Harrow and Department of Family and Community Services - [2000] AATA 344

DECISION AND REASONS FOR DECISION [2000] AATA 344

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S99/493

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

DECISION

Tribunal Senior Member J.A. Kiosoglous MBE

Date3 May 2000
PlaceAdelaide

Decision      Pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal sets aside the decision under review and in substitution therefor, decides that an amount of the compensation money received by the applicant be treated as not having been received such that the resultant preclusion period finishes on 1 May 2000.
  (Signed)
  J.A. KIOSOGLOUS
  (Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – preclusion period – lump sum compensation – reasonableness of expenditure – family and health circumstances – financial circumstances – special circumstances considered
Social Security Act 1991 ss.17, 1165
Workers Rehabilitation and Compensation Act 1986 (SA) ss.42, 42A
Re Hajar and Secretary, Department of Social Security (AAT 4859, 23 December 1988)
Re Hill and Secretary, Department of Family and Community Services [1999] AATA 909

REASONS FOR DECISION

3 May 2000 Senior Member J.A. Kiosoglous MBE

This is an application by Ms Theodora Harrow (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 24 November 1999 (T2) which affirmed a decision of an authorised review officer (ARO) dated 18 October 1999 (T24) affirming a decision of the delegate of the respondent dated 27 November 1998 (T15) to impose a preclusion period from 26 August 1999 until 26 July 2000.
The Tribunal received into evidence the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T1-T28), together with one exhibit lodged by the applicant (Exhibit A1) and one lodged by the respondent (Exhibit R1). In addition, the Tribunal heard evidence from the applicant who represented herself. The respondent was represented by Mr J. Underwood, a departmental advocate.
The issue before the Tribunal is whether or not there are circumstances such that it can treat part or all of the compensation payment received by the applicant as not having been made.
history of the application
The applicant, who was injured in a motor vehicle accident on her way to work on 2 September 1988, received income maintenance paid in respect of annual periods up until 25 August 1999 (T6), pursuant to section 42A of the Workers Rehabilitation and Compensation Act 1986 (SA) (the State Act). She also received a lump sum payment of $40,000 on 17 November 1998 (T13), being a redemption payment pursuant to section 42 of the State Act.
On the basis of the receipt of the lump sum, the respondent calculated a preclusion period for the period 26 August 1999 to 26 July 2000 (T15) using the formula set out in section 1165 of the Social Security Act 1991 (the Act), dividing the "compensation part" (which pursuant to section 17 of the Act is $20,000) by the "income cut-out amount" (being $412.70). The resultant period is 48 weeks, commencing, pursuant to sub-section 1165(5) of the Act, on 26 August 1999.
This decision was affirmed upon review by the ARO and SSAT, the latter of whom stated (inter alia) in its reasons for decision (T2):
"…
It is accepted that special circumstances may exist where Centrelink has provided incorrect advice concerning the effect of compensation on social security payments or where the amount of the settlement is unusually low and clearly inadequate to meet long standing debts. It is not accepted that special circumstances exist where the person claims to be unaware of the compensation provisions, claims to have been given incorrect advice about the compensation provisions by their lawyer or to have spent their compensation money despite advice that they could be subject to the compensation provisions.
Another situation which is not normally considered a special circumstance is financial hardship of itself where the person has paid off debts and other commitments and has either no settlement funds left or insufficient to cover ongoing expenses until the end of the preclusion period. Financial hardship can be considered in conjunction with other factors only if the hardship is exceptional to allow for the special circumstances rule to be used.
While Ms Harrow did not plan from the outset to purchase the family home or to undertake a course at TAFE with a view to self-employment, both decisions were a deliberate choice on her part and could not be considered unforeseen circumstances over which she had no control.
The reduction in maintenance payments represents a different issue and should probably be renegotiated to reflect the amount of care provided by each parent.
The Tribunal appreciated that Ms Harrow considered that she had made wise use of her compensation settlement and had not frittered the money away. It could not conclude, however, that her circumstances were such as to warrant the application of the discretion to reduce the preclusion period."

applicant's evidence and submissions

The applicant told the Tribunal that she had been made aware of the preclusion period and intended to make the compensation monies last for that length of time, but there were a number of unforeseen circumstances which required her to use the money for other purposes. These circumstances included her marriage break-up and necessary property settlement.
She stated that following receipt of the lump sum, she decided to purchase the existing home after the unexpected dissolution of her marriage and an offer by her son to help with the home loan. Most of the lump sum monies were spent on the home loan. The house is valued at approximately $180,000. She stated that she believed that it was the best course of action to take, in that had she not used the compensation monies, she would not have been able to afford the higher monthly mortgage repayments and would not have been able to provide a stable home environment for her children.
She told the Tribunal that she has three children and that her youngest child lives with her. Her middle child went to live with his father some time in November/December 1999. She stated that this was a source of great stress. Her eldest child (aged 21) is currently living at home but does not pay lodging, as he is a source of emotional support and provides for himself in terms of washing, cleaning and cooking.
The applicant detailed her income and expenses to the Tribunal and stated that she considers herself to be a good budgeter and not one to waste money. The mortgage on the house stands at approximately $60,000 with repayments made until July 2000. She completed a TAFE sign writing and decorative painting course with fees of about $3,000. She has expenses associated with establishing a sign writing and painting business which has not yet generated the amount of work she anticipated. She receives $88 per week in Family Allowance payments and about $30 per week from teaching yoga. Her other expenses include $3,950 owing to her mother and she needs a new septic tank which will cost about $1,000.
respondent's submissions
Mr Underwood submitted, on behalf of the respondent, that whilst the applicant has some financial hardship there are no other circumstances which could be considered to be special.
He submitted that the applicant had ten months notice of the preclusion period and has the house available as a useable asset (referring to Re Hajar and Secretary, Department of Social Security (AAT 4859, 23 December 1988). He submitted that her business has not failed and she is available to do part time work .
discussion and findings
The Tribunal has examined the method of calculation of the preclusion period and is satisfied that the Department has correctly calculated a period of 48 weeks commencing the day after the last payment of periodic compensation as required by the legislation and so finds.
Turning to the issue of special circumstances, the Tribunal considers that the applicant is to be commended for the way in which she conducted herself at the hearing and indeed how she has conducted herself over the past several years, during some obviously dramatic times.
The Tribunal does not consider that it is appropriate to expect the applicant to sell her home, especially as her youngest child is entitled to a degree of stability in her life. In Re Hajar there was the potential (and intent) to realise the house asset but this case is clearly distinct on its facts. Re Hajar is not a general authority for the proposition that a house must be sold but speaks directly to the circumstances and the appropriateness of house sale in that case.
There are a number of circumstances which have arisen in this case that were unforeseen by the applicant at the time she accepted the lump sum, and at the time she decided to invest the majority of it into mortgage repayments. These include the marriage break-up, the subsequent need for a property settlement and a dramatic drop in child support payments. These unforeseen circumstances do not of themselves give rise to special circumstances, but they are factors the Tribunal considers appropriate to take into account in so far as they impact and influence the other circumstances of this case.
In Re Hill and Secretary, Department of Family and Community Services [1999] AATA 909 the Tribunal remarked at paragraphs 32 and 33:
"32. Mr Underwood submitted that Parliament expects compensation recipients to reasonably expend their money, and this is certainly a reasonable expectation. The question remaining is what this Tribunal is to do in the circumstance where a person presents with a long preclusion period in front of them, and no realistic means of support? If a person has spent the compensation money recklessly or irresponsibly then the Tribunal may take a dim view of such a circumstance, but in a matter such as the present, where the Tribunal has recognised that the applicant was not capable of rationally thinking about how to dispose his money, it surely cannot be Parliament's expectation that such a man be left out in the cold.
33. All to often, these preclusion period cases come before the Tribunal, and it is in effect, after the horse has bolted, for the money has already been spent. Where an applicant's expenditure can be reasonably explained, as in the present matter, and there is no visible means or assets from which the applicant can support himself, this Tribunal must exercise compassion. To not do so would be to abandon one of those people in the community most in need of support.
…"
This case is distinct from Re Hill in so far as there is no issue as to the state of mind and severe health problems as there was in Re Hill and the preclusion period is shorter in the current case. Nevertheless, the Tribunal is confronted with a situation where it cannot be said that the expenditure of the lump sum was unreasonable. It is reasonable to have regard to the children's best interests in terms of the purchase of the present home. The furtherance of study in order to find work must be said to be reasonable and also in the community's best interest, in that it minimises the time the applicant would expect to receive benefits. It was appropriate expenditure in the Tribunal's opinion to invest in the future through retraining in such a field appropriate to the applicant's skills, abilities and health problems.
The applicant has taken steps to obtain work, both on her own and with other employers and whilst the applicant may be able to obtain part time work, she has not yet done so. Although the business has not failed, it cannot be said to be successful as yet. There should not be a distinction drawn between those cases where compensation money has been put into a business and it has failed and where it will hopefully succeed but has not yet done so.
The Tribunal must not only look to the future but to the present. At present, the applicant's financial circumstances are dire, with an income of about $120 per week to support herself and her daughter and meet usual household expenses (barring the pre-paid mortgage). She has debts of $3,950 and needs a new septic tank. It is unreasonable to expect the applicant's mother to continue to support her as this increases the applicant's debt and from the applicant's evidence it is not entirely appropriate given the mother's own problems.
The applicant has also had the stress of the marriage breakdown and her middle child leaving to live with his father. The Tribunal accepts that at this point in time it is not appropriate to seek lodging money from the eldest son due to the emotional support he provides.
It would be unjust, unreasonable and inappropriate taking into account the various unforeseen circumstances that have befallen the applicant, the dire current financial circumstances, the emotional and family consequences that might well result if the applicant were to experience any further upheaval in her life in the next few months and the fact that expenditure on training at TAFE was reasonable to keep the preclusion period in place until July 2000.
decision
For the above reasons, and pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal sets aside the decision under review and decides that an amount of the compensation money received by the applicant be treated as not having been received such that the resultant preclusion period finishes on 1 May 2000.
I certify that the 23 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member J.A. Kiosoglous MBE
Signed:         .....................................................................................
  Personal Assistant
Date/s of Hearing  20 April 2000
Date of Decision  3 May 2000
Counsel for the Applicant        In person
Solicitor for the Applicant         -
Counsel for the Respondent    Mr J. Underwood
Solicitor for the Respondent    Centrelink