Glohe and Secretary, Department of Employment and Workplace Relations

[2007] AATA 1727

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2007] AATA 1727

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2006/0812

GENERAL ADMINISTRATIVE  DIVISION		)
Re		PETER GLOHE

Applicant

And SECRETARY, DEPARTMENT OF EMPLOYMENT & WORKPLACE RELATIONS

Respondent

DECISION

Tribunal Robin Hunt

Date3 September 2007

PlaceSydney

Decision

The decision under review is set aside and in substitution the tribunal decides:

a) pursuant to section 1184K(1) of the Social Security Act 1991, in the special circumstances of Mr Glohe's case, that half of the compensation payment be treated as not having been made; and,

b) The matter is remitted to the respondent to calculate the appropriate preclusion period.

....................[Sgd].......................

Ms Robin Hunt
  Senior Member

CATCHWORDS

SOCIAL SECURITY – payments, benefits and allowances – application for disability support pension – effect of compensation payment – resulting preclusion period – subsequent divorce resulting in division of assets - mental health problems – reduced financial circumstances – additional family considerations - support of children – finding of special circumstances – part of compensation payment should be disregarded – decision set aside..

legislation

Social Security Act 1991 s 1184K

cases

Haidar v Secretary, Department of Social Security [1998] 994 FCA

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

Groth v Secretary of Department of Social Security (1995) 40 ALD 541

Beadle v Director-General of Social Security (1985) 7 ALD 670

Secretary, Department of Social Security v Thompson (1994) 53 FCR 580

Dranichnikov and Another v Centrelink and Another (2003) 75 ALD 134; [2003] FCAFC 133

Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797

Re Ivovic and Director – General of Social Services  (1981) 3 ALN N95

Re Green and Secretary, Department of Social Security (1990) 21 ALD 772

Matijasevic v Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1018 (19 January 2007)

Secretary, Department of Social Security v Ellis (1997) 46 ALD 1

Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716

Secretary, Department of Social Security v Winterbotham (1990) AATA 6499

Re Nikolov and Secretary, Department of Social Security (AAT Decision No 7452, 7 November 1991)

McAllister and Department of Family and Community Services [1999] AATA 286 (5 May 1999)

Re Alver and Secretary, Department of Social Security (1992) (AAT Decision No 8351 SSR 1042)

Secretary, Department of Social Security v Smith (1991) 13 AAR 454

REASONS FOR DECISION

3 September 2007 Senior Member Robin Hunt          

summary

1.      Mr Peter Glohe, the applicant, suffered a work related injury in 1999. Mr Glohe’s compensation claim was settled for an agreed amount. Due to the application of the usual 50% rule which applies to receipt of monies under an agreed compensation award, a Centrelink officer calculated the appropriate preclusion period during which Mr Glohe was disqualified from receiving certain social security benefits. The payment meant that Mr Glohe was precluded from receiving disability support pension until 2014. Subsequently, Mr Glohe argued that his circumstances had changed and he was placed in special circumstances so that his compensation award should be disregarded. I have found that Mr Glohe does have special circumstances so that part of his compensation payment should be treated as not having been made.  The effect of this is to reduce the preclusion period and to permit Mr Glohe to access the disability support pension sooner than 2014.

background

2.      Under the terms of settlement to which he agreed, Mr Glohe was awarded $715,000 as compensation for his injury. Centrelink records show Mr Glohe received $715,000 gross and was required to repay Centrelink periodic compensation made to him, up to 26 November 1999, in the total amount of $87, 854.59. The settlement sum was inclusive of all legal costs and medical expenses. Mr Glohe received the balance in 2000 after deduction of the expenses of his action and other associated amounts. Centrelink calculated that, based on the statutory 50 percent of the sum attributable to economic loss, Mr Glohe was precluded from receiving payments under the Social Security Act 1991 (the Act) until 2014.

3.      At Mr Glohe’s request, Centrelink reconsidered the decision and affirmed it. The Social Security Appeals Tribunal (the SSAT) also affirmed the decision on 28 March 2006.  Mr Glohe has not challenged the accuracy of the calculation of the lump sum preclusion period. The sole issue for determination by me is whether, pursuant to s 1184K of the Act, part or all of the compensation payment should be treated as not having been made in the special circumstances of this case. 

legislation

4.Section 1184K(1) of the Act provides as follows:

(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.

issue

5.      Are there are special circumstances so that I may treat the whole or part of the settlement payment received by Mr Glohe as not having been made? If so, how much of the payment should be disregarded with the result that the preclusion period may be shortened?

evidence

6.      An advocate from the Welfare Rights Centre represented Mr Glohe.  Mr Glohe and his partner, Ms Janet Day, as well as his brother, Anthony Glohe, gave oral evidence before me.  Mr Glohe’s sister also furnished a written statement.

7.      Mr Glohe conceded that, at the time when he agreed to accept the settlement amount, he was no doubt advised about a possible preclusion period applying. He gave evidence to the effect that he did not give it much thought as he used to leave financial matters to his wife even before he was incapacitated by the accident.

8.      Mr Glohe could not recall how much of the settlement monies he actually received. Centrelink records show he declared the amount of $498,000 on his application for the disability pension made on or about 5 January 2004. Before me, Mr Glohe thought that may have been correct but that some more money might have gone on doctors’ bills after he received the payment. The Centrelink reconsideration decision made on or about 20 June 2004, notes that Mr Glohe claimed he received $420,000 net. The SSAT recorded he thought it was about $450,000 and that Ms Day had obtained the information that it was $498,000 from his ex-wife.

9.      Under questioning, Mr Glohe conceded he previously had received another lump sum from Wyong Council of about $60,000. This was in connection with an earlier accident. A copy of a court order before me showed the Council was ordered to pay Mr Glohe a sum by way of compensation in March 1998. A handwritten note on the copy of the order indicated payments ceased in 1999. Mr Glohe could not remember what had happened to this money nor that his former wife had requested an estimate of a preclusion period related to that payment. He told the Tribunal again that his former wife had looked after all the financial matters. He knew there had been some deductions and that he had to repay $18,000. Mr Glohe also recalled that he attended an interview at Centrelink some time in 2001. He did not disagree with a Centrelink record dated 8 March 2001 that showed he had asked at that time whether the preclusion period might be reduced.

10.     Mr Glohe gave further evidence about how he dealt with the compensation sum he received in 2000, that is, the money that caused his present preclusion. Part of Mr Glohe’s compensation was put towards the purchase of a house. Mr Glohe and his former wife and children lived in the house. He said the purchase price was $180,000. I note that he gave the price as $192,000 on a Centrelink review questionnaire at T34, but this figure may have included stamp duty and legal expenses. He also gave evidence that he bought a car for around $30,000 and some furniture. Mr Glohe said he liked the location of the house because it was near other members of his family and near his children’s school. It was a good base for him because it was near a hospital and doctors. He and the children had already been living five minutes away and had bought in a familiar area. He had bought partly because he wanted to give the children some security.

11.     At the stage when they bought the house, Mr Glohe and his wife did not have to borrow or take out a mortgage. He told me they expected to manage financially during the preclusion period. Mr Glohe gave evidence that he and his wife had discussed how they would mange and part of the plan was that she would work and bring in some income. They saw a financial adviser before deciding on the best way to manage the settlement funds. After buying the house they were able to invest $200,000 for the future. Documents supplied by Mr Glohe include a financial plan prepared by an adviser.

12.     All this planning went awry when Mr Glohe’s wife left him and sought a property settlement. She had offered not to contest a share of the house but claimed a share of other matrimonial property. She asked for the remaining investment money and the new family car and offered to let Mr Glohe keep the house. By this time, the investment had dwindled to $100,000. Mr Glohe gave evidence his solicitor recommended he accept the offer as his wife may have been entitled to more. Mr Glohe went ahead and agreed to the settlement suggested by his former wife. The terms of the settlement were approved by the Family Court on 19 May 2003.  

13.     Under the divorce settlement terms, Mr Glohe’s ex-wife was expected to have custody of the two children of the marriage. However, the children have been living with Mr Glohe after an initial period with their mother. Having been forced to share the matrimonial property with his former wife, and then having the children to care for despite the agreement, Mr Glohe claims he and the children were left in difficult financial circumstances. He said he is slightly better off since he started to receive family tax benefit, Ms Day moved in and contributes to the running of the household and his ex-wife pays him $20 per month maintenance.

14.     Mr Glohe’s estimate of the current value of his house was $300,000. He said he had asked an estate agent for an estimate and the agent had suggested up to $340,000. Mr Glohe thought the market had dropped somewhat since. He had considered selling but thought it was not a solution as he would have to pay rent. The swimming pool attached to the house enabled him to exercise his back. The children’s school and friends were nearby and it would be upsetting for them to move again after the trauma of the divorce and the unsuccessful time spent living with their mother and her partner.

15.     The divorce settlement provided that Mr Glohe give his ex-wife the family car. Having given her the car, he had no vehicle until his father and brother bought a second hand car for him. He thought it was worth about $2,000. He gave further evidence that he had spent about $20,000 to $25,000 on furniture out of the settlement money including a special bed for his back. His ex-wife had taken all the new furniture except for the bed. Mr Glohe conceded that he and his ex-wife had been receiving some additional payments shown in their joint bank account statements for December 1999 to the end of January 2003. He said these payments came from their investment but Mr Glohe was unclear about the amounts received and could not account for several withdrawals made during the period. He again said his ex-wife looked after the household monies.

16.     Mr Glohe does not work and medical evidence discussed below shows he is unable to work. Mr Glohe said he tried to work for a time on a tomato farm but it knocked him about. He had done some training courses but had been unable to find work partly because he was unable to get a doctor’s clearance.  He referred to the certificate of his general practitioner, Dr Stephen F Green, dated 30 March 2007. This stated Mr Glohe was unfit to work in any capacity.

17.     As to his back problems, Mr Glohe said he still struggled to get out of bed every day and felt his back had deteriorated further since the injury. He had contemplated suicide at times because of the accident, the marriage breakdown and the bad times when his children were not coping. He said the children had been doing well since Ms Day had been living with them as a family.

18.     Ms Day gave evidence that she and Mr Glohe met in 2003 and she had moved to a house near him in 2005. She moved in with Mr Glohe and the children in 2006. Ms Day said Mr Glohe had trouble focussing on things and was confused. She organised his bills and also gave him emotional support. Ms Day said they sat down together and tried to work out their finances. They were often short and sometimes asked family members for financial help. She said she had seen money come in the mail from Mr Glohe’s family members.

19.     Ms Day gave evidence she had medical problems as well as Mr Glohe. She said she was diagnosed with osteoporosis in February 2006 and receives the disability support pension. Her pension helped them manage financially and made them slightly better off but they still struggled to provide the children with food and clothing. She further said that the St Vincent de Paul Society helped them once a fortnight with food vouchers.

20.     Mr Anthony Glohe gave evidence that he lived in another town at a distance from his brother which made it difficult to see him often but he rang his brother once a week. The mainly talked about the children and finances. He had tried to mediate between Mr Glohe and his ex-wife at the time of the marriage breakdown. He had also looked at their bank statements and had asked the ex-wife what several large amounts had been spent on but she had declined to tell him, saying this was private. He further gave evidence that he had organised a solicitor for his brother when the marriage broke up. He told the tribunal his brother had been energetic and sports oriented before the accident that left him incapacitated. When they talked, they often ended up in tears. He also said that he and his parents tried to send Mr Glohe money sometimes although they were all on low incomes. He gave evidence that he had taken out two Centrelink loans and had sent his brother some of that money. He was himself on Newstart allowance and their other brother was on an invalid pension.

21.     Attached to the applicant’s written statement made on 30 November 2006 were a number of supporting documents. These included medical reports about Mr Glohe’s back injuries and continuing health problems further discussed below. Also before me was an application to the NSW Department of Family and Community Service in January 2006 for assistance to purchase school uniforms, which had a note on it indicating the request was approved. A letter from St Vincent de Paul confirmed Mr Glohe’s family had needed crisis assistance in June 2006 and had been receiving ongoing assistance ever since.

22.     A copy of a financial plan, dated 10 February 2000, confirmed that Mr Glohe and his ex-wife saw a financial adviser who provided a detailed plan on that date. One of the adviser’s recommendations was that Mr and Mrs Glohe invest $190,000 in joint names so they could split the income. An estate agent’s letter of 6 October 2006 advises that Mr Glohe’s house might be advertised for sale between $300,000 and $340,000. Before me as well is also a projection of family income worked out by Mr Glohe’s advocate.

23.     The applicant’s advocate worked out comparisons between compensation divisors showing how the preclusion period might have been calculated more favourably to Mr Glohe had he received his payout in July 2000 or later rather than in November 1999, when the applicable preclusion period was calculated. Under current tables, according to this calculation, Mr Glohe’s preclusion period would be reduced to 440 weeks instead of 741 weeks. As at 1 July 2000, the advocate set out that the post-GST divisor would have resulted in a three year reduction in the preclusion period. The Secretary did not dispute these comparisons or calculations.

24.     The Welfare Rights Centre suggested in written submissions that the special circumstances affecting Mr Glohe were:

·The unanticipated marriage breakdown and subsequent property settlement in 2003.  This meant Mr Glohe lost access to Mrs Glohe’s anticipated earnings as well as the remaining $100,000 investment.

·The children of the marriage returned to live with him in October or November 2005 due to a breakdown of their relationship with their mother although the divorce settlement terms set out that the settlement was based, among other things, on the children living with their mother.

·Severe financial hardship. He was unable to provide for himself and the children without financial help from his family members.

·Mr Glohe’s continuing ill health and inability to work.

·The unfair impact on Mr Glohe of the 50% rule.

consideration

25.     Mr Glohe has requested that the preclusion period should end or be shortened because of his poor financial circumstances. The Secretary, or the tribunal, has discretion to disregard all or part of the payment received by a social security recipient. I may exercise this discretion in accordance with 1184K of the Act if and only if special circumstances exist, as is set out in the section. 

26.     Mr Glohe gave evidence that he had no reason concern about a preclusion period at the time of the house purchase.  He had adequate funds at the time for the house purchase, and money left over to invest. He and his wife former discussed her plans to return to work and bring in extra income.

27.     The evidence arising from the material before me as giving rise to possible special circumstances can appropriately be grouped as concerning marriage breakdown leading to diminution of assets, ill health, current financial circumstances and unfairness of the strict application of the Act. I am mindful I should also look at the totality of the situation and the combination of circumstances, including the slight improvement to finances and general wellbeing provided by Ms Day.

marriage breakdown and property settlement in 2003

28.       I accept Mr Glohe’s evidence that his marriage breakdown was unanticipated and that it impacted severely on his finances. The terms of settlement approved by the Family Court confirm that Mr Glohe paid his ex-wife $100,000 by way of settlement and also transferred a motor vehicle to her. In addition, I note that Mr Glohe lost access to Mrs Glohe’s anticipated earnings as well as any income from the former investment. The bank statements show that the remainder of the investment was dissipated. Mr Glohe and his brother have given evidence to the effect that Mr Glohe left financial matters to his ex-wife and can account for very little of the spending that led to the eroding of this investment. Ms Day also gave evidence that Mr Glohe was confused about his financial affairs and that she tried to assist. 

29.     The applicant was now without any income or savings apart from the family tax benefit he received for the younger child. He had been receiving Family Tax Benefit for his son but this ceased when the boy turned 16 earlier this year. Mr Glohe said he had relied on his former wife to manage their financial affairs and he could not explain a number of large withdrawals from the joint bank account. His brother gave evidence that he suspected the applicant’s former wife had used these funds for her own purposes.

30.     The marriage breakdown and property settlement in 2003 are obviously, in my view, substantial changes in Mr Glohe’s circumstances and warrant consideration under section 1184K as special circumstances.  Although Mr Glohe cannot account for much of the dissipation of the other $100,000 which was originally invested, there is nothing in the evidence before me to indicate that he personally entered into a pattern of reckless spending.

31.     I further find that children of the marriage returned to live with Mr Glohe in October or November 2005 due to the breakdown of their relationship with their mother although the divorce settlement terms set out that the settlement was based, among other things, on the children living with their mother. Looking after the children is another factor which has altered Mr Glohe’s circumstances in many ways. In my view, the family situation justifies Mr Glohe’s wish to keep the house rather than sell. The house is not an overly luxurious one in terms of value and does provide stability in the lives of the children. While sale of the house would provide funds to carry the family for some time, they would still have expenses associated with rent or alternative accommodation.

health and medical evidence

32.     A number of medical reports describe Mr Glohe’s health problems. The medical evidence indicates that Mr Glohe suffers from chronic pain syndrome which has caused secondary depression. He currently takes 60mg of MS Contin twice per day for pain, Ordine (liquid morphine) as a ‘top-up’ if the MS Contin is insufficient to manage his pain, Inza, an anti-inflamatory and 100mg daily of Luvox for depression. Dr Diane Donohoe furnished a CT scan report dated 10 September 1998. She reported that this showed a number of injuries to Mr Glohe’s back. Mr Glohe was assessed by a Rehabilitation Consultant on 21 January 2004 as capable of doing less that 8 hours of work per week. Even with education or training, the consultant was of the opinion that Mr Glohe would only be capable of working up to 14 hours per week in the next two years. The Rehabilitation Consultant also stated that Mr Glohe’s depression was a temporary condition as at 2004. However, I note that Mr Glohe still takes daily anti-depressant medication.

33.     I have summarised some of the medical reports although many of them date back to 1998. Dr Michael Nicholas from the University of Sydney Pain Management and Research Centre at Royal North Shore Hospital furnished a report dated 19 May 1998. According to Dr Nicholas, overall, Mr Glohe made some physical performance gains through Stage 1 of the ADAPT program, which were only partially maintained after the four week home period. He reported it was clear that a number of issues remained to be resolved in relation to his marital situation. If available closer to home, Dr Nicholas thought the services of a suitably qualified clinical psychologist or psychiatrist with expertise in cognitive-behavioural therapies and experienced in pain management would also be appropriate.

34.     Dr Grant, in his report dated 7 August 1998, observed that Mr Glohe reported improved pain control since being on MS-Contin and increased activity level (e.g. less time lying in bed, doing more with the children etc). Dr Grant was concerned that Mr Glohe would suffer excessive discomfort, and that his life-style would revert to the previous unhappy state. He noticed a marked increase in anxiety levels, irritability and dysphoria, as a result of uncertainty generated by the approach of the Royal North Shore’s pain clinic. At a recent interview, Dr Grant noted that Mr Glohe commented he was having suicidal thoughts again, he was so afraid of not having adequate pain management. Dr Grant concluded Mr Glohe would benefit by being facilitated back into the workforce, but he would need to be in a stable mental state, and have adequate pain control to do this.

35.     In his next report, a little over one month later, Dr Grant wrote that Mr Glohe’s suicidal ideation was of concern, among other problems. Dr Grant said he shared Mr Glohe’s concerns with his medical management, as with the exception of Dr Green’s treatment, nothing else afforded him anything like adequate pain relief. Dr Grant noted Mr Glohe had certainly tried the behavioural approach, with no significant improvement in his pain levels, which remained his most pressing problem.

36.     Dr G C Booth on 3 September 1998 wrote that Mr Glohe was not suitable to come into the inpatient programme at Royal Newcastle Hospital for people suffering from chronic back pain. Dr Booth described Mr Glohe’s symptoms at the time of his evaluation by reference to low back pain and other pain features. Emotionally, he reported Mr Glohe described frustration, anger and depression. His activities include attending hydrotherapy three times a week, walking and helping with home chores. Dr Booth wrote that he did not believe this man is going to return to work (unless some miraculous improvement in pain reduction can be brought about).

37.     Dr Maclean, in his report dated 21 October 1998 took a history that Mr Glohe had been working for Wyong Council as a construction labourer for approximately seven years. While riding a pushbike to work on 24 January 1996 he was hit by a car. He sustained soft tissue injuries to his neck and back and was sent home from hospital. Subsequently he had ongoing pain and eventually had surgery. The noted the surgery seemed to make him worse. Dr Maclean observed that Mr Glohe has a chronic pain syndrome. He lost his job 10 months after the accident and had generally been depressed. His depression has also been worse since his surgery. He described having “death thoughts” and at times feels suicidal. He has a general lack of purpose and “wonders how much more I can take”. Dr Maclean found evidence of reactive depression but no suggestion of a biological illness. There was no suggestion of dramatisation or exaggeration.

38.     Dr Ghabriel saw Mr Glohe in November 1998. He commented on Mr Glohe’s disc surgery which took place in May 1997 and decided not to operate further at that time. He noted Mr Glohe might require further surgery if his back deteriorated further. Dr Katherine King on behalf of Professor Ghabrial, on 20 June 2006, noted that Mr Glohe described back pain which had bothered him for the last few years and significantly over the last few months despite taking regular MS Contin.

39.     Dr Green provided a Health Summary Sheet, printed on 11 November 2006, which set out Mr Glohe’s current medications and noted his active problems were back pain and depression. Dr Green further certified on 18 January 2007 that Mr Glohe was suffering severe chronic back pain and was currently taking morphine for back pain. He was unfit to work in any capacity and had difficulty sitting or standing for prolonged periods.

40.     Taking all these materials into account as well as the oral evidence from Mr Glohe and Ms Day, there is also sufficient evidence before me to show Mr Glohe continues to have severe back problems, suffered depression in recent years and is still on medication.  It is clear from Mr Glohe’s doctors’ opinions that he cannot work. In addition, I accept the evidence of Ms Day that she is in poor health and that restricts her ability to contribute more financially. Therefore, I find that the poor health of Mr Glohe and his partner, Ms Day, are additional circumstances I should take into account.

family and domestic circumstances

41.     When Mrs Glohe left the applicant and sought a property settlement, Mr Glohe was obliged to share the assets of the marriage. He gave evidence that his former wife asked for $100,000 and agreed that he could keep the house. He gave further evidence that his solicitor advised him to accept these terms as she may have been entitled to more. The Family Court approved a divorce settlement in these terms and gave Mrs Glohe custody of the two children.

42.     However, Mr Glohe now has the two children. When his wife left him and moved in with another man, she took the two children with her. This situation did not last. The applicant and Janet Day, who developed a relationship with Mr Glohe after his marriage breakdown, both told the tribunal that the children were unhappy living with their mother’s new partner. First, the boy came to visit them in 2005 and never went back to live with his mother. He was now much happier and healthier and more sociable. At a later time, in 2006, Mr Glohe collected his daughter and she continued to live with them as well. Ms Day said she got on well with the children and she helped with finances as well although she herself was on a disability pension.

are there special circumstances?

43.     Special circumstances may arise in many different situations and are considered on a case by case basis. The term ‘special circumstances’ is not defined in the Act. General principles commonly referred to were set out by Justice Toohey in the tribunal case of Re Beadle and the Director-General of Social Security (1984) 6 ALD 1. Justice Toohey J, presiding on the tribunal said, 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….

44.     Although considering another legislative provision in Beadle, the case involved a provision similar to section 1184K, which dealt with discretion available in special circumstances. The Full Court in Beadle v Director-General ofSocial Security (1985) 7 ALD 670, approved the Tribunal’s interpretation, noting in relation to the timeliness of the submission of a claim,

“More difficult would be questions of ignorance, illiteracy, isolation, illness and the like.  It would depend on the circumstances of the particular case whether these constituted special circumstances.”

45.     There have been many instances where the tribunal has applied the criteria suggested in Beadle. In addition, the Tribunal has often observed that each case must be decided on its particular facts.  

46.     In Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 the tribunal identified principles under the former social security legislation.  The Tribunal considered “special …intended to provide the fullest opportunity to consider the particular circumstances of the case” and while hardship is a relevant consideration “regard must be had to the way in which the hardship arose”.  

47.     Drawing on principles identified in Re Ivovic, Senior Member Barnett in Re Green and Secretary, Department ofSocial Security (1990) 21 ALD 772, noted these principles were approved by the tribunal in Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 and had generally been followed by the tribunal since that time. I note that many recent cases still refer to similar considerations.

48.     Justice Kiefel, then sitting on the Federal Court, enunciated a helpful formula in the case of Groth v Secretary of Department of Social Security (1995) 40 ALD 541. After referring to the Federal Court’s decision in Re Beadle, Justice Kiefel observed that special circumstances:

… would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. … It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary. …

49.     The Tribunal continues to apply the guidelines referred to above in determining whether special circumstances exist under the current legislative provisions permitting exercise of the discretion to ameliorate unfair outcomes. The same general principles apply where an unfair outcome results from strict application of the 50% rule that applies to the compensation provisions and the operation of section 1184K of the Act. For a recent example, see Matijasevic v Secretary, Department of Families, Community Services and Indigenous Affairs [2007] AATA 1018 (19 January 2007). Senior Member Isenberg and Member Frost in the course of their reasons noted that section 1184K is designed specifically to enable the Secretary to ameliorate unfairness or injustice which results from the strict application of the Act. Ultimately, in Matijasevic, the Tribunal found Mrs Matijasevic’s circumstances were not special as there was nothing out of the ordinary in her case compared to other welfare recipients.

50.     A failure by legal advisers or by the Department to inform the party of the operation of the 50% rule may be a special circumstance but there was no such failure in the present case. I note that Mr Glohe would have been entitled to a shorter preclusion period had his payment been made a few months later, after 1 July 2000 when the GST affected the divisor. However, I am not convinced that changes from time to time to the divisor should be considered unfair to earlier recipients. Had the parliament wished to recognise this influence, it could have taken steps to adjust the effect of earlier payments.

51.     Special circumstances do not have to be “extreme” or “unique” to be out of the ordinary and special. See Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the Federal Court cases of Groth (supra) and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1.

financial circumstances – severe financial hardship

52.     Mr Glohe and his witnesses have given evidence he is unable to provide for himself and the children without financial help from his family members and a charitable organisation. On balance, I accept this evidence as truthful.

53.     Often, the Tribunal has been reluctant to find special circumstances where a party has spent money on an expensive house or taken out a mortgage. See Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 and Secretary, Department of Social Security v Winterbotham (1990) AATA 6499 However, there have also been cases where buying a house and ensuing financial difficulties have not prevented a finding of special circumstances. One example is the case of Re Nikolov and Secretary, Department of Social Security (AAT Decision No. 7452, 7 November 1991). The Tribunal, in comparing the circumstances of Nikolov to those in Hajar noted that Mr. Nikolov's house was "at the bottom end of the Sydney market in Sydney/Illawarra area and sale of the house to purchase a less expensive dwelling is not feasible". Also see McAllister and Department of Family and Community Services [1999] AATA 286 (5 May 1999).

54.     In the present case, it is true that the applicant did choose to use part of his award to buy a house. However, he was not then in the precarious financial situation he now faces and had not expected his marriage to come to an end. As well, the house was not particularly expensive, costing around $190, 000. In addition, he still had $200,000 which he invested and thought his former wife would return to work and bring in some income.  He and his wife took the advice of an investment adviser before deciding on the best way to use the settlement money and to provide for their future. Mr Glohe did not foresee that his marriage would break down and that his investment funds would soon disappear.

55.     In another case, Re Alver and Secretary, Department of Social Security (1992) (AAT Decision No. 8351 - 72 SSR 1042), the Tribunal concluded that the financial circumstances suffered by Mr Alver and his family together with personal and family stress caused by the injury was such as to justify a finding of special circumstances. The Tribunal so found, even though the hardship suffered was in part a product of Mr Alver's own mismanagement.

56.     In my view, Mr Glohe has not made foolish spending decisions but is the victim of his marriage breakdown. It is concerning that Mr Glohe and his ex-wife were already seeking a reduction in the preclusion period in November 2002, when Centrelink records show they lodged an application. This does indicate some irresponsibility and early overspending but Mr Glohe has consistently claimed that his ex-wife handled his funds. Nevertheless, I find that Mr Glohe is now suffering severe financial hardship and that this is not entirely his fault but is due in large part to his marriage breakdown. In consequence, I find Mr Glohe’s financial hardship is a factor I should take into account in considering whether part of his compensation payment should be disregarded.

findings

57.     In considering the discretion to adjust a preclusion period, I note the comments of Einfeld J in Secretary, Department of Social Security v Thompson (1994) 53 FCR 580 and von Doussa J in an earlier case. Justice Einfeld drew on the judgment of Justice Von Doussa in Secretary, Department of Social Security v Smith (1991) 13 AAR 454 that the scheme is intended to operate:

as a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.

58.     In following this reasoning, I am of the opinion that, notwithstanding Mr Glohe’s having been given adequate and proper warning of the implications of the compensation payment, but taking all the circumstances into account, I find Mr Glohe’s circumstances are sufficiently unusual, exceptional and out of the ordinary to deserve the exercise of the discretion in his favour. In other words, I find that special circumstances exist in this matter. I am of the opinion that a fair balance with the competing interests of the community and those of Mr Glohe and his children means Mr Glohe deserves assistance despite having received a large sum of compensation.

59.     I accept that Mr Glohe’s unanticipated marriage breakdown and subsequent property settlement in 2003 is a special circumstance. The event of the children of the marriage returning to live with him amounts to a further special circumstance. Mr Glohe and his children are suffering severe financial hardship. I accept the evidence that he is unable to provide for himself and the children without financial help from his family members. As well, Mr Glohe suffers continuing ill health and inability to work. Ms Day, his partner, is also unable to work. I note as well the unfair impact on Mr Glohe of the 50% rule although this is not as serious a matter as the other factors I have mentioned. Accordingly, I determine that a reduction in the preclusion period is warranted. 

60.     Having determined that special circumstances exist in this case, which justify a departure from strict enforcement of the legislation, the next step is to work out how much of the compensation should be disregarded. Bearing in mind that Mr Glohe has had to split his assets with his ex-wife, I consider that ½ of the compensation payment should be disregarded in accordance with section 1184k(1).

conclusion

61.     The decision under review is set aside. In making this finding, I substitute the decision that the respondent is to treat half of the lump sum compensation payment as not having been made. In order to calculate the preclusion period based on half the payment, I will remit the matter to the Secretary in order for calculate the new preclusion period.  

decision

62.     The decision under review is set aside and in substitution the tribunal decides:

a) pursuant to section 1184K(1) of the Social Security Act 1991, in the special circumstances of Mr Glohe's case, that half of the compensation payment be treated as not having been made; and

b) The matter is remitted to the respondent to calculate the appropriate preclusion period.

I certify that the 62 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Hunt

Signed: Talaishia Collis
  Associate

Date/s of Hearing  3 May 2007
  24 July 2007      
Date of Decision  3 September 2007
Solicitor for the Applicant          Ms J Finlay – Welfare Rights Centre
Solicitor for the Respondent     Mr G Lozynsky – Centrelink Legal Services