Galea and Secretary, Department of Social Services (Social services second review)

[2018] AATA 2719

Galea and Secretary, Department of Social Services (Social services second review) [2018] AATA 2719 (23 May 2018)

Division:GENERAL DIVISION

File Number(s):      2017/7291

Re:Vilma Galea

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Bill Stefaniak AM RFD, Senior Member

Date:23 May 2018

Date of written reasons:        9 August 2018

Place:Sydney

For the reasons given orally at the conclusion of the hearing of this matter on 23 May 2018, the decision of AAT1 dated 9 November 2017 is affirmed.

............................[SGD]............................................

Bill Stefaniak AM RFD, Senior Member

CATCHWORDS

SOCIAL SECURITY – newstart allowance – lump sum preclusion period – whether special considerations exist – ill health – financial circumstances – changed circumstances – expenditure on an invention – decision affirmed

LEGISLATION

Social Security Act 1991 (Cth)

Workers Compensation Act 1987 (NSW)

SECONDARY MATERIALS

Guide to Social Security Law, Overview of the Application of the Special Circumstance Provisions.
Guide to Social Security Law, Factors to Consider When Determining Special Circumstance Provisions.

WRITTEN REASONS FOR ORAL DECISION

Bill Stefaniak AM RFD, Senior Member

9 August 2018

BACKGROUND

1. The Applicant, Ms Galea, grew up in the Philippines. After finishing university in 1993, she worked as a front office supervisor in the hotel industry. She managed people's vacations. She was a sales manager.

2. She came to Australia in 1996 and she had various jobs such as a housekeeper, a receptionist, and a night manager at a hotel. She was a manager at hotels such as the Pacific International and the Mantra Hotels, as well as a night manager of the Travelodge Hotel in Parramatta.

3. It was there that she suffered, on 18 September 2006, a particularly nasty experience. A man attacked another man (the victim) with a knife after raping that victim. The victim then fled and in the process of fleeing was stabbed by the perpetrator. The Applicant assisted the victim whilst the perpetrator leapt out of a window. It seemed to be, by any account, a particularly nasty, traumatic incident.

4. The Applicant soldiered on quite well in all of the circumstances, working at other hotels usually for periods of between three to four months up until 2010. The Applicant experienced a couple of other unpleasant incidents, including one in 2009 when she was verbally abused when she was front manager at the Carlton Crest.

5. The Applicant finished working in 2010 at the Royal Automobile Club in Circular Quay as a night auditor. After ceasing work there, she was admitted to St John of God Psychiatric Hospital and has not worked since that date. The Applicant suffered some significant medical problems, which all related back to the incident in September 2006.

   THE COMPENSATION

6. As a result of her problems she sought help from Firth Compensation Lawyers.

7. Despite the best efforts of her lawyers and the staff from St John of God Hospital, it took until 2013 before she received compensation.

8. As can be seen in the payment schedule in the Supplementary T-Documents, the first payment started on 12 July 2013.[1] It consisted of a couple of weeks of payment.

   [1] Supplementary T-Documents page 224 onwards

9. Then, on 19 July 2013, a fortnight after the payments started, there were 11 back payments. The back payments were all made on 19 July 2013 and were broken up to cover certain periods. The first period started 1 October 2007. The periods that followed were 1 April 2008; 1 October 2008; 1 April 2009; 1 October 2009; 1 April 2010; 1 October 2010; 1 April 2011; 1 October 2011; 1 April 2012; and 1 October 2012. The payments totalled about $135,000.

10. It should be noted that when this Tribunal gave its oral decision and reasons, the payment figure was stated as $125,000, but a subsequent check of the back payments indicated that $135,000 was the correct figure.

11. The payments then continued, with payments occurring on 27 July 2013, and 5 August 2013, and then fortnightly payments thereafter until 15 June 2014 which took the payment period up until 28 June 2014. After that the Applicant received a lump sum payment.

12. The Applicant also received earlier in 2014 two lump sum payments prior to settlement.[2] This included $37,500 for permanent impairment pursuant to section 66 of the Workers Compensation Act1987 (NSW), and $32,500 for pain and suffering pursuant to section 67 of the Workers Compensation Act1987 (NSW) making a total of $70,000.

    [2] T-Documents at p32.

13. Afterwards, as at the date of settlement and with effect from 29 June 2014, she received $390,000 less solicitor's fees and some repayments she had to make back to social security. They were not particularly large repayments. The legal fees appeared to be about $55,000. She also had $45,000 taken out of those payments, being the 10 per cent payments to Medicare. She was ultimately was refunded $39,000 from that $45,000 deduction.

14. When the $39,000 refund was taken into consideration, the net payment the Applicant received was $335,713.43.

15. As I noted above in paragraph 12, the Applicant had earlier received $70,000. The Applicant gave oral evidence that the $70,000 was spent paying various bills and debts that she had incurred.

16. She also gave evidence in relation to the lump sum payments received on 19 July 2013 and said that she had also used that to pay debts which were substantially credit card debt.

17. I am satisfied from her evidence that she was in a Catch 22 situation with the credit card debt. She either paid it or she did not pay it. If she did not pay it she would be paying excess in interest, and if she paid part of it there would still be significant interest building up. It was a difficult situation.

18. With regard to the disposal of the lump sums of money, (ie the $70,000) which were payments made prior to the settlement, no evidence was advanced by the Respondent to contradict the Applicant’s evidence.

19. The Applicant, on being advised of how much money she was actually getting, was told that the preclusion period started as at 29 June 2014 and it extended up until 6 April 2019. This being 249 weeks at $920.80 per week.

    THE PRECLUSION PERIOD FORMULA

20. The formula which is used to work out the preclusion period is set out in the Respondent’s Statement of Facts and Contentions.[3] The Statement of Facts and Contentions indicates that for the purposes of subsection 17(1) of the Social Security Act 1991 (Cth) (the Act) “The income cut-out amount is calculated in accordance with section 17(8) of the Act.”

    [3] Respondent’s Statement of Facts and Contentions, dated 7 May 2018, para 25.

21. The Act provides that the deemed weekly amount to be applied is two times the maximum basic rate of pension. Namely, a disability support pension or an old age pension (the most generously paying pension a claimant can get) plus the pension supplement component, plus the energy component, plus an ordinary free area limit, with a CPI increase per annum factored in as well.

22. For the purposes of this application it was $920.80 per week.

23. A person's preclusion period is also based on 50 per cent of their lump sum payout. The lump sum payout in the Applicant’s case was $460,000 (being the two lots of payments made earlier totalling $70,000 plus the $390,000). This is then halved to $230,000, and then it is worked out in terms of the formula just mentioned. This means it was 249 weeks and a few days. It was then rounded down to 249 weeks.

24. During the hearing there was considerable discussion in relation to the above, but I am satisfied that the mathematics are correct and that the pension has been worked out correctly.

25. There were some issues raised by the Applicant in relation to when the period should start from, and in relation to whether there were special circumstances in her case. I shall consider this shortly.

    THE ISSUE OF LUMP SUM PAYMENTS AND WHEN THE EXCLUSION PERIOD SHOULD START

26. The Applicant submitted that the $70,000 should not have been counted, that it should only be the $390,000. If that were so, the Applicant would be able to start claiming some sort of pension immediately  

27. Unfortunately for the Applicant the law is quite clear.

28. Section 1171 of the Act states as follows:

    1171 Deemed lump sum payment arising from separate payments

    1If:

    (a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation ( the multiple payments); and

    (b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;

    the following paragraphs have effect for the purposes of this Act and the Administration Act:

    (c)the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;

    (d)the single payment is taken to have been received by the person

    (i)     on the day on which he or she received the last of the multiple payments; or

    (ii)    if the multiple payments were all received on the same day, on that day.

    2A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.

29. So if a person receives (see subsection 1(a)), 2 or more lump sum payments in relation to the same event that gave rise to an entitlement to compensation and at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn, in this instance the big payment of $390,000, subsections (1)(c) and (1)(d) have effect for the purpose of the Act.

30. Subsection 2 states that a payment is not a lump sum payment for the purposes of subsection 1(a) if it relates exclusively to arrears of periodic compensation. Subsection 2 does not apply in this application, in relation to the lump sum payments totalling $390,000.

31. Furthermore, Centrelink sent a letter to the Applicant dated 14 May 2014, stating as follows:

    “We have been advised that you are to receive a lump sum compensation payment:

    ·     for the incident dated 18 September 2006, we have been advised that the compensation amount is $70,000.

    After considering the terms of settlement of your claim, it has been determined that your compensation claim attracts no Centrelink charge and no future preclusion period.”[4]

    [4] Supplementary T-Documents, p160.

32. I can understand how that statement could lead to a belief that there is no preclusion period for the $70,000. The letter goes on to say:

    “This means that either your Centrelink payments will continue or if you need assistance, you can make a claim at your nearest  Centrelink office.”[5]

    [5] Ibid.

33. That statement could also reinforce the idea that there is no preclusion period. However, the letter then goes on to say:

    “While there are no changes relating to your settlement, your compensation money may affect the amount you are paid in the fortnight you receive your settlement under the ordinary income test provisions. You must notify us within seven days if you receive more than one lump sum payment of compensation as a result of injuries arising for the same compensable event. We can add all the lump sums together to calculate a preclusion period. This means that, if you receive a further lump sum payment as a result of injuries arising from the same compensable event we may need to work out a new preclusion period.”[6]

    [6] Ibid.

34. The letter then goes on to tell the Applicant where she can find information. It flags the possibility that if a person received a further lump sum payment a preclusion period may apply. This is exactly what happened.

35. The further lump sum payment has to be a compensation payment relating (at least in part) to future earnings and earning capacity, which clearly the lump sum of $390,000 does.

36. Accordingly, the Applicant’s argument does not really get anywhere because of the fact that the $390,000 is the last of the payments, and all of the payments have to be added together pursuant to section 1171 of the Act. Centrelink foreshadows that in the letter dated 14 May 2014. Unfortunately for the Applicant section 1171 of the Act is clear, as is the letter.

37. The other issue which was raised by the Applicant was that she received about $135,000 on 19 July 2013 as a lump sum payment for back pay, which was something she should have received earlier.

38. In reality the Applicant could not have received it earlier because she could not receive it until she had claimed it pursuant to her claim for compensation, but it is a logical argument because on 9 July 2013 she received approximately $135,000 albeit in 11 separate entries.

39. It is highly relevant that the lump sum was received in 11 separate entries/payments on the same day. That indicates that these were intended to be ongoing payments rather than a lump sum compensation, which would then mean that the Applicant would be getting less income on a regular basis.

40. There is further documentation before the Tribunal which indicates the payments she has been receiving are approximately $350 a week, which is not anything near what she would be receiving would she be working.

41. The Applicant’s evidence indicated that she was often getting $800, $900 a week when she was working in the years 2006 – 2008, and the payments she was receiving did not really assist her. This can be seen in the letter from Firths Compensation Lawyers dated 19 April 2013.[7] This letter outlines a first offer of settlement, where the insurance company offers to pay the single statutory rate as follows:

    ·2 November 2006 to 31 March 2007 at $354.40 per week;

    ·1 April 2007 to 10 May 2007 at $361.30 per week;

    ·11 May 2007 to 15 May 2007 at $287.67 per week;

    ·16 May 2007 to 17 June 2007 at $177.04 per week.

    The rate then varies significantly, until 1 April 2013 when it becomes $447.70 per week, with credits to be made for any payments made by the insurer within the defined periods.

    [7] Supplementary T-Documents, p 229.

42. The Applicant’s lawyers advise her that she cannot do any better than that offer if the case went to hearing. They recommend that she accepts that part of the offer, but tell her they can increase the figure for pain and suffering (which in fact then occurred). They also advise the Applicant that they want to discuss the matter further because she has now exceeded the relevant 15% threshold and that might entitle her to bring a Work Injuries Damages claim. This seems to be quite good advice, and as a result the matter ended up being settled.

43. I should also add that I note the legal fees end up being $55,000. Having looked at a number of these cases that sum is considerably less, considering the time involved in running this case, than what some solicitors charge. So it seems, in the absence of any evidence to the contrary, that the Applicant has been well served by the firm and no issues arise in this matter in relation to her legal advice.

44. When the matter was finalised after June 2014, the Applicant received a net amount of $296,713.43. And then Medicare sent her $39,000 shortly thereafter, making a combined net total of $335,713.46.

45. The Applicant ran out of money in April 2017 and then applied to Centrelink for a Newstart allowance.

46. The Applicant provided evidence to the Tribunal, both oral and documentary, including evidence before the AAT1, showing how much she has spent on various items. I will address that shortly.

47. I should however before coming to that, reiterate that the clear intent of the insurer was for the Applicant to receive periodic payments and the above is indicative of that.

48. The basic logic of the scheme is that if this was not the case, and if these payments were to be treated as a lump sum payment, one would have to go back to 1 October 2007 and then the 249 weeks would run from then to sometime in August - September 2012. This would be ridiculous as the preclusion period would end before any payments were made. It would be before the payments of $32,500 and $37,500, and before the lump sum payment of $296,713.43 made at settlement. The legal process leading to settlement was still ongoing in 2012.

49. The legislation and the principles behind the legislation is to work out a fair amount from the person's lump sum compensation when they agree to take a lump sum compensation. That lump sum takes into account whether the sum is either all for, or mostly for, loss of earnings and future loss of earnings, and to work out a period where the person can live off that before they can claim a pension.

50. $920.80 per week is not unreasonable and the formula is not unreasonable. I do note that it is probably close to what the Applicant was actually earning when she was working, and possibly even a little bit more.

51. The idea then is that the person should not, unless there are exceptional circumstances, be able to receive a pension during that period.

52. In the Respondent’s Statement of Facts and Contentions, it was stated that $920.80 per week for 249 weeks is equivalent to 14 years on a Disability Support Pension or 21 years on a Newstart Allowance. It is therefore a reasonable amount of money. The idea is that a person should not be able to double dip at the Australian taxpayers’ expense.

53. It is true that one of the problems of receiving a lump sum payment is that the individual does not get the benefits of the pension card. This can certainly be worth money if the individual has ongoing medical issues, however it seems that the legislation has taken that into account by creating a reasonably generous formula.

54. The intent of the legislation is also to ensure that once the period ends an individual can then reapply for a pension, especially if they still cannot work as a result of the original injury. I add that nothing prevents an individual from working during that period if they are able to. Many people, for obvious reasons, are not able to work.

55. The Applicant has some significant issues in relation to capacity to work. She has significant mental health issues and this was apparent to the Tribunal as the hearing proceeded. The Tribunal notes that the Applicant appears to have done a very good job in raising her 15 year-old daughter with the assistance of her former husband. The Applicant has also invented during the period we are looking at, a sealed body bag. It is not everyone that makes inventions such as that, or indeed inventions of any sort, and this was a rather unique feature of this case.

    CONSIDERATION OF SPECIAL CIRCUMSTANCES

56. The Applicant is certainly not alone in relation to spending money before the preclusion period ends.

57. Having regard to the Applicant’s financial affairs, repaying $60,000 on a mortgage so that she can downsize, despite the Respondent contending that that is not necessary, does seem to this Tribunal as sensible as it enables the Applicant and her former husband to pay a reduced mortgage.

58. Although living separately and apart under the one roof, both she and her former husband contribute to running the household. Her former husband only works part-time and I note that this may need to change. When their daughter was younger it may have been justified but I feel it is something that should change as he could then earn more money to contribute. At any rate, the Applicant’s former husband was and is receiving $500 to $600 a week from part-time work.

59. The Applicant has detailed her household costs.[8] They are as follows:

    ·$26,350.90 on household costs in 2013-2014;

    ·$33,442.93 on household costs in 2014-2015;

    ·$35,442.93 on household costs in 2015-2016;

    ·$28,026.00 on household costs in 2016-2017; and

    ·$18,892.00 on household costs in 2017-2018.

    [8] Summary available in the Respondent’s Statement of Facts and Contentions, dated 7 May 2018, para 52.

60. The Applicant appears to have been trying to economise. There are some logical but minor expenses, such as going to the Philippines to see her grandmother taking cheap economy fares, and spending 65,000 Pesos on a medical procedure (>$2,000 at the then exchange rate). I find these to be a logical, sensible, and reasonable expenditure of a moderate nature.

1. I do note that there is $54,933.36 listed in the Applicant’s documentary evidence that is unaccounted for. The figure is probably less after her oral evidence which listed extra expenditures, reducing the unaccounted amount to approximately $50,000.

2. Although at one stage her husband spent $80 a week on takeaways, which is clearly a discretionary expense, the Tribunal was not presented with any further information that would explain the fact that there is about $50,000 unaccounted for. I do note that the Applicant spent $60,000 on the mortgage and $79,000 on her invention, but that still leaves about $50,000 unaccounted for.

3. The question still remains, does any of this amount to special circumstances? Are there special circumstances in this case?

4. Special circumstances are not defined in the Act. However, they have to be very much out of the ordinary, and not common. There is a guideline available which details what decision makers have to have regard to when considering the application of the special circumstance provisions.[9]

   [9] Guide to Social Security Law, - 4.13.4.10 – Overview of the Application of the Special Circumstance Provisions, and 4.13.4.20 Factors to Consider When Determining Special Circumstance Provisions. Reproduced in the T-Documents at pp 23-30.

5. The Guide to Social Security law provides a list of factors to consider when determining special circumstance provisions.

6. The factors include ill health to the Applicant’s immediate family or the Applicant themselves that is unforeseen and unexpected which causes additional expenses to be incurred, and that is not related to the actual injury. Such ill health would need to be more severe than that of the majority of DSP recipients.

7. A person's stress/mental health that was not related to the injury, is a factor but, unfortunately for the Applicant, her injury is to her mental health.

8. The Guide to Social Security Law details things that can’t be considered, including if a person has deliberately deprived themselves of the means of support by inappropriately spending the lump sum.

9. However, other things can be considered in relation to special circumstances including if a person has received incorrect or insufficient legal advice that has resulted in causing them to suffer difficulties and which made it difficult to get compensation quickly. I must say that does not appear to be the case here. It seems the legal advice was quite reasonable in the circumstances.

10. The Guide to Social Security Law further provides that a person does have to look at other avenues of support, including family and friends who can provide for them such things as free board. The Guide indicates that even if someone has to sell their house that is not necessarily a special circumstance.[10]

    [10] Guide to Social Security Law – Factors to Consider when Determining Special Circumstance Provisions 4.13.4.20 – T-Documents p28.

11. Changed circumstances can be a factor to consider. These circumstances must be circumstances wholly or partly outside the person's control: a sudden collapse of a well-considered investment business which was meant to generate self-supporting income; natural disasters; sudden ill health of a person or of the person themselves or a member of the family; or if a person has been defrauded out of their funds.

12. The above are the considerations that can be taken into account but generally the special circumstances provisions, and the application of the special circumstances guidelines, is a very difficult test for a person to meet and qualify for.

13. Is the expenditure of $79,000 on an invention a special circumstance? If it is, the Applicant could start applying for a pension immediately. I unfortunately have not been able to find anything in relation to inventions in the case law and I have not received anything from the representative for the Respondent in relation to any relevant case law.

14. I do not agree with the AAT1 in terms of their description of the invention. I think people are to be commended for inventing things. An invention is something, if it is successful, that will reap considerable benefits to a lot of people, including the inventor.

15. It is however, like any new business venture, a gamble. There is nothing in the legislation or in case law which would indicate that it would amount to being a special circumstance, despite the fact that many inventions can be very meritorious and improve the lot of society and advance civilisation. It should perhaps be acknowledged as such.

16. However, apart from the satisfaction of having tried, spending money on an invention is somewhat of a gamble as is any new untried business venture.

17. It is understandable for the Applicant to try, even if she fails. The invention may even pay dividends in the long run, but unfortunately, for the Applicant it does not fall within the special circumstances provisions.

18. An invention is not in the same category as the sudden collapse of a well-considered investment business. Although it may be a good idea which has not yet come to fruition, it cannot be considered as special circumstances.

19. It should be noted that I made suggestions during the hearing as to what the Applicant could do to advance her invention further.

20. Although I am no expert in these things and I probably do not know enough in terms of what exactly the invention does, the invention appears to have considerably good application in terms of slowing down diseases, providing a good way of safely storing dead bodies in various climates, and facilitating the body not decomposing, especially in circumstances bought on by natural disasters. It seems to have considerable application both in Australia and overseas.

21. The Applicant has already spent $79,000 on the invention. She requires someone else to pick up the bill and would benefit from going in with a larger group, either a government agency or a private investor who is prepared to spend the money. She would get royalties from it.

22. This can still happen and I suggested a number of potential individuals and agencies the Applicant should approach who may be interested in taking her idea further.

23. The Applicant is to be commended on her invention but unfortunately there is no provision in the legislation or the case law which states that the Tribunal has a discretion to recognise that money spent on inventions as being a special circumstance.

24. As far as the law is concerned, whilst it may be a great idea, a person in the Applicant’s position is expected to wait until the preclusion period had ceased before spending money on her invention. She then could have spent the $79,000 on supporting herself and her family. Had she done so, the $79,000 would have probably tided her over until the end of the period. At the end of that day that is her call, but she has to live with consequences of that call.

25. The Tribunal and the Applicant also discussed the possibility of the Applicant seeking assistance from the NDIS.

26. The Applicant also raised a tax issue she had.

27. She claimed she had potential tax penalties in relation to her being unable to file documents as the insurance company and other people who she had no control over did not release them, and it seemed, would not release them. The Tribunal notes that she could not file documents she did not have, and urges the Australian Tax Office to bear that in mind. Maybe the Australian Tax Office can force third parties to release the documents.

28. It seems to be (providing she is accurate in what she has told this Tribunal) a Catch 22 situation totally beyond her control, and surely those are circumstances where one should not have to pay any penalties. The Tribunal noted that surely some arrangement can be made in relation to back tax, to take into account the Applicant’s very strained financial circumstances.

29. The Tribunal also discussed ways the Applicant and her family could survive for the next 10 months. However, unfortunately for the Applicant, there is nothing the Tribunal can do under the legislation to assist her.

30. Accordingly, the Applicant’s situation does not amount to special circumstances. I should also add that it is still unclear to the Tribunal where the $50,000 unaccounted for was spent and perhaps therein lies a further problem with this application.

    DECISION

31. For the reasons given above the decision of the AAT1 will be affirmed.

I certify that the preceding 91 (ninety-one) paragraphs are a true copy of the reasons for the decision herein of Bill Stefaniak AM RFD, Senior Member

.............................[SGD]...........................................

Associate

Dated: 9 August 2018

Date(s) of hearing:	15 May 2018 and 23 May 2018
Applicant:	In person
Solicitors for the Respondent:	Ms E Ulrick - Department of Human Services