FAYSAL SAFAOUI and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2009] AATA 615
•20 August 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 615
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/0125
GENERAL ADMINISTRATIVE DIVISION ) Re FAYSAL SAFAOUI Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Senior Member M D Allen Date20 August 2009
PlaceSydney
Decision The decision under review is set aside and the Tribunal substitutes its decision, namely that the Applicant, Faysal Safaoui, is precluded from receiving compensation affected payments from 3 July 2007 until 28 September 2009. ....................[sgd]..........................
M D Allen
Senior Member
CATCHWORDS
SOCIAL SECURITY: Lump sum preclusion period – 50% lump sum is calculated on the settlement sum not the amount received by the Applicant – no special circumstances – decision of Social Security Appeals Tribunal varied to reflect proper application of subsection 17(3) Social Security Act 1991
LEGISLATION
Social Security Act 1991: S 17, 1170, 1184K(a)
CASE LAW
Secretary, Department of Social Security v Ellis (1996-7) 24 AAR 535
Manafikhi and Secretary, Department of Education, Employment and Workplace Relations [2007] AATA 1529
Hollis and Secretary, Department of Employment and Workplace Relations [2006] AATA 4
REASONS FOR DECISION
Senior Member M D Allen 1. By application made the 13th day of January 2009, the Applicant sought review of a decision by a Social Security Appeals Tribunal (“SSAT”) that set aside the determination of a Centrelink authorised review officer and directed that the preclusion applying following a receipt of common law damages be calculated on the basis that the Applicant received a lump sum of $165,000.00.
2. Subsection 17(1) of the Social Security Act 1991 (“the SSA”) states, inter alia, that a compensation affected payment includes a Disability Support Pension (“DSP”) or a social security benefit. Compensation is defined in subsection 17(2) of the SSA as including:
“ (a)a payment of damages that is made wholly of partly in respect of lost earnings or lost capacity to earn resulting from personal injury.”
3. Subsections 17(3) and (4) of the SSA read:
“Compensation part of a lump sum
(3) Subject to subsection (4), for the purposes of this Act, 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; or
(ab) 50% of the payment if the following circumstances apply:
(i)the payment represents that part of a person’s entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or
(b)if those circumstances do not apply—so much of the payment as is, in the Secretary’s opinion, in respect of lost earnings or lost capacity to earn, or both.
(4) Where a person:
(a) has received periodic compensation payments; and
(b)after receiving those payments, receives a lump sum compensation payment (in this subsection called the LSP); and
(c)because of receiving the LSP, becomes liable to repay an amount (in this subsection called the Repaid Periodic Compensation Payment—RPCP) equal to the periodic compensation payments received;
then, for the purposes of subsection (3), the amount of the lump sum compensation payment is:
LSP – RCP”
4. Section 1170 of the SSA then sets out the formula by which the lump sum preclusion period is calculated.
5. In this matter, the Applicant settled a claim for damages in the sum of $269,524.79. From that sum, an amount of $98,524.79 was paid directly to his workers compensation insurer to reimburse payments of worker compensation. Pursuant to subsection 17(4) of the SSA, the relevant sum for calculating the Applicant’s preclusion period became $171,000.00.
6. The sum of $171,000.00 was not received by the Applicant. The nett sum received by him was $165,000.00. The reason for this difference is set out in the letter from his solicitor to the Applicant dated 10 July 2007 (see T18 page 53). Although the lump sum settlement was exclusive of costs, the solicitor’s solicitor and own client costs were greater than the party / party costs obtained from the Defendant’s insurer.
7. The terms of subsection 17(3) of the SSA are quite clear and unambiguous. The 50% of the payment used for the calculation of a preclusion period refers to 50% of the lump sum settlement, not the amount of the settlement that found its way into the hands of the Plaintiff.
8. In this matter, the SSAT totally misconceived the legislative provisions and directed that the preclusion period be calculated on the sum actually received by the Applicant.
9. It may well be that if costs are included in a lump sum settlement, a social security beneficiary may receive very little of the settlement sum. This is unfortunate but section 17 of the SSA does not permit the rectification of imprudent settlements. As pointed out by the legislation, it is the settlement sum, not the payment received by the Plaintiff that is subject to the 50% rule.
10. In this matter, 50% of $171,000.00 is $85,500.00 and the calculations by the authorised review officer were totally correct.
11. If the Applicant is to obtain any relief from the imposition of the preclusion period calculated upon a lump sum payment of damages, recourse must be had to subsection 1184K(1) of the SSA which states:
“ Secretary may disregard some payments
(1)For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.”
12. The term “special circumstances” was discussed by Carr J in Secretary, Department of Social Security v Ellis (1996-7) 24 AAR 535 at 539, namely:
“ In Beadle v. Director-General of Social Security (1985) 60 ALR 225, a Full Court of this Court had to consider whether the Administrative Appeals Tribunal had erred in its interpretation of s102(1)(a) of the Act which provided for an extension of time in which to claim a family allowance “…in special circumstances…”. At 673 – 6754 the Full Court said:
"Presumably in this context special circumstances must include events which would render the six months unfair or inappropriate. ... It would depend upon the circumstances of the particular case whether these constituted special circumstances. We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase "special circumstances", although lacking precision, is sufficiently understood in our view not to require judicial gloss."
In Groth v.Secretary, Department of Social Security (1995) 40 ALD 541 at p.545, Kiefel J, after referring to Beadle, said:
"... for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied."
Later (on the same page) Kiefel J expressly approved the Tribunal's reasoning in holding that Mr Groth's circumstances were not out of the ordinary when Part 3.14 of the Act (in which ss.1168 and 1184 are to be found) had the same effect on him as it did on other persons qualified to receive a disability support pension. Her Honour added:
"It [the Tribunal] went on to find that his circumstances and those of his family although difficult, did not constitute hardship and they could not be said to be different from other pension recipients."
13. In evidence to the Tribunal, the Applicant stated that he had from the $165,000.00 received by him paid $150,000.00 towards the mortgage on the dwelling house occupied by himself, his wife and family of four children.
14. Originally the mortgage re-payments were $700 per fortnight and by reducing the mortgage sum outstanding, the Applicant was able to reduce the minimum payments due and thus secure his continued ownership of the property in which he and his family live.
15. He also expended $15,000.00 in purchasing a larger car so as to adequately seat his family.
16. Since his appearance before the SSAT, the Applicant’s situation has changed in that he has now obtained a further loan in the sum of $146,000.00 against his property. This loan was to repay to relatives in Lebanon a sum of $100,000.00 USD which they had advanced to the Applicant to enable him to purchase the property.
17. The Applicant’s mortgage repayments are now in the sum of $515.00 per fortnight. Although he was questioned on the subject, the Applicant was unable to say if he would be able to obtain further advances against his house. That property had increased in value since it was purchased by the Applicant and a further advance secured by the property is a possible avenue for the Applicant to explore.
18. The Applicant has also incurred debts in the sum of $8,000.00 and $12,000.00 respectively to two friends of his. He said that they were not pressing for repayments on these loans. One of the friends, a Mr Hodroj, gave evidence and said that he was content to wait for repayments until the Applicant gets the money.
19. Some evidence was given of the Applicant’s son suffering from a serious illness shortly after birth. That child has subsequently recovered and is not undergoing any further treatment. He does not require ongoing medication.
20. The Applicant’s wife is in receipt of Family Tax Benefit (“FTB”) in the sum of $1412.20 per fortnight and in addition received a payment of $3,080.00 in July 2009 being FTB supplement.
21. The Applicant’s wife does not work. A psychologist report tendered by the Applicant suggests that she would be incapable of working due to a major depressive disorder. The Applicant, were he not subject to a preclusion period, would be a candidate for a DSP.
22. The Applicant was advised by the solicitor acting for him in the workers compensation proceedings about the existence of a preclusion period. The Applicant then expended his compensation payment without obtaining financial advice and in the knowledge of the preclusion period.
23. In Manafikhi and Secretary, Department of Education, Employment and Workplace Relation [2007] AATA 1529, the Tribunal said:
“ Mr Manafikhi is in a similar position to Winterbotham. He was, of course, entitled to buy his family a home and this may have been a good financial decision as well in view of his evidence that rent was more expensive than the mortgage repayments. This does not lead to a conclusion that, having disposed of his settlement monies, Mr Manafikhi is now entitled to seek support from the community.”
24. Although the extent of any ability of the Applicant to raise further funds on the security of his dwelling is uncertain, in Hollis and Secretary, Department of Employment and Workplace Relations [2006] AATA 4, the Tribunal found that the existence of a redraw facility in a mortgage account supports a decision not to exercise the discretion under section 1184K of the SSA.
25. Whereas both the Applicant and his wife are in indifferent health, this is a common feature for people who seek the payment of a DSP. Ill health with nothing more is not a special circumstance.
26. All in all, I can see no special circumstances in this matter. The decision under review will be set aside so as to reflect the proper application of subsection 17(3) of the SSA however that part of the decision that held that there were no special circumstances in the matter is, in effect, affirmed.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member M D Allen
Signed: ..........................[sgd]......................................................
M.Corcoran, AssociateDate of Hearing 13 August 2009
Date of Decision 20 August 2009
Solicitor for the Applicant Appeared in person
Solicitor for the Respondent Mr D Buchanan, Centrelink Legal Services
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