Encev and Secretary, Department of Employment and Workplace Relations

[2007] AATA 10

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 10

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2006/325

GENERAL ADMINISTRATIVE  DIVISION

Re:         GABRIELLA ENCEV

Applicant

And:       SECRETARY,

DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Respondent

DECISION

Tribunal:       Regina Perton, Member

Date:             9 January 2007

Place:            Melbourne

Decision:The Tribunal affirms the decision under review. 

(sgd) Regina Perton

Member

SOCIAL SECURITY ‑ lump sum compensation ‑ preclusion period ‑ whether special circumstances exist

Social Security Act 1991 ss 17, 1169,1170(1), (4), (5), 1184K

Ryde v Secretary, Department of Family and Community Services [2005] FCA 866

REASONS FOR DECISION

9 January 2007  Regina Perton, Member

1.      Gabriella Encev, who is now 47 years old, was injured in a motor vehicle accident on 27 January 1992.  Ms Encev received periodic compensation payments from the Victorian Transport Accident Commission (TAC) until 26 January 1995.  When the payments ceased, Ms Encev applied for, and received, sole parent pension and after her son’s 16^th birthday on 2 January 1996, sickness allowance.    

2.      On 24 November 1997, Ms Encev was awarded a lump sum of compensation by the Supreme Court of Victoria.  The total sum awarded was $517,166.62.  This included $168,841.22 for pain and suffering; $73,825.40 for past economic loss; $14,500.00 interest on past economic loss; and $260,000 for future economic loss.  Centrelink was repaid $29,149.60 for the benefits Ms Encev received between 9 February 1995 and 27 November 1997.   

3.      On 5 December 1997, Centrelink sent two letters to Ms Encev.  In the letters, Centrelink informed Ms Encev that her social security benefit would cease due to her receipt of the lump sum compensation.  Centrelink informed Ms Encev that she would not be eligible for a pension until 11 August 2011 except in special circumstances.  Centrelink also offered Ms Encev free financial advice in working out how to make the best use of her money.  Detailed information on how the preclusion period had been calculated was also provided. 

4.      On 12 August 2005, Ms Encev applied for disability support pension (DSP).  The claim was rejected on the basis that Ms Encev was subject to a preclusion period for a further six years.  On 4 January 2006, an authorised review officer (ARO) of Centrelink affirmed the decision to refuse DSP because of the preclusion period.  On 16 March 2006 the Social Security Appeals Tribunal (SSAT) affirmed the decision on the same grounds.

5.      On 26 April 2006, Ms Encev applied for an extension of time in which to lodge an application with the Tribunal for review of the SSAT decision.  On 16 May 2006, with Centrelink’s consent, the Tribunal granted the extension of time.

6.      The issue before the Tribunal is whether there are grounds to waive part or all of the preclusion period due to special circumstances.

EVIDENCE

7.      In her written and oral evidence, Ms Encev stated that she was in a dire financial situation.  She also stated that her mental and physical health had deteriorated in the past few years.  She pointed out that the cost of living is now much higher than it was when her preclusion period was calculated.  Ms Encev said that her mother had died recently in Romania but she could not afford to go to the funeral.  She stated that she has no savings.

8.      Ms Encev said that she separated from her husband in 1995 and divorced in 1998.  It was he who had been driving when she suffered her compensable injuries.   After the separation, she cared for her son as a sole parent.  Ms Encev described the nature of her injuries and the medical treatment she required following the accident and over the years since.  She suffers ongoing pain.

9.      At the time of the compensation award, Ms Encev was renting a house.  In 1998, she purchased a house in Taylors Lakes for $240,000.  She and her son lived in that house.  She also purchased an investment property in Werribee for $83,000.   In 1999, she sold the Werribee house for $81,000.  In 2002, she sold the Taylors Lakes house for $315,000 having decided that the house was too big given her son had moved out.  She also had too much money tied up in it.  She then bought a house in Rockbank for $180,000.  That home, which she has lived in since 2002, is much easier to maintain.  Ms Encev purchased new furniture and appliances to the value of around $25,000 after she moved into the Taylors Lakes house.   

10.     Soon after the compensation award, Ms Encev bought a second hand BMW car for $6,500.00.  Her son drove the car and then sold it even though it was in her name.  She then bought him a $16,000 Holden Commodore which he wrote off.  The car was not insured.  Ms Encev bought a Ford Festiva for around $11,000 in February 2003 which she still drives.  She estimated its value now at around $4,000.

11.     Ms Encev said that she paid off some credit card and insurance debts totalling around $12,000.  She also spent $7,000 or more visiting her mother in 2000 after her mother sustained an injury.  Calculations by Centrelink and the SSAT showed that there was a considerable amount not accounted for after her living and other expenses were taken into account.  Ms Encev could account for only part of that balance.  She said that other expenses included renovations to the property in Rockbank.  She also paid $5,000 to $6,000 in Citylink tollway fines that her son had accumulated driving a car registered in her name.  When her son was unable to get work, she also helped him financially.  Now 27 years old, he gets casual work but is only able to help her with the odd $20 or so.  Her son was troubled after the marriage break up and his father’s imprisonment for drug related offences.  He left school early.  This has limited his access to long-term employment. 

12.     Ms Encev described medical conditions from which she now suffers that were not in evidence at the time of the compensation award.  These include arthritis and gall bladder problems.  Her medical condition has prevented her from finding work despite efforts to do so. 

13.     Ms Encev said that she has no savings and has unpaid bills.  She does not want to sell her house as it is her security.  She has no mortgage on the property.  

CONSIDERATION OF THE ISSUES

14. Section 17(1) of the Social Security Act 1991 (the Act) provides that a compensation affected payment includes disability support pension. Section 17(2) of the Act provides that compensation includes:

17.(2)  Subject to subsection (2B), for the purposes of this Act, compensation means:

(a)      a payment of damages; or

(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

(d)      any other compensation or damages payment;

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

15. Section 1169 of the Act provides that DSP is not payable during a preclusion period. Section 1170 of the Act sets out the method of calculating a compensation preclusion period, which commences on the day following the last day of periodic payments (s 1170(1)(a)). Section 1170(1)(b) provides that the length of the preclusion period is calculated by dividing the compensation part of the lump sum payment by the income cut-out amount (s 1170(4) and (5)).  Income cut-out amount is defined in s17 as is the formula for calculating the income cut‑out amount.

16.     Centrelink and the SSAT have undertaken a number of checks of the calculations of the length of the preclusion period and the amount to be included as compensation given the compensation award was not by settlement but by judicial determination.  The Tribunal is satisfied that Ms Encev is subject to a preclusion period and that the calculated length of the preclusion period is correct.  The Tribunal notes that Ms Encev did not challenge that calculation.  However, she suggested that the formula used to assess her compensation entitlement in 1997 was out of date and should be adjusted for the vastly higher cost of living now.

17.     Section 1184K(1) of the Act gives the decision‑maker discretion to treat the whole or part of a compensation payment as not having been made or not liable to be made, if the decision‑maker thinks it is appropriate to do so in the special circumstances of the case.  It is this provision that Ms Encev seeks to rely upon in applying for review to this Tribunal. 

18.     For the Tribunal to use the discretion provided in s 1184K it must be satisfied that there is something to make the case stand out from the usual or the ordinary.  The term special circumstances is not defined in the legislation.  It has been discussed in many court cases where it has generally been defined as requiring a departure from the norm.  In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866 Branson J stated at paragraph 26 that the circumstances of a particular case must give rise to hardship or unfairness sufficient to justify departure from the general rule.

19.     Special circumstances need to be considered on a case by case basis and in considering this concept the Tribunal must maintain a balance between the circumstances and difficulties of the individual involved and the purpose of the legislative provision. 

20.     Ms Encev admitted she was aware of the length of the preclusion period and the need for the compensation award to provide her with income for the duration of the preclusion period.  She was renting at the time of the award.  She is now the owner of an unmortgaged property.  While the Tribunal is sympathetic to her desire for security, it nonetheless notes that she holds an asset which could be partly or wholly liquidated to meet her living expenses.  Ms Encev has chosen to spend a considerable amount on her son’s cars and for other expenses.  There is also a large amount of money unaccounted for.  It is uncertain whether Ms Encev would satisfy the requirements of DSP in relation to achieving the relevant points score and demonstrating that she is unable to work or undertake training over the two years following her application for DSP.

21.     After considering all relevant matters and viewing Ms Encev’s case in its entirety, the Tribunal is not satisfied that her circumstances, though difficult, are such that they could be described as special circumstances.  Therefore, it is not appropriate for the Tribunal to exercise the discretion under s 1184K(1) of the Act, to disregard the compensation received, in whole or in part.  As a result, Ms Encev is prevented from qualifying for DSP based on her application made in August 2005 due to a preclusion period.

DECISION

22.     The Tribunal affirms the decision under review.

I certify that the twenty-two [22] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

(sgd)       Olympia Sarrinikolaou

Clerk

Date of hearing:  23 October 2006
Date of decision:  9 January 2007
Advocate for applicant:                Self represented
Solicitor for respondent:              Ms U. Jayasinghe, Clayton Utz