Erich and Secretary, Department of Social Services (Social services second review)
[2017] AATA 1733
•17 October 2017
Erich and Secretary, Department of Social Services (Social services second review) [2017] AATA 1733 (17 October 2017)
Division:GENERAL DIVISION
File Number: 2017/2609
Re:William Erich
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Senior Member A C Cotter
Date:17 October 2017
Place:Brisbane
The decision under review is affirmed.
.........................[Sgd]...............................................
Senior Member A C Cotter
CATCHWORDS
SOCIAL SECURITY –Age Pension – cancellation due to preclusion period – where claim for compensation settled – whether Applicant is subject to a compensation preclusion period – length of period - whether special circumstances – decision under review affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1184K
CASES
Director General of Social Services v Hales (1983) 47 ALR 281
Dranichnikov v Centrelink (2003) 75 ALD 134
Gartside and Secretary, Department of Social Services [2017] AATA 45
Groth v Secretary, Department of Social Security [1995] FCA 1708
Hammelswang and Secretary, Department of Social Services [2015] AATA 905
Kirkbright v Secretary, Department of Family & Community Services (2000) 65 ALD 211
Krzywak and Secretary, Department of Social Services (1988) 15 ALD 690
O’Neill and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 619
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Secretary, Department of Social Security and Winterbotham [1990] AATA 808SECONDARY MATERIALS
Guide to Social Security Law
REASONS FOR DECISION
Senior Member A C Cotter
17 October 2017
INTRODUCTION
When Mr William Erich’s claim for compensation from a workplace accident was settled, he was notified by the Department of Human Services that it had applied a lengthy compensation preclusion period against him. The Age Pension which he had been receiving was cancelled as a consequence.
His request for a review of that decision was unsuccessful, as were the subsequent claims he lodged for Age Pension. On the most recent occasion, he sought an internal review of the Department’s decision, as well as a review by the Social Services & Child Support Division of this Tribunal. Both of those applications for review were unsuccessful. Mr Erich now seeks a review by the General Division of the Tribunal.
For the reasons I outline below, I consider the Department’s decision was correct and should be affirmed.
BACKGROUND
Mr Erich was injured in a workplace accident on 2 September 2008.[1]
[1] Exhibit 1, T Documents, T 5, page 35, letter from Sciaccas to Centrelink dated 12 September 2012
On 11 September 2012, Mr Erich’s claim for compensation was settled (in round terms) for an amount of $1,400,000.00 plus a gratuitous care component of $184,850.00, making a total of $1,584,850.00.[2] The next day, the Department of Human Services (“Department”) was notified of the settlement.[3]
[2] Exhibit 1, T Documents, T 2, page 7, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017, [1].
[3] Exhibit 1, T Documents, T 5, page 35, letter from Sciaccas to Centrelink dated 12 September 2012
On 27 September 2012, the Department notified Mr Erich that it had applied a preclusion period to his Centrelink payments from 14 November 2009 to 11 December 2026.[4]
[4] Exhibit 1, T Documents, T22, pages 224-226, letter from the Department of Human Services to Mr Erich dated 27 September 2012.
The Department also wrote to Mr Erich’s lawyers, advising that WorkCover Queensland would be required to repay it the sum of $38,412.72, representing the income support payments which had been made to Mr Erich by Centrelink during the relevant period.[5]
[5] Exhibit 1, T Documents, T22, pages 227-228, letter from the Department of Human Services to Sciaccas Law dated 27 September 2012.
Also on 27 September 2017, the Department wrote to Mr Erich, advising him of the decision to cancel his Age Pension as a result of the preclusion period.[6]
[6] Exhibit 1, T Documents, T 22, pages 229-230, letter from the Department of Human Services to Mr Erich dated 27 September 2012.
Mr Erich sought a review of that decision by an Authorised Review Officer (“ARO”), but that was unsuccessful.[7]
[7] Exhibit 1, T Documents, T 27, page 316, online document recording records, dated 5 October 2012; and T 10, pages 56-62 letter, Authorised Review Officer to Mr Erich dated 14 August 2013 (with notes).
In May 2014, Mr Erich lodged a claim for Age Pension.[8] It was rejected because of the preclusion period.[9]
[8] Exhibit 1, T Documents, T 27, page 312, online document recording records, dated 22 May 2014.
[9] Exhibit 1, T Documents, T 22, pages 231-232, letter Department of Human Services to Mr Erich, dated 2 June 2014.
On October 2016, Mr Erich lodged a new claim for Aged Pension.[10] It, too, was rejected as a result of the preclusion period.[11]Mr Erich’s subsequent applications for review, first by an ARO,[12] and later by the Social Services & Child Support Division (“SSCSD”) of this Tribunal,[13] were unsuccessful.
[10] Exhibit 1, T Documents, T 16, pages 114-137, Mr Erich’s claim for Aged Pension dated 13 October 2016.
[11] Exhibit 1, T Documents, T 17, pages 138-139, letter, Department to Mr Erich, dated 17 October 2016.
[12] Exhibit 1, T Documents, T 19 pages 151-157, letter Authorised Review Officer to Mr Erich dated 29 November 2016 (with notes).
[13] Exhibit 1, T Documents, T 2 pages 6-10, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017.
Dissatisfied with the SSCSD’s decision, Mr Erich has sought a second tier review of it by the General Division of the Tribunal.
THE LEGISLATIVE FRAMEWORK
The legislative intent of the provisions dealing with compensation and its effect on social security income support payments is summarised in the Guide to Social Security Law:
It is a fundamental principle of the social security system that people who are unable to work because of a compensable injury are prevented from receiving income support from both the social security and compensation systems for the same period. These rules are designed to ensure that people who find themselves in this situation receive income support from those with the primary responsibility to provide the support i.e. statutory compensation schemes and insurers.[14]
[14] Guide to Social Security Law, 4.13.1.30 Effect of Compensation on Compensation Affected Payments.
Section 17 of the Social Security Act 1991 (Cth) (“Act”) contains the definitions relevant to compensation recovery.
“Compensation” is defined in s 17(2) of the Act to mean:
(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.
“Compensation part of a lump sum compensation payment” is relevantly defined as:
(a) 50% of the payment if the following circumstances apply:
(i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; …[15]
[15] Social Security Act 1991 (Cth), s 17(3).
The term, “compensation affected payment” is said to include, among other things, an Age Pension.[16]
[16] Ibid, s 17(1).
Section 1169(1) of the Act provides that if a person receives or claims a compensation affected payment and they receive a lump sum compensation payment, the compensation affected payment is not payable to them in relation to any day or days in the lump sum preclusion period.
The calculation of a lump sum compensation preclusion period is undertaken in accordance with s 1170 of the Act. It relevantly provides:
1) …if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
…
4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
Income cut-out amount
5)If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
Section 1184K of the Act provides that the Secretary may treat the whole or part of a compensation payment as not having been made, or not liable to be made, if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
ISSUES FOR THE TRIBUNAL
The issues which arise for my determination in the present case are:
(a) whether Mr Erich is subject to a compensation preclusion period and if so, for what period; and
(b) whether there are special circumstances which would justify treating part or all of Mr Erich’s compensation payment as not having been made.
I deal with these questions below.
CONSIDERATION
Is Mr Erich subject to a preclusion period, and if so, for what period?
The Secretary contends that Mr Erich is subject to a compensation preclusion period, he
having been in receipt of lump sum compensation through the compensation system. It is further contended that the calculation of the preclusion period is correct.[17]
[17] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 25 August 2017, [26] and [30].
No specific criticism of, or challenge to, the calculation of the preclusion period was made on behalf of Mr Erich. His wife, Mrs Judith Erich, was his representative throughout the various reviews. In response to a question from the Secretary’s representative, Mrs Erich said that she did not understand the calculation of the preclusion period, and would accept what the Secretary said.
Having regard to the settlement figures and undertaken the calculation of the preclusion period myself, I am satisfied that Mr Erich is subject to a preclusion period and that the Department’s calculation is correct.
The total settlement amount was $1,584,849.90. Of that total, an amount of $103,109.90 was paid in weekly benefits between 6 October 2008 and 13 November 2009,[18] leaving the balance of $1,481,740.00 as a lump sum compensation payment. Under s 17(3) of the Act, the compensation part of that lump sum compensation payment is 50 percent of that amount, being $740,870.00.
[18] Exhibit 1, T Documents, T 2, page 7, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017, [1].
Mr Erich ceased receiving weekly benefits on 13 November 2009, meaning that the preclusion period commenced with effect from 14 November 2009.[19]
[19] Social Security Act 1991 (Cth), s 1170(1).
The length of the preclusion period is calculated in accordance with s 1170(4) of the Act, with the compensation part of the lump sum compensation ($740,870.00) being divided by the relevant cut-off amount ($831.50),[20] giving a figure of 891 weeks (in round terms).
[20] Exhibit 1, T Documents, T 2, page 8, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017, [9].
Therefore, the preclusion period commenced on 14 November 2009 and ends 891 weeks later, on 11 December 2026.
Are there special circumstances which would justify treating part or all of Mr Erich’s compensation payment as not having been made?
What are “special circumstances”?
Section 1184K of the Act is designed specifically to enable the Secretary, and on review, the Tribunal, to ameliorate any unfairness or injustice when it appears by virtue of the strict application of the Act.[21]
[21] See Kirkbright v Secretary, Department of Family & Community Services (2000) 65 ALD 211, [22] (Mansfield J); and Secretary, Department of Social Security and Winterbotham [1990] AATA 808, [17] (DP Burns and Member Rogers).
The term “special circumstances” is not defined in the Act, although it has been the subject of much consideration by the courts and this Tribunal in this, and similar, contexts.
It has often been said that the expression looks to circumstances that are unusual, uncommon or exceptional, or which “have a particular quality of unusualness that permits them to be described as special”.[22] It requires something to distinguish the person’s case from others, “to take it out of the usual or ordinary case”.[23]
[22] See, for example, Re Beadle and Director-General of Social Security (1984) 6 ALD 1, 3 (Toohey J, Member Wilkins and Member Billings); and Dranichnikov v Centrelink (2003) 75 ALD 134, 148 (Hill J).
[23] Groth v Secretary, Department of Social Security [1995] FCA 1708, at page 7 (Kiefel J).
Mr Erich’s circumstances
Mrs Erich told the SSCSD hearing that they had spent all of the compensation money they had received. They had lived as if they were still working and “probably made some wrong decisions”. However, the money had gone and she did not know how they would be able to pay their bills; the cost of living was very high and they could not survive financially until the end of the preclusion period.[24]
[24] Exhibit 1, T Documents, T 2 page 8, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017, [10].
She confirmed to the SSCSD that she is in receipt of Age Pension (partnered) and Carer Allowance, but after expenses, still had a shortfall of about $373.00 per fortnight.[25] Mrs Erich said that at that stage (21 March 2017), they had about $10,000.00 left. However, she said that they had recently sold a car for $20,000.00,[26]making a total of about $30,000.00.
[25] Ibid, page 10, [22].
[26] Ibid, [23].
The note from Mrs Erich which accompanied her husband’s application for review reiterated that they had to sell a car in order to live, and had nothing left to sell; their motorhome was their home, and they would like “a little emergency money”. It was stated that the motorhome was also the only means by which they could travel to family residing interstate and elsewhere in Queensland. Mrs Erich attached an automatic teller withdrawal receipt, showing an account balance of just over $21,000.00 as at 27 April 2017.[27]
[27] Exhibit 1, T Documents, T 1, page 3, Mr Erich’s application for review dated 25 April 2017.
In July this year, Mrs Erich lodged with the Tribunal a further note, saying that the pension only covered food and hygiene expenses for the fortnight, and did not cover other expenses, such as chemist, rent, insurance, fuel and phone. She attached a further automatic teller receipt, showing an account balance as at 13 July 2017 of $6,266.39. A medical certificate by Dr Michelle Groves dated 5 October 2016 was also attached, noting that Mr Erich suffered from right sided hemiparesis due to a spinal cord injury, prostate cancer and degenerative spinal disease.[28]
[28] Exhibit 2, Mrs Erich’s note to the Tribunal dated 13 July 2017 (with attachments).
By the time of the hearing before me (15 September 2017), Mrs Erich said that they had just $5,000.00 left in the bank and that they did not know what to do. Asked to explain where $25,000.00 had gone since March, she said that there had been five deaths in the family in two years. In particular, she had travelled to be with her dying brother and spent seven weeks with him before he passed away. Mrs Erich also listed a number of other visits to family and friends.
Are Mr Erich’s circumstances “special”?
The Secretary submitted that Mr Erich’s circumstances would not justify the exercise of the discretion to disregard the whole or part of the compensation payment. Indeed, it was said that there are several factors which weigh strongly against the favourable exercise of the discretion.[29] Those factors are discussed below.
[29] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 25 August 2017, [34].
Notice of preclusion period
There is no doubt that Mr and Mrs Erich were given clear and unambiguous advice on numerous occasions about the compensation preclusion period and its impact.
Mr Erich was first notified of the application of the preclusion period and its impact in the Department’s letter of 27 September 2012.[30] That was reinforced by the Department’s letter of the same day, advising him of the cancellation of his Age Pension for that reason.[31] The former letter went on to advise him that Centrelink had Financial Information Service Officers who could help current and future customers make “informed decisions about their investment and financial issues.”[32]
[30] Exhibit 1, T Documents, T 22, pages 224-226, letter, Department to Mr Erich dated 27 September 2012.
[31] Exhibit 1, T Documents, T 22, pages 229-230, letter, Department to Mr Erich dated 27 September 2012.
[32] Exhibit 1, T Documents, T 22, page 225, letter, Department to Mr Erich dated 27 September 2012.
At the SSCSD hearing, Mrs Erich agreed that they were aware of the long compensation preclusion period. She said that they did not obtain financial advice and did not think about how they should invest the money for the future. Mrs Erich stated that they did not know how long they might be healthy enough to travel, so they thought they should use the money to make the most of their life whilst they could. She noted that this probably meant that they made some bad decisions along the way.[33]
[33] Exhibit 1, T Documents, T 2, page 10, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017, [21].
During the hearing before me, Mrs Erich confirmed that she and her husband were aware of the preclusion period applying until December 2026 and that they needed to support themselves for that period. However, she said that they did not think they would live that long. Mrs Erich acknowledged that they had spent a lot on travel, but added “that is what we do”; with her husband’s disability and her worry about ongoing expenses, she needed to travel for the sake of her mental health. She again conceded that they had made wrong decisions on a lot of things.
If Mr and Mrs Erich were under any misapprehension about the application of the preclusion period and its impact, that would have been dispelled by the ARO’s decision of August 2013, affirming the decisions to apply the preclusion period and cancel Mr Erich’s Age Pension.[34] After noting Mrs Erich’s comment that, in the 11 months since the settlement, they had spent all but about $260,000.00 of the money, the ARO told her that they needed to be “very cautious about the expenditure of the remaining amount of the money due to the lengthy preclusion period”.[35]
[34] Exhibit 1, T Documents, T 10, pages 56-62, letter, Authorised Review Officer to Mr Erich dated 14 August 2013 (with notes).
[35] Ibid, page 61.
On 2 June 2014, the Department rejected Mr Erich’s claim for Age Pension on the ground that because of the preclusion period, he could not be paid a pension until after 11 December 2026.[36]
[36] Exhibit 1, T Documents, T 22, pages 231-232, letter, Department to Mr Erich dated 2 June 2014.
The following May, the Department wrote to Mr Erich to remind him of the impact of the preclusion period. It specifically explained how the period was calculated and again advised that he was not able to receive income support from Centrelink until after 11 December 2026.[37]
[37] Exhibit 1, T Documents, T 22, pages 233-234, letter, Department to Mr Erich dated 15 May 2015.
From that summary, it is beyond doubt that Mr and Mrs Erich were well aware, from an early stage, that Mr Erich was subject to a lengthy preclusion period and that they would need to support themselves for that period, without Mr Erich having to rely on the social security system for support. That message has been repeated a number of times since. Mr and Mrs Erich’s awareness of the preclusion period and its impact is an important, and pervading factor in my consideration as to whether the discretion should be favourably exercised.
Financial hardship
The Secretary contends that financial hardship must go beyond “straitened” circumstances and be truly exceptional in order to be considered “special”.[38] I agree.[39] There needs to be something to distinguish the person’s circumstances from the usual or ordinary case. Regrettably, impecuniosity and straitened circumstances are neither unusual nor out of the ordinary amongst social security recipients.[40]
[38] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 25 August 2017, [40].
[39] See Krzywak and Secretary, Department of Social Services (1988) 15 ALD 690 (SM Dwyer).
[40] Director General of Social Services v Hales (1983) 47 ALR 281, 321 (Sheppard J).
That is not to say, however, that a person’s straitened circumstances are to be ignored. They are an important factor, but not the sole one. Other factors that also need to be considered include the general administration of the social security system and whether the applicant’s disposition of their compensation payment has been reckless.[41]
[41] Gartside and Secretary, Department of Social Services [2017] AATA 45, [57]-[58] (SM Sosso).
As mentioned earlier, Mrs Erich says that, apart from $5,000.00, all the money from the settlement has gone, and there is nothing left to sell. That raises two issues: whether there is sufficient, credible evidence to support her claim that the settlement moneys have been depleted; and if that is the case, whether the motorhome, as a substantial realisable asset, ought to be sold to enable Mr Erich to support himself for the balance of the preclusion period.
In November last year, the ARO undertook an analysis of the disposal of Mr Erich’s funds. That exercise identified that he had failed to account for approximately $350,000.00 of the settlement monies received.[42] At the hearing before me, Mrs Erich was asked by the Secretary’s representative whether she was able to explain that unaccounted expenditure, and in particular, whether there had been any other major items of expenditure. She responded that their only method of travel was in their motorhome and that was expensive, with fuel and rent for caravan park sites. She also said that when they were in Perth, they took a 46 day cruise of the Indian Ocean, which she estimated cost about $40,000.00. She acknowledged that the cruise was something that they should not have done. Even taking that cruise and the cost of motorhome travel into account, there still appears to be other substantial expenditure unaccounted for. While I appreciate there would be ongoing expenses associated with travelling in the motorhome, I find it difficult to accept, having regard to the expenditure disclosed by Mr and Mrs Erich, that it would have substantially depleted the balance of the unaccounted $350,000.00.[43]
[42] Exhibit 1, T Documents, T 19, page 157, notes of Authorised Review Officer dated 29 November 2016.
[43] The cost of site rental was put at $40.00 per night in Mr Erich’s “Compensation Recovery- Statement of Financial Circumstances” form dated 8 November 2016 (Exhibit 1, T Documents, T 18, page 147), or $14,600.00 per year.
Similarly, the Secretary’s representative asked Mrs Erich to explain the $25,000.00 expenditure in the six months between the SSCSD hearing and the hearing before me. Again, the only explanation offered related to the cost of travel.[44] It is unclear whether that travel occurred during the six months in question.
[44] See paragraph 37 above.
It follows from what I have said that there remain significant items of expenditure unaccounted for. Without further corroborative evidence concerning the disposal of the funds, I am not persuaded that the settlement proceeds have been completely depleted.
Before addressing the question of whether the motorhome ought to be sold in order to provide support for the remainder of the preclusion period, it is useful to provide some background.
Mrs Erich told the SSCSD that prior to the workplace accident, she and her husband owned a yacht and had envisaged spending their retirement living on the yacht and travelling. Following Mr Erich’s accident, they had to sell the yacht as he was disabled. However, they believed they should “live life to the fullest” and travel while they still could. In a relatively short space of time, they purchased, renovated and sold one house, before repeating the exercise with a second house. They also purchased a motorhome in 2012, which they later sold, before purchasing their current motorhome in June 2015 for about $217,000.00. That had to be modified to meet Mr Erich’s needs.[45] It is, as Mrs Erich told me, their home and their car. She questioned what they would do if they had to sell it. They would have to rent, and would have no car. She said that she did not want to put her husband in a nursing home.
[45] Exhibit 1, T Documents, T 2, page 9, Social Services & Child Support Division decision and reasons for decision dated 21 March 2017, [18] and [19].
The Secretary contends that the decision to purchase the motorhome was not reasonable, in light of the substantial amount of advice given to Mr Erich about the impact of the preclusion period. In those circumstances, the Secretary submits that Mr Erich ought to realise that asset before a finding of “special circumstances” can be made. It is said that is particularly so in the present case, where the Erichs purchased and renovated two houses with full knowledge of the preclusion period and its impact, and where the purchase of the motorhome was explained in order that they could “live life to the fullest”.[46]
[46] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 25 August 2017, [44].
In making those submissions, the Secretary’s representative noted that the question of whether a person ought to be required to sell a home purchased out of compensation proceeds before a preclusion period should be reduced due to special circumstances, has been considered by the Tribunal on a number of occasions. Those decisions, he acknowledged, have gone both ways.[47] From my reading of the decisions referred to me, each matter depends on the circumstances of the particular case, and involves considering and weighing up a variety of factors.
[47] See, for example: (refusal to find special circumstances) Secretary, Department of Social Security and Winterbotham [1990] AATA 808 and Davis and Secretary, Department of Family and Community Services [1999] AATA 84; and (finding of special circumstances) Barba and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] AATA 403 and Madrick and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 408,
Turning to the present case, I do not consider that Mr Erich’s purchase of the motorhome in June 2015 was reasonable, having regard to the lengthy preclusion period (the existence and impact of which he was fully aware), and the already substantial depletion of the compensation funds. The reason advanced for the purchase, to enable him and his wife the opportunity to “live life to the fullest”, indicates an intention to deliberately ignore the cautions given to them about the impact of the preclusion period.
If the initial purchase was unreasonable, it is equally now not unreasonable to expect the motorhome, representing the last substantial realisable asset, to be sold, in order to make funds available to support Mr Erich during the remainder of the preclusion period. In saying that, I am conscious of the fact that on previous occasions (such as the sale of the two houses and the earlier motorhome), Mr Erich has been willing to sell substantial assets; this occasion should be no different.
While the sale of the motorhome would necessarily mean that Mr and Mrs Erich would be forced to rent, that is not an unusual or uncommon experience for recipients of social security payments. Nor is it unusual that rental accommodation does not offer the same comforts and attributes as one’s own accommodation.
It follows from what I have said that, while he has a substantial realisable asset available to him, I do not consider that Mr Erich is suffering from financial hardship.
Conduct in the expenditure of the lump sum
The Secretary contends that Mr Erich was profligate in the disposal of compensation funds, pointing to the purchase, renovation and sale of two houses, the purchase of two motorhomes (one of which was sold) and the undertaking of extensive travel. If, as Mr Erich claims (but which is not conceded by the Secretary), he has exhausted the balance of his compensation funds, the Secretary estimates that Mr Erich has expended approximately $130,000.00 per year since 2012.[48]
[48] Exhibit 3, Secretary’s Statement of Facts and Contentions dated 25 August 2017, [46].
I agree with, and accept, the Secretary’s submission that Mr Erich was profligate. Without intending to be exhaustive, the following are some examples. As noted earlier, an ARO sounded a warning to Mrs Erich just 11 months after the settlement, after she disclosed that only $260,000.00 remained from the settlement proceeds. As for the purchases, Mrs Erich concedes that they made wrong decisions “on a lot of things”. She acknowledged in particular that they should not have taken the Indian Ocean cruise. The $30,000.00, identified by the SSCSD as potentially being available to cover Mrs Erich’s budget shortfall for the following three years, virtually evaporated in six months without any clear explanation.
In short, I agree that Mr and Mrs Erich displayed a reckless disregard for their future financial stability – fully aware of the lengthy preclusion period and its impact, they effectively turned a “blind eye” to the consequences of their actions, determined to “live life to the fullest”.
In coming to that view, I note that there is no medical evidence to suggest that either Mr or Mrs Erich suffered from a diagnosed condition with specific symptoms of compulsive or uncontrollable behaviour, which might go some way to explaining their level of expenditure.
In summary, I accept the Secretary’s submission that Mr and Mrs Erich’s conduct was highly irresponsible and weighs heavily against the favourable exercise of the discretion.
Ill health
There is no doubt that Mr Erich suffers from serious medical conditions. However, that is not unusual or out of the ordinary for someone who has received compensation for a compensable injury. As Deputy President Hack observed in Hammelswang and Secretary, Department of Social Services:
Whilst I accept that Mr Hammelswang has a considerable injury and is in considerable pain that, it seems to me, is, in and of itself, not unusual. Most who qualify for disability support pension do so because of the presence of one or more impairments that prevent them from pursuing employment. That presupposes a level of disability common in persons who would qualify for disability support pension. The financial position in which Mr Hammelswang finds himself is undoubtedly strained; however, it does not seem to me to be out of the ordinary for someone in his circumstances.[49]
[49] [2015] AATA 905, [7].
Summary and overview
In summary, Mr Erich was well aware of the preclusion period applied to him and the impact that it would have on his ability to receive income support from the social security system. In particular, he knew full well that the compensation money he received would have to last until December 2026. Despite being aware of those matters, he sought no specialist advice as to how to manage those funds.
Instead, he and his wife embarked on a course of spending which seriously depleted his funds. Within 11 months of Mr Erich’s receipt of the compensation payment, an ARO was already cautioning Mrs Erich about the level of expenditure.
The spending was profligate. In a relatively short period, two houses were bought, renovated and sold in succession, and a motorhome was bought and sold before another motorhome was purchased and modified. Mr and Mrs Erich embarked on extensive travel, including a 46 day cruise in the Indian Ocean. Given that the funds were to support Mr Erich until 2026, that spending was unreasonable and irresponsible. Still other expenditure, in the vicinity of $310,000.00 and on a later occasion, $25,000.00, remained unaccounted for.
Mr and Mrs Erich’s explanation was that they did not think they would live to see the end of the preclusion period, and so intended to “live life to the fullest”. That said, Mrs Erich conceded that they had made mistakes on a lot of things, including going on the cruise.
In light of those matters, the Erichs’ conduct can only be described as irresponsible and reckless. While it is only natural for one to aspire to live life to its fullest, it is another thing to expect that lifestyle to be funded by the public purse.
As Mr Erich has a substantial realisable asset in the motorhome, he could not be said to be in financial hardship or destitute.[50]
[50] Cf O’Neill and Secretary, Department of Education, Employment and Workplace Relations [2009] AATA 619 (Isenberg SM).
Considering those factors together, I am not prepared to exercise the discretion in his favour.
CONCLUSION
For the reasons outlined above, I consider that the preclusion period applied in respect of Mr Erich, and that it was correctly calculated. I do not believe there are special circumstances which would justify treating part or all of his compensation payment as not having been made.
Accordingly, the decision under review is affirmed.
I certify that the preceding 75 (seventy-five) paragraphs are a true copy of the reasons for the decision herein of Senior member A C Cotter
............................[Sgd]............................................
Associate
Dated: 17 October 2017
Date of hearing: 15 September 2017 Applicant:
Applicant’s Advocate:
By phone
Mrs Judith Erich (by phone)
Solicitor for the Respondent: Mr Nick Warren
Department of Human Services
0
7
0