Holland and Secretary, Department of Social Services (Social services second review)
[2019] AATA 339
•6 March 2019
Holland and Secretary, Department of Social Services (Social services second review) [2019] AATA 339 (6 March 2019)
Division:GENERAL DIVISION
File Number: 2018/5061
Re:Robert Holland
APPLICANT
Secretary, Department of Social ServicesAnd
RESPONDENT
DECISION
Tribunal:Member C Edwardes
Date:6 March 2019
Place:Perth
The decision under review is affirmed.
..........[Sgd]..................................................
Member C Edwardes
CATCHWORDS
SOCIAL SECURITY – compensation - motor vehicle accident - consent judgement – compensation preclusion period applied – Disability Support Pension (DSP) payment – straitened financial circumstances – ill health – other factors – evidence does not support special circumstances – decision affirmed.
LEGISLATION
Social Security Act 1991 (Cth) – ss 17(1) - 17(2) - 17(3)(a) – 17(8) – 23 - 1169(1) – 1170(1)(a) – 1170(4) - 1171(1) – 1178 – 1179 - 1184 - 1184G – 1184K
CASES
Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25
Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Massoud v Secretary, Department of Social Services (Social services second review) [2017] AATA 1366
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) [1979] AATA 179
Secretary, Department of Employment and Workplace Relations v Homewood [2006] FCA 779Secretary, Department of Social Security and Winterbotham [1990] AATA 808
SECONDARY MATERIALS
The Guide to Social Policy Law – Social Security Guide – Version 1.252 (Released 4 February 2019) - Part 4.13.4.10 – Part 4.13.4.20
REASONS FOR DECISION
Member C Edwardes
6 March 2019
BACKGROUND
This is an application for the review of a decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) dated 10 August 2018 (T2, 5-10). The AAT1 affirmed a decision of the Department of Human Services (Centrelink) that for the period 15 November 2013 to 9 November 2015, the Applicant was subject to a compensation preclusion period.
Consequently the AAT1 determined the Applicant was subject to a Disability Support Pension compensation charge.
INTRODUCTION
On 15 November 2013 the Applicant was involved in a motor vehicle accident (T20, 76).
The Applicant was previously granted a Disability Support Pension (DSP) on 6 August 2001 (T32, 162).
The Tribunal notes a ‘consent to judgement’ document dated 30 November 2016 signed by the Applicant and his solicitors states that the consent to judgement was for “the sum of $175,000 and costs fixed at $25,248.60” (T18, 70-71).
The Tribunal notes that the Department of Human Services states that they were not advised about the Applicant’s compensation claim until 9 January 2017 (T20, 77).
On 18 January 2017, Centrelink sent a notice pursuant to s 1178 of the Social Security Act 1991 (Cth) (the Act) to both the Applicant and his solicitor in the following terms (T23, 84):
We have been advised that your client is entitled to a lump sum compensation payment of $200,248.60, and have calculated that Mr Robert J Holland has a preclusion period starting on 15 November 2013 and ending on 12 November 2015. During this period, your client is not able to receive income support from Centrelink and must therefore repay $43,359.98 in Centrelink payments.
A recovery notice in similar terms was sent to the Applicant on 18 January 2017 (T24, 86).
The Department determined that pursuant to s 17(3) of the Act 50% of the gross total payment paid to the Applicant of $200,248.60 formed the compensation part of a lump sum. The Tribunal notes that the assessed amount of $100,124.30 resulted in the calculation of a 104 week preclusion period from 15 November 2013, ending 12 November 2015, through the operation of s 1170 of the Act (T29, 97).
This decision of the department was, at the request of the Applicant referred to an Authorised Review Officer (ARO) for review. The Applicant was informed in writing on 5 June 2018 that the decision had been referred to an ARO (T28, 94).
On 13 June 2018 the ARO affirmed the Department’s decision and found the following (T29, 96-97):
·You were granted Disability Support pension from 6 August 2001.
·You suffered an injury on 15 November 2013.
·On 18 January 2017 the department was informed that on 30 November 2016 you obtained a lump sum compensation payment for the sum of $200,248.60.
·The lost earnings or lost capacity to earn component of your settlement was assessed as $100,124.30.
·The department has calculated you are the subject to a preclusion period (and a Social Security payment is therefore not payable to you) from 15 November 2013 to 12 November 2015.
·On 18 January 2017 the department raised and sent you a notice of a Disability Support Pension compensation charge of $43,359.98 for the period 15 November 2013 to 9 November 2015 (debt number S83059xx).
On 19 June 2018 the Applicant applied to the AAT1 for a review of the ARO decision (T2, 6).
On 10 August 2018, the AAT1 affirmed the decision of the ARO and made the following findings (T2, 8-10):
15.The tribunal finds that the compensation preclusion period commenced on 15 November 2013 and ended on 9 November 2015 and disability support pension was not payable to Mr Holland during that period.
…
20.The tribunal decided that Mr Holland has a debt to the Commonwealth in the amount of $43,359.98.
…
37.The tribunal considered Mr Holland’s circumstances in their entirety. Having regard to the spirit and purpose of the legislation, the tribunal is not satisfied that Mr Holland’s circumstances are sufficiently unusual or uncommon to justify the exercise of the discretion contemplated by section 1184K of the Act.
38.Accordingly, the tribunal declines to exercise the discretionary power, conferred by subsection 1184K(1) of the Act, to treat the whole, or any part, of the compensation payment made to Mr Holland as not having been made.
On 6 September 2018 the Applicant applied to the General Division of the Administrative Appeals Tribunal for review of the AAT1 decision dated 10 August 2018.
ISSUES FOR DETERMINATION
The issues in this matter are:
·Whether a compensation preclusion period applies; if so,
·Whether a DSP compensation charge should be attributed to the Applicant; and
·Whether it is appropriate, in the circumstances of the case, that part or all of the compensation payment should be treated as not having been made (in order to reduce the length of the compensation preclusion period).
RELEVANT LEGISLATION AND PRINCIPLES
The Tribunal notes relevant legislation in the Social Security Act 1991 (Cth).
The Tribunal also notes policy contained in the “Guide to Social Policy Law – Social Security Guide” (the Guide). Whilst not bound to do so, the Tribunal will apply policy in the absence of cogent reasons not to do so (Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, 645).
The principles underpinning the relevant provisions and the objectives of the Act more generally have recently been put by Senior Member Sosso in Massoud v Secretary, Department of Social Services (Social Services Second Review) [2017] AATA 1366 (Massoud) as follows:
12.The Act contains provisions dealing both where a person, the recipient of social security payments, receives a lump sum compensation payment and where a person who has received a compensation payment subsequently applies for social security.
13.The Act is focused either on recovery of social security paid, or preventing the payment of social security during the preclusion period. The principle underpinning these provisions is that “double dipping” should not be allowed, and that a person should not simultaneously obtain the benefit of a compensation payment and also receive the benefit of a social security pension or allowance.
14.The Commonwealth Parliament enacted legislation with the specific objective of ensuring that if a person receives a compensation payment for economic loss, the recipient should draw on those funds for a reasonable period before again benefitting from social security payments.
15.This overriding objective was explained by Deputy President Burns in Secretary, Department of Social Security and Winterbotham [1990] AATA 808 as follows:
“This particular piece of legislation…was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse…Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the taxpayer.”
Part 4.13.4.10 of the Guide relevantly states:
Intent of Compensation recovery provisions
The compensation recovery provisions of social security law are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.
Note: The special circumstances provisions should not be used to override this basic legislative intention.
Whether a compensation preclusion period applies?
Compensation is defined in s 17(2) of the Act to mean:
(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;
that is made wholly or partly in respect of loss earnings or lost capacity to earn resulting from personal injury.
Subsection 1169(1) of the Act 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.
Pursuant to s 17(1)(a) of the Act, “compensation affected payment” includes a DSP payment.
Whether the DSP compensation charge should be attributed to the Applicant?
Section 1170(3)(a) provides that, as the Applicant has not been in receipt of periodic compensation payments, the lump sum preclusion period begins “on the day on which the loss of earning or loss of capacity to earn began” and ends at the end of the number of weeks as calculated using s 1170(4) and s 1170(5) of the Act.
The length of the compensation preclusion period is calculated according to s 1170(4) of the Act:
(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
Income cut-out amount
The compensation preclusion period is calculated using the “compensation part of the lump sum.” This amount is determined according to s 17(3)(a), which provides:
Compensation part of a lump sum
(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;
The income cut-out amount is defined in s 17(1) of the Act as “…the amount worked out using the formula in subsection (8) of the Act, as in force at the time when the compensation was received.”
Section 1178 of the Act provides:
Repayment of amount where both lump sum and payments of compensation affected payment have been received
(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.
(2)The amount to be specified in the notice is the recoverable amount under section 1179.
Section 1179 of the Act provides:
1179 The section 1178 recoverable amount
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.
Section 1184 of the Act provides that the Secretary may send a recovery notice to a compensation payer or insurer.
Section 1184G of the Act states that:
If the Secretary gives a person a notice under section 1184 that the Secretary proposes to recover a specified amount from the person, the specified amount is a debt due by the person to the Commonwealth
Whether it is appropriate that part or all of the compensation payment be treated as not having been made?
Subsection 1184K(1) of the Act provides:
Secretary may disregard some payments
(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.
The Tribunal notes Senior Member Sosso’s commentary in Massoud:
30“Special circumstances” is not defined in the Act, but it has generally been accepted that “special circumstances” are “unusual, uncommon or exceptional” or “markedly different from the usual run of cases” per Toohey J, Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3. The discretionary nature of the “special circumstances” provision requires a consideration of the particular facts and merits of each case. Certainly, in undertaking this exercise the Tribunal is required to consider the scope and purpose of the compensation preclusion provisions so as to avoid making determinations that would frustrate the legislative intent — Re Ivovic (1981) 2 ALN 95.
31However, Branson J cautioned against overstating the test by emphasising “exceptional” —Ryde v Secretary, Department of Family and Community Services [2005] FCA 866. Her Honour said (at [26]):
the statutory requirement for ‘special circumstances’ discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness…must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.
32This approach was also endorsed more recently by Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; 100 ALD 9 at [33]:
…the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case.
33Although these cases concern different provisions in the Act their approach to what constitutes special circumstances applies with equal force to those words in s 1184K—Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 at 580–581 per O’Loughlin J.
34Finally, reference can be made to the decision of French J (as he then was) in Secretary, Department of Employment and Workplace Relations v Homewood [2006] FCA 779; 91 ALD 103. His Honour outlined how the Tribunal should address the question whether special circumstances in the context of s 1184K exist (at [34]):
“The decision before the Tribunal in this case arose under s 1184K of the Act. It was necessary to the exercise of the power conferred by that section that the Tribunal identified ‘special circumstances of the case’ in which it thought it ‘appropriate’ to treat the whole or part of the relevant compensation payment as not having been made. In giving its reasons for a decision under that section to treat the whole or part of a compensation payment as not being made it would be expected, consistently with s 43, that the Tribunal would:
1 Identify the circumstances of the case which it found to be ‘special’ and the reasons for which it arrived at that finding.
2 Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.
3 Explain why it selected the particular quantum (i.e. the whole or part) of the compensation payment as not having been made.”
The Tribunal notes instruction provided at 4.13.4.20 of the Guide. This states that the Applicant’s health may be considered in determining whether s 1184K of the Act ought to be exercised in the Applicant’s situation. Some general principles for delegates to follow include:
·State of ill health should be more severe than the majority of disability support pension recipients.
·Injury that a person received compensation for cannot generally be regarded as a special circumstance.
·Current medical reports should be provided of the conditions that the individual/family member has and the impact of these conditions should be outlined.
The Tribunal further considers that the Applicant’s financial circumstances should be unusual when considering whether there are “special circumstances” within the meaning of the Act to warrant a decision by the Respondent to waive recovery of monies. (Colaiacolo and Secretary, Department of Social Security [1985] AATA 91).
EVIDENCE
The matter was heard in Perth on 25 February 2019. The Applicant appeared in person. The Secretary was represented by Ms Jones-Bolla of Sparke Helmore.
The Tribunal received the following evidence:
·Exhibit A1 – Submissions filed under email dated 21 October 2018.
·Exhibit A2 – Applicant’s hearing certificate.
·Exhibit A3 – Email dated 20 February 2019.
·Exhibit R1 – T Documents (T1-T32, 1-167)
·Exhibit R2 – Statement of Facts Issues and Contentions (SOFIC) dated 30 January 2019.
·Exhibit R3 – Respondent’s Hearing Certificate.
The Tribunal has reviewed all of the material before it. The Tribunal is satisfied that all relevant evidence was before it and that both parties were provided an opportunity to address the evidence, either orally or in writing. Relevant aspects of the evidence and material before the Tribunal will be analysed and referred to below.
The Secretary has made the following contentions (R2):
Is the Applicant subject to a compensation preclusion period and if so, for how long?
21.The Guide at 4.13.4.10 provides that 'compensation recovery provisions are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.' The Secretary contends that the provisions are designed to ensure that compensation recipients are receiving income support from those with the primary responsibility to provide that support, such as insurers or statutory compensation schemes.
22.The Secretary contends that it is a fundamental principle of the social security system that people who are unable to work due to a compensable injury are prevented from receiving income support from both the social security and compensation system for the same period. These rules are designed to ensure that people who find themselves in this situation receive income support from those with the primary responsibility to provide that support, for example insurers or statutory compensation schemes.
23.The Secretary notes the second reading speech for the Social Security Legislation Amendment Bill (No 1) 1995 it was noted, in part that:
The compensation recovery provisions of the Act protect the social security system from 'double dippers', that is, those who might receive social security payments, as well as compensation, for the same period.
24.The Secretary contends that the Applicant was appropriately subject to a compensation preclusion period having received payment of $200,248.60 which is a lump sum compensation payment as defined in subsection 17(2) of the Act.
25.By operation of subsection 1170(3) and 17(5A)(a) of the Act, the compensation preclusion period commences with effect from 15 November 2013 - the date of the event that gave rise to the Applicant's entitlement to compensation.
26.In accordance with section 17(3) of the Act, the compensation part of a lump sum compensation payment is 50% of $200,248.60, being $100,124.30. It is this compensation part that is then subjected to the formula in section 1170(4) of the Act to calculate the length of the preclusion period. The Secretary notes that the relevant income cut out amount as at the date of settlement being 30 November 2016 was $959.10 (T32, p 159). Having regard to the formula as set out in subsection 1170(4) of the Act, the following applies:
$100,124.30
959.10
27.Accordingly the Secretary contends that the Applicant is subject to a preclusion period of 104 weeks. The Secretary contends that the correct compensation preclusion period is from 15 November 2013 to 12 November 2015 as previously found by the AAT1 and the ARO.
Is the Applicant subject to a compensation charge and if so, for what amount?
28.Section 1178 of the Act states:
(1)lf-
(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.
(2)The amount to be specified in the notice is the recoverable amount under section 1179.
29.Section 1179 provides that the recoverable amount is the lesser of the compensation part of the lump sum compensation payment or 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.
30.During the compensation preclusion period of 15 November 2013 to 12 November 2015 the Applicant received DSP totalling $43,359.98. Therefore, the recoverable amount under section 1179 of the Act is $43,359.98
31.Section 1184F of the Act provides that:
If the Secretary gives a person a notice under section 1178 or 1180 determining that the person is liable to pay to the Commonwealth the amount specified in the notice, the amount so specified is a debt due by the person to the Commonwealth.
32.The Department sent the requisite notice pursuant to section 1178 of the Act on 18 January 2017 (T24). Therefore the Applicant has a debt of $43,359.98.
Are there any special circumstances which would justify treating part or all of the Applicant's compensation payments as not having been received?
33.Where there are 'special circumstances' in a particular case, section 1184K of the Act allows the Secretary to treat part or all of the compensation monies as having not been made, thereby reducing the length of the preclusion period.
34.Section 1184K of the Act is designed to enable a decision maker to exercise discretion to disregard the whole or part of a compensation payment in special circumstances; where the strict application of the Act would otherwise lead to an unfair or inappropriate result.
35.The Guide at 4.13.4.10 notes that 'the special circumstances provisions should not be used to override this basic legislative intention of the compensation recovery provisions'.
36.In Re Secretary, Department of Social Security and Winterbotham [1990] AATA 808, the Tribunal found:
This particular piece of legislation... was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse... Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the tax-payer.
37.The Secretary contends that persons who receive lump sum compensation payments are expected to support themselves from their own resources for a reasonable period before seeking support from the public purse.
38.The term 'special circumstances' as found in section 1184K are not defined in the Act or in related legislation. However, the term has been extensively considered in case law and the most frequently cited cases are:
(a)Beadle and Director-Genera/ of Social Security (1984) 6 ALO 1 where the AAT stated:
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.
(b)Groth and Secretary Department of Social Security (1995) FCA 1708 where the Federal Court stated:
The phrase "special circumstances''. it has been said, although imprecise is sufficiently understood not to require judicial gloss...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 enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary...
(c)Angelakos and Secretary Department of Employment and Workplace Relations [2007] FCA 25 where the Federal Court stated:
There is less overstatement if the words “unusual" or “uncomrnon" are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case...
39.The Guide, at 4.13.4.10, states that each case must be examined on its own merits but as a general rule, special circumstances would not usually be applied where:
(a)the person has sufficient liquid assets to support themselves, and their family if applicable, for the duration of the preclusion period, or
(b)the person acquired realisable assets AFTER the person was advised of the preclusion period, and there is no impediment to the realisation of those assets, or
(c)the person's periodic compensation payments are reduced due to the effects of taxation laws, and this is the only grounds for consideration, or
(d)where the only special circumstance is the legal deduction from both a social security payment and a DVA payment, or
(e)where the only special circumstance is the perceived unfairness of the 50% rule, or
(f)if the sole factor is that the person or their partner's reason for receiving a CAP was different to the reason the compensation was paid.
40.The Guide at 4.13.4.20 states that 'the discretionary nature of the special circumstances provisions makes it impossible to give a precise list of factors that should be taken into account when considering whether the provisions should be applied.'
41.The Secretary submits that there are no circumstances in the present matter that would justify the exercise of the discretion to disregard the whole or part of the compensation payment.
42.In the application for review of decision and in his submissions to the AAT1, it appears the Applicant suggests that the decision to recover the compensation charge amount is wrong and should be shortened because, in summary:
(a)it is his lawyers and the Department's fault that he has a debt;
(b)he is a disability support pensioner who is not in good health; and
(c)he used the compensation payment to purchase a house.
43.The Secretary notes that the Guide at 4.13.4.20 is relevant in determining what type of evidence required when assessing a person's request for special circumstances consideration. It provides:
If a compensation recipient requests a section 1184K review, all claims must be substantiated by evidence. Appropriate documentation and/or details of professional advice must be obtained by the delegate from a person qualified to comment, such as a health professional, financial adviser, etc. It would be expected that documentation including bank account statements, invoices, receipts particularly for large purchases (cars, furniture) be produced by the person to substantiate expenditure.
44.The Secretary contends that there is no documentary evidence with respect to any of the Applicant's contentions regarding his claimed special circumstances.
Other parties at fault
45.It is the Applicant's submission that debt has arisen due to the conduct of his lawyers and their/the Department's failure to inform him about a preclusion period and/or deduct the compensation charge before providing him with a final settlement amount.
46.It is not clear what advice the Applicant did or did not receive from his lawyers. Nevertheless, the failure of a solicitor to advise a person about the existence of a preclusion period is not considered persuasive or determinative (Bolton and Secretary, Department of Social Security [1989] AATA 479).
47.In Mosarevski and Secretary, Department of Social Security [1996] AATA 510 the Tribunal commented (at paragraph 31) 'I am not satisfied that the Australian community should undertake the financial responsibility of supporting the applicants when they might properly recover damages from their solicitor as a result of the negligent legal advice thereby reinstating some financial security'.
48.In Re Secretary, Department of Social Security and Vxy [1993] AATA 70, the Tribunal noted earlier decisions of the Tribunal that incorrect advice from a solicitor should not be treated as special circumstances because the person has a claim in negligence against his or her solicitor.
49.In Ahmic and Secretary Department of Employment and Workplace Relations [2007] AATA 74 the Tribunal decided that customers ought to avail themselves of any legal action against their solicitor for negligence before turning to the tax-payer for relief.
50.In Secretary, Department of Social Security and Stafford Ross Griffin [1997] AATA 403, in relation to "special circumstances" waiver of social security debts, the Tribunal noted that incorrect financial advice leading to loss is the same as incorrect legal advice but, citing Danilo Guerrero and Secretary, Department of Social Security [1994] AATA 170, it held that incorrect advice "cannot be a special circumstance, nor contribute towards a special circumstance".
51.As set out by the AAT1 at paragraphs 28-31 of its decision (T2), the Applicant was advised on a number of occasions prior to receiving compensation that he must notify the Department within seven days of receiving a compensation payment (see T5-T17).
52.Where the Department is aware of a compensation claim, recovery of the charge is usually requested from the insurer before settlement. However, the Department was not made aware of the compensation claim or settlement until 9 January 2017. The Department immediately wrote to the insurer and raised a charge against the Applicant.
53.In short, there is no fault by the Department, as it was not notified of the compensation payment until 9 January 2017 and immediately took steps to recover the charge. That the Applicant appears to have spent the entirety of his compensation payment within weeks of receiving it and before advising the Department in accordance with his notification obligations cannot be considered a special circumstance.
Financial Hardship
54.The Secretary contends that for financial hardship to qualify as a special circumstance the Applicant's circumstances need to be severe and worse than the majority of social security recipients.
55.In considering the exercise of the discretion, it is clear that financial hardship must go beyond straitened circumstances and be truly exceptional. The Guide at 4.13.4.20 states that 'it needs to be shown that there are truly compelling reasons why a person should not realise their assets'.
56.In Re Hajar and Secretary, Department of Social Security (1988) 16 ALO 716 it was held that:
On the question of hardship, I find it impossible to ignore the existence of the house, which is valued at approximately $175,000 and which is free of encumbrances... It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it...
57.In Re Austin and Secretary, Department of Social Services [2014] AATA 516 the Tribunal referred to the decision in Re Hajar finding that it was particularly inequitable for a person to claim financial hardship when his or her house is unencumbered by a mortgage. The Tribunal further found:
The applicant's house, in effect, represents his compensation in a different form. In that, he is in a better financial position than many other recipients of social security payments. He has health concerns relating to his back and diabetes mellitus. The realisation of his assets will enable him to continue with his medication regimen for his back and diabetic condition.
58.Senior Member Sosso in Gartside and Secretary, Department of Social Services [2017] AATA 45 at [57]:
I do not understand the many Federal Court and Tribunal decisions on "special circumstances" to require the Tribunal to find that special circumstances exist simply because the Applicant is in straitened financial circumstances. My understanding of the law is that it is open for the Tribunal to find special circumstances in such a circumstance, but a Tribunal Member is not obliged to do so. In exercising the discretion vested in the Tribunal, a Member is required to consider all of the matters the evidence admitted produces and straitened financial circumstances is one factor, albeit a very important one, but not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:
"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. Very often their stories will be quite tragic."
Other factors which may outweigh straitened financial circumstances include consideration of the general administration of the social security system (Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114) and whether an Applicant's disposition of their compensation payment has been reckless - e.g. Davis and Secretary, Department of Family and Community Services [1999] AATA 84.
59.Given the Applicant has significant financial assets at his disposal and continues to receive DSP, without any substantial debt; the Secretary contends that the Applicant is not currently in financial hardship.
Ill health
60.The Guide at 4.13.4.20 states that the state of a person's 'ill health' should be more severe than the majority of DSP recipients. It states that the injury for which the person received compensation cannot generally be regarded as a special circumstance.
61.The Secretary contends that if the Applicant suffers from ongoing health issues this is not unusual or out of the ordinary for someone who has received compensation as a result of a compensable injury and is presently in receipt of DSP.
62.The Secretary contends that there is no evidence that the Applicant's ill health is unusual or out of the ordinary, nor is there any evidence in relation to what medical expenses have been required, and this is a factor weighing against the exercise of the discretion under section 1184K of the Act.
(Original emphasis.)
The Applicant submitted the following (A1):
Firstly about my complaint to centrelink and its internal review system.
Its stated that my complaint is to challenge the ledgeslation [sic] of centrelink, regarding that a pre-clutionary [sic] period.
(NOT TRUE)
The centrelink reviewer did not pay me the common curtisy [sic] to contact me and speak with me about my complaint, instead opting to advise other parties that an attempt was made dispite [sic] having active message bank and and the centrelink & mygov App installed on my phone, centrelink debt recovery has no such problem contacting me regularly.
This left the reviewer free to report what she thought was the problem, with the knowledge of hindsight and the workings of the AAT to receive a favourable result for her cause and not of the complainant.
The lawyers whom I placed all my faith in to have everything done in a correct manner, was not done. I was instructed by the lawyers the process was that all moneys would be turned over to them.
They would be the ones to distribute and dispurse [sic] of all the requirements of the claim they would give the following organisations an invitation of making a claim. TAXATION/MEDICARE/CENTRELINK /LEGAL. Following this the remaining money would be transferred to my bank account.
No paper work was supplied to me from the lawyer's or by the insurance commission itself.
I was in no position to know who was paid, how much they were paid, and for what they were paid for, it only came to my attention through this process a sum of money went missing, centrelinks information received from the insurer and figures supplied did not match up, with the claims made against the payout figure and what was transfered [sic] into my account.
BANK STATEMENT SUPPLIED.
l was given no information nor had any control over any of the precedings. [sic] (My faith in others turned unfaithful to them.
After working through the the [sic] facts and what had occurred with the debt team at centrelink, it become very nasty and I was placed as public enemy NO 1 and branded as a theif [sic] and persecuted, the personalitys [sic] and egos of these officers are outrageous considering they are public servants.
There [sic] demands were that I pay a lump sum of $5,000 immediately and $80 per fortnight from my disability pension.
I followed there [sic] demands, for a period of six months, unable to support myself my capacity to pay was gone.
I applied to repay a lower amount of $30 per fortnight, this was quickly refused they opting for the unsustainable higher amount. I then mounted a review of there [sic] decision, and ended up in the AAT.
Item 28 in the T documents explains how compensation payments are usually conducted this was not done in my case, putting my situation in the unusual category, I am asking if this could be considered under section 1184k.
The horrific traffic accedent [sic] was not my fault, unfortunately I have been on a disability pension for 18 years apart from the older home I live in the country is my only asset.
Kind regards
Robert Holland.
HEARING
The Respondent’s opening remarks centred on the content of the Secretary’s Statement of Facts, Issues and Contentions (R2).
The Applicant opened by stating that his current predicament resulted from a motor vehicle accident. He feels through the entire process that he is a victim of the system and is confused in his dealings with departments, lawyers and debt collectors.
Under cross-examination he stated:
·His Disability Support Pension commenced in 2001.
·His motor vehicle accident occurred on 15 November 2013.
·Proceedings relating to the accident commenced on 7 October 2015.
·A consent judgement was finalised on 30 November 2016.
·He agreed with (T20, 75-76) that he received compensation of $167,634.00 as outlined in a MOD C document signed and dated by him on 9 January 2017.
·He agreed that he had received documents (T5, 40), (T7, 44), (T8, 47),(T10, 52) (T12, 57), (T17, 68), all outlining the following – “Compensation: Tell us within seven days if you and/or your partner will receive, have received or are likely to receive compensation”
·He did say however that he was reliant on others to address administrative matters.
·He agreed he purchased a home sometime in January 2017.
·He stated he spent $35,000 on renovations to the property he purchased.
·He receives $877.00 per fortnight in DSP payments and $20 is garnished from that to repay his debt to the Commonwealth.
·He claimed he did not recall receiving the letter dated 18 January 2017 (T24, 86-87) and also claimed he did not contact Centrelink for the purpose of discussing his compensation (T31, 142,145-146 and 148).
·He claimed he had no control during this time over his life and relied on others to look after such matters.
CONSIDERATION
Whether a compensation preclusion period applies
The Tribunal notes that the Applicant received a compensation payment as defined by
s 17(2) of the Act, being $175,000 plus costs of $25,248.60, (lump sum compensation payment) (T18, 70).
The Tribunal accepts that pursuant to s 17(1) of the Act, the Applicant received a lump sum compensation payment. Further, pursuant to s 17(1)(a) of the Act, the DSP payments being received by the Applicant at the time of the lump sum compensation payment were a compensation affected payment.
The Tribunal accepts, pursuant to s 1169(1) of the Act any compensation affected payment is not payable to the person in relation to any day or days during the compensation preclusion period.
The Tribunal finds a compensation preclusion period does apply.
Whether the compensation charge of $43,359.98 should be attributed to the Applicant?
Pursuant to s 1170(3) of the Act, as the Applicant did not receive periodic compensation payments, the lump sum preclusion period begins on the day on which the loss of earnings or loss of capacity to earn began. That is, the Tribunal agrees that the compensation preclusion period began on 15 November 2013.
The Applicant’s lump sum compensation payment equated to a total of $200,248.60. Pursuant to s 17(3)(a) of the Act, the Tribunal therefore considers that the compensation part of the Applicant’s lump sum payment was $100,124.30 ($200,248.60x0.50).
The Tribunal notes that the length of the preclusion period is calculated according to s 1170(4) of the Act:
(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
Income cut-out amount
The Tribunal is satisfied that the Department followed the legislative requirements in assessing the Applicant’s compensation charge. The Tribunal is satisfied that the ‘compensation part of lump sum’ pursuant to s 17(3) of the Act equated to $100,124.30 and that the ‘income cut out amount’ following the date of settlement equated to 959.10 (T32, 159). The Tribunal accepts the Respondent’s submission that the relevant preclusion period in relation to the Applicant was 104 weeks.
The Tribunal notes the department sent the Applicant a notice of recovery on 18 January 2017, for the amount of compensation affected payment the Applicant received during the compensation preclusion period, which amounted to $43,359.98 (T24, 86-87).
Whether it is appropriate that part or all of the compensation payment be treated as not having been made
The Tribunal will now turn its mind to determine whether evidence before it demonstrates “special circumstances” which might warrant the compensation payment being treated as not having been made pursuant to s 1184K of the Act.
There have been several Federal Court and Tribunal determinations which have examined the various factors which may be taken into account when exercising discretion in relation to special circumstances. Any attempt made to enumerate such factors can only be indicative, and any attempt to limit the exercise of this discretion would be legally impermissible.
Consideration of health issues
The Tribunal considers that for the purposes of s 1184K of the Act, ill health may be seen as a factor that can constitute a ‘special circumstance,’ and can be an important consideration.
The Tribunal notes the Applicant told the AAT1 that (T2, 10):
35.… he is the victim of a motor vehicle accident that wasn’t his fault and all the rules have gone against him. He received severe injuries in the accident and he has a lot of illnesses. He has been on disability support pension for 18 years and he cannot take advantage of working credits and extra allowable income.
Part 4.13.4.20 of the Guide relevantly states that the Applicant’s state of ill health should be more severe than the majority of DSP recipients to determine special circumstance, and that the injury that a person received compensation for could not generally be regarded as a special circumstance. The Tribunal also notes that current medical evidence should be provided in support detailing the relevant conditions and their impact.
The Tribunal notes commentary in Massoud (at [70]):
The Applicant is in bad health, but in most cases involving the preclusion period that would be expected. The fact that an applicant has been injured and received a compensation payout usually results in that person being in ill health during the preclusion period or immediately thereafter. The various Tribunal determinations focus on the consequences of that ill health in making a determination as to special circumstances. In short ill health is the starting point of the exercise, not the determining factor. Further, it is usually the case when determining that ill health is a special circumstance, the ill health being experienced by an applicant is more severe than the majority of DSP recipients.
There is no evidence before the Tribunal demonstrating the nature of the injuries the Applicant sustained as a result of the accident. There is no evidence to indicate any additional medical conditions suffered by the Applicant. Nor is there evidence of any medical conditions he has that require him to be on DSP other than what he has told the Tribunal. The Tribunal finds these conditions cannot be categorised as ‘special circumstances’ greater in severity than many other recipients of the payment.
Consideration of Applicant’s financial circumstances
The Applicant told the AAT1 (T2, 10):
32.Mr Holland said at the time of receiving the lump sum compensation payment he was living in government housing. He used the payment to buy an old house in the country thereby saving the taxpayer from funding his subsidised housing. The purchase price of the house was $125,000 and he has spent $35,000 on fixing it. He has $3,000 in a bank account and his only source of income is his disability support pension.
33.Mr Holland told the tribunal the Department’s debt recovery team have behaved in a threatening and intimidatory manner towards him despite his efforts to work with them. He has paid a lump sum of $5,000 and $80 per fortnight by withholdings from his disability support pension towards recovery of the debt. He won’t outlive the debt and the outstanding amount is accruing interest.
34.Mr Holland said he has asked for the amount of the withholdings to be reduced however his request was refused.
The Tribunal finds the evidence of the Applicant to be unconvincing.
The Tribunal finds at the time of purchasing and renovating his property the Applicant knew he had a Commonwealth debt, yet decided rather than meeting those commitments to spend his compensation for the purposes of accommodation.
The Tribunal agrees with the Secretary’s contention that the purchase of the property was a choice made by the Applicant.
The Tribunal is of the view that the Applicant could have continued receiving rental assistance and using the $200,248.60 that he received as lump sum compensation to pay his Commonwealth debt. This could have resulted in his providing less money towards the purchase of the property. The Tribunal considers that these were the choices he had available to him.
There is no evidence before the Tribunal to demonstrate the Applicant’s circumstances are such they are out of the ordinary for most people in the community on social security payments. They cannot be interpreted as being unusual in terms of the established case law regarding special circumstances. After all, out of the fortnightly DSP payments of $877.00 his debt to the Commonwealth is being paid off through $20 deductions.
The Tribunal finds that alternative funding arrangements for the purchase of the property could have been arranged in circumstances that would have allowed the Applicant to pay his debt and purchase the property. Having purchased the property, the Tribunal considers, as noted by Senior Member McMahon in Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 that it “is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it, particularly, when the lack of encumbrances has been brought about by the diversion of some of the compensation moneys.”
Consideration of other circumstances
The Applicant told the AAT1:
25.Mr Holland told the tribunal that the decision to recover the compensation charge amount is wrong because he was kept in the dark by his lawyers. They told him his circumstances were similar to the probate process and said his compensation payment would be presented to the Australian Taxation Office, Medicare and Centrelink and that each of these government departments would make a decision about whether he owed them any money before he received his compensation payment.
26.Mr Holland said his lawyers were not very honest and appeared to be corrupt however he did not provide any further evidence to support these claims.
27.Mr Holland said Medicare controlled everything in relation to his claim for compensation.
The Applicant told the Tribunal he relied on others to correctly manage his affairs and felt let down.
The Tribunal notes on 9 January 2017 the Applicant advised Centrelink that he was in receipt of a compensation lump sum payment on 12 December 2016 (T20, 76-77).
The advice provided regarding the lump sum payment (T22, 82-83) on 17 January 2017 indicates the settlement date to be 30 November 2016 and that the lump sum payment included both future and past economic loss of $125,000.
The Tribunal can find no evidence before 9 January 2017 to indicate the Department received advice of a potential or actual compensation payment.
The Tribunal found (T5, 40), (T7, 44), (T8, 47),(T10, 52) (T12, 57), (T17, 68) advice from the department to the Applicant contained the following information:
You must tell us within 14 days (28 days if residing outside Australia) if any changes listed below happen or are likely to happen to you ……….. If you get a fortnightly Reporting and Income Statement, report your earnings or changes in circumstances on your reporting day.
……
Other income: Income from rent, boarders or lodgers, lump sum payments
…
Compensation: Tell us within seven days if you and/or your partner will receive, have received or are likely to receive compensation.
The AAT1 at (T2, 9) confirmed this lack of advice from the Applicant:
28.Where the Department is aware of a compensation claim, recovery of a compensation charge is usually requested from the insurer before the settlement funds are released to the claimant. If the Department is unaware of the compensation claim, or the funds are released to the claimant prior to the Department registering their interest, recovery is requested from the claimant.
29.There was no evidence that the Department was informed of Mr Holland’s compensation claim before 9 January 2017, when he lodged a Module C – Compensation and damages form stating his claim was settled on 12 December 2016 for $167,634.
30.The Department wrote to the insurer requesting details and on 18 January 2017 the insurer advised that Mr Holland’s compensation claim was settled on 30 November 2016 for a gross lump sum amount of $200,248.60.
31.The Department sent Mr Holland letters dated 16 July 2014, 17 July 2014, 13 January 2015, 23 February 2015 and 14 September 2016 which included information about his notification obligations. The letters said that he must tell the Department within seven days of receiving a compensation payment. Mr Holland did not notify the Department within seven days. Mr Holland told the tribunal he did not recall reading the letters and said they appeared to be standard letters.
Whilst the Tribunal notes the advice of the Applicant dated 21 October 2018 outlining a number of factors which contributed to him not personally reporting his lump sum payment earlier than he did, they do not in the view of the Tribunal constitute special circumstances. They are merely misgivings the Applicant has with the system, his lawyers and his own lack of awareness (A1).
The Tribunal finds responsibility for advising the Department lay with the Applicant and there are no factors which might persuade the Tribunal to find special circumstances.
CONCLUSION
The Tribunal does not find the Applicant’s condition is exceptional, unusual or uncommon.
There is no evidence before the Tribunal to show that the Applicant’s circumstances were significantly different to others receiving DSP.
The Tribunal, on the basis of having considered all the evidence and circumstances of this case, concludes that:
·A compensation preclusion period applied;
·The DSP paid during the compensation preclusion period was correctly recovered; and
·Section 1184K of the Act does not apply to the Applicant’s circumstances.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 78 (seventy-eight) paragraphs are a true copy of the reasons for the decision herein of Member C Edwardes
................[Sgd]...................................................
Associate
Dated: 6 March 2019
Date of hearing: 25 February 2019 Applicant: In person Counsel for the Respondent: Ms D Jones-Bolla Solicitors for the Respondent: Sparke Helmore
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