Keskin and Secretary, Department of Social Services (Social services second review) - [2020] AATA 2101

Keskin and Secretary, Department of Social Services (Social services second review) [2020] AATA 2101 (6 July 2020)
Division:GENERAL DIVISION
File Number(s): 2018/5072
Re:Ali Keskin
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

Decision
Tribunal:
Mr S Evans, Member
Date:6 July 2020
Place:Sydney

The decision under review, being the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal dated 27 August 2018, is affirmed.
..............................[sgd].........................................
Mr S Evans, Member
Catchwords
SOCIAL SECURITY – compensation preclusion period – lump sum compensation payment – application for newstart allowance – motor vehicle accident – whether discretion under s 1184K should be exercised – special circumstances – expenditure of compensation not accounted for – decision under review affirmed
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s 18B
Social Security Act 1991 (Cth) ss 17, 1160, 1169, 1170, 1184K
Cases
Gartside and Secretary, Department of Social Services [2017] AATA 45
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secondary Materials
Social Security Guide
REASONS FOR DECISION
Mr S Evans, Member
6 July 2020

The applicant, Ali Keskin, was injured in a motor vehicle accident in December 2004. A compensation claim was settled in relation to the accident in June 2008 for $1,775,000 of which $1,200,000 (“the compensation”) was provided to Mr Keskin after legal costs and other disbursements. Mr Keskin applied for newstart allowance (now known as “jobseeker payment”) and his application was rejected by the Secretary of the Department of Social Services (“the Secretary”) because Mr Keskin is subject to a compensation preclusion period.
Background
At the time of settlement, Mr Keskin was receiving disability support pension (“DSP”). On 3 July 2008 the Secretary applied a compensation preclusion period for the period 11 December 2004 to 28 May 2027 (“the preclusion period”) and Mr Keskin’s DSP was cancelled. A letter was sent to Mr Keskin advising of the preclusion period, the cancellation of his DSP and that he would be required to repay $45,787.31 to Centrelink out of his compensation payment.
On 3 January 2018 Mr Keskin lodged an application for newstart allowance. On 19 January 2018 the Secretary rejected Mr Keskin’s application because he was subject to a compensation preclusion period. On 7 February 2018 he sought review of the decision to reject his claim for newstart allowance. On 8 June 2018 the decision was affirmed by an Authorised Review Officer (“ARO”).
On 26 June 2018 Mr Keskin applied to the Social Services and Child Support Division of the Administrative Appeals Tribunal (“AAT1”), which affirmed the decision of the ARO on 27 August 2018. On 5 September 2018 Mr Keskin applied to the General Division of the Administrative Appeals Tribunal (“the Tribunal”) for review of the AAT1 decision.
Hearing
The matter was heard on 23 April 2020. Mr Keskin was self-represented and both he and the Secretary’s representative appeared via telephone in accordance with the COVID-19 Special Measures Practice Direction issued under section 18B of the Administrative Appeals Tribunal Act 1975 (Cth) (“the AAT Act”).
Mr Keskin gave evidence under oath and provided details of how the compensation was expended. Unless otherwise stated, the findings of fact that follow are based on the evidence of Mr Keskin.
For the reasons which follow, the decision under review will be affirmed.
Issues
The issues to be determined by the Tribunal are:
(i)whether Mr Keskin is subject to a compensation preclusion period; and if so
(ii)should the whole or part of Mr Keskin’s compensation payment be treated as not having been made as there were appropriate special circumstances.
relevant law and guidelines
The relevant law is set out in the Social Security Act 1991 (Cth) (“the Act”). Additional relevant information is set out in the Social Security Guide (“the Guide”).
The Act provides for circumstances where a person receives a lump sum compensation payment for an injury and where a person who is subject to a preclusion period subsequently applies for social security.
Section 1169 of the Act stipulates that a preclusion period applies when a person receives a lump sum compensation payment and is receiving, or intends to receive, a compensation affected payment.
The effect of compensation payments are dealt with by Part 3.14 of the Act. Section 1160 provides:
(1) This Part operates in certain specified circumstances to do one or more of the following:
(a) reduce a person's compensation affected payment;
(b) render a person's compensation affected payment not payable;
(c) require the repayment of some or all of a person's compensation affected payment;
because of the receipt of compensation by the person or the person's partner.
Relevantly subsection 17(2) of the Act determines that compensation means:
(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(1) of the Act determines that newstart allowance is a “compensation affected payment” and consequently it is subject to a lump sum preclusion period which is worked out in accordance with section 1170 of the Act. Subsection 1170(3) relevantly states:
(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).
Subsections 1170(4) and (5) of the Act provide that the length of the lump sum preclusion period in relation to a person is worked out using the formula:
(4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
(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.
“Compensation part of lump sum” is defined in subsection 17(3), as follows:
(3) … 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…
The “income cut-out amount” refers to the maximum amount of weekly earnings that a person can earn before a pension, at the single person rate, is no longer payable to that person. The formula for calculating the income cut-out amount is contained in subsection 17(8) of the Act.
Section 1169 of the Act deals with compensation affected payments not being payable during a lump sum preclusion period and states:
(1)       If:
(a)       a person receives or claims a compensation affected payment; and
(b)       the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
(2)       In this section:
lump sum compensation payment does not include a lump sum payment:
(a)       to which section 1164 applies; or
(b)       that relates only to arrears of periodic compensation payments.
…
(emphasis in original)
Section 1164 does not apply to this matter. Newstart allowance is a compensation affected payment under the Act.
Special circumstances
Subsection 1184K(1) of the Act provides:
(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.
The Guide at 4.13.4.20 provides a list of factors to consider when determining special circumstances which relevantly includes ill health, emotional state, decision making capacity, financial circumstances and changed circumstances.
evidence
Mr Keskin is currently married and living with his wife and children in their Sydney home. He and his wife are separated but continue to live together.
Mr Keskin has travelled overseas extensively. At the hearing, he estimated that he has been overseas between ten and fifteen times. Centrelink records confirm that Mr Keskin has travelled overseas on 14 occasions since the settlement of his compensation claim. He has been to Turkey twice and visited the Philippines regularly. Mr Keskin finds travelling therapeutic as it is good for his mental health.
In 2013 and 2014 Mr Keskin conceived two children in the Philippines. He told the Tribunal that the children’s mother has left them and both children are currently in care. He sends his children $100 each month via Western Union money transfers to support them. There are no records relating to his children in the Philippines in the documentation before the Tribunal, but Mr Keskin maintains records of the money transfers exist. Until 2018 he travelled regularly to the Philippines to visit his children.
Accounting for the compensation
The Secretary contends that whilst Mr Keskin claims to have no funds available, he has not provided documentary evidence to verify expenditure of the compensation.
In evidence is a copy of the cheque that was provided to Mr Keskin dated 23 July 2008 which indicates that he received $1.2 million in hand. This is not contested, and Mr Keskin submits that he spent the $1.2 million compensation by February 2018 as follows:
(a)$250,000 was paid to his father as a loan repayment for when he was paying Mr Keskin’s expenses prior to settlement of the compensation claim;
(b)$400,000 was used to purchase a house in 2009;
(c)$415,000 was used to purchase a taxi plate as an investment; and
(d)$120,000 was used to start a business with a friend which was unsuccessful, and those funds were lost.
Similarly, Mr Keskin reported to the AAT1 that he had spent the compensation payment on these same outgoings with the addition of spending any remaining funds on living expenses. At the AAT1 he submitted that $352,500 was used for the purchase of the house instead of $400,000 and $400,000 was invested in a taxi plate.
The Secretary accepts that Mr Keskin used funds to purchase a taxi plate for $415,000 in 2010. Mr Keskin later sold the taxi plate for $150,000. A conveyancing document dated 27 May 2009 indicates the purchase price of Mr Keskin’s property was $352,500. In which case, the net disbursement on his house and the taxi plate would appear to be $617,500.
In relation to the repayment of $250,000 to his father, a statutory declaration dated 15 June 2020 from Mr Keskin’s father states that he lent his son money between 2004 and 2008 for his “medical, wedding, living, expenses etc approx. $250,000”. He also confirms that he and his son shared an investment property which they sold in October 2015 and Mr Keskin repaid his father’s share “of approx. $195,000”. He maintains that the property was entirely in his son’s name and that the transfer of funds was “an act of family trust between father and son”.
Mr Keskin was questioned about the loan from his father during cross-examination by the Secretary’s representative. It was noted by the Secretary that during the period in which Mr Keskin was loaned money from his father, Mr Keskin was also in receipt of DSP. Whilst it was not disputed by Mr Keskin that he received DSP during the loan period, he explained that he was married in 2007 and his father paid for the wedding. He also claims that he and his father did not make any capital gain out of the real estate they purchased.
The Secretary submits that the sum Mr Keskin says he repaid to his father is arbitrary and lacks any supporting documentation. It equates to $5,208 each month in addition to the $45,787.31 that Mr Keskin received in DSP payments during this period.
Mr Keskin maintains that the money he owed his father was spent paying for expenses which included his fiancé’s visa and the cost of his overseas wedding. There are no bank records, receipts or other documentation to substantiate any of the expenses or transfers in relation to the repayment of $250,000 to his father. The only documentary evidence relating to the repayment is Mr Keskin senior’s statutory declaration.
Mr Keskin also claims to have purchased a kebab shop in 2009 but there is no evidence of him having done so before the Tribunal.
Current financial circumstances
Mr Keskin explained that when he received the compensation amount, his father offered to take care of his finances but he declined the offer. He indicated that he now regrets that decision.
In his application for newstart allowance dated 3 January 2018, Mr Keskin stated that he had $100 in cash on hand, half of which belonged to his wife. He claimed a net asset value of $5,000, of which half was his and included a Toyota motor vehicle with an estimated value of $3,000.
Mr Keskin’s income and expenditure as outlined in his Statement of Financial Circumstances dated 9 August 2019 leaves him with an income of $127 each fortnight and outgoings of $1,930. The Secretary submits that the $1,463 shortfall indicates that Mr Keskin has funds available to him.
In a letter dated 1 October 2019, Mr Keskin’s brother, who owns and operates a kebab shop, writes that he has been depositing money into Mr Keskin’s accounts as well as providing him cash “in the past two years”.
Mr Keskin is paying a mortgage on the home he lives in. The home was purchased in 2009 for $352,500, indicating that it is a substantial realisable asset. However, the home is currently subject to three caveats – one being from Mr Keskin’s first wife. The two other caveats appear to relate to loans allegedly made to Mr Keskin totalling $175,000 for which Mr Keskin did not account.
Mr Keskin has provided evidence of unpaid accounts. He is in arrears for his local council rates, he has defaulted on his home loan and is behind in payments to Sydney Water. He has also provided a child support account statement from March 2020 indicating payments are overdue.
Consideration
Is the compensation preclusion period appropriate?
Mr Keskin did not challenge the validity or calculation of the compensation preclusion period but I have considered it in the interests of completeness.
On 27 June 2008 Mr Keskin’s claim was settled for $1,775,000. The compensation component of a lump sum compensation payment is defined in subsection 17(3) of the Act which provides that it is fifty percent of the gross settlement. In Mr Keskin’s case, this results in a compensation component of $887,500.
In accordance with subsection 17(8) of the Act, the Secretary calculated the income cut-out amount to be $756.75. By applying the formula set out in subsection 1170(4) of the Act, the income preclusion period is calculated to be 1,172 weeks.
Having considered the calculation of the lump sum preclusion period in accordance with section 1170 of the Act, I am satisfied that Mr Keskin’s lump sum preclusion period beginning on 11 December 2004 to 28 May 2027 has been correctly calculated and applied by the Secretary.
Is the compensation accounted for?
The short answer is no. Mr Keskin received $1,200,000 in June 2008. The Secretary estimates that $432,500 has not been accounted for and contends that the unverified expenditure of such a substantial amount does not support the exercise of the discretion under section 1184K of the Act.
The $432,500 unaccounted for compensation is calculated by subtracting the house purchase price and taxi plate investment from the compensation amount. It is a generous calculation by the Secretary which does not account for the fact Mr Keskin received back $150,000 from his investment in the taxi plate. It does not, however, allow for the gradual draw down of funds which would have been required for Mr Keskin to live on since settlement.
There are no receipts in evidence for the claimed expenditure on his children in the Philippines, though Mr Keskin indicated they are available. There are no bank statements which show the gradual draw down of funds over the years. Similarly, there are no verifiable expenses which would account for the loan to his father. Mr Keskin submits that he and his father jointly owned an investment property, which they later sold for nil profit. There is no evidence as to the sale of this asset, which he submits was in his name, or the transfer of half the proceeds to his father.
The limited bank statements provided indicate that Mr Keskin is receiving financial support from both his father and brother. As recently as 25 October 2017 his father appears to have deposited $650 into his account. A NAB statement for April – June 2019 indicates that his brother, Hazma, was making regular $500 deposits into his account.
The Tribunal accepts the Secretary’s contention that $432,500 of Mr Keskin’s compensation has not been adequately accounted for.
Should some or all of the lump sum compensation payment be treated as not having been made?
Subsection 1184K(1) of the Act provides:
(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.
The expression special circumstances has been considered by the Federal Court and this Tribunal on many occasions. Kiefel J said in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545:
The phrase "special circumstances", it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (at ALR 229; ALD 674), and 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.
The Tribunal should take into account Departmental policy when making administrative decisions which require the exercise of discretion. The Guide provides a non-exhaustive table of factors which could be taken into consideration when determining special circumstance provisions. As a general principle, it is stated:
Generally, where people choose to wantonly/irresponsibly spend all of their compensation proceeds and do not set aside sufficient funds to meet their living costs during the preclusion period, decision makers should NOT find special circumstances exist unless there are truly compelling reasons to do so.
The Secretary contends that the discretion afforded by section 1184K of the Act should not be exercised in circumstances where Mr Keskin is professing to have no available funds but has not provided documentary evidence to verify the expenditure of the compensation. This argument carries considerable weight in circumstances where the amount which is unaccounted for is significant, amounting as it does to $432,500.
Mr Keskin has been upfront with the Tribunal, writing in his application for review to the AAT1 that he “has spent the compensation funds [and] missmanged [sic] financially”. There is no indication that Mr Keskin has been deliberately misleading about his financial affairs, but that does not provide clarity or certainty as to if or how his compensation has been expended.

It is accepted by the Tribunal that Mr Keskin has spent a great deal of his compensation. In the case of the investment in a taxi plate, his timing was unfortunate given it appears to have coincided with the introduction of ride sharing. Mr Keskin lost a considerable portion of his initial investment to the value of $415,000. He later sold the asset for $150,000. Further, he has travelled extensively overseas. He submits that he has two children in the Philippines which he seeks to support. The Tribunal has no documentary evidence relating to the children. His personal affairs are complicated as he is separated from his wife. His property is currently subject to three caveats.
The Secretary draws the Tribunal’s attention to the matter of Gartside and Secretary, Department of Social Services [2017] AATA 45 where Senior Member Sosso (as he was then) at [57]-[58] writes:
I do not understand the many Federal Court and Tribunal decisions on “special circumstances” to require the Tribunal to find that special circumstances exist simply because the Applicant is in straitened financial circumstances. My understanding of the law is that it is open for the Tribunal to find special circumstances in such a circumstance, but a Tribunal Member is not obliged to do so. In exercising the discretion vested in the Tribunal, a Member is required to consider all of the matters the evidence admitted produces and straitened financial circumstances is one factor, albeit a very important one, but not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:
“The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances. Very often their stories will be quite tragic.”
Other factors which may outweigh straitened financial circumstances include consideration of the general administration of the social security system (Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114) and whether an Applicant’s disposition of their compensation payment has been reckless – e.g. Davis and Secretary, Department of Family and Community Services [1999] AATA 84.
In this case I am unable to conclude that Mr Keskin is currently in straitened financial circumstances. I accept that Mr Keskin appears to be a poor record keeper but the money for which he has not accounted is substantial. By his own evidence his father has offered to assist him, and his brother is doing the same. There is every indication that Mr Keskin’s father and brother seek to support him where they can.
At a minimum the Tribunal must be satisfied that Mr Keskin’s compensation was expended so the Tribunal can be confident of his actual financial circumstances before he can be considered for support from the welfare system.
Mr Keskin suffers from serious medical conditions as a result of his accident and there is evidence of this before the Tribunal. A letter from Dr Rebecca Martens of the Western Sydney Local Health District Brain Injury Rehabilitation Service dated 23 May 2019 confirms that assessments have demonstrated deficits in Mr Keskin’s intellectual functioning “particularly in non-verbal intellectual abilities, impairment of ability to maintain concentration, impairment of short term memory, difficulties with recall of past distant information, disruption of verbal communication…” .
Dr Martens writes that whilst Mr Keskin’s function has remained stable, “he continues to be significantly impaired from his traumatic brain injury and requires support for day to day activities given his cognitive impairments and communications impairments.”
Mr Keskin was alert and engaged with proceedings during the hearing. He followed the issues and provided evidence without any obvious difficulty. He advocated capably on his own behalf and did not at any point provide cause to question his understanding of what was being discussed. He certainly appreciated the fundamental concept of the preclusion period and why it resulted in his application being denied.
That said, the Tribunal accepts Dr Marten’s assessment of Mr Keskin’s impairments and recognises the potential of such injuries to impair his decision making ability. Mr Keskin’s impairments do not allow for the lack of evidence regarding the disbursement of his compensation. It is also the case that Mr Keskin did not contend that the expenditure of his compensation was the consequence of his health conditions. If he were to do so, it would not be possible to determine how his medical condition relates to Mr Keskin’s decision making and financial circumstances based on the evidence that is currently before the Tribunal.
The Guide provides for discretion to be applied where a person’s circumstances have altered significantly since the commencement of the preclusion period. Mr Keskin was married and divorced since settlement. Consistent with the Guide, this may be considered a cause of expenditure beyond what was anticipated. Whilst Mr Keskin’s first wife lodged a caveat over his house, it is apparent that the settlement is still being worked out. As such, it is not possible to determine that additional expenditure outside his control has been required or that his personal assets have been reduced due to a property settlement.
Conclusion
Mr Keskin contends that he has spent all of his compensation payment and is now in straitened financial circumstances. In circumstances where a considerable portion of the compensation is unaccounted for it is not possible to conclude that Mr Keskin is in straitened financial circumstances. This is particularly so when the unreported sums are so substantial and Mr Keskin’s application was made nearly a decade before the preclusion period is due to end.
This is further complicated by Mr Keskin’s financial affairs being less than straightforward. He sold an investment property he claims he half owned with his father and he transferred half of the capital to him. He claims to have paid $250,000 to his father for costs which were incurred prior to receiving compensation. He says he purchased a business. There is a caveat against his home for which substantial loans are claimed to have been made. Without explanation, details or essential documentation for each of these and other items, it is almost impossible to have confidence in Mr Keskin’s actual financial circumstances.
It is also the case that Mr Keskin has a large realisable asset in his house. Whilst it is currently the subject of an ongoing legal dispute, it remains an asset.
On balance, it is apparent that Mr Keskin has spent much of his compensation unwisely, but the evidence does not establish that he now finds himself in circumstances that warrant exercise of the discretion under the special circumstances provisions.
Decision
The decision under review, being the decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal dated 27 August 2018, is affirmed.

I certify that the preceding 67 (sixty -seven) paragraphs are a true copy of the reasons for the decision herein of Mr S Evans, Member

...............................[sgd].........................................
Associate
Dated: 6 July 2020

Date(s) of hearing: 23 April 2020

Applicant: In person

Solicitors for the Respondent: Services Australia

Date(s) of hearing:	23 April 2020
Applicant:	In person
Solicitors for the Respondent:	Services Australia