Knibbs and Secretary, Department of Social Services (Social services second review)
[2016] AATA 951
•28 November 2016
Knibbs and Secretary, Department of Social Services (Social services second review) [2016] AATA 951 (28 November 2016)
Division
GENERAL DIVISION
File Number
2016/1010
Re
David KNIBBS
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Mr D. J. Morris, Member
Date 28 November 2016 Place Perth The Tribunal affirms the decision of the Social Services and Child Support Division. The compensation preclusion period applicable to the Applicant is correctly calculated and applies from 28 August 2010 to 7 December 2019.
.....(Sgd)....................................................
D. J. Morris, Member
SOCIAL SERVICES – Compensation Preclusion Period – lump sum compensation payment – application for Newstart Allowance – meaning of special circumstances – waiver of compensation preclusion period – correctly calculated and applied – special circumstances not present - affirmed
LEGISLATION
Social Security (Administration) Act 1999
Social Security Act 1991 – s 17 – s 1169 – s 1170 – s 1184K
SECONDARY MATERIALS
Guide to Social Security Law – 4.13.4.20
CASES
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25
Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Groth v Secretary, Department of Social Security (1995) 40 ALD 541; [1995] FCA 1708
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Sams and Secretary, Department of Social Services [2016] AATA 654
Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Waters [2011] AATA 666
Secretary, Department of Social Security and Winterbotham [1990] AATA 808
Taylor and Secretary, Department of Families, Community Services and Indigenous Affairs [2013] AATA 161REASONS FOR DECISION
D. J. Morris, Member
28 November 2016
BACKGROUND
The Applicant, Mr David Knibbs, seeks review of a decision by the Social Services and Child Support Division of the Tribunal (AAT1) on 18 January 2016 that affirmed a decision to subject him to a compensation preclusion period from 28 August 2010 to 7 December 2019.
In 2000 the Applicant suffered a workplace injury. In August 2010 his solicitor requested an estimate of the likely Centrelink charge and preclusion period.
On 12 September 2010 Mr Knibbs received a lump sum compensation payment in the amount of $882,800. The economic loss component of the payment was $375,000.
On 15 September 2010 the Department of Social Services (the Department) wrote to the Applicant’s solicitor advising that Mr Knibbs would be subject to a preclusion period and that it would start on 28 August 2010 and end on 4 October 2019. On the same date the Department wrote to the Victorian Workcover Authority advising that Centrelink’s recovery in Mr Knibbs’ personal injury proceedings were nil. The Department also wrote to Mr Knibbs on the same date advising him of the preclusion period and that, during this period, he would be unable to receive income support from the Department.
On 15 November 2010 the Department wrote to the Applicant requesting that he acknowledge the compensation period. On 18 November 2010 Mr Knibbs signed a letter of acknowledgement stating that he understood that the lump sum compensation payment of $750,000 that he received affects his future entitlement to income support and that a preclusion period applies, and that the period commences on 28 August 2010 and ends on 4 October 2019. The letter further acknowledged that the Applicant would not be eligible to receive income support payments during the preclusion period.
On 9 October 2015 Mr Knibbs made a claim for Newstart Allowance.
On 22 October 2015 the Applicant’s psychologist, Mr Jeff Devine, provided a report stating that the Applicant was unfit to work.
On 23 October 2015, the Department made a decision that the Applicant was not entitled to Newstart Allowance until 5 October 2019. This was the original decision.
Mr Knibbs sought a review of this decision by an Authorised Review Officer (ARO), an independent officer in the Department, on the basis that, owing to his mental state, he should not be subject to the preclusion period.
The ARO affirmed the preclusion from compensation affected payments decision on 5 November 2015 but noted an error in the calculation and found that the Applicant’s preclusion period started on 28 August 2010 and will end on 7 December 2019, not 4 October 2019.
The Applicant requested a review by AAT1 which found that the preclusion period had been correctly applied and calculated by the ARO and that there were no special circumstances which made it appropriate to shorten the preclusion period.
All of the above facts were common ground between the Applicant and the Respondent.
The Applicant sought a review of AAT1 on the basis that special circumstances apply in his case.
HEARING
The hearing took place on 15 November 2016 by telephone. Mr Knibbs represented himself and was cross-examined by counsel for the Respondent, Mr Ashley Burgess.
The Tribunal admitted into evidence documents lodged by the Respondent under section 37 of the Administrative Appeals Tribunal Act 1975. The Respondent’s Statement of Facts, Issues and Contentions dated 14 October 2016 which included six annexures numbered A to F was also admitted into evidence (Exhibit R1).
The following documents were tendered by the Applicant and were admitted into evidence:
·Letter dated 14 October 2016 from Mr Jeff Devine, registered psychologist of Goldfields Psychology Practice (Exhibit A1);
·Letter dated 28 April 2016 from Mr Devine to Constable O’Connor & Company Pty Ltd, solicitors for the Applicant (Exhibit A2);
·Letter dated 15 September 2016 from Mr Devine to Centrelink (Exhibit A3);
·Medical Certificate dated 27 June 2016 of Dr Michael Livingston at Hopetoun Medical Practice (Exhibit A4);
·Statement of Financial Circumstances (Centrelink Reviews) dated 19 September 2016 signed by the Applicant (Exhibit A5);
·Letter dated 25 July 2016 from Troi Mccoll of Allianz Australia Workers’ Compensation (Victoria) Limited on behalf of WorkSafe Victoria (Exhibit A6);
·Letter from Mr Devine dated 11 July 2016 to Constable O’Connor & Company Pty Ltd, solicitors for the Applicant (Exhibit A7).
There are two issues before the Tribunal:
1. Whether the compensation preclusion period has been correctly calculated and applied.
2. Whether there are special circumstances, in Mr Knibbs’ case, that make it appropriate to exercise the discretion provided for in section 1184K of the Social Security Act 1991 (the Act) to disregard part or all of the compensation paid to the Applicant.
THE LAW
Section 1169 of the Act applies to people who have received lump sum compensation payments. It provides that a person cannot receive a compensation affected payment during a compensation preclusion period.
The definition of a compensation affected payment is set out in section 17(1) of the Act and, inter alia, includes “a social security benefit”. Section 17(2) defines ‘compensation’ to include payment made wholly or partly in respect of lost earnings or capacity to earn resulting from a personal injury.
Section 1170 of the Act sets out how a lump sum compensation preclusion period is calculated, including the applicable formula. The Respondent submitted that the calculation had been done correctly and that the period should be affirmed as starting on 28 August 2010 and ending on 7 December 2019. In his evidence, Mr Knibbs agreed that he did not dispute the calculation of the compensation preclusion period as affirmed by AAT1.
I affirm the decision that the correct period starts on 28 August 2010 and ends on 7 December 2019.
Section 1184K(1) of the Act provides:
(1) For the purposes of this Part, the Secretary may treat the whole or part of a compensation payment as:
(a) not having been made; or
(b) not liable to be made;
if the Secretary thinks it is appropriate to do so in the special circumstances of the case.
Neither the Act nor the Social Security (Administration) Act 1999 defines the phrase “special circumstances”. However the Tribunal is aware that the phrase has been extensively considered by the courts and by the Tribunal itself.
The Respondent argued that it is a “fundamental principle” of the social security system that people who are unable to work owing to a compensable injury are prevented from receiving income support from both the social security and compensation systems for the same period. The Secretary contended that the rules are designed to ensure that persons who find themselves in this situation receive income support from those with primary responsibility to provide that support, such as insurers or statutory compensation schemes.
The Respondent drew the Tribunal’s attention to the Minister’s second reading speech for the Social Security Legislation Amendment Bill (No. 1) 1995 which said in part:
The compensation recovery provisions of the act [i.e. the Social Security Act] protect the social security system from ‘double dippers’ — that is, those who might receive social security payments, as well as compensation, for the same period.
The Respondent contended that this made clear the intention of Parliament when enacting these statutory provisions.
The Respondent referred the Tribunal to Secretary, Department of Social Security and Winterbotham [1990] AATA 808 wherein a majority of the Tribunal stated at [19]:
This particular piece of legislation [the Social Security Amendment Act 1988] was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse … Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the tax-payer.
While the principal legislation before the Tribunal at that time has since been replaced by the current Act, this general principle still remains.
Because the Act does not define what constitutes ‘special circumstances’ in section 1184K, the Tribunal must look at how this phrase has been considered by the Courts and in similar cases before this Tribunal.
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541; [1995] FCA 1708, Kiefel J considered the meaning of the expression “special circumstances”. Her Honour said at p 545:
The phrase ‘special circumstances’, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle’s case [Beadle v Director-General of Social Security] (at ALR 229 ALD 674), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this 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. (Emphasis added.)
In Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9; [2007] FCA 25, Besanko J warned against requiring exceptional circumstances before there may be said to be special circumstances at [33]:
I also note that 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. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context. (Emphasis added.)
The Tribunal must look at the request from the Applicant that the compensation preclusion period be varied so that he can receive Newstart Allowance and whether the circumstances applying to him are out of the ordinary, unusual or uncommon, or whether the particular circumstances distinguish his case from others in similar circumstances.
Mr Knibbs contended that he meets the ‘special circumstances’ criteria in two respects: (1) financial hardship; and (2) mental illness and the costs of associated medical treatment for that illness.
In his evidence, the Applicant agreed that he received a lump sum compensation payment of $882,800 in 2010 of which $132,800 was paid back to Centrelink and $173,000 was paid to his solicitors for legal costs. He ended up with $577,000.
How has the remaining lump sum compensation payment been spent?
With that money, Mr Knibbs has done various things. He and his then wife purchased two properties, a house at Wangaratta for $265,000 which they lived in for six months and then tenanted out for $290 per week. The Wangaratta property was sold in 2014 for $255,000. They also purchased an investment property for $235,000, paying $100,000 and taking out a mortgage for the remainder. This property was rented out for approximately $240 per week. The investment property was sold in 2014 for $206,000. They also purchased a caravan for $35,000 and went on some holidays.
Mr Knibbs purchased a block of land at Hopetoun for $65,000 and said he spent about $135,000 on it, building a lined dwelling, installing a solar heating system, which the Applicant estimated was at a cost of around $40,000, installing wiring, a security system, lighting and the like. Evidence of his ownership of the property was before the Tribunal.
He split up with his wife in August 2015 and gave her the jointly-owned caravan as a form of private settlement. She disposed of it and retained the funds.
The Applicant agreed that he had started up a business in property maintenance and at one stage had been earning $900 per week, but that the business did not last for very long. He said he started work as a truck-driver in 2013 and maintained that employment for “around 12 to 14 months”. In his Statement of Financial Circumstances (Exhibit A5), the Applicant stated he “turned over 15800 [dollars] last year”.
He also gave evidence that he had owned a property at Glenrowan which he sold around 2004 or 2005 for $180,000. He told the Tribunal he used these funds for “other things”.
Mr Knibbs agreed that in 2014 after he had made improvements to his Hopetoun property he had around $261,000. He also confirmed to the Tribunal that he owned a motor vehicle valued at around $60,000 and a boat which he stated he had purchased for $5,000 and which he had tried to sell by placing a notice in the local post office but he had only received an offer of $1,500, which he said was well below its value. He also told the Tribunal that he had liquidated other assets such as a significant amount of tools, equipment and a camper-trailer he said he has purchased for $25,000 in 2010-11 and recently sold for $5,000.
The Tribunal did not have any corroborative evidence about the various property and asset purchases and disposals or about the cost of the improvements to the Applicant’s residence at Hopetoun, other than a valuation of the Hopetoun property in the amount of $120,000 which Mr Knibbs said he obtained as a verbal estimation from a local real estate agent. The Applicant contended he had received financial advice to invest in real estate rather than other assets, but again had no corroborative evidence of this.
The Applicant conceded in the hearing that in 2015 he had about $120,000 in savings apart from his house, vehicle and other household effects but “he was not sure where the money has been spent”.
The Tribunal notes that the Applicant appears to have made some losses on properties but also that it was not clear where a significant amount of the lump sum compensation payment has been spent.
The Tribunal also notes that Mr Knibbs owns outright an expensive vehicle and other assets, as well as owning outright his property at Hopetoun. Mr Knibbs said he did not contemplate selling his property because he had owned real estate since he was aged 21 and found it provided him with “security”.
While the Tribunal is sympathetic to Mr Knibbs’ not wanting to sell his property, the fact remains that he has assets which can be sold and that he has shown his ability to be successfully employed since his lump sum payment in 2010. I note that he continues to deal with a mental health condition but also that he is receiving professional support by way of counselling, the costs of which is being largely paid by insurers, and I will consider that matter further below.
The Tribunal is reluctant to exercise the discretion provided in section 1184K to shorten or disregard the preclusion period on the grounds of financial hardship. As Senior Member McDermott said in Taylor and Secretary, Department of Families, Community Services and Indigenous Affairs [2013] AATA 161, at [16]:
In considering the issue of financial hardship it becomes necessary to consider the nature of the expenditure of the settlement funds. The applicant contends that in four months he expended the sum of $108,000. It is not possible on the evidence before me to see how the funds from the compensation payment have been dispersed … in giving telephone evidence at this Tribunal … the applicant states that he has no money in the bank but has not provided any documentary evidence to show how the settlement funds have been applied. I would be reluctant to exercise the discretion under s 1184K of the Act in circumstances where there is no documentary evidence of how the settlement funds have been applied.
Although the expenditure by Mr Knibbs has not been as quick as in Taylor, precisely where his significant cash reserves have gone is quite unclear, and he was unable to assist the Tribunal in this regard. Mr Knibbs has not put forward any case that he has been faced with unexpected or unusual expenses which are out of the ordinary. He told the Tribunal how he had spent a large proportion of the remaining lump sum compensation payment after legal expenses were deducted: by buying and purchasing properties, a four wheel drive motor vehicle, a boat, a trailer, a caravan, a compressor, a range of tools and by building a dwelling on his block at Hopetoun and fitting it out as his residence. But where the remaining funds have gone is an enigma.
In regard to Mr Knibbs’ claim that he faces financial hardship, I note the remarks of Senior Member McMahon in Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716, where he said at [45]:
It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it, particularly, when the lack of encumbrances has been brought about by diversion of some of the compensation moneys that led to the present application.
Personal financial decisions are of course a matter for the Applicant but where he has the ability to realise valuable assets, that fact cannot be ignored by the Tribunal in his current request.
Were the Applicant’s legal expenses unusually high?
The legal expenses deducted from his original payment made up about 23 per cent of the total compensation payment. This is a significant amount but the Tribunal considers that the expenses are not especially disproportionate to the amount of compensation received and, while higher than the proportion in other similar cases (see Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Waters [2011] AATA 666, where the amount of legal costs was 16 per cent of the settlement), this amount was significantly less than that which applied in the recent decision of Deputy President Constance in Sams and Secretary, Department of Social Services [2016] AATA 654, where the amount of legal costs was some 41 per cent of the settlement. I note, also, that Mr Knibbs’ solicitors are still undertaking work in his interests and on his evidence arranged the payment with Allianz for his attending psychological counselling in Kalgoorlie. The Applicant did not contend in the hearing that the legal costs deducted were unreasonable.
I cannot conclude, therefore, that the proportion of legal costs in the compensation payment constitute grounds for the exercise of the discretion in section 1184K of the Act in this case.
Do the Applicant’s medical conditions and treatment amount to special circumstances?
The Guide to Social Security Law (the Guide) is an internal policy document used by Department officers as an aid to applying the provisions of the Act. Paragraph 4.13.4.20 of that Guide (factors to consider when determining special circumstance provisions) while noting that the factors listed are not exhaustive, says that the state of a person’s ill health should be “more severe” than the majority of Disability Support Pension (DSP) recipients, and that the injury for which the person received compensation cannot generally be regarded as a special circumstance.
The Tribunal is not bound to follow this Guide, but, adopts the view taken in Drake v Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634, that to ensure consistency in decision-making, the Guide should be followed unless there are cogent reasons to depart from its application and do otherwise.
While Mr Devine says that the Applicant is suffering from “elements of paranoia” and he believed in July 2016 that the Applicant’s condition had worsened, this information is not sufficient for the Tribunal to conclude that Mr Knibbs’ medical conditions would be “more severe” than the majority of DSP recipients. That phrase in the Guide is not the most helpful because it applies a testing measure against something that is, essentially, unknown.
However, noting that his mental health condition is the only cited medical condition of the Applicant and applying the general rules for assessment of impairment for DSP, there was no corroborative diagnosis before the Tribunal that would support a ‘severe’ impairment for DSP, i.e. 20 impairment points under Table 5 – Mental Health Function in the Social Security (Tables for the Assessment of Work-related Impairment for Disability Support Pension) Determination 2011, which might qualify Mr Knibbs for DSP. Mr Devine is a registered psychologist and while the Tribunal does not reflect on his professional conclusions, he is not in the category of persons mandatory for diagnosis of a mental health condition in the context of DSP. The Tribunal notes that Dr Michael Livingston, general practitioner, in his medical certificate dated 27 June 2016 (Exhibit A4), diagnosed “Periods of anxiety; Low mood and depression” but did not state whether the condition was permanent and said the prognosis was ‘uncertain.’ Dr Livingston is also not in the category of practitioners mandatory for assignment of impairment points under the rules of DSP but his opinion informs the Tribunal.
So I do not think objectively on the evidence before me that Mr Knibbs’ mental health condition could be categorises as “more severe” than the majority of DSP recipients. In addition, his health situation clearly fluctuates and the Applicant’s own evidence was that he has worked periodically since he received his lump sum payment. The nature of the compensation payment took into account the acceptance of his workplace psychological injury, and the loss of earning capacity, and was designed to help maintain him while he was restored to better health and returned to the workforce. This circumstance applying to the Applicant is not, in my view, out of the ordinary, to use the words in Groth, and therefore does not constitute “special circumstances”.
In terms of the cost of treatment, Mr Knibbs told the Tribunal that, in relation to treatment for his mental illness, Allianz Insurance paid the counselling fees for Mr Jeff Devine, registered psychologist, and in addition paid him, on provision of receipts, a mileage allowance and the cost of motel accommodation and meals when the Applicant visited Mr Devine in Kalgoorlie. Accordingly, the Tribunal does not find that the current cost of treatment, partly defrayed as it is, contributes to “special circumstances”.
CONCLUSION
The Tribunal cannot disregard the fact that the Applicant has the ability to realise valuable assets which he purchased with part of his compensation payment. While he may be reluctant to do so, that is a personal decision and such reluctance does not create special circumstances which would enliven the Secretary’s discretion. Mr Knibbs was given a substantial compensation payment. He has spent a large proportion of it in a way that has not been satisfactorily explained to the Tribunal. He has assets which can be used to support him as he looks for work.
Mr Knibbs presented as someone genuinely trying to address his mental health situation. I hope, once he is able to resolve these challenges through the professional treatment he is receiving, he can return to gainful employment as he has shown, since the lump sum payment in 2010, he is capable of doing. The ingredients necessary for special circumstances which would invoke the Secretary’s discretion to disregard or shorten the preclusion period are not applicable in his case.
DECISION
The Tribunal affirms the decision of the Social Services and Child Support Division. The compensation preclusion period applicable to the Applicant is correctly calculated and applies from 28 August 2010 to 7 December 2019.
I certify that the preceding 57 (fifty seven) paragraphs are a true copy of the reasons for the decision herein of D. J. Morris, Member .....(Sgd)........................................................
Administrative Assistant
Dated 28 November 2016
Date(s) of hearing 15 November 2016 Applicant In person Counsel for the Respondent Mr A Burgess Advocate for the Respondent Ms J Vetter Solicitors for the Respondent Sparke Helmore
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