Drage and Secretary, Department of Family and Community Services
[2003] AATA 1233
•5 November 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 1233
ADMINISTRATIVE APPEALS TRIBUNAL )
) No A2003/261
GENERAL ADMINISTRATIVE DIVISION ) Re Raymond Drage Applicant
And
Secretary, Department of Family & Community Services
Respondent
DECISION
Tribunal Mr G A Mowbray Date5 November 2003
PlaceCanberra
Decision For reasons given orally the Tribunal affirms the decision of Centrelink as affirmed by the Social Security Appeals Tribunal on 11 June 2003 to impose a compensation preclusion period from 1 October 2002 to 19 December 2005.
..................................…………..
G A Mowbray
Member
CATCHWORDS
SOCIAL SECURITY – Preclusion period - whether jurisdiction - whether applicant made claim for compensation affected payment - whether special circumstances apply - whether there was misleading legal advice – ill health – financial hardship – decision under review affirmed.
Administrative Appeals Tribunal Act 1975 ss 25(1)(a), 25(4)
Social Security (Administration) Act 1999 ss 179(1)(a), 179(2)(a)
Social Security Act 1991 ss 17(2), 17(3), 1169, 1170, 1184K
Re Lynch and Department of Family and Community Service [2002] AATA 80
Re Beadle and Director-General Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (NSW) (1978) 1 ALD 167
Secretary, Department of Social Security v Alvaro (1994) 34 ALD 72
Kelly and Watson (1985) 8 ALD 385; (1985) 64 ALR 113
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 691
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Re Secretary, Department of Social Security and Galea (1993) 35 ALD 749
Re Venables and Secretary, Department of Social Security (1988) 15 ALD 180
Re Cook and Secretary, Department of Social Security (1992) 28 ALD 602
Director-General of Social Services v Hales (1983) 47 ALR 281
Re Secretary, Department of Social Services and Winterbotham [1990] AAT 6499
REASONS FOR DECISION
4 December 2003 Mr G A Mowbray Background
1. On 13 November 1998 the applicant, Mr Raymond Drage, injured his back in a workplace accident while operating a front end loader. He was again injured in similar circumstances on 22 April 2000. From December 2000 until 30 September 2002 Mr Drage was paid weekly compensation payments. On 5 June 2001 he was advised that his disability support pension (“DSP”) had been cancelled as his income was above the allowable limit.
2. On 19 September 2002 Mr Drage's claim for workers compensation was settled for a lump sum of $200,000. Mr Drage accepted in evidence that this sum included an element for lost capacity to earn. On 3 October 2002 Centrelink advised Mr Drage that it had imposed a compensation preclusion period from 1 October 2002 to 19 December 2005.
3. Mr Drage applied to the Tribunal for review of a decision of the Social Security Appeals Tribunal (“SSAT”) made on 11 June 2003 which affirmed the original decision made by Centrelink on 3 October 2002 to impose this compensation preclusion period.
4. The application was heard in Canberra on 31 October 2003. Mr Drage was accompanied by a friend and appeared without representation. Ms Kayren Paul, a Centrelink advocate, appeared on behalf of the respondent. Oral reasons for the decision were given on 5 November 2003 affirming the decision under review. On 5 November 2003 Mr Drage requested written reasons for the decision pursuant to 43(2A) of the Administrative Appeals Tribunal Act 1975 (“AAT Act”). Accordingly these written reasons have been prepared based on the oral reasons with appropriate minor editing.
Issues
5. The issues before the Tribunal are
(1) has the Tribunal jurisdiction to review this matter
(2) if so
(a) would a lump sum preclusion period apply to Mr Drage
(b) if so, what is the correct period, and
(c) are there any special circumstances such that all of part of the
compensation payment should be treated as not having been made.6. For the reasons given below I have decided
(1) the Tribunal has jurisdiction to review the matter
(2) (a) a lump sum preclusion period does apply
(b) the period is from 1 October 2002 to 19 December 2005, and(c)there are no special circumstances such that all or part of the compensation payment should be treated as not having been made.
Consideration of Issues and Findings
Does the Tribunal have jurisdiction
7. As I indicated at the hearing, I have decided that the Tribunal does
have jurisdiction in this matter.8. On 28 October 2002 Centrelink forwarded submissions to the Tribunal asserting that the Tribunal had "no jurisdiction to review the decision". Centrelink submitted
“Upon reviewing the file, the respondent has identified that the applicant has not lodged a claim for a compensation affected payment in the period 1 October 2002 to present. The applicant was last paid a Compensation affected payment on 5 June 2001 and the respondent has no record of any claim for a Compensation affected payment being lodged since that date.”
…
“The respondent therefore submits that as the applicant is not a person whose interests in relation to a payment are affected by the decision at the time of review by the SSAT, that the AAT has no jurisdiction to review the decision as there is no effective decision before it.”
9. Reference was made in those submissions to the decision of Senior Member Handley in Re Lynch v Department of Family and Community Services [2002] AATA 80.
10. In oral submissions Ms Paul from Centrelink repeatedly referred to the failure of Centrelink to make any decision refusing a welfare payment such as a DSP. However, she acknowledged that there had been a decision to impose a lump sum preclusion period and eventually conceded that the Tribunal had jurisdiction to review the decision of the SSAT affirming that decision of Centrelink.
11. But of course the Tribunal has to be satisfied itself that it has jurisdiction. It is common ground that on 3 October 2002 Centrelink decided to impose a preclusion period from 1 October 2002 to 19 December 2005. Centrelink advised Mr Drage of that decision by letter on 3 October 2002. That decision was upheld on reconsideration on two occasions, 28 January 2003 and 13 February 2003. It was further affirmed by an Authorised Review Officer (ARO) on 11 March 2003 and on 11 June 2003 the SSAT affirmed the decision, that is, to impose a lump sum preclusion period.
12. This Tribunal is given jurisdiction in matters such as this pursuant to section 25 of the AAT Act, relevantly subsections (1)(a) and (4)
“(1) An enactment may provide that applications may be made to the Tribunal:
(a) for review of decisions made in the exercise of powers conferred by that
enactment;
…
(4)The Tribunal has power to review any decision in respect of which application is made to it under any enactment.”
13. Section 179 of the Social Security (Administration) Act 1999 provides as follows
“Review of decisions by AAT
(1) If:
(a) a decision has been reviewed by the SSAT; and
(b) the decision has been affirmed, varied or set aside by the SSAT;
application may be made to the AAT for review of the decision of the SSAT.
(2)For the purposes of subsection (1), the decision made by the SSAT is taken to be:
(a) where the SSAT affirms a decision - that decision as affirmed;”
14. The Tribunal has the jurisdiction to review “ a decision made in fact”, whether or not that decision might have been invalid or tainted with some legal defect (Re Brian Lawlor Automotive Pty Ltd and Collector of Customs (NSW) (1978) 1 ALD 167; Secretary, Department of Social Security v Alvaro (1994) 34 ALD 72; Kelly v Watson (1985) 8 ALD 385). In any event I am not persuaded that the SSAT decision is so tainted as suggested by Centrelink relying on the decision in Lynch.
15. For these reasons I am satisfied that I have jurisdiction to review the decision of Centrelink to impose the lump sum preclusion period as affirmed by the SSAT.
Would a lump sum preclusion period apply to Mr Drage
16. For the reasons I now give my answer to this is yes.
17. It is accepted by both parties that on 19 September 2002 Mr Drage settled his workers compensation claim for $200,000. Further, Mr Drage agreed in evidence that this $200,000 included a component for lost earnings or lost capacity to earn.
18. Mr Drage therefore received "compensation", as it is defined in section 17(2) of the Social Security Act 1991 (“the Act”). The compensation part of that $200,000 lump sum compensation payment is half that sum, that is $100,000 (section 17(3)). This sum is taken to relate to lost earnings or capacity to earn. It is therefore clear that were Mr Drage to apply for a compensation affected payment such as a DSP he would be subject to a lump sum preclusion period, unless the whole of the $100,000 compensation payment was disregarded under section 1184K (sections 1169 and 1170). This will be considered later.
What is the correct period
19. Centrelink has calculated this period correctly as 1 October 2002 to 19 December 2005.
20. Section 1170(4) provides the formula for calculating the number of weeks in the lump sum preclusion period
Compensation part of lump sum
Income cut-out amount
21. The compensation part of the lump sum is $100,000. Centrelink asserts that the income cut-out amount is $592.50. This was not disputed by Mr Drage.
22. The preclusion period is therefore 168 weeks, after rounding down the figure, and that is from 1 October 2002 to 19 December 2005 (section 1170(1), (4)and(5)). This period has been correctly calculated by Centrelink.
Are there any special circumstances
23. For the reasons that follow my answer to this question is no.
24. Section 1184K of the Act permits the whole or part of a compensation payment to be treated as not having been made or not liable to be made if it is appropriate in the special circumstances of the case. There is no definition of special circumstances provided in the legislation and although numerous cases have given the phrase consideration, the case law has not arrived at a precise or exhaustive definition. In one leading case, Re Beadle and the Director-General of Social Security (1984) 6 ALD 3, the Tribunal stated
“An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying objective looks to circumstances that are unusual, uncommon or exceptional. 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 the circumstances in one case are markedly different from the usual run of cases. That is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”
25. This passage was approved by the Full Federal Court in a further appeal in Beadle's case ((1985) 7 ALD 670).
26. In Re Krzywak and Secretary, Department of Social Security (1988)
15 ALD 691 at 699, the Tribunal said“Another way of looking at the matter is to consider whether they are circumstances which make it unjust, unreasonable, or otherwise inappropriate for Ms Krzywak to be without [a] pension… A number of factors appear relevant to the exercise of the discretion in this matter. They may be broadly grouped under the following headings, financial hardship, legislative changes, incorrect legal advice, ill health. Each requires further consideration.”
27. The Tribunal in Beadle also held that in examining particular circumstances, it was important not to lose sight of the need to look at the whole of a person’s circumstances
“….it is not helpful to focus too closely on each particular circumstance of the applicant and ask whether it is special… The question is whether, when the relevant circumstances of the applicant are looked at in their entirety, they may be fairly described as unusual, uncommon or exceptional…”
28. In determining what are special circumstances the Federal Court in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 observed that it would require something that distinguished the case and took it out of the "usual or ordinary case". The Court noted that if something "unfair, unintended or unjust had occurred”, this would be something that would ordinarily distinguish it as such a case.
29. Mr Drage's oral evidence to the Tribunal broadly covered three areas of possible special circumstances: incorrect legal advice, ill health and financial hardship. I will consider each of these in turn although, as noted above, Mr Drage's circumstances need to be assessed as a whole (Beadle). Furthermore, issues of ill-health and incorrect legal advice are relevant to Mr Drage's financial hardship.
Incorrect legal advice
30. Mr Drage asserts that he received incorrect legal advice on two matters
· his compensation lawyer, Mr Tim Walter, from Stacks, did not advise him until it was too late on the implications of the compensation payment on future Centrelink benefits
· Ms Mary Burgess, of Legal Aid, advised him to purchase his house.
31. Mr Drage gave oral evidence that he had decided to buy a house in about June or July 2002. He had found the property at 33 Merriman Drive, Yass, that he eventually purchased a few weeks before he paid the deposit. He paid a deposit on the property around 26 October 2002.
32. Initially Mr Drage was uncertain whether Mr Walter had advised him before or after he bought the house that he would not be entitled to Centrelink benefits for some time. He did not tell him at the time he settled his compensation claim but under cross-examination he conceded that he may have received written advice from Mr Walter by mid October. A Centrelink file note records
“ Annotate by SRJ641 on 12 Feb 2003.
I rang his Sol (Tim from Stacks) to inquire about both the estimate and the final charge letters - Tim stated (even though he realised that what he was about to say would not be in his client's favour) that, following the settlement letter, he wrote to the client advising him that his settlement monies were expected to last him until Dec 2005 - he also enclosed a copy of the letter that we sent to him. Tim did say that his client was uneducated but was of the view that he had a partner who would/should have read him the letters. I rang the client to discuss the review - he did not deny having received the letters…” (Exhibit T3, page 13)
33. Mr Walter did not give evidence before the Tribunal.
34. I note also that Mr Drage agreed that he had received a letter from Centrelink dated 3 October 2002 advising him of the period during which he would not be entitled to Centrelink payments. He had received this letter prior to the letter from Mr Walter.
35. Although I cannot be certain, I think it more probable than not that Mr Walter did advise Mr Drage before the deposit was paid on the house on about 26 October 2002 that his compensation payments must last him until December 2005 as he would be ineligible for Centrelink payments until then.
36. Mr Drage also gave evidence that Mary Burgess, the Legal Aid solicitor who assisted him with his custody matter, advised him to buy a house. Mr Drage was seeking custody of his two young children, John, now seven years, and Cheyenne, now five years.. Ms Burgess had said he could still rent a home. She did not say he should buy one, but he would have a better chance of obtaining custody if he owned his home. Mr Drage said he was not aware "at that time" that the main reason for him being granted custody was physical abuse of the children by his ex-wife. Ms Burgess had given evidence to this effect before the SSAT.
37. I accept from Mr Drage's evidence that he was influenced by Ms Burgess' advice to him. Generally incorrect or misleading advice of itself may not constitute special circumstances (Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716). But the significance of inadequate legal advice is the consequent lack of knowledge of a preclusion period. For example, in Re Secretary, Department of Social Security and Galea (1993) 35 ALD 749, the lack of advice from the compensation solicitors was important in relation to the state of mind of the applicant when the house was purchased. Thus, it was not the fact that the lawyers had failed to advise the applicant, but the fact that he had absence of knowledge of the preclusion period, whatever caused that lack of knowledge. (Re Venables and Secretary, Department of Social Security (1988) 15 ALD 180).
38. In this matter, Mr Drage was well aware at the time that he paid a deposit on his house that he was subject to a preclusion period. He knew that he would not be entitled to Centrelink payments until December 2005. Furthermore, on his own evidence he was aware that he had a choice whether to rent or buy, difficult though that choice was. There is nothing in these circumstances by themselves which is so unusual, uncommon or exceptional to constitute special circumstances.
Ill health
39. Mr Drage said that some months ago his seven year old son John started suffering what might be epileptic fits. He was undergoing tests to see what was the cause. Mr Drage currently owes Dr Roger Tuck, a consultant neurologist, $110 and cannot afford further tests as the medical practitioners do not bulk bill. Reimbursement from Medicare would be less than half the cost.
40. Mr Drage himself is in pain every day as a result of his work accident. He cannot work - something confirmed by Dr Cowan. He requires morphine once or twice per month, at $105 each time. Depending on the weather, he may need it more often than this. He cannot afford this medication.
41. Ill health resulting in increased medical costs and incapacity to engage in paid employment is relevant to finding special circumstances, but it must be examined within the total circumstances of the person. Having regard to Mr Drage's circumstances, I am not satisfied that either of these medical concerns are so unusual, uncommon or exceptional to amount to special circumstances. At this stage, John is still subject to medical tests. The requirement for such testing is not out of the ordinary. Mr Drage has not quantified the possible costs associated with these tests. However, if this were to become a very significant and exceptional expense in the future, it may be a matter that could be reconsidered at that time.
42. Mr Drage is also concerned that he is unable to meet his own medical expenses. He instanced morphine for his work-caused injury. Although Mr Drage said he was not sure whether his lump sum compensation covered future medical expenses arising from the work accidents, it would be usual for this to be the case.
Financial hardship
43. Mr Drage's main concerns for seeking a shorter preclusion period were financial. As noted previously, on 19 September 2002, he received a lump sum of $200,000 in settlement of his compensation claim. He agreed that this sum had been disposed of as follows: house $150,130.79; HIC repayment $1,108; repayment of loans $13,400; legal fees $26,161; Telstra $2,494; car $7,315.02. I note this totals slightly more than $200,000 - $200,608.81.
44. Mr Drage paid the deposit on his house on about 26 October 2002. His evidence on his current financial circumstances was somewhat vague and uncertain. His income, he said, was from family assistance, at $420 per fortnight. This included an amount for Bobbie-Jo Hall. He also received a child support payment of $10 per fortnight. His expenditure per fortnight included electricity at $20, car fuel $30, phone $60, rates $40-$50, food $100-$120, Crisco, a food hamper for Christmas $45. This totalled $325. He referred to the remainder being spent on clothes, other food bills and emergencies. He referred also to his morphine medication $105 a time.. Mr Drage's assets were, he said, his house $195,000, contents $4000 and car $4000-5000. His current liabilities were medical expenses $200, electricity $140 and phone $130.
45. When it was pointed out to Mr Drage that total expenditure was somewhat less than the income, Mr Drage, although unable to detail the further expenditure specifically, said that he receives his family assistance on a Friday and it is all spent by later that day. The balance, he said, would go on food, clothes and emergencies. Food expenditure varies. It was definitely more than $120 a fortnight and may be up to $300 a fortnight. He received some assistance from Bobbie-Jo Hall, a 15 year old stepdaughter from another relationship, who lives with him as part of his family. Bobbie-Jo earns $120-$130 per week at McDonald's. Mr Drage does not charge Bobbie-Jo board but she helps out with the food, as does Mr Drage's mother from time to time. Mr Drage says he could not afford such things as sporting or weekend activities for his children.
46. He said that although his house was unencumbered, Westpac had indicated it would not provide him with a mortgage as he could not repay it. Mr Drage stated he would rather stay in his own home than rent, which would cost about $220 per week. He could not function without a car, as his children must be brought to their mother in Canberra each fortnight for access.
47. In Re Cook and Secretary, Department of Social Security (1992) 28 ALD 602 at 603 Senior Member Muller said
“(12) In deciding whether or not to treat financial hardship as a matter of special circumstance such that it would be appropriate to treat the whole or part of the payment as not having been made, the tribunal is assisted by the discussions and the decisions contained in numerous cases which have been heard by the tribunal and the Federal Court. The following principles (among others) have emerged:
(a) It is the plain intention of the Act that those persons who receive compensation payments in respect of lost earnings or lost earning capacity should not receive social security payments for the period during which the compensation payments are received.
(b) If the compensation is in the form of a lump sum, a pension, benefit or allowance ceases to be payable for a period during which it would be expected the person would be able to support themselves from the compensation payment. The purpose of the relevant provisions is to guard against applicants obtaining the benefit both of payments made under the Act and of payments provided by way of compensation for the same period.
(c) In the exercise of the discretion which the Act confers, the decision-maker must have regard to whether, by exercising the discretion in the particular case, he or she will be achieving or frustrating ends or objects which conform with the scope and purpose of the Social Security Act.
(d) Whilst keeping the dominant principle of the Act in mind, the decision-maker must nevertheless be prepared to respond to the special circumstances of any particular case, by reason of which strict enforcement of the provisions of the Act would be unjust, unreasonable, or otherwise inappropriate.
(e) Hardship is a relevant consideration in the exercise of the discretion.
(f) The circumstances out of which any alleged hardship is said to have arisen should be taken into consideration.
(g) In order for financial hardship to be a special circumstance under the Act it is necessary for it to be unusual or severe hardship in the context of the Act.”
48. In order for financial hardship to be a special circumstance it must be an unusual or uncommon hardship. Justice Sheppard in Director-General of Social Services v Hales (1983) 47 ALR 281 at 321 stated that financial hardship is nothing unusual or uncommon for recipients of payments under the Act. His Honour said
“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.”
49. Therefore, to constitute special circumstances, those circumstances must be beyond straitened circumstances and truly exceptional. I note that there have been cases that have found that special circumstances have existed where the person has used part or all of their lump sum payment to purchase a house. In Galea for instance, the applicant was a drug addict and could not handle large sums of money very well and so bought a house so the money would not be a temptation.
50. In this case, however, there's no doubt that Mr Drage is suffering financial hardship. There's no doubt his circumstances are truly straitened. He asserts, and I accept, although he has not proven, that his expenditure exceeds his income. However, he purchased this home with most of the proceeds of his lump sum compensation payment. He made the decision after he had been advised by Centrelink, and most likely his compensation lawyer, that he would not be entitled to Centrelink payments until December 2005. In my view, Mr Drage knew the effect of this advice relating to the preclusion period. The following passage from Re Secretary, Department of Social Services and Winterbotham [1990] AAT 6499 is apposite
“24. The respondent contended that he was perfectly entitled to have expended his settlement moneys in providing his family with a home and no-one, least of all this Tribunal, would dispute that. However, that is not the issue - it is the fact that the respondent, having disposed of his settlement moneys, now seeks support from the community. The emotional attachment of the respondent and his wife to the family home was obvious and their reluctance even to think of selling it understandable. However, the Tribunal must take a home into account in deciding whether the respondent is in a position of exceptional financial hardship. While the respondent has assets of such value he can never be so regarded.”
51. I accept that Mr Drage entered into the purchase of the home in good faith and for the best of reasons, seeing that as the best means to obtain custody for his children and to house and care for them. But, as I have said earlier, he had other options. At the time of purchase of the home he was renting a home in Yass. Nevertheless, aware of the implications of the preclusion period, he chose to purchase. As to Mr Drage's stated position that he would rather stay put than rent, I refer again to Winterbotham
“25…the Tribunal would compare his position with that of another recipient of a compensation award who chooses to expend his compensation moneys on investments. Should there be any difference between one who invests his money in stocks and shares and one who invests in real estate? Neither should expect the taxpayer to support him while he holds on to assets he could well realise and use to support himself. This is not to say that the Tribunal seeks to force the respondent to sell his house; or even recommends that course of action. It is not the Tribunal's role to do that. At the same time, the Tribunal cannot ignore the view that the selling of the house is one way by which the applicant could resolve his present difficulties. It is an evident course of action, although not by any means the only one.”
52. For these reasons, although I accept that Mr Drage is in straitened financial circumstances, I am not satisfied that those circumstances amount to special circumstances as required by the Act.
Circumstances as a whole
53. As I noted above, I must also assess Mr Drage's circumstances as a whole, as well as looking at the individual elements. The elements on which evidence was presented were incorrect legal advice, ill health and financial hardship.
54. I have found that none constitutes special circumstances under the Act. Taking Mr Drage's circumstances as a whole, and relying also on the reasons I have given above, I am unable to conclude that Mr Drage's circumstances are so unusual, uncommon, or exceptional, as to justify a reduction in the preclusion period by exercise of the discretion in section 1184K (1) of the Act.
Decision
55. The Tribunal affirms the reviewable decision being the decision of Centrelink, as affirmed by the SSAT on 11 June 2003, to impose a compensation preclusion period from 1 October 2002 to 19 December 2005.
I certify that the 55 preceding paragraphs are a true copy of the reasons for the decision herein of Mr G A Mowbray
Signed:
...........[Sarah Rososinski]..........................................
AssociateDates of Hearing 31 October 2003
Date of Decision 5 November 2003
Date of Written Reasons 4 December 2003
Counsel for the Applicant Self-Represented
Solicitor for the Applicant Ms Kayren Paul, Centrelink Advocate
1
6
0