Ferreira and Secretary, Department of Family and Community Services

[2006] AATA 254

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 254

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2005/1064

GENERAL ADMINISTRATIVE DIVISION		)
Re		MANUEL FERREIRA

Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Respondent

DECISION

Tribunal Senior Member Robin Hunt

Date17 March 2006

PlaceSydney

Decision  The tribunal affirms the decision under review.

..............................................

[Sgd] Ms R Hunt
  Senior Member

CATCHWORDS

SOCIAL SECURITY – Compensation payment – Preclusion period imposed – Special circumstances – Financial hardship – Unresolved debt claim - Application of preclusion not unjust, unreasonable or entirely inappropriate – Decision affirmed

LEGISLATION

Social Security Act 1991

CASES

Akesson and Secretary, Department of Family and Community Services [1998] AATA 141 (5 March 1998)

Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Beadle and Director- General of Social Security (1984) 6 ALD 1

Re Colaiacolo and Secretary, Department of Family and Community Services (AAT case 2109, 24 April 1985).

Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Ivovic and Director-General of Social Services (1991) 3 ALN N95

Kelso and FACS [2001] AATA 41 (25 January 2001)
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Maloney and FACS [2002] AATA 320 (3 May 2002)
SDSS v Banks (1990) 20 ALD 19
Secretary, Department of Social Security v Smith (1992) 29 ALD 385

REASONS FOR DECISION

17 March 2006	Senior Member Robin Hunt
SUMMARY

1.      Mr Manuel Ferreira, the applicant, applied for review of a decision by a delegate of the Secretary of the Department of Family and Community Services, the respondent. Mr Ferreira had received compensation after an accident. The delegate’s decision imposed a preclusion period from 5 October 2001 until 15 February 2007, which operated to prevent Mr Ferreira from receiving the disability pension during this time. Mr Ferreira claimed that he had special circumstances that warranted treatment of his compensation sum as not having been paid. The tribunal has decided that although Mr Ferreira is suffering financial difficulties his circumstances are not such that they amount to special circumstances for the exercise of the discretion to waive the preclusion period in his favour. This means Mr Ferreira has not been successful in his claim.

BACKGROUND

2.      Mr Ferreira was 53 years old at the time of the review. On 22 July 1997, he had sustained a workplace injury.  He was paid periodic workers’ compensation from 20 December 1998 until 4 October 2001.  He later received disability support pension (DSP) from 4 February 2002 to 16 September 2003.

3.      On 25 February 2003, the NSW Court of Appeal awarded Mr Ferreira the sum of $440,985.10 gross, before deduction of costs. He received a net compensation payout of $313,340.95, which was released to him on 26 August 2003 (T32, 97). Mr Ferreira advised Centrelink of his compensation payout on 18 September 2003 and his pension was cancelled. Centrelink imposed a preclusion period from 22 September 2001 until 22 June 2007 and a charge of $15,211.35. Mr Ferreira sought review of the decision to impose the preclusion period and to recover the compensation charge. Centrelink shortened the preclusion period to 22 February 2007 and the Social Security Appeals Tribunal (SSAT) shortened it again. The SSAT found the preclusion period should be from 5 October 2001 until 15 February 2007.

ISSUES

4.      The issue for the tribunal to determine is whether there are special circumstances that allow the preclusion period imposed on Mr Ferreira to be reduced or abolished. In particular, Mr Ferreira claimed he will suffer financial hardship if the preclusion period is imposed.

ANALYSIS AND FINDINGS

5. Section 1184K of the Social Security Act 1991 provides that the whole or part of a compensation payment may be treated as not having been made if the Secretary thinks it is appropriate to do so in the special circumstances of the case. The term “special circumstances” is not defined in the Act but there are numerous cases in which the term has been considered.

6.      Mr Ferreira claimed that his special circumstances were the financial hardship he and his family were suffering. Mr Ferreira stated that he will suffer financial hardship if the preclusion period is imposed as he has no money and is unable to work.. He was unable to make mortgage payments to reduce the debt to a bank secured over the family’s home. The injuries caused by the accident for which he was compensated meant he cannot work or had limited ability to work. He previously worked as a stonemason and as a “roof plumber” or tiler. Material before the tribunal showed Mr Ferreira was born in Portugal and came to Australia as a migrant sponsored to work as a stonemason. Mr Ferreira told the tribunal that it was difficult and dangerous for him to continue to work because of his physical injuries. Mr Ferreira gave further evidence that he also suffered a psychiatric condition for which he was receiving no treatment. He gave evidence that he needed to go to Portugal for psychiatric treatment. This was one of his financial needs. He would also like to see his family back in Portugal and had not been back for many years.

7.      Among the documents before the tribunal was a report by Dr Jonathan Phillips, consultant psychiatrist, dated 13 February 2001, in which he reported that Mr Ferreira was in need of psychiatric treatment and that it would be best delivered by a therapist who spoke Portuguese. In the absence of treatment, Dr Phillips thought Mr Ferreira’s prognosis poor. Dr Phillips further thought that Mr Ferreira could never return to physical labour. He observed that Mr Ferreira’s former trade was now out of the question and he was not a good candidate for retraining.

8.       Mr Ferreira used his compensation money towards the purchase of a house for $475,000. Mr Ferreira, his wife and eldest daughter each own one third of the house as is shown on a copy of the title deed. He and his wife and daughter took out a mortgage of approximately $100,000. The SSAT was incorrect in finding that this was the daughter’s debt only. The daughter, Sonia, contributed $62,000 of her own savings towards her share of the house. Mr Ferreira gave evidence his daughter was repaying the mortgage at the rate of $305 per fortnight. He said he and his wife were accruing a debt of $100 per week for their share of the mortgage.

9.      Mr Ferriera had three daughters and a son aged 14 at the time of the SSAT hearing in July 2005. The SSAT noted that his daughters were aged 25, 22 and 19 at the time of that hearing. Mr Ferreira gave evidence two of his three daughters were employed and the youngest daughter was studying at TAFE. His son was still at school. The children, in particular the two older daughters, helped out with the family’s bills but did not pay board or lodging. Mr Ferreira said that they already helped enough. He said his three daughters shared one bedroom and that the house was modest. He furnished a complete loan summary from the bank showing that he and his co-owners were the borrowers and that the closing balance of the mortgage over the property at 30 June 2005 was $98,529.77 in debit. Repayments have been credited at the rate of $305.50 per fortnight, with one payment of $500 on 28 January 2005. Mr Ferreira said these payments were made by his daughter. The debit balance had reduced over the period of the statement.

10.     Mr Ferreira argued that buying a house was a sensible way to use his compensation payout and he had thought home ownership would not affect his entitlement as a home property was an exempt asset. He said he did not realise it was taken into account for calculating the preclusion period.  I acknowledge that owning a house is desirable especially when one is bringing up a family. It is a good way to invest for the future but it does not mean that a person in Mr Ferreira’s position can afford to be reckless and invest above his means. I do not accept that he did not know that disposing of his award in the purchase of the house would be taken into account for calculating the preclusion period. Materials before me show that he was advised several times that a preclusion period would apply.

11.     Further materials before the tribunal show Mr Ferreira’s wife receives parenting payment of $360.30 per fortnight and family tax benefit of $251.64 per fortnight and has no other income. Mr Ferreira argued his family were unable to support themselves on these payments. He felt his compensation payout was not fair and that he should have received a higher economic loss figure. Mr Ferreira said his weekly earnings around the time of the work accident were $1,000 but were assessed by the court at $590. As the SSAT pointed out, this was a matter for the court and cannot be adjusted by the tribunal. In addition, Mr Ferreira argued he may have to pay a substantial sum in legal expenses. He handed up documents that suggest the solicitors who represented him in the compensation proceedings took action in the Supreme Court to recover an outstanding legal bill of $160,734.06. Mr Ferreira noted the SSAT, when making its decision, did not consider this claim as a special circumstance as the outcome was uncertain. He told the tribunal, however, that this matter had since been resolved. He provided the tribunal with a certificate of taxation from the court stating that Zebra Stonework Pty Ltd, the defendant, was required to pay him $82,889.27 in costs.

12.     After the hearing, the Secretary’s representative made further enquiries and obtained a letter from Mr Ferreira’s former solicitors in the court action as to the current position. The solicitors advised, by letter dated 30 January 2006, that their application to the court for assessment of solicitor/client costs had not yet been resolved and a final certificate had not yet issued. They were claiming professional costs of $49,887.39 and disbursements of $110,846.68. The total came to $160,734.06. The letter noted that Mr Ferreira had apparently resolved the party/party costs and been awarded a sum of $84,496.61.

13.     Mr Ferreira furnished an updated statement of financial circumstances dated 7 February 2006 together with bank statements and accounts from service entities supplying the family home. He also wrote a letter accompanying his statement explaining the complexities of the costs matters associated with his compensation award and saying resolution of these could drag on for months.

Are Mr Ferreira’s circumstances special circumstances waranting reduction of the preclusion?

14.     Mr Ferreira’s recent statement of financial circumstances shows his family’s income was significantly below that required to meet their expenses. However, the possibility of Mrs Ferreira claiming and receiving income support payments exists and was discussed at the tribunal hearing. Mr Ferreira was advised at the hearing to follow up this possibility. Mrs Ferreira’s lack of current income is a factor towards a finding of financial hardship but the hardship could be mitigated by applying for alternative payments or by seeking employment.

15.     I have considered Mr Ferreira’s circumstances in comparison to other cases where relief is sought and according to guidance from the courts. The Full Court of the Federal Court in Beadle v Director-General of Social Security (1985) 7 ALD 670 generally approved the approach of the tribunal in Re Beadle and Director- General of Social Security (1984) 6 ALD 1 at 3. The tribunal observed:

“An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special”.

16.     In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, Keifel J observed that special circumstances were something out of the ordinary and:

“would require something to distinguish…case from others, to take it out of the usual or ordinary 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…”

17.      In order for financial hardship to qualify as special circumstances, the financial hardship must go beyond straitened circumstances and be truly exceptional: see Re Colaiacolo and Secretary, Department of Family and Community Services (AAT case 2109, 24 April 1985). In Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690, the tribunal noted straitened finances are not enough to amount to special circumstances without other hardship. In Re Ivovic and Director-General of Social Services (1991) 3 ALN N95, O’Loughlin J remarked that the reference to hardship in former section 115 did not mean that “we should ignore the circumstances out of which the alleged hardship is said to have arisen”.  In the present case, the purchase of the house is relevant as it took place in the knowledge that a preclusion period would be imposed The Federal Court approved of O’Loughlin J’s judgment in SDSS v Smith (1992) 29 ALD 385. Von Doussa J in Smith found that the discretion given in former section 156 should apply where there was a clearly unjust result.

18.      The aim of compensation is to make up for a loss where possible and not to place the recipient in a better financial situation than before. In Mr Ferreira’s case, his award was made to overcome his loss of earnings for a period when his injury prevented him from working. Mr Ferreira chose instead to buy a house rather than make his award last over the period it was designed to keep him in income. He is reluctant to sell his house to alleviate his financial hardship. In some circumstances, the tribunal has found that owning a house is reasonable and desirable to the extent that special circumstances justify keeping the house rather than overcoming financial hardship by selling it. However, pension entitlements are not designed to benefit those who use compensation to purchase an asset. Without some special circumstances, Mr Ferreira cannot expect to have his expenses met by Australian taxpayers until 15 February 2007 rather than wait out the preclusion period.

19.      An important consideration is that Mr Ferreira was made aware of the application of a preclusion period before he bought the house. When he advised Centrelink of his receipt of compensation, Centrelink cancelled his disability support pension on 18 September 2003. Centrelink wrote to him on 1 October 2003 informing him that his compensation payout would result in a preclusion period and charge. Further correspondence followed and Mr Ferreira asked for more information. Centrelink sent him a letter on 28 April 2004 setting out the basis for the preclusion and the charge. Mr Ferreira wrote to Centrelink again on 14 May 2004 querying both the preclusion and the charge. Nevertheless, despite Centrelink’s warnings and advice, on 5 July 2004, Mr and Mrs Ferreira and one of their daughters bought the house and sank Mr Ferreira’s award into this purchase. Mr Ferreira continued to dispute the preclusion and charge and sought continuing review of these impositions.

20.      The SSAT noted that the gross amount awarded to Mr Ferreira was reduced by various amounts and this was borne out by the court record. It was reduced by $100,303.54 in respect of weekly payments he had been receiving from the defendant before the judgment was handed down. The costs of acting claimed by Mr Ferreira’s solicitors were in the vicinity of $160,000. Of this amount, according to the copy of the certificate of taxation Mr Ferreira furnished, $84,496.61 was assessed on 16 January 2006 by the Supreme Court to be paid to Mr Ferreira.  Nevertheless, I note that, even if Mr Ferreira has to pay the balance of approximately $90,000 to his former solicitors in due course, he presently has not agreed to pay this amount to them. Although he owed his solicitors costs and disbursements they had incurred on his behalf, Mr Ferreira lodged a request to the Supreme Court registry on 26 August 2003 (T32, 97) for the judgment sum of $313,340.95 to be released to him. He took this step in the knowledge that costs questions were not finally resolved.

21.      Mr Ferreira referred to several previous decisions of the tribunal in support of his argument that his were special circumstances. For example, in Akesson and Secretary, Department of Family and Community Services [1998] AATA 141, the tribunal shortened a preclusion period where Mr Akesson also had utilised his compensation award to buy a house for his family. It is true that Mr Ferreira, like Mr Akesson, has not wasted his money by buying a house, in comparison to someone who gambles or indulges in extravagant habits. Mr Ferreira has put forward identical arguments to Mr Akesson as to his reasons for buying the house and has complained as did Mr Akesson that he too expected more compensation for his injury. This is, of course, something that the taxpayer cannot remedy. It was a matter for the court that made the judgment..

22.      On the other hand, Mr Ferreira has not provided such compelling evidence as Mr Akesson of serious ongoing medical problems and family repercussions from his deteriorating health beyond the expectations when he bought the house. Mr Akesson had endured 22 lots of surgery on his legs and was awaiting another operation. His wife was suffering severe depression as a result of their troubles and had attempted suicide. This case is mainly distinguishable in my view because the special circumstances arose from hardship suffered after the preclusion was imposed and not all the consequences of disposing of the lump sum were apparent beforehand. Mr Ferreira’s position has not deteriorated since the preclusion was imposed except through his own actions in buying a house. He has not incurred any extra unexpected debts.

23.      In the case of Kelso and Family and Community Services [2001] AATA 41, the tribunal ended the preclusion period early. The case was similar to Mr Ferreira’s to the extent that Mr Kelso had used his payout partly to purchase a house. However, he also had spent some of his compensation award on farming equipment with the intention of continuing to work. Mr Kelso’s plans were foiled when he became ill. Mr Ferreira, by contrast, did not submit that he had bought any equipment to assist him to earn income or there was any new turn of events except that he was investigating a stomach complaint which might turn out to be serious. He has not, at this stage, suffered an additional health setback. His medical and psychiatric conditions existed when he received his compensation and comment on them formed part of the material for his compensation case. Dr Phillip’s psychiatric report recounts the history of Mr Ferreira’s accident and is addressed to Mr Ferreira’s former solicitors on 13 February 2001. I therefore do not agree with Mr Ferreira that his case is as special as Mr Kelso’s. Mr Ferreira’s problems, once he put all his funds into the house and had to make mortgage repayments, were readily foreseeable and did not arise unexpectedly.

24.      In Maloney and FACS [2002] AATA 320, the tribunal reduced the preclusion period, taking into account the circumstances of the wife of the applicant. Mrs Maloney had increasing care needs and medical costs. These new expenses became apparent after the original preclusion decision. By comparison, nothing has changed in Mr Ferreira’s situation except that he decided to buy a house without due consideration of his circumstances and ability to manage financially without further income. Unlike Mr Ferreira, Mr Maloney had also reserved some funds and had tried to secure ongoing income from other sources.

25.      The aim of the legislation limiting payment of the disability support pension, where a compensation award has been made, is to avoid double dipping. This aim is expressed by the court in SDSS v Banks (1990) 20 ALD 19. Mr Ferreira has been compensated for the injury which gave rise to his reliance on unearned income. Mr Ferreira was at all times aware of his responsibility to reimburse the solicitors who acted for him and won him an award. He was also aware that his award would affect his eligibility for a pension for a time. Mr Ferreira’s financial hardship is of his own making in that he has deliberately over-extended his ability to repay his share of the mortgage taken out to enable the purchase of a house. On balance, I am not persuaded that the preclusion period imposed results in an unjust, unreasonable or otherwise inappropriate result if the discretion under s1184K of the Act is not exercised.

26.      Finally, I note that Mr Ferreira’s financial position may yet change and has not been resolved in several respects. Mr Ferreira said that he was not meeting his obligation under the mortgage and only his daughter is making any payments. However, Mr Ferreira said she is not paying board and that makes the situation less unfair to his daughter. As well, the mortgage debt is reducing even without Mr and Mrs Ferreira paying any share. Furthermore, Mr Ferreira contributed a great deal more to the purchase than his wife and daughter, according to the information he has furnished. He put the bulk of his compensation award into the house. In addition, Mrs Ferreira had not, at the time of the review, explored the further social security entitlements which the Secretary’s representative suggested she might be eligible for. If so, these would increase the family income. Once these matters have been resolved the actual financial position of the family will be clearer and it may be a more appropriate time to investigate whether the preclusion period should be shortened.

27.      I have taken all the above matters into account.  While it is conceded that Mr Ferreira cannot presently meet all his expenses and is in difficult financial circumstances, he has not satisfied me, on balance, that the preclusion period should be shortened at this time. On the basis of the information before me I am not satisfied that special circumstances exist that justify the exercise of the discretion under section 1184 in Mr Ferreira’s favour.

decision

28.      The tribunal affirms the decision under review.

I certify that the 28 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Robin Hunt

Signed:     Margaret Driscoll
  Associate

Date/s of Hearing  23 January 2006
Date of Decision  17 March 2006
Counsel for the Applicant          
Solicitor for the Applicant          Self Represented
Counsel for the Respondent      
Solicitor for the Respondent     Susan Mantaring