Gaston and Secretary, Department of Employment and Workplace Relations
[2006] AATA 683
•4 August 2006
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2006] AATA 683
ADMINISTRATIVE APPEALS TRIBUNAL )
) No S2006/33
GENERAL ADMINISTRATIVE DIVISION ) Re SANDRA AILEEN GASTON Applicant
And
SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS
Respondent
DECISION
Tribunal Senior Member L Hastwell Date4 August 2006
PlaceAdelaide
Decision The Tribunal affirms the decision under review.
..............................................
L HASTWELL
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – Disability Support Pension –preclusion period – deemed lump sum payment arising from separate payments – special circumstances – decision affirmed
Social Security Act 1991 ss 17, 1160, 1169(1), 1170(4), 1171, 1184K
Workers’ Rehabilitation and Compensation Act 1986 (SA) ss 32, 42, 43
Smith v Federal Commissioner of Taxation (1987) 164 CLR 513
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95REASONS FOR DECISION
4 August 2006 Senior Member L Hastwell 1. Mrs Sandra Gaston (the applicant) sustained injuries in the course of her employment in 2002 as a result of which she received a number of compensation payments, culminating in a final consent judgment settlement for $30,000 on 19 April 2005.
2. The respondent (the Department) determined that a lump sum preclusion period from receipt of benefits was applicable. They aggregated the three lump sum payments received by the applicant for her injury, and based their calculation of the preclusion period on that deemed lump sum. A preclusion period from receipt of benefits applied from 28 April 2005 until 19 April 2006.
3. An Authorised Review Officer affirmed the original decision on 19 October 2005. The Social Security Appeals Tribunal (SSAT) affirmed the decision on 5 December 2005. The applicant seeks a review of that decision.
4. The applicant queries whether the Department can deem three separate sums to be one lump sum for the purposes of calculating the preclusion period. She also asserts that there are special circumstances in her case which would justify the Secretary disregarding some or all of the compensation payments made, thereby reducing or removing altogether the preclusion period.
relevant legislation
5. Section 1160 of the Social Security Act 1991 (the Act) provides that where a person receives a compensation payment, entitlement to Social Security payments may be affected by that compensation.
6. “Compensation affected payments” are defined in s 17(1) of the Act and include DSP.
7. Section 17(2) of the Act provides as follows:
“17(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.”
8. Section 17(3) of the Act provides:
”17(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.”
9. Section 1169(1) of the Act states:
“1169(1)If:
(a) a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.”
10. Section 1170(4) of the Act provides:
“1170(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-off amount”
11. Section 1171 of the Act deals with situations where more than one lump sum payment is made in respect of the same compensable event and states:
“1171 Deemed lump sum payment arising from separate payments
1171(1) If:
(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.
1171(2) A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.”
12. In some circumstances, payments can be disregarded under the discretionary provisions of the legislation. Section 1184K(1) of the Act provides:
“1184K(1)For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
1184K(2)If:
(a)a person or a person’s partner receives or claims a compensation affected payment; and
(b) the person receives compensation; and
(c)the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s or the person’s partner’s receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).”
background
13. The applicant sustained a knee injury in the course of her employment as a chef in January 2002. The injury required surgery for the knee condition. As a result of that surgery she suffered a damaged ulnar nerve of the right arm. She also suffered from psychological and psychiatric sequelae as a result of these events.
14. On 1 October 2003 a lump sum payment of $22,107.53 was determined as being the applicant’s entitlement under s 43 of the South Australian Workers’ Rehabilitation and Compensation Act 1986 (SA) (the WRC Act). It was comprised of a payment for 15 percent loss of function to her left leg at or above the knee, 5 percent disfigurement to her right arm and 2 percent disfigurement in the left knee. There was no economic component in this payment.
15. On 22 January 2004 the applicant was awarded $16,742.53 pursuant to s 43 of the WRC Act, being a lump sum payment for the damaged ulnar nerve to right arm and psychiatric sequelae which she sustained in the course of her employment. It is common ground that there was no economic loss component in this sum.
16. In April 2005 she accepted redemption of her right to weekly payments pursuant to s 42 of the WRC Act in the sum of $29,500. She also received a s 32 payment in the same lump sum of $500 for medical and other expenses. She signed an acknowledgement that she had received advice of the Centrelink implications in relation to the redemption payment. The redemption redeemed her entitlement to all prior work-related injuries including the knee and arm injuries.
17. When the applicant applied for DSP in September 2005, she was advised that she was subject to a lump sum preclusion period, and did not have any entitlement to a compensation affected payment (in this case DSP) until the preclusion period ended in April 2006.
the hearing
18. The applicant attended the hearing with her husband and gave evidence on her own behalf. A number of exhibits were tendered to the Tribunal and will be referred to where relevant. The Department was represented by Mr Harvey who made submissions on the Department’s behalf.
19. The applicant acknowledged receipt of the lump sums. She did not dispute the calculation of the lump sum preclusion period, but she did query whether the Department had the right to add together three separate sums, two of which had no economic loss component in them.
20. She asked the Tribunal to take into account her special circumstances and disregard some or all of the compensation payments made to her. She and her husband were both in receipt of DSP at the date of the hearing as the preclusion period has ended
21. At the time of the applicant’s injury, her husband was in full employment. They owned their own home, although they had a mortgage. Her husband worked in the transport industry and worked long hours. The applicant had been in the workforce for many years and was forced out of the workforce by the injury. She had knee surgery soon after the injury and thereafter was in receipt of WorkCover payments until such time as she settled her claim in 2005. As a result of the operation, she sustained nerve damage to her right arm which compounded her health problems.
22. In late 2003 her husband developed significant depressive illness. He left his employment in early 2004. He received a modest payout of $11,000 which was used for their general living until her husband became eligible for Centrelink payments in 2005
23. Once the applicant’s husband left his employment in February 2004 they found themselves in financial difficulties and struggling to pay their mortgage. They decided to sell their house and build a house at Mawson Lakes in a joint venture with their daughter. They sold their house in 2004 and received a net sum of $230,000. They then jointly purchased land at Mawson Lakes with their daughter and her husband and they moved into rental accommodation until such time as they could move into the new home that they then built at Mawson Lakes. They now own that property as a tenants-in-common in equal shares with their daughter.
24. The applicant received her next lump sum payment in April 2005. After the solicitors’ costs were deducted, she had $23,000 left over which she put in the bank. She used those funds to purchase an air conditioner and to update her vehicle. Because of their respective health difficulties, she and her husband continued to carry a medical benefits cover after she had settled her claim.
25. She told the Tribunal that she thought that she was subject to preclusion from benefits for 7 or 8 months from April 2005. She was not aware that in calculating any preclusion period the prior lump sums would be added to the redemption sum. Of the $30,000 she received in the final lump sum, she paid $7,000 of that in lawyers’ fees.
26. During this difficult period in their lives, the applicant’s husband was also diagnosed with bladder cancer. Some treatment was required at the time. The cancer is currently in remission. In her evidence the applicant commented that she thought that when she ran out of funds the Department would not leave her without any payments, and that they would “give me something towards living”. Hence she applied for DSP payments on her own calculations. The preclusion period had ended.
27. The applicant and her husband now reside in the Mawson Lakes property that they jointly own with their daughter. Their interest in the property is debt free. She and her husband have a joint Visa debt of approximately $6,000. She owes her daughter $5,000. She is currently not making repayments to her daughter. She and her husband were both in receipt of DSP at the time of the hearing.
28. An income and expenditure statement (Exhibit A2) was presented to the Tribunal by the applicant, which showed a deficit per week with respect to income and outgoings.
submissions
29. The applicant’s submission was that there are special and exceptional circumstances in her case that would justify the Tribunal disregarding some or all of the compensation payments made to her. She emphasised her ill health and that of her husband. She also pointed to her current financial circumstances and her lack of knowledge that the three payments would be aggregated in the calculation of the lump sum. She also queried whether it was correct that the three payments be aggregated.
30. The Department submitted that a distinction should be drawn between someone being in difficult financial circumstances and someone being in financial circumstances that are sufficiently straitened to be special. The Department submitted that the applicant fell into the former rather than the latter category.
31. The Department also argued that there are different considerations for the exercise of the discretion when a situation is being considered retrospectively rather than when an applicant is facing ongoing hardship. In this case the applicant was in receipt of benefits and managing financially at the date of the hearing, and so the current circumstances should be considered when determining whether it is appropriate to exercise the discretion.
32. The Department argued that s 1171 of the Act was directly applicable in this case and that all three payments were “in relation to the same event”. The third sum related to the two prior impairments for which compensation had been received and so all three payments were tied together by virtue of the final lump sum received by the applicant in April 2005.
consideration
33. The Tribunal considered all available evidence, including the T documents and exhibits tendered. The applicant had made inquiry as to a likely preclusion period in February 2005, and before she received the third lump sum payment. She asked for an estimate based on a notional figure that she gave the Department of approximately $40,000. An estimated preclusion period was provided, but it was hypothetical only, and in the same letter the following phrase was included (T8/50):
“… Any earlier lump sum settlement for the same event may have been added and past periodic compensation may have been deducted where it is required to be repaid from the settlement. …”
34. Mrs Gaston was a straightforward witness and stressed the difficult financial position that she and her husband found themselves in when they discovered they could not receive benefits for an extended period. They described a difficult period in their lives. They had both developed ill health after long and successful working lives and found themselves reliant on Social Security entitlements and struggling to make ends meet for a period of some months after September 2005 when they had exhausted their available funds.
35. The Tribunal noted the contents of the statement of income and expenditure at Exhibit A2. The expenses outlined, for instance allowances for food, registration and health insurance, all seemed excessive for a couple living entirely on Social Security payments.
findings of fact
36. The factual matters as set out in paragraphs 13 to 17 are not disputed.
37. In addition, the Tribunal makes the following findings of fact:
·The applicant sustained an injury to her knee in the course of her employment in early 2002 as a result of which she required surgery and did not return to work. She remained in receipt of WorkCover payments until she finally redeemed her entitlement to payments and received a final lump sum settlement in April 2005.
·The applicant and her husband owned their own home which was subject to a mortgage to the bank at the time that she sustained her injury. At the time her husband was working full-time in the transport industry.
·The applicant’s husband suffered a depressive illness in November 2003, and was eventually forced to leave his employment because of ill health He received a lump sum payment of his entitlements when he finished his employment, in the sum of $11,000.
·The applicant received three compensation payments, all of which related to her employment injury and to the sequelae of the original knee injury that she had sustained in January 2002. The final redemption agreement was stated to be with respect to the injuries for which she was compensated in her first and second lump sum payments. This third payment redeemed her entitlements for weekly payments with respect to all prior compensable events.
·The applicant’s husband at some stage during the period that the applicant was in receipt of workers’ compensation contracted bladder cancer. He had treatment for it and is now in remission.
·The payments received by the applicant pursuant to s 43 of the WRC Act were used to reduce the mortgage on her home and put towards the building of a new home. The applicant has received benefit from those payments, and they are now represented in equity in property.
·The applicant and her husband decided to sell their own home and purchase a property with their daughter after the applicant’s husband ceased his employment and they were having difficulty managing debts.
·After the sale of their property, they invested the full net proceeds of $230,000 in a joint project with their daughter .They are now residing with her in a property at Mawson Lakes which is estimated to be worth $450,000 and which is freehold in the applicant’s hands. The daughter may have a loan against her share of the property, but the applicant and her husband own their share outright.
·The applicant was aware that a preclusion period would result from the receipt of the third payment. She thought it would be for 7 or 8 months.
·The applicant spent some of the $23,000 (net of legal fees) that she received as her final redemption payment on purchasing a car and on an air conditioner. She eventually ran out of funds, and upon enquiry to Centrelink in September 2005 she ascertained that she was subject to preclusion from receipt of benefits until April 2006. She had thought until then that the preclusion ran until November or December of that year.
·The applicant and her husband had some difficulty managing financially during the period that they were not entitled to any payments, and she had to borrow from her daughter. The applicant and her husband are now in receipt of benefits and slowly reducing their debts. The period of significant financial difficulty was from September 2005 until April 2006.
·The applicant and her husband need to live within a tight budget, but they are progressively reducing their debt.
application of the law
38. It is common ground that the first two compensation payments received by the applicant had no economic loss component in them as they were awarded under s 43 of the WRC Act. It is common ground that the third payment was for economic loss, being for a redemption of future weekly payments.
39. The Department has added together all three sums in determining what sum should be used to calculate the preclusion period. In that regard the Tribunal is satisfied that under s 1171(1) of the Act the payments have been correctly added together and have resulted in a “deemed lump sum”. In that regard the Tribunal refers to ss 1171(1)(a) and (b) of the Act. The applicant has received two or more lump sum payments in relation to the same event which gave rise to her entitlement to compensation. The third of those payments was made wholly in respect of lost earnings, but related back to each of the two earlier compensable events, namely her knee and her arm. She is therefore taken to have received one lump compensation payment of an amount equal to the aggregate of the multiple payments (s 1171(1)(c) of the Act).
40. The authorities are clear that the words “in relation to the same event” must be given its widest possible meaning. Toohey J in Smith v Federal Commissioner of Taxation (1987) 164 CLR 513 at 533 commented that “in relation to” like “in respect of” was “probably the widest of any expression intended to convey some connection between two related subject matters”.
41. If one describes the event as the applicant’s claim for compensation for her employment related injuries, it is clear that the lump sums were in relation to the same event. The third payment brings together all injuries and the sequelae arising out of her employment as being the events that are being compensated. The Tribunal takes the view that the word “event” includes the plural in this instance. The Tribunal is satisfied that s 1171 of the Act has been correctly applied in this case.
42. The Tribunal then considered whether there is any basis upon which s 1184K of the Act could be applied. If “special circumstances” exist in a particular case, the Secretary may treat the whole or part of the compensation payment as not having been made or not liable to be made. This would result in a recalculation of a preclusion period.
43. There has been significant prior judicial consideration of the concept of special circumstances. It has been discussed on many occasions in the Federal Court and in Administrative Appeals Tribunal cases. Factors relevant to the discretion have been considered in various cases.
44. In ReBeadle and Director-General of Social Security (1984) 6 ALD 1 (which referred to the former s 102(1) of the Act) the Tribunal commented at page 3:
“…
An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend on the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
…”
45. In Re Ivovic and Director-General of Social Services (1981) 3 ALN N95, the Tribunal commented:
“… the use of the word ‘special’ is, we think, intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case. … Whilst we agree that hardship is a relevant consideration in the discretion conferred … we reject the submission … that we should ignore the circumstances out of which the alleged hardship is said to have arisen. …”
46. Special circumstances are to be considered on a case by case basis and in considering this concept the Tribunal must maintain a balance between the sensibilities and difficulties of the individual involved and the underlying purpose of the legislation
47. The Tribunal accepts that in this case the applicant and her husband have had a difficult period in their lives. The applicant was suddenly rendered incapable of returning to work and then during the period of her ongoing incapacity, her husband developed an illness that ultimately resulted in him leaving his employment. They made financial decisions based on the hope that they would become eligible for Social Security benefits once their money had run out. At one stage in her evidence the applicant made comment to that effect.
48. They moved into a joint arrangement with their daughter, which is clearly now beneficial to them and they now own an unencumbered half share in a property at Mawson Lakes. The compensation paid for some of that asset in that some of the compensation was used to reduce their mortgage and they also upgraded a vehicle of their own volition.
49. In February of the year when the applicant was about to receive her compensation she made a general enquiry of Centrelink and was given some estimates of what the lump sum preclusion period may be, based on an estimate she had given at the time. She was aware of the likelihood of a preclusion period. The Tribunal found it notable that despite her subjective awareness of a preclusion period, she elected to spend her redemption payment on items that were perhaps inappropriate at the time given that she knew a preclusion was in place.
50. The applicant acknowledges that she received advice from her lawyers when she signed off on her redemption agreement as to the effect that the agreement may have on Social Security entitlements. Nevertheless it appears she did not explore the detail of this likely preclusion and chose to turn a blind eye to the likely length of the preclusion when deciding how to spend her redemption payment.
51. It was regrettable that her husband around this time contracted cancer. It would appear that it is now in remission. Although it must have been distressing for both of them at the time, that episode in their life has now resolved.
52. In the Tribunal’s view, there is nothing that takes this case so far out of the ordinary that it is exceptional, uncommon or special. The applicant’s life was complicated further by the decision to move house during the period that she was still in receipt of her compensation payments. Nevertheless, they are now well set up in terms of their current assets and housing, but have some debts which they will need to repay over time. They were aware of a preclusion period, and did not obtain accurate information before spending all their funds on renovations and a vehicle.
53. The applicant’s compensation funds have been largely converted to equity that she and her husband still retain.
54. In the circumstances the Tribunal is not willing to disregard some or all of the payment that has been made.
55. The Tribunal notes that the applicant and her husband are now back in receipt of benefits. They have no accommodation expenses now, other than their share of rates and taxes and with some budgeting they should over time be able to repay the debt that they owe to their daughter and their Visa card debt.
56. In the circumstances the Tribunal affirms the decision under review.
I certify that the 56 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member L Hastwell
Signed: .....................................................................................
AssociateDate of Hearing 17 May 2006
Date of Decision 4 August 2006
Applicant In person (with Mr Gaston)Advocate for the Respondent Mr Bruce Harvey
(Centrelink Legal Services Branch)
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