DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS and ADAM SMITH
[2012] AATA 262
•4 May 2012
[2012] AATA 262
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2011/3740
Re
DEPARTMENT OF FAMILIES, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
APPLICANT
And
ADAM SMITH
RESPONDENT
DECISION
Tribunal Ms A F Cunningham (Senior Member)
Date 4 May 2012 Place Hobart ........................................................................
Senior Member
CATCHWORDS
SOCIAL SECURITY - claim for disability support pension - lump sum compensation - special circumstances - reckless and prolific expenditure - no medical evidence of drug or gambling addiction – no reasonable account of expenditure - subsequent evidence of total permanent disability insurance payout - no special circumstances found - decision under review set aside and original decision rejecting claim for DSP and imposing compensation preclusion period reinstated
LEGISLATION
Social Services Act 1947 s 115 (4)(A)
Social Security Act 1991 ss 17, 1170, 1184k,
CASES
Ivovic v Director General of Social Services (1981) AATA 57
SDSS v Hulls (1991) FCAFD 8
Beadle v Director General of Social Security (1984) AATA 176
Beadle v DGSS 6 ALD 3
Martin v SDSS (1990) AATA 6482
Wilson v Director General of Social Services 4 ALN 94
SDSS v Thompson (1993) AATA 8997
Brodley v SDSS (1991) 63 SSR 878Shi v Migration Agents Registration Authority (2008) HCA 31
REASONS FOR DECISION
Ms A F Cunningham (Senior Member)
The applicant’s Secretary seeks the review of a decision made by the Social Security Appeals Tribunal (SSAT) on 4 August 2011 which set aside a decision of Centrelink and determined that such part of the compensation payment received by the respondent is to be treated as not having been made so as to end the compensation preclusion period (LSPP) on 4 August 2011. The LSPP originally imposed by Centrelink applied from 20 November 2010 to 7 December 2012.
The application for review was heard by the Tribunal on 18 April 2012 in the absence of the respondent. The application was originally listed for hearing on 28 March 2012 and adjourned to a directions hearing on 4 April 2012 as the respondent had failed to attend the hearing. The Tribunal had been advised by the respondent’s mother that he was attending a medical appointment at the time.
On 30 March 2012 the Tribunal received an application for a stay of the decision of the SSAT which was served on the respondent. The respondent failed to attend the hearing on 4 April and the Tribunal granted the application for stay pending the hearing of the appeal which was listed on 18 April 2012.
A summons requiring the attendance of the respondent and the production of documents at the hearing on 18 April was issued and served on the respondent who again failed to attend the hearing or contact the Tribunal regarding his non- attendance.
Mr Sparkes appeared on behalf of the applicant secretary. The T Documents were lodged pursuant to section 35 of the Administrative Appeals Tribunal Act 1975. Also received into evidence were documents annexed to the Secretary’s Statement of Facts and Contentions with respect to the payment of the respondent’s Total and Permanent Disability Benefits in the sum of $118,200. A copy of an email addressed to Mr Sparkes from Linda Wykes, Case Manager, CommInsure Life Claims dated 16 April 2012 stating that the sum of $112,200 was paid on 29 August 2011 and $6,000 was paid on 15 September 2011 to the member was tendered in evidence.
BACKGROUND FACTS
The following facts are evidenced by documents tendered in evidence and contained in the T Documents and are accepted by the Tribunal.
(a)The respondent was injured at work on 27 May 2009 and was paid periodic compensation payments until 19 November 2010.
(b)The respondent’s claim for compensation in respect of the work injury was settled on 19 November 2010 for $170,000, inclusive of costs. The net amount received by the applicant in November 2010 was in excess of $148,000.
(c)On 19 November 2010 Centrelink advised the respondent’s legal adviser that a lump sum preclusion period would apply from 20 November 2010 to 7 December 2012.
(d)The respondent was similarly advised on 23 November 2010 and also informed that he would be unable to receive income support from Centrelink for that period.
(e)On 21 March 2011 the respondent lodged a claim for disability support pension (DSP) which was rejected on 23 March 2010 as a result of the preclusion period.
(f)On 6 July 2011 an authorised review officer affirmed the decision to impose a lump sum preclusion period and reject the claim for DSP.
(g)On 4 August 2011 the SSAT set the decision aside on finding special circumstances and deciding that the LSSP should end on 4 August 2011.
ISSUES AND CONTENTIONS
It is the Secretary’s contention that the original decision not to grant DSP because of a LSPP from 20 November 2012 to 7 December 2012 was correct and that the SSAT erred in finding special circumstances to treat the whole or part of the compensation payment as not having been made pursuant to section 1184k of the Social Security Act 1991 (The Act). It is contended that the SSAT erred in failing to take into account the prospective payment in the sum of $118,200 in Total and Permanent Disability Benefits when it had been informed that a claim had been lodged by the respondent.
The issues for the Tribunal to determine are:
(a)Was the compensation lump sum payment received by the respondent – i.e. $170,000 – compensation as defined by the Act?
(b)If so, is the respondent subject to a lump sum preclusion period and what is that period?
(c)Are there special circumstances that would warrant treating the whole or part of the compensation payment received as not having been made?
THE LEGISLATION
The Legislation relevant to this matter is contained in the Social Security Act 1991 (The Act).
The Tribunal is satisfied that the lump sum payment received by the respondent constitutes a compensation affected payment as defined under section 17 of the Act and that the preclusion period was correctly calculated in accordance with Section 1170.
Under section 1184 the Secretary may treat the whole or part of a compensation payment as not having been made if it considers it appropriate to do so in the special circumstances of the case.
CONSIDERATION
The term “special circumstances” has been considered by the Courts and the Tribunal on many occasions. In Re Ivovic and Director General of Social Services (1981) AATA 57 when considering the term special circumstances as provided in the former section 115 of the Act, the Tribunal stated:
“…In the exercise of the discretion which s 115(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 comformable with the scope and purpose of the Social Services Act 1947…. Thus whilst keeping the dominant principal 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 the section would be unjust, unreasonable or otherwise inappropriate.”
O’Loughlin J in SDSS v Hulls 1991 FCAFD 8 endorsed the approach taken by the Full Court in Beadle v Director General of Social Security 1984 AATA 176. The Full Court in Beadle’s case had said that circumstances “must include events which would render the six months unfair or inappropriate” and that “it is not possible to lay down precise limits or precise rules.” In the Tribunal’s decision of re Beadle vDGSS 6 ALD 3 it had said that “an expression such as special circumstances is by its very nature incapable of precise or exhaustive definition. The qualifying objective looks to circumstances that are unusual, uncommon or exceptional. Where the 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. That 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.
On the basis of the evidence present to the SSAT which included oral evidence from Mr Smith, the Tribunal concluded that Mrs Smith’s circumstances were not similar to others in the community. It concluded that special circumstances existed and determined to end the preclusion period at an earlier point of time. The Tribunal referred to Mr Smith’s account of his expenditure of his compensation monies as contained in the Compensation Recovery Statement of Financial Circumstances at T11, the record of a phone interview and heard evidence from Mr Smith regarding his account of some of the expenditure. The Tribunal accepted that Mr Smith had accounted for $91,152 but found his explanation regarding a payment of $48,000 to “Alison” evasive and unconvincing. The Tribunal heard evidence from Mr Smith regarding a gambling and a drug habit and said at paragraph 34:
“His drug use is a vague estimate and apparently occurred over a short period; similarly, his reported gambling was rampant for a period in January 2011, but before then under control.”
At paragraph 35 the SSAT stated:
“An amount of $30,848 is inadequately accounted for [$170,000 – ($91,152 + $48,000)]. However, I was satisfied and so found that Mr Smith does not have any remaining assets. I concluded if his former partner holds any remaining funds, the vagueness of the transaction said to have occurred would appear to render unlikely action to recover any funds given to her during their relationship.”
Despite a finding that Mr Smith’s reported gambling was rampant for only a short period in 2011 and before then under control, the Tribunal said at paragraph 45:
“The situation I found was that Mr Smith’s circumstances were not similar to others in the community – while he had access to funds he would gamble until they were lost. He was restrained only when others limited his access to funds. He continues to gamble even after acknowledging this to be a cause of his present financial plight and that his demands on his parents to fund his ongoing gambling is bringing them close to bankruptcy. His parents might have capacity to support him during the remaining preclusion period were it not for the additional demands for funds to cover his addictions. Overall, I concluded there were special circumstances in this case”
The SSAT accepted that Mr Smith had not accounted for a considerable portion of his compensation payments. It was his evidence that on a number of occasions he had transferred funds into his friend’s bank accounts in exchange for cash. The SSAT does not appear to have taken account of the reckless manner of Mr Smith’s expenditure and his failure to make provision for his financial needs during the imposed preclusion period, of which he had been given notice and legal advice. There was no medical evidence and indeed the SSAT seems to have accepted, that Mr Smith did not have a drug or gambling addiction during the relevant period.
FINDINGS
The application for review by the AAT is a merits review on a de novo basis and the Tribunal did not have the benefit of evidence from the respondent Mr Smith.
There are several decisions in which the Tribunal has concluded that the reasonableness of a person’s expenditure of the lump sum is to be considered in determining whether there are special circumstances.
As the Tribunal stated in Re Martin and SDSS (1990) AATA 6482 at paragraph 10:
“In considering the question of financial hardship it is relevant to consider the reasonableness of the applicant’s action in disposing of his compensation money. Re Wilson and Director-General of Social Services 4 ALN 94. While the Tribunal does not consider the applicant’s actions in disposing of the compensation monies to be sufficiently extravagant or unwise as to be unreasonable it has not been such as to warrant special consideration and therefore to constitute special circumstances.”
The Tribunal in Re SDSS and Thompson (1993) AATA 8997 accepted the evidence suggesting the applicant’s psychological imbalance and social and intellectual disadvantage at the date of receipt of the lump sum payment and determined to reduce the preclusion period despite his expenditure of a large proportion of his $575,000 lump sum on friends, alcohol, cars, gambling and drugs as well as poorly handled investments.
There is no evidence in the present case, however, that Mr Smith has suffered from any medical or medically diagnosed drug or gambling addiction since receipt of his compensation payments. The bank records at T11 indicate a prolific expenditure of large sums of money since the deposit of $111,163.31 on 25 November 2010 and a further deposit of $10,000 from Blissendon Lawyers on 26 November 2010. On 30 November 2010 a cheque to Tilford Pty Ltd was presented and a cash withdrawal was made of $38,000. There are a number of withdrawals on the 10, 11, 12 January 2011 which appear to be to an on-line gambling agency. Mr Smith has admitted to spending in the order of $19,600 on gambling and amphetamines.
The Compensation Recovery Statement sets out Mr Smith’s expenditure as follows :
·Lawyer $8,000
·Car, Prado $14,600
·Car, Suzuki $10,300
·Centrelink $14,000
·Car insurance $1,000
·Changeover fees $500
·Transport fines $4,500
·Maintenance $3,500
·Cash withdrawal $38,000 (30/11/10)
·Holiday to Melbourne $12,000
·Fridge $1,000
·Personal finance (mum and dad) $1,000
·Personal finance $1,000
·Personal finance $1,900
·Credit Card GE $2,500
·ANZ (parents) $5,500
making a total of $119,300.
It was submitted on behalf of the Secretary that financial hardship on its own will not constitute special circumstances particularly where the financial hardship has been self imposed. The law was relevantly summarised by the Tribunal in re Brodley and SDSS 1991 63 SSR 878 where it said:
“In Re Colaiacolo and Secretary, Department of Social Security (Decision No 2109, 24 April 1985), it was stated that the factor of financial hardship alone is not sufficient to amount to special circumstances unless it is “exceptional”. Such exceptional circumstances were seen to exist in Re Krzywak (supra) where the applicant had no income or savings and had used all her award in repayment of debts incurred prior to settlement.”
As noted above, there was evidence before the SSAT from Mr Smith that he had submitted claims for total permanent disablement in respect of two superannuation accounts which if successful, were expected to net about $112,000. This Tribunal has received into evidence documentary advice regarding payment of the insurance/superannuation monies in the total sum of $118,200. There is no evidence before the Tribunal regarding the use, expenditure or investment of these monies by Mr Smith but in light of this evidence, the Tribunal is unable to conclude financial hardship. As found by the High Court in its decision Shi v Migration Agents Registration Authority (2008) HCA 31, it is open to the Tribunal to have regard to evidence subsequently available that is relevant to the issue to be determined. In the present case there was evidence that the respondent had lodged claims and had an expectation of payment once the required medical reports were obtained.
The Tribunal accepts that the respondent was fully aware of the LSPP and that he would not be entitled to social security benefits prior to its expiration. With that knowledge he appears to have embarked on a pattern of reckless and extravagant expenditure in total disregard of its impact and without making any provision for his support during the LSPP. The Tribunal is not satisfied on the basis of the evidence before it, that the whole of the compensation has been expended despite Mr Smith’s advice to the SSAT that since January 2011 he had no remaining funds. This would have meant an expenditure of some $170,000 over a two month period.
There are no other factors in this case that would lead the Tribunal to conclude that the respondent’s circumstances were in any way unusual, uncommon or exceptional such as to constitute special circumstances and justify a shortening of the LSPP. As stated in the Guide to the Social Security Law the intent of compensation recovery provisions is to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.
For all of these reasons and in the absence of a finding of special circumstances such as to treat either the whole or part of the compensation payment as not having been made, the Tribunal determines to set aside the decision of the SSAT and reinstate the original decision rejecting Mr Smith’s claim for Disability Support Pension on the basis of a compensation preclusion period from 20 November 2010 to 7 December 2012.
I certify that the preceding 28 (twenty eight) paragraphs are a true copy of the reasons for the decision herein of Ms A F Cunningham (Senior Member).
........................................................................
Administrative Assistant
Dated 4 May 2012
Counsel for the Applicant Brian Sparkes
Solicitors for the Applicant Centrelink Program Litigation & Review Branch
Respondent Mr Adam Smith
Date(s) of hearing 18 April 2012
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