Keskin and Secretary, Department of Social Services (Social services second review)
[2022] AATA 79
•21 January 2022
Keskin and Secretary, Department of Social Services (Social services second review) [2022] AATA 79 (21 January 2022)
Division:GENERAL DIVISION
File Number(s): 2021/1914
Re:Ali Keskin
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:Chris Puplick AM, Senior Member
Date:21 January 2022
Place:Sydney
The decision under review is set aside and the matter is remitted to the Respondent with a direction that the preclusion period be recalculated on the basis that the sum of $250,000.00 is excluded from the calculation of the gross lump sum.
....................................[sgd]...................................
Chris Puplick AM, Senior Member
CATCHWORDS
SOCIAL SECURITY – Disability Support Pension refused due to Compensation Preclusion Period – whether Compensation Preclusion Period was correctly calculated – whether all or part of the compensation payment should be disregarded for the purposes of the preclusion period calculation – whether special circumstances exist – decision set aside and remitted
LEGISLATION
Acts Interpretation Act 1901 (Cth) s 29
Social Security (Administration) Act 1999 (Cth) s 72
Social Security Act 1991 (Cth) ss 17, 1170 and 1184K
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Austin and Secretary, Department of Social Services [2014] AATA 516
Beadle and Director-General of Social Security (1984) 6 ALD 1
Black and Secretary, Department of Social Security [1994] AATA 291
Cavuoto and Secretary, Department of Social Security [1994] AATA 397
Davis and Secretary, Department of Family and Community Services [1999] AATA 84
Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
Dranichnikov v Centrelink [2003] FCAFC 133
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441
Gartside and Secretary, Department of Social Services [2017] AATA 45
Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162
In the Marriage of Phillippe (1997) 4 Fam LR 153
Ivovic and Director-General of Social Services [1981] AATA 57
Jess v Scott and Ors (1986) 70 ALR 185
Keskin and Secretary, Department of Social Services (Social services second review) [2020] AATA 2101
Minda and Secretary to the Department of Social Security [1989] AATA 53
Rice and Secretary, Department of Employment and Workplace Relations [2006] AATA 757
Riddell v Secretary, Department of Social Security [1993] 114 ALR 340
Secretary, Department of Education, Employment and Workplace Relations and Morrison (2008) 105 ALD 635
Secretary, Department of Education and Workplace Relations v Homewood [2006] FCA 779
Secretary, Department of Social Security and Barry [1995] AATA 579
Secretary, Department of Social Security and Bolton [1989] AATA 479
Secretary, Department of Social Security and Bunge [1990] AATA 486
Secretary, Department of Social Security and Winterbotham [1990] AATA 808
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Secretary, Department of Social Services and VYS (1995) 40 ALD 745
Severino and Secretary, Department of families and Community Services [2005] AATA 745
Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569
Tralongo and Secretary, Department of Education [2016] AATA 393
SECONDARY MATERIALS
Andrew Constance (NSW Minister for Transport), ‘A New Transport Economy: Consumer Choice, Competition and Downward Pressure on Fares’ (Media Release, 17 December 2015)
Commonwealth, Parliamentary Debates, House of Representatives, 19 June 1995
Social Security Guide
REASONS FOR DECISION
Chris Puplick AM, Senior Member
21 January 2022
BACKGROUND
Mr Ali Keskin (the Applicant) was born in 1983 and on 11 December 2004 was involved in a serious motor vehicle accident which resulted in him suffering a traumatic brain injury.[1]
[1] Tribunal documents (T-documents) at 131-135.
He made a claim for compensation and on 24 June 2008 he was awarded a lump-sum compensation amount of $1,775,000.00. From this award, various deductions were made so that on 23 July 2008 a cheque from his solicitors in the sum of $1,200,000.00 was paid, on his behalf to Access Superannuation.[2]
[2] Ibid at 103.
Unfortunately for the Applicant it was shortly after this date that the full impact of the Global Financial Crisis (GFC) struck Australia and it appears that the Applicant’s funds held in this superannuation account were diminished. There is however no evidence before the Tribunal to establish exactly to what extent this might or might not have been the case and so no further attention can be paid to this matter.
The reduction from $1,775,000.00 to $1,200,000.00 was to accommodate various payments and distributions as outlined in Consent Orders filed with the District Court of NSW on 27 June 2008 and included repayment to the Commonwealth of an outstanding debt for DSP overpayment.
Solicitors for the insurance company advised the Department of Social Services (the Respondent) on 1 July 2008 that the initial award of compensation had been made.[3]
[3] Ibid at 255.
Prior to his receipt of the compensation payment the Applicant had been granted the Disability Support Pension (DSP) on 10 January 2005.
The Applicant also made an application for Newstart Allowance on 3 January 2018 which was rejected by the Respondent on 19 January 2018 because he was subject to a preclusion period. This decision was affirmed by an Authorised Review Officer (ARO) of the Department on 8 June 2018 and then further affirmed by a decision of the Social Services and Child Support Division of the Tribunal (AAT1) on 27 August 2018. In turn, that decision was reviewed in the Tribunal’s General Division and again re-affirmed.[4]
[4] Ibid at 54-68; Keskin and Secretary, Department of Social Services (Social services second review) [2020] AATA 2101.
THE CURRENT CLAIM
On 3 July 2008 the Respondent notified the Applicant that his DSP had been cancelled because the payment of the compensation lump-sum had given rise to what is called a “preclusion period” which commenced on 11 December 2004 and was calculated to end on 28 May 2027. During a preclusion period a person is not entitled to receive social security benefits if they are in receipt of payment(s) by way of lump-sum compensation from another source.
The notification of 3 July 2008 also indicated that the Applicant had a debt to the Commonwealth in the sum of $45,787.31 which the Respondent had asked Allianz Australia Insurance Ltd (the insurer) to pay to the Commonwealth by way of withholding this amount prior to any finalised payments to the Applicant.[5] This debt arose from overpayment of DSP to the Applicant during a period when he was subject to the preclusion period arrangements. It appears that this sum was recovered accordingly.[6]
[5] Ibid at 40.
[6] Ibid at 276.
The Applicant made another claim for payment of the DSP on 7 October 2020 which was rejected on 19 November 2020 because of the existence of the preclusion period.
On 8 January 2021 that decision was affirmed by an ARO of the Department and on 18 January 2021 the Applicant sought a review of the ARO’s decision by the Social Services and Child Support Division of this Tribunal (AAT1).
The AAT1 handed down its decision on 22 March 2021 affirming the decision of the ARO and on 29 March 2021 the Applicant sought a further review of that decision before this Tribunal. The matter was scheduled for hearing before the Tribunal on 2 December 2021, but the Tribunal was advised on the morning of the hearing that the Applicant was unavailable due to a death in the family. As a result, the hearing was adjourned on that date until 11 January 2022. The hearing was conducted with the Applicant, who was self-represented, appearing by telephone and the other parties using the Microsoft Teams platform in accordance with the Tribunal’s COVID-19 protocols.
The sole issue before the Tribunal is the question of the correctness of the AAT1’s decision dated 22 March 2021.
THE LEGISLATION AND THE PRECLUSION PERIOD
The operation of the preclusion period for social security payments is outlined in the Social Security Act 1991 (Cth) (the Act) and supplemented by the guidance provided in the Social Security Guide (the Guide).
There is an underlying public policy supporting this arrangement which was stated by the government to be:
“The compensation recovery provisions of the [A]ct protect the social security system from ‘double dippers’ – that is, those people who might receive social security payments, as well as compensation, for the same period.”[7]
[7] Second Reading Speech for the Social Security Legislation Amendment Bill (No 1) 1995, Commonwealth, Parliamentary Debates, House of Representatives, 19 June 1995 at 1768 (Janice Crosio, Parliamentary Secretary to the Minister for Social Security); see also Secretary, Department of Education, Employment and Workplace Relations and Morrison (2008) 105 ALD 635 at [24].
The calculation of a preclusion period commences by working out what is called the “compensation part of the lump sum” in question. Subsection 17(1) of the Act provides a list of social security payments which are included in the definition of “compensation affected payment”. Among the income support payments referenced in this section is the DSP.
It also provides the definition of what is called the “income cut-out amount”:
“income cut‑out amount”, in relation to a person who has received a compensation payment, means the amount worked out using the formula in subsection (8), as in force at the time when the compensation was received.
Subsection 17(8) then provides:[8]
2 x (Maximum basic rate + Pension supplement component + Energy supplement component) + Ordinary free area limit
52
[8] Each of the terms used in this formula are defined in the section and vary in their quantum over time. The Tribunal is in no position other than to accept that these elements have been correctly calculated by the Respondent.
This means, of course that the “income cut-out amount” will vary from time to time depending on the value of the various components used in its calculation.
Subsection 17(2) provides:
(2) Subject to subsection (2B), 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 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.
Subsection 17(3) establishes the method for the calculation of the “compensation part of the lump sum compensation payment” as follows:
(3) Subject to subsection (4), 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; 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; 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, or both.
Thus sections 17(2), 17(3) and 17(8) establish the meanings of “income cut-out amount”, “compensation payment” and “compensation part of the lump sum payment” which are then to be used further in the calculation of the preclusion period.
This calculation is outlined in section 1170 of the Act:
Lump sum preclusion period
(1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:
(a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
(2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the 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 at the end of the number of weeks worked out under subsections (4) and (5).
(3) If neither of subsections (1) and (2) applies, the lump sum preclusion period is the period that:
(a) begins on the day on which the loss of earnings or loss of capacity to earn began; and
(b) ends at the end of the number of weeks worked out under subsections (4) and (5).
(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 [divided by] 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.
In this instance the Applicant was awarded the sum of $1,775,000.00. It is clear that the Applicant did not receive anywhere near this amount after deductions were made in relation to matters such as legal expenses and other disbursements. In total the Applicant actually received $1,200,000.00. It is this latter sum which the Applicant believes should be the basis of calculations as this was the quantum of money available to him for his use.[9] However, that is not what the law provides – it requires calculations to be based on gross payments.
[9] T-documents at 217.
It is now possible to establish the preclusion period as follows:
(a)establish the gross sum of the compensation payment = $1,775,000.00;
(b)apply the 50% discount = $887,500.00;
(c)divide by the income cut-out amount at that time ($756.75) = 1,172.77;[10]
(d)round down[11] and express in weeks = 1,172; and
(e)calculate 1,172 weeks from the date of the commencement of the preclusion period (the date of the motor vehicle accident, 11 December 2004).
[10] Ibid at 42.
[11] Social Security Act 1991 (Cth) (Act) s 1170(5).
This results in a preclusion period commencing 11 December 2004 (the date of the accident)[12] and concluding on 28 May 2027.
[12] Act s 1170(3).
The Tribunal notes two relevant matters at this stage. In the first instance, the payment from the insurance company was not made direct to the Applicant but rather to an account of his managed by Access Superannuation. It was the Applicant’s oral evidence that this company “managed” his finances until sometime at the end of 2011 or the commencement of 2012 when he assumed this responsibility for himself.
Secondly, on 3 July 2008 a letter was sent by the Department to the Applicant which advised him, inter alia:
“We are writing to let you know about the effect your compensation payment has on the Centrelink payments paid to you.
Under Part 3.14 of the Social Security Act 1991, lump sum compensation payments which contain money for lost earnings or capacity to earn can be used to calculate a period in time during which you will not be eligible to receive Centrelink payments. This period of time is called the preclusion period and, depending on your circumstances, may affect past and/or future payments made to you. Preclusion periods do not apply to Carer Allowance, Mobility Allowance, Family Tax Benefit, Health Care Card and child related payments.”[13]
[13] T-documents at 42.
It was the Applicant’s evidence to the Tribunal that while he thought he may have received the letter (which the law deems he had received)[14] he did not recall this to be the case and in any event was unaware of any details about “preclusion periods” until he made his Newstart application in 2018.
[14] Social Security (Administration) Act 1999 (Cth) (Administration Act) s 72; Acts Interpretation Act 1901 (Cth) s 29.
SPECIAL CIRCUMSTANCES
There is no doubt that a preclusion period exists by virtue of the payment of an amount of lump-sum compensation to the Applicant. The preclusion period having subsequently been established on the basis of proper calculations based upon the formula set out in the Act, the question arises as to whether there are any special circumstances in which all or part of the compensation payment should be disregarded for the purposes of the preclusion period calculation.
Section 1184K of the Act allows “special circumstances” to be found so that part or all of a compensation payment may be disregarded for the purposes of determining a preclusion period:
1184K 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 or a person’s partner receives or claims a compensation affected payment; 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 or the person’s partner’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).
As with so many key concepts in the Act, the term “special circumstances” is not given any precise definition. Without going into extensive detail, it can be said that the courts have identified a number of factors which go to establishing whether or not “special circumstances” exist. They must be:
·something more than ordinary or usual;[15]
·markedly different from the usual run of cases – not necessarily unique but having a particular quality of unusualness;[16]
·somehow distinguishing from usual cases of an analogous nature;[17]
·attuned to the individual circumstances of each case;[18]
·not so rigidly applied as to risk harsh or unreasonable outcomes;[19]
·involving “facts peculiar to the particular case which set it apart from other cases”; or[20]
·supportive of the overall integrity of the social security system and recognising the public interest in ensuring that public moneys are recovered where they can and should be.[21]
[15] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; Jess v Scott and Ors (1986) 70 ALR 185.
[16] Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3.
[17] Dranichnikov v Centrelink [2003] FCAFC 133.
[18] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114.
[19] Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
[20] In the Marriage of Phillippe (1997) 4 Fam LR 153 per Kay J.
[21] Skinner and Secretary, Department of Social Services (Social services second review) [2015] AATA 569; Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114; Secretary, Department of Social Security v Hales (1998) 82 FCR 154.
Additionally, the Tribunal is invested with “a broad discretion to respond to a variety of circumstances”[22] but should note that special circumstances “are not merely directed to the person's own circumstances. Rather; they are directed to those that are ‘special circumstances ... that make it desirable to waive.’”[23]
[22] Hogan v Secretary, Department of Employment, Education and Workplace Relations [2011] AATA 162 at 82.
[23] Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114 at 80.
In Secretary, Department of Education and Workplace Relations v Homewood, French J stated:
The decision before the Tribunal in this case arose under s 1184K of the Act. It was necessary to the exercise of the power conferred by that section that the Tribunal identified ‘special circumstances of the case’ in which it thought it ‘appropriate’ to treat the whole or part of the relevant compensation payment as not having been made. In giving its reasons for a decision under that section to treat the whole or part of a compensation payment as not being made it would be expected, consistently with s 43,[24] that the Tribunal would:
1. Identify the circumstances of the case which it found to be ‘special’ and the reasons for which it arrived at that finding.
2. Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.3. Explain why it selected the particular quantum (ie the whole or part) of the compensation payment as not having been made.[25][24] Administrative Appeals Tribunal Act 1975 (Cth).
[25] [2006] FCA 779 at [34].
THE APPLICANT’S EXPENDITURE
At the heart of this claim lies the pattern of expenditure by the Applicant once he had received the $1,200,000.00 compensation payment. This expenditure is outlined in the Respondent’s Statement of Facts, Issues and Contentions (SFIC) (at [5.8]), the general outlines of which the Applicant accepts as being correct, as follows:
“(a) An amount of $250,000 was paid to the Applicant’s father as a loan repayment as he was providing the Applicant with financial support from the time of the accident until he received the compensation payout;
(b) An amount of $352,000 was used to purchase the house at… Baynes Street, Mount Druitt (Baynes Street Property) in 2009;
(c) In 2010, he invested $155,000 in a business that was running at a loss and only received $30,000 back.
(d) He gave $50,000 to his ex-wife in 2010 which was arranged between the families and there was no documentation;
(e) He spent $100,000 on the construction of a house in the Philippines for two of his children;
(f) An amount of $400,000 was used to purchase a taxi plate in 2010, and sold it for $150,000;
(g) He made regular payments to an account in the Philippines from November 2012 to June 2017;
(h) He made regular child support payments from August 2010 to April 2017 for his child, Ahmet, born in 2008; and
(i) He paid for his father’s share in a home at… Cheviot Street, Mount Druitt in August 2008 in the amount of $195,000 and paid for costs associated with sewerage, guttering and renovations between 2010 and 2015.”
In contrast with many (perhaps most) such cases, in this instance the Applicant has been able to supply a considerable amount of documentary and other evidence to substantiate these various expenditures. It is not necessary for the Tribunal to restate the full details which are contained in the Respondent’s SFIC (at [5.9]).
Suffice to say that initially it was stated that:
“The Secretary accepts that there is documentary evidence to verify a total amount spent on the above purchases as $1,188,397.”[26]
[26] Respondent’s Statement of Facts, Issues and Contentions (SFIC) at [5.10].
This was modified in submissions by the Respondent to take into account payments of $14,500.00 by way of child support,[27] so as to agree that payments in total of $1,202,897.00 had been documented and accounted for.
[27] Supplementary T-documents at 281-353.
The Respondent then initially made the following points in relation to the items of alleged expenditure:
·in the relevant period the Applicant borrowed approximately $400,000.00 from other people and from banks;
·the Applicant has not provided evidence (apart from what was acknowledged as being provided by the Respondent (at [5.9] of their SFIC) such as loan documentation for other monies lent, receipts for the monies spent on home and garden maintenance or bank records to verify the remainder of his purported expenditure of the settlement amount;
·there are no records or receipts of the $250,000.00 paid to his father, the $50,000.00 he paid his ex-wife in 2010, the $105,000.00 spent on house and gardening maintenance and the $100,000.00 purportedly spent on construction of accommodation for his children in the Philippines;
·there are no records in respect of the gradual withdrawal of funds for living expenses or why the Applicant borrowed up to $400,000, and how that money was spent;
·the Applicant has taken fourteen overseas trips since receiving the settlement lump sum in 2008, and that no evidence has been provided to the Tribunal or the Department to verify how these trips were funded; and
·there is no significant evidence supporting details of the intra-family loan between the Applicant and his father.[28]
[28] Ibid at [5.11]-[5.15].
Additionally, in oral submissions the Respondent’s representative also discussed the purchase of a number of motor vehicles. Of those discussed it appears that one was bought and sold while another is still in the possession of the Applicant (being a trade vehicle) and another may well be effectively the vehicle used by his wife.
It should be noted, however, that the material before the Tribunal addressed some of these matters including detailed records from Western Union showing remittances to the Philippines[29] and a calculation by the Applicant of various household and maintenance expenses.[30]
[29] T-documents at 178-180. In total approximately $16,150.00.
[30] Ibid at 17.
CONSIDERATION OF THE EXPENDITURE
In Rice the Tribunal reproduced the Respondent’s submissions as follows:[31]
The intent underpinning the relevant compensation provisions in the Act is that those who receive a lump sum compensation payment are expected to support themselves from their own available resources for a period before seeking support from the taxpayer. In Re Secretary Department of Social Security and Winterbotham,[32] the Tribunal observed:
"This particular piece of legislation.... was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse..... Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the tax-payment."
[31] Rice and Secretary, Department of Employment and Workplace Relations [2006] AATA 757 at [19].
[32] [1990] AATA 808.
When a person is awarded a lump-sum compensation payment and this is translated into a preclusion period, during which time no other social security benefits may be paid to the person, the award itself imposes upon the recipient a clear and positive obligation about how that compensation money is to be spent during that preclusion period.
The preclusion period is not arrived at in some arbitrary fashion. It is calculated with direct reference to the rate of social security payment which would be otherwise available to the person. It is an equivalent alternative to such payments.
Such a payment requires the recipient to husband their resources and manage their financial affairs so that they do not fall into distress during the preclusion period.
The lump-sum payment is provided primarily for the maintenance of the recipient at a level approximate to that which would have been the case had they been in receipt of other social security benefits. It is not intended to be spent capriciously or recklessly on extravagant, frivolous or unnecessary items.
To the extent that a recipient chooses, knowing the purpose of the compensation payment and the operation of the preclusion period, to undertake expenditure which is extravagant, frivolous or unnecessary and hence dimmish their financial resources to the point that they become financially distressed, that is a decision which they have made consciously.
If they land in a state of financial distress as a direct consequence of their own actions, the remedy for this does not lie in the laps of the Australian taxpayers. Taxpayers cannot be expected to pick up the tab for the reckless behaviour of others whose distress has been caused by their own irresponsible behaviour.
In some instances, expenditure may not only be reckless, but deliberately designed to bring about situations of hardship.
In Davis the Tribunal cautioned:
If the circumstances were different, and the Applicant had saved the money and carefully and safely invested it, then in addition to his house he would have had sufficient money to tide him over at a reasonable standard of living until the completion of his preclusion period. If the preclusion period is shortened or waived because of his reckless spending then that would be an invitation to others in similar circumstances to do likewise and then to become dependent on the public purse. One could anticipate the public outcry, and reasonably so.[33]
[33] Davis and Secretary, Department of Family and Community Services [1999] AATA 84 at [46].
The Guide indicates that decision-makers should have regard to consider the question, “[h]as the person deliberately deprived themselves of their means of support or recklessly or inappropriately spent their lump sum?”[34]
[34] Guide at 4.13.4.20.
In Barry the Tribunal warned against making decisions related to special circumstances being used to justified to shorter preclusion periods, stating:
Indeed the exercise of discretion in shortening the preclusion period is unjustified in this case for two reasons; firstly, it would condone a spending pattern which took little or no account of planning for financial maintenance during the preclusion period, and secondly it would take no account of the reasonableness of the Respondent selling his property, the building of which was the subject of somewhat lavish spending, and using the proceeds for his financial maintenance.[35]
[35] Secretary, Department of Social Security and Barry [1995] AATA 579 at [27].
The Secretary contends that the “Applicant has recklessly spent the majority of his funds”.[36]
[36] Respondent’s SFIC at 5.6.
This is an assertion which is tested below.
Payments to members of the Applicant’s family
The Applicant repaid a loan to his father of ($250,000.00) and there is some documentary explanation of this from his father.[37] He had some sort of arrangement whereby he paid his ex-wife $50,000.00, and he paid some $195,000.00 to his father for a share in a house and associated repairs and maintenance.
[37] T-documents at 209.
It is understandable that people take seriously the moral obligation which they feel to repay intra-family loans. This is especially the case in relation to payments to his father who, the Applicant attested, had provided care and support for him between the date of his accident (December 2004) and the payment of his compensation amount (July 2008).
However, the Tribunal has held that;
a moral obligation to repay a loan does not, of itself, constitute financial hardship sufficient to warrant the exercise of the discretion. Ms Cavuoto repaid the debt with knowledge of the preclusion period and with knowledge that she would not receive a pension or benefit for a considerable period of time. These considerations mitigate against a finding of special circumstances in this case.[38]
[38] Cavuoto and Secretary, Department of Social Security [1994] AATA 397 at [15] agreeing with the reasoning in Minda and Secretary to the Department of Social Security [1989] AATA 53.
The Tribunal agrees that some of this expenditure could be considered reckless given the Applicant had been made aware of the operation and impact of the preclusion period on his access to other means of social security support.
Investments
The Applicant made two unsound business investments in relation to, first, a business proposition and second, a taxi plate.
Business proposition
In the first instance the Applicant lent both a relative and a friend of his father’s a total of $155,000.00[39] for them to invest in a business proposition which ultimately failed and in relation to which the Applicant claims he was defrauded. The Tribunal can make no further comment on this other than to note that such unsound investments are not uncommon in proceedings such as these, and within this context were reckless, caveat emptor.[40]
[39] T-documents at 61 and 171.
[40] Let the buyer beware.
Taxi plate
The Applicant’s second investment was the purchase of a taxi plate for $400,000.00 in May 2010.[41] The Applicant made this purchase in order to generate an ongoing source of income and it was his evidence to the Tribunal, accepted by the Respondent that, for a number of years he received a monthly remittance from the organisation managing the taxi licence of approximately $2,000.00 per month. Both his income (falling to less than $1,000.00 per month) and the value of the taxi plate collapsed when the NSW State Government decided in December 2015 to legalise the Uber ride-sharing service. The Government’s announcement was accompanied by details of a $250 million “industry adjustment package for taxi and hire car licence plate owners.”[42] It is not known whether or not the Applicant applied for or received any compensation for the loss of value of his taxi plate, but the AAT1 hearing of August 2018 records that “Mr Keskin said he later sold the taxi plate for $150,000.”[43] The Applicant told this Tribunal that the sale was for less than that figure although he was unable to specify either the exact figure or the date of sale.
[41] T-documents at 93.
[42] Andrew Constance (NSW Minister for Transport), ‘A New Transport Economy: Consumer Choice, Competition and Downward Pressure on Fares’ (Media Release, 17 December 2015).
[43] T-documents at 47.
The Tribunal does not regard the purchase of a taxi plate in 2010 as in any way “reckless”. It was a justified decision to acquire an asset that was expected (and for some time did) yield a steady income and there was no way of knowing that five years later a change in government policy would reduce significantly both the value of the asset and the income derived from it.
Payments in the Philippines
There are scant details, other than the Western Union transfers, about these payments which apparently involve support of the Applicant’s two children who live in the Philippines with their aunt (rather than their mother with whom the Applicant was in a relationship from 2012 to 2015/2016), including money spent on provision of a house. There is no evidence before the Tribunal to allow a determination as to the genuine nature or accuracy of these payments. The Applicant gave evidence to the effect that while the majority of these funds were paid to the Philippines between 2012 and 2017, he still occasionally sends money to his children there, for example at Christmas time in 2021.
While this expenditure may have been unusual or unwise, it can hardly be characterised as “reckless” in that it was intended to support two of his own children.
Child support
The Applicant states that he made regular child support payments for his son from August 2010 to April 2017.[44] These payments amount to some $14,500.00 with some $2,248.49 in arrears. These payments are made for his child A who is in the care of his ex-wife Ms N while the Applicant also has a son (F) who lives with him and Elif, to whom the Applicant was married in 2015.
[44] T-documents at 127-130; Supplementary T-documents at 368-372.
Purchase of a home
The Applicant spent $352,000.00 in 2009 to purchase a house in Mount Druitt where he now lives.
Of course, owning one’s own home remains part of the so-called “great Australian dream” and, in most instances, the purchase of a home could not be regarded as reckless or unjustified expenditure. However, decisions by the courts and this Tribunal have qualified that assertion. In Davis the Tribunal said:
[35] There is no justification for treating the acquisition of a house as sacrosanct. The Applicant was a renter previously, and it is not unusual for compensation recipients to remain in the rental market.
…
[40] To preserve a house in a situation where there are no extraordinary circumstances like family responsibilities, or psychiatric disabilities which prevent proper management of money, or cognitive disorders, invites every solicitor to advise his/her client to spend their lump sums on homes "and then call the Commonwealth's bluff when the money runs out".[45]
[45] Davis and Secretary, Department of Family and Community Services [1999] AATA 84.
In Winterbotham:
24. The respondent contended that he was perfectly entitled to have expended his settlement moneys in providing his family with a home and no-one, least of all this Tribunal, would dispute that. However, that is not the issue - it is the fact that the respondent, having disposed of his settlement moneys, now seeks support from the community. The emotional attachment of the respondent and his wife to the family home was obvious and their reluctance even to think of selling it understandable. However, the Tribunal roust take that home into account in deciding whether the respondent is in a position of exceptional financial hardship. While the respondent has assets of such value he can never be so regarded.
25. As to the submission that the respondent should not be forced to sell his house, the Tribunal would compare his position with that of another recipient of a compensation award who chooses to expend his compensation moneys on investments. Should there be any difference between one who invests his money in stocks and shares and one who invests in real estate? Neither should expect the tax-payer to support him while he holds on to assets he could well realise and use to support himself. This is not to say that the Tribunal seeks to force the respondent to sell his house; or even recommends that course of action. It is not the Tribunal's role to do that. At the same time, the Tribunal cannot ignore the view that the selling of the house is one way by which the applicant could resolve his present difficulties. It is an evident cause of action, although not by any means the only one.[46]
[46] Secretary, Department of Social Security and Winterbotham [1990] AATA 808 at [24]-[25].
In Hajar the Tribunal stated:
On the question of hardship, I find it impossible to ignore the existence of the house which is valued at approximately $175,000 and which is free of encumbrances... It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it...[47]
[47] Hajar and Secretary, Department of Social Security (1988) 16 ALD 716 at [45].
In Austin the Tribunal referred to Hajar and went on:
The applicant’s house, in effect, represents his compensation in a different form. In that, he is in a better financial position than many other recipients of social security payments.[48]
[48] Austin and Secretary, Department of Social Services [2014] AATA 516 at [22].
Once again, the Tribunal would not characterise this expenditure as “reckless”. From the time of his accident until the payment of his compensation the Applicant lived with and was cared for by his father. He was married to his first wife in December 2006[49] and his first child was born in 2008.[50] It was not unreasonable for the Applicant to seek to have a home of his own and his purchase of the Mount Druitt property (unencumbered and without mortgage) in 2009 was a reasonable expenditure decision.
[49] T-documents at 109.
[50] Ibid at 239.
The history of loans taken out by the Applicant from various people resulting in caveats being imposed on the sale of the property and the subsequent raising of a mortgage against the property is complex and it is hard to determine the exact nature of relevant repayments, but for these purposes those matters do not need to be determined.[51]
[51] Ibid at 158-163 and 228-229.
It is recognised that the existence of these caveats impairs the Applicant’s ability to potentially sell his home, pay his debts and then have access to the proceeds,[52] but of course should he do so, he would need to incur additional expenditure to find other accommodation.
[52] Respondent’s SFIC at [5.28].
Unaccounted expenditure
This includes a series of borrowings and loan transactions for which no adequate documentation exists and at least 14 overseas trips. The AAT1 noted that three of these trips were made after January 2018.[53] The respondent asserts that the level of unaccounted expenditure amounts to some $500,000.00.[54]
[53] T-documents at 9, AAT1 decision at [20]. These involved trips to Turkey paid for by the Applicant’s father and to Indonesia paid for by his brother.
[54] Respondent’s SFIC at [5.6]. This figure is slightly higher than that submitted to the AAT Second Review of the Newstart application in the T-documents at 63.
ISSUE OF APPLICANT’S CAPACITY
The Guide at 4.13.4.20 lists “[f]actors to consider when determining special circumstances”. One of the factors to consider is given as “ill health” and the “general principle” which applies to this consideration is stated as “state of ill health should be more than the majority of DSP recipients”.
The Guide also references matters of “decision making capacity” and notes that what a decision-maker should look for includes:
·whether poor education or limited life skills affected the person's capacity to make a rational decision; and
·whether the person's injury contributed to a loss in capacity to make rational decisions (such as behaviour common to those who have suffered a head injury).
It is axiomatic that the majority of DSP recipients will suffer some degree of ill-health or incapacity, but whether the majority also suffer cognitive impairment as a result of a traumatic brain injury (the existence of which is not disputed by the Respondent) is another matter.
The mere presence of some degree of ill-health is not, in itself, demonstrative of the presence of any special circumstances. In this respect the Respondent cites the Tribunal’s findings in Bolton but I do not find those sufficiently analogous to this application to be definitive. In Bolton the Tribunal was dealing with an issue of the “decline” in the applicant’s state of health between the time of the compensation payment and the date of his application. Much of the case turned upon the decision of the (then) SSAT that:
The special circumstance found to exist was the dramatic change in the respondent's health that was not reasonably foreseeable by him at the time of his purchase of the property.”[55]
…
Ill Health: This factor is very prominent here. The respondent's condition has considerably deteriorated since his accident in 1984 and award in 1987.[56]
[55] Secretary, Department of Social Security and Bolton [1989] AATA 479 at [15].
[56] Ibid at [24].
At best, Bolton stands for the proposition that ill-health alone cannot be held to be a special circumstance, but it does not preclude ill-health being taken into account as part of the consideration of the larger suite of “financial hardship; legislative changes; incorrect legal advice; and ill health considered in that case.”[57] More on point however is the decision in Severino in which the Tribunal was explicit to the effect that there is nothing special about DSP recipients being in a state of poor or ill health.[58]
[57] Ibid.
[58] Severino and Secretary, Department of families and Community Services [2005] AATA 745 at [31]-[32]; see also Secretary, Department of Social Services and VYS (1995) 40 ALD 745 at [40].
There are a series of medical reports before the Tribunal from Mr Peter Khnana (a Registered Psychologist); Dr Jennifer Chapman (Staff Specialist, Rehabilitation Medicine, Westmead Hospital) and Dr Rebecca Martens (Rehabilitation Consultant, Brain Injury Rehabilitation Unit, Westmead Hospital).[59] All of the reports refer to the Applicant suffering a significant degree of stress, anxiety and depression, while that of Dr Chapman (dated 21 March 2018) also states:
“Part of Mr Keskin’s management was a neuropsychological assessment in 2005 which showed a profile of cognitive difficulties consistent with a traumatic brain injury. Mr Keskin has marked difficulties in aspects of thinking and memory typical of extremely severe brain injury.”[60]
[59] T-documents at 131-136.
[60] Ibid at 133.
The report of Dr Martens (dated 19 September 2016) opines:
“His initial neuropsychological assessment was undertaken six months post his injury and demonstrated significant ongoing impairments. Having reviewed this assessment and his current level of functioning, I do not expect that there would have been any significant change in his cognitive profile since this time and I would not recommend a repeat neuropsychological assessment from a clinical perspective.”[61]
[61] Ibid at 135.
The Tribunal notes that the Respondent asserts:
“While the Secretary accepts that the Applicant has ongoing medical conditions relating to his traumatic brain injury, the Secretary contends that little weight should be given to the impact this had on his ability to make financial decisions in the absence of clear medical evidence.”[62]
[62] Respondent’s SFIC at [5.34].
The Tribunal departs from the Respondent on this point and finds that there is “clear medical evidence” that the Applicant has a significant degree of cognitive impairment and that this would necessarily impact upon his rational decision-making in relation to matters of financial management. However, it must be conceded that the degree of any such impairment is not apparent from any of the material before the Tribunal.
Even so, any such degree of impairment may not necessarily be sufficient to establish “special circumstances.” In Bunge the Tribunal said:
What is 'special' about the circumstances of Mr Bunge is that he is suffering and will suffer permanently from a disability. That is the circumstance which makes him eligible for an Invalid Pension. It is not a circumstance so 'special' as to confer on him entitlements greater than others similarly qualified by such disabilities. The second consideration which creates difficulties for him in the short-term is that he has applied the bulk of the compensation monies in the purchase of a home and car to provide long-term benefits for his handicapped wife, his son and himself. That was a prudent act which has no doubt created short-term difficulties and, which hopefully, will confer long-term benefits, but does not give rise to any 'special circumstances' such as would warrant exceptional treatment for the respondent.[63]
[63] Secretary, Department of Social Security and Bunge [1990] AATA 486 at [23].
Despite his impairment through the acquired brain injury the Applicant has managed to undertake the 14 overseas trips referenced (apparently travelling alone but needing a companion upon arrival and for his stay overseas) and has been able to gather an impressive array of documentary material to present to the Respondent and the Tribunal in his various applications. There is no evidence that he was unable to manage all this on his own and there is no evidence that he has ever required the assistance of a formal guardian or nominee,[64] although his wife is apparently in receipt of carer benefit on his behalf[65] and effectively makes all the important decisions (including financial management) on his behalf. The Tribunal also accepts that the Applicant needs some assistance with day-to-day living arrangements, primarily to cope with his physical rather than intellectual limitations.
[64] T-documents at 10, AAT1 decision at [23].
[65] Witness Statement of Elif Keskin dated 1 September 2021.
Indeed, throughout his four hearings before this Tribunal, the Applicant appears to have acquitted himself well and in these hearings he displayed a considerable degree of alertness and acuity, although he understandably could not remember some details of events back over a period of more than five years.
CURRENT FINANCIAL CIRCUMSTANCES
The Applicant’s taxable income from 2010 to 2018 appears to have been $245,924.00 and in each of the years 2019 to 2021 is shown as nil.[66] The Tribunal was told that the income was derived from payments from the taxi operations supplemented by rental income derived from renting out the Applicant’s Mount Druitt property (purchased in 2009) while he temporarily lived elsewhere for unspecified periods.
[66] Supplementary T-documents at 281-353.
The Applicant has provided a Statement of Financial Circumstances[67] which outlines his current financial position. It reveals that he has monthly expenses of some $4,480.00 but nil income. He lives with and is cared for by Mrs Elif Keskin who is in receipt of a payment of $944.00 per fortnight and is paid on the basis that she and the Applicant are living separately but under one roof.[68] Even if Mrs Keskin’s income was taken in its entirety to be in support of the Applicant he would still be in a situation of incurring monthly losses in the order of $2,592.00.
[67] T-documents at 226-230.
[68] Ibid at 273.
There is no explanation before the Tribunal of how this situation is managed by the Applicant, nor was any elucidated on the date of hearing.
CONSIDERATIONS
There is no doubt that the Applicant is facing straitened financial circumstances, nor that he is otherwise qualified for the payment of DSP on the basis of his disabilities. Straitened financial circumstances are commonplace in such applications and for many DSP recipients, they do not constitute special circumstances.[69]
[69] Gartside and Secretary, Department of Social Services [2017] AATA 45 at [57].
Equally, a preclusion period must be imposed on any payments due to the Applicant as provided for in social security legislation. The only question is whether in calculating the preclusion period the sum taken at the start of the calculations ($1,775,000.00) was correct.
This Tribunal thinks not.
In Riddell the Full Federal Court made it clear that “each particular case must be considered on its merits”[70]and in Ivovic the Tribunal said:
the use of the word ‘special’ is, we think, intended to allow the decision-maker the fullest opportunity to consider the particular circumstances of each case.[71]
[70] Riddell v Secretary, Department of Social Security [1993] 114 ALR 340 at 347.
[71] Ivovic and Director-General of Social Services [1981] AATA 57 at [45].
In that case the Tribunal also cautioned that a decision-maker must avoid exercising any discretion which would have the effect of “achieving or frustrating ends or objectives which are conformable with the purposes of [the Act]” but 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”.[72]
[72] bid. See other references given in Respondent’s SFIC at footnote [17].
In Black the Tribunal stated, “the Tribunal has consistently considered the reasonableness of the persons’ expenditure of compensation payments in determining special circumstances” while going on to say, “[i]n particular substantial loans to family members, monies spent on travel and cars, general extravagance have been considered to mitigate against special circumstances.”[73]
[73] Black and Secretary, Department of Social Security [1994] AATA 291 at [49].
In Tralongo the Tribunal considered the question of “whether the circumstances were beyond Ms Tralongo’s control” when considering whether or not special circumstances could be established.[74]
[74] Tralongo and Secretary, Department of Education [2016] AATA 393 at [24].
Where circumstances are entirely beyond the control of an applicant, and where the expenditure in question is “reasonable”, the circumstances may be considered special.
In Fischer, Katzmann J explained, in accepting that the impact of the GFC on an individual might constitute special circumstances, that:
But it is the circumstances that must be special, not the individual’s experience of them. Circumstances might be special though they apply to more than one person or to a class of persons, provided they are not of universal application. The section does not require the circumstances to be unique to the individual… If, as a result of the collapse of global markets, a pensioner’s shares were so reduced in value that once the margin loan was brought into account they were worthless to her, surely that circumstance could be considered “special” within the meaning of the section.[75]
[75] Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441 at [80].
What is at issue in the mind of the Tribunal is the expenditure of $400,000.00 on the acquisition of the taxi plate. In the Tribunal’s view:
(a)the expenditure was calculated to provide the Applicant with a steady source of income for the foreseeable future to help him meet his living and other expenses;[76]
(b)the expenditure on the acquisition of the asset was reasonable and made after rational consideration and with the apparent acquiescence of the superannuation fund then administering the Applicant’s compensation payment;
(c)five years later the State Government of NSW took steps, as a matter of government policy, which had the effect of destroying the value of the Applicant’s asset and his principal source of income; and
(d)this was a circumstance entirely outside the control of the Applicant.
[76] T-documents at 131 and 215.
In these circumstances the Tribunal believes that the cost of the taxi plate, less the income received by way of its resale ($150,000.00),[77] should not be included as part of the gross lump sum of compensation payment to be used in the calculation of the preclusion period.
[77] The Tribunal accepts this to be $150,000.00 on the basis of evidence put before the AAT1 hearing of 22 March 2021, the AAT1 hearing of 27 August 2018 and the AAT Second Review of 6 July 2020, T-documents at 8, 47 and 61 respectively.
It accepts that all of the other items of expenditure which were undertaken by the Applicant are properly included in this calculation.
DECISION
The decision under review is set aside and the matter is remitted to the Respondent with a direction that the preclusion period be recalculated on the basis that the sum of $250,000.00 is excluded from the calculation of the gross lump sum.
I certify that the preceding 102 (one hundred and two) paragraphs are a true copy of the reasons for the decision herein of Chris Puplick AM, Senior Member
.....................................[sgd]...................................
Associate
Dated: 21 January 2022
Date(s) of hearing: 11 January 2022 Applicant: In person Solicitors for the Respondent: Ms C Hammerton, Services Australia
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