JOHN YOURELL and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2010] AATA 355

Administrative Appeals Tribunal

ADMINISTRATIVE APPEALS TRIBUNAL        )

)         No: 2009/5949

General Administrative Division           )

Re: JOHN YOURELL
Applicant

And: SECRETARY, DEPT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent

CORRIGENDUM

TRIBUNAL:             Mr R G Kenny, Senior Member

DATE:                      13 May 2010

PLACE:                   Brisbane

The Tribunal directs the Registrar, pursuant to subsection 43AA(1) of the Administrative Appeals Tribunal Act 1975 (Cth), to alter the text of the decision in this application as follows:

The date ’30 March 2009’ where it appears at paragraph 6; and at paragraph 27 should instead read ’18 October 2010’.  

...................................................................

District Registrar

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 355

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2009/5949

GENERAL ADMINISTRATIVE DIVISION		)
Re		JOHN YOURELL

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr R G Kenny, Senior Member

Date13 May 2010

PlaceBrisbane

Decision The Tribunal affirms the decision under review.  

..................[Sgd].....................

Senior Member

CATCHWORDS

SOCIAL SECURITY – Pensions, Benefits and Allowances – Settlement of two compensation claims – Lump-sum compensation payment includes component referable to lost earnings and capacity to earn for each injury – Apportionment of lump sum between two injuries - Imposition of two preclusion periods – No special circumstances to disregard any part of lump sum – Overpayment of disability support pension – Debt due to the Commonwealth – Decision under review affirmed.

Social Security Act 1991 (Cth), ss 17, 1169, 1170, 1184, 1184A, 1184C, 1184F, 1184K, 1236, 1237A, 1237AAD

Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9
Director-General of Social Services v Hales (1983) 47 ALR 281
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Department of Social Security and Vys (1995) 40 ALD 745
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Re Krzywak and Department of Social Security (1988) 15 ALD 690
Re Marsh and Secretary, Department of Family and Community Services (2004) 81 ALD 255
Re PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs (2008) AATA 381
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147; [2001] FCA 1160
Secretary, Department of Social Security v Smith (1991) 23 ALD 277
Savage v Secretary, Department of Employment and Workplace Relations [2008] FMCA 32

REASONS FOR DECISION

13 May 2010 Mr R G Kenny, Senior Member    

BACKGROUND

1.      John Yourell received income support payments, in the form of disability support pension (DSP), under the Social Security Act 1991 (Cth) (the Act) from 1998. He worked on a part-time basis and, on 1 March 2006 and 1 May 2008, he suffered workplace injuries. He received compensation payments in the amount of $124 per week from Workcover from after the first injury until 31 August 2008. Common law damages claims by Mr Yourell against his employer were settled on 25 February 2009 in the amount of $160,704. This included a $50,704.11 refund to Workcover for medical costs and the weekly compensation payments to Mr Yourell.

2.      On 1 April 2009, a Centrelink delegate determined that, as a result of the settlement payment, Mr Yourell was subject to a preclusion period from 1 September 2008 until 20 June 2010.  The effect of that decision was that Mr Yourell was precluded from receiving certain forms of income support payments, including DSP, during the preclusion period.  The delegate also determined that Mr Yourell had already received DSP from 1 September 2008 until 30 March 2009, which was during the preclusion period, in the amount of $8,649.37.  Centrelink issued a recovery notice[1] to Workcover requiring Workcover to repay this amount to Centrelink before any settlement monies were paid to Mr Yourell.  By letter dated 1 April 2009, the delegate advised Mr Yourell that this amount of $8,649.37 in DSP would be recovered from his settlement sum. 

[1] See s 1184 of the Act.

3.      On 2 June 2009[2], Mr Yourell formally requested review of the Centrelink decision to impose the preclusion period and to seek recovery of the $8,649.37 on the basis that the lump sum he received from the settlement was only approximately $30,000 and he still required further surgical treatment.  In September 2009, Centrelink delegates recalculated Mr Yourell’s preclusion period and his DSP repayment.  It was determined that he was subject to a preclusion period from 1 May 2008 until 18 October 2009 and two DSP overpayments.  The first of these payments was made from 1 May 2008 until 31 August 2008, in the amount of $4,469.53.  The second was from 1 September 2008 to 30 March 2009 in the amount of $8,649.37.  As the second amount had been recovered by Centrelink from the settlement sum, the amount payable by Mr Yourell as a debt to the Commonwealth was $4,469.53.  That recalculation decision was affirmed by an authorised review officer on 8 October 2009 and, in turn, by the Social Security Appeals Tribunal (“the SSAT”) on 2 November 2009. 

[2] Initially, review was requested by telephone on 8 May 2009.

ISSUES AND LEGISLATION

4.      Where a person receives compensation monies which include a component referable to lost earnings or lost capacity to earn, provision is made in the Act for the imposition of a period during which certain income support payments are precluded.  It is not disputed in this matter that Mr Yourell’s compensation payment was of that character.  The relevant provisions are ss 17, 1169, 1170, 1184, 1184A, 1184C and 1184F of the Act and they require the number of weeks of the preclusion period to be calculated by applying the formula:

compensation part of lump sum

income cut-out amount.

5.      Initially, Centrelink determined that the compensation part of Mr Yourell’s lump-sum was $55,000 and the income cut out amount was $779.13.  Application of the formula led to a preclusion period from 1 September 2008, the day after Mr Yourell’s compensation payments ceased, for a period of 94 weeks to 20 June 2010.  The recalculations were made in reliance on the decision of the Federal Magistrates Court in Savage v Secretary, Department of Employment and Workplace Relations[3].  There, it was held that, where one lump sum is paid in respect of different compensable events, the lump sum is to be apportioned between them[4].  This was done in the decision under review by starting with the amount of the settlement sum which was clear of the Workcover refund (ie $110,000) and apportioning that equally (ie $55,000) in relation to each of the two injuries sustained by Mr Yourell on 1 March 2006 and 1 May 2008, respectively.  The equal apportionment was made because Workcover was unable to advise how the settlement monies were attributable to each of Mr Yourell’s injuries.  For the first of his injuries, the Workcover refund of $50,704.11 was added to the $55,000 (ie $105,704.11).  For the second injury, only the apportioned amount of $55,000 was relied upon.  The formula noted above was then applied to each of those sums to calculate the two preclusion periods ie 1 May 2008, the date of the second injury, until 31 August 2008 during which Mr Yourell was paid DSP in the amount of $4,469.53; and 1 September 2008, the day after compensation payments ceased, to 30 March 2009 during which he was paid DSP in the amount of $8,649.37. 

[3] [2008] FMCA 32.

[4] Supra at para 41.

6.      The net effect of the reviewable decision was that, while Mr Yourell’s overpayment amount was increased by $4,469.53 for payments received by him in the four months from the date of his second injury until his compensation payments ceased, he was substantially better off financially because the preclusion period ended on 30 March 2009 rather than on the original end date of 20 June 2010.  This enabled him to become a DSP recipient some fourteen months earlier than under the original decision. 

7.      The first issue raised by Mr Yourell relates to the operation of s 1184K(1) of the Act which makes provision for disregarding part or all of the lump-sum payment.  This will result in the shortening of the applicable preclusion period.  The second issue for determination is whether Mr Yourell’s preclusion periods and DSP calculations have been correctly made. 

8.      While the amount of $8,649.37 recovered by Centrelink from Workcover is not a debt owed by Mr Yourell[5], a further issue is whether the amount of $4,469.53 is a debt owed by him to the Commonwealth which must be repaid.

[5] See s 1184C of the Act.

EVIDENCE

9.      Mr Yourell gave the following evidence.  His first injury was to his shoulder.  This was on 1 March 2006 and he underwent surgery for ligament repair.  He then began a course of physiotherapy during which, on 1 May 2008, he suffered another injury to his shoulder for which he will require further surgery.  The injuries have prevented him from working and he has been in receipt of the DSP again since the preclusion period ended. 

10.     Mr Yourell could not recall making a second claim for the injury in May 2008 but accepted that he must have done so because claims for each injury are identified in the Release and Discharge he signed on 25 February 2009.  Mr Yourell was critical of the way in which his solicitor handled his claims and recalled being advised, at one stage, that he might receive a settlement of some $1.4 million.  He was aware that he would be subject to a preclusion period and that he would be required to repay Centrelink monies paid to him during that time.  He agreed that he had received a Centrelink letter, dated 13 March 2007, advising him that if he received any payment of weekly compensation or a lump sum compensation payment, some of his Centrelink payments may need to be repaid to Centrelink.

11.     Of the settlement sum of $110,000 clear of the amount withheld by Workcover, Mr Yourell received less than $30,000.  Apart from the amount of $8,649.37 recovered by Centrelink from Workcover, other deductions from the lump sum were solicitor’s fees in excess of $54,000 and an amount of approximately $16,000 for repayment of a loan that he took out from his solicitor.  In expectation of receiving a larger sum, he purchased, before settlement, a boat for approximately $23,000.

12.     Mr Yourell and his wife live separately and apart under the one roof in rented premises.  His wife also receives the DSP and requires constant care which Mr Yourell provides and for which he receives the carer pension.  Centrelink payments are their only income and $10 per fortnight is deducted by Centrelink from his DSP for repayment of the debt.  After meeting their general living expenses, their income is expended each fortnight.  Particular expenses include his and his wife’s medication and high running costs of his car in which he transports his wife for various forms of treatment on almost a daily basis.  Mr Yourell’s health problems include diabetes mellitus, hypertension and continuing shoulder pain.  He still owns the boat he purchased recently and has a car and he estimated the value of these at $16,500 and $2,500, respectively.  Mr Yourell and his wife have virtually no savings.  The only debt he identified was to a finance company for a vehicle he had when he was working but this appears to have been settled with his surrender of the vehicle some years ago.

13.     In evidence were copies of the Release and Discharge executed on 25 February 2009 by Mr Yourell, his employer and Workcover.  One of its recitals is that Mr Yourell made claims for damages on 18 June 2006 and 2 November 2008 for his injuries sustained on 1 March 2006 and 1 May 2008, respectively.  It lists the settlement sum as $110,000 clear of refunds to Workcover.  Also in evidence were copies of documents sent to Centrelink by Mr Yourell’s solicitor requesting estimates of the length of any preclusion period and any amount to be repaid to Centrelink for each of three proposed lump sum amounts.  In each request, only one injury is referred to.  Copies of Centrelink’s responses were also in evidence.  They repeat the reference to a single injury and give estimates of the likely preclusion period for each of the three lump sum payments.  These were $137,622, $187,622 and $237,622.  The preclusion periods were from 1 September 2008 to 9 May 2010, to 19 December 2010 and to 31 July 2011, respectively.  In each case, the repayment amount was estimated to be $6,904.44.

14.     Documents setting out the Centrelink payments of DSP and the Workcover payments of periodic compensation to Mr Yourell were also in evidence.  The former totalled $13,118.90 and the latter totalled $13,082.00.  Mr Yourell did not dispute the correctness of those calculations.  Also in evidence were the documents which set out the calculations of the two preclusion periods using the formula in s 1170 of the Act[6].

[6] See para 4 above.

SUBMISSIONS 

15.     Mr Yourell’s concern was that he received only some $30,000 out of the settlement lump sum.  He was also under the impression that, because he had two injuries, there would be a halving of the preclusion period advised in the original Centrelink decision.  He also expressed concern at the way in which his claims were dealt with by his solicitor.

16.     For the respondent, Rick McQuinlan submitted that Centrelink was bound to apply the principle expressed in Savage v Secretary, Department of Employment and Workplace Relations[7] and to apportion the lump sum between the two injuries.  In the absence of any guidance from Workcover as to the apportionment utilised in calculating the lump sum, he submitted that it was appropriate to apportion them equally.  He also submitted that the preclusion periods and repayment calculations had been correctly made.  Further, he submitted that there was no basis for treating any of the lump sum as not having been received by Mr Yourell and that his debt of $4,469.53 should be repaid.

CONSIDERATION 

[7] See para 5 above.

disregarding part of the lump sum

17.     Under s 1184K(1) of the Act, part of Mr Yourell’s settlement sum may be treated as not having been received by him.  This has the effect of shortening any preclusion period.  It reads:

s1184K 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.

18.      The provisions relating to the imposition of a preclusion period have 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.[8]

[8] Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281-282.

19.     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[9].

[9] Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 148.

20.     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 arise in a given case.  The issue of special circumstances is seen in various parts of the Act and, in that context, 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[10].

[10] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545.

21.     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 “unusual” or “uncommon” such that it distinguishes it from the ordinary or usual case.[11]

[11] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 at [33].

22.     Mr Yourell was not satisfied with the way in which his solicitor dealt with his claims.  There have been cases where a legal adviser’s failure to properly advise a person has given rise to an exercise of discretion under s 1184K(1) of the Act[12].  Generally, however, this will not be the case on the basis that it is a matter between client and solicitor[13].  In Mr Yourell’s case, there is no evidence that he was incorrectly advised about the prospect of a preclusion period being imposed or that he would need to repay Centrelink monies received during any preclusion period.  Rather, his concern was that he had been led to believe he would receive a larger settlement than he did.  Again, there is no material to assist in determining the nature of any such advice but I note that settlement sums provided to Centrelink in order to obtain estimates of the likely preclusion period were in the order of the settlement sum that Mr Yourell received.  I am satisfied that Mr Yourell’s concerns, including those relating to the level of fees for which he was liable, are matters between him and the solicitor and do not fall for resolution as between Mr Yourell and the respondent. 

[12] Re Secretary, Department of Social Security and Vys (1995) 40 ALD 745.

[13] See Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716.

23.     Mr Yourell purchased a boat before he received his settlement.  He may not have done this if he had been aware of the size of the settlement.  However, he had been advised by Centrelink that there may be a preclusion period and that DSP payments may need to be repaid.  The estimates of the repayment amounts which Centrelink provided to Mr Yourell’s solicitor were less than the amounts which Centrelink eventually sought to recover.  However, it would seem that those estimates did not take into account the effect of the Federal Magistrates Court decision noted above[14]. 

[14] See para 5 above.

24.     Mr Yourell and his wife are not in a strong financial position.  While financial hardship is a relevant consideration, it will not generally constitute a special circumstance unless it goes beyond straitened circumstances and is truly exceptional[15].  His evidence is that he now has none of his settlement monies left.  However, he has the benefit of the carer allowance and he and his wife both receive the disability support pension.  His evidence is that they are able to meet their financial obligations on a fortnightly basis albeit with no excess.  I am satisfied that Mr Yourell is in a position not significantly different from that of many other recipients of social security benefits who are not uncommonly in that situation[16].  Also, Mr Yourell has retained the boat that he recently purchased and this is an asset potentially available to him to alleviate his financial position.  In some cases, it has been considered reasonable for a person to sell an asset acquired with monies from a lump sum payment of compensation, even the family home, in order to alleviate financial difficulty[17].  Given the availability of this asset, the overall financial circumstances of Mr Yourell can not be described as being beyond straitened or truly exceptional. 

[15] Director-General of Social Services v Hales (1983) 47 ALR 281 at 321 and see Re Krzywak and Department of Social Security (1988) 15 ALD 690 at 700.

[16] See Director-General of Social Services v Hales (1983) 47 ALR 281 at 321,

[17] See Marsh and Secretary, Department of Family and Community Services (2004) 81 ALD 255.

25.     Both Mr Yourell and his wife have significant health problems.  However, they form the basis upon which the DSP is paid to them and the carer payment is made to Mr Yourell.  These do not constitute special circumstances under the Act.  Mr Yourell suffers pain in his shoulder which is related to the injuries for which he was compensated.  It is not an unusual or uncommon consequence that the compensated condition would lead to that outcome such that the discretion under s 1184K(1) of the Act should be enlivened. [18]

[18] See Re PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 381.

26.     An exercise of the discretion in sub-section 1184K(1) of the Act would bestow a double benefit on a person in Mr Yourell’s position.  In this case, I am satisfied that the matters raised by Mr Yourell do not constitute, individually or in combination, circumstances that are unusual, uncommon or exceptional such that it would be unfair or inappropriate to give effect to the legislative intention reflected in the scheme which imposed the preclusion period.  Accordingly, I am satisfied that there are no special circumstances that would justify the exercise of the discretion under sub-section 1184K(1) of the Act to treat some part of Mr Yourell’s compensation sum as not having been paid.

the debt

27.     I am satisfied that Centrelink correctly relied upon the principle expressed in Savage v Secretary, Department of Employment and Workplace Relations[19] to calculate the two preclusion periods from 1 May 2008 until 31 August 2008 and 1 September 2008 until 30 March 2009.  On that basis, I am also satisfied that, during those periods, Mr Yourell received DSP payments in the amounts of $4,469.53 and $8,649.37, respectively, which he was not entitled to receive[20].  The amount of $8,649.37 was recovered by Centrelink directly from Workcover and is not a debt due by Mr Yourell to the Commonwealth[21].  The amount of $4,469.53 is a debt due by him to the Commonwealth[22]. 

[19] See para 5 above.

[20] See s1169 of the Act.

[21] See s 1184C of the Act.

[22] See s 1184F of the Act.

writing off or waiving the debt

28.     Provision is made for a debt to be written off under s1236 of the Act.  This is the case if the debt is irrecoverable at law; or the debtor has no capacity to repay the debt; or the debtor's whereabouts are unknown after all reasonable efforts have been made to locate the debtor; or it is not cost effective for the Commonwealth to take action to recover the debt.  The only component of that provision of potential relevance in this matter is that relating to lack of capacity to repay the debt.  Mr Yourell is repaying the debt to the respondent through deductions from his DSP payments and I am satisfied that debt should not be written off.

29.     A debt may be waived under s1237A of the Act, the first element of which is that the debt must be attributable solely to an administrative error made by the Commonwealth.  That is not Mr Yourell’s situation.  A debt may also be waived under s 1237AAD of the Act where there are special circumstances (other than financial hardship alone) that make it desirable to waive.  This discretion is akin to that available under s 1184K of the Act[23] and, as with that provision, I am satisfied that no special circumstances arise in Mr Yourell’s case. 

[23] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545.

DECISION

30.The Tribunal affirms the decision under review.

I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R G Kenny, Senior Member

Signed: .........................[Sgd]....................................................
  Kate Slack, Research Associate

Date/s of Hearing  6 May 2010
Date of Decision  13 May 2010
The Applicant was self represented
For the Respondent                  Mr Rick McQuinlan, departmental advocate