Jennifer Tease and Secretary, Department of Social Services
[2014] AATA 172
[2014] AATA 172
Division GENERAL ADMINISTRATIVE DIVISION File Number
2013/4625
Re
Jennifer Tease
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Mr R G Kenny, Senior Member
Date 28 March 2014 Place Brisbane The Tribunal affirms the decision under review.
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Mr R G Kenny, Senior Member
CATCHWORDS
SOCIAL SECURITY – Pensions, benefits and allowances – Settlement of compensation claim – Lump sum compensation payment includes component referable to lost earnings and capacity to earn – Imposition of preclusion period – Use of Guide to Social Security Law (the Guide) - Six year limitation period on debt recovery in Guide not relevant - Special circumstances not established for part of settlement to be treated as not having been received – Preclusion period not shortened – Decision under review affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1184K
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25
Director-General of Social Services v Hales (1983) 47 ALR 281
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
PGVK v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381
Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152
Re QX05/10 and Secretary, Department of Employment and Workplace Relations [2006] AATA 178
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Secretary, Department of Social Securityv Hulls (1991) 22 ALD 570
Secretary, Department of Social Security v Smith (1991) 23 ALD 277
SECONDARY MATERIALS
Guide to Social Security Law, Australian Government
REASONS FOR DECISION
Mr R G Kenny, Senior Member
28 March 2014
BACKGROUND
Jennifer Tease was injured in a motor vehicle accident on 7 September 2004.
In settlement of her compensation claim on 8 March 2013, she was awarded a lump sum payment of $310,000. On 2 April 2013, a Centrelink delegate determined that, as a result of that settlement, the applicant would be subject to a preclusion period from the date of her accident until 3 March 2008. The effect of the Centrelink decision was that the applicant was precluded from receiving forms of income support payments under
the Social Security Act 1991 (Cth) (“the Act”) during the preclusion period.
The decision to impose the preclusion period was affirmed by an authorised review
officer on 5 August 2013 and by the Social Security Appeals Tribunal (“SSAT”) on
4 September 2013.
ISSUES AND LEGISLATION
In calculating the preclusion period, Centrelink determined that part of Mrs Tease’s lump sum payment was related to future economic loss and, therefore, included the whole lump-sum of $310,000 in its calculation of the preclusion period. Mrs Tease submitted that it was not clear to her that the lump sum payment included a component for future economic loss. She also submitted that part of the amount paid to her legal representatives should have been deducted from the lump-sum. Further, Mrs Tease contended that she had not been fully informed by Centrelink of the likelihood of the preclusion period being imposed upon her. She was also concerned that there were special circumstances applying to her situation which require that some part of her settlement monies should be disregarded so that the preclusion period would be shortened.
Mrs Tease was in receipt of the disability support pension (“DSP”) at the time of her accident. Under s 17(1) of the Act, that is a compensation affected payment. Under s 1169 of the Act, a person cannot be paid a compensation affected payment during a preclusion period. Under s 1170(1) of the Act, the preclusion period commenced on the day that her earning capacity was lost and it is not in dispute that this was the date of her accident on 7 September 2004. It is also common ground that Mrs Tease received DSP during the preclusion period in the total amount of $46,380.45. This has been repaid to Centrelink.
The length of the preclusion period is dependent on the amount of the lump sum.
The terms on which the settlement was made are not clear from the agreement signed by Mrs Tease but a Centrelink document, Compensation Advice of Lump-Sum Payments,[1] noted that the settlement contained a component for economic loss. In evidence was a letter from the lawyers of the defendant in the compensation claim. This also confirmed that allowance was made in the settlement payment for future economic loss. I am satisfied that the settlement sum of $310,000 included a component for future economic loss. As will be dealt with below, I am also satisfied that it was appropriate to include the amounts attributable to the costs paid to Mrs Tease’s lawyers in the lump sum of $310,000. Centrelink determined that 50% of that amount comprises the compensation part of the lump sum compensation payment as calculated under s 17(3) of the Act.
[1] Exhibit 1, page 34.
The formula for calculating the length of the preclusion period is set out in s 1170(4) of the Act. Mrs Tease has not disputed the application of that formula and I am satisfied that it was properly applied in this matter. An issue for determination is whether any part of the compensation lump sum should be disregarded so that the application of the formula would result in a shorter preclusion period. The relevant provision of the Act reads:
Section 1184K 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.
After the hearing, Mrs Tease referred the Tribunal to part 6.7.3.08 of The Guide to Social Security Law (“the Guide”) which was published by the respondent to provide assistance to those who administer the Act. While not bound to apply policy guidelines of the kind referred to in the Guide, the Tribunal will usually apply them unless, unlike the situation here, there are cogent reasons in a particular case for not doing so.[2] The Guide at 6.7.3.08 reads:
[2] See Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-645.
6.7.3.08 Statutory Limitation Period
Summary
A debt may be written off for an indefinite period. However, if no action has been taken after 6 years since the start of the debt, the debt will often be deemed irrecoverable at law. At any time, the write off can be reversed and recovery proceedings begun where circumstances change. Unlike a waiver, write off does not extinguish a debt.
Act reference: SSAct section 1236 Secretary may write off debt, section 1231 Deductions from debtor's pension, benefit or allowance
Six year limitation period
As a general rule, the recovery powers in social security law (withholding, garnishee and legal proceedings) can only be used if there has been recovery action on a debt within
6 years of the start of the debt.The 6 year period starts on the first day an officer becomes aware of the circumstances that gave rise to a debt, or could reasonably have been expected to have done so.
The period can be extended if there has been some activity on the debt during that
6 year period. Every time that any activity (such as recovery action) takes place within the initial 6 year period, a new 6 year period begins. In effect, this means that since any action extends the 6 year period, recovery can be extended indefinitely. Nevertheless, Centrelink is expected to recover the debt within the shortest possible time-frame.The 6 year limitation period is renewed whenever:
·a repayment is made (this includes a withholding), or
·the person acknowledges that they owe the debt, or
·legal action or garnishee action is taken, or
·a file review relating to action for the recovery of the debt occurs, or
·other internal departmental activity relating to action for the recovery of the debt occurs.
If departmental activity (including file review) were begun within the initial
6 year period, the limitation period would be extended a further 6 years. Each resulting recovery action or debt repayment would begin another 6 year period, as above. However, if departmental activity were the only action taken, or this did not result in any debt recovery, the extended 6 year period would be seen as lapsed, and the debt irrecoverable at law.
Once the statutory 6 year period has expired, compulsory recovery cannot be pursued. However, Centrelink can still accept voluntary repayments of the debt. Voluntary repayments do not change the status of the debt.
Although a debt may be irrecoverable at law due to the expiration of the 6 year period, the debt still exists and recovery may be waived where appropriate.
Example: If a debt arises solely due to Commonwealth error (and all the other legislative tests in the SSAct section 1237A are met), the SSAct requires that recovery of the debt must be waived. This applies even where the debt may be written off under section 1236 because the 6 year period has expired.
Act reference: SSAct section 1231 Deductions from debtor's pension, benefit or allowance, section 1232 Legal proceedings, section 1233 Garnishee notice
Consideration will also be given to the application of that component of the Guide.
EVIDENCE
Although the settlement amount was $310,000, Mrs Tease received only $135,231.53. This was because of deductions for her disability support pension ($46,380.45),
Medicare ($31,000), legal fees ($93,694.80) and other deductions. Subsequently, Medicare refunded an amount of $30,234 to Mrs Tease.
Mrs Tease submitted that it was unfair for all of the legal fees to be included by Centrelink in the calculation of the preclusion period. This was because it took more than nine years for the settlement to be reached and most of this was due to delays by the insurer in obtaining additional medical reports about her condition. She submitted that the legal fees would have been significantly less if that had not occurred and that this was a special circumstance which should be taken into account when assessing the preclusion period.
Mrs Tease has spent almost all of her settlement monies and she completed a statement of her financial circumstances in which she listed items of expenditure. She moved, at a cost of about $2,600, from Sydney to Brisbane with her two children in order to find affordable housing. She paid a deposit of $112,500 on a house and meets the mortgage payments of $300 per week. Mrs Tease explained that this is some $40 more than she is obliged to pay but the additional amount is available to her in times of need. She had solar panels fitted to her house for $5,000 and had a pool and a therapeutic spa installed which, with appropriate fencing, cost $16,000. She purchased a car for $16,000 and household goods such as a washing machine and a bedroom suite and repaid personal debts of about $5,000.
Mrs Tease believes that she has been prudent with her settlement monies in that her expenses were for items which she and her children need. The pool and spa, though expensive, are used by her to assist with the continuing problems she has with her shoulder and arm which is a legacy of her accident. She said that, financially, she lives from week to week, but is able to manage. She estimated her fortnightly expenses as being a few dollars less than the fortnightly income support payments she receives from Centrelink. Mrs Tease was in receipt of the disability support pension prior to her accident because of a psychiatric condition and she continues to suffer the symptoms from that condition. Mrs Tease’s son is 10 years old and has recently displayed symptoms of cardiomyopathy. Her daughter is 13 years old and has psychological symptoms for which she has received therapy and counselling.
CONSIDERATION
The purpose of the provisions relating to preclusion periods has been described as operating as a:
…fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.[3]
[3] Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281-282.
Similarly, they have been described as a safeguard against “double dipping” in that:
People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source.[4]
[4] Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 148.
Those considerations must be kept in mind when determining, for the purposes of applying s 1184K(1) of the Act, whether or not special circumstances exist in a given case. The issue of special circumstances arises in various parts of the Act. In the context of other aspects of the Act, it was observed that what is required is:
… something to distinguish ... [the] … case from others, to take it out of the usual or ordinary 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.[5]
[5] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545.
That observation is equally applicable to s 1184K(1) of the Act. Accordingly, there must be something about the applicant’s situation which makes it unfair, unusual or uncommon such that it distinguishes it from the ordinary or usual case.[6] I am satisfied that the applicant’s circumstances do not meet that description.
[6] Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9 at 18; [2007] FCA 25 at [33].
The breadth of the discretion in s 1184K(1) of the Act is such as to accommodate health problems. The applicant experiences problems with her right shoulder and right arm which are a direct result of the accident in 2004 for which she was compensated.
She described a continuing psychiatric condition but there are no medical reports in evidence in respect of that condition or that of her daughter to assist in an assessment of the extent to which these impact upon them. Mrs Tease’s son underwent an echocardiogram on 14 February 2014 after he experienced an episode of precaudial pain. His potentially serious condition appears to be stable at the moment as the echocardiogram report concluded: chest clear; no gallop; no murmurs; and mild arrhythmia with premature atrial beats.
I have noted Mrs Tease’s reference to not being informed by Centrelink of the likelihood of the preclusion period being imposed upon her. However, in evidence was a copy of a letter sent to her by Centrelink on 12 August 2011 which provided that information.
I have also noted Mrs Tease’s reference to a general rule in part 6.7.3.08 of the Guide that recovery powers in social security law can only be used if there has been recovery action on a debt within six years of the start of the debt. The debt recovered by Centrelink relates to payments made to her in the preclusion period which commenced on 7 September 2004 and continued until 3 March 2008. It was recovered by Centrelink more than six years after the commencement of that preclusion period. However, part 6.7.3.08 of the Guide also provides that the six year period starts on the first day a Centrelink officer becomes aware of the circumstances that gave rise to a debt, or could reasonably have been expected to have done so. As I understand the evidence in this matter, Centrelink became aware of a potential damages settlement through receipt of the request, on 5 August 2011, from Mrs Tease’s solicitor for an estimate of any charge that would be imposed by Centrelink. Even then, no estimate of the settlement amount was provided and, as a result, Centrelink was unable to provide an estimate of a charge that might be imposed. Nonetheless, that request to Centrelink was the first that Centrelink was aware of a settlement and of the prospect of the imposition of a preclusion period. That request also marks the earliest awareness by Centrelink of the prospect of debt being raised against Mrs Tease. The debt was raised by Centrelink in its Compensation Recovery Notice to Mrs Tease on 2 April 2013. This was within the period of six years relevant to the application of part 6.7.3.08 of the Guide which, accordingly, is not relevant in this matter.
[7] [2006] AATA 178. See also PGVK v Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381.
Mrs Tease’s main concern was with Centrelink’s decision to include the full amount of her legal costs in the preclusion period calculations. Mr Ffrench submitted that it was the usual case for such costs to be included in those calculations. He submitted that, in
Mrs Tease’s case, the amount of costs was at the upper level of the range when considered as a percentage of the settlement amount. Mrs Tease tendered a commentary of several Tribunal cases which referred to the issue of lawyers’ costs. These included
Re QX05/10 and Secretary, Department of Employment and Workplace Relations[7]and Re Fuller and Secretary, Department of Family and Community Services[8] (“Fuller”).
As I understand the first of those cases, the decision was not based on the exclusion of legal costs from the calculation of the preclusion period but, rather, on the particular circumstances in that case which the Tribunal found were special such as to justify the shortening of the preclusion period. I am also satisfied that the decision in Fuller[9] does not stand as authority for the contention that costs should be excluded in the preclusion period calculation. There, the Tribunal made recommendations to Centrelink concerning certain aspects of its policy of treating differently the situation where the settlement sum included an agreed costs component and the situation where it did not do so because costs were to be subsequently assessed.
[8] (2004) 83 ALD 152.
[9] (2004) 83 ALD 152 at 161-162; See also Secretary, Department of Social Security v Hulls (1991) 22 ALD 570.
I am satisfied that costs may be taken into account as part of “compensation” as that term is defined in s 17(2) of the Act. I accept as correct Mr Ffrench’s contention that the amount of costs in this case may be at the upper end of the range. However, it is not known the extent to which the assessment of the lump sum reflected the expected level of costs in Mrs Tease’s compensation action. I am satisfied that the amount of costs were appropriately included in Centrelink’s calculations.
Special circumstances may be found in financial hardship where that goes beyond straitened circumstances and are truly exceptional.[10] Mrs Tease’s financial situation is not very different from that of many Australians whose income is in the form of Centrelink benefits. I accept Mrs Tease’s evidence that she has not wasted her settlement monies but it is the case that she manages to cope on a week to week basis with the capacity to draw down funds through her mortgage arrangements with her bank in times of need.
[10] Director-General of Social Services v Hales (1983) 47 ALR 281 at 321.
I am satisfied that there are no circumstances, either individually or in conjunction with each other, that are special such as to meet the requirements of s 1184K(1) of the Act.
DECISION
The Tribunal affirms the decision under review.
I certify that the preceding 23(twenty -three) paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior member
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Associate
Dated 28 March 2014
Date of hearing 24 February 2014 Applicant In person Solicitors for the Respondent Mr Tim Ffrench, Department of Human Services
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