Emeli and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2008] AATA 1092
•8 December 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 1092
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/0195
GENERAL ADMINISTRATIVE DIVISION ) Re SULTAN EMELI
Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Ms Robin Hunt, Senior Member Date8 December 2008
PlaceSydney
Decision The reviewable decision is affirmed.
...................[Sgd]....................
Ms Robin Hunt
Senior Member
CATCHWORDS
SOCIAL SECURITY – disability support pension – lump sum compensation – preclusion period – Centrelink deducted compensation charge from lump sum – discretion to treat whole or part of compensation payment as not having been made – no special circumstances – decision under review affirmed
Social Security Act 1991 (Cth) s 17, Part 3.14, s 1184K(1)
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Secretary, Department of Family and Community Services and Guettler [1999] AATA 257
Re QX99C and Secretary, Department of Family and Community Services [1999] AATA 310
REASONS FOR DECISION
8 December 2008 Ms Robin Hunt, Senior Member summary
1. Sultan Emeli was injured in a motor vehicle accident in 2000. At the time of the accident she was receiving disability support pension (“DSP”). Mrs Emeli took court proceedings to recover compensation for the accident but settled her claim out of court in 2007. As a result of the award of compensation, Centrelink imposed a preclusion period for receipt of compensation affected payments including DSP and recovered $17,347.18 from the insurer. This amount was for pension payments already made during the preclusion period before Mrs Emeli settled her claim and is known as the “compensation charge”. Mrs Emeli asked Centrelink to waive recovery of this amount as she argued there were special circumstances in her case. Centrelink and the Social Security Appeals Tribunal (“SSAT”), on review, decided no sufficiently special circumstances existed in her case to justify treating all or part of her compensation payment as not having been made. After hearing Mrs Emeli and considering her evidence as well as the submissions of the Secretary, I decided that the decision to recover the amount of $17,347.18 should be affirmed as no sufficiently special circumstances exist to justify exercising the discretion to treat all or part of the compensation payment as not having been made in Mrs Emeli’s favour.
issue
2. I must decide whether special circumstances warrant exercise of the discretion to treat as not having been made the whole or part of Mrs Emeli’s settlement amount. Mrs Emeli sought continuation of her DSP payments during the preclusion period of 16 March 2000 to 14 November 2001 and the return to her of the compensation charge of $17,347.18, which Centrelink imposed once she consented to settlement of her court claim.
analysis and findings
3. Mrs Emeli has not queried the correctness of the calculation of the preclusion period in her case or the amount of the compensation charge. Mrs Emeli has argued that the amount of the charge should not have been recovered as due to her special circumstances she needs the money which Centrelink received from the insurer who paid her compensation. There is no further amount involved as the preclusion period operated in arrears.
4. Provisions in the Social Security Act 1991 (“the Act”) affect receipt of social security benefits by persons who also receive compensation payments. The legislation aims to prevent, in certain circumstances, those receiving compensation for loss of income from receiving or retaining all or part of particular social security benefits (compensation affected payments) for the same period. Where a lump sum settlement includes a component of economic loss, section 17(3) of the Act has the effect of taking 50 per cent of the lump sum as replacing lost earnings or lost capacity to earn. This amount is the “compensation part” of the lump sum and is used in a formula contained in Part 3.14 of the Act to calculate the length of the period when the person will not be eligible for certain Centrelink payments. The period of ineligibility is called the preclusion period. If, during the preclusion period, the person has received Centrelink payments, a statutory charge over any settlement funds arises to the extent of Centrelink payments made. Centrelink is entitled to recover this amount and the relevant insurer, having been given written notice under the Act, is obliged to pay to Centrelink the amount of the charge ahead of payments to the person entitled to the benefit of the settlement. This is what happened in Mrs Emeli’s case and the insurer, QBE Insurance, paid $17,347.18 to Centrelink by way of reimbursement for support Centrelink gave Mrs Emeli after the accident.
5. Centrelink records show the sequence of events. As well, the Secretary’s statement of facts and contentions sets out events leading to Mrs Emeli’s seeking recovery of the compensation charge and review of decisions rejecting her claims for continuation of DSP during the preclusion period. The reviewable decision made by the SSAT was a majority decision that, although she was in straitened financial circumstances, her circumstances were not exceptional and that the discretion to treat all or part of her compensation settlement amount as having not been made should not be exercised in her favour. A third member of the SSAT dissented and considered Mrs Emeli’s situation warranted waiver of half the compensation charge and the return to her of $8,673.59.
6. Mrs Emeli was receiving DSP when she was injured in the accident. As Mrs Emeli was not working when she was injured, it might be thought that she would not have a substantial claim for loss of earnings. However, Mrs Emeli told the tribunal that had it not been for the accident she would have been working and earning income. A copy of a letter from her solicitors to the insurer dated 21 January 2002 also shows that Mrs Emeli claimed past loss of earnings and future loss of earnings at the rate of $375.00 per week. Her solicitor advised Centrelink by letter dated 15 February 2007 that her compensation did contain a component for economic loss.
7. On or about 15 January 2007, the solicitor acting for Mrs Emeli had enquired of Centrelink, what would be the likely preclusion period and statutory charge if she settled. This enquiry took place before settlement of the compensation claim and the proposed settlement sum at that stage was $100,000. The solicitor’s letter is not on file but a copy of the Centrelink letter in reply, dated 17 January 2007, refers to an enquiry made on 15 January 2007.
8. In addition, an entry on Centrelink records made on 17 January 2007 shows that attached to the enquiry from Mrs Emeli’s solicitors was a statement from solicitors representing the other party or insurer which gave a breakdown of the figures used in calculating the proposed settlement. Centrelink sets out that the likely repayment amount in respect to a compensation payment of $100,000 would be $13,846.88 and the likely preclusion period would be 16 March 2000 to 18 July 2001.
9. Ultimately, Mrs Emeli agreed to settle her compensation claim for $125,000. This meant that the preclusion period and related compensation charge had to be adjusted to reflect the greater amount. The sum of $17,347.18 reflects this calculation and adjustment.
10. A letter dated 23 February 2007 from Mrs Emeli’s solicitor to Medicare asks for issue of an amended notice of charge to reduce the Medicare amount from $24,062.30. The letter explains that Mrs Emeli had failed to promptly complete the schedule of benefits. Other correspondence deals with the many expenses that were incidental to Mrs Emeli’s court action.
11. An out of court settlement was reached on 8 February 2007, which was the third day scheduled for the hearing of her appeal, according to a copy of correspondence on Centrelink files. Mrs Emeli told the tribunal that her potential employer was expected to give evidence at the appeal hearing. This witness failed to attend and things did not go well for Mrs Emeli’s case. Although, as Mrs Emeli explained, the expected witness had given evidence at a previous hearing, he was unavailable for the appeal hearing. Mrs Emeli said that her barrister told her she would lose the case because her employer had not turned up. She gave further evidence that negotiations went on all day when the hearing did not proceed. She complained that the parties did not even go into the courtroom. She also said that her solicitor told her he would not act for her if she did not accept the settlement offer.
12. Mrs Emeli gave further oral evidence that, on the day she agreed to the settlement, she believed she would receive about $42,000 clear. Mrs Emeli gave further evidence that she “signed the paper” because her solicitor and someone at Centrelink both led her to believe she would receive about $40,000 from the settlement. Although her solicitor wrote to her some months before she signed the settlement detailing medical and other expenses incurred, Mrs Emeli gave evidence that she had seen the letters but not understood them because her daughter did not always have time to read them to her. She also said her solicitor rang her at home to assure her she would receive $42,000 clear before she signed the settlement deed. She said she would not have accepted the offer if she knew Centrelink would take $17,000.
13. Mrs Emeli made complaints about her solicitor and about the interpreter employed on the day of the court hearing who she claimed told her “they are not going to charge you anything”. She gave further evidence that her solicitor agreed to forego costs for the day, but that the barrister charged for the three days set down for the hearing. The solicitor’s bill on the Centrelink file shows the solicitor’s fees were $22,000 and other correspondence shows that this figure was modest for the time and effort put into Mrs Emeli’s case.
14. Among the documents provided by Mrs Emeli to the SSAT are copies of correspondence to Mrs Emeli from her solicitor. A copy of a letter dated 9 February 2007 sets out costs and disbursements incurred or already borne by the solicitor in her case. These expenses included fees paid or payable to three different barristers and fees paid to another solicitor, on her behalf, as well as unpaid medical treatment expenses and interpreter’s fees. A copy of a letter dated 7 February 2007 which her last barrister sent to her solicitor was attached. The barrister explained why the settlement achieved was the best possible result in the circumstances.
15. The barrister’s letter of 7 February 2007 described difficulties with proceeding to hearing on 6 February 2007, the first of three days for which the matter was scheduled. The letter said that her solicitor received a fax on the day of the hearing advising that the employer witness was not available. The barrister went on to say Mrs Emeli arrived late and produced a medical certificate which said she also could not give evidence but provided no reason. He sought an adjournment on Mrs Emeli’s instructions and this was granted by Judge Garling. The barrister wrote that he understood there had been a previous adjournment because the potential employer had failed to appear. Following the adjournment extensive negotiations continued until 5.30 pm. Mrs Emeli did not accept the offer on that day and the matter was listed for further mention in case it did not settle. The barrister strongly recommended she settle for the reasons in his letter and suggested she would do worse if the matter were determined by a court.
16. Mrs Emeli told the tribunal she complained to various authorities about her solicitor but “lost the case”. She gave evidence that she complained to her local member of parliament who referred her to a Turkish speaking solicitor to whom she spoke about the matter. She also complained to the solicitor who had acted for her but received no more money.
17. A copy of a letter from the Office of the Legal Services Commissioner dated 6 June 2008 shows that the Commissioner investigated her complaint and was satisfied no actionable misconduct was raised by her solicitor’s handling of her case. Among matters addressed, the Commissioner said her solicitor mentioned that Mrs Emeli had consistently failed to complete Medicare schedules and that this resulted in a larger deemed amount being deducted from her award than might have been justified if she had completed the required schedules. He also explained that her case was complex and lengthy and that she lost the first proceedings in the District Court, which resulted in judgment for the defendant. In the Commissioner’s opinion, the ultimate award that was negotiated did not reflect adversely on her solicitor. As well, his costs were heavily discounted.
special circumstances
18. The discretion that Mrs Emeli seeks to have exercised in her favour is contained in section 1184K(1) of the Act. It 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.
19. Mrs Emeli says her special circumstances include poor legal advice and difficult financial circumstances compounded by expensive medical needs. The term “special circumstances” is not defined but has a well known train of commentary by tribunals and courts which suggest relevant circumstances must be exceptional, unusual or out of the ordinary and should involve hardship. See, for example, Groth v Secretary, Department of Social Security (1995) 40 ALD 541.
poor legal advice not found
20. As to the first ground, Mrs Emeli says she would not have agreed to settle had she been better represented and informed correctly of the amount that Centrelink would recover. On balance, I do not accept that Mrs Emeli was poorly represented or badly advised. The barrister who was engaged to represent her on the day has explained very compellingly the reasons why she could not have succeeded before the court. Her solicitor has also heavily discounted his costs despite the long drawn out and complex nature of her case and, without warning on the hearing day, having no witness to verify Mrs Emeli’s intended employment.
21. In any event, poor legal advice or representation is not often a special circumstance giving rise to waiver or treatment of a compensation payment as not having been made. Recourse against a solicitor is available as Mrs Emeli knows. Her oral evidence and the letter from the Office of the Legal Services Commissioner indicate she took action against her solicitor. The Legal Services Commissioner, however, found no fault in her solicitor and gave a detailed written explanation of why the solicitor was blameless. I do not consider Mrs Emeli’s dealings with her legal team are any basis for treating whole or part of her compensation payment as not having been made so as to reduce the preclusion period and the compensation charge.
financial circumstances not unusual
22. The next point Mrs Emeli made involved her difficulty in meeting expenses. Mrs Emeli no doubt has financial difficulties but this is not unusual for social security recipients. Otherwise, recipients would not need to apply for benefits. The further question is whether Mrs Emeli’s circumstances are so dire as to warrant treating whole or part of her compensation payment as not having been made.
23. In response to questions by the advocate for the Secretary, Mrs Emeli gave evidence that she had borrowed money to buy a second hand 4WD motor vehicle for $20,000. She borrowed from friends in anticipation of receiving compensation. While the SSAT recorded that Mrs Emeli gave evidence that she borrowed two lump sums of $10,000 to fund her purchase, she gave evidence before me that she borrowed the money “on and off” and repaid it in instalments. She said her friends had helped her pay registration and other fees as well as pay for the car, giving her help as needed from time to time. She further said her total debt to friends was $28,000 and she had repaid $20,000.
24. The purchase of an expensive vehicle, especially ahead of any receipt of compensation, was, in my view, foolhardy and extravagant. The purpose of compensation is to put a person in the position he or she would have been had it not been for the accident and it is not designed as a windfall. There is also no evidence before me that the large vehicle purchased was necessary or particularly desirable because of Mrs Emeli’s injuries. Mrs Emeli may need a vehicle but not such an expensive model.
25. Mrs Emeli completed a statement of financial circumstances on 20 August 2008 showing she paid rent of $160 per fortnight, $150 per fortnight on food and household goods, $20 per fortnight on clothing and $80 per fortnight on petrol. She also included as costs of living her car registration and insurance and bills for the usual services, including water, electricity and telephone. She indicated that there were outstanding bills for electricity and the telephone.
26. Mrs Emeli gave oral evidence that she had bank debts. At one point Mrs Emeli said she had no bank debt but then changed this evidence, saying she owed the bank $4,000. This debt was not mentioned in the completed form of financial circumstances and Mrs Emeli said this was because her daughter helped her fill out the form. However, she also said that she had no current bank debt but old debts to the bank which had been repaid. She gave further evidence to the effect that her daughter and her niece’s husband had paid some of her debts or car loan instalments. Mrs Emeli gave further evidence that she owed her niece’s husband $1,700 and her married daughter $1,000.
27. None of these debts appeared in the statement of financial circumstances and Mrs Emeli’s evidence about her debts was confused and difficult to follow with her giving different versions of her position. From my understanding of her evidence, Mrs Emeli has no outstanding legally binding obligations at present apart from a telephone bill for $124.44 and an electricity bill of $329. Even as to these bills, Mrs Emeli produced no account or invoice but simply wrote these amounts down in her statement of financial circumstances submitted to the Respondent on 26 August 2008.
28. In the form she completed, Mrs Emeli stated that she had one dependant living with her, aged 20. In response to questions, however, Mrs Emeli agreed that her daughter, who usually lived with her, was presently overseas, that she was a student and in receipt of financial assistance from Centrelink. From this evidence I find that Mrs Emeli’s daughter is not her dependant and has some income of her own.
29. As well, Mrs Emeli told the tribunal she had very heavy pharmaceutical expenses despite having a health card. She told the tribunal she had prescriptions to fill and also took vitamins, sleeping pills and pain relief medications. In addition, Mrs Emeli said she suffered from tinnitus and treatment for this was not covered by the health card. Mrs Emeli’s evidence about the tinnitus treatment was unclear as to whether her doctor did not prescribe this medication or it was not necessary to obtain it on prescription. Nevertheless, Mrs Emeli said she needed to use this medication and it cost $35. She said the fortnightly cost of her medications varied from about $5 to $30.
30. Mrs Emeli provided further information about her medicines after the hearing in the form of records obtained from pharmacies who had supplied her. Mrs Emeli faxed to the tribunal a list from a pharmacy of drugs she purchased between 26 July 2007 and 15 June 2008 for a total of $173.80. These may have been prescribed drugs but the list does not disclose whether this was so. Further purchases from the same pharmacy in August and October 2008 totalled $21.30. While the faxed pages did not indicate that these preparations were furnished under prescription, a handwritten addition, apparently made by Mrs Emeli read: “I have other supplements for over the counter” and that these cost $39.40 and $38.20. A faxed tax invoice from another pharmacy set out a list of drugs supplied between 18 August 2008 and 13 October 2008 amounting to $36.45. A third pharmacy supplied a list of prescription reference numbers, unlike the previous two pharmacies, and indicated a total expenditure of $25 between 5 August 2008 and 21 September 2008.
31. I accept, on balance, that Mrs Emeli has heavy medical requirements but her expenses are reduced by having a health card. It may be that some of the preparations she takes for health reasons are not covered by her compensation award. However, there is insufficient material before me to conclude that Mrs Emeli is unable to afford all the medicines she requires. Overall, I am not convinced that Mrs Emeli’s doctor advises her to take all of the pharmaceutical products she purchases, particularly over the counter supplies. In addition, if I calculate her yearly expenses on the basis of a fortnightly cost of $30, the maximum that Mrs Emeli told me she spent on medicines, her annual cost would be $780. The cost to Mrs Emeli indicated between June 2007 and October 2008 when taking together the three pharmacy records supplied suggests her annual purchases would be less than this figure. She has supplied evidence that over a 16 month period, her pharmacy bills are $256.66. On balance, on the material before me, I find that the cost of medicines is not exceptional or unusual for a person in receipt of DSP and does not justify a finding of special circumstances in this case.
32. Mrs Emeli had the disappointment of not receiving a large personal payout for her injuries and was unable to carry out some other plans she mentioned such as having a holiday and visiting her parents in Turkey and helping her brother with his wedding. These considerations are not so unusual or such a hardship as to amount to exceptional circumstances, in my view.
33. Lastly, I have considered briefly the reasons the dissenting member of the SSAT gave for his findings that Mrs Emeli should have access to 50 per cent of the compensation charge. He referred to the tribunal case of Re Secretary, Department of Family and Community Services and Guettler [1999] AATA 257, where the applicant had no earning capacity before the accident and legal and medical expenses were high. I think Mrs Emeli’s case is distinguishable as her claim for compensation included an element for loss of future earnings. This is clear from her evidence that she had been offered a cleaning contract and that her employer was to give evidence. Economic loss was part of the settlement as her solicitor confirmed in his letter to Centrelink on 15 February 2007.
34. I also distinguish the case of Re QX99C andSecretary, Department of Family and Community Services [1999] AATA 310. In that case, the tribunal found the preclusion period should be shortened as additional legal costs of $35,200 were incurred in respect of settlement of $100,000 for damages and $35,000 for costs. Mrs Emeli’s case bears some similarities but her case was a very long running one for which there were multiple costs incurred for previous court hearings among other things and for which costs were discounted by her last solicitor who obtained the settlement after a loss in the lower court. Also, Mrs Emeli claimed economic loss so, although she was receiving social security payments before and after the settlement, it was taken into account in negotiating settlement. The applicant in QX99C was not compensated for economic loss.
35. For these reasons, I find that the circumstances of Mrs Emeli do not meet the criteria in section 1184K(1). I am not satisfied that special circumstances arise in her case. It follows that I do not think it is appropriate to treat as not having been made any part of her compensation payment. This means that I do not think the Secretary should reimburse Mrs Emeli with any part of the compensation charge already recovered from the insurer.
decision
36. The reviewable decision is affirmed.
I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Ms Robin Hunt, Senior Member
Signed: ..........................[Sgd]............................
Jennifer Wong, AssociateDate of Hearing 22 October 2008
Date of Decision 8 December 2008
Appearance for the Applicant Self-representedSolicitor for the Respondent Ms G Heggen, Centrelink Legal Services and Procurement Branch
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