Downs; Secretary to the Department of Family and Community Servic Es
[2003] AATA 174
•21 February 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 174
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V2003/50
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY TO THE DEPARTMENT OF FAMILY AND COMMUNITY SERVICES Applicant
And
KENNETH DOWNS
Respondent
DECISION
Tribunal Mrs Joan Dwyer, Senior Member
Date21 February 2003
PlaceMelbourne
Decision The Tribunal sets aside the decision under review and in substitution decides that there are no special circumstances such that it is appropriate to treat any part of Mr Downs’ compensation payment as not having been made. Accordingly the preclusion period is as originally calculated, from 29 July 1997 to 12 January 2004. (Sgd) Joan Dwyer
Senior Member
SOCIAL SECURITY – “new lump sum preclusion period” – “income cut-out amount” – whether fact that preclusion period calculated using an “income cut-out amount” which did not adjust for the GST is itself sufficient to constitute “special circumstances” such as to make it appropriate to treat part of the compensation payment as not having been made – the particular circumstances of the person not such as to attract the discretion – decision set aside
PRACTICE AND PROCEDURE – form of decision exercising discretion under s 1184K(1) of Social Security Act 1991
Social Security Act 1991 ss 17(1), 1165(2AA), (5), (8) and (9), and 1184K(1)
Social Security (Administration) Act 1999 s 149(1)
Family And Community Services Legislation (Simplification And Other Measures) Act 2001 (No. 71 of 2001)
A New Tax System (Family Assistance) (Administration) Act 1999 (No 45 of 2000)
Kertland v Secretary, Department of Family and Community Services
[1999] FCA 1596
Secretary to Department of Family & Community Services v Allan [2001] FCA 1160
Re Secretary Department of Social Security and VYS (1995) 40 ALD 745
Secretary, Department of Family & Community Services v Chamberlain
[2002] FCA 67
Re Allan and Secretary, Department of Family & Community Services
[2001] AATA 271
Re Giannekas and Secretary, Department of Family & Community Services
[2001] AATA 236
Re Stephens and Secretary, Department of Family & Community Services
[2001] AATA 108
Kirkbright v Secretary Department of Family & Community Services
[2000] FCA 1876
Martinez v Secretary Department of Family & Community Services [2000] FCA 1090
Re Coxon and Department of Family & Community Services [2001] AATA 294
Director General of Social Services v Hales (1982) 47 ALR 281
REASONS FOR DECISION
21 February 2003 Mrs Joan Dwyer, Senior Member
THE NATURE OF THE APPLICATION
1. This is an application by the Secretary to the Department of Family and Community Services ("the Secretary") for review of a decision of the Social Security Appeals Tribunal ("SSAT"), on appeal from the decision of a Centrelink officer made under the Social Security Act 1991 ("the Act") as to a preclusion period.
2. Mr Sparkes, an advocate with Centrelink, appeared for the Secretary. Mr Downs appeared and gave evidence with some assistance from his wife. The Tribunal had before it the documents ("the T documents") lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 and also the exhibits lodged by Mr Downs during the hearing.
3. Centrelink decided on 11 September 1998 that, applying the provisions of the Act, Mr Downs was subject to a preclusion period for 337 weeks from 29 July 1997 to 12 January 2004. Mr Downs did not challenge that decision until early 2002 when he sent a request for a review to Centrelink. It is clear from the T documents (T17 pp37 and 38) that Mr Downs sent detailed documentation with his request and that it was received by Centrelink and sent to “Leon” and then to the “Comp Review Team Area West Vic on the 13/02/2002”. It appears to have been lost. At Tdocs p36 an officer has written: “He seemed to be aware that documentation he had spent three days completing had gone astray between Ballarat C/link office and Compensation Area Victoria”. The material was not included in the T documents and had not been found by the time of the hearing. This suggests that the Centrelink procedures for forwarding material to other offices may require review.
FORM OF SSAT DECISION
4. The SSAT described its decision as follows:
DECISION OF THE TRIBUNAL
On 13 September 2002 the Tribunal decided to vary the decision under review and send the matter back to the Chief Executive Officer of Centrelink with the direction that Mr. Downs’ preclusion period be recalculated taking into account the income cut off amount of $543.63 from 1 July 2000 and thereby reduce the preclusion period by 45 weeks to a total of 292 weeks.
This means the appeal is partly successful.
5. That formulation of the decision creates some problems. First, the power to reduce a preclusion period stems from s 1184K(1) of the Act. It provides as follows:
1184K Secretary may disregard some payments
(1)For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a)not having been made; or
(b)not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
6. The SSAT did not employ that terminology in its decision. It directed that a different divisor be used, so as to reduce the preclusion period by a specified number of weeks. The SSAT had no power to make such a direction. Its only power was to treat the whole or part of the compensation payment as not having been made. It could have remitted the matter with a direction that so much of the compensation payment as would reduce the preclusion period by 45 weeks be disregarded, but it had no power to direct the use of a different divisor so as to reduce the period by 45 weeks. The difference is of form rather than substance, but a similar error led to an appeal being allowed in Kertland v Secretary, Department of Family and Community Services [1999] FCA 1596.
7. Merkel J, in Kertland remitted the matter to the Administrative Appeals Tribunal (“AAT”). His Honour said at paragraphs 44 and 45:
44 It follows from the foregoing that it was open, as a matter of law, to the AAT to conclude that the circumstances of the applicant's case were "special" for the purposes of s 1184(1) and that the discretion under the sub-section was able to be exercised by it in the applicant's favour in order to protect her social security benefits for the period during which she was precluded from receiving compensation.
45 However, the AAT erred in the manner it exercised its discretion by altering the preclusion period rather than by determining to treat part of the compensation payment as not having been made. Whilst it would have been open to the AAT to exercise its discretion by treating part of the compensation as not having been made, so as to ensure that the applicant is entitled to retain the social security payments paid for the period in respect of which she was not entitled to receive compensation for pecuniary loss, the AAT did not do so. Although the statutory scheme only allows that result to be arrived at indirectly, provided the discretion is exercised in the manner provided for by s 1184(1), it is open to the AAT to do so in a manner that achieves that result. A similar award, to achieve a similar result, was made by the Tribunal in Smith.. Whether the AAT determines to exercise its discretion in that, or in some other manner, in the present case is a matter for it, rather than the Court, to decide.
8. The SSAT seems to have also overlooked s 149(1) of the Social Security (Administration) Act 1999 (“the Administration Act”), which sets out its powers on a review as follows:
149 SSAT review powers
(1)If a person applies to the SSAT for review of a decision (other than a decision referred to in subsection (5)), the SSAT must:
(a)affirm the decision; or
(b)vary the decision; or
(c)set the decision aside and:
(i)substitute a new decision; or
(ii)send the matter back to the Secretary or the CEO, as the case requires, for reconsideration in accordance with any directions or recommendations of the SSAT.
9. Thus the SSAT may either vary a decision under s 149(1)(b), or, set aside a decision and remit the matter for reconsideration in accordance with directions under s 149(1)(c). The SSAT does not have power to both vary and remit a matter. There would also seem to be a difficulty about directing that there be a recalculation and specifying the result that recalculation must achieve.
EVIDENCE AT THE HEARING
10. The facts giving rise to this application are straightforward and are not in dispute. Mr Downs, who was then in his late 30s, was involved in a head‑on vehicle accident, while driving his school age daughter to the bus stop on 28 July 1995.
11. The main injury sustained by Mr Downs was a shattered kneecap. He also had chest problems as a result of the impact of his chest with the steering wheel in the head‑on collision. Mr Downs was taken to hospital and had an operation on his knee that evening. After the operation he began to feel ill, but was nonetheless sent home. His condition deteriorated and he was readmitted to hospital. Mr Downs has since been informed that he was suffering septicaemia. It seems high temperatures led to a minor seizure. He suffered some vagueness, and for a time became a little incoherent. Although he has now substantially recovered, he said that since that time some of his higher level cognitive skills have diminished.
12. Prior to the accident Mr Downs was a qualified licensed aircraft mechanical engineer. He had given up that career in order to undertake university studies to qualify him as a teacher. He was working part-time as a relief teacher and was also doing machine shut down maintenance, for which he was qualified because of his aircraft mechanical engineering qualifications.
13. During the 12 months following his readmission to hospital, Mr Downs underwent a considerable amount of hydrotherapy and physiotherapy and learnt to walk properly again. He has resumed some teaching work but can no longer do the shut down maintenance. He does not have the physical endurance and agility he had before the accident. He has also noticed that he has become bad tempered, vague and cross, and lacks concentration. Eventually, after attending a clinical and forensic psychologist, he was told that there was an organic change in his brain, and that the changes were attributable to physical causes, rather than being emotional in origin.
14. Mr Downs instructed solicitors who issued proceedings on his behalf. On 10 September 1998 judgment by consent was entered in his favour. A copy of the consent judgement was sent to Centrelink. Before he received his lump sum compensation payment, Mr Downs had been in receipt of weekly payments from the Transport Accident Commission for two years. He then transferred to a social security payment.
15. On 11 September 1998 Mr Downs was advised by letter from Centrelink that a “preclusion period” was applicable to his social security entitlements. It commenced on 29 July 1997 and will end on 12 January 2004.
16. In January 2002 Mr Downs contacted Centrelink Ballarat seeking review of the compensation preclusion period. On 13 February 2002 he sent detailed information in support of his claim of financial hardship to Centrelink Burnie. That material was lost. On 19 March 2002 a decision was made by a delegate of the Secretary affirming the original calculation. That decision was affirmed by an authorised review officer on 24 April 2002. The decisions seem to have been made on the basis of information Mr Downs had provided in telephone conversations on 7 March 2002 and 23 April 2002.
17. The central issue in this matter concerns the meaning of the term “special circumstances”, and, in particular, the question whether a result which is required by the legislation, and which operates unfairly on a particular group of Social Security claimants, can without more, be considered a “special circumstance”, so as to come within s.1184K(1) of the Act.
18. The scheme for dealing with claims for social security payments by persons who have recovered lump sum compensation payments was summarised by Gray J in Secretary to Department of Family & Community Services v Allan [2001] FCA 1160 as follows:
“1 This appeal from the Administrative Appeals Tribunal (the Tribunal) concerns the application of provisions of the Social Security Act 1991 (Cth) (the Act) which deal with the suspension ("preclusion") of social security benefits where recipients have received compensation for loss of earnings by awards under workers compensation legislation or damages at common law. The basic policy, understandably enough, is that there should not be "double dipping". People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source.
2 Relevantly for present purposes, under s 1165(1A) of the Act if a person is in receipt of a "compensation affected payment" and that person also receives a "lump sum compensation payment" no compensation affected payment is payable to the person for the "new lump sum preclusion period".
3 By s 17(1) "compensation affected payment" is defined to mean various benefits, pensions and allowances under the Act including a disability support pension (DSP).
4 "New lump sum preclusion period" is, for present purposes, defined in s 1165(7) to (9).
5 The period begins on the first day on which the person's loss of earnings or loss of earning capacity began and ends after the number of weeks worked out under subss (8) and (9).
6 The number of weeks is worked out by dividing the "compensation part of lump sum" by the "income cut-out amount" (subs (8)). (As will be seen, the Tribunal used the expression "compensation divisor" which I take to be the same thing as the "income cut-out amount"). The "compensation part of lump sum" is defined in s 17(3) and (4). For present purposes it is enough to say that it is 50 per cent of the lump sum compensation payment. Typically compensation awards will include compensation for loss of earnings and also non-economic loss such as pain and suffering and loss of enjoyment of life. The policy revealed by the Act is to avoid a detailed analysis of the loss of earnings component in each case but rather to take an arbitrary figure of 50 per cent. The "income cut-out amount" is worked out according to a formula prescribed by s 17(8). It is not necessary to go into the detail of this; the important element in the formula is the "maximum basic rate" which is a sum which will vary from time to time. Apparently it is normally recalculated every March and September following CIP [sic] reviews but may also be recalculated if one of the other variables in the formula changes.
7 The Act recognises that circumstances may change over the preclusion period in a way which will result in hardship. The method adopted to ameliorate this is the substitution of a reduced amount, or a nil amount, for the compensation payment. Section 1184(1) provides:”
"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 appropriate to do so in the special circumstances of the case."
19. As at 11 September 1998, the legislative requirement as to compensation preclusion periods was found in s 1165 (2AA) of the Act which provided:
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.
20. Section 1165(5)(8) and (9) explained how the “new lump sum preclusion period” was to be calculated. There is no dispute between the parties as to the correctness of the calculation of the “new lump sum preclusion period”. Section 1165 was repealed, and a new “Division 3 Receipt of Compensation”, ss 1168-1176 was inserted in the Act, by the Family And Community Services Legislation (Simplification And Other Measures) Act 2001 (No. 71 of 2001), with effect from 20 September 2001. As that was after Mr Downs’ preclusion period had been fixed, those amendments are not significant for this decision.
21. As at the time Mr Downs’ “new lump sum preclusion period” was calculated, the formula for calculating the “income cut-out amount” was in s 17(1) of the Act. By amendments made by the A New Tax System (Family Assistance) (Administration) Act 1999 (No 45 of 2000), the definition of “income cut-out amount” was amended and the formula was moved to s 17(8) of the Act. From 1 July 2000 the “income cut-out amount” increased substantially, apparently to take into account the effect of the GST.
22. The increase in the “income cut-out amount”, had the effect that preclusion periods became shorter. This follows from the fact that at all relevant times a “lump sum preclusion period” or “new lump sum preclusion period” has been calculated by using the formula:
Compensation part of lump sum
Income cut - out amount
23. The change to “income cut-out amount” from 1 July 2000 has been very significant. It is apparent from the T-documents (T11, p27) that the “income cut-out amount”, called “the divisor” by the Department, used in calculation of Mr Downs’ preclusion period was $410.00. The SSAT decision states that from 1 July 2000 the divisor increased to $543.63. Mr Sparks said that at the time of the hearing it was $602.00.
24. Naturally, Mr Downs would like his preclusion period to be calculated using a higher divisor and thus making the period shorter. The SSAT used s 1184K(1) to do that. It calculated the new period in a logical and fair manner. It explained the way it went about that task as follows:
26. Mr. Downs’ case puts forward his diminishing financial position and the adverse effect on his investment income and increased cost of living since the introduction of the Goods and Services Tax (GST) on 1 July 2000. Mr Downs says that these problems seem to have arisen about two years after the settlement and were not foreseeable at the time.
27. The Tribunal accepts the information provided by Mr Downs which shows that his capital investment is diminishing, having lost $4,175 in the past financial year. It is also accepted that the family income post-GST is significantly lower compared to pre-GST ($14,864 for 00/01 compared to $21,321 for 99/00).
28. In relation to the calculation of Mr. Downs’ preclusion period, the Tribunal notes that the calculation used $138,500 (50% of total settlement) as the economic loss component. The Tribunal notes that there is no specific evidence such as particulars of claim for the make up of the payment at the time of settlement. The figure of $138,500 was determined in accordance with the provisions of sub-section 17(3) of the Act. The $138,5000 was divided by the relevant divisor at the time of settlement ($410.00) to determine the 337-week period. The Tribunal agree that this calculation was correct.
29. The preclusion period of nearly 6 ½ years is lengthy and spans the period when GST was introduced from 1 July 2000. The Tribunal has reviewed the income cut out amounts and notes a substantial increase from 1 July 2000, which is, presumably, a response to the GST. The rate in March 2000 was $428.40 and from 1 July 2000 increased to $543.63.
After discussing the concept of “special circumstances”, the SSAT concluded:
45. In SDFaCs v Allan (2001), Heery, J. said that;
“Regard needs to be had to the purpose of s1184(1) which is to ameliorate what would otherwise be harsh and unfair application of a rigid formula. With a very large compensation sum the preclusion period might be very long. The longer the period, the greater the potential for unforseen circumstances to create hardship.
46. The Tribunal considers that Mr. Downs’ circumstances are “special” within the meaning of the legislation. The Tribunal believes that such a conclusion is consistent with SDFaCS v Allan (2001) and Re Coxon and SDFaCS (2001).
47. The Tribunal also finds that the circumstances are sufficient to justify a reduction of the preclusion period. Section 1184K does not specify a method to nominally reduce a preclusion period. The Tribunal considers that the period ought to be reduced by applying the appropriate divisor at the time of the introduction of the GST to the balance portion of the compensation monies attributable from 1 July 2000. The portion of the preclusion period from 29 July 1997 to 30 June 2000 is 152 weeks. The original calculation may be broken down to represent the sum attributable to the period 29 July 1997 to 30 June 2000 as a total of $62,320, made up as 152 weeks x $410.00 = $62,320.
48. In determining the reduction in the period, the starting figure to which the divisor, effective on 1 July 2000, should be applied is;
$138,500
$ 62,320
$ 76,180
The balance of the preclusion period from 1 July 2000 is calculated as;
$ 76,180 = 140 weeks
$543.63
Therefore the preclusion period should total 292 weeks from 29 July 1997 - a reduction of 45 weeks from the original period.
25. Mr Sparks, for the Secretary, contended that Mr Downs was not in straitened financial circumstances, and that his circumstances were not “special” within the meaning of that term in s 1184K(1) of the Act.
26. Mr Downs provided detailed evidence as to his financial circumstances. That evidence was not challenged by Mr Sparks. Mr Downs and his wife have three school age children, aged 14, 11 and 8. Mrs Downs has not worked since the children were born. Prior to that she was an accounts payable bookkeeper. At the time of the accident Mr and Mrs Downs lived on a steep country property in Tasmania on which they had sheep. As already stated, Mr Downs was studying at university and was also doing relief teaching on an intermittent basis, and doing shut down maintenance.
27. About six months after the accident, Mr Downs resumed relief teaching but he could no longer do the shut down maintenance work he had been doing. There was not much relief teaching available in Tasmania. He also did some adult numeracy and literacy tuition.
28. After the accident, as a result of his knee injury, Mr Downs had difficulty looking after sheep, and also had a problem with the steepness of the property in Tasmania. He and his wife decided to sell that property. They were paying off a mortgage. They realised $127,000 from the sale of that property.
29. Instead of buying another property in Tasmania, Mr and Mrs Downs decided to move to Victoria to increase Mr Downs’ changes of finding work as a teacher, and so that they and their children would be closer to their parents. They bought a block of land from Mr Downs’ parents, and moved to Victoria in late 2002. They are planning to build a new home. Meanwhile they are living with Mr Downs’ parents.
30. Mr Downs had some expenses to pay out of the $277,000 lump sum settlement he received. He invested $230,000, with professional advice, to provide an income for him and his family. As at 10 September 2002 the value of his investment had reduced to $177,137 due to expenditure and poor financial returns on investments, probably due to the worldwide economic downturn.
31. Mr and Mrs Downs spent approximately $10,000 on the move to Victoria. As at the date of hearing the value of his investments was approximately $164,624 (R4). Mr and Mrs Downs also held the $127,000 proceeds of the sale of the property in Tasmania in a separate account. They had prepared an estimate of the cost of preparing their land and building their home, after having paid $25,000 for the land. They expect the costs of building the house itself will be in the vicinity of $180,000 to $210,000, making a total expenditure of approximately $260,000, not taking into account soil tests, and telephone and power connection.
32. Mr and Mrs Downs’ current investment is $164,624, plus the $127,000 from the sale of the house in Tasmania totalling $291,624.00. That means that after paying for the construction of the home, apart from living expenses, Mr and Mrs Downs would have something in the vicinity of $25 - $30,000 of their investment left. Of course they will have to pay their living expenses out of that amount during the preclusion period, but they will also have some income in that time.
33. Mr and Mrs Downs prepared an estimate of their living expenses. Mr Sparks accepted all their figures. They showed a fortnightly expenditure of $1338.75. Mrs Downs receives $441.00 per fortnight parenting payment. At present she has been told that their assets preclude her receiving parenting allowance, but that could change as more of their investment is expended on building their home or on living expenses. Mr Downs withdraws $1000 a month from his investments for living expenses. He said that the family has a shortfall of approximately $400 a month for payment of bills. He deals with that by using his bankcard and then withdrawing $3000, when required to pay off his bankcard.
34. On those figures it looks as though Mr Downs should spend approximately $11,000 on living expenses over the 11 months to 4 January 2004, and an extra $4,500 for bankcard withdrawals in that time. Even if he earned no teaching income this year, that would leave him with $10-15,000 of his original lump sum, as well as a fully paid off new home, if the house is finished when the current preclusion period expires.
35. Of course, even carefully worked out budgets can vary either for better or for worse. Mr Downs, in the calculations as to which he gave evidence, made no allowance for income from teaching. One of the reasons the family moved to Victoria was because he believed there would be more teaching available to him. He is registered as a teacher in Victoria, but arrived here too late to be appointed to a school. He has had interviews with a number of principals about the prospects of relief teaching. It is too early to know how much, if any, will become available to him. Similarly, the building and associated costs were all estimates. They could vary up or down. At this stage it can not be known what the precise costs will be. Another factor which may change is that, once a part of the investment money has been expended in building the family home, Mrs Downs may become qualified for family allowance.
36. Mr Downs submitted that he has handled his damages payment responsibly. There is no dispute about that. He also submitted that his damages have not been “a windfall”, but have been the money he has used for living expenses to supplement his relatively low income from teaching and from his investments over the last 3 ½ years. He submitted that it was fair of the SSAT to take into account the fact that his claim was settled at a time when the “income cut-out amount” was much lower than it is now. It was also appropriate for that reason for the SSAT to adjust his preclusion period by dividing the “lump sum compensation amount” which had not been notionally expended by 1 July 2000, by the “income cut-out amount” which came into operation on that day.
37. I agree that the SSAT decision gives a fair result. But the discretion in s 1184K(1) is only available where there are “special circumstances”.. That concept was considered in Re Secretary Department of Social Security and VYS (1995) 40 ALD 745 where I said, at p 752-754:
“(20) The term "special circumstances" has been considered in a number of decisions of the tribunal and in particular in Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 and; Re Beadle and Director-General of Social Security (1984) 6 ALD 1. . . .
In Re Beadle the Tribunal said, at 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.”
This passage was approved by the Federal Court in Beadle v Director-General of Social Security (1985) 60 ALR 225; 7 ALD 670. The court, at ALR 230; ALD 675, said:
While we would place less emphasis on one dictionary definition of "special", we are in broad agreement with the approach of the tribunal and are in agreement with its conclusion.
(21) The Full Court of the Federal Court in Trimboli v Secretary, Department of Social Security (1989) 86 ALR 64; 17 ALD 201 considered the concept of "special circumstances" in similar provisions of the Social Security Act 1947 (Cth). Hill J said, at ALR 73; ALD 209:
“It is neither appropriate nor proper here to attempt a definition of what circumstances will be "special". The occasions when circumstances are special will vary with the facts of each particular case. Further, the decision as to when it will be "appropriate" to exercise the power ... involves the exercise of a discretion which is extremely broad and which is not to be confined, save in accordance with usual principles, namely, that it is to be exercised bona fide and for the purposes for which the discretion is conferred, such purposes being determined by reference to the policy and purpose of the Social Security Act: cf Giris Pty Ltd v FCT (1969) 119 CLR 365 at 384.”
In Secretary, Department of Social Security v Thompson (1995) 36 ALD 563 at 568, Einfeld J added:
“The width of the discretion under the section clearly extends to all the circumstances of the case, including circumstances not specifically related to a particular portion of the compensation payment. It is not therefore outside the section for the tribunal to consider the general factors such as the mental health and social conditioning of the individual in concluding that the preclusion period should be shortened.”
(22) The interesting and most difficult aspect of the use of the special circumstances discretion is the balancing required between the need to maintain conformity with the general principles underlying the compensation recovery provisions of the Act and the underlying objective of the Act being, as its title indicates, to provide "Social Security" to those in the community with a need for such assistance. Although the Act is mainly concerned with the provision of financial security, that is not the only relevant factor. This point was made clear by Einfeld J in Thompson when he referred to "general factors such as mental health and social conditioning of the individual" as being relevant to the exercise of the discretion.
(23) In Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 at 699 the tribunal suggested that the factors relevant to the exercise of the discretion in that matter could be broadly grouped under the headings financial hardship, legislative changes, incorrect legal advice, and ill health. That, of course, was not intended to be an exhaustive list but was simply a summary of the relevant matters which arose on the evidence in that matter. It serves as a useful starting point in this matter.”
38. In Secretary, Department of Family & Community Services v Chamberlain [2002] FCA 67, Kiefel J said at paras 19, 20, 21
19 The words "special circumstances" are not so imprecise as to require judicial gloss: Beadle v Director-General of Social Security (1985) 60 ALR 225, 228. In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, 545 I expressed the view that the words require something which distinguishes a person's case from others, something that sets it apart from the usual or ordinary case.
20 The question whether the strict application of the Act can result in unfairness or inappropriateness and therefore qualify as a "special circumstance" has been considered in a number of cases. In Beadle the statute treated the period of six months for the back-dating of a payment as generally sufficient, but the Director-General had power to fix a longer period if "special circumstances" existed. In that context it was held (at 228) that "special circumstances" included events which would make the application of the six month limit unfair or inappropriate. Examples given were of misleading advice or the negligence of a third party. The Full Court however cautioned against attempts to lay down any fixed rule.
39. Her Honour explained at paras 26 & 27.
26 These observations do not however conclude the matter, since s 1184 was inserted to ameliorate the harshness of the arbitrary provisions: Haidar v Department Social Security (1998) 157 ALR 359, 367, Hill J. Pursuant to it the decision-maker is entitled to treat the compensation payment, or part of it, as if it had not been made, which is to say in a manner different from that required by the formulae. This is undertaken only if the requisite opinions are formed, namely that "special circumstances" exist and it is considered appropriate to treat the compensation payment such that there will either be no period when double payment is assumed to have been made, or there will be a shorter period.
40. Kiefel J, in Chamberlain at paras 33 & 34 concluded that the application of the formula in the Act “cannot, by itself, amount to a special circumstance, one out of the ordinary”. Her Honour held that the fact that Mrs Chamberlain had received far less for economic loss than the 50% taken under the Act to represent economic loss, could not provide the necessary “special circumstances”. Her Honour explained that what the Tribunal should have done was look at the facts “personal to the applicant” and consider the question of special circumstances in the light of that information.
41. That is the approach adopted by the SSAT in this matter. But the only circumstance “personal to the applicant”, apart from the missing out on the benefit of the much larger “income cut-out amount” which would have applied if the claim had been settled after July 2000, was the loss of value of investments. That was treated by the SSAT as due to the introduction of the GST. That factor applied to all Australians. Or, if it were due to the world wide economic downturn, it would also be a general rather than a “special circumstance”.. Similarly, the harsh operation of the legislation which required Mr Downs’ preclusion period to be calculated by reference to a 1998 divisor, which does not reflect the increase in costs due to the GST, applies to all recipients of compensation affected payments, whose preclusion periods commenced prior to 1 July 2000 and extend beyond that date.
42. Senior Member Hallowes, did treat the harsh operation of the Act on a person whose claim was settled prior to 1 July 2000 and the introduction of the GST, as one of a number of special circumstances, so as to make it appropriate to treat the whole or part of a compensation payment as not having been made. Her decisions raising the issue were Re Stephens and Secretary, Department of Family & Community Services [2001] AATA 108; ReGiannekas and Secretary, Department of Family & Community Services [2001] AATA 236; ReAllan and Secretary, Department of Family & Community Services [2001] AATA 271.
43. In Stephens, Senior Member Hallowes explained the operation of the Act, as to the concept of an “income cut-out amount”, as follows, at paras 22-25 & 27.
“22. When the Tribunal asked Ms D'Cunha to apply the formula in subsection 17(1) to Mr Stephens's matter, to demonstrate how the sum of $403.20, applied by the ARO was arrived at, she was unable to do so. She explained that the figures which are used are stored in the department's computer. She provided the following table.
Compensation Divisor (CMDV)
Effective Date
Amount
Effective Date
Amount
1 JUL 2000
$543.63
1 JUL 1997
$403.20
20 MAR 2000
$428.40
20 MAR 1997
$402.20
20 SEP 1999
$422.90
27 FEB 1997
$571.90
1 JUL 1999
$417.80
6 FEB 1997
$572.10
20 MAR 1999
$416.80
14 NOV 1996
$569.20
20 SEP 1998
$412.70
24 OCT 1996
$566.70
20 MAR 1998
$410.70
16 AUG 1996
$564.60
(All figures prior to August 1996 have been omitted, and emphasis has been added to amounts relevant to this decision)
23. As the definition of "income cut-out amount" was only inserted into the Act under Schedule 12 of Act Nº 84 of 1996, which came into effect on 20 March 1997, the Tribunal was perplexed as to why the figures in the table went back to 19 May 1994 and why there was no consistency in the dates when the amounts changed. Ms D'Cunha explained that the income cut-out amount is normally recalculated every March and September following CPI reviews but she said that it may also be recalculated if one of the other variables in the formula changes. . . . Presumably, the figures in the table before 20 March 1997 represent average weekly earnings (originally average male weekly earnings). At no stage did the divisor figure drop below $529.00, in effect in May 1994, until 20 March 1997 when, following the above amendments to the Act, provisions with respect to new lump sum preclusion periods were inserted, affecting the length of preclusion period for those receiving a lump sum compensation payment after 20 March 1997. It is indeed unfortunate for Mr Stephens that his solicitors did not settle his compensation claim before 20 March 1997. At that date the divisor figure with respect to new lump sum preclusion periods became $402.20, being recalculated as $403.20 on 1 July 1997, the figure used to calculate Mr Stephens's preclusion period. There has been a gradual increase in the divisor figure, no doubt reflecting cost of living adjustments until 1 July 2000 when the divisor figure jumped to $552.63, to compensate those on low incomes for the introduction of the goods and services tax ("GST") and the effect of the introduction of that tax on their cost of living.
24. The Tribunal notes that Mr Stephens had the misfortune to have the second lowest divisor figure applied to his circumstances resulting in a lengthy period of preclusion before he would be entitled to be paid a compensation affected payment under the Act. A distinction is drawn between those receiving a lump sum compensation payment on or after 20 March 1997 and those who received their lump sum compensation payment before that date.
The distinction to which Senior Member Hallowes referred was the change of divisor from average weekly earnings to “income cut-out amount” which was a much lower figure.
25. It is apparent from the figures in the table provided by Ms D'Cunha that, if Mr Stephens's preclusion period was to be calculated now, it would lead to a considerable shortening of his preclusion period. The Tribunal further asked Ms D'Cunha to point to the provision in the Act which provides that the calculation must be done on a particular day. Ms D´Cunha later advised the Tribunal that the legislation does not specify the date at which the cut‑off amount is to be calculated.
. . .
27. There must be very little joy for customers who are severely injured, and who are paid lump sum compensation to find that they are precluded from compensation affected payments under the Act for a considerable period of time if their preclusion period is determined when income cut‑out amounts were low and at a time when the affect [sic] of the introduction of the GST on the cost of living was not compensated for.
44. Senior Member Hallowes added at paragraphs 31 & 32.
31. The Tribunal rejects the inference made by Ms D´Cunha in her statement of facts and contentions that the applicant should be provided for by other members of his family. The Tribunal is satisfied that Mr Stephens's circumstances are special for the following reasons. The prognosis with respect to his health is poor. The Tribunal accepts his evidence that, after being paid his lump sum compensation payment, he was persuaded by his wife to withdraw well above the amount of $400.00 per week from his bank account for living expenses. He used some of that money to try and save his marriage and to keep the family together. His wife has now left him and he does not have the benefit of the ameliorating provisions introduced into the Act with respect to couples when income cut-out amounts were introduced as divisors. The GST has been in effect since 1 July 2000, and has increased Mr Stephens's cost of living. This is reflected in the more than $110.00 increase in the compensation divisor as from 1 July 2000. The Tribunal was impressed by the evidence Mr Stephens gave with respect to the three young people in his care. . . . For the children's continued development, it is important that Mr Stephens does not become destitute before mid-2003. It appears that administrative error may have occurred when Mr Stephens's preclusion period was calculated using the divisor in effect in July 1997, rather than the divisor in effect when Mr Stephens claimed a compensation affected payment being used.
32. Mr Stephens has been precluded from being paid a compensation affected payment under the Act since the end of October 1997 and the Tribunal will remit the matter to the Secretary for reconsideration in accordance with directions that that part of Mr Stephens's compensation payment, which would end the preclusion period on 1 July 2001, when he has had to bear the brunt of any increase in his cost of living since the introduction of the GST for one year, as not having been made. The Tribunal presumes that other people whose preclusion periods were calculated before the introduction of the GST, have been similarly affected. That is a matter for the Secretary. The Tribunal accepts that it may be no easy matter for preclusion periods, which have already commenced to run, to be recalculated as unspent periods, would need to be redetermined. (emphasis added)
45. Senior Member Hallowes’ approach in Stephens was consistent with what was said by the Federal Court in Kirkbright v Secretary Department of Family & Community Services [2000] FCA 1876. Mansfield J, said at para 22, that it was not appropriate to exclude from consideration unfairness in the strict application of the legislation as possibly demonstrating that special circumstances exist in an applicant’s case. His Honour added at paras 28, 29 & 31:
28 In my judgment the Tribunal has erred in approaching the matter in the way in which it did. It has failed to recognise that s 1184 may provide a release valve for such unfairness or injustice in certain circumstances.
29. The consequence is that the Tribunal has deprived the applicant of the opportunity of the Tribunal considering whether, in the light of the injustice and unfairness which the Tribunal clearly found to exist by the strict application of the Act, it would determine in accordance with s 1184(1) of the Act that that gives rise to special circumstances so as to make some decision under that provision. That it may have done so is apparent from the concluding paragraph of its reasons in the following terms:
"Whilst the Tribunal sympathises with the unfair way in which the application of the legislation has impacted upon the applicant, it cannot find any other circumstances which would take this case outside the norm. In the absence of other circumstances which could be described as special, the Tribunal would be ruling contrary to the legislative intent to find this case to be exceptional on the basis of this unfairness alone. Whilst it is unjust, it is unfortunately not uncommon, and the Tribunal can only urge legislative reform to address the inequity in the application of preclusion periods where eligibility or benefit arises independently too (sic) entitlement to compensation."
……
31 Finally, I mention an argument which was advanced on behalf of the respondent through its counsel namely that the unfairness or injustice by the strict application of the Act cannot qualify as a special circumstance, unless in some way the unfairness or injustice itself arises out of some other special circumstance. In my view, that submission is not supported by authorities. It is a somewhat circuitous proposition. It fails to have regard to the role of s 1184 in the Act and to its plain words. It is but another way of putting the proposition that injustice or unfairness by the strict application of the Act can not of itself amount to a special circumstance for the purposes of s 1184. That is a proposition which, as I have noted, has been rejected by a number of decisions of the Court as far back as Smith and Beadle. It has also been rejected more recently by R D Nicholson J in Martinez v Secretary, Department of Family and Community Services [2000] FCA 1090.
46. That decision of Mansfield J does seem on its face as if it could provide some assistance to Mr Downs and support for the approach which the SSAT adopted in this matter. It is helpful to set out the facts of the matter. Mr Kertland received a damages award, fixed by a Judge, which included the sum of $75,000 awarded for loss of earnings capacity, following a motor vehicle accident. Applying the lump sum preclusion period provisions of the Act, the preclusion period ran from 27 July 1993 to 9 January 1997. During that period Mr Kertland had been paid $30,327 by way of sole parent pension. The Secretary decided that amount was recoverable, as money received during a preclusion period. Mr Kertland sought to have the compensation payment treated as not having been made so that he did not have to repay that money.
47. The unfairness of the strict application of the Act to Mr Kertland was that, if he had received the sum of $70,000, which the Judge awarded in respect of past loss of earnings, as income during the period 27 July 1993 to 9 January 1997, it was agreed that he would have still been entitled to sole parent pension. Although, if he had worked and earned $14,000 a year, he would have had an entitlement to sole parent pension, the strict application of the preclusion provisions on his lump sum compensation amount put him in a worse position than if he had earned the same money. A further special circumstance was that there was no causal relationship between the injury giving rise to the entitlement to damages and the sole parent pension, as Mr Kertland was in receipt of pension prior to the accident.
48. Mansfield J held that the Tribunal was in error in failing to consider whether in the light of the injustice and unfairness it found to exist by the strict application of the Act, it should determine that there were special circumstances such that it should exercise the discretion under s 1184K(1) of the Act. His Honour also pointed out that there could be some errors in the calculation of the preclusion period. Mansfield J concluded by saying that he would not indicate what conclusion the Tribunal should reach. He said all he was saying was that a factor the Tribunal had put out of its mind was in his view a relevant factor.
49. Mansfield J, in Kirkbright, pointed out that his view that the unfair or unjust operation of legislation could be a factor constituting a special circumstance, was supported by Merkel J in Kertland v Secretary, Department of Family & Community Services [1999] FCA 1596 and by R D Nicholson J in Martinez v Secretary Department of Family & Community Services [2000] FCA 1090.
50. In Kertland, Merkel J held that a circumstance which resulted in the statutory scheme operating unfairly, unjustly or harshly in respect of a particular applicant can constitute a “special circumstance”. In that matter, Ms Kertland had not been working before the relevant accident, but had been receiving Jobsearch and Newstart Allowance. After the accident she received a sickness allowance. Ms Kertland brought a claim for damage suffered by reason of the accident. The Transport Accident Act 1986 (Vic) (“the TAA”) precluded payment of damages to her in respect of loss of earnings or loss of earning capacity, as she had not been “an earner” as defined in s 3 of the TAA, at the time of the accident. Thus, her settlement money did not, in fact, contain any component representing loss of earnings or loss of capacity to earn. The Tribunal found special circumstances existed saying:
In this case Ms Kertland did not receive payments in respect of lost earnings or lost capacity to earn from two sources during the 18 months period between 24 September 1994 and 24 March 1996. She did not receive any periodic payment or lump sum compensation in respect of lost earnings or lost capacity to earn as the result of her claim under the TAA and received only SA/DSP payments from the respondent during this 18 months period. To deprive Ms Kertland of the SA/DSP which was paid to her by virtue of her rightful entitlement to these Social Security benefits during 24 September 1994 to 24 Mach 1996 on the basis that she is to be taken to have been already compensated for it by TAC, when in actual fact she was not, would be unjust.
51. Merkel J upheld the finding that special circumstances existed. He held they made it appropriate to treat the whole or part of the payment of damages as not having been made. He pointed out that because of the operation of the TAA, no part of the compensation paid related to pecuniary loss, and therefore there could be no “double payment of social security payments and compensation for pecuniary loss”. He pointed out that the absence of the double payment arose by reason of the operation of the TAA “in the context of the particular circumstances of the applicant” and that that constituted a special circumstance.
52. Martinez is a brief decision which adopts what was said by Merkel J in Kertland.
53. The issue of the relevance of a statutory provision which operates harshly on a particular applicant was again considered by the Federal Court in Secretary to the Department of Family and Community Services v Allan. Mr Allan had received lump sum compensation of $250,000 on 3 March 1998. The statutory preclusion period was calculated to run from 14 March 1998 to 20 February 2004. Mr Allan did not have a partner, and so there was no social security payment coming into his household. Mr Allan had a home, but he had used his whole lump sum compensation payment in buying the home and paying debts and expenses. He had no capacity for work. The only way Mr Allan could support himself was by selling his home. The Authorised Review Officer made that suggestion to him, and he did so.
54. At the time the matter came before the Tribunal, Mr Allan had sold his home and stood to receive $59,000 from that sale after paying out his bank. Further, Mr Allan had become addicted to drugs. The Tribunal found that his injuries, and the chronic pain he suffered, had played some part in his addiction. The Tribunal in Re Allan said at para 22:
22. It appears to the Tribunal that Mr Allan will continue to depend on Mr Weidner and medical practitioners to assist him with the control of his addiction, an addiction the Tribunal is satisfied was contributed to by his compensable injury (paragraph 12 above). His addiction is a factor which makes Mr Allan’s circumstances uncommon. Having lost his home, the decision under review provides that he must find food and shelter through his own resources, including the funds he has following the sale of his house and land, to survive until 20 February 2004. It is important that he be given some hope for the future. The compensation divisor used to determine Mr Allan’s preclusion period was $403.20, which came into effect on 1 July 1997. Three years later the compensation divisor became $543.63. That figure will, doubtless, rise between now and February 2004. One of the special circumstances the Tribunal took into account in Re Stephens, under subsection 1184(1) of the Act, was the effect of the GST on the cost of living after 1 July 2000.
55. The Tribunal treated so much of the compensation payment as not having been made, as would allow the preclusion period to finish on 1 July 2003. It arrived at that date by dividing the $59,000, remaining to Mr Allan out of the proceeds of the sale of his home, by a divisor which took into account the effect of the GST on the cost of living after 1 July 2000.
56. On appeal, in Secretary, Department of Family and Community Services v Allan Heerey J said at paras 18 and 20:
18 The impact of the GST on Mr Allan was but one of a number of circumstances which, in total, the Tribunal regarded as special. A factor which applies to all, or a substantial part of, the community need not necessarily be excluded in considering the range of circumstances which affect an individual and whether those circumstances in total can be said to be "special". Regard needs to be had to the purpose of s 1184(1) which is to ameliorate what would otherwise be harsh and unfair application of a rigid formula. With a very large compensation sum the preclusion period might be very long. The longer the period, the greater the potential for unforeseen circumstances to create hardship. For example it is conceivable that Australia might enter into a phase of hyper inflation of the order of twenty per cent or more. The fact that inflation affects everybody in the community would not, I think, rule it out as a relevant consideration. In the present case the Tribunal noted that the compensation divisors operative on 20 March 2000 and 1 July 2000 were $428.40 and $543.63 respectively. The Tribunal regarded this marked increase as being compensation for those on low incomes for the introduction of GST and its effect on their cost of living. Thus the Tribunal took a different view from that of the Secretary in the contentions on appeal already mentioned, namely that the GST "is a tax which affects the entire community, pensioners and wage earners alike". Whether the Tribunal's view is in fact correct as a matter of economic analysis is not to the point. It seems to me a rational view which the Tribunal was able to take, based as it was on the increase in the figures mentioned. (emphasis added)
. . .
20 It is apparent from pars 22 and 23 of the Tribunal's reasons quoted above that the starting point of its calculations was $59,000, the net proceeds of sale of Mr Allan's property and thus his remaining capital sum. This sum seems appropriate as it is that sum which he must rely on until benefits under the Act can resume. I did not understand counsel to attack the relevance of this sum.
57. It is apparent from Heerey J’s reasons, that he did not consider that the impact of the GST on Mr Allan, or of the unavailability to him of the increased “income cut-out amount”, which compensated for the GST, was itself sufficient to constitute special circumstances. His Honour made the point that it was “but one of a number of circumstances which, in total, the Tribunal regarded as special”.
58. A reference to the decisions on the issue of by Senior Member Hallowes, shows that to have also been her approach in other decisions. In Giannekas, Senior Member Hallowes said, at paras 14 and 15:
14. Having considered what was said in Kirbright, the Tribunal has decided that it would be unfair to Mrs Giannekas if it did not exercise its discretion under section 1184 of the Act and treat part of her compensation payment as not having been made, as in the Tribunal's opinion, her circumstances are special. Mrs Giannekas's evidence satisfies the Tribunal that she is in dire straits. Her telephone has been cut off and other utilities are about to be disconnected as she has no money with which to settle her accounts. She has tried to find employment, but, as she cannot afford to register her motor vehicle, the only opportunities for employment available to her are to leave her name at local shops as a potential employee. To a large extent she relies on the goodwill of a neighbour who has driven her to a couple of job interviews and who has provided her with some food. In Re Stephens the Tribunal was satisfied that the effect of the introduction of the GST in July 2000 had increased Mr Stephen's cost of living. It is difficult to make the same finding with respect to Mrs Giannekas as she is apparently not paying for anything at all. Even if her utilities are cut off however, debts which she already has outstanding must be paid. The Tribunal assumes that people, such as Mrs Giannekas, who are not in receipt of a payment under the Act have no entitlement to the services of providers who assist those in receipt of pensions or benefits find employment.
15. If Mrs Giannekas did have money with which to pay for her daily needs, the introduction of the GST would be impacting upon her and this is reflected in the considerable increase in the compensation divisor on 1 July 2000. The break-up of Mrs Giannekas's marriage has also impacted upon her and the Tribunal is satisfied that those factors make her circumstances special such that the preclusion period should end earlier than it otherwise would. The Tribunal will remit the matter to the Secretary for reconsideration in accordance with directions that her preclusion period now come to an end.
59. In contrast, in Re Coxon and Department of Family & Community Services [2001] AATA 294, Senior Member Hallowes did not exercise the s 1184 discretion, even though Mr Coxon, too, had been disadvantaged by the fact that his preclusion period had been calculated prior to the introduction of the GST so that the “income cut-out amount” used, was the lower divisor, which did not take the GST into account. In that matter the “income cut-out amount” used for the calculation was $422.90, which resulted in a preclusion period of 236 weeks.
60. Mr Coxon’s injuries were a crushing injury to the fingers of his right hand, industrial deafness and an inability to sleep due to stress. At the time Mr Coxon asked to have his preclusion period reviewed under s 1184 of the Act, he had bought a house with his settlement monies. He had a $15,000 mortgage and “no money left”.. However, by the time of the Tribunal hearing he was working 3 hours each evening in a cleaning position and his wife was in receipt of DSP as she had acute emphysema. She was paid $289.92 a fortnight.
61. The Tribunal did not find that there were special circumstances. It recognised the significance of the amended “income cut-out amounts” but concluded at para 12:
12. Considering Mr Coxon's circumstances as a whole however, the Tribunal is satisfied that it should not exercise its discretion in Mr Coxon's favour. He has managed to find some employment. His wife is in receipt of a social security payment. Although he has considerable debt, he is probably in a position to borrow further against his house, which may be increasing in value. The injury to his right hand has made life very difficult for him, but that circumstance does not take his case out of the range of circumstances for many people who suffer injury and who must live with ongoing disability under reduced financial circumstances. Although there may be an increase in the cost of living as a result of the introduction of the GST in July 2000, the impact on Mr Coxon of any increase is not such, at this time, that the Tribunal considers it should estimate what his preclusion period would be if the present compensation divisor was used to calculate a preclusion period taking into account the remaining amount of Mr Coxon's lump sum compensation. Mr Coxon's period of preclusion does not cease until June 2004. This is a long time. If his circumstances change and he finds himself unable to work, to raise further borrowings against his house or, if he ceases to be a member of a couple, he may consider again seeking the exercise of the discretion under section 1184.
62. This matter is similar to Coxon.. It seems unfair that because Mr Downs’ damages claim was settled during the period March 1997 to July 2000, the “income cut-out amount” used to calculate his preclusion period was significantly lower than the “income cut-out amounts” before or after that period. His preclusion period is longer than it would have been if the settlement date was before March 1997, or after 1 July 2000. That factor, as Heerey J said in Allan, is capable of being taken into account as “one of a number of circumstances which in total, . . .[may be] regarded as special”. It is not, of itself alone, sufficient to constitute “special circumstances” such as to make it appropriate to exercise the s 1184K(1) discretion.
63. Although Mr and Mrs Downs must be very careful with their expenditure, they are managing with the help of his parents, to live mainly on the income from their investments. On their projections they will have an unencumbered, new and comfortable family home at the end of the preclusion period. They will also still have perhaps $10,000-$15,000 of their investments remaining. If, as Mr Downs hopes, he manages to obtain teaching positions during the year, their position may be significantly better than their projections.
64. It is fortunate that Mr Downs seems to have made a relatively good recovery from his injuries so that he can still teach primary level mathematics and adult numeracy and literacy classes. He obtained some relief teaching and adult tuition in Tasmania. In the years ending 30 June 2000, 2001, 2002 his income from teaching and from his investments was $21,321, $14, 864, and $15,699 respectively. One of the reasons for the move to Victoria was the hope of increasing those earnings, in the belief that there would be more relief teaching available in Victoria. It seems reasonable to expect that during the coming school year, Mr Downs should be able to earn, from teaching and from his investments, approximately $15,000 as a conservative estimate.
65. Mr Downs did say that he may one day require knee surgery, and that it could cost $10 - $15,000 to have that surgery as a private patient. He has always said that the prospect of future surgery to the knee was a matter taken into account in the settlement of his claim for damages. I accept that evidence. But there is no medical evidence suggesting that knee surgery is appropriate at the present time. The medical circumstances are not such as to add any “special” quality to the circumstances of this case.
66. Mr Downs’ circumstances as a whole lack the special quality which would allow me to exercise the s 1184K(1) discretion. Although there is financial difficulty it is not such as to be characterised as “dire straits” or as “special” in the context of Social Security legislation. As Sheppard J said in Director General of Social Services v Hales (1982) 47 ALR 281 at p. 321:
“The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances.”
67. Mr Downs would, of course, be better off if a higher “income cut-out amount” had been used to calculate his preclusion period. That is what would have happened if he had the benefit of the increase in “income cut-out amount”, introduced from July 2000. But the consequences of the preclusion period as calculated, using a pre GST divisor, have not, as things stand today, turned out to be so harsh as to qualify as “special circumstances”, such as to make it appropriate to treat part of a compensation payment as not having been made. I do not consider that s 1184K(1) allows this Tribunal or the SSAT to vary a preclusion period simply because we think the scheme of the Act should have recognised the positions of those whose preclusion period commenced before 1 July 2000, by allowing them some adjustment to take account of the GST. What is required is something about the particular circumstances of the person which makes it appropriate to exercise the s 1184K(1) discretion.
68. The legislation has always operated so that once a preclusion period is calculated it is not varied or adjusted except under s 1184K(1) or its predecessor. That approach was adopted in circumstances where it was beneficial to potential recipients of social security payments. As Senior Member Hallowes explained in Stephens, when the concept was introduced into the Act the divisor was a generous one, namely average male weekly earnings. From March 1997 it was reduced to a much lower “income cut-out amount” based on income which would preclude receipt of social security payments. It was appropriate to allow those whose preclusion period had been calculated on the basis of a more generous divisor, to retain that benefit. Whether the same approach in the legislation is still appropriate is not so clear.
69. The decision of the SSAT will be set aside. In substitution I will decide that there are no special circumstances such that the Secretary should, under s 1184K(1) treat the whole or part of the compensation payment made to Mr Downs as not having been made.
I certify that the 69 preceding paragraphs are a true copy of the reasons for the decision herein of
Mrs Joan Dwyer, Senior MemberSigned: G.A. CARNEY
Personal Assistant
Date/s of Hearing 30 January 2003
Date of Decision 21 February 2003
Solicitor for the Applicant Self Represented
Departmental Advocate Mr B Sparkes
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