Gosney and Secretary, Department of Family and Community Services - [2002] AATA 1133

DECISION AND REASONS FOR DECISION [2002] AATA 1133

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2002/106

GENERAL ADMINISTRATIVE DIVISION       )
           Re      GARRY GOSNEY
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Mr IR Way, Member

Date5 November 2002
PlaceBrisbane

Decision      The Tribunal affirms the decision under review.
  ....................(Sgd).....................
  IR Way
  Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – compensation payment – application of statutory formula – compensation payment for personal injury received while in receipt of pension payments – statutory objectives in utilisation of formula - whether special circumstances exist

Social Security Act 1991

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67

Re Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487

Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 7 ALD 670

REASONS FOR DECISION

5 November 2002 Mr IR Way, Member

This is an application by Garry Gosney for review of a decision of the Social Security Appeals Tribunal ("SSAT") made on 22 January 2002, which affirmed a decision of Centrelink, dated 31 October 2001, to impose on the applicant a lump sum preclusion period from 21 February 1998 to 16 October 1998 and to recover a charge amount in the sum of $6,398.70, comprising the payments of disability support pension made to the applicant during the preclusion period.
The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (T1 – T34) and the following documentary evidence tendered at the hearing:

Exhibit R1 Respondent's Statement of Facts and Contentions dated 23 July 2002
Exhibit R2 Statement of the applicant dated 23 May 2002
Exhibit R3 Letter from Cooke & Hutchinson, Lawyers dated 19 February 2002

Mr R McQuinlan, Advocacy and Administrative Law Team, Brisbane, appeared for the respondent and Mr R Mitchell, a friend of the applicant, appeared for the applicant and gave evidence for the applicant, who was overseas and unavailable to give evidence.
Background Facts
The following background facts are not in dispute and in light of this and on the material before it the Tribunal finds:

Mr Gosney has been in receipt of disability support pension since 1994.
On 21 February 1998, Mr Gosney was injured in a car accident (T13, Folio 39) and sought compensation in relation to his injuries.
Mr Gosney's Statement of Loss and Damages indicates he claimed a loss of income figure of $9,940 during the period 21 February 1998 to 30 June 1999, based on an income of $140 per week.
On 11 October 1999, Centrelink wrote to Mr Gosney advising him that if he should receive compensation, some or all of the social security payment paid to him since the injury may have to be repaid (T5, Folio 24).
On 15 October 1999, a file note indicates Mr Gosney contacted Centrelink about the notice sent to him and objected to Centrelink "trying to take his money" (T8, Folio 27).
On 15 October 2001, Mr Gosney's solicitor sought an estimate of social security charge/preclusion based on a settlement of $40,000.
On 22 October 2001, Centrelink estimated there would be a thirty-four week preclusion period running from 21 February 1998 to 16 October 1998 and the compensation charge would be $6,398.70 (T13, Folio 39).
On 25 October 2001, Walsh Halligan Douglas, Lawyers acting for Suncorp Metway advised Centrelink that Mr Gosney had settled his claim for compensation for an agreed sum of $40,000 plus costs.
On 25 October 2001, a file note indicates Mr Gosney rang Centrelink to dispute the estimate given to his solicitors.
On 31 October 2001, Centrelink calculated a preclusion period ran from 21 February 1998 to 16 October 1998 and a charge of $6,398.70 was to be recovered (T15, Folio 41). Advice letters were sent to Mr Gosney (Folio 49) and his solicitors (Folio 47).
Centrelink records indicate the compensation charge has been fully recovered.

Issues

This matter is contested on the grounds that there are special circumstances that would warrant disregarding some or all of the applicant's payment of compensation following settlement of his claim on or about 25 October 2001.
Legislative Framework
The Social Security Act 1991 ("the Act") relevant provides as follows:
"17(1) In this Act, unless the contrary intention appears:
'compensation' has the meaning given by subsection (2).
          'compensation affected payment' means:
          (aa)     an age pension; or
          (a)       a disability support pension; or
          (b)       a parenting payment; or
          (c)       a social security benefit; or
          (e)       a disability support wife pension; or
          (f)        a carer payment; or
          (g)       a special needs disability support pension; or
          (h)       a special needs disability support wife pension; or
(i)        mature age allowance; or
          (j)        mature age partner allowance; or
          (k)       a former payment type.
'compensation part', in relation to a lump sum compensation payment, has the meaning given by subsections (3) and (4).
…
'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.
…
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.
…
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, on or after 9 February 1988; or
…
17(8)    For the purposes of the definition of income cut-out amount in subsection (1), the formula is as follows:
2.5 (Maximum basic      +     Pharmaceutical amount )   +     Ordinary free
      (          rate  for a single person        )      area limit ______________________________________________________________
52
…
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.
1169(2) In this section:
lump sum compensation payment does not include a lump sum payment:
(a)to which section 1164 applies; or
(b)that relates only to arrears of periodic compensation payments.
1170(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;
…
1178(1)If:
(a)a person receives a lump sum compensation payment; and
(b)the person receives payments of a compensation affected payment in relation to a day or days in the lump sum preclusion period;
the Secretary may, by written notice to the person, determine that the person is liable to pay to the Commonwealth the amount specified in the notice.
1178(2) The amount to be specified in the notice is the recoverable amount under section 1179.
1179    The recoverable amount under this section is equal to the smaller of the following amounts:
(a)       the compensation part of the lump sum compensation payment;
(b)the sum of the payments of the compensation affected payment made to the person in relation to a day or days in the lump sum preclusion period.
…
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)."

Evidence for the Applicant

In applying to the Tribunal for review of the SSAT decision, the applicant said (Exhibit R2):
"I am Dyslexic, and through this I often have problems fully comprehending things. To help the clarity of this deposition, I have had a friend re-write what I have wanted to say to help make it clearer for you.
At the time of agreement of settlement of my compensation claim I was unaware that I would have to be paying a refund of my pension to Centrelink. By the documents that have been sent to me, it appears I did have a discussion with someone at Centrelink about it, though I do not remember it. Up until after I had agreed to settle I was of the belief that it was to be a tax not a refund of moneys. If I had realised that I had to repay part of my pension I would have required a larger settlement figure to help cover what I had to repay. When I agreed on the settlement, my lawyer had told I that it was possible that they might be able to have the amount I had to pay reduced. It was after I had signed the settlement agreement that it was fully explained to me that it was not a tax but a requirement to repay part of my pension. I had been receiving this pension before the accident ever happened and therefore the payment of it to me had nothing to do with supporting me due to the accident.
From the documents that were sent out, this appears to be a forever losing situation as it appears that every time the Administrative Appeals Tribunal has granted an appeal it has been taken to the Federal Court where it has been reversed in favour of Centrelink. A Disability Support Pension recipient is discriminated against by not being able to make a claim for complete loss of wages as an accident would not cause them to lose their pension but only the small amount they are able to earn without it affecting their pension. The regulation, that this refund is required under, is to me further discriminatory towards pensioners as the amount used to calculate how much must be repaid is calculated as if they were being paid the average wage for Australia (something I have never done in my working life). If I had claimed for complete loss of earnings, then I would have no complaints about refunding part of my pension but because I was only able to work part time before the accident I only claimed for the loss of the small amount I had been earning as an extra to my pension. It seems completely unfair to treat me in the same manner as someone who had claimed for complete loss of earnings."
In a letter to Centrelink dated 20 December 2001 (T3, Folio 71) the applicant stated:
"I have recently received your letter referring to the effect my compensation payment has had on my Centrelink payment.
While I acknowledge that under Part 3.14 of the Social Security Act 1991, I am required to repay some of my Centrelink payment, I wish to lodge an appeal against the amount under special circumstances.
As I was already receiving a Centrelink payment at the time of the accident my claim was only for the amount that I had been earning for some part time work, which I am no longer able to do. This amount, which I was able to earn without it affecting my Centrelink payment, was $120.00 per week at the time of the original accident claim as at the time I was married with five (5) children to support. Since then I have been divorced and so was willing to settle for a smaller amount as the amount I would be able to earn without affecting my Centrelink payment has reduced.
The amount you require me to repay seems to be an unfair amount as I was only claiming for the lost extra earnings I am now no longer able to earn. The amount I claimed for the period, for which you require me to repay $6398.70, only totals approximately $2040 on what I am allowed as extra earnings if I was still able to work and so it seems to me that it is inequitable to ask me to repay the amount you have specified. It appears as if the government is trying to make a profit from my accident."
At the hearing Mr Mitchell told the Tribunal that he had met Mr Gosney through the Internet and they had been friends for about two years. He said that the applicant had been married with four or five children at the time of his accident. However, he had subsequently separated from his wife in May 1998. Mr Mitchell said that to his knowledge the applicant felt that the extent of the repayment he would be required to make had never been fully explained to him.
Mr Mitchell said that the applicant undertook part-time work, one or two days a week, as a taxi driver to supplement his disability support pension within the allowable limits and that it was this amount he claimed as loss of earnings in his compensation claim.
The Tribunal notes that in his compensation claim Mr Gosney stated this amount was $140 per week and that in evidence to the SSAT and in his letter dated 20 December 2001 (T32 Folio 71) he stated that the amount he was able to earn without it affecting his Centrelink payment was $120 per week. Further in his letter of 20 December 2001 the applicant referred to a total amount of $2,040 (or $60 per week) as the amount he claimed for loss of earnings (this, according to Mr Mitchell, being related to a lowering of his allowable limit subsequent to separation from his wife).
It was Mr Mitchell's evidence that the applicant felt he had done the right thing in only claiming the loss of earnings with respect to his part-time taxi driving and that he (the applicant) only "got on his high horse" when he realised the compensation part of his claim was deemed to be 50% of his settlement, that is, $20,000 rather than the much lesser amount that he had claimed.
Mr Mitchell told the Tribunal that on a number of occasions he had attended with the applicant when the applicant saw the solicitors who were acting for him with respect to his compensation claim and, in particular, on the day that the claim was finally settled. Mr Mitchell said that on this day prior to signing the settlement papers the applicant was aware that his solicitors were trying to persuade Centrelink to reduce the amount to be recovered; that the applicant signed the settlement papers; and that subsequently he was told that the charge could not be reduced. Mr Mitchell also recalled that the applicant's solicitors had informed the applicant that $40,000 was the most he could expect on his accident.
Mr Mitchell was unable to explain what the applicant meant when he said that he thought he would only have to pay "an income tax figure". Mr Mitchell said the applicant felt he was being robbed and discriminated against because he was a pensioner on a disability support pension before the accident and therefore only able to work part-time and incapable of claiming a full loss of income.
It was Mr Mitchell's evidence that the applicant told him he was dyslexic; that he had found the applicant had difficulty in spelling but he could communicate adequately verbally; that he thought the applicant had some mental difficulties being very difficult to handle and being hard to convince that a particular mindset that he had was not really the ways things were; and not being capable of understanding complicated matters such as applied in this case. The Tribunal is mindful that there is no medical evidence before it which would throw any light on the applicant's mental condition.
With respect to financial hardship Mr Mitchell said that to the best of his knowledge the applicant was not suffering financial hardship, that he had received approximately $25,000 net from his compensation settlement amount, that he was still on disability pension and that he was doing what he had always dreamed of doing, namely, travelling through the USA and staying with various friends in that country.
Respondent's Submissions
Mr McQuinlan for the respondent submitted that in this matter the respondent had correctly calculated the compensation part of the applicant's compensation settlement; had correctly calculated the preclusion period that applied to the applicant; and had correctly calculated the payment charge arising from compensation affected payments made to the applicant during the preclusion period.
With respect to the various contentions put forward for the applicant to be afforded the discretionary provisions of section 1184K of the Act, the respondent submitted there were no special circumstances. The respondent submitted that there was no evidence of any financial hardship; that having regard to all of the material before the Tribunal the applicant could not assert he did not know that he was subject to a preclusion period and a payment charge; that he knew about the requirement to pay Centrelink and, if he had forgotten this or not fully understood this, special circumstances were not on foot; that in accordance with the proper application of the relevant legislative provisions the applicant could not claim to be discriminated against in that the legislative provisions applied to everyone, in particular, the 50% rule used to determine the compensation part of a lump sum settlement. With respect to this matter, the Tribunal was referred to Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 and Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67.
Consideration
It is appropriate in the first instance in this matter to consider the proper application of section 17(3) of the Act, particularly the question as to whether it is unfair to apply the 50% rule in determining a compensation part of a lump sum settlement when the actual economic loss suffered by the applicant is considerably less than the amount arrived at by applying the 50% rule.
The Tribunal is mindful of what his Honour Justice O'Loughlin said in the matter of Hulls at 578:
"The history of this legislation and, in particular, the reasons for using an arbitrary formula of 50% were traced in detail by von Doussa J in Secretary, Department of Social Security v Banks (1990) 20 ALD 19; 23 FCR 416. His Honour referred to the minister's second reading speech when the '50% rule' was introduced into the legislation. The relevant passage from that speech is (at 422): 'Settlements of lump sum compensation particularly in the workers compensation jurisdiction are being manipulated to obscure the economic loss component and to avoid recovery of social security payments. To prevent this abuse the minister announced on 8 February 1988 that, for future personal injury settlements made by agreement or by consent order, 50% of lump sum compensation will be deemed to be in respect of economic loss. This Bill gives effect to that proposal: Hansard, 13 April 1988, p 1497'.
Once the mischief at which the amending legislation was aimed has been so clearly identified, it becomes apparent that the legislation prevents any dissection of the 'lump sum'. Although those words are not defined, I respectfully agree with what von Doussa J said of them in Banks' case: 'They are not words of art. In the Macquarie Dictionary a 'lump sum' is defined as a sum 'including a number of items taken together or in the lump'. In my opinion the words bear that meaning in the section."

Furthermore, the Tribunal notes that the question has been addressed fully in the recent case of Chamberlain. In this matter, her Honour Justice Kiefel said:
"23.     It may generally be accepted that the statutory provisions here in question were intended to operate upon factual bases which were assumed and were not intended to reflect the true position. This is so with respect to the figure of fifty per cent taken of the lump sum compensation payment; the amount of basic rate of pension used to divide it; the period during which double payment is assumed to have occurred; and perhaps even the commencement of the period when the loss of earning capacity arose, which would normally be taken to be the date when the compensable injury was occasioned to the person.
…
25.      …The statutory purpose is to overcome the need in each case to determine what part of a lump sum compensation payment in truth represents economic loss. Although the assumptions to be made and the result reached are necessarily arbitrary, it is a course which has been taken for administrative simplicity…
26.      These observations do not however conclude the matter, since s 1184 was inserted to ameliorate the harshness of the arbitrary provisions…Pursuant to it the decision-maker is entitled to treat the compensation payment, or part of it, as if it had not been made, which is to say in a manner different from that required by the formulae. This is undertaken only if the requisite opinions are formed, namely that 'special circumstances' exist and it is considered appropriate to treat the compensation payment such that there will either be no period when double payment is assumed to have been made, or there will be a shorter period."
The Tribunal also notes that when the matter of Chamberlain was remitted to the Tribunal for further consideration the Tribunal in its determination said:
"The real lesson from Chamberlain and the other authorities seems to be this: once the Tribunal has satisfied itself the statutory formula was correctly applied, the Tribunal is not otherwise interested in the formula and whether or not it accurately reflects the 'true' position. The logic of the legislative scheme removes the need for that investigation. It is irrelevant that an applicant might have been treated more favourably if the rule were modified to reflect the amount actually allocated in respect of economic loss in a given case. The Tribunal must instead focus on whether special circumstances exist following the application of the rule and the imposition of the preclusion period (or the extraction of the sum under s 1166). If special circumstances do exist, the exercise of the discretion may be justified." [Re Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487]
With respect, the Tribunal adopts the approach as set out above and, after consideration of all the material before it, finds that the respondent correctly determined the compensation part of the applicant's lump sum settlement to be $20,000.
It is common ground that the income cut-off figure of $576.38 is correct and it follows from this that the respondent has correctly determined a preclusion period of thirty-four weeks. Pursuant to sections 1178 and 1179 of the Act the respondent has correctly calculated the payment charge of $6,398.70.
It remains then to consider whether there are any special circumstances in this matter such that part or whole of the compensation payment to the applicant can be disregarded pursuant to section 1184K of the Act.
In consideration of this matter the Tribunal notes that although special circumstances are not defined in the Act, the interpretation and the application of the discretionary provisions of the Act have been dealt with by the Tribunal and the Federal Court in numerous cases.
In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 it was said:
"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 upon 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."
This decision was generally affirmed on appeal by the Full Court of the Federal Court of Australia in Beadle v Director-General of Social Security (1985) 7 ALD 670 where it was said that:
"The phrase 'special circumstances', although lacking precision, is sufficiently understood in our view not to require judicial gloss."
With respect, the Tribunal adopts the above approach and in so doing is mindful that there is a need to consider all of the particular circumstances of this matter in order to ascertain whether there are circumstances which are unusual, uncommon of exceptional so as to make the strict application of a compensation preclusion period unjust, unreasonable or otherwise inappropriate.
For the reasons given above, the Tribunal does not accept that the applicant has been discriminated against because of his disability support pension and associated part-time employment and as such there is no question of special circumstances with respect to this particular issue.
In his final submission, Mr Mitchell contended that special circumstances applied in this case because of the applicant's mental inability to fully comprehend what was happening. It was contended that even though the applicant had been told many times about what might happen there was never any mention of exact figures, that it was only in the last three months before settlement that a figure of $40,000 emerged and that the applicant was not aware of the exact amount he would have to pay until after he signed the final settlement papers.
These contentions must be weighed up against the evidence of the respondent's records of correspondence and telephone communications with the applicant, his insurers and his solicitors; the evidence of the solicitors acting for the applicant in his compensation claim; and the lack of any medical evidence as to the mental health of the applicant. The Tribunal notes:
(a)the correspondence between the respondent and the applicant with respect to preclusion periods and repayment of social security benefits (T5 Folio 24, T6 Folio 25, T7 Folio 26, T8 Folio 27, T12 Folio 38, T13 Folio 39); and
(b)the responses of the applicant's solicitors to questions asked of them by the respondent, namely, that Mr Gosney was told many times throughout his claim of his obligation to refund monies to Centrelink and that various estimates were obtained from the respondent and furnished to the applicant.
After consideration of all the material before it, and the submissions of both parties, the Tribunal is satisfied that the applicant was properly notified by the respondent and his solicitors about the nature and extent of his preclusion period and repayment of disability support pension payments.
The Tribunal is also satisfied that any difficulties that the applicant may have had in comprehending or remembering what he had been told by the respondent or his solicitor about preclusion periods and repayment does not constitute "special circumstances" within the meaning of the term as set out above.
The Tribunal accepts Mr Mitchell's submission that the applicant does not suffer financial hardship and there being no matters put to the Tribunal, other than those set out above, with respect to special circumstances, the Tribunal finds that there are no special circumstances in this matter which would activate section 1184K of the Act.
The Tribunal therefore affirms the decision under review.
I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Mr IR Way, Member
Signed:         Sarah Oliver
  Associate
Date of Hearing  11 October 2002
Date of Decision  5 November 2002
For the Applicant  Mr R Mitchell
Solicitor for the Respondent         Mr R McQuinlan, Departmental Advocate