Dunn and Secretary, Department of Family and Community Services

[2005] AATA 404

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 404

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2004/1608

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SHARON DUNN

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Ms Robin Hunt, Senior Member

Date5 May 2005

PlaceSydney

Decision The Tribunal affirms the decision of the Social Security Appeals Tribunal, dated 22 November 2004, to preclude the Applicant from receiving compensation affected payments from 11 July 2003 to 30 March 2006.

.........................................

Ms R Hunt
  Senior Member

CATCHWORDS

SOCIAL SECURITY – Settlement of compensation claim - Applicant receives compensation lump sum payment – Applicant seeks Centrelink payments during preclusion period -  Preclusion period imposed – Discretion to modify where special circumstances – Finding circumstances not special enough for Tribunal to exercise discretion.

CASES

Beadle v Director-General of Social Security (1985) 60 ALR 225

Re Beadle and Director- General of Social Security (1984) 6 ALD 1

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690

Re Cvetanoska and Secretary, Department of Family and CommunityServices (2000) AATA 459 (9 June 2000)

Re Secretary, Department of Social Security and Barry (AAT 10320, 28 July 1995)

Re Black and Secretary, Department of Social Security (1994) 83 SSR 1219

Re Cavuoto and Secretary, Department of Social Security (1994) AAT 9249

In Re Ivovic and Director-General of Social Services (1991) 3 ALN N95

Re Minda and Secretary, Department of Social Security (1989) 49 SSR 641

Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464

Re Colaiacolo and Secretary, Department of Social Security (1985) AAT 2109 (24 April 1985)

Re Magallanes and SDSS (1995) AAT 10044 (3 March 1995)

Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793

Re Secretary, Department of Social Security and Norman (1998) AAT 13005 (22 June 1998)

Re Hadchiti and Secretary, Department of Family and Community Services (1999) AATA 20

Re Hajar and SDSS (1988) 47 SSR 614

Re SDSS and Winterbotham (1990) AAT 6499 (11 December 1990)

SDSS v Smith (1992) 29 ALD 385

SDSS v Rodgers (1992) AAT 7911 (23 April 1992)

Platel and SDSS (1992) 70 SSR 1008

Re SDSS and Bray (1992) 72 SSR 1044

Re Lintern and SDSS (1993) 72 SSR 1041

REASONS FOR DECISION

5 May 2005 Ms Robin Hunt, Senior Member   

1.      Mrs Dunn, the Applicant, was injured at work and claimed compensation. Her compensation claim was settled on 2 October 2003 by the agreed payment of $280,000. Mrs Dunn did not receive the whole of this amount as it was reduced by expenses incurred in connection with the claim. After reimbursement of various amounts paid on Mrs Dunn’s behalf, Mrs Dunn received approximately $90,000. Expenses deducted from the settlement monies included workers compensation payback, legal costs, medical costs, repayments to the Health Insurance Commission (HIC) and a repayment to Centrelink.

2.      Mrs Dunn gave oral evidence to the Tribunal that her solicitor warned her that the settlement money should last 3 years and not to spend it all too quickly. Centrelink also wrote to Mrs Dunn on 13 October 2003 advising her that, as a certain result of the settlement, she was precluded from receiving payments from Centrelink from 11 July 2003 to 20 July 2006. She was notified on the same day that her “parenting payments single” were cancelled due to her compensation payout. In addition, Centrelink notified Mrs Dunn that it was entitled to the recovery of $2,917.48 for the period 11 July 2003 to 9 October 2003. This was one of the amounts deducted from Mrs Dunn’s settlement. She received $59,320.81 after expenses were deducted from her settlement monies as shown by the statement from her solicitors on 5 November 2003 at T43. Subsequently, Mrs Dunn also received a refund from the HIC of $27,888.85.  Copies of Centrelink correspondence are before the Tribunal and Mrs Dunn does not dispute these figures.

3.      Mrs Dunn sought review of the decision to impose a preclusion period and the decision to cancel the parenting payments. A Centrelink file note shows she first sought review of the preclusion period decision on 17 October 2003 and then sought review of the cancellation of her parenting payments on 7 November 2003. On 13 July 2004, Mrs Dunn wrote a letter appealing against the cancellation of her parenting payment and asking that the preclusion period not apply, as her compensation money had all gone. These matters were reviewed by Authorised Review Officers in August 2004 and then by the SSAT. The SSAT, on 22 November 2004, made a decision to affirm that the preclusion period should continue to 30 March 2006. This is the decision before the Tribunal.

4.      Mrs Dunn has five children, one son and four daughters. One of her daughters is of school age and the youngest does not yet attend school according to the material before the Tribunal. Bank statements and Centrelink statements show Mrs Dunn still receives about $179.06 per fortnight in benefits. She also received bonus payments of $1204.14 on 28 September 2004 and $1200.00 on 17 June 2004. However, Centrelink discontinued Mrs Dunn’s additional parenting payment. Centrelink originally calculated the preclusion period to 20 July 2006, based on a net receipt to Mrs Dunn of $100,090.51. This sum was used as the economic loss factor after deduction of the wage component of her settlement. After representations from Mrs Dunn, Centrelink reduced the net figure to $90,127.48. This resulted in a shortened preclusion period ending on 30 March 2006.

5.      Mrs Dunn appeared before the Tribunal and gave oral evidence that she and her children were in dire financial circumstances. She told the Tribunal that she had spent all of the compensation money that she received on herself and her children because they had gone through a difficult period in their lives. Mrs Dunn and her husband had separated in 1998 and there had been deaths in the family in 1999. She had lost both her grandmothers and an uncle. Leading up to their deaths, she had visited her uncle in hospital and done his washing and shopping. She further said that her son, who was present at the hearing, had undergone removal of a brain tumour. In a letter to Centrelink, she wrote that he was hospitalised for 2 weeks and then underwent 4 months of chemotherapy. During this time, in 2000, she discovered that she was pregnant and gave birth to her youngest child. Her oldest daughter became pregnant in 2001 and she and her partner broke up. Mrs Dunn started having panic attacks and developed depression.

6.      Mrs Dunn said that friends had been helping her out financially and paid for her school age daughter to go on school excursions. She told the Tribunal that she used some of the compensation money she received to repay loans from friends and from her father. The loans totalled about $10,700. When the Respondent suggested that she had not provided evidence of such loans, apart from a receipt from a bank for payment of $7,576 on the home loan and a statement with it that she had borrowed the money from her father (at T41), Mrs Dunn said she really owed her father much more, in the figure of $20,000. She had repaid the amount he lent her for this mortgage payment and had repaid friends who helped her out to a total of about $7,500. She had fallen into arrears with her mortgage when her father lent her money.

7.      Mrs Dunn said she had refinanced her mortgage and regretted that she had not used her compensation payment towards reducing the loan. Her mortgage debt had increased and she now owed $189,000. The amount put towards the mortgage in the previous 9 months, according to the statement at T51, was $10,863. The SSAT noted, in its reasons for decision on 22 November 2004, that Mrs Dunn’s monthly mortgage payments were $1383. Mrs Dunn said that the required monthly repayments had since increased. Mrs Dunn gave evidence that she had sought advice from Centrelink about whether she might use her payout to reduce her mortgage and had been told that she could not do this. She alleged that this was why she had not used the compensation to help pay off the mortgage. In addition, Mrs Dunn argued that repayment of debts should not be ignored in assessing the appropriate use of the lump sum. While repayment might be only a moral obligation, she felt bound to repay people who had helped her financially.

8.      Some of the expenditures detailed by Mrs Dunn in a letter she wrote to Centrelink on 13 July 2004 included a car purchased for $13,000, a pergola costing $4,000, a holiday with her children costing $3,000, a computer, a fax machine, furniture, carpet, Christmas presents costing $3,000, expenditure of $2,000 for the new year, a Gold Coast holiday as a 21^st present for her son costing $2,500, pre-school fees of $400, various household expenses and mortgage payments. Mrs Dunn gave similar oral evidence to the Tribunal about how she had gone through the compensation money. Under questioning, she confirmed that she already had another vehicle when she purchased a four wheel drive for $13,000. She argued that this was a bargain and that she needed it to drive her daughter to school. She still had the other vehicle. She was not prepared to sell it in its present condition and could not afford repairs to bring it up to a usable condition. She had not used the vehicle as a trade-in because she had bought the second vehicle privately. Someone had offered her $500 for the first vehicle for spare parts but it would be worth about $5,000 or $6,000 if repaired. Mrs Dunn disagreed with the Respondent’s estimate of the value of the vehicle at $9,000.

9.      Mrs Dunn justified having spent money on home renovations. In particular, she said the expenditure on the pergola was reasonable due to her son suffering a skin condition, alopecia. She wanted him to be able to sit outside.  She provided receipts for much of the expenditure on items such as furniture. Mrs Dunn said some of the furniture she bought was second hand. As well, she admitted that some of this money might have been dissipated on poker machines and keno at her local club. In response to questioning about the withdrawal of $200 several times a day which was shown on her bank statements, Mrs Dunn said that it was true that she sometimes went to the club with her daughter and made cash withdrawals there. However, she did not always spend it all at the club. She used to have a drawer full of cash at home but it had all gone.

10.     Mrs Dunn also said that she and her older daughter had hoped to set up a small business of sewing at home. However,  they had not qualified to do a business course with Centrelink so they had not proceeded with this plan. Mrs Dunn said she no longer had a telephone although telephone expenses of $2,600 were listed as one of the expenditures at the time of the written statement made on 13 July 2004 at T51. Mrs Dunn said her son paid some board and her ex-husband paid her maintenance of $420 per fortnight. Family payment of $180 per fortnight was indicated at T51.

11.     Mrs Dunn said some money went on cigarettes and playing keno and poker machines at the local club. She said most of the family smoked and admitted that she had a gambling habit. She had been trying to control this but, as she suffered from depression, she sometimes turned to gambling on the poker machines or keno when she was feeling down. A general practitioner furnished a letter to the Tribunal confirming that Mrs Dunn was a patient of his practice and had been treated for depression and anxiety since December 2004. He wrote that her mental health was affected by her financial difficulties. Mrs Dunn also handed up an unsworn and unsigned statement about her poor circumstances. Mrs Dunn claimed the statement had been handwritten by a neighbour. Mrs Dunn further told the Tribunal that she had been seeing a psychologist but had not approached him for a letter as there had been a death in his family.

consideration

12.     Mrs Dunn received a compensation settlement sum in late 2003 and another sum early in 2004, totalling approximately $90,000 net. In addition to Mrs Dunn receiving a large sum of money, she has a substantial asset in the house in which she and the children live. Mrs Dunn has told the Tribunal that she spent a good portion of her money improving the house and the contents. She did not inform the Tribunal whether she still owns this asset jointly with her former husband or if it was transferred to her outright when she refinanced the loan. The bank receipt at T41 mentioned above is dated 1 March 2002 and refers to the mortgage in joint names. However, Mrs Dunn indicated that she was responsible for the monthly repayments on the mortgage and only received maintenance from her former husband. She also told the Tribunal she had refinanced the mortgage. Whether she owns a half share or is the sole owner, the house is a substantial asset. Mrs Dunn does not have to pay rent unless she fails to maintain her mortgage payments.

13.     I accept Mrs Dunn’s evidence about the series of unfortunate events that have beset her and her family. It is true that some of Mrs Dunn’s circumstances are unusual or out of the ordinary. She is the mother of several children ranging from 23 years of age to 4 years of age. She and her children suffered a number of misfortunes before Mrs Dunn received her payout. Not only did Mrs Dunn suffer two accidents at work but several relatives have passed away in recent years. Mrs Dunn’s son, Stan Dunn, started undergoing radiotherapy in 2002 when he was only 17 according to a hospital record. Mrs Dunn experienced an unexpected pregnancy in 2001 and does not receive any contribution from the father of this child. One of the items on her list of expenses is preschool fees. Mrs Dunn also told the Tribunal that she has been unable to find work. This means she is on a severely restricted income.

14.     However, Mrs Dunn did receive a very large sum of money late in 2003 and dissipated it very rapidly within a few months although she had a family to support and a mortgage to meet. As to her assertion that Centrelink advised her not to use the lump sum to reduce her mortgage, it may be that officers advised her that using the money in this way would not change the preclusion period. She may have misunderstood the advice she was given. In any event, there is no supporting evidence before the Tribunal that Mrs Dunn was given any advice by Centrelink about her mortgage and I am not persuaded that Centrelink was in any way responsible for Mrs Dunn not using the money at her disposal in this manner.

15.     Mrs Dunn entered into a pattern of reckless spending as soon as she received her compensation money. She told the Tribunal that she thought her family deserved the gifts and holidays she provided for them out of the compensation money. She also said she kept a drawer full of cash but that it had all gone. As the SSAT observed, bank statements and materials before it and this Tribunal show that she was spending at the rate of $10,000 a month or $120,000 per year. Mrs Dunn did not slow down and consider her long time position but continued to spend until the money ran out. From this behaviour and her almost immediate applications for review of the decisions to cancel her parenting payments and to apply the usual preclusion period, I have formed the view, on balance, that Mrs Dunn intended to spend all her compensation and then turn to the public purse. Mrs Dunn’s actions demonstrate that she has always, since she received advice from both Centrelink and her solicitors that a preclusion period for public benefits would apply to her, carried on reckless spending in the expectation that Centrelink would renew her parenting payments once she ran out of funds.

16.     Mrs Dunn has requested that the preclusion period should end because of her poor financial circumstances. She initiated an application to Centrelink for the usual rules not to apply in her case as early as 13 October 2003 after receiving over $59,000 on 2 October 2003. This course of action indicates that Mrs Dunn never intended to try to make the compensation money last for the period it was designed to cover.  Her pattern of spending shows a reckless disregard for the consequences. Mrs Dunn admitted before the Tribunal that her solicitor and Centrelink both told her the money had to last for three years. Nevertheless, she set about spending the money in a few months. She has asked the Tribunal to overlook her parting with over $90,000 between October 2003 and May 2004. She claimed that most of her expenditure was justified but then went on to describe visits to a local club where she played the poker machines.

17.     Mrs Dunn has explained that she suffers from depression, panic attacks and chronic gambling. I do not doubt that Mrs Dunn suffers from problems of this sort but she has not provided evidence of any serious attempt to seek professional help with these problems. Mrs Dunn told the Tribunal that she has seen a psychologist on an informal basis. She mentioned a neighbour who counselled her and whom she had not asked to give evidence because of a death in the family. Mrs Dunn has not seen a psychiatrist to help with these problems. She said she has trouble controlling her gambling when depressed. She still gambles and tries to overcome this habit through activities such as gardening. She described how the neighbouring psychologist had given her this advice and it had been of some benefit. In addition, she told the Tribunal that she takes anti-depressant medication. However, Mrs Dunn did not tell the Tribunal of any efforts she made to seek treatment by a psychiatrist.

18.     In my view, Mrs Dunn has not made a serious effort to overcome her gambling and depression. While I take these problems into account in considering special circumstances, I would give them more weight if there were evidence before me that Mrs Dunn had made a real attempt to deal with her gambling and sought professional advice and treatment.

19.     On the other hand, I also take into account that some of the money Mrs Dunn spent was used to repay debts. It was put to the Tribunal that loans from friends and relatives were moral obligations only and not enforceable. This is correct and, as well, Mrs Dunn provided no supporting sworn statements or strong evidence of the existence of these debts. Nevertheless, I agree with her submission that it is reasonable to meet this type of moral obligation. Some of her other expenditures such as modest improvements to her house also seem to me to be reasonable. I am also bearing in mind that Mrs Dunn’s children are likely to suffer as a result of her now having stripped herself of funds. Mrs Dunn told the Tribunal that her 12 year old daughter would have to live with her father, who is often not home as he does shift work, if she were not assisted by the Tribunal.

20.     However, I do not accept that much of her spending was necessary or desirable for herself or her children. I do not consider it was necessary or desirable to spend $13,000 on a new vehicle when she already had a vehicle which has been left to decay. On her own evidence, this car could have been repaired and would be worth a considerable amount if in running order. Other expenditures such as lavish presents for birthdays and Christmas as well as holidays were excessive. Several thousand dollars has not been accounted for in Mrs Dunn’s evidence other than vague explanations such as the last of the money went on “bits and pieces”.

21.     Centrelink has already decided to reduce the amount taken into account in calculating the usual preclusion period. On 5 August 2004, following Mrs Dunn’s request, Centrelink used $90,127.14 to calculate this period rather than $100,090.51, which would have been the usual component to be used in the calculation. Since this reduction, Mrs Dunn has allowed new debts to accumulate. At the Tribunal hearing, she produced copies of bills from Mt St Thomas Pre-school  totalling $439.53, a gas bill for $315.33, a telephone bill for $410.65, a rates bill of $460.74, a water bill for $444.60, a pathology bill for $88.90 and a default notice on her mortgage with $3598.62 outstanding.

22.      The 50% rule that applies to the compensation provisions and the operation of section 1184K has often been considered by the Tribunal. For example, a failure by legal advisers or by the Department to inform the party of the operation of the 50% rule may be special circumstances. There was no such failure in the present case. Again, the Tribunal has been reluctant to find special circumstances where a party has spent money on an expensive house or taken out a mortgage as in the cases of Re Hajar and SDSS (1988) 47 SSR 614 and Re SDSS and Winterbotham (1990) AAT 6499 (11 December 1990).  Mrs Dunn told the Tribunal that she has taken out a mortgage over her house rather than use some of her award to reduce the debt over the house. She told the Tribunal that she refinanced her mortgage and spent some of her money on house improvements. Such spending does not give rise to special circumstances.

23.      The Tribunal has referred to the guidance of the Full Federal Court in Beadle v Director-General of Social Security (1985) 60 ALR 225 when the Court generally approved the approach of the Tribunal in Re Beadle and Director- General of Social Security (1984) 6 ALD 1. Although this case involved another legislative provision, it was similar in that it dealt with discretion in special circumstances. Toohey J, presiding in the Tribunal case, suggested that a case must have a particular quality of unusualness for them to be described as special. In Re Ivovic and Director-General of Social Services (1991) 3 ALN N95, O’Loughlin J remarked that the reference to hardship in former section 115 did not mean that: 

“we should ignore the circumstances out of which the alleged hardship is said to have arisen.”

The Federal Court approved of O’Loughlin J’s judgment in SDSS v Smith (1992) 29 ALD 385. Von Doussa J in Smith found that the discretion given in former section 156 should apply where there was a clearly unjust result. In my opinion, the non-exercise of the discretion in the present case does not produce an unjust result. As well, I cannot ignore the reckless spending that led to Mrs Dunn’s present hardship.  

24.      Drinking and gambling have been found not to be special circumstances in SDSS v Rodgers (1992) AAT 7911 (23 April 1992), similarly gifts and loans to family members (Platel and SDSS (1992) 70 SSR 1008) and being generally extravagant (Re SDSS and Bray (1992) 72 SSR 1044). Holidays and a new car (Re Lintern and SDSS (1993) 72 SSR 1041) and a repayment of a family loan (Re Cavuoto and Secretary, Department of Social Security (1994) AAT 9249) were also not found to be special circumstances. These are some of the main expenditures that Mrs Dunn attempted to justify. As well, in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Keifel J observed that special circumstances:

“would require something to distinguish…case from others, to take it out of the usual or ordinary case…it would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary…”

25.      Mrs Dunn’s reckless spending in the few months after she received over $90,000 and the increase in her level of debt are entirely her own fault. It is therefore not appropriate to forgive this conduct when so many other deserving persons have to rely on the public purse. While I understand that a chronic gambler is not always able to control the habit and that this may be worse when coupled with chronic depression, Mrs Dunn has not sought specialist professional assistance with these problems. She has relied on a GP for medication and some friendly advice from a neighbouring psychologist. Mrs Dunn’s present difficulties are financial. In Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690, the Tribunal noted straitened finances are not enough to amount to ‘special circumstances’ without other hardship.

26.      Taking all these circumstances into account, on balance, I do not accept that Mrs Dunn’s circumstances are so special as to be deserving of the exercise of the available discretion in her favour. While subsection 1184K(1) allows the Tribunal to treat the whole or part of a compensation payment as not having been made if the Secretary thinks it appropriate in the special circumstances of a particular case, Mrs Dunn’s case falls outside what are special circumstances. Her hardship is financial only. Mrs Dunn’s circumstances are not due to unforseen circumstances or unusual events taking place after she received her award. She was not misinformed about the need to make the money last. She set out on a deliberate path of spending and tried to provide for the future only by seeking removal or shortening of the preclusion period within days of her award. Mrs Dunn made no effort to conserve her funds. To enforce the usual preclusion period is not unfair and there is no unintended or unjust consequence.  

decision

27.      The Tribunal affirms the decision of the Social Security Appeals Tribunal, dated 22 November 2004, to preclude the Applicant from receiving compensation affected payments from 11 July 2003 to 30 March 2006.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of  

Signed:         .....................................................................................
Zoe McDonald
Associate

Date/s of Hearing: 31 March 2005
Date of Decision: 5 May 2005         
Solicitor for the Applicant: Self        
Solicitor for the Respondent: Mr George Lozynsky