Kirkbright and Secretary, Department of Family and Community Services - [2000] AATA 221

DECISION AND REASONS FOR DECISION [2000] AATA 221

ADMINISTRATIVE APPEALS TRIBUNAL )

) No S1999/247

General Administrative DIVISION )

Re GRANT ANDREW KIRKBRIGHT
Applicant

And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent

DECISION

Tribunal Senior Member J.A. Kiosoglous MBE

Date22 March 2000
PlaceAdelaide

Decision Pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal affirms the decision under review.

(Signed)
J.A. KIOSOGLOUS
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – Sole Parent Pension – lump sum preclusion period – special circumstances – lack of relationship between entitlement to benefit and compensable injury – intent of legislation – unfair legislative effect – other circumstances considered
Social Security Act 1991 ss.17, 1165
Social Security Legislation Amendment (Budget and Other Measures) Bill 1996
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
Re Beadle and Director General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

22 March 2000 Senior Member J.A. Kiosoglous MBE

This is an application by Mr Grant Kirkbright (the applicant) for review of a decision of the Social Security Appeals Tribunal (SSAT) dated 26 May 1999 (T2) which affirmed a decision of an authorised review officer (ARO) dated 4 May 1999 (T18) affirming a decision of a delegate of the respondent dated 17 February 1999 (T8) to raise and recover an amount of Sole Parent Pension (SPP) due to the imposition of a lump sum preclusion period.
The Tribunal received into evidence the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T1-T21), together with nine exhibits, five lodged by the applicant (Exhibits A1-A5) and four lodged by the respondent (Exhibits R1-R4). In addition, the Tribunal heard evidence from the applicant, who was represented by Mr T. Stanley of counsel. The respondent was represented by Mr A. Goldie, a departmental advocate, assisted by Mr J. Underwood, also of the Department.
The applicant was not challenging the method of calculation or necessary existence of the preclusion period. The sole issue for the Tribunal is whether or not there are special circumstances which make it desirable to treat part or all of the compensation payment as not having been made.
history of the application
The facts of this matter were not generally in dispute. The applicant received SPP between 28 January 1993 and 4 September 1997 (T8). He had a motor vehicle accident on 27 July 1993, which resulted in incapacity for work. The South Australian District Court heard the applicant's compensation claim in November 1998, and delivered a judgement on 4 February 1999, awarding the applicant $121,463.39 compensation including $70,000 for loss of past earning capacity and $5,000 for future loss of earning capacity (Exhibit A3).
The delegate determined that the compensation part of the lump sum was $75,000 and calculated a 181 week lump sum preclusion period for the period 27 July 1993 to 9 January 1997 (T8). The 181 week period was calculated by dividing the $75,000 by the "income cut out amount", being $412.70, as provided for in sub-s.1165(8) of the Social Security Act 1991 (the Act) which states:
"If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
"
The "income cut out amount" is defined in sub-s.17(1) of the Act as follows:
"'income cut-out amount' means the amount worked out using the following formula:

where:
'maximum basic rate' means the amount specified in column 3 of item 1 in Table B in point 1064-B1.
'pharmaceutical amount for a single person' means the amount specified in column 3 of item 1 in the Pharmaceutical Allowance Amount Table in point 1064-C8.
'ordinary free area limit' means the amount specified in column 3 of item 1 in Table E-1 in point 1064-E4."
Sub-section 1165(7) of the Act sets the date upon which the preclusion period commences as being the day upon which the loss or earnings or earning capacity began, which in this case was 27 July 1993. As the applicant received SPP during the preclusion period, the delegate raised a recoverable amount, being payments of SPP for the pension days 29 July 1993 to 9 January 1997 inclusive.
This decision was affirmed upon review by the ARO and SSAT. The SSAT in its reasons for decision (T2/11) stated (inter alia) as follows:
"The Tribunal considered all the facts relating to the compensation claim and the finalisation of that claim but could not conclude that there were any special circumstances which would allow the application of the discretion to waive all or part of the compensation payment received."

mr grant kirkbright

In his evidence before the Tribunal, the applicant stated that he is currently 39 years old. He left school after year 10 and worked in occasional casual jobs as a labourer. He has two children from a marriage which lasted between 1982 and 1985. The elder son lived with him from 1985 until 1998. He remarried in 1997, and has one child from that marriage, born in March 1999.
The applicant stated that after the accident in 1993 he was unable to work and will never be able to return to the type of work he was doing before the accident, but it is his goal to be able to return to some kind of work. He is currently in receipt of Disability Support Pension (DSP), and described the problems he continues to have with neck, knee and back pain. He also described his ongoing psychological problems including outbursts of anger. He told the Tribunal that his current wife had to stop working following the birth of their child in March 1999, as he is not in a fit psychological state to care full time for the child.
The applicant described in detail his financial circumstances to the Tribunal. He has paid off his house mortgage, and has a combined fortnightly income of $308.60 (DSP), $294.70 Parenting Payment and $128.54 Family Payment (total $731.84). He has $40,000 in a Colonial State Investment account set aside for emergencies and his youngest son's private school education. He detailed his expenses to the Tribunal, and stated that after necessary expenditure on food, clothing, insurance rates and medical treatments, he has about $120 per fortnight left, which is used for other expenses such as birthdays and home improvements. From the list tendered to the Tribunal (Exhibit A5) it noted that fencing, roofing, carpeting, painting and new curtains are all things the applicant has not yet paid for and feels are necessary to maintain a suitable home for his child.
applicant's submissions
Mr Stanley submitted to the Tribunal that it should find special circumstances on the basis of the applicant's ill health and continuing incapacity for future employment, straightened financial circumstances, and the lack of a causal relationship between the injury and the entitlement to SPP.
He submitted that if the judgement of the District Court awarded compensation in respect of lost earning capacity is considered on a representative weekly basis, it works out to $256.38 (to trial) and $244.75 (to judgement) gross per week. He submitted that this deemed weekly amount would not preclude the applicant from SPP during the preclusion period, and that it could not be said that the applicant was double dipping. In his submission, the strict application of the legislation would put the applicant in a worse position than had he actually earned the money during the relevant period, and would be "unjust, unfair and unreasonable".
respondent's submissions
Mr Goldie submitted, on behalf of the respondent, that the applicant still has a considerable amount of money remaining available to him, that the expenditure of the lump sum was on discretionary items, and that he is not in a parlous financial state.
He submitted that the purpose of the Act is to treat social security benefits as a payment of last resort, such that when a person has money available to them, it should be exhausted before any benefit becomes payable.
In response to questions from the Tribunal, Mr Underwood submitted that his understanding of the purpose of the "income cut out amount", was to represent the maximum income a person can receive before they lose all entitlement to benefits under the Act.
discussion and findings
Although the Tribunal has only briefly summarised the submissions of both parties, it has taken the evidence as a whole into account, including submissions, as well as the various authorities referred to.
There were three main grounds on which the applicant's special circumstances contentions were based; ill health, financial circumstances and the unfairness of the strict application of the Act.
The Tribunal first turns to consider this last point in relation to the lack of a causal relationship between the injury and the benefit paid, as that formed the substantive aspect of the applicant's case. The Tribunal agrees with Mr Stanley's submission that strict application of the Act is unfair to the applicant, given that the deemed income as determined by the District Court would not in fact preclude him from all benefits during the relevant period. The Tribunal finds that there is no causal relationship between the injury and the entitlement to SPP, as the applicant was in receipt of SPP prior to the accident, and the deemed rate of income implicitly set by the District Court would not have precluded him from some eligibility for SPP benefits.
Whether this factor constitutes a special circumstance was canvassed by Carr J in Secretary, Department of Social Security v Ellis (1997) 46 ALD 1. Both Mr Stanley and Mr Goldie sought to put different interpretations on Ellis. In Ellis, Carr J stated (inter alia) at p6-7:
"The applicant complained about the finding by the tribunal that payments of SPP are not related to the payments for workers' compensation or the work-caused injury, and arose independently of that situation. The applicant submitted that the fact that there was no relationship between the payment of SPP and the deriving of income by reason of a work-caused injury was not intended by parliament to be deemed an "unfair" circumstance calling for the application of the discretion in s 1184 of the Act. In essence, the applicant says that the tribunal should not have taken that factor into account because it was irrelevant. By taking that factor into account, the tribunal is said to have erred in law.
It is not entirely clear from the tribunal's reasons that, in reaching its conclusion that special circumstances existed, it took this matter into account. On one reading of those reasons it is possible that the circumstances which it took into account were those referred to in paras (10) and (11). However, at para (4)(g) it certainly made a finding that payments of SPP are not related to payments for workers' compensation or the work-caused injury, and arose independently. I shall work on the assumption that the tribunal took this factor into account.
In my opinion, this was not an irrelevant factor. As the applicant conceded in his written submissions, the discretion vested in the secretary under s 1184 is wide. The applicant's submission was that the essential legislative purpose in cases such as Groth and Secretary, Department of Social Security v Smith (1991) 30 FCR 56; 23 ALD 277 is to prevent "double dipping" whereby a recipient of a pension would also have the advantage of a second source of income though compensation payments. The applicant acknowledged that in relation to preclusion periods involved in such cases, the legislative policy itself, if unmitigated, would on occasions operate in an arbitrary manner. The applicant argued:
In the case of receipt of periodic payments of compensation, the principle is the same, but may admit of a more stringent application.
In my view, the tribunal was entitled to take into account a whole host of facts in the factual matrix of considering whether it was appropriate, in the special circumstances of the respondent's case, to exercise the discretion conferred by s 1184(1). One such circumstance was the fact that her entitlement to SPP arose independently of the work-caused injury which resulted in her entitlement to workers' compensation payments. When that factor is taken into account, it can be seen that the respondent cannot be described as "double dipping". It is also relevant to the decision of how much, if any, of the workers' compensation payments are to be disregarded. The Social Security Appeals Tribunal and the Tribunal decided that it would be appropriate to disregard so much of the workers' compensation payments as would put the respondent in the same position as if she had earned those payments by way of wages. The tribunal cannot be said to have focused on that factor to the exclusion of all others. Its primary findings were that there was "unacceptable hardship" and "quite desperate" financial circumstances. The tribunal was, in my opinion, quite entitled to take into account the absence of any relationship between the entitlement to SPP and the work-caused injury as part of an overall assessment whether there were special circumstances. I do not consider that the tribunal erred in law in the manner contended."
In this Tribunal's opinion, Ellis establishes that the lack of a causal relationship between the injury and the benefit entitlement is a relevant circumstance to be taken into consideration when looking at the issue of special circumstances Special circumstances requires consideration of all circumstances of a case, and an assessment as to whether, when one takes all circumstances into account, they possess that character that can be described as being "unusual, uncommon or exceptional" (Re Beadle and Director General of Social Security (1984) 6 ALD 1 at p4).
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J stated (inter alia) at p545:
"… it 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. …"
Thus, when considering special circumstances, one also looks to whether the case is "out of the ordinary" (ie exceptional) and whether something unjust, unintended or unfair has occurred.
Despite the fact that the Tribunal considers that strict application of the Act in this case is unfair to the applicant, it must have regard for the legislative intent, as to whether this is unintended. It is clear from the terms of the legislation and from the resultant information which stems from the Department, that compensation payments are intended to be treated differently to any other source of income. An example of this appears on the SPP rates information sheet (Exhibit A4), wherein it is noted that "lump sum compensation payments are also subject to special rules", and "each dollar of compensation income reduces Social Security payment by a dollar". The rules in relation to income tests are entirely separate in so far as compensation payments are concerned, and indeed compensation payments are effectively quarantined in the Act in relation to other income sources.
In the Explanatory Memorandum to the Social Security Legislation Amendment (Budget and Other Measures) Bill 1996, Part 2 of Schedule 15, dealing with amendments relating to the treatment of lump sum compensation payments, the intent of the legislative provisions is made clear. It states (inter alia):
"…
Under the compensation provision of both the Social Security Act and the Student and Youth Assistance Act 1973 (the Youth Assistance Act), when a person receives a compensation lump sum payment of compensation made wholly or partly for lost earnings or lost capacity to earn (economic loss), a period is calculated during which social security and youth training allowance payments, except payments for children, are not payable to the person or the person's partner. The rationale for the provision is that a person who receives a lump sum compensation payment that contains an amount for economic loss, should use part of the payment to provide for himself or herself for a period before turning to the Australian taxpayer, through the social security system, for additional income support.
The preclusion period may be in the past, the future, or both, depending on the circumstances. If the preclusion period is in the past and the person, and the person's partner, received any compensation affected payments during that period (usually while waiting for settlement of the compensation claim) the amount of social security or youth training allowance payments received during the period is recoverable from the lump sum. If the preclusion period is in the future, the person, and the person's partner, may not be paid a compensation affected social security payment until that period has expired.
…"
The legislation intends that a compensation recipient exhausts available funds before claiming social security benefits. A period is therefore calculated using a deemed income figure equivalent to an amount of income at which a person would be rendered ineligible for benefits. No account is given as to whether or not this accords with the rate at which they have been deemed to have accrued income in a compensation payment. The legislation also gives no account to whether or not that compensation payment deemed rate would have rendered the person eligible for benefit.
This intent is reflected in the "income cut out amount" which by its very name creates a deemed rate of income whose concern is to establish a rate at which a person is fully reliant on such deemed income as opposed to any social security benefit. The income cut out amount makes no reference to consideration of deemed amounts as contemplated in compensation payments.
There is clear legislative intent to treat compensation payments as an entirely separate and distinct "income" entity when considering income under the Act. This Tribunal considers that such application can often lead to unfair results (as in the present case) but it cannot ignore this legislative intent.
Whilst this unfairness is an aspect that can be considered by the Tribunal as one of the relevant circumstances, of itself, it does not give rise to "special circumstances", for it is in no way unique to this applicant. All compensation recipients whose compensation payment deems income at a rate low enough that some independently arising benefit would still have been payable will be unjustly penalised. The unfairness alone, is not special, as it is not of itself, uncommon or exceptional.
In order to find special circumstances the Tribunal must consider all the circumstances as a whole. Since the "unfairness" caused by legislative application in this case is not of itself special, the Tribunal must be able to find other circumstances, which, when coupled with the unfairness can be described as special.
In this Tribunal's opinion, that is the correct interpretation to be given to Ellis. The Tribunal considers that Ellis is not, as Mr Goldie submitted, suggesting that special circumstances have to exist before consideration is given to the aspect of whether eligibility for SPP arises independently of the entitlement to compensation. Ellis reaffirms the notion of taking a global approach to special circumstances. In Ellis, it was the combination of factors (in particular, the extreme financial hardship found by the Tribunal) which gave rise to special circumstances.
In this case, the Tribunal needs to consider all of the other circumstances put before it. The Tribunal heard evidence from the applicant and found him to be an articulate and entirely credible witness. He has been through some tough times, much of which has resulted from his injuries. He continues to suffer from the effects of the injuries he sustained, and this hampers his future employment prospects. He is however, in receipt of DSP in respect of these injuries, and the Tribunal cannot see that he is any worse off as a result of his injuries than other recipients of DSP.

Ill health is certainly something which this Tribunal has been prepared to consider special in the past, but it can only be in circumstances where such ill health takes an individual outside that normal range of hardship one sees in other pension recipients (and DSP recipients in particular). Whilst the applicant's injuries have undoubtedly caused him problems during the past years, he has received compensation for these problems. His future prospects are not dire, and on the balance of the evidence, one would expect that he would be able to return to some form of normal life, and undertake some form of employment in the future.
In relation to his financial circumstances, the Tribunal must again consider this applicant in relation to other pension recipients. The Tribunal considers his expenditure of the lump sum to be entirely reasonable. Whilst his financial circumstances are straightened, he is not in a position different to many other families, who struggle to meet the demands of child and house related expenses.
In this case, the applicant admitted to having some free and available income each fortnight after expenses, has no mortgage and some $40,000 remaining in the bank. How the applicant chooses to use that money is of course entirely up to him, however its existence takes him out of the exceptional category in relation to financial circumstances. The Tribunal sees many other cases where the financial circumstances are much worse than in this case and so much the exception, that it would be in error to conclude that the financial circumstances in this case are exceptional so as to warrant the description special.
Whilst the Tribunal sympathises with the unfair way in which the application of the legislation has impacted upon the applicant, it cannot find any other circumstances which would take this case outside the norm. In the absence of other circumstances which could be described as special, the Tribunal would be ruling contrary to the legislative intent to find this case to be exceptional on the basis of this unfairness alone. Whilst it is unjust, it is unfortunately not uncommon, and the Tribunal can only urge legislative reform to redress the inequity in the application of preclusion periods where eligibility for benefit arises independently to entitlement to compensation.
decision
For the reasons given, and pursuant to section 43 of the Administrative Appeals Tribunal Act 1975, the Tribunal affirms the decision under review.
I certify that the 37 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member J.A. Kiosoglous MBE
Signed:         .....................................................................................
  Personal Assistant
Date/s of Hearing  29 February 2000
Date of Decision  22 March 2000
Counsel for the Applicant        Mr T. Stanley
Solicitor for the Applicant         Tindall Gask Bentley
Counsel for the Respondent    Mr A. Goldie
Solicitor for the Respondent    Centrelink