Gardner and Secretary, Department of Social Services (Social services second review)
[2021] AATA 2945
•17 August 2021
Gardner and Secretary, Department of Social Services (Social services second review) [2021] AATA 2945 (17 August 2021)
Division:General Division
File Number(s): 2020/8414
Re:Brian Gardner
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Chris Puplick AM, Senior Member
Date:17 August 2021
Place:Sydney
The decision under review is set aside and the matter is remitted to the Secretary with a direction that the sum of $28,550.00 is to be deducted from the lump sum compensation payment and the preclusion period recalculated accordingly.
...............................[sgd].........................................
Chris Puplick AM, Senior Member
CATCHWORDS
SOCIAL SECURITY – Disability Support Pension refused due to Compensation Preclusion Period – whether Compensation Preclusion Period was correctly cancelled – whether special circumstances exist – expenditures as proper and necessary for the Applicant to lead a life to minimise compromised health condition relating to compensation payment – decision set aside and remitted
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 1169-1171, 1184 and 1184K
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Chaker v Secretary, department of Social Services (Social services second review) [2020] AATA 3128
Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov v Centrelink [2003] FCAFC 133
Gartside and Secretary, Department of Social Services (Social services second review) [2017] AATA 45
Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339
Haidar v Secretary, Department of Social Security (1998) 157 ALR 359
Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162
In the Marriage of Phillippe [1997] 4 Fam LR 153
Jess v Scott and Others (1986) 70 ALR 185
Kezchek v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] FCA 856
Krebs v Secretary, Department of Social Services [2015] AATA 963
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Riddell v Secretary, Department of Social Security [1993] FCA 261
Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Secretary, Department of Education, Employment and Workplace Relations and Morrison [2008] AATA 1017
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569
Tallon and Secretary, Department of Social Security [1988] 15 ALD 6
Thomas and Secretary, Department of Family and Community Services [2003] AATA 842
SECONDARY MATERIALS
Social Security Guide s 4.13.2.40
Social Security Legislation Amendment Bill (No 1) 1995, Minister’s Second Reading Speech, Hansard: House of Representatives, 19 June 1995
REASONS FOR DECISION
Chris Puplick AM, Senior Member
17 August 2021
THE APPEAL
Mr Brian Gardner (the Applicant) is seeking a review of a decision by the Social Services and Child Support Division of this Tribunal (AAT1) which upheld a decision by the Secretary, Department of Social Services (the Respondent) to deny him payment of the Disability Support Pension (DSP).
Although the Applicant is currently in receipt of the DSP (as from 21 October 2020) this matter relates to an earlier claim which was made on 24 January 2020. That claim was rejected by the Respondent on 12 March 2020 and that rejection decision was affirmed by an Authorised Review Officer (ARO) of the Department on 13 October 2020.
The Applicant sought a review of that decision by application to the AAT1 which nevertheless affirmed it on 11 December 2020.
THE BASIS OF THE REFUSAL DECISION
The reason for the refusal of the application for the DSP made on 24 January 2020 (the matter before this Tribunal) had nothing to do with the Applicant’s qualifications for the DSP as laid down in section 94 of the Social Security Act 1991 (Cth) (the Act).
Rather, the refusal was based on various other provisions of the Act which provide that where a person receives certain defined compensation payments, they are excluded from receiving certain other social welfare payments for a period of time[1] worked out in accordance with a formula set out in the Act.[2] This is called the ‘preclusion period’.
[1] Social Security Act 1991 (Cth) (Act), ss 17, 1169-1171 and 1184.
[2] Act s 1170.
The public policy supporting this arrangement was stated by the government to be:
“The compensation recovery provisions of the [A]ct protect the social security system from ‘double dippers’ – that is, those people who might receive social security payments, as well as compensation, for the same period.”[3]
[3] Social Security Legislation Amendment Bill (No 1) 1995, Minister’s Second Reading Speech, Hansard: House of Representatives, 19 June 1995 at 1768; see also Secretary, Department of Education, Employment and Workplace Relations and Morrison [2008] AATA 1017 at [24].
The relevant compensation payment
On 20 June 2012 the Applicant suffered significant injuries in a motor vehicle accident which resulted in a claim for personal injury compensation being assessed.
In the meantime, it appears that on or around 2 December 2013 the Applicant was granted the DSP[4] and that on or around 11 February 2013 he was also granted Sickness benefits.[5] It is most unfortunate that the Applicant’s history of receipt of social security benefits was not set out in detail in the Respondent’s Statement of Facts, Issues and Contentions which gives the impression that the Applicant’s first engagement with the DSP payment was in January 2020.
[4] Tribunal documents (T-documents) at 110.
[5] Ibid.
The assessment was carried out by the Claims Assessment Resolution Service (CARS) of the State Insurance Regulatory Authority (Motor Accidents) and a determination was made on 30 September 2016.
It is important to identify at this stage the fact that the assessment made by CARS was contested by the Applicant and by the Insurer.[6]
[6] T-documents at 42-43 and 45.
Where parties agree upon the amount of compensation to be paid and seek ratification of this agreement from the assessor, the outcome is referred to as a settlement. Where the parties are not in agreement, the final award made by the independent assessor is referred to as a judgement.
This is an important distinction as the legislation provides that payments by way of settlement and payments by way of judgement are treated differently for the purposes of assessing the preclusion period.
The final determination by CARS was that the damages awarded were:
·$508,882.42 in respect to the claim;
·$47,952.34 for costs; and
·$37,913.18 as an additional credit under section 130 of the Motor Accidents Compensation Act 1999 (NSW).
Paragraph 17(3)(b) of the Act provides that the compensation part of any lump sum payment in question is that part of the lump sum that relates to lost earnings or lost capacity to earn.
The calculation of the amount of economic loss from a payment by way of judgement is set out in section 4.13.2.40 of the Social Security Guide (the Guide).
In this instance the amount in question has been calculated by the Respondent as being $417,435.00. This represents both loss of earnings and superannuation contributions and the future loss of both.
In the event, it appears that total amount received “in hand” by the Applicant, after the deduction of legal fees, Medicare expenses and other items was some $348,613.53.[7]
[7] T-documents at 10 and 85; AAT1 decision at [20].
Notification to the Applicant
Following the decision of CARS on 30 September 2016, Services Australia wrote to the Applicant on 4 November 2016 explaining the operation of the preclusion period arrangements and advising him that his preclusion period ran from 12 November 2012 to 14 March 2021.[8] This advice was in error as the preclusion period should have been taken as commencing on 20 June 2012. This advice was corrected in subsequent correspondence to the Applicant dated 13 October 2020.
[8] T-documents at 46-48.
However, the same letter (4 November 2016) correctly advised that the Applicant had been paid $50,117.08 “in this period” and that that sum needed to be recovered by way of requiring the insurer to remit that amount to the Department prior to their making any payout to the Applicant.
The Tribunal was advised at the hearing that this money had been so recovered. Apparently, it represents recovery of payment for Sickness Allowance ($2,844.70) and DSP ($47,272.38) made to the Applicant between 3 January 2013 and 28 October 2016.[9] In effect, this letter represented not only a notification of repayment of monies already paid, but a cancellation of the DSP which apparently was granted on or about 2 December 2013.
[9] T-documents at 117.
CALCULATION OF THE PRECLUSION PERIOD
The calculation commences by working out what is called the “compensation part of the lump sum” in question. Subsection 17(1) of the Act provides a list of social security payments which are included in the definition of “compensation affected payment”.
It also provides the definition of what is called the “income cut-out amount”:
“income cut‑out amount”, in relation to a person who has received a compensation payment, means the amount worked out using the formula in subsection (8), as in force at the time when the compensation was received.
Subsection 17(8) then provides:[10]
2 x (Maximum basic rate + Pension supplement component + Energy supplement component) + Ordinary free area limit
52
[10] Each of the terms used in this formula are defined in the section and vary in their quantum over time. The Tribunal is in no position other than to accept that these elements have been correctly calculated by the Respondent.
Subsection 17(2) then provides (emphasis added):
(2) 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.
Subsection 17(3) establishes the method for the calculation of the “compensation part of the lump sum compensation payment” as follows (emphasis added):
(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.
It is at this stage that the distinction between the treatment of payments by way of settlement and those by way of judgement becomes relevant.
The Guide provides as follows:
“Instruction 4.13.2.10 Treatment of Specific Lump Sums of the Guide provides the following information in relation to the New South Wales Claims Assessment and Resolution Service (CARS):
The Motor Accident Authority (MAA) of New South Wales uses CARS to determine personal injury claims resulting from motor vehicle accidents occurring on or after 5 October 1999. Under section 94 of the New South Wales Motor Accidents Compensation Act 1999 a CARS assessor determines all claims finalised under CARS.
However, depending on the process to reach that determination, the final decision by the assessor may be a settlement or it may be a judgement for social security purposes. The following table shows how to determine the compensation part of a lump sum that has been finalised under CARS.”
If….
Then….
the assessor has to make an independent assessment because one or both of the parties have contested the proceedings
the determination is treated as a judgement rather than a settlement. This is because the CARS assessor must make an independent judgement about the heads of, damage. The compensation part of the lump sum is then based on the specific amounts awarded for economic loss (see above).
the parties have negotiated and presented an agreement to the CARS assessor for ratification
the determination is treated as a settlement and the 50% rule applies. This is because, unlike the situation above where the CARS assessor makes an independent judgement, the CARS assessor is only ratifying the agreement already struck between the parties. Although heads of damage may be specified in the agreement, the 50% rule applies because there has NOT been an independent judgement made as to the basis of the agreement
In 2009 a case came before the Federal Court in Kezchek.[11] In this instance Mr Kezchek had received a compensation payment under the NSW Motor Accidents Compensation Act and the question was whether, in relation to the operations of the Commonwealth Social Security Act that payment was to be treated as falling under section 17(3)(a) or 17(3)(b) of the latter. As Jagot J put it:
Although the facts are simple, the competing submissions of the parties can be understood only in the context of the relevant provisions of the Social Security Act, an enactment of the Commonwealth Parliament, and the Motor Accidents Compensation Act, a later enactment of the New South Wales Parliament.
[11] Kezchek v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] FCA 856.
After a lengthy exposition of the meaning of the words “settle” and “settlement” (at 37), agreeing that they should be taken at their ordinary meanings, Her Honour also noted that within the range of possible ordinary meanings, the Tribunal’s conclusion that paragraph 17(3)(a)’s reference to settlement required a “resolution of claim by an agreement between the parties” was correct. Therefore, in the circumstances of Kezchek, Her Honour found that the payments in question should be treated as falling under section 17(3)(b) instead.
This means that the compensation quantum as per the CARS assessment of damages had to be taken in full in any further calculations and was not subject to the 50% rule found in paragraph 17(3)(a).
In his evidence to the Tribunal the Applicant explained at length why he had, on legal advice, challenged the original assessment which he did not believe properly compensated him for imminent and developing impairment of secondary dystonia.
From there the calculation must turn to Instruction 4.13.2.40 of the Guide (Compensation Part of Lump Sum – Judgement by Contested Hearing):
“Judgement by contested hearing
A court, tribunal or arbitrator can make a judgement by contested hearing. The compensation part of the lump sum is determined by the delegate based on the specific amounts awarded for economic loss.
What is the economic loss amount
When a case is finalised after a contested hearing, the compensation part of the lump sum is made up of the amounts awarded specifically for economic loss. In particular the delegate should have regard to amounts awarded for:
· lost wages (past economic loss),
· interest on past economic loss,
· lost capacity to earn (future economic loss),
· interest on future economic loss,
· lost superannuation contributions, and
· interest on lost superannuation contributions.
Note: Any Fox v Wood (1981) HCA 41; 148 CLR 438 component is not included as economic loss. This component is to reimburse income tax previously paid when weekly compensation must be repaid from the judgement.
If a court order does NOT set out fully the basis of the award, more information should be sought about the nature of the award and a decision made on the basis of all the available information. If NO information is available then the 50% rule should be applied.”
Once again, the distinction between the treatment of payments made by way of judgement rather than settlement is highlighted.
This establishes the various figures to be used to calculate the preclusion period as follows:
Lump sum preclusion period
(1) Subject 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).
(2) If 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).
(3) If 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).
(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
________________________
Income cut-out amount
(5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
The calculation proceeded as follows:
(a)the total sum awarded to the Applicant was $594,747.94;[12]
(b)the sum in question was to be treated as a judgment not a settlement;
(c)using the provisions of paragraph 17(3)(b) of the Act and in accordance with the Instructions in 4.13.2.10 of the Guide
(d)the compensation part of the lump sum payment was calculated as $417,435.00;
(e)the income cut-out amount at the relevant date was $959.10;
(f)dividing the compensation part of the lump sum by the income cut-out amount yields a figure of $435.24;
(g)that number is rounded to 435.00 and expressed as a number of weeks;
(h)the staring date for the calculation of timing is 20 June 2012;[13] and
(i)the concluding date for the calculation (the preclusion period) is 20 June 2012 plus 435 weeks, that is 20 October 2020.
[12] Damages ($508,882.42) + Costs ($47,952.34) + Motor Accidents Compensation Act award ($37,913.18).
[13] The date of the original accident and hence the date at which loss of earnings commenced.
The Tribunal is satisfied that the correct calculations have been made of the length and timing of the preclusion period.
SPECIAL CIRCUMSTANCES
It is necessary to consider several questions – what constitutes “special circumstances”; what are the specific facts of this Applicant’s case and what were his personal actions and responsibilities in terms of managing his finances once he had received the compensation payment.
What are “special circumstances”?
Section 1184K of the Act allows ‘special circumstances’ to be found so that part or all of a compensation payment may be disregarded for the purposes of determining a preclusion period. The section has been described by the Federal Court as intended to “ameliorate” the otherwise stark provisions of the preclusionary regime.[14]
[14] Haidar v Secretary, Department of Social Security (1998] 157 ALR 359 at 360.
As with so many key concepts in the Act, the term “special circumstances” is not given any precise definition. Without going into extensive detail, it can be said that the courts have identified a number of factors which go to establishing whether or not “special circumstances” exist. They must be:
·something more than ordinary or usual;[15]
·markedly different from the usual run of cases – not necessarily unique but having a particular quality of unusualness;[16]
·somehow distinguishing from usual cases of an analogous nature;[17]
·attuned to the individual circumstances of each case;[18]
·not so rigidly applied as to risk harsh or unreasonable outcomes;[19]
·involving ‘facts peculiar to the particular case which set it apart from other cases’;[20] or
·supportive of the overall integrity of the social security system and recognising the public interest in ensuring that public moneys are recovered where they can and should be.[21]
[15] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; Jess v Scott and Others (1986) 70 ALR 185.
[16] Re Beadle and Director General of Social Security (1984) 6 ALD 1 at 3.
[17] Dranichnikov v Centrelink [2003] FCAFC 133.
[18] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.
[19] Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
[20] In the Marriage of Phillippe [1997] 4 Fam LR 153 per Kay J.
[21] Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569; Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114; Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
Additionally, the Tribunal is invested with “a broad discretion to respond to a variety of circumstances”[22] but should note that special circumstances “are not merely directed to the person's own circumstances. Rather, they are directed to those that are ‘special circumstances... that make it desirable to waive’”.[23]
[22] Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162 at [82].
[23] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at [80].
Social welfare payments are attuned (often finely) to the individual circumstances of each applicant/recipient and the Tribunal must take into account the circumstances of each applicant as presented.
In Riddell the Federal Court opined:
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.[24]
[24] Riddell v Secretary, Department of Social Security [1993] FCA 261 at [23].
In Hales, French J (as His Honour then was) considered the broad public policy issues related to matters of “special circumstances”. His Honour stated:
The taxpayer is entitled to expect that in the ordinary course money paid to people which they are not entitled to receive will be recovered, albeit in a way appropriate to the circumstances which led to the overpayment and the circumstances of the persons concerned. However, the confining of a recovery regime by rigid rules, particularly in this area of the law, is likely to be productive of unfair or harsh outcomes in some of the great variety of fact situations that can arise. There are provisions in the Act which recognise that reality. They relate to the writing off and the waiver of debts otherwise due to the Commonwealth. This case primarily concerns the proper construction of a section of the Social Security Act 1991 (Cth) which provides for the waiver of debts where special circumstances are found to exist. There is a tension in the construction of such provisions between the needs for certainty of application and flexibility of response to the situations that may arise from time to time.[25]
[25] Secretary, Department of Social Security v Hales (1998) 153 ALR 259 at 260.
What are the Applicant’s particular circumstances?
The Applicant indicated to the Tribunal that, as a result of the injuries which he suffered in the accident he had taken certain steps to preserve and enhance his ongoing quality of life and avoid allowing a deterioration in his condition or his level of dependency on others.
These included the purchase of a wheelchair and then a motor vehicle (second hand) which was capable of accommodating that chair. He then acquired a basketball-wheelchair and became an active participant in that sport, to the extent of undertaking regular training at a semi-elite level and travelling around the State to participate in competitions. He acquired a handcycle which allows him to maintain a level of cardio-fitness and which helps him with a problem of the regulation of his body temperature which was one of the results of his accident and if not managed leads to him suffering “dystonic storms”.
In order to plan for his future and fearful of ending up in a sub-standard nursing home he travelled to Thailand where, with the assistance of a carer, he investigated disability-related facilities in that country which could be accessed at (in his view) a better standard and certainly at a lesser cost than in Australia.
He repaid a debt to his parents who had been supporting him up until he was able to access payment of the DSP. He was involved in a divorce, during the course of which he made certain payments to his ex-wife which included buying her a car. One of the consequences of the divorce was that the Applicant’s daughter (aged about 16 years) came to live with him, and he paid for her course of counselling and psychiatric treatment (which the Applicant said resulted from abuse suffered at the hands of her mother) and he paid extensive dental bills for her.
The Applicant finds that his conditions of dystonia and chronic spasticity were poorly managed or alleviated by traditionally prescribed pharmaceuticals but that once he was (legally) able to access cannabis oil (CBD) he found this to be a great benefit. Unfortunately, the costs of this medication (in excess of $3000 per annum) are not covered by Medicare although he can claim a refund of up to $500 annually on his private health insurance.
The Applicant made certain arrangements to access his superannuation when he found that he was running out of money,[26] although since he has had access to the DSP, he has sought to preserve his superannuation entitlements. For a considerable period of time the Applicant was not able to access the National Disability Insurance Scheme (NDIS) although he has become eligible for some level of support since May 2021.
[26] T-documents at 94.
As a result of these expenditures the Applicant found himself, prior to the grant of the DSP in October 2020 in considerable financial stress.
Did the Applicant manage his finances appropriately?
Many applicants pleading special circumstances will find themselves in circumstances of financial hardship. However, in Gartside[27] the Tribunal made it clear:
“I do not understand the many Federal Court and Tribunal decisions on ‘special circumstances’ to require the Tribunal to find that special circumstances exist simply because the Applicant is in straitened financial circumstances. My understanding of the law is that it is open for the Tribunal to find special circumstances in such a circumstance, but a Tribunal Member is not obliged to do so. In exercising the discretion vested in the Tribunal, a Member is required to consider all of the matters the evidence admitted produces and straitened financial circumstances is one factor, albeit a very important one, but not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:
‘The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances. Very often their stories will be quite tragic.’”
[27] Gartside and Secretary, Department of Social Services (Social services second review) [2017] AATA 45 at [57].
In its Statement of Facts, Issues and Contentions the Respondent characterised the Applicant’s pattern of expenditure as “extravagant”.[28] This was a characterisation which the Applicant found profoundly offensive[29] and which, properly, was withdrawn by the Respondent in their oral submissions.
[28] Respondent’s SFIC at [64].
[29] Applicant’s Email to Tribunal 25 July 2021.
Nevertheless, there is also clear authority as to the burden of personal responsibility borne by individuals where they are required to manage compensation payments.
In Groom the Tribunal found that the applicant’s “circumstances are entirely of his own making and occurred despite him having received legal advice of the preclusion period and its consequences.”[30]
[30] Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339 at [62].
In Sams, Deputy President Constance noted that the should the applicant have “been more careful in managing her finances then Mrs Sams’ present financial hardship could have been prevented.”[31]
[31] Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654 at [40].
On the other hand, the Tribunal also recognises that “hardship is hardship even if it is self-inflicted”[32] and that “[e]ven the foolish and profligate must be protected in appropriate circumstances through the exercise of the discretion embodied in s 1184.”[33] The facts in this case mitigate against a finding of appropriate circumstances constituting special circumstances.
[32] Tallon and Secretary, Department of Social Security [1988] 15 ALD 6 at [8].
[33] Thomas and Secretary, Department of Family and Community Services [2003] AATA 842 at [16].
It might also be noted that while the Applicant’s claim that it is “unfair” for him to be assessed on his gross payments, rather than the actual amounts received, this has also been considered by the Courts.
Kiefel J (as Her Honour then was) stated:
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]
[34] Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 at [33].
More generally, the view was expressed in Clark that:
It may well be that in Mr Clark’s case, because of his age, the sum of $280,000 included no component, or only a very small component, for loss of his capacity to earn beyond age 65 (29 April 2004) and the statutory formula produces a result that is unfair to him, but if so, that result flows from a deliberate policy decision of the legislature favouring simplicity and efficiency of administration and reduction in administrative costs over attaining a fair result in each case considered on its individual merits.[35]
[35] Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076 at [44].
The precedents in Chamberlain and Clark have generally been followed by the Tribunal. For example, in Krebs the Tribunal stated:
I noted that the Secretary relied upon the case law, in particular, Chamberlain and Clark, where Justice Lindgren in essence said that the fact that the outcome regarding the calculation and imposition of preclusion periods may be unfair, that it is not a special circumstance. He emphasised that that was what the legislature intended. I am mindful many cases have followed Clark and Chamberlain. I have also taken into account the relevant clauses of the Guide such as 4.13.2. Whilst the Guide is not law, unless there is any inconsistency with the legislation, its guidance should be taken into account.
I accept the Secretary’s submissions, and must apply the judgments in the cases of Clark and Chamberlain. I find that accordingly, notwithstanding there might be unfairness in the imposition of a compensation preclusion period for Mrs Krebs…[36]
[36] Krebs v Secretary, Department of Social Services [2015] AATA 963 at [39]-[40].
This Tribunal, in Chaker (a decision not appealed by the Respondent) came to a somewhat different position after finding that “special circumstances” existed in that case and that as a result the lump sum calculation should be amended from that awarded by the authorities to that actually received by the Applicant.[37]
[37] Chaker v Secretary, Department of Social Services(Social services second review) [2020] AATA 3128 at [12].
DISCUSSION
It is obviously difficult to reconcile the need for administrative simplicity expressed in the rigid application of the statutory formula with the stated public policy underpinning the legislation (“what the legislature intended”), namely that there should not be “double-dipping”.
An Applicant cannot “double-dip” something to which the Applicant had no access. The formula is based on a sum of $417,435 but the Applicant only had access to (could “double-dip” into) $348,613.
Even if the Applicant is effectively being penalised for allegedly having access to money to which he did not have access, the Tribunal finds that the Respondent did not properly have regard to the management of expenditures which were necessary for the Applicant to minimise the compromises to his life and living occasioned by the accident.
In Chaker the Tribunal said:
[I]t is appropriate that when a person has suffered significant physical injury as a result of a compensable accident some allowance should be made for them to modify their home living conditions to accommodate a response to any resultant disabilities.[38]
[38] Ibid at [51].
The Tribunal has described above some of the steps taken by the Applicant in an attempt to improve his physical and mental wellbeing and has also noted the other major items of expenditure which he has provided. Some of those were set out in the Tribunal documents (T-documents) (at 81) and others were referred to in oral evidence.
The Respondent submits the following (citations to T-documents omitted):
“44. At the date of his DSP claim (24 January 2020), the Applicant had $16,614 in savings remaining.
45. The Secretary further notes that the Applicant has accounted for the following expenditure:
· $65,000 repaid to his parents;
· $6,800 repaid to credit cards;
· $16,500 on a car purchase;
· $7,725 on a handcycle);
· $7,631 on his daughter’s dental expenses; and
· $1,325 on a wheelchair.
· Total: $104,981
46. Taking into account the $16,614 in savings, the Applicant has accounted for $121,595 of his compensation proceeds. The Secretary notes that out of $348,613.71 the Applicant received from the final lump sum payment, there is $227,018.71 for which no account has been provided.
47. The unaccounted expenditure during the period from 2 December 2016 (when the compensation payment was received) to 24 January 2020 (when DSP was claimed) equates to expenditure of approximately $5,974.18 per month ($71,690 per year) in addition to the expenses detailed above. The Secretary notes this is more than three times the current maximum DSP rate.
48. The Secretary notes the Tribunal has previously declined to exercise the special circumstances discretion where much of the additional expenditure has not been satisfactorily explained (see Lazarov and Secretary, Department of Family and Community Services (2004) AATA 743).”
The Applicant in his email submission of 25 July 2021 contends (inter alia):
“2. I was told I could only state or claim expenses that I could substanciate, [sic] but would like to point out that in the preclusion period I went through a divorce in which I had to buy my wife a car so she wouldn't take mine $4000 plus $1000 registration and insurance, and I paid out her credit card as part of monetary settlement. I don't recall the amount I paid on her card.
3. Additionally in this time I bought my daughter her first car when she got her license $5200 plus $1000 registration and insurance.
4. My CBD (cannibis) [sic] oil and other medications cost me in excess of $300 per month to manage my dystonia and clonic spasticity which are not covered by medicare or health insurance. The CBD oil alone costs me $310 per month.
5. The BMW car that I had prior to buying the Commodore wagon required a transmission rebuild that cost over $4000.
These costs over the 3 year period account for another $29,000.”
In addition to this information, the Tribunal was informed at the hearing of expenditure of approximately $2,000.00 on the trip to Thailand and that the Applicant’s basketball wheelchair cost approximately $3,000.00.
The Tribunal regards some of these expenditures as proper and necessary for the Applicant to lead a life which minimises the compromised condition of his health for which he was paid compensation. These items are:
(a)the purchase of an appropriate motor vehicle = $16,500.00;
(b)the purchase of a handcycle = $7,725.00;
(c)the purchase of a wheelchair = $1,325.00; and
(d)the purchase of a basketball wheelchair = $3,000.00.
This is a total expenditure of $28,550.00.
Had more information been forthcoming about the commencement and regularity of use and of the costs of CBD and more evidence presented from competent medical authorities about its proven efficacy and the lack of alternatives, this item might also have been open for consideration. In the light of the evidence before the Tribunal however it cannot be considered at this stage.
The Tribunal agrees with the Respondent that repayment of debts to his parents and payment of expenses for his daughter were more discretionary in nature, especially as the repayment to his parents could have been made over a period of time and not in one lump sum as was the case. Similarly, the expenses for his daughter’s dental work cannot be included because there is limited evidence (accounts only) of both the services provided to her and the extent to which such services were available through the public health system.
In passing, the Tribunal notes that the Respondent asserts that
“52. The Applicant states that he repaid $65,000 to his parents. The Secretary contends that the repayment of debts would only constitute a moral obligation….”
The Tribunal finds it bordering on offensive for the term “only” to be used in a pejorative reference to moral obligations, especially in the middle of a pandemic when the responsibilities of members of the community to each other in terms in terms of protecting each other and ensuring community safety can be described as being a “moral obligation” only.
The Thailand trip may have been a prudent expenditure in terms of planning for the Applicant’s long-term future, but the details provided to the Tribunal are too vague to allow any further consideration of it as a legitimate expense.
Similarly, the Tribunal cannot take into account expenditure related to the Applicant’s divorce. It understands the position in which he found himself and appreciates that divorce settlements may involve considerable expenditure for the parties. Nevertheless, such incidents are, as the Applicant himself observed at the hearing, not uncommon and many applicants in similar proceedings would find themselves in exactly the same position.
CONCLUSION
The Tribunal finds that special circumstances exist because the Respondent has failed to take into account expenditure out of the lump sum awarded to the Applicant which was expenditure required for the Applicant to lead and sustain an improved quality of life. The expenditure was necessary and appropriate. It was not extravagant or unwarranted.
Notwithstanding this Tribunal’s decision in Chaker, the circumstances of that application are sufficiently distinguishable from this that the Tribunal does not find it possible to follow its Chaker decision in its entirety. Rather, the Tribunal accepts (on the authority in Chamberlain and Clark) that the starting point for calculations must be the nominal sum of $417,435 (in preference to the received amount of $348,613.53, recognising as did Kiefel and Lindgren JJ the element of unfairness about this) from which should be made the reasonable and necessary deductions outlined in [70] supra.
DECISION
The decision under review is set aside and the matter is remitted to the Secretary with a direction that the sum of $28,550.00 is to be deducted from the lump sum compensation payment and the preclusion period recalculated accordingly.
I certify that the preceding 80 (eighty) paragraphs are a true copy of the reasons for the decision herein of Chris Puplick AM, Senior Member
....................................[sgd]....................................
Associate
Dated: 17 August 2021
Date(s) of hearing: 28 July 2021 Applicant: In person Solicitors for the Respondent: Ms L Boyd, Hunt & Hunt Lawyers
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