Hemmings and Secretary, Department of Employment and Workplace Relations

[2005] AATA 890

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2005] AATA 890

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2005/390

GENERAL ADMINISTRATIVE DIVISION

Re:         PETER RONALD HEMMINGS

Applicant

And:       SECRETARY,

DEPARTMENT OF EMPLOYMENT AND

WORKPLACE RELATIONS

Respondent

DECISION

Tribunal:       G.D. Friedman, Senior Member

Date:             14 September 2005

Place:            Melbourne

Decision:The Tribunal affirms the decision under review. 

(sgd) G.D. Friedman
  Senior Member

SOCIAL SECURITY ‑ lump sum compensation ‑ preclusion period ‑ purchase of property and other items ‑ whether special circumstances exist

Social Security Act 1991 ss 17(1), (2), (3), 1166, 1170(1), (4), (5), 1184K(1)

Director-General of Social Servicesv Hales (1983) 47 ALR 281
Groth v Secretary, Department of Social Security (1995) 40 ALD 541

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

Re Secretary, Department of Social Security and Winterbotham

(AAT 6499, 11 December 1990)

REASONS FOR DECISION

14 September 2005  G.D.Friedman, Senior Member

1.      This is an application by Peter Ronald Hemmings (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 14 April 2005.  The SSAT affirmed a decision of an authorised review officer of Centrelink dated 18 March 2005to refuse a claim for disability support pension (DSP) because of the imposition of a compensation preclusion period from 24 June 1999 to 10 May 2006.

2.      At the hearing on 1 September 2005 the applicant represented himself, and Ms K. Paul a Centrelink advocate, represented the Secretary to the Department of Employment and Workplace Relations (the respondent).

3. The Tribunal received into evidence the documents lodged under s 37 of the Administrative Appeals Tribunal Act 1975 (T1-T32).

BACKGROUND

4.      On 29 June 1999 the applicant received a lump sum payment of $300,000 after suffering a work-related back injury.   

5.      With that money the applicant purchased a house in Hoppers Crossing for $139,000 (plus $16,000 for repairs), a motor vehicle for $25,000 (plus $5800 for repairs), electrical goods for $4000 and false teeth for $1000.  The remainder was used for living expenses.

6.      On 11 June 2003 the applicant lodged a claim for DSP.  Centrelink refused the claim because of the application of the preclusion period.  The applicant lodged further claims in December 2004 and 21 February 2005, which were similarly unsuccessful.  On 18 March 2005 an authorised review officer affirmed the decision of 21 February 2005.    

7.      On 23 March 2005 the applicant sought review by the SSAT, which affirmed Centrelink's decision.  On 6 May 2005 the applicant lodged an application with the Tribunal for review of the SSAT decision.

8.      The issues before the Tribunal are whether a compensation preclusion period applies; and whether any part of the compensation lump sum should be disregarded for the calculation of the preclusion period because of special circumstances.

EVIDENCE

9.      In oral evidence the applicant told the Tribunal that when he settled his claim for compensation for $300,000 he was receiving weekly compensation payments.  He said that he paid $20,000 for legal expenses and was told by his solicitor and Centrelink that a compensation preclusion period would apply until May 2006.  He said that he did not dispute the dates of the preclusion period.  He explained that, despite the advice, he decided to purchase the property because he was living in a small rented unit that was inappropriate for his partner and her disabled child.

10.     The applicant told the Tribunal that the vehicle he purchased in 1999 was a 1997 Commodore which is now in need of repair and requires new tyres.  The registration ($550) is due shortly, which he is unable to pay.  He said that the vehicle is now worth about $5000.  He told the Tribunal that he has debts including council rates ($312), a bank debt ($741) and a mobile telephone bill ($175), in addition to normal living expenses.

11.     The applicant explained that the house has appreciated in value and is worth about $220,000, but selling the property is not an option because the house suits his family and he is in no position to rent another property.  He stated that his stepson attends a special school for disabled children but his partner is unable to work because of her obligations to her son and has not worked for a number of years.  She receives a carer payment of about $300 per fortnight.  The applicant said that he approached a financial institution for a loan but was refused because he was not working.

12.     In relation to future employment prospects the applicant stated that his back condition prevents him from contemplating any kind of work, and he is unskilled and cannot undertake work from home.  He said that there are no family members or friends who are in a position to assist him during the remaining months of the preclusion period.  He admitted that he had been reckless in spending the entire settlement amount before the expiry of the preclusion period.

CONSIDERATION OF THE ISSUES

13. Section 17(1) of the Social Security Act 1991 (the Act) provides that compensation affected payment includes disability support pension.  Section 17(2) of the Act provides:

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.

14.     Under s 17(3) of the Act, 50 per cent of a lump sum settlement payment is considered to be the compensation part of the payment.  Section 1170 of the Act sets out the method of calculating a compensation preclusion period, which commences on the day following the last day of periodic payments (s 1170(1)(a)).  Section 1170(1)(b) provides that the end of the period is calculated according to a formula by which the compensation part of the lump sum payment is divided by the income cut-out amount (s 1170(4) and (5)). 

15.     Section 1184K(1) of the Act provides:

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.

16.     In reaching its decision the Tribunal takes into account the oral evidence and written material, including the submissions made by the parties.

17.     The Tribunal finds that the lump sum payment of $300,000 received by the applicant included an amount for loss of earnings or loss of earning capacity, so it falls within the definition of compensation in s 17(2) of the Act.  Under s 17(3) of the Act, 50 per cent or $150,000 of the lump sum settlement is considered to be the compensation part of the payment.

18.     Using the formula specified in s 1170 of the Act, the Tribunal finds that the preclusion period is from 24 June 1999 to 10 May 2006.  During this period DSP is not payable to the applicant.  

19.     Section 1184K(1) of the Act gives the decision‑maker discretion to treat the whole or part of a compensation payment as not having been made or not liable to be made, if the decision-maker thinks it is appropriate to do so in the special circumstances of the case.  However, in order for the decision-maker to use this discretion, there must be something to make the case stand out from the usual or the ordinary (Groth v Secretary, Department of Social Security (1995) 40 ALD 541). In Re Beadle and Director‑General of Social Security (1984) 6 ALD 1 the Tribunal held that special circumstances must be unusual, uncommon or exceptional. 

20.     The Tribunal is satisfied that before and after the settlement of the compensation claim Centrelink and the applicant’s solicitor informed him of the preclusion period and the consequences of exhausting the settlement money.  The Tribunal accepts that expenditure of the settlement money on the purchase of a house, motor vehicle and other items, plus living expenses, has caused the applicant to live in straitened circumstances. However, financial hardship must go beyond straitened circumstances to constitute special circumstances (Director-General of Social Servicesv Hales (1983) 47 ALR 281).

21.     The applicant admits that he acted recklessly but was trying to provide for his family, particularly the needs of his disabled stepson.  The Tribunal accepts that the applicant is reluctant to consider selling the house when only eight months of the preclusion period remain, and that his partner has restrictions on her ability to seek part-time or casual employment.

22.     In Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990) the Tribunal stated:

24.      The respondent contended that he was perfectly entitled to have expended his settlement moneys in providing his family with a home and no‑one, least of all this Tribunal, would dispute that.  However, that is not the issue ‑ it is the fact that the respondent, having disposed of his settlement moneys, now seeks support from the community.  The emotional attachment of the respondent and his wife to the family home was obvious and their reluctance even to think of selling it understandable.  However, the Tribunal must take that home into account in deciding whether the respondent is in a position of exceptional financial hardship.  While the respondent has assets of such value he can never be so regarded.

25.      As to the submission that the respondent should not be forced to sell his house, the Tribunal would compare his position with that of another recipient of a compensation award who chooses to expend his compensation moneys on investments.  Should there be any difference between one who invests his money in stocks and shares and one who invests in real estate?  Neither should expect the tax‑payer to support him while he holds on to assets he could well realise and use to support himself.  This is not to say that the Tribunal seeks to force the respondent to sell his house; or even recommends that course of action.  It is not the Tribunal's role to do that.  At the same time, the Tribunal cannot ignore the view that the selling of the house is one way by which the applicant could resolve his present difficulties.  It is an evident cause of action, although not by any means the only one.

23.     The Tribunal notes that the applicant has debts and a limited income for the remainder of the preclusion period.  However, he has realisable assets comprising a house and motor vehicle valued at more than $225,000, and there may be some prospect of his partner supplementing the family income by seeking casual employment during school hours. 

24.     The Tribunal concludes that the applicant did not make a reasonable effort to keep sufficient funds in reserve for living and other expenses during the preclusion period despite clear advice about the consequences of the preclusion period.  After considering all relevant matters and viewing the applicant’s case in its entirety, the Tribunal is not satisfied that the matters raised by him, including his financial state, are such as to make his circumstances unusual, uncommon or exceptional.  His circumstances, while difficult, are not special circumstances.  Therefore, it is not appropriate for the Tribunal to exercise the discretion under s 1184K(1) of the Act, to disregard the compensation received in whole or in part.

DECISION

25.     The Tribunal affirms the decision under review.

I certify that the twenty‑five [25] preceding paragraphs are a true copy of the reasons for the decision of:

G.D.Friedman, Senior Member

(sgd)       Catherine Thomas

Clerk

Date of hearing:   1 September 2005
Date of decision:  14 September 2005
Advocate for applicant:                Self-represented
Advocate for respondent:            Ms K. Paul, Centrelink