Keys and Secretary, Department of Social Services (Social services second review)
[2017] AATA 2099
•2 November 2017
Keys and Secretary, Department of Social Services (Social services second review) [2017] AATA 2099 (2 November 2017)
Division:GENERAL DIVISION
File Number: 2016/5364
Re:Kenneth Keys
APPLICANT
AndSecretary, Department of Social Services
RESPONDENT
DECISION
Tribunal:L M Gallagher, Member
Date:2 November 2017
Place:Perth
The decision under review is affirmed.
........[sgd].......................................................
L M Gallagher, Member
CATCHWORDS
SOCIAL SECURITY – compensation preclusion period – disability support pension – unfairness – straitened financial circumstances – changed circumstances – ill health - no special circumstances - evidence does not support that compensation preclusion period be shortened – decision under review affirmed
LEGISLATION
Social Security Act 1991 (Cth) – s 17(1) – s 17(2) – s 17(3)(a) – s 17(4) – s 17(8) – s 1169(1) – s 1170 – s 1171(1) – s 1184K
CASES
Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076
Cooper and Secretary, Department of Social Services [2015] AATA 41
Debnam and Secretary, Department of Families, Housing, Community services and Indigenous Affairs [2010] AATA 919
Haidar v Secretary, Department of Social Security [1998] FCA 994; 52 ALD 255
Kertland v Secretary, Department of Family & Community Services [1999] FCA 1596
Massoud v Secretary, Department of Social Services (Social services second review) [2017] AATA 1366
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) [1979] AATA 179
Secretary, Department of Social Security v Banks (1990) 20 ALD 19 at 24
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
SECONDARY MATERIALS
The Guide to Social Security Law – Part 4.13.2.60 – Part 4.13.4.10 – Part 4.13.4.20
REASONS FOR DECISION
L M Gallagher, Member
2 November 2017
INTRODUCTION
On 18 July 2011, Mr Keys was injured in a work accident (T8, page 77).
From 17 May 2013 to 9 August 2013, Mr Keys was paid periodic compensation for total incapacity at the rate of $1,109.23 (gross) per week (T8, pages 77 and 79).
As noted in a consent judgment dated 9 December 2015 (T37, page 221), Mr Keys was then paid weekly payments of workers’ compensation through to 15 September 2015. The consent judgment also states that Mr Keys’ settlement sum for his work accident on 18 July 2011 was $300,000.00 (net) in damages plus party/party costs of $29,400.70 plus additional advance of $4,000.00 paid to Mr Keys prior to settlement. The total settlement amount in relation to Mr Keys’ work accident was therefore $333,400.70.
An undated reconciliation statement prepared by Rando Solicitors shows that from the settlement amount (recorded as $329,400.70, that is, excluding the additional advance of $4,000.00), Mr Keys was required to reimburse RiskCover in the amount of $134,777.75 and Premier Pet Pty Ltd in the amount of $83,192.25 (T43, page 233), a total reimbursement amount of $217,970.00 (see also T37, page 221). Deducting the total reimbursement amount from the total settlement amount, Mr Keys received $115,430.70 from the settlement.
On 1 October 2015, Mr Keys lodged a claim for the Disability Support Pension (‘DSP’) (T58, page 368).
On 19 January 2016, the Department of Human Services (the ‘Department’) communicated with Mr Keys regarding the consequences of having received a lump sum compensation payment on any claims for income support, namely (T40, page 227):
“We have been advised that you are entitled to receive a lump sum payment of $333,400.70. As a result, we have calculated that you have a preclusion period that starts on 16 September 2015 and ends on 8 November 2016. During this period you are not able to receive income support from us.”
[Emphasis added]
On 2 February 2016, Mr Keys received from Rando Solicitors a trust cheque in the amount of $74,280.00, being the remainder of the $111,430.70 settlement payment (exclusive of the advance payment of $4,000.00) following a deduction of $37,150.70 by Rando Solicitors for its legal fees and disbursements (T43).
On 29 March 2016, Mr Keys’ claim for DSP was rejected on the basis that he was subject to a compensation preclusion period from 16 September 2015 until 8 November 2016[1] (the ‘compensation preclusion period’) (T57, page 354).
[1] The Tribunal notes that the preclusion period has concluded and Mr Keys has been in receipt of the DSP since 9 November 2016, the day following the last day of the preclusion period (see Annexure J of the Respondent’s Statement of Facts, Issues and Contentions dated 24 February 2017 including annexures and list of authorities (R1)). The fact that the preclusion period has concluded is irrelevant and the Tribunal would be in error if it took this factor into account in reaching its decision (Haidar v Secretary, Department of Social Security [1998] FCA 994; 52 ALD 255).
On 23 June 2016, Mr Keys requested a review of the decision dated 29 March 2016 (T57, page 356) and on 14 July 2016, an Authorised Review Officer (‘ARO’) of the Department affirmed that decision on the same basis (T53).
On 28 July 2016, Mr Keys applied to the Administrative Appeals Tribunal (‘Tribunal’) for a first review of the ARO decision dated 14 July 2016 (T2). On 14 September 2016, the Tribunal’s Social Services and Child Support Division (‘AAT1’) affirmed the ARO decision (T2). The AAT1 found that it was not satisfied that Mr Keys’ circumstances, considered in their entirety were ‘special,’ in the sense of being sufficiently unusual or uncommon, to justify the exercise of the discretionary power conferred by section 1184K of the Social Security Act 1991 (Cth) (the ‘Act’) to treat the whole, or any part, of the compensation payment made to Mr Keys as not having been made (T2).
On 6 October 2016, Mr Keys applied to the Tribunal’s General Division for a second review of the AAT1 decision dated 14 September 2016, claiming that AAT1 decision was wrong because (T1, page 2):
“I didn’t have evidence back from the ATO at the time of the hearing that evidence has now arrived and proved beyond doubt that I have not had an income since the 18th July 2011. The $74,280.00 I received should have been taken into account when calculating the preclusion period from the above date. So I am owed disability payments from the end of the revised preclusion period.”
RELEVANT LEGISLATION AND PRINCIPLES
The statutory provisions relevant to the present matter are contained in the Act. The Guide to Social Security Law (the ‘Guide’) provides assistance to those who administer the Act. The Tribunal, whilst not bound to apply policy guidelines will usually do so unless there are cogent reasons in a particular case for not doing so (Refer to Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) [1979] AATA 179).
The principles underpinning the relevant provisions and the objectives of the Act more generally have recently been put by Senior Member Sosso[2] as follows:
12.The Act contains provisions dealing both where a person, the recipient of social security payments, receives a lump sum compensation and where a person who has received a compensation payment subsequently applies for social security.
13.The Act is focused either on recovery of social security paid, or preventing the payment of social security during the preclusion period. The principle underpinning these provisions is that “double dipping” should not be allowed, and that a person should not simultaneously obtain the benefit of a compensation payment and also receive the benefit of a social security pension or allowance.
14. The Commonwealth Parliament enacted legislation with the specific objective of ensuring that if a person receives a compensation payment for economic loss, the recipient should draw on those funds for a reasonable period before again benefitting from social security payments.
15. This overriding objective was explained by Deputy President Burns in Secretary, Department of Social Security and Winterbotham [1990] AATA 808 as follows:
“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 taxpayer.”
[2] Massoud v Secretary, Department of Social Services (Social services second review) [2017] AATA 1366
Part 4.13.4.10 of the Guide relevantly states:
The compensation recovery provisions of social security law are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.
Note: The special circumstances provisions should not be used to override this basic legislative intention.
Subsection 1169(1) of the Act provides that if a person received a “compensation affected payment” and also receives a lump sum compensation payment, then the compensation payment is not payable to the person during the lump sum preclusion period.
Subsection 17(1) of the Act defines the term “compensation affected payment” to mean one of a number of pensions and allowances listed in that subsection. Subsection 17(1)(a) of the Act provides that the DSP is a compensation affected payment.
Subsection 17(2) of the Act defines “compensation” for the purposes of the Act as follows:
Compensation
(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)(a) of the Act defines the compensation part of a lump sum to be 50% of the payment if it is made in settlement of a claim related to an injury (among other things) and the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise.
Subsection 17(4) of the Act provides that:
(4) Where a person:
(a) has received periodic compensation payments; and
(b)after receiving those payments, receives a lump sum compensation payment (in this subsection called the LSP); and
(c) because of receiving the LSP, becomes liable to repay an amount (in this subsection called the Repaid Periodic Compensation Payment—RPCP) equal to the periodic compensation payments received;
then, for the purposes of subsection (3), the amount of the lump sum compensation payment is:
LSP - RPCP
Section 1170 of the Act provides for the calculation of the comp sum compensation preclusion period, including the duration of the preclusion period and the start and end dates, relevantly as follows:
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).
…
(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
Compensation part of lump sum
Income cut-out amount
(5)If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.
Subsection 1171(1) of the Act contains the provisions regarding the aggregation of lump sum compensation payments, as follows:
(1)If:
(a) a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and
(b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act …:
(c) the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;
(d)the single payment is taken to have been received by the person:
(i) on the day on which he or she received the last of the multiple payments; or
(ii) if the multiple payments were all received on the same day, on that day.
[Emphasis added]
Subsection 17(8) of the Act calculates the “income cut-out amount” with reference to the maximum basic rate of pension.
Part 4.13.2.60 of the Guide refers to the result of the calculation: -
Compensation part of lump sum
Income cut-out amount
as the divisor.
Further, Part 4.13.2.60 of the Guide states:
If more than one lump sum is made in respect of the same compensable event, and the lump sums are aggregated, then the divisor applying at the time of the most recent lump sum is used to recalculate the preclusion period. Each time a subsequent lump sum is paid, the divisor applying at that later time is used to recalculate the preclusion period.
Section 1184K of the Act vests in the Secretary the discretion to treat the whole or part of a lump sum compensation payment as not having been made or not liable to be made if the Secretary thinks it appropriate to do so in the special circumstances of the case.
Section 1184K cannot be used to shift the period that it applies to. In Kertland v Secretary, Department of Family & Community Services [1999] FCA 1596, Justice Merkel stated that:
“[27] The difficulty with the AAT's conclusion, as the parties correctly point out, is that there is no discretion or power under the Act to determine that the preclusion period began on any date other than 24 September 1994, being the day on which loss of earnings or loss of earning capacity began: see s1165(7), Secretary, Department of Social Security v Thompson (1994) 53 FCR 580 at 588 and Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349 at 358-359.”
As to special circumstances, Senior Member Sosso in the Massoud decision summarised the general principles as follows:
[30] “Special circumstances” is not defined in the Act, but it has generally been accepted that “special circumstances” are “unusual, uncommon or exceptional” or “markedly different from the usual run of cases” per Toohey J, Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3. The discretionary nature of the “special circumstances” provision requires a consideration of the particular facts and merits of each case. Certainly, in undertaking this exercise the Tribunal is required to consider the scope and purpose of the compensation preclusion provisions so as to avoid making determinations that would frustrate the legislative intent—Re Ivovic (1981) 2 ALN 95.
[31] However, Branson J cautioned against overstating the test by emphasising “exceptional” —Ryde v Secretary, Department of Family and Community Services [2005] FCA 866. Her Honour said (at [26]):
the statutory requirement for ‘special circumstances’ discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness…must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.
[32] This approach was also endorsed more recently by Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25; 100 ALD 9 at [33]:
…the authorities have emphasised time and again the importance of maintaining flexibility in determining what constitutes special circumstances. The danger is that the test will be overstated if the word ‘exceptional’ is emphasised. It was not the intention of Parliament to confine the exercise of the discretion to an exceptional case. There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case.
[33] Although these cases concern different provisions in the Act their approach to what constitutes special circumstances applies with equal force to those words in s 1184K—Secretary, Department of Social Security v Hulls (1991) 22 ALD 570 at 580–581 per O’Loughlin J.
[34] Finally, reference can be made to the decision of French J (as he then was) in Secretary, Department of Employment and Workplace Relations v Homewood [2006] FCA 779; 91 ALD 103. His Honour outlined how the Tribunal should address the question whether special circumstances in the context of s 1184K exist (at [34]):
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, 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.”
Part 4.13.4.20 of the Guide also contains factors to consider when considering special circumstances for the purpose of section 1184K of the Act.
ISSUES FOR DETERMINATION
It is not in dispute between the parties and the Tribunal is satisfied on the evidence before it that:
(a)Mr Keys received compensation payments as defined by subsection 17(2) of the Act, being the $333,400.70 he received in compensation by consent judgment for his work accident (refer to paragraph 3 above).
(b)As such, Mr Keys is subject to a compensation preclusion period.
In the present application, Mr Keys has taken issue with:
(a)the start date of the preclusion period (contending it should be earlier in time namely 18 July 2011, the date of injury); and in turn,
(b)the end date of the preclusion period; and
(c)the actual duration of the lump sum preclusion period as determined by the Secretary.
Mr Keys has also made a number of contentions regarding reimbursement of pharmaceutical costs, which is not a matter before this Tribunal.
Therefore, the issue for review is whether Mr Keys’ claim for DSP was correctly rejected, which in turn requires consideration of the following issues:
(a)whether, as a result of receiving lump sum compensation, and being precluded from receiving the DSP, the start date for Mr Key’s preclusion period is 16 September 2015 (or some other earlier date); and
(b)whether the evidence discloses “special circumstances” of the case which would allow the disregarding of part of all of the lump sum payment, thereby shortening the preclusion period to a date earlier than 8 November 2015 (or some other earlier date).
EVIDENCE
The matter was heard in Perth on 4 September 2017. Mr Keys appeared in person and was self-represented. The Secretary was represented by Mr Ashley Burgess from Sparke Helmore Lawyers.
The Tribunal received the following evidence:
·Applicant’s Statement of Facts, Issues and Contentions dated 26 January 2017 (A1);
·Respondent’s Statement of Facts, Issues and contentions dated 24 February 2017 including annexures and list of authorities (R1); and
·a 367 page set of T-Documents (T1 – T58) (R2).
The Tribunal has reviewed all of the material before it. The Tribunal is satisfied that all relevant evidence was before it and that both parties were provided an opportunity to address the evidence, either orally or in writing. Relevant aspects of the evidence and material before the Tribunal will be analysed and referred to below.
Mr Keys gave the following oral evidence at hearing, including during cross-examination by Mr Burgess:
(a)He had gone to Centrelink to “apply for benefits” out of desperation at a time when he had nowhere to live. Mr Keys said that the Family Court has quarantined his assets due to the divorce (from his then wife) going on at that time.
(b)His employer company had had no workers’ compensation insurance and following his work injury, paid him until January 2012 and then made him redundant.
(c)He thinks that the “50% rule” (in subsection 17(3)(a) of the Act) results in unfairness, that the length of the preclusion period is “excessive” and that he “still disagrees with the start date (of the preclusion period).”
(d)He wants the Tribunal to move the start date for the 60 week preclusion period back to 18 July 2011 (being the date of injury), so as to disregard the date that the periodic payments ended as a factor relevant to when the period should start.
(e)As to his request for the Tribunal to “make back payments for prescriptions paid for from that date (18 July 2011) on receipt of pharmacy invoices” or “at least from 2013 when [Mr Keys] moved to Yanchep” (refer to A1), he wished to be reimbursed for prescriptions during the period that he was not in receipt of the DSP because during that time he had to pay full price. Mr Key estimates that he incurs costs of between $120.00 and $150.00 per month on medication (refer to A1, paragraph 5), however the amount he actually pays has been “knocked down by about two thirds, closer to $65 a month” as he now has a health care card.
(f)His Mariginiup property had sold for $678,000.00 in July 2017, with $407,000 owing on it (T13, page 129). Mr Keys said it was not the case however, that this sale left him with a profit $271,000, because the Mariginiup property was “cross-collateralised” with the Yanchep property which had a $725,000 mortgage on it and sold on 15 October 2016 for $620,000.00.
(g)Of the $151,000.00 profit from the sale of the two properties ($271,000 profit on the sale of the Mariginiup property less the $120,000.00 debt on the sale of the Yanchep property), he has only $15,000.00 left because of the $136,408.00 he owed his ex-wife (see A1, paragraph 3) from those sales following Family Court orders to that effect.
(h)He maintains that he has a $63,000.00 debt despite the sale of the properties, which comes from “all sorts of things that came out of the sale, when added up.”
(i)When asked by Mr Burgess, Mr Keys confirmed that according to the Court orders, the obligation to repay this amount (i.e. completely discharge the mortgages) was actually owed by his wife but he believes he is going to be “stuck with it.” Mr Keys said that he doesn’t know how someone on a pension can repay a $63,000.00 debt on a house that they don’t own. Mr Keys said that he thinks this is enough to warrant the special circumstances discretion to be exercised.
(j)His ex-wife was “quarantined some of the money” as “the Judge” asked her to “set up a trust account.” Mr Keys said that “some of the quarantined money might free up once the Family Court proceedings [are finalised].”
(k)His ex-wife sold the Yanchep property for lower than the reserve price.
(l)He now lives in a rental property and meets his rental payments from his DSP income.
(m)As to his ill health, he “falls into pieces by the day,” had reviewed (Part 4.13.4.20 of) the Guide and “thinks he could tick every box.” Mr Keys said that he needs “special supports” to step in and out of the shower and “you can’t put those in a rental property.”
(n)Further regarding his ill health, Mr Keys has been on a waitlist for a liver transplant since 2013. He consults with a Professor at the hospital once every 6 months but no other action is required at this stage.
CONSIDERATION
The start date and duration of Mr Keys’ compensation preclusion period
Mr Keys contends that the start date of the lump sum preclusion period should be backdated to 18 July 2011, the date of his work injury, disregarding subsection 1170(1) of the Act, with the effect of concluding the preclusion period prior to his application for DSP. Mr Keys also contends that the preclusion period should also be “shortened.”
The Secretary contends that the start date of Mr Keys’ preclusion period begins on 16 September 2015 in accordance with subsection 1170(1)(a) of the Act, being the day following the last day of the last periodic payments period (where there is more than one periodic payments period).
By subsection 1170(1)(a) of the Act, the start date of Mr Keys’ lump sum preclusion period is and can only be 16 September 2015, (refer to paragraph 3 above). There is no discretion provided for in the Act or elsewhere and no authority of any kind for the start date to be any date other than the day following the last day of the periodic payments period.
The Tribunal also notes in this regard that Mr Keys’ lump sum preclusion period cannot start on the day on which the loss of capacity to earn began (in this case, the date of injury), because his lump sum payment included a “repaid periodic compensation payment.” As explained in Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076 (Clark)at [36], where the LSP does include an RPCP, the preclusion period will be shorter, but will begin on the day following the last day of the periodic payments period.
The 50% rule
The compensation part of a lump sum payment is defined in subsection 17(3) of the Act to be 50% of the payment if it is made in settlement of a claim related, among other things, to an injury. As noted in paragraph 21 of the Massoud decision, the 50% rule was designed to avoid manipulation of the system by obscuring the economic loss component of the payout. Parliament therefore deemed 50% to be in respect of economic loss (citing Secretary, Department of Social Security v Banks (1990) 20 ALD 19 at 24).
As Mr Keys was required to repay periodic compensation payments totalling $217,970.00 (refer to paragraph 4 above), the amount of the lump sum compensation payment is $115,430.70. This amount does not take into account any deduction for legal fees, agreed or otherwise. As noted in paragraph 39 of the Secretary’s written submissions (R1), it is well established that legal costs are included in the definition of compensation and there is no legislative basis to exclude legal costs from a lump sum payment for the purposes of subsection 17(3) of the Act.
As such, the Tribunal finds that, applying subsection 1171(1) and subsection 17(3) of the Act, Mr Keys’ compensation part of a lump sum is $57,715.35 (being 50% of $115,430.70). As the income cut-out amount at the time Mr Keys received his final lump sum payment was $948.00 (T56, page 307), by subsection 1170(4) of the Act, the number of weeks in the lump sum preclusion period is 60 weeks ($57,715.35 divided by $948.00).
On this basis, the Tribunal find that Mr Keys’ compensation preclusion period was correctly determined by the Secretary to be from 16 September 2015 to 8 November 2016.
Whether there exist any special circumstances
Mr Keys contends that given a number of special circumstances in existence (addressed below), in his submission, the Tribunal ought to exercise the discretion in section 1184K of the Act to treat the whole or part of a compensation payment as not having been made, with the practical effect of disregarding some or all of that payment (and shortening or indeed reducing to zero) the preclusion period.
As to the many factors that can be taken into account when exercising the discretion in relation to special circumstances, the Tribunal again refers to the Massoud at [52]:
“…Clearly, any attempt to enumerate such factors can only be indicative, at best. Whilst a checklist of factors based on previous decisions and determinations is helpful as a guide, the discretion vested in the Tribunal is broad and not subject to statutory limitation. Consequently, any attempt to arbitrarily limit or restrain the exercise of this discretion would not only be futile but legally impermissible.”
Unfairness
Mr Keys stated that he considers the “50% rule” results in unfairness. In this regard, the Tribunal refers to Federal Court authority to the effect that perceived unfairness of the operation of the legislation cannot, by itself, amount to a special circumstance, one out of the ordinary (Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67). The Tribunal also notes the decision of Clark at [42] - [44] in this regard).
Consistent with the authorities referred to in paragraph 47 above, a note to the Guide at Part 4.13.4.10 states that “special circumstances should not be applied if the only reason is the delegate does not agree with the legislation. This is contrary to the intention of Parliament and is illegal.”
Straitened financial circumstances and changed circumstances
As to the relevance of a person in straitened financial circumstances (Massoud at [53]):
“The many cases and determinations do not require the Tribunal to find that special circumstances exist simply because an applicant is in straitened financial circumstances. Whilst it is open for a Tribunal member to find that special circumstances exist in such a circumstance, there is no obligation to do so. The Tribunal is required to consider all matters and straitened financial circumstances is one factor, albeit an important one, but certainly not the sole one…”
In relation to straitened financial circumstances, Part 4.13.4.20 of the Guide says, among other things, that “financial circumstances needs to be severe and worse than the majority of social security recipients” and that “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 Guide also relevantly states that it should be considered whether the circumstances of a person have altered significantly since the preclusion period commenced due to circumstances wholly or partly outside of the person’s control, giving the example that “the compensation recipient has divorced since the settlement[3] and their personal assets have reduced due to the property settlement.”
[3] Regarding Mr Keys’ marital breakdown, the Tribunal notes the decision of Debnam and Secretary, Department of Families, Housing, Community services and Indigenous Affairs [2010] AATA 919 at [27] which held that separation and divorce are not exceptional circumstances and often necessitate the sale of previously loved and valued assets, including homes.
Mr Keys seeks a reduction in or shortening of the preclusion period for a number of financial reasons, namely:
(a)There are very little profits remaining following the sale of the Mariginiup and Yanchep properties as court orders require him to pay his ex-wife a significant amount from those sales (refer to A1, paragraph 3).
(b)He is “stuck with” a debt of $63,000.00 because of “all sorts of things that came out of the sale.”
(c)His wife has “quarantined some of the money,” although some of this might “free up” once the Family Court proceedings are finalised.
(d)Centrelink started the preclusion period one month after he received his last payment from WorkCover at a time when he really needed (financial) support (A1). Following his injury in July 2011, he “had no means of support and had to go to WorkCover to survive” (A1). Mr Keys compared his situation to that of someone who has lost their job and “apply for unemployment” while they get back on their feet, to then be told that they have been working and are subject to a preclusion period.
(e)He had to use his compensation payment to “pay all the money back to WorkCover” (i.e. the reimbursement to the insurers) “and to his employer” (i.e. the reimbursement of the periodic payments) and pay for legal fees in relation to the Family Court proceedings (the payment of legal fees is addressed further at sub-paragraphs 53(a), 54(d) and 54(h) and paragraph 55 below).
The Secretary, while it accepts that Mr Keys circumstances had changed since the commencement of the preclusion period (although not significantly) (R1, paragraph 78) and that he is experiencing straitened financial circumstances (R1, paragraph 81), contends that (R1):
(a)Mr Keys used the majority of the lump sum compensation payment to pay legal costs of Family Court proceedings, even where, at the beginning of the preclusion period, the two properties were subject to significant mortgages, and were subject to the outcome of Family Court proceedings.
(b)Mr Keys’ financial position is similar to other people applying for social security benefits and is not out of the ordinary.
The Tribunal notes the available evidence in relation to Mr Keys’ financial and changed circumstances is as follows:
(a)Mr Keys and his wife divorced on 1 July 2012 (T11, page 85 and T58, page 365).
(b)Mr Keys was advised on 23 February 2016 that the mortgages for both the Yanchep and Mariginiup properties were in default (T46, page 237). The default notice shows that instalments had not been paid on those mortgages since January 2014 (T46).
(c)Family Court orders on 20 May 2016 (T48) included that Mr Keys must pay his wife the sum of $136,408 by 12 August 2016, but should use his best endeavours to pay her by 15 July 2016, and if he defaulted, his wife was to be appointed trustee for the purpose of selling the Mariginiup and Yanchep properties (which is what occurred).
(d)Dwyer Durack Trust Statement of Account as at 30 June 2016 shows that Mr Keys paid a total of $58,700.00 for legal fees incurred in 2016 in relation to Family Court proceedings (T49, page 269).
(e)The Yanchep property, owed jointly (50:50) by Mr Keys and his ex-wife, was sold on 15 October 2016 for $620,000, with $725,000 owing on the mortgage (T15, page 139 and R1, Annexure F).
(f)Handwritten notes regarding the sale of the Yanchep property (R1, Annexure F) state that the property was worth $715,000 and “my ex-wife as trustee has orders to sell my properties for the price of the sworn valuations. This matter is subject to court proceedings because she sold it under value.”
(g)The Mariginiup property, owned by Mr Keys, was sold in July 2017 for $678,000, with $407,000 owing on the mortgage (T13, page 129). Mr Keys did not consider profit of $271,000 from the sale of the Mariginiup property to be a profit in the general sense of the word given the debt incurred on sale of the Yanchep property (refer to sub-paragraph 54(c) above).
(h)Mr Keys detailed his financial circumstances as at September 2016 and how his settlement monies were spent as follows (T44 read together with T55):
WorkCover
$217,000.00
Rando Solicitors
$37,718.00
Nat Aust Bank (credit card)
$7,963.00
ANZ Bank (credit card)
$12,690.00
Dwyer Durack Lawyers
$19,177.00
Car (asset)
$2,000.00
Bank account (asset)
$659.00
(i)Mr Keys has, since the sale of his properties, moved into a shared rental property (the Tribunal notes the Residential Tenancy Agreement dated 16 November 2016 signed by Mr Keys at R1, Annexure E), where he and another tenant pay $420.00 per week in rent.
Mr Keys applied for the DSP on 1 October 2015. Mr Keys was then advised of the preclusion period on 19 January 2016 (T40, page 227). Mr Keys received his lump sum compensation payment of $74,280.00 on 2 February 2016. Mr Keys then paid $19,177.00 in legal fees on 18 March 2016 and a further $58,700.00 as per the account as at 30 June 2016. The Tribunal notes this expenditure was made despite having already been advised of the preclusion period. The Tribunal considers that the payment of legal fees in relation to a marriage breakdown is not unusual, unless the particular amount of those legal costs is so excessive to be out of the ordinary and even then this may (but not always give rise to special circumstances[4]. The Tribunal finds that the legal fees incurred and paid in Mr Keys’ case are not unusual in the circumstances and in the present matter do not give rise to special circumstances.
[4] Cooper and Secretary, Department of Social Services [2015] AATA 41.
The Family Court proceedings relating to Mr Keys and his ex-wife commenced prior to the start date of the preclusion period and the order requiring him to pay $136,408 was then made on 20 May 2016. Given Mr Keys’ default on the mortgage payments for the two properties, his ex-wife was appointed as trustee for the purpose of selling those properties.
Mr Keys has now lost his interest in those properties, however the Tribunal finds he has, on balance also significantly reduced his financial liabilities at the same time. The Tribunal also finds that the $63,000.00 debt that Mr Keys also spoke of cannot be taken into account as a debt as the Family Court orders require his ex-wife to discharge this debt from quarantined funds upon completion of the Family Court proceedings.
The Tribunal also notes that there is no evidence to suggest that Mr Keys was unable to support himself during his compensation period and that even now he is able to meet his rental payments.
Ill health
Ill health is a further factor that can be considered with regard to special circumstances for the purposes of justifying the exercise of the direction contemplated by section 1184K of the Act.
In relation to ill health, Part 4.13.4.20 of the Guide says the state of ill health should be more severe than the majority of DSP recipients, the injury that a person received compensation for cannot generally be regarded as a special circumstance and current medical evidence in support detailing the relevant conditions and their impact should be provided.
As noted in the Massoud decision at [70]:
“The Applicant is in bad health, but in most cases involving a preclusion period that would be expected. The fact that an applicant has been injured and received a compensation payout usually results in that person being in ill health during the preclusion period or immediately thereafter. The various Tribunal determinations focus on the consequences of that ill health in making a determination as to special circumstances. In short ill health is the starting point of the exercise, not the determining factor. Further, it is usually the case when determining that ill health is a special circumstances, the ill health being experienced by an applicant is more severe than the majority of DSP recipients.”
Mr Keys claims, the Secretary accepts and the Tribunal finds on the evidence that Mr Keys has ill health as a result of a spinal condition (fracture of lumbar veterbrae) and a brain condition (subarachnoid haemorrhage suffered in 2012 and subdural haematoma and hypoadrenalism suffered in 2013) (R1, Annexure I). Mr Keys also gave evidence that he is on the waitlist for a liver transplant but made no comment regarding the impact of a liver condition (if any) on his health.
As to Mr Keys’ brain condition, the Tribunal notes the report of Ms Vidovich, Clinical Neuropsychologist dated 25 July 2015 (R1, Annexure I), which referred to a number of additional reports where the medical opinion was that it was unlikely that Mr Keys’ brain condition could be linked to his work accident in 2011 but that it was likely that Mr Keys’ spinal injury was sustained as a consequence of that accident.
The Tribunal notes that the symptoms of Mr Keys’ brain injury were assessed in a Government-Contracted Doctor Disability Medical Assessment dated 8 March 2016 (R1, Annexure D) as “headaches, poor endurance and impaired concentration, memory loss, forgetful…mood swings, distractibility…, requires occasional assistance from family for planning, financial management.”
Based on the medical opinion summarised at paragraphs 63 and 64 above, while it is reasonable for the Tribunal to conclude that Mr Keys’ ill health and treatment for his spinal condition is related to the injury for which he received compensation (and therefore cannot, by Part 4.13.4.20 of the Guide) be regarded as a special circumstance, the same conclusion cannot be reached in relation to Mr Key’s brain injury.
The Tribunal finds however, that even if Mr Keys’ brain condition was related to the injury for which he was compensated, there is insufficient evidence to support a conclusion that Mr Keys’ state of ill health, whether it be in relation to his brain injury or his spinal injury, is more severe than the majority of DSP recipients.
Consequently, Mr Keys’ ill health is not a factor that can be considered in the favourable exercise of the special circumstances discretion.
CONCLUSION
The key issue before the Tribunal is whether special circumstances can be found to exist such as to enliven the discretion granted by section 1184K of the Act.
The Tribunal has considered Mr Keys’ circumstances in their entirety. Based on all the evidence before it, the Tribunal finds that evidence does not support the exercise of the discretion because:
(a)There is no evidence of any unfairness to Mr Keys in the application of the preclusion period.
(b)Mr Keys is not in straitened financial circumstances. He had sufficient liquid assets to support himself during the preclusion period and meet his medical expenses and now meets his rental payments with his DSP payments. The Tribunal considers the sale of his properties overall has, rather, somewhat alleviated his financial hardship.
(c)While Mr Keys suffers from ill health, it is not in a manner that can be regarded as a special circumstance, because the evidence is that his spinal condition relates to the injury for which he was compensated and this matter is unclear in relation to his brain condition. Regardless of the relationship of Mr Keys’ conditions to his work injury, the Tribunal finds it cannot be said in either case that Mr Keys health has been demonstrated to be more severe than the majority of DSP recipients.
(d)There is no evidence of any personal hardship to Mr Keys otherwise experienced by Mr Keys during the preclusion period.
(e)There is no evidence that compared to other persons in receipt of the DSP and are subject to a preclusion period, that Mr Keys’ circumstances are exceptional, unusual or uncommon.
In reaching its decision, the Tribunal has also had regard to the spirit and purpose of the Act and the Guide (refer to paragraph 13 above). Mr Keys stated in his application for review that he has not had an income since 18 July 2011 (refer to paragraph 11 above). With respect to Mr Keys, his income from that date was in the form of compensation payments met by the party that was liable for his inability to work.Shortening Mr Keys’ preclusion period would have the effect of rendering Mr Keys in receipt of the DSP at a time when he was also in receipt of compensation, which is exactly the “double dipping” that the Act seeks to avoid.
DECISION
The decision of the AAT1 dated 14 September 2016, which affirmed a decision of the Department dated 14 July 2016, that Mr Keys’ claim for DSP was rejected on the basis that he was subject to a compensation preclusion period from 16 September 2015 until 8 November 2016 is affirmed.
I certify that the preceding 71 (seventy - one) paragraphs are a true copy of the reasons for the decision herein of L M Gallagher, Member
.......[sgd]............................................................
Administrative Assistant
Dated: 2 November 2017
Date(s) of hearing: 4 September 2017 Applicant: In person Advocate for the Respondent: Mr A Burgess Solicitors for the Respondent: Sparke Helmore Lawyers
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