Fry and Anor and Secretary, Department of Family and Community Services and Anor

[2007] AATA 27

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 27

ADMINISTRATIVE APPEALS TRIBUNAL        N°V2005/743
  N°V2005/753

GENERAL  ADMINISTRATIVE  DIVISION
Re:		WAYNE FRY

Applicant

And:

SECRETARY,

DEPARTMENT OF FAMILY AND COMMUNITY SERVICES  

Respondent

Re:

SECRETARY,

DEPARTMENT OF FAMILY AND COMMUNITY SERVICES 

Applicant

And: WAYNE FRY

Respondent

DECISION

Tribunal:Ms Regina Perton, Member

Date:18 January 2007

Place:Melbourne

Decision:The Tribunal sets aside the decision under review and substitutes a decision that Mr Fry is subject to a compensation preclusion period until 28 July 2008.

(sgd) Regina Perton

Member

SOCIAL SECURITY – disability support pension - lump sum compensation ‑ preclusion period ‑ whether special circumstances exist

Accident Compensation (Workcover Insurance) Act (Vic) 1993

Social Security Act 1991 ss 17, 1170, 1184K

Social Security (Administration) Act 1999 s 192

Superannuation Industry (Supervision) Regulations 1994 reg 6.01

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

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

REASONS FOR DECISION

18 January 2007  Regina Perton, Member

1.      Wayne Fry, who is 44 years old, sustained serious injuries in a workplace accident in March 1996.  He received a lump sum compensation award of $325,000 on 29 May 2000.  As a result, Mr Fry was subject to a compensation preclusion period from 30 May 2000 to 28 July 2008 in respect of social security payments.  

2.      On 1 February 2005, Mr Fry lodged a claim for disability support pension (DSP).  Medical and other evidence, then and now, indicates that he would be likely to meet medical and work/study criteria for DSP were it not for the preclusion period. 

3.      Centrelink, which administers programs for the Department of Employment and Workplace Relations (DEWR), rejected Mr Fry’s application due to the preclusion period.  On 16 March 2005, an authorised review officer of Centrelink affirmed the decision to reject the claim for DSP due to the preclusion period.

4.      On 15 July 2005, the Social Security Appeals Tribunal (SSAT) decided that the preclusion period should be shortened due to special circumstances.  The SSAT amended the expiry date of the preclusion period from 28 July 2008 to 31 October 2006.

5.      On 18 August 2005, Mr Fry lodged an application for review with the Tribunal seeking a further shortening of the preclusion period (application N° V2005/743).  On 23 August 2005, the Secretary of DEWR lodged an application for review seeking to set aside the decision of the SSAT and reinstate the entire preclusion period (application N° V2005/753).  As both applications concern the length of the preclusion period for Mr Fry, the Tribunal is considering the two applications in this decision.

6.      The issue for the Tribunal is whether there are special circumstances that warrant shortening the preclusion period.

Mr Fry’s health and personal circumstances

7.      It is not in dispute that Mr Fry suffers from medical conditions that prevent him from undertaking physical work of the type he did previously.  Furthermore, his illiteracy prevents him from undertaking work or training that is reading-based.  His doctors, including orthopaedic specialists, have attested to the long-term impact of his injuries. 

8.      Mr Fry is married and has four children.  Three of the four are adults.  The youngest is under 18 but she has left home and is living independently.  Mr and Mrs Fry care permanently for their grand-daughter who was born to their elder daughter.  She was born in June 2001 and will commence school this year.  Mr Fry’s two sons stay in the family home occasionally.  Mrs Fry is a full-time carer.

9.      Prior to the settlement, Mr and Mrs Fry lived in Ministry of Housing rental accommodation in Winchelsea.  They then bought a home in the nearby area.  Mrs Fry said that the purchase was partly due to having to move out of their previous rental home.  They then sold that house and bought a home in Clifton Springs as it is closer to Mr Fry’s parents and his doctor.  The house had a number of faults that were not obvious to the Frys at the time of purchase.  They needed to undertake repairs and modify the home to accommodate Mr Fry’s needs.   

10.     Letters of support for Mr Fry were provided from those who have assisted him, including:

·Mr Peter Wilde, Orthopaedic Surgeon, in a letter dated 11 April 2006 indicated that Mr Fry has been his patient for many years.  Mr Wilde indicated that Mr Fry suffers from chronic lumbar spinal back pain with referral into both legs.  Mr Fry underwent a spinal fusion and had tried various non-surgical treatments without success.  Mr Wilde proffered the view that Mr Fry will not be able to return to work in the foreseeable future as his condition will not change. 

·Dr L Trosky, in a letter, dated 18 August 2006, stated that Mr Fry’s medical condition has not improved and will deteriorate with age.  He indicated that Mr Fry still suffers from chronic lumbar pack pains, leg pains, anxiety, stress, insomnia & chest pains & takes his many medications as before.  There are earlier letters to Centrelink with similar comments.

·Ms Jodie Van Aggelen, Financial Counsellor, in a letter dated 29 August 2006, stated that the family is struggling while relying on Mrs Fry’s Centrelink benefit of $723.96 per fortnight for the couple plus their dependent grand-daughter.  She enclosed a copy of her client’s income and expense statement.

·Ms Tania Smith of the Salvation Army, in a letter dated 15 August 2006, stated that on 11 August 2006, Mr Fry attended an appointment with their Geelong Family Support Services stating he was experiencing financial hardship.  He was provided with food, fuel and firewood.

Mr Fry’s financial circumstances

11.     Mr Fry owns a house in Clifton Springs outright.  It was purchased for $197,000 in 2002.  Part of the purchase was financed by the profit from the sale of their previous home.  That home had been purchased for around $110,000 soon after the compensation award.  Mr and Mrs Fry described their disappointment at the hidden faults in the Clifton Springs home which has resulted in them spending a significant amount on repairs.  Further repairs are still needed. 

12.     Although the compensation award included costs in favour of Mr Fry, his solicitors, with Mr Fry’s consent, charged 25 per cent above the scheduled fees.  Around $50,000 in fees was paid out of the award.

13.     Cars formed another item of expenditure.  A financial counsellor estimated that a net amount of $23,400 was spent on cars for Mr Fry and his children since the compensation award.  A gross amount of $35,100 was estimated although insurance of $8,700 was recouped for a stolen car and another $3,000 from the sale of another.  Money was also spent on car repairs and maintenance. 

14.     Other expenses estimated in a schedule provided to Centrelink in 2005 included $9,000 in holidays, $10,000 in gifts and $3,500 in repayment of debts.  In oral evidence, Mr Fry stated that they had also invested around $8,000 in shares on the advice of their older son but sold them at a loss in early 2005.

15.     Mr Fry has spent a considerable amount on medication and aids due to his condition.  He did not realise until relatively recently that he could claim a considerable portion of those expenses as part of his compensation.

16.     Mr and Mrs Fry and their grand-daughter rely primarily on Mrs Fry’s carer and family tax benefit payments to live on.  They cited the cost of childcare amongst their expenses although in recent times they have become aware of, and have utilised, free child care.  They pointed out that at the time of the compensation settlement, they were not aware that they would be raising Carrera as she was not yet born.  Nor were they aware that their daughter would not cope with raising Carrera and that they would be raising her.  Mrs Fry indicated that her role as carer prevents her from re-entering the workforce.

17.     Mr Fry said that they have had to resort to seeking help from community agencies in recent times.  Mr Fry has funds in the Bendigo Bank but believed the money was inaccessible until he reached retirement age.

Access to superannuation funds

18.     At the time of the SSAT’s decision, the information available was that around $45,000 invested in a superannuation account after the compensation award, was not available to Mr Fry until he reached retirement age.  The SSAT made a specific finding that:

...He [Mr Fry] currently has about $45,000 in STL superannuation fund, which cannot be accessed.

19. Since then, Centrelink has undertaken investigations into the accessibility of moneys held in the superannuation fund in Mr Fry’s name. Under the investigative powers available to it under s 192 of the Social Security (Administration) Act 1999, Centrelink is able to ask questions of individuals and companies in relation to social security claimants or recipients.   

20.     On 31 August 2006, the day after the hearing, Mr Mark Hester of Centrelink Legal Services Branch wrote to the Australian Prudential Regulation Authority, (APRA) which is responsible for the administration of superannuation, in the following terms:

Can you please answer the following question in relation to the release of monies from a superannuation fund for a person born on 29 March 1962.

1.  If a person placed monies in a superannuation fund after being assessed as totally and permanently disabled for work, is it still possible for that person to withdraw the monies now if they can establish to the satisfaction of the Trustees that they are totally and permanently disabled?

21.     On 14 September 2006, APRA provided the following response:

…

4.  All contributions made by a member are subject to preservation, i.e. they can only be paid to the member when the member satisfies a condition of release such as retirement or permanent incapacity.  The standards for superannuation monies are contained in Part 6 of the Superannuation Industry (Supervision) Regulations 1994.

5.  A ‘condition or release’ is defined in r. 6.01 of the SIS Regulations as follows:

‘condition of release’ means a condition of release specified in Column 2 of Schedule 1 and, a member of a fund is taken to have satisfied a condition of release if the event specified in that condition has occurred in relation to the member.

6.  Schedule 1 of the SIS Regulations includes ‘Permanent Incapacity’ (i.e. total and permanent disablement) and is defined under r. 6.01 of the SIS Regulations as follows:

‘permanent incapacity’, in relation to a member who has ceased to be gainfully employed, means ill-health (whether physical or mental) , where the trustee is reasonably satisfied that the member is unlikely, because of ill-health, ever again to engage in gainful employment for which the member is reasonably qualified by education, training or experience.

7.  Generally a TPD benefit is made up of the member’s accrued benefit component and the insured benefit component (which is generally paid to the trustee by the funds insurer).  In this case it is not clear whether a further insured benefit is payable but, regardless of this, the member is able to apply to the trustee for the payment of any preserved benefits held by the member in the fund on the grounds that the member is permanently incapacitated.  If the trustee is satisfied that the member is permanently incapacitated it could pay any monies in the member’s account to the member.  This would include a contribution related to the insurance benefit.

8.  If the trustee does not consider that the member is permanently incapacitated, the member can seek review under the fund’s internal disputes resolution process and, if after this review the member remains dissatisfied, the member can refer their application for release of benefits to the Superannuation Complaints Tribunal for its consideration.

22.     Mr Hester wrote to Bendigo Investment Services on 31 August 2006 about Mr Fry’s Bendigo Super Plan in the following terms: 

Can you please answer the following questions in relation to Mr Wayne Fry’s Bendigo Super Plan reference number….

Please note that the monies provided by Mr Fry to establish the Bendigo Super Plan were initially received from a payout from Mr Fry’s STA Superannuation Fund as an insurance payout on the grounds that he is totally and permanently disabled for work.

1.  Given the Mr Fry established the Bendigo Super Plan after being assessed as totally and permanently disabled for work, is it still possible for him to withdraw the monies now if he can establish to the satisfaction of the Trustees that his is totally and permanently disabled?

23.     On 14 September 2006, Mr Dennis Saliba of Bendigo Investment Services provided the following response: 

To the best of my knowledge of superannuation law Mr Fry would be able to withdraw the benefits of his Bendigo Superannuation Plan under the permanent incapacity condition of release subject to the trustee being reasonably satisfied that Mr Fry is unlikely because of ill health ever again to engage in gainful employment for which he is reasonably qualified by education, training or experience.

24.      Mr Fry was afforded the opportunity to comment on the outcome of Mr Hester’s investigations.  On 4 October 2006, Mr Harvey Streager of Victoria Legal Aid provided Centrelink and the Tribunal with documentation concerning payments provided by Bendigo Investment Services.  These included: 

·     A benefit statement from the Bendigo Superannuation Plan for the period from 1 July 2005 to 15 June 2006, which indicated, amongst other things:

…

Adviser:  Mr Dennis Saliba

…

Net Account Balance as at 15 June 2006      $45,420.56

…

Total & Permanent Disablement Benefit       $45,420.56;

·     A letter to Mr Fry dated 4 September 2006 (after the hearing) concerning his request to issue forms in relation to a Total & Permanent Disablement Claim.  He was advised that for the trustees to consider the claim, he is required to complete forms including two current doctor’s reports which are to include the details and prognosis of the disability; 

·     A letter dated 26 May 2000 from Mr Fry’s solicitors confirming settlement of his claim against his former employer.  The letter points out he has accepted the defendant’s offer of $325,000 plus party/party costs and disbursements on the basis that Mr Fry would retain all the weekly WorkCover payments to date and that he would retain a lump sum of $40,000 paid pursuant to the Accident Compensation (Workcover Insurance) Act (Vic) 1993.  The solicitors confirmed what they had discussed at length with Mr Fry, namely …that because of his inability to read and write our advice is that you should engage the services of a professional financial advisor regarding the management of settlement funds; 

·     The transcript of a taped discussion on 18 May 2000 between Mr Fry’s solicitor and Mr Fry concerning settlement, the court case, the fees and the preclusion period of eight years;

·     A letter to Mr Fry dated 15 June 2001 from his solicitors concerning a payment from Superannuation Trust of Australia (STA), stating:

Your superannuation insurer has offered to settle your claim for total and permanent disablement benefit by paying you the proposed sum of $44,250.00.

There are taxation implications in accepting a lump sum and we have requested advice in this regard from our business law department.  We shall write to you again in the near future with the advice.

Another option would be to roll the lump sum over into an approved superannuation fund and our business law department will also provide advice concerning this option…;

·     A letter to Mr Fry dated 11 July 2001 from his legal firm confirming a conversation which took place between one of their solicitors and Mr Fry on 9 July 2001.  The firm confirmed that the discussion concerned taxation issues in relation to the lump sum.  Mr Fry was urged yet again to obtain an accountant’s advice; 

·     A letter to Mr Fry dated 4 December 2001 from his solicitors confirming that he wished the insurance benefit from STA to be paid directly to him rather than being rolled over into another superannuation fund; and 

·     A letter from STA to Mr Fry’s solicitors dated 13 December 2001 indicating that the trustees had approved early release of Mr Fry’s benefits on the basis of his total and permanent disablement.  A cheque for $43,816.08 in Mr Fry’s name was attached representing Mr Fry’s full entitlement from the fund.

25.     The Tribunal provided the opportunity for the parties to put in further submissions should they wish to do so following receipt of the post-hearing documents but both declined.

CONSIDERATION OF THE ISSUES

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

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

(a)      a payment of damages; or

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

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

(d)      any other compensation or damages payment;

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

27. Under s 17(3) of the Act, 50 per cent of a lump sum settlement payment is held to be the compensation part of the payment. Section 1170 of the Act sets out the method of calculating a compensation preclusion period. There is no dispute between the parties or any evidence before the Tribunal that the lump sum compensation paid to Mr Fry should not result in a preclusion period. Nor is there any evidence to suggest that the original calculation was contrary to the relevant legislative provisions. The original calculated compensation preclusion period was from 30 May 2000 to 28 July 2008.

28. Section 1184K(1) of the Act gives the decision‑maker discretion to treat the whole or part of a compensation payment as not having been made or not liable to be made, if the decision‑maker thinks it is appropriate to do so in the special circumstances of the case. 

29. For the Tribunal to use the discretion provided in s 1184K it must be satisfied that there is something to make the case stand out from the usual or the ordinary. The term special circumstances is not defined in the legislation.  An often cited description of special circumstances is found in Re Beadle and Director‑General of Social Security (1984) 6 ALD 1 where the Tribunal held that the special circumstances referred to in the Act, must be unusual, uncommon or exceptional.   The term has been considered in many other Federal Court and Tribunal cases.  In Ryde v Secretary, Department of Family and Community Services [2005] FCA 866 Branson J stated at paragraph 26 that the circumstances of a particular case must give rise to hardship or unfairness sufficient to justify departure from the general rule.

30.     The Tribunal accepts that Mr Fry has multiple medical problems which he will face for the foreseeable future.  His doctors have stated that his illiteracy and medical conditions will prevent him from working or retraining.  The Tribunal accepts that Mr Fry is unlikely to work again.  

31.     In relation to Mr Fry’s financial situation, the Tribunal accepts that he and his dependents are on a limited income.  He, his wife and his grand-daughter rely on social security benefits payable to Mrs Fry as a carer and in family tax benefit.  While he has not received regular income since the compensation settlement, Mr Fry is in a much better financial situation in terms of his assets. 

32.     Prior to the compensation settlement, Mr Fry and his family were in a rented home.  They are now in a house which they purchased for $197,000 in 2002.  The two parties to this matter presented the Tribunal with submissions citing several cases with opposite conclusions about whether a person on a preclusion period should be required to sell a home they bought from the proceeds of a compensation settlement rather than the preclusion period being shortened.  Given the outcome of the investigations concerning the money in the Bendigo Super Fund, the Tribunal does not believe that it needs to make a finding in relation to this issue.  Mr Fry obtained a significant financial gain on the sale of his first home which had been purchased with funds from the compensation settlement.  That first home appears to have been an astute financial investment.

33.     When this matter was before the SSAT, Mr Fry and the SSAT believed that the money in the Bendigo Super Fund was not available for his use before the end of the preclusion period.  However, more recent evidence indicates that the entire amount is likely to be available for Mr Fry to live on between now and the end of the original preclusion period on 28 July 2008.  Documentation presented to the Tribunal by Mr Fry’s solicitor indicates that he applied for release of the moneys after the hearing.  Two of his treating doctors, Dr Trosky and Mr Wilde have attested on a number of occasions that he meets the requirements for release of the money in the Bendigo Super Fund.  While the Tribunal is not the decision-maker in relation to release of the moneys in the superannuation fund, it is satisfied on the balance of probabilities that it is likely to be accessible.  

34.     Mr Fry, despite his expenditure on a number of non-discretionary items such as holidays, gifts and cars for family and what appears to have ultimately turned out to be a wise purchase of his first home, still has access to around $45,000 which he put into a superannuation account.  Since initially seeking review of the decision to refuse him DSP, Mr Fry has become aware that he could reclaim the cost of some of his medication as well as a back brace as part of the compensation settlement.  His wife has also discovered that they were entitled to free childcare for their grand-daughter.  Mr Fry has also given up smoking which has resulted in a saving in the family’s weekly expenditure.  The money released from the Bendigo Super Fund combined with his wife’s social security appears to be sufficient to take the couple through to the end of the preclusion period.  Their financial situation will be tight.  However, that does not differ significantly from others who receive a compensation award and are precluded from being paid DSP for a period despite being likely to qualify for such a payment on medical grounds.

35.     After considering all relevant matters and viewing Mr Fry’s case in its entirety, the Tribunal is not satisfied that his circumstances, though difficult, should be considered as special circumstances which would warrant a shortening of the preclusion period. Therefore, it is not appropriate for the Tribunal to exercise the discretion under s 1184K(1) of the Act, to disregard the compensation received in whole or in part. As a result, Mr Fry is not qualified for DSP for the entire preclusion period as calculated, namely 30 May 2000 to 28 July 2008.

DECISION

36.     The Tribunal sets aside the decision under review and substitutes a decision that Mr Fry is subject to a compensation preclusion period until 28 July 2008.

I certify that the thirty-six [36] preceding paragraphs are a true copy of the reasons for the decision of:

Regina Perton, Member

(sgd)       Ursula Noyé

Clerk

Date of hearing:  30 August 2006
Date of decision:  18 January 2007
Counsel for Mr Fry:  Mr A. Lavery
Solicitor for Mr Fry:  Victoria Legal Aid
Advocate for Respondent:          Mr M. Hester, Centrelink Legal Services