King and Secretary, Department of Social Services (Social services second review) - [2021] AATA 5288

King and Secretary, Department of Social Services (Social services second review) [2021] AATA 5288 (5 October 2021)

Division:GENERAL DIVISION
File Number(s): 2020/5416
Re:Ryan James King
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION

Tribunal:Member G Hallwood
Date:5 October 2021
Place:Adelaide

The decision under review is affirmed.

.....................[SGND]..........................

Member G Hallwood

Catchwords

SOCIAL SECURITY –disability support pension – compensation lump sum received – preclusion period – 50% rule – whether legal costs a component of compensation – whether medical costs a component of compensation – Secretary able to exercise discretion – decision affirmed

Legislation

Social Security Act 1991 (Cth)

Cases

Beadle and Director-General of Social Security (1984) 6 ALD 1; (1985) 7 ALD 670.

Clark v Secretary, Department of Employment and Workplace Relations [2007] FCA 1076.

Fuller and Secretary, Department of Family and Community Services [2004] AATA 615.

Groth v Secretary, Department of Social Security (1995) 40 ALD 541.

Haidar v Secretary, Department of Social Security (1998) 52 ALD 255.

Secretary, Department of Social Security v Hulls [1991] FCA 58

Secondary Materials

Social Security Guide

REASONS FOR DECISION
Member G Hallwood
5 October 2021
BACKGROUND

This review is about whether a preclusion period from 18 October 2016 – which was the date from which Mr King (the Applicant) was granted the disability support pension (DSP) – to 23 January 2018 should be applied to the Applicant’s DSP payments because he received a lump sum payout as a result of injuries sustained in a motor vehicle accident.
On 1 September 2020, the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) affirmed a decision of Services Australia dated 17 April 2020. The decision was that the Applicant was subject to a compensation preclusion period from 18 October 2016 to 23 January 2018 in respect of a lump sum payment received on 18 March 2020. For this reason, a charge of $29,309.81 was recoverable in respect of amounts of DSP payments that the Applicant had received during the preclusion period[1]. This is the decision under review.
[1] T2, pages 6-10.
Mr King sustained injuries in a motor vehicle accident on 5 October 2016[2].
[2] T13, page 100.
On 21 September 2017, Mr King was granted the DSP from 18 October 2016[3].
[3] T15, page 263.
On 18 March 2020, the District Court of South Australia made orders by consent in favour of Mr King for a lump sum payment of $140,000 in relation to his motor vehicle accident[4].
[4] T13, page 103.
On 17 April 2020, Services Australia decided that Mr King’s DSP was subject to a preclusion period from 18 October 2016 to 23 January 2018 as a result of receiving this lump sum payment. Allianz, the compulsory third party agent at the time of the accident, was given notice to pay to the Commonwealth $29,309.81 out of the lump sum to cover payments provided for during the preclusion period[5].
[5] T15, pages 271-273.
Mr King requested reviews of Services Australia’s decision which was affirmed by a Subject Matter Expert within Services Australia on 11 May 2020,[6] an Authorised Review Officer on 16 June 2020 who also determined not to treat any part of the lump sum compensation payment as having not been made[7] and, the AAT1 on 1 September 2020[8].
[6] T14, page 199.
[7] T3, pages 11-15.
[8] T2, pages 6-10.

ISSUES

The Social Security Act 1991 (the Act) provides at Part 2.3 for a DSP scheme that incorporates the principle that if a person has been compensated for a past or future loss of income, they should use that money to live off for a period of time related to the amount received, and will be precluded from receiving a taxpayer-funded payment for the period to which the compensation relates. A preclusion period is the period that the compensation recipient is unable to receive a social security income support payment.
Subsection 1169(1) of the Act provides that if a person claims or receives a compensation affected payment (which includes DSP) and has also received a lump sum compensation payment, then the compensation affected payment is not payable in relation to any days in the lump sum preclusion period. Section 1170 of the Act sets out the method of calculating the preclusion period.
Section 1184 of the Act provides that the Secretary can recover such amounts from an insurer who is liable to pay compensation.
Section 1184K of the Act provides the Secretary with the discretion to disregard the whole or part of a compensation payment, and so reduce or remove a compensation preclusion period if it is considered appropriate to do so in the special circumstances of the case.
The issues to be considered in this matter are:
(a) Is Mr King subject to a preclusion period?
(b) If so, is the amount paid to him during that period recoverable?
(c) If so, is there any reason why all or part of the motor vehicle accident lump sum compensation payment should be treated as not having been made?

CONSIDERATION

By way of background, Mr King told the Tribunal that in February 2012 he had sustained injuries because of a workplace assault, and in about September 2012 he had operations on both shoulders. He received workers’ compensation, income maintenance and physical rehabilitation over a period of about four years. Because of changes to the workers’ compensation legislation in South Australia from 1 July 2015 (when the Return to Work Act 2014 (SA) replaced the Workers’ Rehabilitation and Return to Work Act 1986 (SA)), which limited the payment of income maintenance to two years except for ‘seriously injured workers’, Mr King told the Tribunal he reluctantly accepted a lump sum redemption payment finalising his entitlements with Return to Work SA. The redemption payment precluded him from receiving DSP for a period of time. On 27 September 2016, toward the end of the preclusion period resulting from his workers’ compensation redemption payment, Mr King applied for DSP.
The preclusion period currently before the Tribunal is one that resulted from a lump sum payment for injuries sustained in a motor vehicle accident that occurred on 5 October 2016, about a fortnight before the date from which Mr King’s DSP payments commenced. It was not until 18 March 2020 that Mr King received all-inclusive consent orders for a lump sum payment of $140,000 in relation to his motor vehicle accident.

Is Mr King subject to a preclusion period?

Mr King contends that the ‘compensation part of the lump sum’ should only relate to the portion allocated to past economic loss, which he argues was $4,039.95. The Secretary contends that 50% of the lump sum payment ($140,000 x 50%) represents the ‘compensation part of the lump sum’.
Division 3 of the Act sets out the effect of receiving compensation payments on entitlements under the Act.
Compensation affects the payment of most social security pensions and benefits. 'Compensation-affected payment' is defined at paragraph 17(1) of the Act and includes at (a) ‘a disability support pension’.
Section 1169 of the Act provides that where a person receives a compensation-affected payment and receives a lump sum compensation payment, the compensation-affected payment is not payable to that person during the lump sum preclusion period.
Subsections 1170(3)-(5) of the Act explains how the lump sum preclusion period is calculated (subsections (1) and (2) are not included below as they relate to circumstances where periodic compensation payments rather than lump sum compensation are payable):
(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
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 considering whether the 'compensation part of a lump sum' related to only the portion of the lump sum allocated to economic loss as Mr King contends, the Tribunal looked to the definitions contained in section 17 of the Act. The 'compensation part of a lump sum' is relevantly defined at paragraph 17(3)(a) of the Act:
(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;…
Mr King did not dispute that he received a payment in settlement of a claim related to an injury or that the claim was settled by consent.
Mr King provided a document from his solicitor setting out the components of an ‘all-inclusive’ settlement offer amount of $140,000, which appears to have been accepted by Allianz and eventually became the amount the District Court of South Australia orders payable in relation to Mr King’s motor vehicle accident[9]. Mr King points out that there is only an amount of $4,039.95 listed for future economic loss in the breakdown of the offer. Mr King contends that this is the only component that should be used when calculating a reduction of his entitlement to DSP.
[9] Exhibit A8-10
Section 17(2) of the Act defines ‘compensation’ as being any payment made in respect of a personal injury, illness or condition that is made wholly or partly in respect of lost earnings or lost capacity to earn:
(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 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.

The breakdown of Mr King’s payment provided by his solicitor that the all-inclusive lump sum included, as a portion of the lump sum, a payment in respect of lost earnings resulting from personal injury[10]. Mr King expressed displeasure that his payment included a payment in respect of lost earnings because he says he was unable to earn wages due to his incapacity at the time, however, in his evidence he stated that his solicitor included such a payment in the offer which was accepted.
[10] Exhibit A8-10.
The Tribunal is satisfied that despite Mr King’s annoyance at the inclusion of the full settlement amount in the calculation, the lump sum meets the definition of compensation for social security purposes.
Many compensation matters are settled by consent. In such cases the Act determines that 50% of the lump sum amount is deemed to be the compensation part of the lump sum, irrespective of the asserted economic loss component. As the order in this matter was for an all-inclusive amount of $140,000 in settlement of a claim related to a disease, injury or condition, and was settled by consent judgment, the Tribunal is satisfied that the compensation part of a lump sum compensation payment is 50% (under s17(3)(a) of the Act) of the $140,000 lump sum received – that is, $70,000.
Once the compensation part of the lump sum is worked out, the next step is to determine the length of the lump sum preclusion period. The Act sets out a formula for calculating the length of the preclusion period. The lump sum preclusion period is calculated by dividing the compensation part of the lump sum payment by the relevant divisor applicable at the time the payment was made. The result is the period of complete weeks (rounded down to the nearest whole week) in which the person is precluded from receiving a compensation affected payment.
‘Income cut-out amount' is defined in subsection 17(8) of the Act. As of 18 March 2020, this amount was $1,020.40. The divisor is not in dispute in this matter.
Applying the formula in subsection 1170(4) of the Act to Mr King's circumstances to determine the number of weeks the preclusion period is to apply:
70,000 (the compensation part of the lump sum)
/
1,020.4 (the income cut-out amount)
^{= 68.6 weeks}
Subsection 1170(5) states that if the number worked out under subsection (4) is not a whole number, the number is rounded down to the nearest whole number. In this case the nearest whole number when rounded down provides a preclusion period of 68 weeks.
For these reasons, subject to the other questions being considered, the Tribunal is satisfied that Mr King’s preclusion period in respect of his lump sum would start from the date of his accident on 5 October 2016 and end on 23 January 2018. There was no dispute, and the Tribunal is satisfied, that Mr King received DSP totalling $29,309.81 during this preclusion period.[11]

[11] T14, page 114

Is the amount paid during the preclusion period recoverable?

Section 1184 of the Act relevantly states that the Secretary can recover such amounts from an insurer who is liable to pay compensation:
(2) If:
(a) an insurer is liable, under a contract of insurance, to indemnify a compensation payer against any liability arising from a person's claim for compensation; and
(b) the person has received a compensation affected payment in relation to a day or days in the periodic payments period or the lump sum preclusion period, as the case may be;
the Secretary may give written notice to the insurer that the Secretary proposes to recover from the insurer the amount specified in the notice.
(3) If a compensation payer or insurer is given notice under subsection (1) or (2), as the case may be, the compensation payer or insurer is liable to pay to the Commonwealth the amount specified in the notice.
(4) The amount to be specified in the notice is the recoverable amount under section 1184A.
Subsection 1184A(1) of the Act sets out the recoverable amount under section 1184 of the Act where lump sum compensation has been made, but not periodic compensation payments:
(1) If a person receives compensation affected payments in relation to a day or days in a lump sum preclusion period, the recoverable amount under this section is equal to the smallest of the following amounts:
(a)   the sum of all compensation affected payments made to the person that relate to a day or days in a lump sum preclusion period;
(b)   the compensation part of the lump sum payment;
(c)   in the case of a compensation payer-the maximum amount that the compensation payer is liable to pay to the person in relation to the matter at any time after receiving:
(i)a notice under section 1182 in relation to the matter; or
(ii)if the compensation payer has not received a notice under section 1182 - the notice under section 1184 in relation to the matter;
(d)   in the case of an insurer-the maximum amount for which the insurer is liable to indemnify the compensation payer in relation to the matter at any time after receiving:
(i)a notice under section 1182 in relation to the matter; or
(ii)if the insurer has not received a notice under section 1182 - the notice under section 1184 in relation to the matter.
Centrelink, as a delegate under s1184 of the Act, sent a Compensation Recovery Notice to Allianz Australia Insurance Ltd on 17 April 2020 seeking an amount of $29,309.81 as the amount of recoverable payments received by Mr King during the preclusion period.
In this matter, the Tribunal is satisfied that the preclusion period was correctly calculated as was the amount paid to Mr King during that period and s1184A of the Act provides that the amount is recoverable.

Is there any reason why all or part of the lump sum compensation payment should be treated as not having been made?

In a submission dated 23 October 2020, Mr King lists five special circumstances that he believes warrant a change in the decision from the one made by the delegate in this matter:
(a) the financial and general stress inherent in dealing with a drawn-out motor vehicle accident claim;
(b) poor legal advice received (which he contends resulted in a lump sum amount which was less than he should have received in compensation, as well as an inclusion of economic loss component which he contends should not have been included);
(c) his current and previous mental state;
(d) financial hardship; and
(e) the impact of COVID-19.

Mr King also told the Tribunal that he felt that it was unfair that the law allowed portions other than those related to his economic loss to be included in the calculation of the compensation part of the lump sum.
Section 1184K of the Act provides that the Secretary may disregard some payments in special circumstances where the strict application of the Act would otherwise lead to an unfair or inappropriate result.
The concept of what constitutes “special circumstances” has been considered and discussed in many cases in the Federal Court of Australia and in the Tribunal. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1 (Beadle), the Tribunal was dealing with an application under a different section of the Act which involved a consideration of whether special circumstances existed. Toohey J said (at page 3):
An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
In the same case on appeal[12], a Full Federal Court (Bowen CJ, Fisher and Lockhart JJ) said, at 675, that the Court was “in broad agreement with the approach of the Tribunal”, and reiterated the need to avoid limiting the scope of what might constitute special circumstances when it explained, at 674:
We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.
[12] (1985) 7 ALD 670.
In a later case, Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court’s decision in Beadle, observed at 545 that special circumstances:
… would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case ... It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary.
In Haidar v Secretary, Department of Social Security (1998) 52 ALD 255 at 263, where Hill J discussed the predecessor of s 1184K of the Act, and observed that in that section an attempt was made to balance on the one hand, finite budgetary allocations against the interests of the recipient of the payment. His Honour continued:
Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments.
However, the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184, therefore, provided the means whereby the secretary or, in the event ultimately of an appeal to the Administrative Appeals Tribunal, that tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances. The question of what constitutes special circumstances has been the subject of a number of decisions of this court. It suffices here to say no more than that something is required which would take the matter out of the usual ordinary case …

According to Mr King, his motor vehicle accident resulted in injuries including: a torn cartilage in his left shoulder; two cervical herniations; other injuries to his lumbar, cervical and thoracic spine; leg problems; an injured right elbow; as well as damage to his jaw, teeth and face muscles. He said he also suffered from psychological issues. The Tribunal has no reason to doubt this evidence.
Mr King also told the Tribunal that he had extra expenses because he needed to move out of the home which he lived with his partner because of illegal activity he alleges his brother-in-law was participating in.
He told the Tribunal, “my lawyer dumped me in the end”. Mr King said $25,000 of the lump sum was for legal expenses and $20,000 for medical expenses. Apart from a few physiotherapy treatments at the start, Allianz had not paid for his rehabilitation. He had $500 of dental repairs, and his dental health was an ongoing issue.
Mr King told the Tribunal that during the preclusion period he was dependent on the DSP for his day-to-day living expenses, and had covered his medical and rehabilitation costs by extending his loans, and borrowing money from his mother. Mr King also told the Tribunal that during this period he had drawn down his superannuation in order to escape a bad living situation.
Mr King in a written submission to the Tribunal dated 23 October 2020 and in his oral submissions indicated that due to the physical, psychological and financial traumas he had faced since his motor vehicle accident, on top of the traumas of his workplace injuries, he was left beaten and totally drained mentally, physically and financially.[13] He felt that he had been coerced into accepting what he believes was an inadequate offer from Allianz.
[13] Exhibit A4.
Applying Keifel J in Groth, for Mr King to be successful he will need to demonstrate an unintended or unjust consequence resulting from something unusual or out of the ordinary in respect of his case.
This test requires firstly that special circumstances exist, and secondly that those circumstances led to an unintended or unjust consequence for Mr King.
The Tribunal will firstly look at each of the special circumstances Mr King contends led to unjust consequences for him as a result of something unusual or out of the ordinary in his case.
Stress from motor vehicle accident claim
Mr King put to the Tribunal that there was stress, both financial and psychological, resulting from the drawn-out process of a motor vehicle accident claim.
Mr King had previously had a workplace injury and, about the time he put in his motor vehicle accident claim, the preclusion period for his DSP claim resulting from his workplace injury lump sum payout ceased. It took from 5 October 2016, when Mr King was involved in the motor vehicle accident until 18 March 2020 when the District Court of South Australia issued orders for the claim to be settled. During this period, Mr King says that he was subject to financial and general stress.
Mr King’s written submission to the Tribunal said ‘I was beaten and totally drained mentally and financially’[14].
[14] Ibid.
A letter to the Tribunal dated 13 October 2020 from his psychiatrist, Dr Angelos Giannakoureas, states:
Mr King has had numerous traumas and losses. He has been left with physical and psychological scars. Mr King wants to move on with his life. However, recent decisions relating to some sort of recovery process, by Centrelink, are causing him to ruminate obsessionally. This has led to further detriment to his mental state and hinders resolution of his torment.
It is accepted by the Department and the Tribunal agrees that Mr King has suffered financial and general stress as a result of the drawn-out motor vehicle accident claim.
Sadly, it is in the nature of a common law compulsory third party scheme that injuries need to be diagnosed, treatment undertaken to the extent required to establish a prognosis, and ongoing functional loss needs to be identified before settlement can be negotiated and eventually settled. As is indicated in Mr King’s claim, these hardships are inherent in dealing with a drawn-out motor vehicle claim. The Tribunal does not find, and there is no evidence put, that Mr King’s claim was any more drawn-out than other claims of this type.
Mr King’s stress, both financial and general, resulting from the motor vehicle claim process are not unusual or out of the ordinary and do not represent special circumstances.
Poor legal advice
Mr King contends that he received poor legal advice, and in particular that he was poorly advised about the impact of the lump sum he received on the preclusion period.
In his written submission, Mr King points out that the settlement figure he received was less than the estimate both his solicitor and barrister suggested he would receive but that they “pushed me to settle”[15]. The submission describes advice from his lawyer indicating that Centrelink’s recovery would be limited, and that Mr King could fight Centrelink’s decision if it were contrary to this, as a major factor in him signing the settlement agreement with Allianz. There is no corroborating evidence of this.
[15] Ibid.
The Secretary contends that Mr King was aware of the requirement for him to repay Centrelink payments and also aware of the 50% rule in calculating the preclusion period.
On 14 November 2019, Centrelink wrote to Mr King relevantly advising him that if he received a lump sum compensation payment, some or all of the Centrelink payments paid to him since the date of injury may have to be paid back.[16]
[16] T15, page 267.
A file note dated 16 December 2019 records Mr King as having telephoned the agency to enquire about the effect of compensation on his DSP. The file note relevantly states:

Ryan has called upset as his sols has given him an estimation re: settlement & advised that after costs & Centrelink charge there will be nothing left. Ryan has not yet agreed to settlement… I have explained how we treat the lump sum - advised of the 50% rule for settlements with eco-loss & I have given the divisor figure & advised of his payments so that when he knows the exact total of lump sum he can do a calculation before he accepts.[17]
[17] T14, page 194.

A file note dated 4 February 2020 records that Mr King telephoned the agency to enquire again about the effect of compensation on his DSP. The file note relevantly states:

·     Customer rang with comp query.
·     Customer has mva claim which is in the process of settling.
·     Advised that settlement may have a small component for eco loss.
·     Advised Customer that if settlement contains $1 or more in eco loss, the compensation provisions apply.
·     Advised Customer of our Estimate Service.[18]
[18] T14, page 195.

The Tribunal is satisfied that Centrelink had made clear to Mr King the effect any lump sum compensation would have on his DSP.
Mr King told the Tribunal that his only recollection from his conversations with Centrelink was ‘if you don’t get economic loss you don’t have to pay’.
The Tribunal is not satisfied that Mr King’s recollection of the advice he received is as reliable as the contemporary written evidence. It is clear is that Mr King’s recollection of Centrelink’s advice is limited to what would be favourable to him, and it may or may not be that his recollection of the advice he received from his solicitor and barrister is similarly influenced.
Even if Mr King received poor legal advice, and that is not established on the evidence before the Tribunal, it is difficult to identify in these circumstances why the public purse should compensate for that. If the Applicant believed that he had received incorrect advice from his legal counsel, that is a matter between him and his counsel.
The Tribunal is not satisfied that a decision by Mr King to pursue a resolution from the Department for what he believes is poor advice he received from his solicitor and barrister are special circumstances that led to an unintended or unjust consequence for Mr King under the Act.
Mental state
Mr King put to the Tribunal, and the Tribunal accepts, that he is now in the worst mental state that he has been in for a long time, and that he has morbid thoughts finding it ‘hard to go on’. Mr King is currently receiving treatment from a psychiatrist and a psychologist.
In his submission of 23 October 2020, which was reinforced by his oral evidence, Mr King indicates that his mental health is suffering because of the decision made in relation to his preclusion period and the recovery of that money by the Department.
A letter to the Tribunal from Mr King’s psychiatrist, Dr Giannakoureas, dated 21 November 2020 states:
Centrelink has recovered a significant amount of money (precluded). This has caused psychological despair and a sense of injustice. Mr King continues to ruminate about this decision, which has progressed to an unhealthy obsession. He has become increasingly isolative and irritable. He has had morbid thoughts about self-harm… Although, I do not fully understand the circumstances relating to his contacts with Centrelink and the AAT, it is clear these matters are having a profound impact on his wellbeing.
As a consequence, he has developed a Chronic Adjustment Disorder, with depressed mood. This appears to be evolving into a Major Depression, causing increasing functional impairment.
Mr King is clearly struggling mentally. At the hearing he presented to the Tribunal as someone frustrated and anxious because the decision of Centrelink which had been affirmed by AAT1 had not gone the way he had hoped or expected, and that now this was consuming him. Dr Giannakoureas’ report of 21 November 2020 goes on to say of Mr King: “He remains ‘stuck’ and cannot make meaningful psychological progress, due to the decisions made by Centrelink”.
The general principle contained in the Social Security Guide at instruction 4.13.4.20 is that where someone seeks to rely on ill health as a factor in seeking the exercise of the discretion under s 1184K of the Act, their ‘state of ill health should be more severe than the majority of DSP recipients’.
While the Tribunal is not obligated to follow policy advice, it should be followed unless there are cogent reasons not to do so.[19]
[19] Drake v Minister for Immigration & Ethnic Affairs (No 2) (1979) 2 ALD 634.
In order to qualify for the DSP, a person must have a physical, intellectual or psychiatric impairment which affects the person’s functional capacity and prevents the person working 15 hours or more a week (8 hours if the person is under 35 years of age).
People that receive lump sum settlements from motor vehicle accidents of the type received by Mr King usually do so because they have sustained injuries and have a level of functional loss as a result.
In this matter, Mr King had a number of physical as well as psychological injuries during the relevant period and many of these are continuing. There is no evidence before the Tribunal that these injuries take Mr King out of the usual range of people receiving lump sum settlements as a result of motor vehicle injuries, or those successfully claiming DSP.
The Tribunal is not satisfied that Mr King’s mental state or physical functional restrictions, are elements that are unusual or out of the ordinary in a case where somebody has a preclusion period for DSP resulting from a motor vehicle accident.
Financial hardship
Mr King contends that he is in financial hardship as a result of a combination of circumstances during and after the preclusion period for his DSP claim.
It was not until 17 September 2017 that Mr King was granted DSP from 18 October 2016. His preclusion period, as has been discussed, was calculated to be from 18 October 2016 until 23 January 2018. Mr King told the Tribunal that he had borrowed money from his mother to survive and help pay for treatment and rehabilitation.
From Mr King’s account, he had been on workers’ compensation until soon before his motor vehicle accident and had accepted a redemption of his income maintenance which precluded him from receiving DSP. He had applied for DSP when the preclusion period was ending. He told the Tribunal that he had been living with his partner and their newly born son, together with his partner’s brother, but had to get out of the house because Mr King alleges the brother was using drugs in the house.
Mr King stated that he had borrowed $50,000 from his mother and had withdrawn all of his superannuation in the amount of $175,000, of which $166,471 went into his bank account. The Tribunal notes that the superannuation withdrawal was in April 2019.[20] There is no documentation relating to a loan from his mother. On 26 June 2019, Mr King bought a home for $295,500 accessing $54,145 from a loan against an investment property together with his superannuation funds.[21] Mr King owns an investment property valued at $245,000 (over which he reports he has a mortgage owing of about $50,000) and this returned a gross income of $255 per week until recently when the return increased.[22]
[20] T9, page 77.
[21] T14, page 192.
[22] T16, page 286.
During the preclusion period, Mr King was initially receiving Newstart Allowance until his DSP was approved with the difference backpaid to him by Centrelink once the DSP was approved.
At 4.13.4.20, the Guide provides that for financial hardship to amount to a special circumstance under section 1184K of the Act, an applicant's financial circumstances should be 'severe and worse than the majority of social security recipients'.
Mr King received $58,818.74 in his account from the $140,000 settlement payment. The evidence shows that Mr King was not in a severe financial situation at the time he received his settlement payment even after the preclusion period money was recovered. The Tribunal is not satisfied Mr King was worse off than the majority of social security recipients.
The impact of COVID 19
Mr King’s submission of 23 October 2020 states:
Covid 19 situation has only further hindered me, as costs have risen life’s been thrown upside down this has to have a bearing as it’s a massive impact on me specifically as the DSP did not get the $550 a fortnight rise that was hard to come to terms with, and threw off my budget, it is now keeping me in greater financial hardship as I have no ability to make any income and my payment was left the same I have no explanation why as the government has not explained this.
Mr King expressed difficulty understanding why unemployed people should be given an increase in allowance when he was not while on the DSP. At the hearing, Mr King stated: “My ex-girlfriend, kid’s mum, got an increase because she is on Jobseeker. I didn’t”.
The Tribunal does not consider that a decision by the government that treats all DSP recipients alike, albeit treating them differently to recipients of other government benefits, is a special circumstance in Mr King’s case. His receiving less income than his ex-girlfriend for a period of time is certainly not a trigger for the Tribunal to exercise its discretion to reduce or disregard the legislated preclusion period.
Unfair law
Throughout the hearing Mr King expressed that he thought that the application of the 50% rule contained in s1170 of the Act was unfair. His arguments were based on the impact of large legal fees, and the loss of income compared to the amount he had received for that loss.
As has previously been discussed in relation to ‘poor legal advice’, the Tribunal is satisfied that Mr King was aware of his obligations and the calculations involved prior to accepting the settlement amount.
In Clark,[23] Lindgren J described the “outworking of the formula” not amounting by itself to “special circumstances”, relevantly stating:
……The expression "special circumstances" in s 1184K does not embrace the circumstance that the 50 percent rule will yield a preclusion period beginning on a certain date that will or may be excessive, even grossly excessive, having regard to the component included in a lump sum settlement for loss of earnings or of earning capacity, to the age of the injured person, and perhaps to other circumstances.
Once one embarks on an inquiry of the kind that would be required in such a case, one is defeating the legislative intention. The Parliament must be taken to have contemplated as "usual" or "ordinary" the circumstances of people placed as Mr Clark is. In effect, by adopting the rough and ready 50 percent rule, the legislature has faced such people with a choice: not sue at all and to rely, instead, on such other entitlements as may be available; litigate to trial so that the Court will identify a figure for loss of earnings and of earning capacity; or settle subject to the operation of the 50 percent rule.
In the present case, Mr Clark must be taken to have decided against the former two courses. I do not know why he did so. In one sense, it seems unfair that Mr Clark should suffer a preclusion period until 15 February 2008, but I do not think that this constitutes "special circumstances" in the light of the legislative intention.
If the position were otherwise, the régime that was introduced in 1988 would be defeated because it would be again open to parties to a settlement to attribute an artificially low figure to loss of earnings and earning capacity, and to the injured person, through s 1184K of the SS Act, to initiate the very kind of investigation that it was the intention of the 1988 amending Act to eliminate.
The amount paid for legal costs that may result in a grossly excessive preclusion period was considered in Hulls,[24] when O’Loughlin J determined an appeal by the Secretary from a decision of the Administrative Appeals Tribunal which had excluded legal costs in calculating the compensation part of the lump sum received for the purposes of calculating the compensation preclusion period under the Social Security Act 1947. His Honour said at [37]:
…I have concluded that the Tribunal failed to address the significant fact that the “compensation part” of a lump sum payment was only 50% of the lump sum. In my opinion, it failed to appreciate the reason why there was an arbitrary formula in the legislation. I further believe that the Tribunal erred in law when it concluded that it could make use of s.156 with respect to legal costs because those costs, if they had been identified by the parties to the settlement, would have been excised before arriving at the lump sum. It was wrong to conclude that s.156 could be invoked, as a matter of course, when the parties to a settlement had failed to give a separate identification to legal costs. That is not to say that s.156 will never be available with respect to legal costs. The particular facts of a case might make them – or the amount of them – a special circumstance. This therefore is not a case where this Court is being asked as a matter of fact, to consider whether the Tribunal was correct in determining that there were special circumstances attaching to the legal costs.
[24] Secretary, Department of Social Security v Hulls [1991] FCA 58
Section 1184 is the equivalent of section 156 in the Social Security Act1947. After concluding that what the Full Court of Federal Court of Australia said in Beadle and what the Administrative Appeals Tribunal said in Ivovicabout “special circumstances” applied with equal force to section 156, O’Loughlin J in Hulls went on to say that:
Armed with these comments, I am of the clear view that there were no special circumstances warranting the application of s.156 in Mr Hull's favour. It would seem that his common law claim for damages was a routine claim; there was nothing to suggest that any circumstance was present that was "special". It is commonplace for such claims to be settled on the basis of a global sum with the plaintiff meeting his liability for his legal costs.
Mr King paid $25,000 in legal costs, $2,750 in barrister’s fees, and $15,920 in disbursements.
In some circumstances, excessive unknown legal costs, that is legal costs that only become apparent after settlement and which are in excess of expectations, are treated differently by the Tribunal. In this case Mr King’s all-inclusive offer was broken down into its components by his previous solicitor on 12 March 2020 and six days before the Court issued its order. In the break-down, $30,000 had been allowed for party/party costs and $20,000 for disbursements making his actual legal costs less than he expected prior to settlement. In the circumstances of this matter, neither the component breakdown nor the lesser amount paid are considered by the Tribunal to be unusual amounts in a settlement of $140,000 and for that reason they are not treated as special circumstances.
Overall circumstances

Mr King’s story is a sad one. Over the last decade he has suffered from difficult circumstances including a workplace accident, a motor vehicle accident, mental health issues, financial difficulties that have played on his mind, and a relationship breakdown. He also perceives that the law has conspired to further cause him harm.
Unfortunately for Mr King, these unfortunate vagaries of life are not unusual or out of the ordinary for people in circumstances like his, and there are many people in those circumstances. Mr King’s circumstances, even when viewed as a whole, are not enough to enliven the Tribunal’s discretion under section 1184 where there are special circumstances.

CONCLUSION

At the hearing, Mr King expressed that the reason he was seeking a review was because “this is about worth”. Mr King is equating the application of a set of rules which has reduced what he, incorrectly, believed would see him receiving the $29,309.81 which was recovered from his lump sum by the Commonwealth.
The decision in this matter does not go to Mr King’s worth in any way. The Tribunal found him to be a proud man that was fighting for what he believed to be his rights, but ultimately did not satisfy the Tribunal by way of the law that he had special circumstances that should result in a reduction of the preclusion period applied to his DSP.
In accordance with s 1169 of the Act, the Tribunal is satisfied that Mr King’s DSP is not payable to him during the preclusion period and that the preclusion period is 68 weeks from the date of his accident on 5 October 2016, ending on 23 January 2018 in accordance with the formula in subsection 1170(4) of the Act.
The Tribunal is satisfied that the amount of $29,309.81 being the specified amount in paragraph 1184(1)(a) of the Act was correctly recovered.
The Tribunal is not satisfied that any of the circumstances put by Mr King to the Tribunal as special circumstances are reasons for the Tribunal to disregard any or all of his lump sum payment to apply the discretion afforded by s1184K of the Act. There are no circumstances related to his compensation payment that satisfy the Tribunal that Mr King’s case to be subject to unjust or unintended consequences of the operation of the Act. The Tribunal is satisfied the Act has been applied in the way in which it was intended.
For these reasons, the decision to recover $29,309.81 from his lump sum payment must be affirmed.
DECISION
The decision under review is affirmed.

I certify that the preceding one hundred and four (104) paragraphs are a true copy of the reasons for the decision herein of Member G Hallwood

………………[SGND]………………..

Associate

Dated: 5 October 2021

Date of hearing:	3 March 2021
Advocate for the Applicant:	In person
Advocate for the Respondent:	Riley Calaby, Services Australia

[23] Clark v Secretary, Department Of Employment and Workplace Relations [2007] FCA 1076.