Kastoras and Department of Family and Community Services
[2001] AATA 265
•3 April 2001
DECISION AND REASONS FOR DECISION [2001] AATA 265
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2000/850
GENERAL ADMINISTRATIVE DIVISION )
Re Constantinos Kastoras
Applicant
And Secretary, Department of Family and Community Services
Respondent
DECISION
Tribunal Ms SM Bullock, Senior Member
Date3 April 2001
PlaceSydney
Decision The decision under review is affirmed.
...................[sgnd]..................
Ms SM Bullock
Senior Member
Catchwords
SOCIAL SECURITY – Lump Sum Compensation - Preclusion Period – Special Circumstances
Legislation
Social Security Act 1991, ss 17, 1165, 1184
Authorities
Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Secretary, Department of Social Security v Banks (1990) 23 FCR 416
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Beadle v Director-General of Social Security (1985) 60 ALR 225
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Ferry and Secretary, Department of Social Security (1997) AAT 11691, 13 March 1997
Re Secretary, Department of Social Security and Winterbothom (1990) AAT 6499, 11 December 1990
Re Lintern and Secretary, Department of Social Security (1993) 72 SSR 1041
Secretary, Department of Social Security and Smallacomb (1991) 23 ALD 141
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Re Stevens and Secretary, Department of Social Security (1989) 18 ALD 659
Re Liebelt and Secretary, Department of Social Security (1992) 70 SSR 1007
Re Secretary, Department of Social Security and Kirwan (1990) 22 ALD 280
Re Martin and Secretary, Department of Social Security (1990) AAT 6482, 14 November 1990
Re Kulakov and Secretary, Department of Social Security (1991) 63 SSR 879
Re Zaccardi and Secretary, Department of Social Security (1995) 40 ALD 760
Re Colaiacolo and Secretary, Department of Social Security (1995) AAT 2109, 24 April 1985
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Re Secretary, Department of Social Security and Gulevsky (1996) AAT 10959, 24 May 1996
Re Black and Secretary, Department of Social Security (1995) 83 SSR 1219
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793
Re Magallanes and Secretary, Department of Social Security (1995) AAT 10044, 3 March 1995
Re Beus and Secretary, Department of Social Security (1992) 68 SSR 981
Re Hadchiti and Secretary, Department of Social Security [1999] AATA 20
Re Latour and Secretary, Department of Social Security (1988) 16 ALD 279
Re Secretary, Department of Social Security and Rodgers (1992) 26 ALD 235
Re Secretary, Department of Social Security and Barry AAT 10320, 28 July 1995
Re Cavuoto and Secretary, Department of Social Security (1994) AAT 9249, 13 January 1994
Re Minda and Secretary, Department of Social Security (1989) 49 SSR 641
Re Secretary, Department of Social Security and Winkleman (1993) AAT 8507, 27 January 1993
Re Bland and Secretary, Department of Family and Community Services [1999] AATA 711
Re Secretary, Department of Social Security and Thompson (1993) AAT 8997, 17 September 1993
REASONS FOR DECISION
3 April 2001 Ms SM Bullock Senior Member
This is an application for review by Mr Constantinos Kastoras to the Administrative Appeals Tribunal ("the Tribunal") of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 3 March 2000, that there were no special circumstances to allow it to alter the preclusion period set by a delegate of the Secretary, Department of Family and Community Services ("the Department") (T2). The SSAT's decision affirmed a decision of an Authorised Review Officer ("ARO") of the Department made and communicated in writing to Mr Kastoras on 20 January 2000 (T23). The ARO's decision affirmed the original decision of a departmental delegate made on 8 May 1999 (T8).
A hearing was held in Sydney before the Tribunal on 21 December 2000. Mr Kastoras was self represented and provided oral evidence to the Tribunal with the assistance of an interpreter in the Greek language, Mr D Zafiropoulos. The Department, the Respondent in this matter, was represented by Mr G Lozynsky, Departmental Advocate. The Tribunal took into evidence documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 (Cth) and the following exhibits:
Exhibit Number Description Date
T1-T28 T Documents Various
A1 Letter from Dr C Baldas, General Practitioner, "To Whom It May Concern" 24 August 2000
A2 Statement of Mr A Kastoras, son of Mr C Kastoras 23 August 2000
A3 Copies of various current bills for Mr C Kastoras Various
A4 Further copies of a number of bills and accounts of Mr C Kastoras Various
A5 Report of Dr G Freilich, Radiologist, Sydney Imaging Group, Campsie 12 October 2000
A6 List of Mr C Kastoras' medication Undated
R1 Respondent's Statement of Facts and Contentions 6 October 2000
R2 Centrelink computer printouts of Pensions and Benefits paid to Mrs J Kastoras 20 December 2000
Issues
The issues in this matter are:
(a)Whether or not a compensation preclusion period from 3 May 1999 to 23 September 2001 is applicable and correctly calculated; and if so
(b)Whether or not there are special circumstances which warrant all or a part of the compensation paid to Mr Kastoras being disregarded.
Legislation
A determination in this matter requires consideration of the provisions of the Social Security Act 1991 ("the Act").
Section 17 of the Act deals with compensation recovery definitions. Subsection 17(1), (2) and (3) of the Act are relevant and state:
"Compensation recovery definitions
17(1) In this Act, unless the contrary intention appears:
average weekly earnings, in relation to an old lump sum preclusion period, means the amount:
(a) estimated as the average total weekly earnings, during a particular month, of all employees (all persons) in Australia; and
(b) last published by the Australian Statistician before the lump sum compensation payment became payable.
compensation has the meaning given by subsection (2).
Note: See also section 1163B.
compensation affected payment means:(aa) an age pension; or
(a) a disability support pension; or
(b) a parenting payment; or
(c) a social security benefit; or
(e) a disability support wife pension; or
(f) a carer payment; or
(g) a special needs disability support pension; or
(h) a special needs disability support wife pension; or
(i) mature age allowance; or
(j) mature age partner allowance; or
(k) a former payment type.…
income cut-out amount means the amount worked out using the following formula:
( Maximum basic rate + Pharmaceutical amount for a single person ) + Ordinary free area limit
where:
maximum basic rate means the amount specified in column 3 of item 1 in Table B in point 1064-B1.
pharmaceutical amount for a single person means the amount specified in column 3 of item 1 in the Pharmaceutical Allowance Amount Table in point 1064-C8.
ordinary free area limit means the amount specified in column 3 of item 1 in Table E-1 in point 1064-E4.…
lump sum preclusion period means either an old lump sum preclusion period within the meaning given by subsections 1165(3) to (4) (inclusive) or a new lump sum preclusion period within the meaning given by subsections 1165(5) to (8) (inclusive), as the case requires.
payment for a period has the meaning given by subsection (7).
periodic payments period means:(a) in relation to a series of periodic payments—the period in respect of which the payments are, or are to be, made; and
(b) in relation to a payment of arrears of a series of periodic payments—the period in respect of which those periodic payments would have been made if they had not been made by way of an arrears payment:
Note: arrears of periodic compensation payments are normally treated as reducing, on a dollar for dollar basis, a payment under this Act that is covered by Part 3.14 because these compensation payments are not lump sum compensation payments: see subsection 17(4A) and sections 1168 and 1170.
…
Compensation17(2) For the purposes of this Act, compensation means:
(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) that is:
(e) made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f) made either within or outside Australia.
Note: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law.
…
Compensation part of a lump sum17(3)For the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a) 50% of the payment if the following circumstances apply:
(i) the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(ab) 50% of the payment if the following circumstances apply:
(i) the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(b) if those circumstances do not apply—so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn.
…"
Part 3.14 of the Act deals with compensation recovery. Section 1165 deals with lump sum compensation payments and preclusion periods and as relevant states:
"Person member of a couple—payment received on or after 20 March 1997
1165(2AA) Subject to subsection (2B), if:(a) a person receives or claims a compensation affected payment; and
(b) the person is a member of a couple; and
(c) the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period.
…
New lump sum preclusion period
1165(5)If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:
(a) begins on the day after the last day of the periodic payment period; and
(b) ends after the number of weeks worked out under subsections (8) and (9).
Note: For periodic payments period see section 17.
1165(6)If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the new lump sum preclusion period is the period that:
(a) begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b) ends after the number of weeks worked out under subsections (8) and (9).
1165(7)If neither subsection (5) nor (6) applies, the new lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of earning capacity began; and
(b) ends after the number of weeks worked out under subsections (8) and (9).
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 amountNote 1: For compensation part of lump sum, see section 17.
Note 2: For income cut-out amount, see section 17.1165(9)If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number.
…"
There may be circumstances in which some compensation payments may be disregarded and of relevance is section 1184 of the Act. As relevant, section 1184 states:
"Secretary may disregard some payments
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.
1184(2) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person's partner receives compensation; and
(c) the set of circumstances giving rise to the compensation are not related to the set of circumstances that give 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 in itself constitute special circumstances for the purposes of subsection (1).
Note: Subsection (2) is in response to comments made in the decision of the Administrative Appeals Tribunal in Re Secretary, Department of Social Security and Lee (S92/155) to the effect that the Social Security Act is aimed at reducing pensions in situations where a social security recipient's entitlement is somehow connected with the fact that the recipient's partner is in receipt of compensation payments and not wages.…"
Background
The information provided herein is not in dispute and is provided by way of background to this matter.
Mr Kastoras was born on 19 January 1953 (T1, p1).
In 1991, Mr Kastoras had purchased a home and on 3 January 1992, he took out a bank loan for the sum of approximately $60,000.00 to renovate his new home (T15). The loan was extended on 28 February 1992 to $70,000.00 (T16).
On 20 February 1996, Mr Kastoras had a work accident (T4). At the time of the accident, Mr Kastoras was employed in a labouring position. He earned approximately $900.00 per fortnight.
While on compensation and experiencing financial difficulty, Mr Kastoras' son, Mr Argy Kastoras, provided financial assistance to cover various expenses including home mortgage repayments. This financial assistance from Argy Kastoras amounted to $60,000.00.
On 23 April 1999, Mr Kastoras settled his worker's compensation claim with Mercantile Mutual Insurance Company for the sum of $105,000.00, having previously received weekly compensation payments of $344.50 from 23 May 1996 to 2 May 1999 (T4).
On 8 May 1999, Centrelink advised Mr Kastoras of the imposition of a preclusion period of 125 weeks from 3 May 1999 to 23 September 2001 (T8).
On 11 June 1999, following receipt of his worker's compensation settlement, Mr Kastoras repaid $54,500.00 to his son. Mr Kastoras later made a further $5,500.00 repayment to his son. In a statement from Mr Argy Kastoras of 23 August 2000, he wrote that the full $60,000.00 provided by him to his father was repaid in full (Exhibit A2, T17, p38).
In September 1999, Mr Kastoras requested an internal review by Centrelink of the decision to impose a preclusion period (T12, p23).
On 22 December 1999, a departmental delegate having reviewed Mr Kastoras' case, affirmed the original decision, concluding there were no special circumstances to allow Mr Kastoras' compensation to be disregarded in part or as a whole (T19).
On 10 January 2000, Mr Kastoras requested a review by an ARO (T21). On 20 January 2000, an ARO affirmed the original decision of the departmental delegate. The ARO concluded that the preclusion period had been correctly calculated and there were no special circumstances to allow Mr Kastoras' lump sum compensation payment to be disregarded in part or as a whole. In regard to Mr Kastoras' claim that he was obliged to repay his son Argy, the ARO noted:
"…However, you have not provided any evidence that you borrowed money from your son, or that you were obliged to repay him. Without such evidence, I formed the opinion you voluntarily gave the money to your son without compelling reason.
As such, I decided your circumstances are not special. You could approach your son and ask that he repay to you some or all of the $60,000." (T23, p60)On 3 February 2000, Mr Kastoras lodged an appeal to the SSAT (T24) and on 3 March 2000, the SSAT affirmed the decision under review concluding that the preclusion period had been correctly calculated and imposed and there were no special circumstances to allow compensation paid to Mr Kastoras to be disregarded in part or as a whole (T2).
On 5 June 2000, Mr Kastoras lodged an appeal to the Tribunal (T1) stating that:
"I consider that the SSAT and originally Centrelink, did not correctly interpret the $60,000 loan taken out after my accident which had to be repaid to my son from the settlement." (T1, p2).
Evidence of Mr Kastoras
Mr Kastoras told the Tribunal that after his work accident, he received $344.50 per week in compensation, which then ceased in April 1999. During this period, Mrs Kastoras was unemployed. Mr Kastoras stated that his compensation claim was settled on 23 April 1999 and he received a settlement of $105,000.00, some six or seven weeks later. Mr Kastoras was told of a two year preclusion period and he was aware of this at the time of the court hearing following which his case was settled. The precise terms of the preclusion period were not made apparent to him, Mr Kastoras stated, until he received Centrelink's letter of 8 May 1999 (T8). Mr Kastoras stated that he had received his settlement after the Centrelink letter advising of the preclusion period.
Mr Kastoras stated that before his work accident, he had committed himself financially to renovations of his house. Once he had been injured at work, his financial situation became very tight. Mr Kastoras' son, Argy, agreed to help him financially to service financial commitments such as mortgage repayments, renovation costs and day to day living expenses. Mr Kastoras stated that the home mortgage was repaid in full before he received his compensation settlement. Mr Kastoras further informed the Tribunal that from time to time his son had also helped him financially prior to the accident. Mr Kastoras stated that he borrowed a total amount of $60,000.00 from Argy. He stated that there was an agreement between him and his son, that Argy would pay all the bills but when Mr Kastoras received his compensation settlement, he would repay the loan. Mr Kastoras informed the Tribunal that there was an agreement from 25 May 1999, that Argy would either provide his father with money which Mr Kastoras would deposit in the bank and then draw it out, or on other occasions, Argy or his wife would pay the bills for his father. Mr Kastoras stated that the agreement was drafted, referring the Tribunal to T12 (page 25). This document is a letter to Centrelink from TS Menounos and Associates, Solicitors and Attorneys, dated 9 September 1999, indicating that Mr Kastoras had informed the solicitors that he owed his son $60,000.00 and that he would repay this from his worker's compensation. Mr Kastoras agreed upon further questioning that this document was not in fact a written agreement.
In relation to the agreement, Mr Kastoras conceded that it was not a written agreement but stated that he believed he had an oral agreement between father and son which he was morally obliged to honour. This oral agreement had the force of a written agreement, Mr Kastoras explained. The funds from his son enabled him to keep his two bedroom house which he considered was an average dwelling. He had never contemplated selling the house which had cost approximately $200,000.00 in 1980. Mr Kastoras did not know its current value.
From the proceeds of the compensation settlement, Mr Kastoras informed the Tribunal that he had purchased a refrigerator, replaced his car with a smaller car and purchased furniture and other household items. The "money ran away very fast", Mr Kastoras informed the Tribunal.
Mr Kastoras did not think of delaying the repayment of $60,000.00 to his son. He thought he should immediately repay this money once his settlement was received. Mr Kastoras conceded that he did not really think of the preclusion period. He stated that he knew he owed his son money and lost sleep over worrying about this debt. After repaying his son, Mr Kastoras took a number of holidays at various times with his wife including travelling to Queensland, Melbourne and Adelaide. Mr Kastoras holidayed "one week here, one week there", he stated. Mr Kastoras reiterated that the money just "went away" and this occurred without him thinking of the preclusion period.
Mr Kastoras' financial situation at the time of hearing is that he has approximately $2,144.90 in a bank account.
Mrs Kastoras does not work and has not worked since 1995. She is in receipt of a Disability Support Pension and receives approximately $660.00 per fortnight. Mr Lozynsky confirmed for the Tribunal that Mrs Kastoras was in receipt of a Newstart Allowance from 2 July 1999 until 20 July 2000 and was receiving $313.90 at that time. A Disability Support Pension was then granted to Mrs Kastoras and she receives between $325.70 and $331.70 per fortnight. Mrs Kastoras also receives a Carer Allowance at the rate of $79.50 per fortnight (Exhibit R2). Mr Kastoras stated that despite his wife receiving the Disability Support Pension, she has her own health needs which must be met. Mr Kastoras and his wife argue a great deal about money, he explained to the Tribunal.
Despite his poor financial position, Mr Kastoras has not considered asking his son again for any financial assistance. He has no other property. Mr Kastoras explained to the Tribunal that his financial situation is so tight that when his mother died on 31 September 2000, he had no way of attending her funeral because he could not afford the air fare. At the time of hearing, Mr Kastoras estimated his personal expenses as being $170.00 per week for items such as food, medication and expenses such as gas, electricity and water. Mr Kastoras confirmed that he has a HealthCare Card. Although Mr Kastoras' financial situation is very tight, he confirmed at the time of hearing there was no money owing on the house and all the "bills" had been paid.
Referring to his health problems, Mr Kastoras described his inability to sleep at night because of pain. He takes the medication Panadeine to try and control his pain. Mr Kastoras further described being restricted in the use of his hands and arms and also has stomach problems for which he takes Losec, two tablets per day. Mr Kastoras informed the Tribunal that he also has a heart condition involving a heart valve and his cardiologist has suggested he may need surgery. Further, Mr Kastoras described suffering depression and is being treated by his General Practitioner. He also suffers from the condition hyperlipidaemia. One and a half years ago he spent some time in hospital experiencing very bad pain in his lungs and having breathing difficulties as a result of this condition. Mr Kastoras' current medications are:
Veracaps Sr (Hypertension) 240mg
Natrilix (Hypertension) 90mg
Sotalol (Atrial Fibrillation) 160mg
Lipobay (Depression) 200mg
Panadeine Forte (Pain)
Lopid (Hyperlipidaemia) 600mg
Losec (Peptic Ulcer) 20mg
Efexor (Depression) 37.5mg
Astrix 100mg
Celebrex 200mg
(Exhibit A6)
Currently, Mr Kastoras consults a Cardiologist, a Gastroenterologist and an Orthopaedic Surgeon for his health problems. Mr Kastoras stated that his health prevents him from driving long distances and he relies on his brother-in-law to transport him to various places. Mrs Kastoras does not drive. Mr Kastoras has not thought of selling the car as his brother-in-law uses it to transport Mr and Mrs Kastoras around.
Mr Lozynsky noted that at the time of the SSAT's hearing on 3 March 2000, Mr Kastoras had told the Tribunal that at that time he had remaining funds of $23,300.00. In evidence to this Tribunal, Mr Kastoras reported that he now only had $2,441.90 remaining, which, Mr Lozynsky indicated, represented a significant spending within a nine month period. Mr Lozynsky put to Mr Kastoras that this was reckless spending for someone who knew of the existence of a preclusion period. Mr Kastoras did not agree, stating that he continually had to withdraw money from the bank "to live". Mr Kastoras was unable to be specific about what these funds were spent on and could not remember if he had any holiday trips after the SSAT hearing but later thought that perhaps he may have had trips in August and October 2000.
Mr Kastoras later stated that after his work accident, he had lost control of himself in terms of his spending. He explained that he finds it difficult to control his spending and his wife has tried to regulate and indeed to stop him recklessly spending money. Mr Kastoras informed the Tribunal that when he has "money in his pocket", he feels the need to spend it. There have been many arguments with his wife about his spending habits but he got to a point where he would just walk away from the arguments.
Since two months prior to the hearing before the Tribunal, Mrs Kastoras has been controlling the finances and Mr Kastoras stated that their financial situation is better and his spending is more under control. Mr Kastoras stated that he had spoken to Dr Baldas about his financial problems and Dr Baldas has suggested that Mr Kastoras should be referred to a "specialist" doctor to help him deal with his problem. Mr Kastoras eventually conceded that he would spend money on gambling perhaps two to three times per week.
Other Evidence
Dr C Baldas, General PractitionerDr C Baldas, Mr Kastoras' General Practitioner, reported on 24 August 2000, that Mr Kastoras had been his "patient for many years" and was a regular visitor to the surgery. Dr Baldas certified that Mr Kastoras was not fit for employment and has the following health problems:
"1. Chronic pain in both shoulders:
·Right shoulder – rotator cuff problem
·Left shoulder – rotator cuff tear and repair (unsuccessful)
– ruptured left biceps tendon
2. Peptic ulcer - Treated with Losec
Severe reflux oesophagitis3. Episodic Atrial Fibrillation - Treated with Sotalol
4. Hypertension - Treated with Vera Cap
Natrilix
5. Depression - Treated with Efexor
6. Hyperlipidaemia - Treated with Lipobay
Lopid
…"
In addition to these numerous ongoing health problems, Dr Baldas reported that Mr Kastoras has a past medical history of bilateral inguinal hernia repair, pulmonary embolism and laparoscopic cholecystectomy (Exhibit A1).
Dr G Freilich, Radiologist, Sydney Imaging Group, CampsieDr Freilich reported to Dr Baldas on 12 October 2000, that in relation to an ultra sound of Mr Kastoras' right shoulder, the subscapularis tendon is mildly thinned and there is minimal cortical irregularity of the humerus at its insertion. There was also a complete absence, on investigation, of the anterior aspect of the supraspinatus tendon at its sight of insertion consistent with a complete tear. There was no effusion identified and there was minimal restriction of movement without sonographic evidence of impingement (Exhibit A5).
Statement of Mr A KastorasOn 23 August 2000, Mr Kastoras' son, Argy, stated that he had a "Gentlemans' Agreement" with his father, whereby:
"… I would take full financial responsibility for all of his debts and incoming bills, as well as any other unmanageable expenses that might arise, for the duration of time that he was on reduced income.
My father agreed to repay to me in full all monies owing to me at the time of settlement of his compensation claim. The total sum I had loaned to my father was $60,000.
On the 11th June 1999 my father repaid to me the sum of $54,500. The remainder of the debt ($5,500) has been repaid in smaller amounts over the last few months, as I have required it.
I do declare that the amount of $60,000 has been repaid to me in full by my father, Constantinos Kastoras, and no further amounts are outstanding." (Exhibit A2)
Submissions
Mr Kastoras stated that he had special circumstances which he submitted the Tribunal should take into account in deciding his application for review. In this regard, Mr Kastoras asked the Tribunal to take into consideration the following circumstances: his financial difficulty; his health - both physical and psychological problems; and the fact that he had an agreement to repay his son $60,000.00 loaned to him when Mr Kastoras was in financial difficulties following his work accident.
Mr Kastoras noted that he sees Dr Baldas frequently, at least once per week and on many occasions three or four times per week. Consultations with Dr Baldas were not just for his physical problems but also because of his psychological difficulties and the stress associated with trying to manage his financial situation. Mr Kastoras submitted that he is very ill and needs the Department's help.
If the Tribunal decided to affirm the SSAT's decision then, in such circumstances, Mr Kastoras submitted that he will "go lower in his life" and his condition will severely deteriorate.
Mr Kastoras asked the Tribunal to consider that if he had not needed the money to live, he would not have made an application for review to the Tribunal. Further, Mr Kastoras asked the Tribunal to understand the importance of the agreement with his son, which, although not in writing, had moral force and was a matter of importance between a father and son. To Mr Kastoras' mind, the agreement he had between his son and himself had the legal force of a written agreement.
Mr Lozynsky, for the Respondent, submitted that noting Mr Kastoras' worker's compensation settlement of 23 April 1999, the preclusion period of 125 weeks from 3 May 1999 to 23 September 2001 had been correctly calculated under the Act. Mr Lozynsky disagreed with Mr Kastoras' view that the debt to his son should have been considered in calculating the length of the preclusion period. Further, Mr Lozynsky submitted that as long as the lump sum compensation payment was in respect of lost earnings or earning capacity, the whole of the worker's compensation payment is caught within the legislative meaning of "compensation". It is apparent, Mr Lozynsky noted, that from the legislation, the term "payment" is a reference to a "compensation payment" appearing in subsection 17(3) of the Act which in turn incorporates the definition of compensation in subsection 17(2) of the Act. Mr Lozynsky further contended that the proper interpretation of "payment" is contained in subsection 17(3) of the Act by reference to the gross settlement figure and not the net figure after bills, expenses and debts had been paid by the Applicant. The Tribunal was referred to a number of cases whereby a compensation payment has been held to embody legal costs, medical costs and general damages components of settlements expressed to be "inclusive of costs". In this regard, Mr Lozynsky specifically noted Secretary, Department of Social Security v Hulls (1991) 22 ALD 570, in which the Federal Court referred to the second reading speech relating to the legislative amendment which introduced the 50 per cent rule. Justice O'Loughlin stated at 579:
"In a'Beckett's case, supra, the Social Security Appeals Tribunal was of the opinion that the pensioner's legal costs of $6,000 should have been excised from the settlement sum of $60,000 for the purpose of applying the '50% rule'. Von Doussa J said:
"If any part of the sum of $60,000 received by the respondent were a payment of the kind described in s 152(2)(a), being a payment in whole or in part in respect of an incapacity for work, the component in that sum representing legal costs should properly be treated as part of the 'lump sum payment by way of compensation'."
I respectfully agree with these remarks.
… A "payment by way of compensation" is, according to s 152(2)(a) a reference to one or more of the four nominated types of payment that is or are "in whole or in part, in respect of an incapacity for work" (emphasis added). Thus, so long as the payment of $70,000 contained an element that was in respect of an incapacity for work - and it is common ground that there was such an element in this case- the payment of $70,000 must be classified, in its entirety as "a payment by way of compensation". Support for this view can be found in Banks' case.
…"
Mr Lozynsky submitted that the purpose of the legislation is to protect the public purse and prevent people from "double dipping" - that is, being paid compensation as well as social security benefits. This view was also noted in Re Ferry and Secretary, Department of Social Security (1997) AAT 11691, 13 March 1997; Secretary, Department of Social Security v Hulls (supra) and Re Secretary, Department of Social Security and Winterbothom (1990) AAT 6499, 11 December 1990. Mr Lozynsky further referred the Tribunal to Re Lintern and Secretary, Department of Social Security (1993) 72 SSR 1041, in which that Tribunal noted that public money should not be used to improve or give gain to social security recipients. Mr Lozynsky submitted that Centrelink's obligation is to the tax-payer to ensure that those who receive compensation are not also benefited with social security payments.
Mr Lozynsky then referred to section 1184 of the Act which contains a discretion allowing for a whole or part of a compensation payment to be treated as not having been made if special circumstances are found to exist. Referring to Re Ivovic and Director-General of Social Services (1981) 3 ALN N95, Mr Lozynsky noted that Tribunal's reference to special circumstances (then dealt with under section 155 of the Social Security Act 1947) in the following terms:
"The reference to special circumstances 'by reason of which' a person liable 'should be released' requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes… Thus whilst keeping the dominant principle of s.115 in mind, he must nevertheless be prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate…"
In Beadle v Director-General of Social Security (1985) 60 ALR 225, Mr Lozynsky noted that the Federal Court concluded at page 230 that it was in broad agreement with the position adopted by the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1, where at page 1, the Tribunal stated:
"An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special."
In Mr Kastoras' case, Mr Lozynsky submitted that if all or part of Mr Kastoras' lump sum compensation payment was disregarded this would frustrate the intention of the Act. This very point was taken up in Groth v Secretary, Department of Social Security (1995) 40 ALD 541.
Mr Lozynsky submitted that the Tribunal should consider the facts of this case and all of Mr Kastoras' evidence including that Mr Kastoras was officially notified in writing of the preclusion period on 8 May 1999 (T8). Yet despite this knowledge of his ineligibility for income support until 23 September 2001, he proceeded to spend the bulk of his $105,000.00 settlement. Referring to Re Lintern and Secretary, Department of Social Security (supra), Re Latour and Secretary, Department of Social Security (1988) 16 ALD 279 and Re Secretary, Department of Social Security and Rodgers (1992) 26 ALD 235, Mr Lozynsky submitted that Mr Kastoras had unreasonably dissipated a large part of his settlement in total disregard of his circumstances. Mr Lozynsky concluded that Mr Kastoras' spending had been expenditure by choice which was within his control. He spent the vast majority of his settlement in a short period of time, indicating some extravagance without any thought to budgeting until the end of the preclusion period. Mr Lozynsky submitted that Mr Kastoras had spent most of his compensation payment on non-essential items such as furnishings, a car and expenditure on holiday trips. Specifically, Mr Lozynsky referred the Tribunal to Mr Kastoras' $5,000.00 in trading in his existing car for a new car; $7,000.00 on furniture; $3,000.00 on a new freezer and television; and, $5,000.00 for trips and presents as described to the SSAT. Further, in relation to the amount of $70,000.00 which Mr Kastoras borrowed from the Commonwealth Bank for renovations, the Respondent contended that Mr Kastoras should have been aware of the costs to be incurred in order to live in the house and hence had no excuse for him spending his money imprudently and in total disregard of the preclusion period. Referring to Re Secretary, Department of Social Security and Barry AAT 10320, 28 July 1995, that Tribunal found that the exercise of the discretion in shortening the preclusion period was unjustified because it would condone a spending pattern which took little or no account of planning for financial maintenance during the preclusion period. Mr Lozynsky submitted that that Tribunal's decision was based on facts very similar to those presented in Mr Kastoras' case.
While Mr Lozynsky acknowledged that Mr Kastoras' financial situation is currently tight, he urged the Tribunal to consider how this financial hardship had arisen. Mr Lozynsky reiterated that Mr Kastoras had spent his money extravagantly and with reckless regard for his future.
In relation to the significant amount of compensation payment which was used to repay a loan to Mr Kastoras' son, Argy, while noting that this was a "Gentlemans' Agreement", such an agreement was not a legally binding agreement, Mr Lozynsky contended. Further, Mr Lozynsky submitted that the loan should not be classed as financial hardship as noted in Re Cavuoto and Secretary, Department of Social Security (1994) AAT 9249, 13 January 1994. This principle was further discussed in Re Minda and Secretary, Department of Social Security (1989) 49 SSR 641 and Re Secretary, Department of Social Security and Winkleman (1993) AAT 8507, 27 January 1993.
While Mr Kastoras has financial commitments, these are the normal consequences of daily living, Mr Lozynsky submitted. Mr Kastoras owns his own home worth approximately $200,000.00 and he has expended further monies in renovations. He has a car valued by the NRMA at $15,500.00 and furniture valued at approximately $7,000.00. In such circumstances, Mr Lozynsky submitted that there was no financial hardship. Further, there is a possibility, Mr Lozynsky submitted, that Argy Kastoras could once again assist his father if financial hardship becomes greater. The fact that Mrs Kastoras is in receipt of a Disability Support Pension and a Carer Allowance indicates that Mr and Mrs Kastoras have income, Mr Lozynsky further noted.
In relation to Mr Kastoras' health, Mr Lozynsky submitted that while there was certainly objective evidence of his illnesses, this could not be considered to be a special circumstance. In Re Black and Secretary, Department of Social Security (1995) 83 SSR 1219, the applicant had suffered ill health and had incapacity for work yet this was not regarded as a special circumstance, since the lump sum received by Mr Black was intended to provide for his restricted working situation. In Re Ferry and Secretary, Department of Social Security (supra), that Tribunal did not find the applicant's ill health as constituting special circumstances but concluded that that applicant should have been aware that he was precluded from social security benefits and should not have disposed of his compensation settlement in such a short period. Further, Mr Lozynsky noted Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464, in which the applicant's health deteriorated in circumstances that had no connection with the compensable injury and that Tribunal emphasised the need to keep an overview of the whole matter and the decline of the applicant's health was not considered paramount. The Tribunal was also referred by Mr Lozynsky to Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793, in which the Tribunal found that a condition not related to the condition for which Mr Davis received compensation was not a factor which outweighed the other circumstances of the case. No special circumstances were found in Re Davis (supra).
Mr Lozynsky submitted that Mr Kastoras' reference to medical expenses could not be held as constituting special circumstances nor did his medical conditions give rise to anything which was uncommon, unusual or exceptional. Mr Lozynsky noted that Mr Kastoras is covered by Medicare and has a HealthCare Card which provides him access to medical and dental assistance.
In the Respondent's Statement of Facts and Contentions (Exhibit R1), Mr Lozynsky referred the Tribunal to a number of other cases which had discussed special circumstances, referring to: Secretary, Department of Social Security and Smallacomb (1991) 23 ALD 141; Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690; Re Stevens and Secretary, Department of Social Security (1989) 18 ALD 659; Re Liebelt and Secretary, Department of Social Security (1992) 70 SSR 1007.
Mr Lozynsky concluded that Mr Kastoras' circumstances were not special, referring to Groth v Secretary, Department of Social Security (supra) where Kiefel J stated at 545 that:
"…for present purposes 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. ..."
In Groth (supra), the Federal Court concluded that Mr Groth's circumstances and those of his family, although difficult, did not constitute hardship and could not be said to be different from other pension recipients.
In conclusion, Mr Lozynsky submitted that Mr Kastoras' general extravagance and money spent recklessly mitigated against a finding of special circumstances. Further, his financial circumstances, though difficult, were not out of the ordinary, particularly when one considered the assets available to Mr Kastoras. While it was also acknowledged by the Respondent that Mr Kastoras suffers from ill health, he does have assistance available to him and a HealthCare Card to assist with medical costs. Mr Lozynsky submitted that the decision of the SSAT should be affirmed as there was no evidence of special circumstances to allow the exercise of the discretion contained within section 1184 of the Act. Therefore, the preclusion period from 3 May 1999 to 23 September 2001, should stand.
findingsThe Tribunal has a reached a decision in this matter, taking into account the oral and documentary evidence, the submissions, the legislation and case law.
The first issue for the Tribunal to determine in whether or not the preclusion period set for Mr Kastoras from 3 May 1999 to 23 September 2001 is properly raised and calculated. It is clear and not disputed that Mr Kastoras' worker's compensation claim was settled on 23 April 1999, in the amount of $105,000.00. This settlement included an amount for non-economic loss (T7, p16). Under the Act, a person who receives a lump sum compensation payment and who is a member of a couple, as is Mr Kastoras, is liable to a preclusion period calculated under subsection 1165(2AA) of the Act. The period is calculated from the next day after the periodic compensation payments cease, under subsection 1165(5) of the Act. The Tribunal finds that Mr Kastoras received compensation in terms of subsection 17(2) of the Act and this was to cover lost earnings or earnings capacity. The Tribunal further finds that the gross lump sum figure must be used in these circumstances to ascertain the preclusion period and not a lesser amount which could be represented by deductions of expenses such as bills, or indeed repayments of a debt such as the $60,000.00 loan from Mr Kastoras' son. The Tribunal is confirmed in this view when referring to Secretary, Department of Social Security v Hulls (supra), Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349 and Secretary, Department of Social Security v Banks (1990) 23 FCR 416.
Thus, the whole lump sum settlement of $105,000.00 is to be used in calculating the preclusion period. Applying the formula contained in subsection 1165(8) of the Act, half the amount, which is $52,500.00 is to be divided by the income cut-out amount which is defined in a formula in subsection 17(1) of the Act as the total of:
(a)The "ordinary free area limit", that is the amount of private income allowed before the income test applies; plus
(b)Twice the sum of the maximum Basic Rate of pension and the amount of pharmaceutical for a single person.
(c)divided by 52
At the relevant time for the calculation of Mr Kastoras' preclusion period, the income cut-out amount was $416.80. Dividing $62,500.00 by $416.80 provides a preclusion period of 125 weeks. Thus, the preclusion period from 3 May 1999 to 23 September 2001 is determined by the Tribunal to have been correctly calculated and raised.
The Tribunal next turns to a consideration of section 1184 of the Act to determine whether or not a part or whole of the lump sum payment to Mr Kastoras should be disregarded in the special circumstances of the case.
The issue of special circumstances has been discussed by various Courts and Tribunals and the Tribunal takes this term generally to mean those circumstances which are unusual, uncommon and which, if not taken into account, would produce an unjust or unfair result. In making a finding concerning the existence or otherwise of special circumstances, the Tribunal is mindful of the need to guard against the possibility of decision-makers allowing any "double dipping" to occur, such that a person might be in receipt of income from both social security payments and worker's compensation. Further, the Tribunal considers it important as a general principle to ensure that when making any determination about special circumstances, the totality of a person's circumstances must be considered.
Considering Mr Kastoras' financial situation, the Tribunal accepts that Mr Kastoras' finances are difficult and tight. At hearing, Mr Kastoras' evidence was that he had only approximately $2,000.00 left in his bank account. Previously at the time of the SSAT decision he had had some $23,000.00. There has been a rapid depletion of his funds. Mr Kastoras does have the usual day to day expenses but at the time of the hearing, his evidence was that he had no debts at that time. Mr Kastoras owns his own home, car and has a HealthCare Card. Mrs Kastoras is in receipt of a Disability Support Pension and has a Carer Allowance. It is the Tribunal's view that it must balance the fact that Mr Kastoras received a lump sum of $105,000.00 with his current situation. Whilst there are currently difficult financial circumstances, the Tribunal finds that these circumstances have arisen substantially because of Mr Kastoras' consistent, and at times, extravagant expenditure when he had full knowledge of the existence of the preclusion period and its implication. Mr Kastoras' evidence was that he found money "ran through his fingers". Mr Kastoras admitted that he had a problem managing money and most recently has turned the management of the family's financial affairs over to his wife. There is no question that Mr Kastoras did not know of or understand the implication of a preclusion period. In these circumstances, the Tribunal finds that the difficulty in Mr Kastoras' current financial situation is in large part related to his lack of concern for his financial security until the conclusion of the preclusion period. In making this finding, the Tribunal can understand Mr Kastoras' feeling of obligation to repay his son an amount of $60,000.00. However, Mr Kastoras was not under any legal obligation to repay this amount and the repayment was done without regard to the preclusion period. There could easily have been a more cautious repayment by Mr Kastoras over time but it seems that this option was not even considered.
The Tribunal cannot ignore Mr Kastoras' spending habits and his seeming disregard for the preclusion period as it related to his income support. In all the circumstances the Tribunal does not consider that it can on all the evidence, make a finding that Mr Kastoras' financial situation is special when one takes into account the evidence and the case law.
Turning to Mr Kastoras' health problems, it is clear that he has multiple health problems as referred to by Dr Baldas and Mr Kastoras' own evidence. Mr Kastoras also refers to his depression and problems with spending money. No treatment seems to have been provided for these later problems apart from Mr Kastoras' reference to Dr Baldas indicating that he could refer Mr Kastoras to a "specialist" doctor. While the Tribunal notes Mr Kastoras' evidence concerning his difficulty managing money, there is no objective medical or clinical evidence that Mr Kastoras has a specific psychological problem relating to spending or indeed any related problem such as gambling. Certainly no mention was made of any such condition by Dr Baldas, apart from depression. The multitude of factors which allowed the Tribunal in Re Secretary, Department of Social Security and Thompson (1993) AAT 8997, 17 September 1993, to reduce the preclusion period are not present here.
Mr Kastoras does have a HealthCare Card and did not indicate to the Tribunal any particular high medical costs. That Mr Kastoras is unwell is not disputed. The Tribunal does not, however, on all the evidence and again referring to the extensive case law, consider that Mr Kastoras' health problems and their treatment can be considered as special.
Mr Kastoras has asked the Tribunal to help him by considering his circumstances as special to allow the preclusion period to be reduced or disregarded. Having regard to the totality of Mr Kastoras' circumstances and specifically his financial and health situation, the Tribunal does not consider, on all of the evidence and applying the case law, that it is able to exercise the discretion contained within section 1184 of the Act to allow for a part or whole of Mr Kastoras' compensation to be disregarded in part or as a whole.
In all the circumstances and for the reasons expressed above, the Tribunal affirms the decision under review. This means that Mr Kastoras' preclusion period operates from 3 May 1999 to 23 September 2001.
I certify that the 55 preceding paragraphs are a true copy of the reasons for the decision herein of Ms SM Bullock, Senior Member
Signed: ............[sgnd]................................................................
Stella Vaughan, AssociateDate of Hearing 21 December 2000
Date of Decision 3 April 2001
Representative for the Applicant Self RepresentedRepresentative for the Respondent Mr G Lozynsky, Departmental Advocate
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