Johnson; Department of Family and Community Services - [2000] AATA 864

DECISION AND REASONS FOR DECISION [2000] AATA 864

ADMINISTRATIVE APPEALS TRIBUNAL )

) No T2000/042

GENERAL ADMINISTRATIVE DIVISION          )
           Re      DEPARTMENT OF FAMILY & COMMUNITY SERVICES
  Applicant
           And    ANDREW JOHNSON
  Respondent

DECISION

Tribunal Mr J. Handley, Senior Member

Date28 September 2000
PlaceHobart

Decision The decision under review is set aside and in substitution it is decided the decision to impose a preclusion period of 50 weeks be reinstated.

..…Sgd. Mr. J. Handley…..
Senior Member

SOCIAL SECURITY: Respondent received Compensation Settlement; did not notify applicant; letters sent to respondent to advise of preclusion period but to incorrect address; whether special circumstance; negligent advice of solicitors and subsequent institution of proceedings; pensions overpayments of benefits and refusal to repay; impecunious circumstances; effect on dependent children; decision set aside.

Administrative Appeals Tribunal Act 1975 s42A(2), s42A(10)

REASONS FOR DECISION

28 September 2000 Mr J. Handley, Senior Member

This application was listed for hearing in Launceston on 31 August 2000. The applicant's representative did not appear. The application was subsequently dismissed in purported pursuance of s42A(2) of the Administrative Appeals Tribunal Act 1975. It became apparent later that the decision to dismiss the applicant was in error because s42A(2) does not apply to "the person who made the decision". At a Directions Hearing on 12 September 2000, having been satisfied that the application was dismissed in error, the application was reinstated pursuant to s42A(10) of the Act. The application was then listed for hearing on 14 September 2000.
On 14 September 2000 the hearing commenced in Launceston. Mr Wilson from the Australian Government Solicitors Office in Hobart then appeared on behalf of the applicant. Mr Marmarinos of the Launceston Community Legal Service appeared on behalf of the respondent.
A number of documents were received into evidence which will be referred to in these reasons. The applicant called Ms Hyland, an officer of Centrelink. Mr Marmarinos called the respondent and his former defacto wife Ms Patmore to give evidence.
Each party filed Statements of Facts and Contentions prior to the commencement of the hearing and provided lengthy and comprehensive oral submissions at the conclusion of the hearing.
The application has been issued by the applicant against a decision of the Social Security Appeals Tribunal ("SSAT") made on 16 February 2000. The SSAT decided to vary a decision previously made by an officer of Centrelink on 24 May 1999 to impose a compensation preclusion period of 50 weeks between the period 29 April 1999 and 12 April 2000. In making that decision, the Centrelink Officer rejected the respondent's application for New Start Allowance.
The SSAT decided to reduce the period of preclusion by 1/3 being approximately 17 weeks (refer SSAT Reasons For Decision paragraphs 55 and 56). The SSAT was satisfied that a letter sent by the applicant to the respondent was not received because it recorded an incorrect address. The letter advised of the preclusion period. It followed that the respondent was not aware that the preclusion period was of a greater duration than he had been advised by his solicitors (because he did not receive the letter). His subsequent impecunious circumstances [according to this decision] occurred because he expended his compensation monies before the expiration of the period referred to in the letter. The incorrect address on the letter was a Special Circumstance, according to the SSAT, because it meant the respondent did not receive it.
The settlement funds received by the applicant arose out of proceedings instituted by him as a result of injuries he received at work in May 1998. Weekly compensation was thereafter paid under the Tasmanian Workers' Compensation scheme.
On 29 April 1999 the respondent signed a release where he and his employer and the employer's workers compensation insurers were parties. The claim was settled at $42,500 "for damages workers compensation, future medical expenses, lump sum payment pursuant to s71 (whether by way of weekly payments, future medical expenses lump sum payments), any amounts outstanding to HIC or Centrelink, legal costs or otherwise" payable by one cheque of $4,250 to the Health Insurance Commission and one cheque of $38,250 to the respondent. Bank statements found at T35 of the T Documents record that the sum of $37,222 was deposited into a bank account held by the applicant on 11 May 1999 and the sum of $4,250 was paid into the same bank account on 8 June 1999. The sum total of these two deposits results in a shortfall with the settlement sum of $1,028. This was unexplained. Similarly, a deposit made into the respondent's bank account on 26 July 1999 of $947.58 was also unexplained.
On 11 May 1999, by reason of the deposit of settlement funds, the applicant then held a bank account credit balance of $37,243.32.
On 2 July 1999 the applicant held a bank account credit balance of $2.16. Within that period the only two deposits to the account were the above two sums.
The bank statements demonstrate an intense pattern of withdrawal of funds within the above period, almost on a daily basis and then often on a number of occasions each day.
At all relevant times the respondent was a member of a defacto relationship with Lyndel Patmore. There is one child of their relationship, an infant daughter, Taylor. Ms Patmore has two children from a previous relationship, both boys aged 7 and 10 years. During the relevant period the respondent therefore lived in a relationship with Ms Patmore and with three infant children. During the period, being the subject of the preclusion period in issue in these proceedings Ms Patmore – initially when she was regarded as a single person – and later the respondent and Ms Patmore when the respondent regarded them as being in a married like relationship – received Family Payments with respect to the three children.
JOANNE HYLAND
Ms Hyland is an officer of Centrelink employed in its Compensation Section. She completed a Proof of Evidence dated 13 September 2000 which was exchanged prior to the hearing. She also gave evidence. Ms Hyland forwarded a letter to the respondent on 24 May 1999. The letter is found at page 29 - 31 of the T Documents.
Ms Hyland said that she received advice 3 or 4 days prior to 24 May 1999 that the respondent had received a compensation lump sum. She said the records of Centrelink showed the respondent as previously having been a recipient of benefit. As a matter of courtesy she said it was decided to forward Mr Johnson the letter of 24 May 1999. Ms Hyland said the practice of Centrelink was not to send letters of this type to persons who are not "current customers" of Centrelink. The letter refers to the possibility of the imposition of a period of preclusion from benefit. Ms Hyland said that the practice within Centrelink was that persons usually only learn about the existence of a preclusion period when they make application for a benefit.
Ms Hyland said the letter was sent to the respondent at an address at Hobart Road, Kingsmeadows, being a suburb of Launceston. She said she obtained this address from the Centrelink records. The letter that was sent is a standard letter forwarded to persons who are likely to be exposed to a preclusion period and is a letter referred to within Centrelink either as a "pre-grant letter" or a "IQP10" or "preclusion advice".
Ms Hyland referred to a document (entered as Exhibit C) being a history of the respondent's addresses as known to Centrelink. At 18 May 1999 he is recorded as residing in Hobart Road, Kingsmeadows. But at 19 May 1999 he is recorded as living at Bowdens Road, Hadspen being the address then of Ms Patmore. These dates are recorded in a column under the heading "Start Date". Ms Hyland said that this column refers to the dates from which persons commence to live at a certain address as opposed to the date from which Centrelink is notified of the change of address. It followed she said that the date 19 May 1999 against the address 18 Bowdens Road, Hadspen was the date from which the respondent commenced to live at that address as opposed to the date that the applicant learnt that he was living at that address. She said that the practice within Centrelink is to record the addresses and the date from which a person commences to live at that address within "a few days" of receiving advice to this effect.
Ms Hyland was aware that the respondent was alleging in the present application that he did not receive the letter of 24 May 1999 and that he was not living at the Hobart Road, Kingsmeadows address at that date. Ms Hyland was then referred to a memorandum found at page 57 of the T Documents which she said was completed by Ms Brcic, the Manager of the Compensation Section of the Centrelink Office in Launceston. That document is dated 18 October 1999 and it refers to a conversation between the respondent and Ms Brcic. The memorandum recorded in part "Mr Johnson acknowledged he had received preclusion advice but spent all the funds by the end of May 1999 on car … ". Ms Hyland said that entry amounted to Mr Johnson having knowledge of the preclusion period. She also pointed to the words "preclusion advice" being the alternative name given to the letter forwarded by her of 24 May 1999. Ms Hyland, however, acknowledged that the words "preclusion advice" could have been used by Ms Brcic (who was not called to give evidence) being advice received from other sources as opposed to amounting to proof or evidence of the letter of 24 May 1999 having been received.
In answer to a question from me, Ms Hyland said that Centrelink made the change in the respondent's address from Kingsmeadows to Hadspen on 25 May 1999 (being the date after the letter of 24 May 1999). She said she was aware of this date because she saw a document completed by a Compensation Liaison Officer in a Melbourne Office of Centrelink and which was given to her by Ms Brcic "in anticipation of giving evidence". She said she did not have a copy of it at the time she was giving her evidence and was not aware whether the applicant's advisors had been given a copy of the document. Ms Hyland said she did not know when Centrelink was notified of the change of address despite the address being changed within the Centrelink system on 25 May 1999. It followed, therefore, that the notification of the change of address occurred on or before 25 May 1999.
lyndel marie patmore
Ms Patmore and Mr Johnson were previously in a defacto relationship until three weeks prior to the hearing.
Ms Patmore said that she recalled attending Mr Johnson's solicitors office at the time he first instructed them with respect to his work injuries. She said that a preclusion period was not then discussed. Ms Patmore said Mr Johnson did not refer to a preclusion period at the time he received his settlement funds but did so approximately two weeks later. She said that he had been advised that there would be a preclusion period for about one or two months. She said she asked Mr Johnson about his eligibility for Social Security and he raised the preclusion period for the first time. She said that she assumed that Social Security would be available after all the compensation funds had been spent.
Ms Patmore recalled that by August of 1999 all of the compensation money had been spent and apart from her Family Payment there was no other income. She said there were insufficient funds to purchase food or pay rent or pay other bills. Ms Patmore recalled that her mother would sometimes give the family meals or she would borrow monies from her father or would obtain grants or vouchers from welfare agencies in Launceston. She recalled being threatened with eviction and sold furniture and other assets to raise monies.
Ms Patmore said there were times when there was no food at all in the house and the family ate bread or toast only. She said the absence of income caused tension within the relationship and amongst the children. She said "everyone was upset" because she and Mr Johnson were "wondering each day where our next meal would come from".
In cross-examination Ms Patmore said that $7,000 of the settlement funds were withdrawn on the day of the deposit. She said $4,000 of this sum was spent immediately to pay bills and another $3,000 was given by Mr Johnson to his sister as a loan to purchase a motor car. She said $10,000 was withdrawn on the day after receipt of settlement funds to pay other bills and outstanding rent but also to pay airfares for the 5 members of the family and Mr Johnson's daughter from his former marriage to permit them to travel to her mother in NSW as a holiday. She said furniture was also purchased comprising a lounge suite, new beds and a loan over a motor car was extinguished. Ms Patmore said that she and Mr Johnson had "never experienced anything like this, we went overboard".
andrew grant johnson
Mr Johnson said that he was told by his former solicitor that he would not be entitled to Social Security Benefits for about 3 months after the date of settlement of his compensation claim. He said he believed the advice that his solicitor had given him and did not receive any other advice concerning a preclusion period. Mr Johnson said he first heard of the term "preclusion period" in about August or September 1999 when he attended the Centrelink Office in Launceston and applied for benefits. He said he was then told by Centrelink that he had no entitlement.
Mr Johnson was referred to a memorandum found at page 38 of the T Documents dated 5 August 1999. The memorandum apparently was completed by an officer of Centrelink who contacted Mr Johnson with respect to repayment of benefits previously overpaid. The memorandum in part records "he said he has no money and has no income and was not entitled to NSS until April 2000". Mr Johnson denied the content of the memorandum and said that he did not ever say to the investigator that he had no entitlement to benefits until April 2000. He said at August 1999 he did not know of that date and did not learn of the expiration of the preclusion period until he attended the Centrelink Office towards the end of August or in September.
Mr Johnson said that he has commenced legal proceedings against his former solictors, in part because he was not advised of the preclusion period. He also said that he was "not happy with the result" and said that the proceedings had been settled "without instructions".
Mr Johnson was referred to a photocopy of what was described to be a hand-written memorandum on the file held by his previous solicitors. The memorandum is dated 23 April 1999 and in part records "preclusion period – (illegible) 42 weeks estimated". Mr Johnson denied that he was ever given that advice and said that his solicitor had told him that he (the solicitor) "would be surprised if it was more than three months".
Mr Johnson said that after the settlement funds were spent "the kids were suffering, there was no food in the house, there was no money for the children for school and the water and phone was cut off". He said that he continued to suffer back pain from the work related injury and was unable to afford the cost of medical treatment.
In cross-examination Mr Johnson said that his previous solicitor had told him of the preclusion period of three months before the release was signed and the period of 42 weeks referred to in the solicitors memorandum was "not true". Mr Johnson said that his current solicitors had advised him that the memorandum had been written "since" and that his former solicitor did not write "anything when I agreed to settle". Mr Johnson said that he did not give his solicitors instructions to settle at $42,500 and when his former solicitor had telephoned him and said that he (the solicitor) had settled for this sum, Mr Johnson recalled that the sum seemed to be "$100,000 light". Mr Johnson said he was unhappy with that sum but did agree to sign the release. He said he did not know what the release document said or what it meant but because he was advised by his solicitor "strongly" to accept the offer he agreed to sign the release because he thought it was a settlement of his compensation rights only. He said he had not ever heard of the term "common law" until much later and said the solicitors had told him to settle his compensation rights because he could concentrate on obtaining a lump sum payment for damages at a later time.
With respect to the memorandum at page 38 Mr Johnson said that he had a number of debts with Centrelink being overpayments of benefits previously made. He said the overpayments commenced in 1993 because he had not previously declared earnings. Mr Johnson agreed that when he received his settlement funds he made no arrangements to repay monies owing to Centrelink and that he did not tell Centrelink of the settlement. In fact he said that Centrelink knew of the claim being settled before he did.
Mr Johnson was taken to a memorandum at page 26 of the T Documents dated 24 May 1999. The memorandum suggests that a representative of Centrelink telephoned Mr Johnson with respect to monies owing from previous overpayments. It appears the officer was aware of the settled sum of $42,500 and inquiries made of an account he held at the Commonwealth Bank indicated that funds had not been banked. The memorandum records that the sum of $42,500 was received on 10 May 1999 and at the date of the memorandum (24 May 1999) "lump sum has not hit account". The memorandum also records "he has not received monies as yet but will contact me once he has". Mr Johnson said that he did not bank the settlement funds into his Commonwealth Bank Account but into an account he held with Island State Credit Union. He did not disclose that account to Centrelink.
Mr Johnson was also referred to a memorandum found at page 32 of the T Documents dated 28 June 1999 completed by a Centrelink Officer. The memorandum suggests that telephone contact was made with Mr Johnson on this date requesting that he make repayments of his debt to Centrelink. The memorandum records that Mr Johnson told the officer that all the compensation funds had been spent and that he "had no intention of repayment DMIS debt". Mr Johnson denied these comments and said that he would not have refused to make payments when Centrelink was in fact withdrawing the sum of $43 per fortnight from his benefits. He said this sum was withdrawn to repay the debts.
With respect to the settlements funds Mr Johnson agreed that "probably a lot was wasted". He said that his sister, to whom he loaned $3000 to purchase a car still owes $1,400 to $1,500. He said the sum of $10,000 withdrawn on the day after depositing the funds was used to purchase furniture and to pay for air tickets. He agreed that he had attended the casino at Wrestpoint and at Launceston on a number of occasions and he estimated that he had lost "a couple of thousand dollars at both casinos". Mr Johnson said that when he left the Kingmeadows address he did not arrange to have his mail forwarded to Hadspen. He said at that time he was not settled, he had recently been divorced and had recently been in jail. He said he was adamant that his address at Hadspen was changed on the Centrelink Computer on 19 May 1999 because he attended the Centrelink Office, he told them of the new address on that day, and the officer keyed the information into her computer screen in his presence. He said he went to Centrelink to notify of the new address and also to disclose to Centrelink that he and Lyndel "were going defacto".
conclusion and reasons for decision

The decision made by the Social Security Appeals Tribunal must be set aside.
On the one hand there is an inconsistency between the address on the letter of 24 May 1999 sent by Centrelink to the respondent and the address which appears on the release signed about 3 weeks earlier. In my view the relevance of the letter assumed a significance in these proceedings which was not warranted. A preclusion period operates as a matter of law. Whether the applicant notified the respondent of the existence of a preclusion period or not has no relevance because the applicant was obliged to apply a preclusion period by force of the legislation.
It would be different, for example, if the letter contained information which if not received caused the respondent to act to his detriment and if it could be established that the applicant did forward the letter to an address that it knew to be wrong. Circumstances of this type do not apply in the present application. The applicant forwarded the letter as a matter of courtesy and I am satisfied as a fact that this was its motivation. I accept the evidence of Ms Hyland that where persons are not in receipt of Social Security benefits they are not ordinarily advised of a preclusion period until such time as an application for benefit is made. This is usually because settlement of compensation or like proceedings are not usually known to the respondent if a client is not in receipt of a benefit. In the present case it appears that the applicant learnt of the respondent's compensation proceedings as a result of information received (sometimes known as a "dob-in"). It appears also that the information received by the Department concerned the respondent allegedly living in a defacto relationship with Ms Patmore. Irrespective of the information received, Ms Hyland said that the letter was sent to Mr Johnson to advise him of the imposition of a preclusion period. The finding made by the SSAT at para 37 of the decision is incorrect. The recording of his address, from 19 May, was a recording of the date he commenced to reside, not the date Centrelink became aware. Centrelink could not forward the letter to his current address on 24 May 1999 because they were not aware of it until 25 May. The failure to forward the letter to the respondent's current address was not in the circumstances of this application a special circumstance. It did not cause him to spend the money in the manner that he did or at the rate that he did when the preclusion period operates by force of law.
Mr Johnson said that he spent the money within the period that he did because he had been advised by his solicitors that there would be a period of about 3 months within which he would not qualify for benefit. I am not prepared to make a finding on this issue because proceedings have been instituted in the Supreme Court of Hobart by the respondent against his former solicitors alleging negligence. In part the Statement of Claim which was received into evidence in these proceedings pleads as an item of negligence the failure to be advised by the solicitors of a period of preclusion. It is appropriate in the circumstances that the respondent should institute legal proceedings against his solicitors with respect to the alleged negligent advice. There are many decisions of this Tribunal and the Federal Court that record that negligent advice is not of itself a special circumstance. The public purse need not be opened if the loss alleged to be suffered by Mr Johnson can be recovered from another source. In this case that source is his former solicitors.
But what remained unexplained is if Mr Johnson believed that he was precluded for a period of three months as he alleged he was advised by his solicitors (which period would have expired at the end of July 1999) why he would have waited until the end of August or September to first claim benefits. On the one hand it was alleged that there were severe financial consequences as a result of the dissipation of the settlement funds by the end of June yet to wait at least one month beyond the date that he said he understood the preclusion period expired was not explained. I can think of no reason why he would have waited this additional period to claim benefits. It was at that date (September 1999) he said he first became aware that a preclusion period had been imposed (because he did not receive the letter) and that it would expire at April 2000. This allegation is however inconsistent with the memorandum found at page 38 of the T Documents which purport to record Mr Johnson having told a Centrelink Officer that he would not be entitled to benefits until April 2000. That entry is dated 5 August and records a conversation conducted at about that time. This is before Mr Johnson approached Centrelink in September 1999 to obtain benefits and when he said he was first advised by Centrelink that the preclusion period would expire in April 2000. On the evidence heard in these proceedings the only occasion where Mr Johnson would have learnt of the preclusion period expiring at April 2000 would have been the letter sent on 24 May 1999. As has been recorded above Mr Johnson said he did not ever receive that letter.
With respect to the settlement funds received, the Parliament decided to preclude persons from receiving "compensation affected payments" for a period of time determined by a formula within the legislation dependent on the amount received in settlement and the date of receipt. The philosophical reasons for the imposition of a preclusion period are not subject to review nor is the legislation. The applicant by its authorised representative did no more than apply what is required to be done under the legislation. Mr Johnson agreed that he probably did waste a lot of the settlement funds yet that is not a matter for judgement by me. The fact is that it would appear from the pattern of spending as evidenced by the bank statement found within the T Documents that (with the benefit of hindsight) Mr Johnson was deserving of financial counselling. I accept that Mr Johnson did purchase items of furniture for the family then comprising he and Ms Patmore and their respective children. I accept also that the settlement funds were used to purchase airfares and commit he and the family to other costs associated with travel to Ms Patmore's mother in NSW. But those funds were paid to him for a period of time during which he would not be entitled to a Social Security benefit. The period of preclusion was 50 weeks. The funds were totally dissipated in about eight weeks. Some of the funds were admittedly wasted on gambling and $3,000 was lent to the respondent's sister. Some of that money is yet to be repaid. The expenditure of the settlement sum and the rate at which it was expended is not of itself a special circumstance. The resultant severe financial insecurity occurred largely because of the failure to properly account for and budget those monies. Yet Mr Johnson deliberately concealed the whereabouts of these funds by refusing to disclose the identity of the Island State Credit Union Account in which the monies were held and he refused also to repay monies owing to Centrelink from previous occasions when he had failed to disclose earnings whilst receiving benefits. Mr Johnson cannot have it both ways. He cannot seek to recover monies during a period of time when the law precludes receipt (subject to special circumstance) yet attempt to conceal the location of the compensation funds (page 26) and refuse also to repay past debts (page 32).
The major thrust of the submissions made by Mr Marmarinos were with respect to the impoverished circumstances of the children of the blended relationship between Mr Johnson and Ms Patmore. This aspect of the application has troubled me deeply because the children were subject to day to day provision of their needs by the respondent and Ms Patmore. They did not spend the settlement funds unwisely yet it was they who had modest and sometimes no meals because there was no monies available. I agree with Mr Marmarinos that the rights of children must be paramount and their needs must be given a much greater consideration than those of their parents who in most cases have the maturity of years and/or the capacity to work and earn income. But throughout the period after receipt of compensation monies until Mr Johnson became entitled to again receive Social Security payments in April 2000, Ms Patmore received Family Payment and/or other Social Security benefits consistent with her responsibility for the three children being two children from her former marriage and the child Taylor from the relationship with the respondent. She has received benefits in an amount which has not been reduced by reason of the monies received by Mr Johnson nor reduced by withholdings with respect to the overpayments previously made to him. Whilst there might be a complaint as to the rate of the benefits received, that rate is struck by the Parliament and is an amount payable to all other persons with a similar number of children. There are many persons who have children and who pay rent and who are dependent on welfare. That of itself is not a special circumstance and does not in any event permit a reduction in the period of preclusion of Mr Johnson.
In conclusion I note that the period of preclusion in this application has well and truly expired and that Mr Johnson is now in receipt of a Social Security Payment. It is hoped that he is making some contribution to Ms Patmore and/or meeting financial obligations with respect to their mutual child, Taylor. If he were not in receipt of benefits and the period of preclusion was continuing and if there was evidence of ongoing perilous circumstances to which the children were exposed and there was evidence of an inability to at least provide regular meals to them I may have reduced the period of preclusion being mindful of the effect of poverty upon children. But that is not the present case.
In all the circumstances the decision under review must be set aside and in substitution for it it is decided that the period of preclusion originally imposed by an officer of Centrelink, being 50 weeks and expiring in April 2000, should be reinstated.

I certify that the preceding forty two (42) paragraphs are a true copy of the reasons for the decision herein of Mr J. Handley, Senior Member
Signed:    Linda A Nemeth    ............................................
                 Secretary
Date of Hearing  14 September 2000
Date of Decision  28 September 2000
Solicitor for the Applicant         John Marmarinos
Solicitor for the Respondent    David Wilson