Karaarslan and Department of Family and Community Services

[2001] AATA 838

DECISION AND REASONS FOR DECISION [2001] AATA 838

ADMINISTRATIVE APPEALS TRIBUNAL        Nº V2001/793
GENERAL ADMINISTRATIVE DIVISION
  Re:         SELMA KARAARSLAN
  Applicant
  And:       SECRETARY TO THE
  DEPARTMENT OF FAMILY AND
  COMMUNITY SERVICES
  Respondent

DECISION

Tribunal:       M.J. Carstairs, Member
Date:             5 October 2001
Place:            Melbourne

Decision:The Tribunal varies the decision under review as follows:

1.the amount of social security payments paid to the applicant in the compensation preclusion period to be recovered from the applicant as a compensation debt is $22,273.33; and

2.the decision under review is otherwise affirmed.

(sgd) M.J. Carstairs
  Member
SOCIAL SECURITY – preclusion period – recovery of social security payments - special circumstances
Social Security Act 1991 s17(2), 17(3), s1165(8), s1166(2), s1184, s1184K
Groth v Secretary, Department of Social Security (1996) 40 ALD 541
Re Beadle and Director-General of Social Services (1984) 6 ALD 1
Re Morgan and Secretary Department of Family and Community Services [2001] AATA 734

REASONS FOR DECISION

5 October 2001  M.J. Carstairs, Member

1. This is an application by Selma Karaarslan (the applicant) for review of a decision of the Social Security Appeals Tribunal (the SSAT) made on 14 June 2001 varying a decision of a Centrelink delegate of the Secretary to the Department of Family and Community Services (the respondent).  The original decision of the respondent was to impose a preclusion period from 18 June 1998 to 24 October 2001, being a period during which the applicant was not eligible to receive Centrelink payments by virtue of having received a lump sum compensation payment; and to recover $22,205.82, being Disability Support Pension (disability support pension) and Parenting Payment (parenting payment) paid to the applicant during the period 18 June 1998 to 13 March 2001.  The SSAT decision affected only the calculation of the amount to be recovered, increasing it to $22,418.68.

2. The Tribunal had before it the documents lodged under s37 of the Administrative Appeals Tribunal Act 1975.  Also before the Tribunal were exhibits marked A to F.  The applicant represented herself and gave oral evidence.  Mrs R. Bradley, an advocate with Centrelink, represented the respondent.
   BACKGROUND

3. The applicant was injured on 18 June 1998 in a fall at Melbourne Airport.  She was receiving parenting payment at the time she had the accident.

4. She later claimed disability support pension.  This claim was rejected in 1998, but was granted on September 1999.  Her husband claimed and was granted Carer Payment (carer payment).

5. The applicant commenced an action for damages in the County Court for the injury she had sustained.  The claim was settled out of court on 18 April 2000 for $150,000.  Disability support pension however continued to be paid to the applicant until 13 March 2001.  The respondent decided on 22 March 2001 to reassess payment of disability support pension to the applicant, taking into account the settlement moneys she had received.  As a result of that reassessment the respondent decided that the applicant had been ineligible to receive payments of disability support pension during the period 18 June 1998 to 13 March 2001.  The respondent sought recovery of $22,205.82 of social security payments made in that period.  Disability support pension was cancelled.

6. On 23 March 2001 a notice was sent to the applicant advising her of the preclusion period and of the amount of social security payments to be recovered.  The applicant sought review of the decision to apply a preclusion period and seek recovery of the social security payments made to her.  On 18 May 2001 an authorised review officer affirmed the original decisions.  The applicant then sought review with the SSAT.   The SSAT varied the decision in the terms stated above.   The applicant sought review with this Tribunal on 29 June 2001.
   EVIDENCE

7. The applicant told the Tribunal that since she suffered the injury at the airport she had been in a lot of pain.  Although surgery has been recommended she is concerned about having it.  She has 4 children.  Seda is aged 18 and studying at TAFE.  Recep aged 16 is in Year 12.  These children receive Youth Allowance (youth allowance).  The other children, Erhan and Korhan, are in Grades 8 and 6 respectively.  The applicant receives family tax benefit for them.  The applicant said that since the accident her husband had been her carer and was not in employment.  He ceased work as a taxi driver in 1994, prior to her accident.  Her evidence to the Tribunal was that her husband could not work part-time as a taxi-driver now, as he had to care for her and the children.

8. She said that when she received the compensation money she spent it almost entirely on household expenses and paid off part of the mortgage.  In 1999 after the compensation action was commenced, she and her husband had purchased a very old house in need of repairs, paying about $140,000 for it.  They considered that purchasing a home was preferable to renting, and not much more expensive for them.  She said they were not a wealthy family.  She stated that her husband considered that with the pain she was in she deserved a nice house.

9. The applicant confirmed her evidence to the SSAT, namely that much of the settlement money which she received had been spent on the house.  She confirmed that outlays included $60,000 in reduction of the mortgage and $38,000 on painting, improvements and furnishings to the house.  Five hundred dollars was given to each of the four children.  Twenty thousand dollars was spent on the purchase of cars, ($16,000 on a car for her husband and $4000 on one for herself).  She said that both cars were needed as her husband liked to be able to go places and sometimes she does not feel well enough to accompany him.  Having her own car enables her to go to visit her mother while her husband is away.  Also, she likes to take the children out for lunch but her husband does not always wish to accompany them on these trips.  She said she was concerned that, should they now try to sell either of the cars they might not recoup the purchase price.  She said that all the expenditure occurred before she had knowledge of the respondent's decision to impose the preclusion period or the compensation charge.

10. The "Plaintiffs Particulars of Special Damage and Loss of Earnings and Earning Capacity " in her action for damages (T14, p.49) set out:

    . . .
    At the time of her fall the Plaintiff's youngest child was established at school and the Plaintiff was looking for work as a machine operator and/or presser.
    . . .
    The Plaintiff estimates she would have obtained such employment on or about 1 February 1999 when her youngest child had commenced his fourth year at primary school. 

Loss of earnings were calculated in that document at the rate of $375 per week from 1 February 1999 to 6 September 1999 and totalled $12,562.50, while the claim made for future economic loss was $300,177.

1. The Terms of Settlement dated 18 April 2000 state:

   . . .
   The Releasee agrees to pay and the Releasor agrees to accept the sum of $110,000 for general damages plus $20,000 for loss of earning capacity plus $20,000 for costs, disbursements and medical expenses totalling $150,000 in full and final settlement of the claim and the action.   [existing emphasis]

2. A letter from the applicant's solicitors to Centrelink on 3 April 2001 stated:

   . . .
   The Release signed by Mrs Karaarslan dated 18 April 2000 demonstrates that a fixed sum of $20,000 was apportioned to loss of earning capacity and although the second sentence in paragraph 2 of the Release is inaccurate when read in its context, she was entitled to understand that her liability to repay your office would be calculated by reference to that fixed amount.   . . .

3. The applicant told the Tribunal that her solicitor was unhelpful to her at the time of her action for damages, and she was not made aware that she would have to pay back any money to Centrelink.  She said that if she had been warned she would never have settled and she believes that she could have been more successful if the matter had gone to hearing.  She said that at the time of settlement she was told only that Centrelink might impose a period of non-payment, but her solicitor said "maybe they will, maybe they will not".  She said that at the time she was on so many painkillers that she was not thinking well.  She has subsequently gone back to see the solicitors about their failure to advise her, however she was informed that the solicitor who had dealt with her matter had since left the firm.  She has not taken the matter further.

4. She told the Tribunal that at present she is receiving about $267 per fortnight in payments from Centrelink and that an amount of some $67 was being withheld to recover the compensation charge.  In her statement of financial circumstances dated 29August 2001 (Exhibit E) the applicant set out details of family expenditure approximating $2156 per fortnight.  She gave evidence of having several outstanding bills that they were having difficulty paying and bankcard debt in July/August 2001 had increased to $6086.06 against a closing balance for the previous month of $5011.20.  At the time of the hearing before the SSAT in June 2001, she and her husband owed $3500 on their credit card.  A cash advance of $1000 was withdrawn on 31 July 2001.  The applicant said that they are using the bankcard facility for their living expenses.  She does not ask for any amount from the two older children's youth allowance, towards their upkeep, as they need the money.

5. In the respondent's Statement of Facts and Contentions the fortnightly payments from Centrelink were shown as:

   Mr Karaarslan - Family Tax Benefit for 2 youngest children          $278.74
   Mr Karaarslan -  Carer Payment  $338.40
   Mr Karaarslan - Carer Allowance  $82.00

6. From the total of these payments ($669.14) Centrelink is withholding $69.68 per fortnight towards recovery of the parenting allowance and disability support pension paid during the preclusion period.

7. A medical report from Dr P. Tisdall dated 27 August 2001 was entered in evidence, as Exhibit D:

   . . .
   Mrs Karaarslan has a serious physical disability.  She has a large central disc prolapse at L5-S1 which causes her significant low back pain.  Mrs Karaarslan requires surgical treatment to remove the prolapse which she has refused.  She has been warned that by refusing surgery she could place herself at risk of developing a cauda equina compression with involvement of her bowel and bladder.  This is a serious medical problem.
   Mrs Karaarslan suffers from constant low back pain which radiates into her legs, she also has paraesthesia in both her legs.  She requires MS Contin 20mg twice daily and up to six Panadeine forte daily to help control her pain. 

8. The applicant told the Tribunal that although she had received numerous letters from Centrelink in the period from 1998 to 2001, it was not her practice to read the back of them where information is provided about obligations to advise Centrelink about claiming or receiving compensation.  She said she has difficulty reading for more than a few minutes and she gets bored.  She said her husband's English language skills are less than hers.
   CONSIDERATION OF ISSUES

9. Section 17(2) of the Social Security Act 1991 (the Act) provides that "compensation" for the purposes of the Act includes a payment in settlement of a claim for damages if there is some component referable to lost earnings or lost earning capacity. Section 17(3) provides that where a claim is settled, 50 per cent of the total settlement is deemed to be in respect of lost earnings or lost earning capacity (compensation part of a lump sum compensation payment). The Tribunal is satisfied that the applicant's settlement sum included a component for lost earnings or lost capacity to earn and that therefore the formula in s1165(8) of the Act must be applied to work out a preclusion period during which the applicant cannot be paid a compensation affected payment. Section 1166(4C) provides that a "recoverable amount" arises where a person has been paid a "compensation affected payment" during a preclusion period. Disability support pension is one "compensation affected payment" (s17(1)(a)) and parenting payment is another (s17(1)(b)).

10. Section 1665(8) provides the formula for working out the preclusion period:

    1165.(8)         If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:

    Compensation part of lump sum
    Income cut-out amount

The respondent submitted that the income cut-out amount in the formula is to be taken as that figure applying at the time of the settlement, although this is not specifically provided for in the Act.  With effect from 20 September 2001, an amendment to the Act (Family and Community Services Legislation (Simplification and Other Measures) Act Nº 71 of 2001) provides that the income cut-out amount is the amount in force when the compensation was received.  In Re Morgan and Secretary Department of Family and Community Services ([2001] AATA 734), the Tribunal decided that although the legislation prior to the amendment does not specifically so state, the date should be that at the time of settlement. The Tribunal agrees with that approach. At the date of the applicant's settlement in April 2000, the income cut-out amount provided for in the Act was $428.40.

1. The "compensation part of the lump sum compensation" is defined in s17(3) of the Act as 50 per cent of the settlement amount. Applying the formula in s1165(8) to the settlement amount in the applicant's case, the Tribunal is satisfied that the resultant period is 175 weeks, beginning on 18 June 1998 and ending on 24 October 2001.

2. As to the question of recovery of payments made during the preclusion period, "recoverable amount" is defined in s1166(2) of the Act as an amount specified in a notice and an amount worked out under s1166(4C). The applicant was sent such a notice on 23 March 2001(T22). It appears from the documents that the information that a settlement agreement had been made had come to Centrelink through a data match with Health Insurance Commission records early in 2001 (T18). The Tribunal is satisfied that the amounts of both parenting payment and disability support pension paid in the preclusion period are recoverable, being debts pursuant to s1225(1) of the Act.

3. The respondent submitted that both the SSAT and the original decision-maker had erred in calculating the "recoverable amount".  Detailed re-calculations, appended to the respondent's Statement of Facts and Contentions, were before the Tribunal and need not be set out in full.  Suffice to say that the calculations done by the SSAT did not take into account an overpayment of parenting payment (later recovered by Centrelink), which occurred in the changeover to disability support pension in 1999.  On the basis of the re-calculations in Exhibit A, the Tribunal is satisfied that the recoverable amount is $22,273.33, not $22,418.63 as calculated by the SSAT.

4. The central issue for the applicant in this case was the question of special circumstances. At the time of the decision under review this was provided for in s1184 of the Act, and is now provided for in s1184K(1) of the Act in identical terms:

   1184.(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.

5. The meaning of special circumstances was discussed by the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1. That case is authority for the proposition that special circumstances must be unusual, uncommon or exceptional and are taken to be circumstances where the imposition of the statutory charge would result in unfairness. Section 1184 allows the decision-maker the fullest opportunity to consider the particular circumstances of each case and the factors which alone or together might be considered to take the case out of the ordinary. There must be something to distinguish the case from others, to make it stand out from the usual or ordinary case (Groth v Secretary, Department of Social Security (1996) 40 ALD 541 at 545).

6. In the applicant's case the matters raised include her ill health, the low amount for economic loss and inadequate legal advice, as well as her lack of knowledge that a period of non-payment would be imposed or moneys recovered. 

7. The applicant submitted that the amount for economic loss should be taken as $20,000 as set out in the Terms of Settlement.  The respondent submitted that the Act provides that where any part of the lump sum is for economic loss it is caught within the provisions of the Act and further that there was no evidence to justify that the figure of $20,000 was a realistic reflection of economic loss given the applicant was still a young woman.  It is clearly the case that the Act provides for the result that economic loss is taken to be a greater amount than is reflected on the face of many settlements.  The applicant submitted that, had she known of this, she would have pursued her claim to hearing.  However, none of this of itself produces a harsh result or justifies making an exception in this case.  Settlements require value judgements to be made to finalise litigation and to assess the strength of the case at the time that the settlement is made.  

8. On the applicant's evidence, presented in Exhibit E, the family's weekly expenditure was $1078.  This differed from the expenditure of $723 per week stated to the SSAT.  The respondent set out Centrelink payments totalling $669.14 fortnightly (family tax benefit for the two younger children and the husband's carer payments).  Sedda received $157 youth allowance and Recep $140 per fortnight. The applicant's Statement of Financial Circumstances dated 29 August 2001 (Exhibit E) showed a maintenance payment of $200 although the source of the payment or the period of payment is not evident from that document.  The applicant's overall evidence was that they have great difficulty in managing their finances, that they have outstanding debts and are running up increasing credit card debt.  The applicant also submitted that she was not given the settlement money to feed herself.  She submitted that it was given to her because of the damage to her and to make up for the fact that she would have to put up with pain. 

9. The Tribunal was not satisfied that the claimed expenditure in the Statement of Financial Circumstances is an accurate reflection of outgoings.  Expenditure of the order suggested could not be sustained on the evidence of household receipts.  At the very least it would be reflected in a far higher credit card debt.  The Tribunal was not satisfied that substantial hardship was being experienced although the increasing credit card debt and inability to pay bills reflect difficult circumstances for the household.  However it does not appear on the evidence that significant attempts are being made to curtail expenditure in areas that are discretionary.  For example it is claimed that $100 per week is spent on entertainment, and $100 per week for clothing.

10. The applicant still has significant assets in the house and the cars.  The Tribunal does not accept that the car valued at $16,000 could not be sold in order to alleviate the difficulties that the applicant says she faces.  Furthermore the house is a substantial asset which is likely to have increased in value due to the improvements made to it using the compensation moneys.  With the assets retained by the applicant this is not a case in which the discretion should be exercised.

11. This is so even although her solicitor may well have poorly advised the applicant.  There is redress available in circumstances where people consider they have received inadequate legal advice.  The Tribunal considers that this on its own would not be sufficient to establish special circumstances.  In the Tribunal's view, any deficiency of advice from the solicitor was compounded by the applicant's own failure to advise Centrelink that the settlement had occurred, and her failure to seek from Centrelink further information after her solicitor had told her that "maybe they would" impose a period of non-payment.  The applicant's own failure to advise Centrelink that she was seeking compensation and her failure to advise when the settlement occurred meant that she did not have the advantage of getting any information from Centrelink about the impact of the receipt of compensation under the Act.  The Tribunal accepts that the applicant outlaid the money in large part before she knew of a preclusion period.   The main reason why she did not have the information about the preclusion period until 2001, was that she did not let Centrelink know she had received the compensation payment.  There were sufficient discussions with her solicitor to put her on notice to take the matter up with Centrelink.

1. The Tribunal accepts that the applicant is disabled by her back condition.  This, by itself, does not put the applicant in a different position than other cases where those injured in the workplace or in circumstances which entitle them to compensation are subject to preclusion periods.  This circumstance either on its own or in combination with the other factors presented is not sufficient to exercise the discretion in this case.

2. For these reasons the Tribunal decides that 50 per cent of the settlement sum must be taken into account using the formula under the Act.  As a result there is a preclusion period between 18 June 1998 and 24 October 2001.  The decision to recover parenting payment and disability support pension paid in the preclusion period is correct and there are no special circumstances to warrant disregarding the compensation in whole or in part.
   DECISION

3. The Tribunal varies the decision under review as follows:

   1.the amount of social security payments paid to the applicant in the compensation preclusion period to be recovered from the applicant as a compensation debt is $22,273.33; and

   2.the decision under review is otherwise affirmed.

   I certify that the thirty-four [34] preceding paragraphs are a true copy of the reasons for the decision herein of 
   M.J. Carstairs, Member

   (sgd)       Catherine Thomas
                 Clerk

   Date of Hearing:  31 August 2001
   Date of Decision:  5 October 2001
   Solicitor for the Applicant:           Nil — self-represented
   Solicitor for the Respondent:       Nil — Mrs R. Bradley, Advocate with Centrelink