Doyle; Department of Family and Community Services - [2002] AATA 676

DECISION AND REASONS FOR DECISION [2002] AATA 676

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2001/298

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

DECISION

Tribunal Mr B J McCabe, Member

Date9 August 2002
PlaceBrisbane

Decision The Tribunal sets aside the decision under review.

(Sgd) B J McCabe
Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – compensation payment – application of statutory formula – compensation payment for personal injury received while in receipt of pension payments – statutory objectives in utilisation of formula – whether discretion to treat part or all of the compensation monies as not having been received should be exercised - whether special circumstances exist

Social Security Act 1991

Secretary, Department of Social Security v Banks (1990) 23 FCR 416
Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152
Re Eggleton and Secretary, Department of Social Security (1998) 50 ALD 1018
Re Stern and Secretary, Department of Family and Community Services [1999] AATA 54
Re Secretary, Department of Social Security and McFetrish (AAT 12920, 7 May 1998)
Re Kulakov and Secretary, Department of Social Security (AAT 7238, 14 August 1991)
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Director-General of Social Services v Hales (1982) 47 ALR 281
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Secretary, Department of Social Security v Ellis (1997) 24 AAR 535

REASONS FOR DECISION

9 August 2002 Mr B J McCabe, Member

Introduction

The Secretary has sought review of a decision by the Social Security Appeals Tribunal (the SSAT) to exercise the discretion contained in s 1184 of the Social Security Act 1991. The SSAT decided to treat part of a lump sum settlement paid to Mr Doyle as if it had not been paid. As a result, Mr Doyle was not required to pay the applicant $10,182.97 which he was otherwise required to pay pursuant to s 17. Mr Doyle says there is a range of special circumstances justifying the exercise of the discretion.
The Facts
Mr Doyle is now 48. He is a painter by trade, although he appears to have had a number of different jobs over the years. At the time of the accident he was unemployed and in receipt of Newstart allowance. He was in poor health following a beating that he received during the course of a home invasion in Sydney in 1993. He sustained head, neck and back injuries in the attack. He was diagnosed with a stress disorder in 1996. Mr Doyle was paid in $15,000 in compensation under the criminal injuries compensation scheme.
The respondent has not worked since before the home invasion. He has ceased work while he was raising his two children. He was a single parent. He moved to Queensland and settled down with his new partner, Ms Jasmin Nehow, sometime after late 1995.
Mr Doyle was injured in a motor vehicle accident on 13 November 1997. He commenced proceedings for compensation. He agreed to settle the matter upon payment of a lump sum in the amount of $60,000 inclusive of statutory refunds plus costs. Ms Nehow was also injured and apparently received a settlement.
The respondent was represented in the damages claim in respect of the car accident by a firm of solicitors in Mackay. He says the lawyers told him early on he could expect to receive a payout of around $140,000 should the matter go to court. In the event, he settled the action for $60,000. The deed of settlement provided the settlement figure was "inclusive of all statutory refunds plus standard costs and outlays". The documentation accompanying the settlement does not apportion the damages between the various heads of damage.
The respondent recalled receiving letters from Centrelink saying he might be liable to repay money as a result of the settlement. But he said he was not concerned because his lawyers said he would not be required to pay anything because he had no earning capacity – in other words, he was incapable of receiving any compensation in respect of economic loss because his health prevented him from earning anything. Mr Doyle says he spoke with staff at Centrelink prior to the settlement on several occasions and they confirmed the applicant was unlikely to seek to recover anything because of his pre-existing incapacity to earn an income. Mr Doyle says he would never have accepted the settlement if he thought his entitlements were at risk. He conceded during cross-examination that his memories of speaking with Centrelink were unclear: he did not recall dates or the identity of the officers with whom he spoke. He says he has a poor memory as a result of the head injuries sustained in the home invasion.
It appears that Mr Doyle's solicitors retained at least $18,000 of the settlement monies in respect of costs. The solicitors may have retained more, but the respondent is unsure as he was not provided with a breakdown of how the monies were apportioned. He is unhappy with the solicitors' conduct of the case and the costs they appear to have recovered, and he has written to the Queensland Law Society to complain. He ultimately received approximately $30,000 of the settlement money.
Mr Doyle had no possessions when he arrived in Queensland and depended on his and Ms Nehow's families for support. Mr Doyle has one son from a previous relationship who is now 16 years old. He also referred to an older daughter who was living with the family. She has moved to Sydney seeking treatment for a drug addiction – Mr Doyle said there were no appropriate facilities in central Queensland. I understand he and his partner, Ms Jasmin Nehow, have three children. The third child was born recently.
Although Mr Doyle was receiving Newstart allowance at the time of the accident, he was given a dispensation from the requirement that he actively seek employment because of the state of his health following the home invasion. The doctors who examined Mr Doyle prior to the accident agreed that he would be unable to work full time in the near future, but it was unclear from the evidence of the treating doctors included in the T-documents whether his incapacity was likely to be permanent, as opposed to indefinite.
Mr Doyle and Ms Nehow currently receive in excess of $28,000 in income support. The family lives in Sarina in rented accommodation. They borrowed a sum of money from Mr Doyle's father. I understand from the oral evidence that Mr Doyle (senior) is still owed around $10,000. The family also borrowed money from Ms Nehow's grandfather, of which around $3,000 remains owing. Mr Doyle and Ms Nehow are repaying her grandfather's widow at the rate of $100 per fortnight, although Mr Doyle said in evidence they would occasionally miss a payment when other bills (such as electricity) took precedence. Mr Doyle purchased a motor vehicle out of the settlement money. It was a VS Commodore worth $18,000. He concedes it was an error in judgment to purchase such an expensive vehicle, and he has subsequently traded it in on a cheaper model. He received $2,500 in cash in the transaction. In the absence of public transport, it seems reasonable for him to purchase a car.
The respondent says the family is forced to approach local charities for assistance when larger bills come in. He said this occurred once every couple of months.
Mr Doyle does not drink. He is a heavy smoker. He says his smoking is exacerbated by his condition: he has difficulty sleeping because of his various injuries and he often reaches for a cigarette during wakeful periods. He currently takes morphine in tablet form for the pain, and he must occasionally travel to Mackay for treatment and pain relief. His medication costs around $50 per fortnight, and he expends around $40 per fortnight in travelling expenses connected with visits to the doctor.
The Law
Section 17 of the Social Security Act provides for the imposition of a lump sum preclusion period. When a claimant receives a lump sum settlement that includes a component of damages in respect of economic loss, he or she becomes ineligible to receive a range of compensation-affected payments for a period of time that is calculated in accordance with s 1165. Where a person was in receipt of compensation affected-payments during the period prior to the settlement, s 1166 may impose an obligation to repay an amount to the applicant.
The legislation is designed to prevent a claimant from "double-dipping". The taxpayer should not be expected to provide income support to persons who have already been compensated for their loss of income, or who are able to recover that loss from someone else.
A settlement figure will ordinarily be apportioned between different heads of damage, including economic loss. Section 17 deems (it does not merely assume) such a settlement to include an economic loss component of 50%. It is this figure that is used for the purposes of the calculation under s 1165. The Parliament introduced the rule for reasons of administrative convenience. The applicant is no longer required to "go behind" settlements to satisfy himself as to how much was in fact allocated to economic loss: see Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 421 per von Doussa J. The rule also prevents the parties from manipulating settlement figures at taxpayers' expense in the course of the negotiating process.
The imposition of an arbitrary rule will occasionally produce unfortunate consequences: see Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 424. The Parliament introduced s 1184 (now s 1184K) to provide relief from the operation of the rule where necessary to avoid unfairness. The section gives the decision-maker the discretion to treat part of the compensation payment as if it had not been paid. Section 1184 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 is appropriate to do so in the special circumstances of the case."

The effect of exercising the discretion in most cases will be to shorten the length of the preclusion period, although it may also relieve an individual of the obligation to repay money to the applicant.
The discretion may only be exercised where the decision-maker is satisfied that special circumstances exist. The cases make it clear a person seeking relief under s 1184 must be able to demonstrate that his or her case is unusual, or out of the ordinary. Something must set it apart from other cases: see Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J.
Going Behind the Settlement
One of the key issues in this case was the disparity between the amount deemed to be in respect of economic loss under the legislation, and the amount that was in fact awarded. As a general proposition, a decision-maker is not permitted to go behind a settlement to examine whether the allocation of damages between different heads of damages is realistic. The court has made clear in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67, that the mere fact there is a disparity between the "true" position and the deemed position will not constitute special circumstances of itself for the purposes of s 1184. There are some exceptions to this rule: see Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 and Secretary, Department of Social Security v Smith (1991) 30 FCR 56. But Kiefel J explained in Chamberlain that the exceptions were rare. Her Honour said (at para 32):
"In those cases it could be seen, objectively, there could not have been a double payment. In such a circumstance it might be concluded that the statutory assumption operated unjustly. This would not seem to me a situation which would often arise and sets these cases apart from the usual."

This approach has been followed by the Tribunal in cases likes Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152 and Re Eggleton and Secretary, Department of Social Security (1998) 50 ALD 1018. The respondent accepts it is inappropriate for the Tribunal to go behind the settlement. But Mr Moore for the respondent argued the settlement does not on its face appear to provide for any damages for economic loss. The applicant produced the insurer's internal documents to prove the settlement does incorporate an amount in respect of economic loss, but the respondent says the rule against going behind the settlement precludes consideration of that material. It is the wording of the settlement deed that counts, the respondent argues.
I disagree. The wording of s 17(2) requires the decision-maker to determine whether the settlement includes a payment in respect of lost earnings, or lost capacity to earn. The terms of the settlement document will obviously provide the clearest evidence of the parties' intentions. But the form of the document agreed as between the parties does not end the inquiry. The decision-maker must divine the true nature of the settlement, and determine whether an economic loss component has in fact been included - whatever the amount.
The Tribunal was prepared to examine the extrinsic documentation in Re Stern and Secretary, Department of Family and Community Services [1999] AATA 54. In that case, the extrinsic documentation showed the applicant was in receipt of a pension and the parties proceeded on the assumption there was no economic loss. But in this case the respondent has made a small claim in respect of economic loss in his statement of claim filed at the commencement of the action. The insurance company's internal documents (including a claims settlement sheet) showed that a small amount was allocated towards economic loss. This case has more in common with the decision in Re Secretary, Department of Social Security and McFetrish (AAT 12920, 7 May 1998) where the Tribunal concluded from the statement of claim that there was an economic loss component in the settlement.
Do Special Circumstances Exist in this Case?
Having concluded the deeming provision applies to the settlement, it becomes necessary to consider whether the respondent's case is affected by special circumstances.
The respondent is certainly in poor health. He was in poor health before the accident, of course, as a result of injuries sustained in the home invasion. The Tribunal explained in Re Kulakov and Secretary, Department of Social Security (AAT 7238, 14 August 1991) that ill health would not of itself amount to special circumstances. There was nothing in the material presented to the Tribunal suggesting that the challenges posed by his health were unusual or out of the ordinary, so as to justify a finding of special circumstances.
There was also a suggestion the respondent was poorly served by his legal advisers. The Tribunal has generally taken the view that complaints about the quality of advice and representation should not be regarded as special circumstances. As Deputy President Todd explained in Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464:
"Overall, this factor is not persuasive or determinative and the best view is that the matter is one, if at all, as between solicitor and client."

Mr Doyle has complained to the Law Society about the conduct of his case. That is the appropriate course.
The respondent also suggested that Centrelink officers misled him about his potential liability to pay the applicant following the settlement. But Mr Doyle conceded he was aware that he might have been required to make a payment, and he apparently received letters from Centrelink to that effect. Even if Centrelink officers expressed the oral opinion that it was unlikely he would be required to pay money, he should have sought more formal advice. In any event, the respondent's recollections of the discussions appeared to me to be unclear. I am not satisfied that Centrelink has done anything that would justify a finding of special circumstances.
The financial hardship being suffered by Mr Doyle and his family raises a more difficult question. Of course, almost every recipient of income support will be suffering from financial hardship: see Director-General of Social Services v Hales (1982) 47 ALR 281 at 321 per Sheppard J. In order to distinguish his case from that if other recipients of benefits, Mr Doyle must demonstrate that he is labouring under an unusually heavy or extreme burden: see, for example, Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 at 699-700; see also Secretary, Department of Social Security v Ellis (1997) 24 AAR 535 at 539-540 per Carr J.
There is no doubt the family is under financial pressure. But they are receiving in excess of $28,000 in income support from the Commonwealth. Their rent in Sarina appears to be relatively low, although there are some costs attached to living in the country, such as the costs associated with travel. In his evidence-in-chief, Mr Doyle referred to the family's occasional resort to local charities for assistance. That is a worry, especially given that Mr Doyle and his partner have recently had another child. The respondent and his partner have also been generously supported by their respective families.
Mr Doyle appears to have behaved responsibly with respect to the settlement monies. He admits that he made an unwise purchase in the motor car, but he has already moved to remedy the situation by trading down to a cheaper vehicle.
While I acknowledge that the respondent faces real financial pressure, I am unable to identify features of the case that set it apart from other cases.
There are no special circumstances that justify my exercise of the discretion under s 1184. In those circumstances, the decision of the SSAT is set aside.
I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member
Signed:         Sarah Oliver
  Associate
Date of Hearing  16 May 2002
Date of Decision  9 August 2002
Solicitor for the Applicant         Mr R McQuinlan, Departmental Advocate
Solicitor for the Respondent    Mr Moore, Lawrence Hewitt Solicitor