Gulcan and Department of Family and Community Services - [2001] AATA 552

DECISION AND REASONS FOR DECISION [2001] AATA 552

ADMINISTRATIVE APPEALS TRIBUNAL)
Nº V99/1487
GENERAL ADMINISTRATIVE DIVISION)

Re: ISMAIL GULCAN

Applicant

And:         SECRETARY TO THE
  DEPARTMENT OF FAMILY AND
  COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       Mr J.T.C. Brassil, am, Member
Date:             19 June 2001
Place:            Melbourne

Decision:The Tribunal decides to set aside the reviewable decision and to substitute therefor a decision that:
(a) pursuant to subsection 1184(1) of the Social Security Act 1991 that 30% of the compensation lump sum payment be taken as not having been made,
(b) the preclusion period will be proportionately reduced by 50 weeks, and
(c) the applicant is eligible for Partner Allowance from the date of his application and the Age Pension from the date of his wife's death.
(sgd) J.T.C. Brassil, am
Member
SOCIAL SECURITY — disability support pension — compensation lump sum payment — preclusion period — special circumstances — whether part or whole of compensation should be regarded as not having been paid — decision
Social Security Act 1991 ss.17(1) & (2), 1165 (6) & (8), 1184 (1)
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Green and Secretary, Department of Social Security (1990) 21 ALD 772
Commonwealth v Daniels (1994) 33 ALD 111
Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797

REASONS FOR DECISION

19 June 2001 Mr J.T.C. Brassil, am, Member

This is an application for review of a decision made by a delegate of the Secretary on 16 March 1999 to reject a claim for a Disability Support Pension (DSP) which was affirmed upon review and again by the Social Security Appeals Tribunal (SSAT) on 30 November 1999.
The applicant was present at the hearing on 29 September 2000 and was represented by Mr D Opie. The respondent was represented by departmental advocate Ms P D'Cunha.
Documents submitted pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 ("the T documents") were taken into evidence together with a sealed copy of writ and statement of claim by the applicant in the County Court dated 3 April 1999, copies of statements and passbook from Commonwealth Bank accounts in the name of the applicant tendered by the respondent. Evidence was given by the applicant, his son Ergun Ismail and Mr Morry Aaron Nightingale of counsel.
By leave of the Tribunal the respondent submitted a document from the Transport Accident Commission (TAC) indicating funeral related payments made to the applicant in relation to his late spouse. The applicant had no comment on the document submitted.
Facts
The applicant was injured at work on 6 April 1990 (T2) and received a lump sum settlement of approximately $42,456.87 on 22 December 1995 (T5) following his action for compensation in the County Court of Victoria.
The applicant also issued at common law and that claim was settled for $135,000 on 5 June 1997 (T6).
The applicant was receiving weekly payments of compensation up to 27 March 1998. He was advised on 21 May 1998 that a preclusion period would be applied from 5 June 1997 to 17 August 2000 due to his receipt of a lump sum compensation payment (T8).
On 16 March 1999 the applicant was refused a Partner Allowance because of the application of the preclusion period (T16).
The spouse of the applicant had been in receipt of an Invalid Pension from November 1986 and this payment (latterly as DSP) was continued until her death on 3 January 2000.
The applicant lodged a claim for the Age Pension and that has been paid since 18 September 2000. He was otherwise qualified for the Age Pension from his 65th birthday on 5 September 1999.
Legislation
A "compensation affected payment" is defined in subsection 17 (1) of the Act to include the DSP.
The following subsections define "compensation" and the "compensation part of a lump sum":
17(2) 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) that is:
(e)made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f)made either within or outside Australia.
17(3) For the purposes of this Act, the compensation part of a lump sum 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 judgement being entered in respect of the settlement or otherwise, on or after 9 February 1988; 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 judgement entered into with respect to the settlement or otherwise, on or after 9 February 1988; 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.
The lump sum preclusion period is calculated pursuant to the following subsections of the Act:
1165(6)    If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the new lump sum preclusion period is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends after the number of weeks worked out under subsections (8) and (9).
1165(8)    If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
   Income cut-out amount
In special circumstances the Secretary may exercise a discretion as follows:
1184(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 son in the special circumstances of the case.

Issues before the Tribunal

The issue the Tribunal must decide is whether the applicant should have been granted Partner Allowance for which he applied on 2 March 1999. In so deciding the Tribunal must consider, firstly, whether a preclusion period should be applied pursuant to the Act and secondly whether, in the special circumstances of this case, the Secretary should have exercised his discretion under ss 1186 (1) to treat whole or part of the lump sum compensation payment as not having been made. If the discretion was used then the preclusion period may or may not have been in operation for the whole or part of the period following 2 March 1999.
Evidence
Evidence was given by Mr Nightingale of counsel who had been instructed by McMullen and Co. to appear for the applicant in the trial of his common law claim for damages in the County Court on 23 May 1997.
He stated that the two heads of damages in such actions could be described as, first, pain and suffering and, second, pecuniary loss. The latter would include expenditures and losses but no medical and like expenses.
He said that as a result of a motor vehicle accident in which the applicant was crushed between two vehicles he suffered significant physical disability following surgery and also psychiatric effects described as post traumatic stress disorder.
For pain and suffering, as his counsel, the witness stated he had formed the opinion Mr Gulcan was entitled to compensation in excess of $100,000 perhaps as much as $140,000, say, $120,000.
In respect to pecuniary loss this had to be calculated taking into consideration that he would have earned a little over $135,000 to date from 6 April 1990 but had been paid some $120,000 in compensation during the period. A legal precedent may allow this to be adjusted to, say, $30,000.
The statement of claim made on behalf of the applicant limited his claim for future earnings to the age 65 years which would have been the normal expectation for a person doing his job in his industry. The claim up to 65 years would, however, be discounted because it was a present sum and, in the view of the witness, the claim for future earning capacity was in the region of $47,500.
Mr Nightingale assessed the quantum of claim to be the sum of these, $197,500 from which the sum received already under the Table of Mains. $62,500 with a net result of $135,000. He stated that this was the method used in the negotiations to assess the amount of the settlement.
He stated that in his long experience as counsel he would not expect the court to compensate a plaintiff beyond the age of 65 years as it was the cut-off date specified in the Accident Compensation Act then operating. He stated that this was the yardstick adopted in the negotiations of this particular settlement. For these reasons he recommended to the applicant that he accept the $135,000 offer of settlement.
The applicant stated he had been born in Turkey on 5 September 1934 and had thus reached the age of 65 years on 5 September 1999.
He stated he had worked in the motor vehicle industry since soon after he had arrived in Australia in 1973, first at GMH and later with Ford.
He confirmed that at Ford he would not be able to work beyond the age of 65 years and it was on that understanding that he accepted the lump sum compensation payment. It was his intention before the accident to seek the Age Pension when he turned 65.
The applicant also confirmed that his wife was killed in a motor vehicle accident in Footscray Mall on 3 January 2000 and that his daughter-in-law and grandson were both seriously injured in the accident.
He stated that he had taken his wife's body to Turkey to be buried and had stayed there until recently, eight months.
He indicated that he had borrowed money from his daughter who still resides in Turkey and would have to pay more than $15,000 to her from what he has had on term deposit here with the Commonwealth Bank.
In cross-examination he said that he had not made any TAC claim for a lump sum in respect to his wife's death.
The applicant's son, Ergun, stated that the amount of $23,382.44 in the term deposit was continued for a further six months because his father was still overseas when it matured. He said there had been two Commonwealth Bank passbooks, one in his mother's name and one in his father's name. These had been combined in a new passbook and now showed a total of $1,082.82.
Ergun Gulcan confirmed that his father had been paid funeral costs as far as the airport from the TAC but nothing else. He had made a claim on TAC for his wife and son but had not acted on behalf of his father.
Submissions
Mr Opie, on behalf of the applicant, submitted that there were special circumstances that would justify the use of the discretion available to the Secretary pursuant to ss 1184 (1) of the Act.
The evidence of Mr Nightingale is uncontroverted in relation to the settlement that was reached on the basis of any future economic loss being calculated only to the applicant's 65th birthday. Mr Gulcan had been advised that in the circumstances it was a fair and reasonable settlement and had accepted it on that advice.
The evidence of the applicant was unchallenged in respect to his own expectation of retirement at 65 years and that was the policy of his employer and in accordance with practice in the motor manufacturing industry.
He submitted that the Tribunal should take judicial notice of the Act itself which provides for the age pension from the age of 65 years for males. The community expectation of male retirement at 65 years is, he submitted, in similar State and Federal legislation.
He pointed out that a co-worker of the applicant at Ford in good health would work to 65 years and then go on the Age pension. A co-worker who had been totally incapacitated at work would get weekly compensation to the age 65 years and then get the Age Pension. He submitted it would be unjust and unreasonable for the applicant to be treated differently from his workmates.
He conceded that the legislation was amended in respect to compensation lump sum payments in order to prevent "double-dipping". For the applicant to receive Age Pension payments from his 65th birthday would not be double payment. To shut him out from receiving the Age Pension would be manifestly unjust.
Ms D'Cunha submitted that there were no special circumstances which would justify the use of the discretion in ss 1184 (1) of the Act. These issues had been considered a number of times by the Federal Court and the consensus has been that for circumstances to be "special" they have to be "unusual, uncommon or exceptional". This view is expressed in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 ("Beadle")
She submitted that at the time the applicant applied for a Partner Allowance from the $135,000 received he had spent $70,000 paying off his mortgage, $10,000 on household furniture, $25,000 on an overseas trip, $21,000 on living expenses and $9,000 gifted to his children. at the time his spouse was alive and she was receiving the Disability Support Pension which would have been used in addition to the $21,000 on living expenses. It was her submission that the applicant was not in straitened financial circumstances but even if he was that alone would not justify use of the discretion in ss 1184 (1).
She submitted that the amount used to calculate the preclusion period was $67,500 which when divided by the appropriate figure for weekly earnings produced a preclusion period of 167 weeks. This was notified to the applicant as soon as it was determined and well before he had expended the amounts previously listed.
She further submitted that he had more than $25,000 in bank deposits now which, even taking into account what was owed to his daughter, meant it was not unreasonable to maintain the full preclusion period.
She conceded that 65 years is the usual retiring age for male workers but submitted that the legislation was amended to insert the "50% rule" to avoid any need to look at possible components of the economic loss compensated in a settlement. It was sufficient that there was such a component in the compensation lump sum.
She said that the Department had not been aware of the circumstances of the death of the applicant's wife until a short time ago and sought leave to obtain and submit to the Tribunal documentation in connection with any TAC payments to the applicant and his family resulting from her accidental death and the severe injuries sustained by members of the applicant's family. [It should be noted that these documents were received and copies provided to the solicitors for the applicant. The documents confirmed the evidence of the applicant and his son.]
Ms D'Cunha submitted that while the applicant may have had to finance the burial of his late wife in Turkey, and it was accepted there were cultural as well as personal aspects to be considered, this was not an occurrence that could be held sufficient in itself to establish "special circumstances".
Consideration of the Issues
It is agreed by the parties that a compensation lump sum payment was received by the applicant and the Tribunal is satisfied that, pursuant to the Act, that a preclusion period should be applied in accordance with the formula set out in the Act. There has been no challenge to the calculation which, on the respondent's submission, was a period of 167 weeks given that the calculation should use 50% of the sum of $135,000 as the numerator in the formula.
The Tribunal must then consider the issues surrounding "special circumstances" so as to determine whether the whole or part of the compensation lump sum should be treated as not having been received. These issues have already been considered in a long line of cases.
In Beadle Toohey J, as he then 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 on the context in which they occur. For it is the context that allows one to say that the circumstances in one case are markedly different from the usual run of cases. That 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."
Beadle was appealed to a Full Court and in Beadle v Director-General of Social Security (1985) 7 ALD 670 the Honourable Court said:
"The phrase 'special circumstances', although lacking in precision, is sufficiently understood in our view not to require judicial gloss."
A decade later in Re Groth and Secretary Department of Social Security (1995) 37 ALD 797 ("Groth") Keifel J in discussing "special circumstances" said:
". . . for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only inquiry to be undertaken in this case. It would follow of course that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature that is out of the ordinary. The inquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied . . . ."
Also in Groth the Tribunal in considering the exercise of discretion to treat whole or part of the compensation lump sum as not having been received, the inquiry this Tribunal must make in this matter, comments on whether it may frustrate the intention of the Act. Groth at 798 said:
" . . It seems to me that the purpose of the provisions [of part 3.14] is to ensure that a period is not paid from two sources in respect of the same period of time. . . . Therefore there will be special circumstances if the circumstances are such that it is unreasonable, unjust or inappropriate not to treat the whole or part of a compensation payment as not having been made bearing in mind that the provisions are intended to ensure that a person is not paid from two sources in respect of the same period of time."
The submission of the respondent was that the applicant was not in straitened financial circumstances such that they were unusual or exceptional and the Tribunal accepts that submission.
However while Beadle does propose that circumstances need to be "unusual, uncommon or exceptional" to be regarded as "special" it does concede that each case can have circumstances markedly different from the usual run of cases.
The submission of the applicant, following the evidence of Mr Nightingale, was that the provision for economic loss within the lump sum payment was on the basis of the applicant's loss being calculated up to the age of 65 years and not beyond. There was no contrary evidence or challenge from the respondent. The Tribunal accepts that submission.

The respondent relied on the intent of the legislation being to apply an arbitrary treatment to compensation payments, the "50% rule", eliminating the need to examine the components of such a payment. Thus the respondent submitted that the Tribunal should not take into consideration that economic loss was calculated only to 65 years.
Alternately the submission on behalf of the applicant is that the real intent of the legislation is to ensure there is no "double-dipping", that two payments are being received for the same period. This is the view expressed in Groth.
In Re Green and the Secretary, Department of Social Security (1990) 21 ALD 772 the need for having regard for the objects of the Act was stated as follows:
"The decision-maker must have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating end or objects which are conformable with the scope and purpose of the Social Security Act."
Mr Opie also submitted that to apply the "preclusion period" arbitrarily, as it had been in this case, meant that the applicant would receive no payment from either source for the period of his 65th birthday until the end of the preclusion period. This he characterised both as unfair and inappropriate.
In Commonwealth v Daniels (1994) 33 ALD 111 in dealing with the discretionary provision (s.156) in the previous Act which was in similar terms to ss 1184 (1) of the current Act Neaves J adopted the following approach:
"It has been accepted that the language of s 156 is such as to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case. The discretion may be exercised in favour of an applicant for a pension where the special circumstances of the particular case demonstrate that the strict enforcement of other provisions of Pt XVII of the Act would be unjust, unreasonable or otherwise inappropriate."

Substantially this view was expressed also in Groth.

The Tribunal accepts that the circumstances of the applicant are out of the usual run of such cases and sufficiently exceptional to establish "special circumstances". The Tribunal also adopts the submission that the relevant intent of the Act in providing for the "50% rule" for compensation payments is to preclude "double-dipping". The Tribunal therefore finds that to extend the preclusion period beyond the applicant's 65th birthday, 3 September 1999, is "unjust, unreasonable and otherwise inappropriate".
In the particular circumstances of this case the Tribunal determines that a preclusion period should be applied but should not extend beyond 3 September 1999.
Conclusion
The Tribunal finds there are special circumstances pursuant to ss 1184 (1) of the Act such that 30% of the lump sum payment should be treated as not having been made to the applicant.
The Tribunal thus finds that the preclusion period should be reduced by 50 weeks which will have the effect that the applicant would have been eligible for Partner Allowance from the date of his application and for an Age Pension from the date of his wife's death subject, of course, to any residential requirements that may be applied during that period prior to his return to Australia.
I certify that the sixty-three [63] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr J.T.C. Brassil, am, Member
(sgd)       Catherine Thomas
              Personal Assistant
Date of Hearing:  29.09.00
Date of Decision  19.06.01
Solicitor for the Applicant            Mr D. Opie, Messrs McMullin Coate & Co
Solicitor for the Respondent        Ms P. D´Cunha, Departmental Advocate