parent Pension during the preclusion period. Mrs Dee was compensated for loss of earnings of $3,120.00. The application of Section 17(3) of the Act requires that in the circumstances of this case, the compensation payment is deemed to be $15,000.00 with the resulting preclusion period of 27 weeks. The Tribunal considers that it is harsh and unfair to expect Mrs Dee to repay $4,565.80 in these circumstances. In Kirkbright v Secretary, Department of Family and Community Services (supra), Mansfield J found it is an error of law not to consider unfairness, in the application of the Act, as special circumstances when the injury giving rise to compensation had no connection with the Applicant's entitlement to Sole Parent Pension.
The Tribunal finds that unfairness occurs in Mrs Dee's case as a result of the application of the legislation itself. The Tribunal distinguishes the facts in this case with those in Re Fowles and Secretary, Department of Social Security (supra). While the problems referred to by Purvis J in that case may not have been unusual and "Those sorts of issues arise day in, day out… ", the unfairness occasioned to Mrs Dee by the application of the 50 per cent rule must, in the Tribunal's view, be carefully considered. The Tribunal also notes that other relevant authorities referred to by the Respondent did not have the opportunity of considering Mansfield J's decision in Kirkbright or a recent decision in Re Secretary, Department of Family and Community Services and Hooper [2001] AATA 243. The Tribunal's overall view, on balance, is that this unfairness produces an unjust result which clearly can fall within the discretion envisaged by the legislators contained within section 1184 of the Act. The Tribunal therefor finds that section 1184 should be exercised in the special circumstances of Mrs Dee's case.
In calculating the reduction of the preclusion period, the Tribunal notes Secretary, Department of Social Security v Thompson (1994) 53 FCR 580, in which the Federal Court concluded it was appropriate to use "intuitive justice" as to the amount of the reduction and that it would take "legalism and bureaucratic pedantry too far " to require the artificial exercise of a calculation process in relation to the whole compensation payment. Accordingly, the Tribunal finds that section 1184 of the Act should be exercised in Mrs Dee's favour to allow so much of the lump sum to be regarded as not having been paid so as to treat $3,120.00 as the amount to be considered in the calculation of the preclusion period. In so finding, the Tribunal does not consider that the consent settlement was in anyway manipulated to achieve a specific result with implication for Social Security benefits.
In all the circumstances and for the reasons expressed above, pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the decision under review is set aside and in substitution therefor, the Tribunal decides that:
a) Pursuant to section 1184 of the Act, in the special circumstances of Mrs Dee's case, for the purpose of calculating the preclusion period, an amount of compensation be treated as not having been made apart from the amount of $3,120.00.
b) The matter is remitted to the Respondent to calculate the preclusion period arising as a consequence of this decision and to refund any money owing to Mrs Dee.

I certify that the 56 preceding paragraphs are a true copy of the reasons for the decision herein of Ms S M Bullock, Senior Member
Signed: .....................................................................................
Jessica Purches, Associate

Date of Hearing 26 September 2001
Date of Decision 22 March 2002

Representative for the Applicant Self Represented with written submissions by Ms L Forbes, Solicitor, Welfare Rights Centre, Sydney

Representative for the Respondent Mr B Slattery, Departmental Advocate

[2002] AATA 195

22 March 2002

Key Legal Topics

Areas of Law

Social Security Law

Legal Concepts

Compensation Affected Payment

50 Per Cent Rule

Preclusion Period

Special Circumstances