Graeme Peters and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2013] AATA 474
[2013] AATA 474
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/0622
Re
Graeme Peters
APPLICANT
And
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal Ms N Isenberg, Senior Member
Date 8 July 2013 Place Sydney The decision under review is affirmed.
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Ms N Isenberg, Senior Member
CATCHWORDS
SOCIAL SECURITY – lump sum workers’ compensation payment – preclusion period – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made – unfairness of the strict application of the ‘50% rule’ – decision affirmed.
LEGISLATION
Social Security Act 1991; ss 17, 1169, 1170, 1171, 1184K
CASES
Beadle v Director of Social Security (1984) 6 ALD 1
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Secretary, Department of Social Security v Smith (1991) 23 ALD 277
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Groth v Secretary of Social Security (1995) 40 ALD 541
Re Colaiacolo and Secretary, Department of Social Security (AAT N84/439, 24 April 1985)
Haidar v Secretary of Social Security (1998) 52 ALD 255
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
Nehme and Secretary, Department of Family and Community Services [2002] AATA 1225
Secretary to the Department of Social Security v Cunneen [1997] FCA 1033
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Director-General of Social Security v HalesREASONS FOR DECISION
Ms N Isenberg, Senior Member
8 July 2013
DECISION UNDER REVIEW
The decision under review is the decision made by the Social Security Appeals Tribunal (SSAT) on 10 January 2013, to affirm a decision made by a Centrelink authorised review officer (ARO) on 20 July 2012 to reject the Applicant’s claim for disability support pension (DSP) because he was subject to a compensation preclusion period until 26 August 2015.
BACKGROUND
On 22 November 2005, the Applicant was injured at work.
He received a payment of $34,500.00 in November 2007. On 6 May 2011, his personal injuries claim was settled and a Consent Order was handed down by the Supreme Court of New South Wales in which he was awarded $325,000.00 inclusive of costs. In all he received $359,500 by way of lump sum. The Applicant continued to receive periodic compensation until 11 May 2011.
On 23 May 2011, Centrelink sent the Applicant a letter advising him, amongst other things, based on the information from the insurer, that he was entitled to receive a lump sum compensation payment of $325,000.00, he had a preclusion period that starts on 12 May 2011 and ends on 26 August 2015.
On 7 June 2011, the Applicant’s solicitors sent him a letter setting out their costs and disbursements in relation to his claim, totalling $120,603.85. On the same date he was sent a statement and a cheque for $155,093.47. An amount of $32,500 was withheld to pay Medicare, if necessary.
On 8 June 2011, he deposited $155,093.47 into his Westpac account. On 8 July 2011 he deposited $32,500, which apparently related to the Medicare payment.
On 13 June 2012 he enquired about disability support pension (DSP) and on 20 June 2012, formally applied for DSP.
On 20 June 2012, Centrelink informed the Applicant that he has a preclusion period from 12 May 2011 to 26 August 2015 therefore he cannot be paid income support payments, including DSP. That decision was affirmed on internal review and by the SSAT.
The Applicant seeks review of the decision of the SSAT.
LEGISLATION
Section 1169 of the Social Security Act 1991 (the Act) deals with compensation payments during a lump sum preclusion period. Subsection 1169(1) relevantly provides:
(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.
DSP, which is the payment in issue in Mr Peters’ case, comes within the definition of “compensation affected payment” in s 17(1) of the Act. Section 17 defines compensation to include a payment for damages, or a payment in settlement of a claim for damages, that is made in respect of lost earnings or lost capacity to earn resulting from personal injury: s 17(2). Section 17 also contains the law in respect to how much of the compensation payment is to be applied to the calculation of the preclusion period. If payment is made by way of settlement, either by consent judgement or otherwise, then 50 per cent of the payment is assessable: s 17(3)(a).
Briefly, the scheme of the legislation is aimed at preventing those who receive lump sum compensation payments for loss of income from also receiving benefits from the public purse. The “compensation part of the lump sum” is then used, by application of a statutory formula, to calculate a period of time during which a person will not be eligible to receive Centrelink payments. This is called “the preclusion period”. Solicitors routinely make enquiries of Centrelink prior to any settlement to ascertain the preclusion period.
The Act, however, provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard the whole or part of the compensation payment in “special circumstances”, as follows:
Secretary may disregard some payments
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.”
ISSUE BEFORE THE TRIBUNAL
The issues to be decided in this application are:
·Is the Applicant is subject to a preclusion period which precludes payment of DSP? If so,
·What is the length of his preclusion period?
·Are there are special circumstances such that part or all of the lump sum used to calculate the preclusion period should be disregarded under s 1184K of the Act.
CONSIDERATION
The Applicant did not attend the hearing, claiming he was unable to afford to do so. He was contacted by phone and the hearing proceeded in that way, until, part way though cross-examination, the Applicant hung up. The Tribunal again contacted him but he declined to participate further.
Is the Applicant subject to a preclusion period which precludes payment of DSP?
The Applicant settled a claim in respect of his workplace injuries for the aggregated sum of $359,500.00.
Mr Peters’ settlement satisfies the definition of “compensation” therefore payment of DSP to him is subject to a preclusion period.
What is the length of his preclusion period?
Subsection 1171(1) provides that two or more lump sum payments made in relation to the same compensable event are combined and treated as one lump sum payment, provided at least one of the payments included a component in respect of lost earnings or capacity to earn.
The Applicant received two lump sum payments in relation to his claim for injury sustained in his employment. These payments were: $34,500.00 on 14 November 2007 and $325,000.00 on 6 May 2011. As both settlements were in respect of the same compensable event, the relevant lump sum for the purposes of calculating the Applicant’s preclusion period is $359,500.00.
Subsection 17(3) provides that the “compensation part” of the lump sum, where that sum is made in settlement of an injury related claim, is 50 per cent of the settlement amount. Therefore the “compensation part” of the Applicant’s lump sum is $179,750.00.
Subsections 1170(4) and (5) provide for calculation of the preclusion period by dividing the compensation part by a fixed amount, the income cut-out amount. In cases of multiple settlements, s 1171 deems the date of receipt as the date the last payment was received. I am satisfied that applying the statutory formula to the compensation amount of $179,750.00, this equals 224 weeks which ends on 26 August 2015.
Are there are special circumstances such that part or all of the lump sum used to calculate the preclusion period should be disregarded under s 1184K of the Act.
The discretion to disregard the whole or part of a compensation payment can be exercised where application of the usual rules would lead to a result that is unfair or inappropriate: see Beadle v Director General of Social Security (1985) 7ALD 670 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570). The Federal Court in Secretary, Department of Social Security v Smith (1991) 30 FCR 56 held that it is appropriate for the discretion to be used where the arbitrary nature of the “50% rule” results in unfairness in a particular case.
Section 1184K is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. Special circumstances do not have to be statistically “extreme” or “unique”, it is sufficient if there is something that takes the matter out of the usual ordinary case: see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1.
It was the Respondent’s position that the Applicant had demonstrated no special circumstances such that the discretion to disregard parts of the compensation payments, pursuant to s 1184(1) of the Act, should be exercised. The advocate for Centrelink told the Tribunal that it may have had a contrary view if the Applicant had provided it with sufficient information for it to reconsider its position. Similarly, the Tribunal has limited information available to it.
The Applicant gave evidence that of the $325,000 he received, his solicitors had ‘taken” $135,000 (he thought). He agreed he had received in excess of $155,000 and had deposited that into his account. He was asked what had happened to the money. He said he had:
·Bought a car for about $35,000
·Paid back loans of about $25,000
·Given his children about $40,000 ($10,000 each)
·Bought furniture for about $7-8,000
·Bought furniture for his children $3000 - $4,000 each (about $12,000 - $16,000)
·Bought motor bikes for two children ($9,000)
The Applicant said his children had not had birthday or Christmas presents for six years.
He agreed that he had also received the Medicare payments in July 2011.
As to his financial circumstances, the Applicant said that he pays rent of about $200 per week and has been behind in the rent, although now is getting back on track, since he has taken in a young girl and her baby as tenants. He lives with two of his sons. One is on Centrelink benefits (temporarily suspended) and works a couple of days a week. His other son receives Abstudy – about $180 per fortnight.
The Applicant said he was told by his solicitors that the settlement would have some impact on his Centrelink benefits, and that Centrelink would tell him how long that would be for. He agreed that he had received a letter from Centrelink that told him he would have to wait for four years.
Financial hardship alone does not constitute special circumstances. To qualify as "special circumstances", financial hardship must go beyond "straitened" circumstances and be truly exceptional: Re Colaiacolo and Secretary, Department of Social Security (1985) (Decision No. 2109, 24 April 1985). In Director-General of Social Security v Hales (1983) 78 FLR 373; 47 ALR 281 Sheppard J of the Full Federal Court stated:
“The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common: they will be impecunious and in straitened circumstances.”
The circumstances out of which hardship arose and the Applicant’s contribution to this must be examined: Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690.
On the Applicant’s evidence he had spent about $133,000 but he did not provide a clear explanation as to how he otherwise spent his lump sum payment. While I accept that he may have been limited in what he could provide by way of gifts to his children in the years since the accident, on his evidence, he had given them about $65,000, or nearly half of the money he received which he knew was to last him until 2015. In addition he received the Medicare money of over $30,000 and there was no indication of where that money had gone either.
On the Applicant’s evidence he applied for DSP in July 2012 because he was having trouble paying the rent. I take it that he meant by that he was experiencing financial difficulties by that time. I do not find his explanation of his expenditure to adequately account for the speed with which he spent his lump sum payment, such that the discretion to find special circumstances should be exercised in his favour.
He thought he would be eligible for DSP because his back is ‘wrecked’ and he is aged 60, and all he knows is furniture removals which he cannot do. He had some contacts and had subcontracted that work, but it had dried up when all the small removalists were taken over by larger firms. He had only made ‘a couple of dollars’ from subcontracting.
The Applicant’s Westpac bank statements were provided. Examination of the bank statements showed some deposits between August 2011 and March 2013 totalling over $50,000. These, it appears, related to the subcontracting work to which the Applicant referred and from which he claimed to have made ‘a couple of dollars’. While there were some significant cash withdrawals about the same time, the withdrawals, which may have been made to pay the subcontractors, were nowhere near as much as the amounts deposited.
Further, it is likely that the subcontractor deposits indicate that the Applicant has the ability to earn a wage. For this reason, also, I find that the discretion to find special circumstances should not be exercised in his favour.
Information from the Applicant’s lawyers indicated that the legal costs and disbursements amount to $131,981.53. The Respondent acknowledged that this amounted to over 40 per cent of the settlement monies and that it is on the high side. However, legal costs are not excluded in the calculation of the preclusion period: see for example, Secretary to the Department of Social Security v Cunneen [1997] FCA 1033. The separate parts of the lump sum are not divisible into their component parts in calculating the preclusion period. There is no legislative basis to exclude legal costs from a lump sum compensation payment for the purposes of s 17(3) of the Act: Re Nehme and Secretary, Department of Family and Community Services [2002] AATA 1225.
I do not consider that the Applicant’s high legal costs should result in a finding of special circumstances.
In summary, I find, the Applicant’s circumstances, taken together, do not warrant the exercise of the discretion under s 1184K of the Act.
DECISION
The Tribunal decides that the decision under review is affirmed.
41. I certify that the preceding forty (40) paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member
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Associate
Dated 8 July 2013
Date of hearing 24 June 2013 Applicant By Telephone Solicitors for the Respondent Susan Mantaring, DHS
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