Knight and Department of Family and Community Services

[2001] AATA 137

DECISION AND REASONS FOR DECISION [2001] AATA 137

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2000/340

GENERAL ADMINISTRATIVE  DIVISION       )       
           Re      MARCUS KNIGHT
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES        
  Respondent

DECISION

Tribunal       Dr EK Christie, Member    

Date23 February 2001      

PlaceBrisbane

Decision       The Tribunal affirms the decision under review.  This means Mr Knight's application is unsuccessful.      

(Sgd)     EK Christie 
  MEMBER
CATCHWORDS
SOCIAL SECURITY - compensation - lump sum settlement - preclusion period - whether "special circumstances" - whether appropriate to reduce part of the preclusion period.

Social Security Act 1991 s 1184
Ayad and Secretary, Department of Family and Community Services [2000] AATA 102
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services (1980-1981) 3 ALN N95
Secretary, Department of Social Security and Norman (AAT Decision 4092, 22 June 1998)

REASONS FOR DECISION

23 February 2001             Dr EK Christie, Member                

1. This is an application by Marcus Knight to review a decision of the Social Security Appeals Tribunal ("the SSAT") made on 28 March 2000.  This decision affirmed the decision of an Authorised Review Officer of Centrelink made on 1 February 2000.  The effect of these decisions was that Mr Knight was subject to a preclusion period from 2 June 1993 to 26 June 2001.

2. In reaching its decision, the SSAT concluded:

   "10. With regard to the discretion under section 1184(1) [the "special circumstances provision"] to treat the whole of or part of the compensation payment as not having been made, such as to reduce the length of the compensation preclusion period, the Tribunal formed the view in weighing the evidence, that Mr Knight's circumstances are not sufficiently 'special', having careful regard to Federal Court and Administrative Appeals Tribunal decisions on such matters…."

1. At the hearing Mr Knight represented himself.  The Department of Family and Community Services ("the Department") was represented by Mr S Letch, a Departmental Advocate.

2. At the hearing the Tribunal had in evidence before it documents lodged pursuant to Section 37 of the Administrative Appeals Tribunal Act 1975 – the "T" Documents (Exhibit 1) and the following document:

• Exhibit 2            Medical Statement of Dr David Sturgess dated 3.11.00

Issues before the Tribunal

1. The only issue for the Tribunal to decide was whether the compensation payment received by Mr Knight came within the "special circumstances" provision of the Social Security Act 1991 and so whether the whole or part of the compensation could be treated as not having been made.  Such a finding would reduce the length of the preclusion period.

2. At the end of the hearing, the Tribunal exerted its inquisitorial power and sought a further report from Dr David Sturgess.  This report was received on 28 December 2000.  Supplementary submissions were received from Mr Letch on 5 February 2001.
   Facts

3. The following findings of fact made by the SSAT were acknowledged by Mr Knight:

   "8.       On the basis of the evidence before it, the Tribunal made the following findings:

   (i)Mr Knight was involved in an industrial accident on 15 January 1992 from which he received on 25 February 1998, an out of court compensation settlement in the amount of $340,000.00, clear of a refund to WorkCover in the amount of $58,995.34.

   (ii)During the period of incapacity Mr Knight received $27,601.33 by way of weekly payments from WorkCover.

   (iii)Mr Knight's current assets include a house for which he paid $50,000;  vehicles valued at approximately $17,000 and an outstanding loan of $45,000 which will begin to be repaid [loan interest] in September 2000.

   (iv)Mr Knight's wife receives family allowance and parenting payment amount to approximately $13,345 per year."  (Document T2 Folio 9)

1. On 1 February 2000 an Authorised Review Officer of Centrelink advised Mr Knight that an error had been made in calculating the length of the preclusion period as an amount of $58,953.34 paid by WorkCover to Mr Knight had not been considered in the calculations.  The effect of this error was that the preclusion period should have ended on 26 March 2002 – not 26 June 2001.  However, the Authorised Review Officer decided, when taking Mr Knight's circumstances into account and using the "special circumstances" discretion under subsection 1184(1), that the preclusion period would not be extended to 26 March 2002 but would end on 26 June 2001.
   Evidence of Mr Knight

2. Mr Knight described the list of medication he currently had been prescribed (Exhibit 2).  These included anti-depressants, a range of pain killers, muscle relaxants and sleeping tablets.  Mr Knight required these medications for conditions of osteoarthritis, chronic depression, sleep apnoea, tinnitus and sight difficulties.  The cost of these medications was around $24 per month.

3. The full medication list specified in Dr Sturgess' statement and currently taken by Mr Knight were:

   "Aspirin Capsule        100mg           1 mane
   Efexor-XR Capsule     75 mg            1 daily c.c.
   Kapanol Capsule       20 mg            1 nocte
   Kapanol Capsule       10mg             1 mane p.r.n.
   Maxolon Tablet         10mg             1 t.i.d. p.r.n.
   Panamax Tablet        500mg           1-2 q.i.d. p.r.n.
   Tazac Capsule          150mg           1 b.d.  
   Temazepam Capsule 10mg            1 nocte p.r.n
   Valium Tablet            5mg               1-2 daily"

1. Mr Knight described some of the side effects of his medication, e.g., having hallucinations and seeking to escape by isolating himself from his wife and family.  He was not treated by a psychiatrist as he could not afford one.

2. Mr Knight said that he had attempted suicide on two occasions in 1998 around the time his compensation claim was settled, and then six months later.

3. During cross-examination by Mr Letch, Mr Knight said:

• that he had been made aware of the effect of the preclusion period on his entitlement to social security benefits by his instructing solicitor at the time of receiving his lump sum compensation as well as by Centrelink;

• that the net sum he had received in February 1998 as lump sum compensation was $291,375;

• that he had purchased a home for his family at Mt Morgan for $50,000 in August 1999;

• that at the same time he purchased this home he had sold their home ("a steel shed on 1 ha") at Balderstone for $50,000;

• that he was under pressure by his wife to sell this property after his father left because he could not manage the area himself because of his medical condition;

• that he and his family had lived in the Philippines for ten months from November 1998.  He estimated travel costs, removal expenses and migration charges to be $24,000;

• that he had purchased a car in August 1999 (for $22,000) and a moped motor bike for $2,000.  He estimated the current value of the motor car at $10,000.  All attempts to sell the motor bike had failed;

• that at the time of receiving the lump sum settlement he had repaid a debt of $5,000 for a caravan and repaid moneys owing on credit cards of $50,000;

• that medication needs over time were a large drain on his resources; and

• that he had placed $45,000 of his lump sum compensation into a mortgage loan on 17 January 2000 for a two year period (Document T56, Folio 88).  He made it clear that he had taken this course of investment "because everything else had disappeared so fast" – rather than as some attempt to facilitate his eligibility for social security benefits.  In addition, he intended that one-half of this sum be a security for his future medical expenses and the other half retained for his two children's future education expenses.

1. In response to a number of Tribunal questions Mr Knight stated:

• that his injury from the fall from a 12 metre tower in 1992 resulted in three cracked back vertebra, a broken right hip, crushed muscle tissue in his left hip, a fractured elbow and a broken wrist;

• that he saw his GP, Dr Sturgess, about one – two times each month;

• that the $4,500 interest he had earned from the first year of his loan investment had been spent on household insurance, car registration and rates;

• that he would attract a $5,000 penalty if he sought to close his loan before the end of the two year term;

• that his current savings were $150 and had to see him through to the end of his preclusion period;

• that he had sought work with the Woorabinda Land Council through a collaborative grant for a tea tree oil production process he had personally developed.  However, an application to ATSIC for a grant had failed;

• that over the past three months, he had earned $300 for his tea tree oil and soaps that he had produced; and

• that his wife's social security benefits paid the family's daily living expenses – but not the fixed costs, e.g. rates, insurance etc.

Legal Framework

1. Section 1184 of the Social Security Act 1991 ("the Act") provides the Department with discretion to decrease the length of the preclusion period:

   "SECTION 1184        SECRETARY MAY DISREGARD SOME PAYMENTS

   1184(1)          [Special circumstances]     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."

Contentions and Submissions of the Parties

1. Mr Letch referred to the following authorities as the basis for his submissions that the length of the preclusion period should not be varied:

• Re Ivovic and Director-General of Social Services (1980-1981) 3 ALF N95

  "The Tribunal went on to conclude:  '…it may well impose hardship on the applicant and his family if he is obliged to sell the premises in their present incomplete state in order to pay the moneys claimed by the Director-General.  But any hardship which may thereby ensue is primarily of the applicant's own making due to his decision to proceed with the construction of a residence which was beyond his financial resources and to utilise for that purpose the whole of the moneys made available by his solicitors without making any provision for payment of his acknowledged debt.'"

• Secretary, Department of Social Security and Norman (AAT Decision 4092 delivered 22 June 1998)

  "18.     It is not an unusual circumstance that a person to whom a preclusion period is applied spends their funds in a way which is unwise.  That is frequently the impetus for them seeking relief through sec. 1184.  Financial hardship alone will not of itself constitute special circumstances under this section (See Director-General of Social Service v Hales (1993) 47 ALR 281).  The provisions in the Act are there to ensure that money received in place of income as part of the Workers' Compensation system is not also paid by way of Social Security benefits.  (See, for example, Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797 at 798).  This prevention of double dipping reflects the idea that the money is there to provide a person with income, not capital for investment."

and later in Norman's case where Deputy President Barnett stated:

"The respondent was aware, before he purchased the unit, that he would have to use the funds for his day-to-day living expenses, and to allow such an issue to constitute special circumstances would be clearly counter to the spirit of the Act."

1. Mr Letch submitted that the principles and conclusions in these cases applied to Mr Knight's circumstances.

2. Mr Letch submitted that Mr Knight had spent enormous amounts of his lump sum compensation within a very short period of time – notwithstanding his background knowledge of the significance of the preclusion period on his social security eligibility.

3. Moreover, Mr Letch submitted that as late as January 2000 Mr Knight had placed $45,000 in a mortgage loan.

4. Mr Letch contended that Mr Knight was the author of his own "misfortune".  Accordingly, the length of the preclusion period should not be reduced.

5. In addition, the tying-up of $45,000 of his compensation in a mortgage loan for two years did not represented a "special circumstance".  It would have been more prudent for Mr Knight to have invested his money in a standard bank investment where funds would have been more readily available. 

6. In addition, Mr Letch contended that medical expenses were not uncommon in situations like Mr Knight's and so did not justify the description of a "special circumstance".

7. Mr Letch further contended that it was significant that Mr Knight's wife continued to receive social security benefits during his preclusion period.

8. Mr Letch concluded that a further relevant consideration as to the appropriate length of the preclusion period was that it was "significantly shorter than normal" (see paragraph 7).

9. Mr Knight made one simple submission to the Tribunal;  that his psychiatric and psychological state, from the time he received his lump sum compensation payment, was such that the money he received should have been invested for him on his behalf.

10. In his supplementary medical report dated 28 December 2000, Dr Sturgess particularised Mr Knight's medication regime and stated:

    "I cannot comment upon medication prescribed to Marcus [Knight] prior to 20/01/2000….Marcus's [Knight] ability to make clear, rational decisions about investing a large sum of money in January 2000 would have been limited by his prescribed medications.  I am unsure of the extent to which Marcus would have been influenced by his medications because I am unsure of his exact medications he took prior to consulting me."

1. In his supplementary submissions Mr Letch contended:

• that Mr Knight's judgement was not so impaired that he was not able to understand the consequences of his actions.  His frequent interactions with Centrelink suggest he clearly understood the consequences of his actions and was keen to pursue whatever avenue was open to him to secure a payment;

• that Mr Knight did not expend the funds frivolously but had made a rational decision to invest the money for his children's future and potential future medical expenses;

• that Mr Knight's oral evidence was that he could redeem his invested funds but would entail a $5,000 penalty if he did so.  Notwithstanding this penalty, Mr Knight still had access to a "considerable cash reserve";

• that because of a "realisable mortgage investment" Mr Knight's financial circumstances could not be regarded as severely straitened;

• that on an ongoing basis Mr Knight derived $4,500 per annum from his mortgage investment – an amount over half of the total maximum entitlement for DSP.  Mr Knight also had access to his partner's income.  Accordingly, Mr Knight's circumstances were not as straitened as many others who seek a reduction in the preclusion period; and

• that it was not circumstances beyond the control of Mr Knight that had led to his current predicament.  Instead, it was Mr Knight's deliberate choice to put the funds out of easy reach, funds that in any event could be accessed if Mr Knight decided to do so.

Consideration of the Issues

1. The objective of the Tribunal is to review administrative decisions on their merits and in accordance with the law at all times.  The basis for this application for review is that the SSAT was wrong to decide that there were no "special circumstances" within the meaning of Section 1184 of the Social Security Act 1991 in this case.

2. The Tribunal has had to consider the meaning and application of the expression "special circumstances" on many occasions.  The decision of the Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 has become an oft-quoted benchmark as to the interpretation of "special circumstances".  In that case the Tribunal said (at 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."

1. The Tribunal carefully considered Dr Sturgess' supplementary medical report (paragraph 26) in terms of whether the effect of Mr Knight's medication regimes on his ability to make rational decisions to manage his affairs represented a "special circumstance".

2. In Ayad and Secretary, Department of Family and Community Services [2000] AATA 102, the applicant was injured in a work accident suffering brain damage that had left him intellectually impaired. The applicant "had a very poor memory and had difficulty managing his day-to-day affairs".  The Tribunal, in this case, concluded that the applicant's capacity to manage his affairs and to engage in rational decision-making had been adversely affected by brain damage. 

3. However, based on the qualifications in Dr Sturgess' report (paragraph 26), the Tribunal cannot conclude that Mr Knight's ability to manage his affairs and to engage in rational decision-making had been adversely affected by his medication regime.  Consequently, the Tribunal finds that there were no special circumstances which justify disregarding part of the compensation settlement for the purpose of calculating the preclusion period.

4. The Tribunal understands the decisions taken by Mr Knight to invest his compensation funds were to provide for his family's future.  However, as stated in Norman's case, to allow such an issue to constitute a "special circumstance" would be clearly counter to the spirit of the Social Security Act, as, under the Social Security Act, the compensation funds reflect the idea that the funds were there to provide a person with income, not capital for investment.

5. Whilst such a decision may be seen as harsh, it may be best regarded as unfortunate.  There are now a number of cases decided by the Tribunal where the Tribunal has made similar decisions.

6. For all of the above reasons, the Tribunal concludes that the compensation payment received by Mr Knight does not come within the "special circumstances" provision of the Social Security Act so that whole or part of the compensation payment could be treated as not having been made.  As a result of this finding, the length of the preclusion period cannot be reduced.

7. The Tribunal affirms the decision under review.  This means Mr Knight's application is unsuccessful.

   I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Dr EK Christie, Member

   Signed:         Emma Oettinger     
     Associate

   Date/s of Hearing  7.11.00
   Written submissions                 5.2.01
   Date of Decision  23.2.01    
   Rep. for the Applicant              Applicant appeared in Person
   Solicitor for the Respondent    Mr S Letch, Departmental Advocate