Executor of the Estate of the late Seth Taulaga and Secretary Department of Social Services (Social services second review)
[2019] AATA 5408
•14 November 2019
Executor of the Estate of the late Seth Taulaga and Secretary Department of Social Services (Social services second review) [2019] AATA 5408 (14 November 2019)
Division: GENERAL DIVISION
File Number: 2018/3248
Re: Executor of the Estate of the late Seth Taulaga
APPLICANT
And: Secretary Department of Social Services
SECRETARY
DECISION
Tribunal Member D K Grigg
Date: 14 November 2019
Place: Brisbane
The Tribunal sets aside the decision under review and replaces it with a decision that pursuant to section 1184K(1) of the Social Security Act 1991 it is appropriate in the special circumstances of the case to treat whole of Mr Taulaga’s compensation payment as not having been made, with the result that the compensation preclusion period be reduced to nil
.......................[sgd].................................................
Member D K Grigg
Catchwords
SOCIAL SECURITY – compensation preclusion payment – calculation of preclusion period – whether preclusion period should be reflective of economic loss claim – whether the discretion under section 1184K of the Social Security Act 1991 (Cth) should be exercised to treat the lump sum compensation payment as not having been made on the grounds of special circumstances - decision under review set aside on grounds of special circumstances – appropriate case for the discretion to be exercised
Legislation
Administrative Appeals Tribunal Act 1975 (Cth)
Social Security Act 1991 (Cth)
Cases
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Beadle and Director-General of Social Security (1984) 6 ALD 1
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Frajnd and Secretary, Department of Social Services [2018] AATA 1515
Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541
Haidar v Secretary, Department of Social Security [1998] FCA 994
Hajar and Secretary, Department of Social Security (1986) 16 ALD 716
Hneidi And Others v Minister for Immigration And Citizenship (2010) FCAFC 20
Moran and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 951
Minos and Department of Family and Community Services [2000] AATA 1104
Riddell v Secretary, Department of Social Security (1993) 42 FCR 443
Secretary, Department of Social Services and Wendy Halliday as the Administrator of the Estate of the Late Ashley Pauling [2018] AATA 3865
Secretary, Department of Employment and Workplace Relations and Homewood [2006] FCA 779
Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones (2012) 89 ATR 267
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Secretary, Department of Social Security v Hales (1998) 51 ALD 695
Secretary, Department of Social Security v Thompson (1994) 36 ALD 563
Secondary Materials
Guides to Social Security Law: Social Security Guide (Version 1.258, released 20 September 2019) (Cth)
REASONS FOR DECISION
Member D K Grigg
14 November 2019
INTRODUCTION
This application concerns whether a lump sum compensation payment received by Mr Seth Taulaga should be treated as not having been made, relying on section 1184K of the Social Security Act 1991 (“the Act”).
On 4 November 2018, subsequent to this application being lodged, the original applicant, Mr Taulaga, passed away at the age of 33. Pursuant to an order made by Deputy President McDermott on 24 January 2019, Mr Taulaga’s wife, Mrs Valisa Taulaga, was made a party to the proceeding. This order was made because Mrs Taulaga is the executor and sole beneficiary of Mr Taulaga’s estate and is therefore a party whose interests will be affected by this decision.[1]
[1]Section 30(1A), Administrative Appeals Tribunal Act 1975 (Cth).
BACKGROUND AND CLAIM HISTORY
From 18 September 2015 Mr Taulaga was a recipient of the Newstart Allowance (“NSA”). On 12 October 2015 his NSA was cancelled, and he was placed on the Disability Support Pension (“DSP”) due to being unable to work as a result of a longstanding serious lung condition, brochiectasis. From 6 February 2017, Mr Taulaga also received the Pensioner Education Supplement (“PES”).
Between 10 August 2014 and 14 October 2017 Mr Taulaga was paid the following benefits totalling $50,724.75:
(a)NSA - $1,144.02;
(b)DSP - $48,470.91; and
(c)PES - $1,109.82.
On 10 August 2014 Mr and Mrs Taulaga’s daughter died in Hospital. Mr and Mrs Taulaga commenced proceedings against the Hospital claiming the Hospital had been negligent in the treatment of their daughter which resulted in her death.
On 11 October 2017 the Department of Human Services (“Centrelink”) was notified by Mr Taulaga’s lawyers that Mr Taulaga’s personal injuries claim against the Hospital had settled by consent on 9 October 2017. Pursuant to the settlement, without admission of any liability by the Hospital, Mr Taulaga was to receive compensation from the Hospital totalling $325,000 for his pathological grief reaction and gambling addiction which had resulted from the death of his child.[2] According to the statement of particulars of his claim, Mr Taulaga claimed that he had lost approximately $30,000 due to his gambling addiction.
[2]Exhibit 2, T Documents, T9, pages 87 – 96, documents and correspondence supplied by Mr Taulaga’s lawyers
received on 23 October 2017.
After necessary deductions from the total compensation amount were made, Mr Taulaga received approximately $250,000. Mrs Taulaga told the Tribunal she also received $250,000 in compensation from the Hospital.[3] Mrs Taulaga told the Tribunal they felt pressured to accept the settlement.
[3]There was no material relating to Mrs Taulaga’s personal injury claim before the Tribunal.
As part of Mr Taulaga’s personal injuries claim, he claimed economic loss of $730 per week gross from the date of the injury (being the date his daughter died) to the date he received the DSP (12 October 2015). The total economic loss claim was approximately $38,000.
Centrelink wrote to the insurer of the Hospital, on 16 October 2017 advising that:[4]
(a)it had determined that the fund was liable to pay compensation to or liable under a contract of insurance to indemnify Mr Taulaga against any liability arising from the claim he had made for lost earnings or a lost capacity to earn; and
(b)pursuant to section 1184 of the Act notice was given that Centrelink proposed to recover from the Hospital’s Insurer an amount of $50,724.75 being the amount of recoverable Centrelink payments received by Mr Taulaga between 18 September 2015 and 12 October 2017.
[4]Exhibit 2, T Documents, T7, pages 80 - 81, Letter from Centrelink to the insurer of the Hospital dated 16 October 2017.
Centrelink also wrote to Mr Taulaga on 16 October 2017 to advise him of the effect his lump sum compensation payment (“LSCP”) of $325,000 would have on his eligibility for any income support payments from Centrelink. Mr Taulaga was informed that Centrelink had calculated that he had a preclusion period that started on 10 August 2014 and ended on 14 October 2017.[5] Centrelink also advised that it had asked the Hospital’s Insurer to repay $50,724.75 to Centrelink before paying the rest of his compensation payment pursuant to the authority given to it in section 1184 of the Act.
[5]Exhibit 2, T Documents, T8, pages 82 – 84, letter from Centrelink to Mr Taulaga dated 16 October 2017.
During a preclusion period a person may be unable to receive income support payments from Centrelink. A preclusion period may apply because during such a period, a potential recipient of Centrelink payments is expected to use the LSCP they have received to provide for their own income support. The length of the preclusion period is calculated according to a formula provided for under the Act (discussed further below).
On 20 October 2017 Mr Taulaga’s lawyers wrote to Centrelink to advise that the preclusion period of 10 August 2014 to 14 October 2017 was not reflective of Mr Taulaga’s claim for economic loss and requested Centrelink review its decision.[6]
[6]Exhibit 2, T Documents, T9, page 86, letter from Curwoods Lawyers to Centrelink dated 20 October 2017.
A further letter was sent by Mr Taulaga’s lawyers to Centrelink a few days later reiterating the position that the preclusion period was not reflective of Mr Taulaga’s claim for economic loss.[7] Section 1184K of the Act provides that the Secretary may treat a compensation payment as not having been made if the Secretary thinks it appropriate to do so in the special circumstances of the case.
[7]Exhibit 2, T Documents, T10, page 97, letter from Gerard Malouf and partners to Centrelink dated 23 October 2017.
Centrelink then referred the matter to an Authorised Review Officer (“ARO”).
The ARO found that:[8]
(a)using the compensation preclusion formula provided for in section 1170 of the Act, the compensation preclusion period had been calculated correctly; and
(b)even in situations where the formula may not constitute an accurate record or accounting for economic loss that this in of itself did not amount to special circumstances to justify reducing or waiving the preclusion period.
[8]Exhibit 2, T Documents, T11, pages 98 – 103, Decision of ARO and notes dated 14 November 2017.
On 5 March 2018 Mr Taulaga lodged an application for review with the Social Services and Child Support Division (“SSCSD”) of this Tribunal.[9]
[9]Exhibit 2, T Documents, T12, pages 104 – 109, Letter from Gerard Malouf and partners to the AAT enclosing an application for review dated 5 March 2018.
On 10 April 2018 Centrelink wrote to Mr Taulaga and requested information regarding his financial circumstances in order to ensure that it had made the right decision regarding his DSP.[10] In response to the request for information Mr Taulaga provided a statement of financial circumstances and a completed income and assets form.[11]
[10]Exhibit 2, T Documents, T14, pages 112 – 113, letter from Centrelink to Mr Taulaga dated 10 April 2018.
[11]Exhibit 2, T Documents, T15 - T16, pages 114 - 132, Statement of Financial Circumstances and income and assets form dated 26 April 2018.
The SSCSD rejected Mr Taulaga’s claim and affirmed the ARO’s decision on 14 May 2018.[12]
[12]Exhibit 2, T Documents, T2, pages 3 – 10, SSCSD’s Decision and Reasons for Decision dated 14 May 2018.
Mr Taulaga then sought a review of the SSCSD’s decision by this Tribunal.[13]
[13]Exhibit 2, T Documents, T1, pages 1 - 2, Application for Review dated 14 May 2018.
ISSUES FOR DETERMINATION
The issues for determination are:
(a)whether Mr Taulaga received a LSCP; and, if yes,
(b)whether a preclusion period applied; and, if yes,
(c)what is the correct preclusion period; and
(d)whether any special circumstances exist which would make it appropriate to treat the LSCP as not having been made.
LEGISLATIVE BACKGROUND
The legislation relevant to this matter is contained in the Act.
The amount, or duration, of a preclusion period is determined in accordance with Part 3.14 of the Act.
The preclusion period is determined in accordance with section 1170 of the Act:
1Subject to subsection (2), 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).
2If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
3If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a)begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b)ends at the end of the number of weeks worked out under subsections (4) and (5).
4The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation on part of lump sum
-----------------------------------------------------------------------------------------------------------
Income cut-out amount5If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
A compensation affected payment includes a social security benefit: section 17(1) of the Act.
Pursuant to section 1169(1) of the Act (emphasis added):
1If:
(a)a person receives or claims a compensation affected payment; and
(b)the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
“Compensation” is defined, relevantly, in section 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.
Section 17(3)(a) of the Act provides, relevantly here, that the compensation part of a lump sum compensation payment is:
(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;
DID MR TAULAGA RECEIVE A LSCP?
It is not in dispute that the compensation received by Mr Taulaga as a result of his personal injuries claim is a LSCP as defined by section 17(2) of the Act.
DOES A PRECLUSION PERIOD APPLY?
It is not in dispute that a preclusion period applies to Mr Taulaga’s LSCP.
What is the preclusion period? How is the preclusion calculated?
The LSCP totalled $325,000. No periodic payments of compensation were made to Mr Taulaga, therefore section 1170(3) of the Act applies to determining the start and end date of the preclusion period.
Section 1170(3) of the Act provides that the preclusion period begins on the day on which the loss of earnings or loss of capacity to earn began and ends at the end of the number of weeks worked out under subsections 1170(4) and (5) of the Act.
The statement of particulars of the claim provided to Centrelink sets out that Mr Taulaga’s claim for loss of earnings commenced on the date of the injury, which was 10 August 2014.
Applying section 17(3) of the Act, the compensation part of the lump sum payment is 50% of the LSCP. The lump sum payment totalled $325,000, 50% of which equals $162,500.
In accordance with section 1170(4) of the Act, the number of weeks in the preclusion period equals 166 weeks calculated as follows:
$162,500[14]/$978.40[15] = 166.09 weeks[16]
[14]50% of the compensation part of the lump sum payment: section 17(3) of the Act.
[15]This is the income cut-out amount calculated in accordance with section 17(8) of the Act; the income cut
out amount as at the relevant time was $978.40.
[16]The number is then rounded down in accordance with section 1170(5) of the Act.
The preclusion period commenced on 10 August 2014 and ended 166 weeks later on 14 October 2017.[17]
[17]See section 1170(1) of the Act.
During the preclusion period Mr Taulaga received a total of $50,724.75 of relevant Centrelink benefits (see para 4 above), and, as a result, this amount was taken by Centrelink from the Hospital’s insurer before his compensation claim was paid to him.
Mr Taulaga would not have been entitled to receive a compensation affected payment (i.e. DSP) during the preclusion period unless special circumstances apply.
If the discretion should be exercised to treat the LSCP as not having been made, the Applicant will be entitled to a refund of the compensation charge imposed at the time Mr Taulaga was to receive the compensation.
ARE THERE ANY SPECIAL CIRCUMSTANCES?
As referred to earlier, pursuant to section 1184K of the Act, a discretion may be exercised to treat the whole or a part of the LSCP as having not been made or not liable to be made if it is appropriate to do so in the special circumstances of the case.
If the Tribunal finds that special reasons exist for the purpose of section 1184K of the Act, French J (as he then was) said, in Secretary, Department of Employment and Workplace Relations and Homewood [2006] FCA 779, at [34], that the Tribunal is expected to:
1Identify the circumstances of the case which it found to be ‘special’ and the reasons for which it arrived at that finding.
2Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.
3Explain why it selected the particular quantum (ie the whole or part) of the compensation payment as not having been made.
What does “special circumstances” mean?
The Act does not define what constitutes “special circumstances”.
There has been considerable judicial consideration of the phrase in the context of other social security legislation, for example:
·“Special” denotes something different from the usual or ordinary: Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541, at 545 per Kiefel J (as she then was).
·French J (as he then was) said in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 (“Hales”), at 162:
The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it… It is inappropriate to constrain that flexibility by imposing a narrow or artificial construction upon the words... It may be that there are few cases in which having found special circumstances to exist, the Secretary would exercise the discretion to waive in the absence of financial hardship. But to anticipate the limits of the categories of possible cases by imposing on the language of the section a fetter upon its application which is not mandated by its words, is to erode its useful purpose.
·The Full Federal Court in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443 held, at 450:
Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.
·Jacobson J in Secretary of the Department of Families, Housing, Community Services and Indigenous Affairs v Jones (2012) 89 ATR 267; [2012] FCA 639 explained the effect of the authorities as follows [emphasis added]:
[51] ...the phrase “special circumstances”, although lacking in precision, is sufficiently understood as including events or things that render the operation of the statue in a particular case as unfair, unintended or unjust. What is required is something that takes the case out of the ordinary, and unfairness or unintended consequences may show that this exists. Moreover, the circumstances of the case are not confined to matters that are external to the operation of the statutory scheme: see Smith per von Doussa J at 60, 61–62; Groth per Kiefel J at 545, Kertland v Secretary, Dept of Family and Community Services (1999) 95 FCR 64 per Merkel J at 71, 73; Kirkbright v Secretary, Dept of Family and Community Services (2000) 106 FCR 281 per Mansfield J at [22], [26]–[27] and [31]–[32]; see also Secretary to the Department of Family and Community Services v Allan (2001) 116 FCR 1 per Heerey J at [17].
The AAT has also considered the phrase and held that the interpretation in Beadle and Director-General of Social Security (1984) 6 ALD 1, at [12] (i.e. that the circumstances must be unusual, uncommon or exceptional), applies to the Act.[18]
[18]See Hunnibell and Secretary, Department and Community Services [2004] AATA 992, at [19]; Papps and Secretary, Department of Family and Community Services [2005] AATA 660, at [37].
In summary, the circumstances relied upon to be “special” must be unusual, different, uncommon or exceptional.[19]
[19]The core requirement for “special reasons” is that there be something “unusual or different”: French J in Boscolo v Secretary, Dept of Social Security [1999] FCA 106; (1999) 90 FCR 531, at [18]; Barker J in Kazmierczak v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2010] FCA 1084,In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 Besanko J reiterated “the importance of maintaining flexibility” in determining what constitutes special circumstances and that circumstances do not have to be exceptional, just unusual or uncommon.
Mental health of the applicant is also a factor to consider.[20]
[20]Secretary, Department of Social Security v Thompson [1994] FCA 1477; (1994) 53 FCR 580, at 586.
The Social Security Guide (Version 1.258 - Released 20 September 2019) (“the Guide”) is also relevant to a consideration of what circumstances may be considered “special”. The Guide provides guidance to relevant departmental officers on how to apply social security legislation.
Brennan J explained the relevance of an adopted policy to decision-making in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 (“Drake”) at 640:[21]
Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with the fairness and continuity of the administrative process.
[21]Singh v Minister for Immigration and Citizenship (2012) 199 FCR 404.
The Full Federal Court in Hneidi And Others v Minister for Immigration And Citizenship (2010) FCAFC 20 set out the four propositions which emerge from Drake v Minister for Immigration and Ethnic Affairs (1979) 24 ALR 577 (“Drake”) when considering the entitlement of an administrative decision-maker to take into account a statement of governmental policy:
[41] …The first is that the decision-maker is entitled, in the absence of specifically defined criteria for the exercise of the discretion, to take into account “government policy”. Thus, where the Tribunal is not under a statutory duty to regard itself as bound by the policy, it is entitled to treat the policy as a relevant consideration.
[42] Second, in the absence of a specific statutory provision (which would no doubt be unusual) the Tribunal is not entitled to abdicate its function of determining whether the decision under review was, on the material before the Tribunal, the correct or preferable one, to a more passive function of determining whether the decision conformed to the relevant policy.
[43] Third, it is not desirable to frame a general statement of the part which government policy should ordinarily play in the determinations of the Tribunal. That is a matter for the Tribunal to determine in the context of the particular case, informed by considerations of the desirability of consistency of administrative decisions but balanced against the ideal of justice in the individual case.
[44] Fourth, the borderline between cases in which the Tribunal has abdicated its functions to those of an unthinking application of “government or Ministerial policy” to the facts may sometimes be blurred. But where the Tribunal considers that the correct or preferable decision results from the application of such a policy, it should make it clear that:
“… it has considered the propriety of the particular policy and expressly indicates the considerations which have led it to that conclusion”
In Drake, Brennan J (as President of the AAT) noted that:
·“An argument against the policy itself or against its application in the particular case will be considered, but cogent reasons will have to be shown against its application”.[22]
·“The Tribunal’s duty is to make the correct or preferable decision in each case on the material before it, and the Tribunal is at liberty to adopt whatever policy it chooses, or no policy at all, in fulfilling its statutory function”.[23]
·Further, consistency with comparable cases and decisions is “[o]ne of the factors to be considered in arriving at the preferable decision… and one of the most useful aids in achieving consistency is a guiding policy”.[24]
[22]Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, at 645.
[23]Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, at 642.
[24]Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, at 643.
The Tribunal is not bound to apply the Guide, but it may, and it should, apply it in exercising its discretion unless it is unlawful or “tends to produce an unjust decision”.[25]
[25]ReDrake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, at 645.
The Guide sets out in section 4.13.4.20, some of the factors to consider when determining special circumstance provisions. In particular, the following circumstances are identified in the Guide as relevant [emphasis added]:
Ill health
· Ill health that has a major bearing on the individual's circumstances.
Example: Unforeseen and unexpected medical expenses for the person or immediate family member or dependant, which results in financial self-support plans being thwarted.
· State of ill health should be more severe than the majority of DSP recipients.
Addictions
· Is there evidence that the behaviour of the person was as the result of an addiction or mental health condition outside their control?
· Has the addiction occurred after the receipt of the compensation lump sum or is there an ongoing history of this abuse?
· Has the circumstance that caused the hardship also contributed to the problem?
· A detailed spending history may provide evidence or a report from a doctor or treating psychiatrist/psychologist.
· Current medical or other reports should be provided outlining the condition and the impact this has on the individual.
Changed circumstances
· Have the circumstances of the person altered significantly since the preclusion period commenced due to circumstances wholly or partly outside of the person's control?
Examples:
· The compensation recipient has divorced since the settlement and their personal assets have reduced due to the property settlement.
· The compensation recipient has been successfully sued with the result that they must use part or all of their settlement to comply with the decision.
· Natural disasters.
· Sudden ill health of the person or member of their family.
· Collapse or failure of a well considered investment/business which was meant to generate self-supporting income.
· Documentation to support claims must be produced by the person.
Do special circumstances exist?
Mr Taulaga’s estate contends that the LSCP should be treated as not having been made because:
(a)the LSCP is not reflective of the economic loss component of Mr Taulaga’s compensation claim;
(b)the LSCP was received in relation to the death of his daughter and is not related to the reasons Mr Taulaga was receiving the DSP;
(c)Mr Taulaga suffered from significant ill health and incurred medical costs for treatment and necessary equipment; and
(d)Mrs Taulaga is concerned about her ability to financially support her family following her husband’s death. Mrs Taulaga has two other children from her relationship with Mr Taulaga.
A preliminary issue to be considered is what period is relevant when considering whether special circumstances exist. Is it only the period during which the preclusion period applied, or can it include subsequent events and circumstances?
In Secretary, Department of Social Services and Wendy Halliday as the Administrator of the Estate of the Late Ashley Pauling [2018] AATA 3865, Deputy President McCabe and Member Bygrave considered this issue and determined that section 1184K of the Act “which refers to the “special circumstances of the case” [emphasis added], to direct that we are required to consider all aspects of the matter irrespective of time”.[26]
[26][2018] AATA 3865, at [43].
The Secretary accepted at the hearing that all aspects of the matter should be considered, irrespective of time. However, the Secretary went on to contend that, in taking into account circumstances as they are now, well after the preclusion period, that the applicant needed to demonstrate that there is a sufficient nexus between the current circumstances and events that occurred during the preclusion period. The Secretary relied on Haidar v Secretary, Department of Social Security [1998] FCA 994 (“Haidar”) for this proposition.
In Haidar Hill J found that:
The contemplation under s 1184(1) is that the decision maker will look at all relevant facts taking into account those which make the case special in determining to treat the lump sum compensation amount as not having been made. Whether difficulties experienced after the preclusion period are relevant is a more difficult question.
…
In Haidar, as here, the preclusion period had already expired by the time of the hearing. Hill J found that [emphasis added]:
In the case such as the present where the preclusion period required by the statutory formula in the absence of discretion had finished, it cannot be said that events at the time of hearing would necessarily be irrelevant. It is clear enough that the Tribunal sitting on appeal from a decision maker, be it the Minister or another Tribunal, must take into account the facts as they exist at the time the matter is heard by the Administrative Appeals Tribunal, to the extent those facts are relevant to the decision. It is not limited to taking into account events which occurred at the time the original decision was made, nor for that matter facts as they were known at that time, notwithstanding that later knowledge would lead to a revision of the earlier factual assessment. However, the fact that the Tribunal can consider facts after the date the initial decision was made does not mean that every fact after that date is necessarily relevant. Where, between the end of the preclusion period and the time of the decision, a claimant's economic situation is good and that arose as a result of receipt of a lump sum compensation amount, clearly the decision maker or Tribunal in place of the decision maker could take into account the economic circumstances existing at the time of the decision. But that is because those economic circumstances bear some relationship to the matter under decision, namely the relevance of the lump sum payment and its impact upon the question whether a pension be paid notwithstanding the receipt of a lump sum.
Conversely, should it be the case, that some event which happened after the expiration of the preclusion period but before the Tribunal heard the matter, and which event was wholly unrelated to the relationship between the lump sum and pension, have any significance at all? It is hard to see how it could...
Even though the Act provides that there need be no connection whatsoever between the LSCP and the basis for which a pension is being paid, it is clear from Haidar that for a factor to be relevant to the exercise of a discretion, that factor must have some relationship to the matter under question.
Hill J went on to consider the intended purpose of the imposition of a preclusion period and the fact that the provision for a discretion to be exercised was recognition that the application of a preclusion period may, in some cases, be inappropriately harsh [emphasis added]:-
The discretion under s 1184(1) is expressed in wide terms untrammelled by specificity. Some assistance is, however, given from the legislative history.
The concept that social security payments might be affected in a particular way by the receipt of a lump sum compensation amount stems, it would seem, from the Social Security Amendment Act 1988 making amendments to the now repealed Social Security Act 1947. The Second Reading Speech to the 1988 Amendment Act said:
"This Bill contains measures to improve the administration and integrity of compensation recovery provisions. Where a person receives personal injury compensation that makes up for lost income the Social Security Act provides that pension or benefit may be reduced or recovered. This is one way in which social security expenditures are directed to those most in need.
Settlements of lump sum compensation particularly in the workers compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of social security payments. To prevent this abuse the Minister announced on 8 February 1988 that, for future personal injury settlements made by agreement or by consent order, 50 per cent of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect to that proposal."
So, as von Doussa J observed in Secretary, Department of Social Security v Smith (1991) 30 FCR 56, in a passage quoted by Einfeld J in Secretary, Department of Social Security v Thompson [1994] FCA 1477; (1994) 53 FCR 580 at 583-4, an attempt was made to balance on the one hand finite budgetary allocations against the interests of the recipient of the payment. Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments.
However, the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184, therefore, provided the means whereby the Secretary or, in the event ultimately of an appeal to the Administrative Appeals Tribunal, that Tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances. The question of what constitutes special circumstances has been the subject of a number of decisions of this Court. It suffices here to say no more than that something is required which would take the matter out of the usual ordinary case: Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541 at 545 per Kiefel J, Secretary Department of Social Security v Ellis (1997) 46 ALD 1 at 5 per Carr J.
As the Full Court of this Court said in Beadle v Director-General of Social Security [1984] AATA 176; (1985) 60 ALR 225 at 228, albeit in a slightly different context, special circumstances will be those matters which render circumstances unfair or inappropriate.
Hill J also noted that:
(a)a person’s financial circumstances are relevant;
(b)hardships and difficulties suffered by the applicant and his family during the preclusion period was “undoubtedly relevant”; and
(c)whether the Government may have to pay money to the claimant was not a matter relevant to the exercise of the discretion.
CONSIDERATION
Relevance of whether the LSCP is reflective of the economic loss component of Mr Taulaga’s compensation claim
The Secretary referred to the decision of Keifel J, as she then was, in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67. This decision concerned an aged pensioner who received only $3,500 for loss of earnings after settling a claim for $39,000. The 50% rule was applied and the preclusion period assumed that she received significantly more than what she was awarded for loss of earnings.
Keifel J considered section 1184K of the Act and found that it does not intend for a decision maker to be required to consider contentions without part of the compensation that reflects the economic loss component, whether one has regard to the application of the formula or the discretion under section 1184K.
Keifel J held that:
[25] Here the factual assumptions upon which the calculations are based, including that which treats fifty per cent of the total compensation payment as representing the economic loss component, could not have been intended to be subject to rebuttal in the process of applying the formulae. The statutory purpose is to overcome the need in each case to determine what part of a lump sum compensation payment in truth represents economic loss. Although the assumptions to be made and the result reached are necessarily arbitrary, it is a course which has been taken for administrative simplicity: Secretary, Department of Social Security v Hulls (1991) 22 ALD 570, 579; Secretary, Department of Social Security v Smith (1991) 30 FCR 56, 61.
And later [emphasis added]:
[33] In the present case the Tribunal considered that the application of the formulae was unfair to the applicant because she would have to pay more than she had received by way of compensation for economic loss, indeed twice as much. That factor will however be present in most cases and is an aspect of the application of the formulae. In my view it cannot, by itself, amount to a special circumstance, one out of the ordinary.
[34] The basis for the Tribunal's view was its acceptance of what the parties to the settlement said had been offered and accepted for the economic loss component. It was far less than the statute assumed to be the case in applying the formulae. Again, however, this will be so in many, if not most, cases to which the Act applies. Further, the extent of the difference from the basis upon which the parties acted could not provide the necessary "special circumstance". The statute has selected a figure which may operate in an arbitrary way.
[35] The statutory objectives in utilising the formulae, referred to above, must also be borne in mind. It is not intended that a decision-maker be required to consider contentions about what part of the compensation reflected the economic loss component. That is so whether one has regard to the application of the formulae or the discretion under s 1184. The latter does not alter the objective and must be read in light of it.
Even if it appears “unfair” for a successful litigant to end up with only less than 100% of the total award, this fact in and of itself does not mean that special circumstances exist such that a preclusion period should apply. One must consider all of the circumstances.
Relevance of the fact that the LSCP was received in relation to medical conditions not related to the conditions for which Mr Taulaga received the DSP
Section 1160(2) of the Act makes it clear that compensation preclusion applies even where there is no connection between the circumstances giving rise to the compensation and the qualification for the compensation affected payment.
This ground of contention does not give rise to a special circumstance.
The tragic death of Mr and Mrs Taulaga’s daughter and the emotional distress which inevitably followed during and after the preclusion period by the family is a special circumstance. The loss of a child at a very young age can hardly be said to be a common occurrence, particularly when the child’s life was potentially lost as result of a Hospital’s alleged negligence.
Financial Circumstances
Mr Taulaga had bronchiectasis. There is no dispute that Mr Taulaga had significant ill health during the preclusion period and that he would have incurred medical costs.
During the preclusion period:[27]
[27]Exhibit 2, T Documents, T5, pages 48 -75, Statement of Financial Circumstances
(a)Mr and Mrs Taulaga had a total income of $44,500 made up of:
(i)Mr Taulaga receiving approximately $632/fortnight of DSP; and
(ii)Mrs Taulaga receiving $1,223/fortnight from Centrelink by way of carer payment for looking after her husband, parenting payments and the family tax benefit;[28]
(b)Mr and Mrs Taulaga had Household expenses of approximately $36,000;[29]
(c)Mr and Mrs Taulaga had the following assets:
(i)A house worth $270,000 (“Family Home”);
(ii)household contents of $30,000;
(iii)A car worth $62,000; and
(iv)Bank balance of $121;
[28]Exhibit 2, T Documents, T15, pages 114 – 115, Statement of Financial Circumstances dated 24 April 2018.
[29]Evidence of Mr Taulaga before the SSCSD.
With the compensation money received, Mr and Mrs Taulaga purchased the Family Home for $242,000. The home was paid for in full.
Mrs Taulaga told the Tribunal:
(a)they had been living with her parents prior to purchasing the Family Home;
(b)they had to undertake renovations before moving in – in part to enable the Family Home to be user friendly for Mr Taulaga (given his mobility issues); and
(c)the renovation work cost approximately $50,000 and included repainting, levelling the property, replacing the toilet and shower, installing fans and blinds, trees containing allergens which impacted on Mr Taulaga’s health had to be removed;
Subsequent to the hearing, with the Tribunal’s leave, Mrs Taulaga provided additional information regarding current income, assets and expenses. The Respondent helpfully summarised the material provided as follows:
·Submissions
oA Statutory Declaration by Valisa Taulaga dated 10 July 2019 (p20);
oA Statement of Financial Circumstances completed by Valisa Taulaga on 18 July 2019 (pp21-25);
·Income
oA Centrelink Notice addressed to Valisa Taulaga: Income Statement dated 8 July 2019, (pp29-31);
oA Centrelink Notice addressed to Valisa Taulaga: Your Centrelink Statement for Parenting Payment dated 8 July 2019 (pp59-61);
·Assets purchased
oA Settlement Statement from Access Legal NQ "Re: Taulaga & Tini Purchase from Cherry & Berthun: [address redacted by the Tribunal]" dated 28 February 2018 (p43);
oAn REIQ Trust Account Receipt dated 23 January 2018, relating to the sale deposit of [address redacted by the Tribunal] in the amount of $1,000 (p1);
oDocuments from Mike Carney Toyota, including:
§A Contract/ Tax Invoice for the Sale of a Demo Motor Vehicle with Mrs Valisa Taulaga for the purchase of a Kluger 4x2 Grande in the amount of $63,885 (p51);
§A Retail Tax Invoice for $63,885 (p52);
·Renovations and Household Furniture Purchased
oSales Order Receipts from Fantastic Furniture relating to the purchase of various furniture items in the amounts of $649 (p4); $3,527 (p5); $7,287 (p5); and $447 (p7);
oAn Amart Furniture Sales Order in the amount of $2,317.00 (p32);
oReceipts/ Tax Invoices from The Good Guys:
§dated 27 February 2018 in the amount of $179 (p42);
§dated 15 March 2018 in the amount of $2,000 (p38);
§dated 15 March 2018 in the amount of $3,407 (pp40-41);
§dated 29 March 2018 in the amount of $29 (p39);
§dated 3 July 2019 in the amount of $125 (p37);
oA Q Otation dated 26 September 2018 from Brooksy's Mates Rates Gardening, Mowing Service in the amount of $2,205 (p57) and handwritten note from Brooksy (p58);
oA letter and quote from Blinds for You dated 15 March 2018 in the amount of $2,995 (pp66-69), and dated 10 April 2018 in the amount of $10,961.23 (pp70-71);
·Medical Expenses
oA Complete Mobility & Rehab Tax Invoice dated 5 June 2018 for $525 (p83);
oCopies of Tax Invoices from Walk on Wheels:
§dated 18 July 2018 in the amount of $213 (p64);
§dated 19 July 2018 in the amount of $17.20 (p63);
§dated 19 July 2018 in the amount of $0 (p65);
§dated 26 September 2018 in the amount of $20 (p62/p91), and Eftpos receipt (p90);
oThe cost of various medications (each being $6.40) for Seth Taulaga dated 4 August 2018 (p9);
oA Patient Pharmaceutical Invoice dated 4 August 2018, addressed to Seth Taulaga, in the amount of $115.20 (p10);
oTTH (Townsville Hospital and Health Services) Tax Invoice dated 20 September 2018 for $100 and Eftpos receipt for $100 (p95).
oAttune Hearing Pty Ltd Tax Invoice dated 18 July 2019, relating to tests for Romeo Taulaga in the amount of $132 (p86);
·Funeral Expenses
oDocuments from Morleys Funeral Home, including:
§A Memorandum of Costs dated 8 November 2018, for 'Funeral Services:- Late Seth Matauala Taulaga' in the amount of $10,962 (p44);
§Transfer Notes for the payment of Invoice #00027846 dated 8 November 2018, in the amounts of $7,962 (p46), $2,900 (p48), and $100 (p49);
§Receipt from Morleys Funeral Home dated 8 November 2018 (p50);
§A balance sheet dated 3 July 2019 showing $0 outstanding (p45);
·Education Expenses
oDocuments from Milestones Early Learning Kelso, including:
§A Statement of Entitlement issued on 10 July 2019, detailing a fee of $874 and gap of $264.72 (p53);
§A CCS Weekly Summary with a Gap weekly total of $132.36 (p54);
§Account Transactions (p55);
§CCS Attendance Summary (p56);
oDocuments from Good Shepherd Catholic School, including:
§A Statement/ Tax Invoice dated 18 July 2019 for the amount of $328 (p84);
§A Family Transaction History All Periods as at 17 July 2019 (p85);
·Household Expenses
oAn Ergon Energy Electricity Account issued on 11 October 2018 in the amount of $570.31 (pp18-19);
oYoui Car Insurance Policy and schedule dated 11 January 2019, for 2017 Toyota Kluger Grande, with an annual premium in the amount of $1,481.86 (pp72-77);
oYoui Home Insurance Policy dated 11 January 2019, for [address redacted by the Tribunal], with an annual premium in the amount of $1,104.34 (pp78-82);
oDepartment of Transport and Main Roads - Overdue Registration. Fees Final Notice dated 15 May 2019, relating to the registration of a Toyota Kluger (pp87-88);
oAn Australia Post Receipt dated 10 August 2019 in the amount of $406.75 for payment of Transport and Main Roads (p89);
oTownsville City Council Rates Notice for [address redacted by the Tribunal] dated 9 August 2018 in the amount of $1,550 (pp92-94);
·Other
oAustralia Post Receipt dated 3 September 2018 in the amount of $1,433.97 (p12);
oA Tax Invoice from Access Legal dated 19 September 2018, for 'Taulaga - Wills/ Power of Attorney' in the amount of $548.50 (pp33-34);
oA Tax Invoice from Access Legal dated 19 September 2018, for 'Taulaga - Transfer' in the amount of $1,133.50 (pp35-36);
oA Patient Travel Subsidy Scheme Certification dated 5 September 2018, requesting flight for Valisa Taulaga (pp13-14);
oA Corporate Travel Management itinerary prepared for Ms Tolorosa Taulaga for a flight from Townsville to Brisbane on Wednesday, 29 August 2018 (p15);
oA Corporate Travel Management itinerary prepared for Ms Valisa Tini for a flight from Towrisville to Brisbane on Wednesday, 29 August 2018 (p17);
oA Corporate Travel Management itinerary prepared for Ms Valisa Tini for a flight from Brisbane to Townsville on Wednesday, 12 September 2018 (p16).
In summary the material and evidence demonstrates that:
(a)Mrs Taulaga currently receives $1,271.16/fortnight from Centrelink; and
(b)has fortnightly expenses totalling approximately $1,238/fortnight (excluding the cost of food, clothing, medical bills);[30]
(c)Mrs Taulaga’s son currently attends a private school at the cost of $150/fortnight and her daughter is at kindergarten at a cost of $200/fortnight. Mrs Taulaga said her children attend private school because this was her husband’s wish.
[30]Updated Statement of Financial Circumstances dated 18 July 2019.
Mrs Taulaga also informed the Tribunal that her six year old son has been diagnosed with Attention Deficit Hyperactivity Disorder and requires medication and treatment. Some of his treatment, speech therapy for example, is not covered by Medicare.
The house and car are realisable assets.
Arguably the home could be sold, or a loan could be obtained to provide any necessary funds with the land as security.
The total renovation works conducted have not been all been independently corroborated, although there are some invoices for blinds and the garden works. Mrs Taulaga explained that she has provided a copy of whatever invoices she still has.
The Tribunal does not know how Mr Taulaga spent or otherwise dealt with the balance of the LSCP. The Tribunal has not been provided with sufficient information to conclude that Mrs Taulaga is suffering from financial hardship. Even if that is the case the Federal Court has made it clear that with respect to financial hardship, being impecunious is not unusual or uncommon. In Hales French J referred to the fact that the one thing social welfare recipients have in common.
In Frajnd and Secretary, Department of Social Services [2018] AATA 1515 at [32] this Tribunal found that "private school fees are a discretionary expense and are not what would constitute a reasonable expense'.
OTHER CONSIDERATIONS
It is not unusual that a recipient of DSP would have ongoing medical expenses.[31] However, in this case Mr Taulaga’s medical condition caused his death.
[31]Hammelswang and Secretary, Department of Social Services [2015] AATA 905, at [7].
Mr Taulaga had the benefit of having realisable assets that other social security recipients would not necessarily have. Mr Taulaga used his LSCP to buy a family property, after being advised of the compensation preclusion period.
In Hajar and Secretary, Department of Social Security (1986) 16 ALD 716 the Tribunal found it impossible to ignore the fact that the applicant had an asset, namely a house, when considering the issue of hardship and found that it would be “inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it”.[32]
[32](1986) 16 ALD 716, at [45].
Mrs Taulaga currently receives the single parent pension as her sole source of income. In the event that she had to sell her home for financial reasons, and needed to rent, there are many recipients of social security benefits who are in rental accommodation. Again, this is not an unusual circumstance.
As a result, the Tribunal finds that no special circumstances exist in relation to the Applicant’s finances.
However, straightened financial circumstances are not a prerequisite to a finding that special circumstances exist.
What is more unusual however is that, as a result of her husband’s death, she is now the sole provider for two very young children. To suggest that a single mother in this situation should sell her home and further unsettle her family who have been through two of the most traumatic events a family can face, would be a harsh outcome and an inappropriate one. The Tribunal finds that it is not reasonable to expect Mrs Taulaga to sell her home to provide for her family’s financial needs at this time.
Mrs Taulaga told the Tribunal that she and her children suffer daily from the loss of Mr Taulaga and her daughter.’
Mrs Taulaga’s grandfather also passed away three months before her husband died.
Mr Taulaga’s mother, Tolorosa Taulaga said the following at the hearing:[33]
My son is robbed, but no compensation will pay for the struggles and scars that have formed,… his family is struggling, emotionally impacted for something that was taken away. Compensation for my granddaughter, and it led to something that is just not right in the eyes of God.
[33]Transcript, page 35.
It was obvious to the Tribunal that Mr Taulaga’s wife and mother are still grieving the loss of their husband and son, and they were, at times, very upset during the hearing.
The purchase of the family home would have given the family some stability and independence in what was the lead up to Mr Taulaga’s death, particularly in circumstances where he had been informed that he was not able to have a lung transport because of other medical issues.
In Minos and Department of Family and Community Services [2000] AATA 1104 (“Minos”) the Tribunal found that the fact that the applicant had a terminal illness was a special circumstance and said:
[63] If his liver disease has reached the commencement of a terminal phase whilst in his lifetime he has achieved his objective of providing real estate for the benefit of his children, it is unlikely that he will survive to enjoy their adolescence…
The Tribunal agrees with the sentiments expressed in Senior Member Handley in Minos:
[63]…No fair-minded person exercising even a modest degree of compassion would deny payment to Mr Minos of Disability Support Pension. That he should be expected to endure the remainder of the current preclusion period (another 4 years) would be intolerable.
In Moran and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 951 the Tribunal found the circumstances in that case justified an exercise of the discretion to treat the LSCP as not having been made. Ms Moran had received compensation from a medical negligence claim. Her child died at the age of 4 months from meningococcal septicaemia and she had claimed that he died due to an initial misdiagnosis. Ms Moran’s claim settled, and, after deductions, she received approximately 30% of the LSCP. During a period between lodging her claim and receiving compensation, Ms Moran had been receiving the DSP. Ms Moran had an intellectual impairment. Centrelink imposed a compensation preclusion period which Ms Moran challenged before the Tribunal.
Ms Moran’s agreed settlement was for a gross amount of $95,000 inclusive of costs. Deductions from Ms Moran’s settlement totalled $57,408.90. In the end Ms Moran received less than 50% of the total compensation. Ms Moran’s partner also had a medical negligence claim and received $110,000 gross in settlement. Centrelink applied a similar preclusion period to the Parenting Payment that her partner, Mr Porter, had been receiving at the relevant time. The Social Security Appeals Tribunal (as the SSCSD was then known) decided, in accordance with section 1184K of the Act, that in the special circumstances of his case it was appropriate to reduce his preclusion period to nil.
The Tribunal found that the experience of the death of her daughter “and the predictable consequences of such a tragic occurrence, could in itself be seen as sufficiently out of the ordinary to justify the application of the discretion allowed by s 1184K(1) of the Act”.[34] In addition, Ms Moran’s personal situation and the impact on another of her children, and the stress and experience of litigation, also added to Ms Moran having “very unusual or even exceptional” circumstances.
[34][2008] AATA 951, at [72].
CONCLUSION
The tragedy of losing a child, followed by the death of her husband, has understandably taken a significant toll on Mrs Taulaga and her family. The death of her daughter and the subsequent stressful litigation to obtain compensation, combined with her husband’s terminal illness and death, her son’s medical condition, and her grandfather’s death, together make the personal and family milieu of Mrs Taulaga unusual by any definition. The Tribunal concludes that special circumstances exist in this case, in line with the meaning of section 1184K(1) of the Act.
The Tribunal finds that it is appropriate in these circumstances to exercise the discretion to reduce the compensation preclusion period to nil.
DECISION
The reviewable decision is set aside and replaced with a decision that pursuant to section 1184K(1) of the Social Security Act 1991 it is appropriate in the special circumstances of Ms Moran’s case that the whole of her late husband’s compensation payment be treated as not having been made, with the result that her compensation preclusion period be reduced to nil.
I certify that the preceding 100 (one hundred) paragraphs are a true copy of the reasons for the decision herein of Member D K Grigg
........................[sgd]................................................
Associate
Dated: 14 November 2019
Date of Hearing: 28 June 2019 Date of Final Submissions: 2 August 2019 Advocate for the Applicant: Mrs Valisa Taulaga (by telephone) Advocate for the Respondent: Ms Lisa Palmer, Seconded Lawyer Solicitors for the Respondent: Department of Human Services
at [37].
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