Kalokerinos and Secretary, Department of Social Services (Social services second review)

[2016] AATA 745

Kalokerinos and Secretary, Department of Social Services (Social services second review) [2016] AATA 745 (26 September 2016)

Division	GENERAL DIVISION
File Number	2015/4885
Re	Nicholas Kalokerinos
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Dr L Bygrave, Member
Date	26 September 2016
Place	Sydney

The decision under review is affirmed.

.................[sgd].......................................................

Dr L Bygrave, Member

CATCHWORDS

SOCIAL SECURITY - lump sum compensation preclusion period - disability support pension - length of the preclusion period - whether special circumstances exist to reduce the preclusion period - decision affirmed

LEGISLATION

Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1184, 1184K

Social Security (Administration Act) 1999 s 80(1)

CASES

Groth v Secretary Department of Social Security [1995] FCA 1708

SECONDARY MATERIALS

Guide to Social Security Law, version 1.225, 20 September 2016

REASONS FOR DECISION

Dr L Bygrave, Member

26 September 2016

INTRODUCTION

1. On 18 June 2009, Mr Nicholas Kalokerinos sustained an injury in an accident (the accident).

2. On 20 June 2014, Mr Kalokerinos successfully applied for the disability support pension. Consequently, he was paid a disability support pension in the amount of $6,389.49 from 20 June 2014 to 30 October 2014.

3. On 30 September 2014, Mr Kalokerinos received a public liability settlement of $550,000 (compensation payment) as compensation for the injury he sustained in the accident.

4. Centrelink wrote to Mr Kalokerinos on 4 November 2014 to advise that, because he had received a compensation payment, a preclusion period applied to his disability support pension from 18 June 2009 to 4 February 2015, and his disability support pension was cancelled effective from 30 October 2014. Mr Kalokerinos was also required to repay the amount of $6,389.49 that he had received during this preclusion period. An internal review by Centrelink on 26 March 2015 affirmed this decision.

5. Mr Kalokerinos applied to the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal for a review of the Centrelink decision. The SSCSD affirmed the decision on 5 August 2015.

6. On 21 September 2016, Mr Kalokerinos applied to the General Division of the Administrative Appeals Tribunal for a review of the SSCSD decision.

7. The matter was heard in Sydney on 8 September 2016. Mr Kalokerinos was self-represented and gave sworn evidence to the Tribunal by telephone.

   RELEVANT LEGISLATION AND ISSUES

8. The issues for determination before the Tribunal are whether:

   (a)a compensation preclusion period from 18 June 2009 to 4 February 2015 (preclusion period) applies to Mr Kalokerinos;

   (b)the decision to cancel Mr Kalokerinos’ disability support pension effective from 30 October 2014 was correct;

   (c)the decision to recover $6,389.49 was correct; and

   (d)any special circumstances exist under which part or all of the preclusion period can be waived.

   Does a compensation preclusion period from 18 June 2009 to 4 February 2015 apply to Mr Kalokerinos?

9. Section 1169 of the Social Security Act 1991 (Cth) (the Act) requires that a preclusion period applies when a person receives a lump sum compensation payment. As set out in the Guide to Social Security Law (the Guide):

   The compensation provisions of Part 3.14 [of the Act] reflect the principle that if a person has been compensated for loss of income, they should use that money to live off rather than receive a taxpayer-funded payment. Lump sum compensation payments are treated on the basis that people who cannot work because of a compensable injury should NOT receive income support for the same period from both the:

   ·social security system, AND

   ·compensation systems. [emphasis in original][1]

   [1] Guide to Social Security Law, section 4.13.2.60.

10. ‘Compensation’ is defined in ss 17(2) and 17(3) of the Act. Relevantly, s 17(2) defines compensation as:

    (a)a payment of damages; or

    (b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or

    (c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or

    (d)any other compensation or damages payment;

    (whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.

11. Mr Kalokerinos’ public liability settlement for the injury he sustained in the accident was settled by consent and included a component for economic loss.[2] I am satisfied that the public liability settlement of $550,000 paid to Mr Kalokerinos on 30 September 2014 is a compensation payment as defined in the Act. I find that a preclusion period should apply to Mr Kalokerinos.

    [2] Exhibit T1, document 10.

12. The lump sum preclusion period is calculated in accordance with s 1170 of the Act, which identifies the start date and end date of the preclusion period. The start date of Mr Kalokerinos’ preclusion period is 18 June 2009 (the date of the accident). The length of the total preclusion period (and therefore the end date for a preclusion period) is derived according to ss 1170(4) and (5), which provide:

    (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

    (5)  If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.

13. Subsection 17(3)(a) of the Act defines the ‘compensation part of a lump sum compensation payment’ as ‘50% of the payment’. The Guide states that ‘the 50% rule is applied to the gross lump sum’.[3] A gross lump sum payment of $550,000 was made to Mr Kalokerinos on 30 September 2014. I find that the compensation part of the lump sum compensation payment is $275,000 (50% of $550,000).

    [3] Guide to Social Security Law, section 4.13.2.30.

14. In accordance with the formula set out in s 1170(4) of the Act, Mr Kalokerinos’ preclusion period is calculated as $275,000/$934.30 ($934.30 being the income cut-out amount at the time he received his compensation payment). This equates to 294 weeks when rounded down as required by s 1170(5).

15. I am satisfied that a compensation preclusion period of 294 weeks applies to Mr Kalokerinos. This period commenced on 18 June 2009 and ended on 4 February 2015.

    Whether the decision to cancel Mr Kalokerinos’ disability support pension effective from 30 October 2014 was correct?

16. Section 80(1) of the Social Security (Administration Act) 1999 (Administration Act) provides that, where a social security payment is being paid to a person who is not qualified for the payment, the payment is to be cancelled or suspended.

17. I am satisfied that, because Mr Kalokerinos was subject to a compensation preclusion period from 18 June 2009 and ended on 4 February 2015, he was not qualified to receive the disability support pension during this time. I therefore find that the decision to cancel Mr Kalokerinos’ disability pension on 30 October 2014 was correct.

18. Mr Kalokerinos submitted that his disability support pension should have been suspended rather than cancelled. However, I agree with the Respondent’s submission that where a beneficiary of a social security payment is not payable and will remain so for an extended period of time, the payment should be cancelled as a matter of public interest in the efficient administration of social security payments.

    Are there any special circumstances that exist under which part or all of the preclusion period can be waived?

19. Mr Kalokerinos received disability support pension payments that totaled $6,389.49 from 20 June 2014 to 30 October 2014, which is during the period he was subjected to a compensation preclusion period.

20. Centrelink, as authorised by s 1184 of the Act, wrote to Mr Kalokerinos and his lawyers on 4 November 2014 requesting the repayment of $6,389.49.[4]

    [4] Exhibit T1, documents 11 and 12.

21. Section 1184K of the Act provides that the 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.

    (2)  If:

    (a)a person … receives or claims a compensation affected payment[5]; and

    (b)the person receives compensation; and

    (c)the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person’s … receipt of, or claim for, the compensation affected payment;

    the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).

    [5] Subsection 17(1)(a) of the Act defines a ‘compensation affected payment’ as including a disability support pension.

22. In Groth v Secretary Department of Social Security[6] the Federal Court said:

    … 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. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied... [emphasis added]

    [6] [1995] FCA 1708 [12].

23. The Guide also sets out that the decision to apply the special circumstances provisions should be based on a holistic view of an individual’s circumstances and should ‘ONLY be applied in unusual, unforeseen or exceptional circumstances’ [emphasis in original].[7] The Guide relevantly determines that factors to consider when determining special circumstances include straitened financial circumstances, ill health, emotional state, and other.[8]

    [7] Guide to Social Security Law, section 4.13.4.10.

    [8] Guide to Social Security Law, section 4.13.4.20.

24. At the Tribunal hearing, Mr Kalokerinos said that his financial circumstances are ‘severe and strained’ and he is currently suffering financial hardship. He confirmed that his financial situation remains similar to when he gave evidence to the SSCSD on 5 August 2015. This evidence was that he received a net compensation payment of $327,000 after the deduction of legal fees ($168,000) and Medicare repayments ($55,000). He lives in an unencumbered home valued at approximately $1.1 million; and he owns an unencumbered motor vehicle worth approximately $39,000 (current value), NIB shares valued at between $2,000 and $4,000, monies held in a Trust valued at between $10,000 and $15,000, and additional superannuation funds of approximately $1 million which he has invested with First State Super. He also has a superannuation fund, which provides him an allocated pension of $40,000 per annum and is taxed at a rate of $3,000 to $4,000 per annum.

25. On 16 February 2015, Centrelink wrote to Mr Kalokerinos about his intention to apply for the disability support pension. Mr Kalokerinos was again advised at the Tribunal hearing that, because his preclusion period had finished, he could lodge a new claim for the disability support pension.

26. Based on the evidence before me, I cannot find that Mr Kalokerinos is in a position of financial hardship. While he may perceive that his financial situation is severe, his financial circumstances are not worse than the majority of social security recipients and he has access to cash through a Trust and two superannuation funds, and realisable assets. As his compensation preclusion period has ended, he is also able to lodge a new claim for the disability support pension.

27. At the Tribunal hearing, Mr Kalokerinos said that his ill health, emotional state and consequent reduced life expectancy also contributed to his special circumstances.

28. A letter from Dr D G Mackay dated 30 August 2010 sets out Mr Kalokerinos’ severe injuries, which were sustained in the accident on 18 June 2009 and a subsequent accident he suffered on 10 May 2010. While I accept that Mr Kalokerinos suffers from ill health and stress associated with his injuries, the Guide states that an ‘injury that a person received compensation for cannot generally be regarded as a special circumstance’.[9] I also have no medical evidence before me to show that Mr Kalokerinos’ ill health is more severe than the majority of disability support pension recipients or that his life expectancy is reduced.

    [9] Guide to Social Security Law, section 4.13.4.20.

29. There are no circumstances for Mr Kalokerinos that are ‘unusual, unforeseen or exceptional’. I am satisfied that there are no special circumstances that warrant any of the compensation payment being excluded in the calculation of the compensation preclusion period. I find that the decision to recover the amount of $6,389.49 was correct.

    DECISION

30. The decision under review is affirmed.

I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Dr L Bygrave, Member

...................[sgd].....................................................

Associate

Dated 26 September 2016

Date of hearing	8 September 2016
Applicant	By telephone
Solicitors for the Respondent	Ms A Fletcher, Department of Human Services