Djakovic and Department of Family and Community Services

DECISION AND REASONS FOR DECISION [2001] AATA 1003

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2001/116

GENERAL ADMINISTRATIVE DIVISION       )
           Re      JELENA DJAKOVIC
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Ms N Bell, Member

Date10 December 2001
PlaceSydney

Decision The decision under review is affirmed.

[sgd] N Bell
Member
CATCHWORDS
Social Security – lump sum compensation payment – whether the recovery of a charge from settlement monies was correct – whether special circumstances exist to warrant the disregarding of all or part of the compensation payment
Social Security Act 1991 – sections 17(2), 1165(A), 1165(7), 1165(8), 1166 and 1184
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 7 ALD 670
Department of Social Security v Hulls (1991) 22 ALD 570
Riddell v Secretary, Department of Social Security (1993) 42 FCR 443

REASONS FOR DECISION

Ms N Bell, Member

This is an application by Jelena Djakovic ("the Applicant") for review of the decision by the Social Security Appeals Tribunal ("SSAT") made on 18 January 2001 which affirmed the decision of the Secretary, Department of Family and Community Services ("the Respondent"), dated 7 March 2000, to recover a compensation charge of $4646.64 from the Applicant.
The Applicant attended the hearing without representation and the Respondent was represented by Ms Fahey, an advocate form the Advocacy and Administrative Law team at Centrelink. The Applicant gave oral evidence to the Tribunal. The following documentary evidence was before the Tribunal:
Exhibit No  Description                Date
T1-30 pp1-66           Documents prepared pursuant to section 37 of the Appeals Tribunal Act 1975
A1      Letter from M Russoniello, Solicitor        14 March 2001
A2      Letter from M Russoniello, Solicitor        20 August 2001
R1      Respondent's Statement of Facts and Contentions
R2      Letter from Health Insurance Commission to Centrelink         8 August 2001
R3      Letter from NRMA Insurance to Centrelink        16 November 2001

background

It is common ground between the parties that the Applicant had a motor vehicle accident in October 1996 and subsequently claimed compensation. The Applicant's claim was settled for a lump sum of $25,000 on 19 January 2000. Centrelink records show that the Applicant's solicitor had sought, and was given, an estimate of the charge owed to Centrelink in the sum $3,682.30, based on a settlement amount of $20,000, on 23 December 1999. A subsequent decision was made by Centrelink to recover the charge amount of $4,646.54 from the relevant insurance company, the NRMA, as the Applicant had been in receipt of newstart allowance during the period 5 October 1996 to 25 April 1997. This charge amount was more than the estimate that had been given to the Applicant's solicitor as the final settlement amount was higher than the amount that had been advised by the solicitor to Centrelink.
issues
The issues to be considered by the Tribunal in this application are:
(1)whether the recovery by Centrelink of the amount of $4,646.54 from the Applicant's settlement monies was correct; and
(2)if so, whether there are special circumstances, which warrant the disregarding of all or part of the Applicant's compensation payment.

legislation

The relevant legislation to be considered in this application is sections 17(2), (3) and (8), 1165(1A), 1165(7), 1165(8), 1166 and 1184 of the Social Security Act 1991 ("the Act").

applicant's evidence

The Applicant told the Tribunal she had been advised by her solicitor that from her settlement monies she would receive $10,000 but that Centrelink would take approximately $1,500 or less. She said that she was also advised by her solicitor that the Health Insurance Commission would require an amount of $2,000 but that that amount would be repaid to her. She confirmed to the Tribunal that from her settlement monies of $25,000, after deductions of costs, expenses, and other repayments, she received the amount of $8,582.66 in her hand.
The Applicant said that with this money she purchased a Honda Prelude, the purchase price of which was $22,990. Document T15 is a receipt from Super Car Centre showing a trade-in and initial deposit payment, which left a balance of $10,000 towards which an amount of $8,581.66 was paid on 17 March 2000, leaving a balance outstanding of $1,418.34. The Applicant said that she had borrowed the initial deposit of $5,000 from her brother-in-law.
The Applicant told the Tribunal that she suffers from severe headaches but is unable to find a treatment that assists her. She is now having no treatment because she cannot afford acupuncture or massage. She said that she is unable to work full time because of her headaches and now works 28 hours per week earning $415.62 per week. The Applicant said that she lives alone, her parents having moved away, and pays rent of $160 per week. She has a number of outstanding debts, which remain to be repaid to friends. She has an arrangement to repay these debts at the rate of $150 per month but recently has not made any payments. She has an amount of $7,000 currently outstanding.
The Applicant told the Tribunal that at the time of her accident she had been in receipt of newstart allowance for approximately six months and obtained her present job a few months after her settlement. The Applicant provided to the Tribunal a letter from her solicitor to her, dated 14 March 2000 (Exhibit A1), which advised her that no amount was included in her claim for economic loss.
In cross-examination, the Applicant was shown paragraph 10 of the SSAT's statement of reasons for its decision (T2), which refers to her evidence to that Tribunal, that her solicitor had told her there was an amount that would have to be repaid to Centrelink, and that she thought she would have to repay about $3,000. The Applicant said that that figure was put to her by her solicitor as an example of the kinds of amounts recovered by Centrelink. She said that the Health Insurance Commission had returned an amount of $2,500 to her approximately two months ago and that she had applied these monies to the payment of insurance on her car.
submissions
The Applicant's submission was that the provisions of the Act concerning charges and preclusion periods should not have been applied to the total amount of her settlement. She referred to the amount that she had received in her hand and argued that it was this amount that should be taken into account by Centrelink. She also submitted that she received no compensation for economic loss either past or future, and for that reason no charge or preclusion period should be calculated in respect of her settlement. Finally, the Applicant argued that her circumstances were special to the extent that her settlement monies should be disregarded.
Ms Fahey, for the Respondent submitted, that against the reference in Exhibit A1 (the letter from the Applicant's solicitor) to the absence of economic loss in the Applicant's claim for compensation, is a facsimile message received by Centrelink from the NRMA dated 1 September 2000 (T19), which advises that an amount of approximately $5,000 was allowed in the settlement figure for future economic loss for the Applicant.
Ms Fahey submitted that the "compensation part" of the Applicant's settlement payment of $25,000 is 50 per cent of that amount, ie $12,500. She detailed the formula, contained in section 1165 of the Act, for calculating the length of the preclusion period applicable to the Applicant and demonstrated that an amount of $12,500 divided by an "income cut out amount" of $422.90 yields a preclusion period of 29.55 weeks. When rounded down to a full week, under section 1165(9), this is a preclusion period of 29 weeks, which commences on the day that the loss of earnings or lost capacity to earn began, ie, the day of the Applicant's accident, 5 October 1996. The Respondent submitted that, pursuant to section 1166 of the Act, a person may have to repay an amount where both the lump sum and payments of compensation affected payment have been received. This was the case in relation to the Applicant who, throughout the period 5 October 1996 to 25 April 1997, was in receipt of newstart allowance. Ms Fahey also referred the Tribunal to the decision in Department of Social Security v Hulls (1991) 22 ALD 570 at 578 as authority for the proposition that lump sum payments of compensation should not be dissected by the Tribunal.
In relation to the question of whether any special circumstances exist to warrant the exercise of the discretion contained in section 1184 of the Act, Ms Fahey referred the Tribunal to a number of decisions, including Beadle v Director-General of Social Security (1985) 7 ALD 670, and submitted that the discretion provided for should be exercised consistently with the objects and purposes of the legislation, that is, to prevent "double dipping", unless it would be unjust to enforce the liability for which the legislation otherwise provides. To treat compensation payments in any other manner in this case, it was submitted, would frustrate the object of the legislation in the absence of any special circumstance in which it would be reasonable to do so. It was submitted that there is nothing about the Applicant's financial situation, which sets her apart from other income support recipients.
The hearing of this application was adjourned to enable the Applicant to obtain further information from her solicitor on the question of whether any claim was made by her for economic loss and to allow the Respondent to make similar inquiries. The Applicant provided a letter from her solicitor (Exhibit A2) in the following terms:
"Jelena's claim was settled for $25,000.00 inclusive.
At the time of the motor vehicle accident she was not working. She subsequently got a job as a data processor.
As she was able to get a job after the accident the insurer was not prepared to make an allowance in its offer for damages for future economic loss. This is reflected in the amount of the offer and the settlement figure.
It's unfair for DSS to take the amount that they did bearing in mind that Jelena was able to get a job after the accident."
The Tribunal notes that this is at odds with the Applicant's evidence to the Tribunal that she obtained her present job a few months after her settlement.
The Respondent provided a letter from NRMA Insurance (Exhibit R3) in the following terms:
"NRMA advises that no claim for past economic loss was made, however a claim for diminution of earning capacity was claimed for, as a result of this NRMA made an allowance of $5,000.00 as part of the settlement."

consideration

The issue to be considered is whether the Respondent was correct in taking into account the whole of the Applicant's settlement amount in its calculation of the charge made by it. The Applicant's submission was that, on two grounds, the whole amount of her settlement moneys should not have been employed in that calculation. The first ground on which this was argued by the Applicant was that there was no amount in the settlement moneys to compensate the Applicant for economic loss. The second ground was that her circumstances are special to the extent that some, or all, of the amount of her settlement should be disregarded in the calculation of the charge amount. The Applicant therefore took issue with the use, by the Respondent, of the whole amount of her settlement moneys as a component of its calculations, rather than with the entirety of the calculations made by the Respondent.
In relation to the Applicant's first ground of objection to the Respondent's use of the whole amount of her settlement moneys in its calculations, that is, her assertion that the settlement contained no component of compensation for economic loss, section 17(2) of the Act is relevant and 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) forms the basis of the calculation of any charge or preclusion period under section 1165(7) 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) 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."
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:

2.5 [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."

Sections 1165(1A), (7) and (8) provide:
"Person not member of a couple—payment received on or after 20 March 1997
1165.(1A) If:
(a)       a person receives or claims a compensation affected payment; and
(b)       the person is not 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.
…
1165.(7) If neither subsection (5) nor (6) applies, the new lump sum preclusion period is the period that:
(a)       begins on the day on which the loss of earnings or loss of earning capacity began; and
(b)       ends after the number of weeks worked out under subsections (8) and (9).
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
…"
To fall within the definition of "compensation" in section 17(2) a payment must be "made wholly or partly in respect of lost earnings or lost capacity to earn" (section 17(2)(f)). The Applicant's solicitor's evidence, provided by letter, was that there was no component in the settlement amount for economic loss. A further letter from the solicitor suggests that the insurer, NRMA, was not prepared to include in the settlement an amount for economic loss because the Applicant had obtained employment after the accident. As noted above this conflicts with the Applicant's evidence that she obtained work after the settlement of her claim.
The letter from the NRMA, provided by the Respondent, states that while no claim for past economic loss was made, a claim was made in respect of diminution of earning capacity and an allowance of $5,000.00 was made as part of the settlement. The Tribunal also notes the Applicant's evidence that she is now only able to work for 28 hours per week due to the continuing effects of her accident.
On balance, the Tribunal finds that the settlement was in respect, in part, of lost capacity to earn, and concludes, therefore, that the settlement received by the Applicant was "compensation" within the meaning of section 17(2) of the Act. It follows that the calculation of the charge arising from, in turn, the calculation of the preclusion period, was correctly based on the whole of the settlement amount, using section 1165(7) and the definitions reproduced above.
Section 1166 provides relevantly:
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.
1166.(3) If the person is not a member of a couple, the recoverable amount is equal to the smaller of the following amounts:
(a)       the compensation part of the lump sum compensation payment;
(b)       the sum of the payments of the compensation affected payment made to the person:
(i)        if the lump sum compensation payment is received before 20 March 1997—for the old lump sum preclusion period; or
(ii)       if the lump sum compensation payment is received on or after 20 March 1997—for the new lump sum preclusion period.
It follows that the Respondent correctly recovered, as a charge on the settlement moneys, an amount in the sum of the payments of compensation affected payment made to her, for the term of the preclusion period.
It remains for the Tribunal to consider whether the circumstances of the case make it appropriate to disregard the whole or part of the compensation. Section 1184(1) provides:
"1184.(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case."
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 breadth of the discretion in relation to "special circumstances" was also commented on by the Full Federal Court in Riddell v Secretary Department of Social Security (1993) 42 FCR 443 at 450:
"Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other."

The Applicant's evidence was that she is now employed, albeit for only 28 hours per week given her continuing headaches, that she put all of her settlement moneys towards the purchase of a car and that she has debts of $7,000.00 outstanding. The Applicant also told the Tribunal that she received, in addition to the $8,582.66 from her settlement, an amount of $2,500.00 by way of refund from the Health Insurance Commission. She applied this money to her car insurance costs.
The Tribunal is of the view that there is nothing in the Applicant's circumstances, as described by her, that "has a particular quality of unusualness that permits them to be described as special" (Beadle [supra]). Unfortunately, it is not unusual for a person who has had a period of unemployment, arising out of an accident or otherwise, to have accumulated some debts or to have continuing physical limitations on his or her ability to work. Indeed, the Applicant is in a somewhat better situation than many people to whom preclusion periods apply, given that she currently earns $415.62 per week, significantly more than she would receive if she was still dependant on social security payments.
For these reasons, the Tribunal does not consider that it is appropriate in the circumstances of this case, to exercise the discretion in section 1184(1) of the Act.
Determination
The decision under review is affirmed.
I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Bell, Member
Signed:         .....................................................................................
  Associate
Date/s of Hearing  10 August 2001
Date of Decision  10 December
Representative for the Applicant   Self
Advocate for the Respondent       Ms Fahey

[2001] AATA 1003

10 December 2001

Key Legal Topics

Areas of Law

Administrative Law

Social Security Law

Legal Concepts

Social Security Act 1991

Judicial Review

Statutory Construction

Limitation Periods

Unjust Enrichment