Krstic and Department of Family and Community Services
[2001] AATA 889
•26 October 2001
DECISION AND REASONS FOR DECISION [2001] AATA 889
ADMINISTRATIVE APPEALS TRIBUNAL )
) No N2001/458
GENERAL ADMINISTRATIVE DIVISION )
Re JOHN KRSTIC
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal M J Sassella, Senior Member
Date26 October 2001
PlaceSydney
Decision The Tribunal affirms the decision under review.
[Sgd] M J Sassella
Senior Member
CATCHWORDS
Social Security – lump sum compensation payment - preclusion period – special circumstances – exercise of discretion
Social Security Act 1991, ss 17(1) definitions of "compensation affected payment" (paragraphs (a) and (c)), "lump sum preclusion period", (2), (3), 1163(1), (3), (9), 1165(1A), (5), (8), (9), 1184(1)
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228
Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985)
REASONS FOR DECISION
26 October 2001 M J Sassella, Senior Member
History of the application
On 10 July 2000 John Krstic ("the Applicant") accepted a settlement of $65000 in respect of a workplace injury sustained on 15 May 1996 (T3, T4).
At some point between July and November 2000 the Applicant lodged a claim for disability support pension with the Respondent. The exact date of lodgement of the claim is unclear from the documentation, however it was rejected by a delegate of the Secretary, Department of Family and Community Services ("the Respondent") on or around 15 November 2000 (T18) and the Applicant stated at the hearing that it had taken some weeks for it to be processed.
On 7 November 2000 the Respondent wrote to Employers Mutual, the insurer liable to pay the compensation (T5). Employers Mutual was informed that the Applicant had claimed or been given a compensation affected social security payment for a period to which the compensation related. Therefore the Respondent was entitled to recover an amount equal to all or part of the amount payable under the contract of insurance, pursuant to s 1177 of the Social Security Act 1991 ("the Act").
On 7 November 2000 the Respondent wrote to the Applicant's solicitors (T6). They were informed that the Respondent may recover some or all of the Centrelink payments paid to the Applicant during the compensation period.
On 7 November 2000 (T7) the Respondent revoked the s 1177 notice given to Employers Mutual (T5) and informed them it could now make any payment to the Applicant for which it was liable.
On 7 November 2000 the Respondent wrote to the Applicant informing him that it may recover some or all of the Centrelink payments made to him during the compensation period (T8). On this date the Respondent also wrote to the Applicant's solicitors and the Applicant informing them that, based on the lump sum payment of $65000, the Applicant would have a social security preclusion period imposed on him from 11 July 2000 to 27 August 2001 (T11, T14).
On 10 November 2000 a Centrelink file note (T17) recorded that the decision imposing the preclusion period was reviewed and affirmed. The Applicant had attended the Centrelink office and informed the Respondent that he had spent the compensation settlement money on a house loan of $55000 and on a personal loan of $8000.
On 15 November 2000 a Centrelink document noted that the claim for disability support pension had been rejected due to the existence of a preclusion period (T18).
On 16 November 2000 the Respondent wrote to the Applicant informing him that it offered an advisory service on how best to manage the lump sum compensation payment, especially in view of the fact that for a period he would not be entitled to social security payments (T19).
On 20 November 2000 the Applicant's solicitors wrote to the Respondent stating that the Applicant had received the sum of $65000 (T20).
On 5 December 2000 an authorised review officer within the Respondent agency affirmed the decision imposing a preclusion period on the Applicant, denying him disability support pension payments for the period 11 July 2000 to 27 August 2001 (T22).
On 22 December 2000 a Centrelink file note recorded that an authorised review officer had affirmed the decision imposing a preclusion period on the Applicant from 11 July 2000 to 27 August 2001 (T21). It was decided that there were no special circumstances pursuant to s 1184(1) of the Act affecting the spending of the Applicant's lump sum payment and that all monies were spent on "foreseeable expenses." The Applicant had called Centrelink to explain that he had spent the money on a "proper" purchase, his house, and that he felt disadvantaged by the preclusion period.
On 29 December 2000 the Applicant lodged an application for review of this decision with the Social Security Appeals Tribunal ("the SSAT") (T26).
The decision under reviewOn 20 March 2001 the SSAT affirmed the Respondent's decision of 5 December 2000 (T2). The Applicant contended that he was unaware that he would not be able to receive any payments until August 2001. He had not been properly informed of this preclusion period and the Applicant felt that he was pushed into signing the document acknowledging the preclusion period without understanding the full implications. At the time of the SSAT hearing the Applicant was earning $150 per week for part time employment as a price checker. There was no dispute as to whether the Applicant had been informed that a preclusion period would apply or that he had spent all the proceeds of the lump sum payment. In order to waive the preclusion period and to treat the compensation payment as not having been made or not liable to be paid, the SSAT would have to be satisfied that there were special circumstances in the Applicant's case. The only circumstance raised was that of financial hardship and that in itself was not considered by the SSAT to be a sufficient ground on which to satisfy the definition of "special circumstances."
The Applicant lodged an application for review of this decision with the Administrative Appeals Tribunal ("the Tribunal") on 9 April 2001 (T1).
Hearing and appearancesA hearing into this matter was convened by the Tribunal on 10 October 2001 in Newcastle. The Applicant represented himself whilst the Respondent was represented by George Lozynsky from the advocacy section of Centrelink. The following materials were taken into evidence:
Exhibit TD1 – Documents prepared pursuant to s 37 of the Administrative Appeals Tribunal Act 1975.
Exhibit R1 – Respondent's statement of facts and contentions dated 9 July 2001.
Exhibit R2 – Departmental printout of the Applicant's social security entitlement status.
Legislation
The relevant legislation in this matter is the Social Security Act 1991 ("the Act"), in particular ss 17(1) definitions of "compensation affected payment" (paragraphs (a) and (c)), "lump sum preclusion period", (2), (3), 1163(1), (3), (9), 1165(1A), (5), (8), (9), 1184(1):
"17
(1) Compensation recovery definitions
In this Act, unless the contrary intention appears:
…
compensation affected payment means:
…
(a) a disability support pension; or
…
(c) a social security benefit; or
…
lump sum preclusion period means either an old lump sum preclusion period within the meaning given by subsections 1165(3) to (4) (inclusive) or a new lump sum preclusion period within the meaning given by subsections 1165(5) to (8) (inclusive), as the case requires.
…
(2) For the purposes of this Act, compensation means:
(a) a payment of damages; or
(b) a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c) a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d) any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments) that is:
(e) made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f) made either within or outside Australia.
…
(3) 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; or
(ab) 50% of the payment if the following circumstances apply:
(i) the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or
(b) if those circumstances do not apply—so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn.
…""1163 General effect of Part
(1) If a person is or may be entitled to or receives compensation, payments of a compensation affected payment to the person or the person's partner might be affected under this Part.
…(3) If the compensation is a lump sum compensation payment, the compensation affected payment might cease to be payable for a period (based on the amount of the lump sum) and some or all of the payments of the compensation affected payment might be repayable.
…
(a) the compensation is received on or after 1 January 1993; and
(b) the claim for the pension is made on or after 1 January 1993.
…(9) This Part operates in certain specified circumstances to affect a person's compensation affected payment because of compensation received by the person or the person's partner. This Part is not intended to contain any implication that, in addition to those specified circumstances, there needs to be some connection between the circumstances that give rise to the person's qualification for the payment and the circumstances that give rise to the person's or the partner's compensation.
…"
"1165 Compensation affected payment not payable during lump sum preclusion period
…
(1A) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person is not a member of a couple; and
(c) the person receives a lump sum compensation payment (whether before or after the person receives or claims the compensation affected payment) on or after 20 March 1997;
no compensation affected payment is payable to the person for the new lump sum preclusion period.
…(5) If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:
(a) begins on the day after the last day of the periodic payment period; and
…(8) 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:
(9) If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number.
…""1184 Secretary may disregard some payments
(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.
…"
Applicant's evidence
The Applicant gave full and frank evidence to the Tribunal. He stated that prior to his compensable injury he had been an extremely active man with a vigorous and serious job which he both enjoyed and was very successful at.
The Applicant further stated to the Tribunal that he felt that his lawyers had inadequately advised him in relation to the lump sum compensation payment and that the implications of the preclusion period had not been made fully clear to him. He considered that the $65000 payment itself was insufficient and he stated that he had lost far more than that amount in wages since the accident which prevented him from working. Upon receipt of the payment the Applicant thought that he would firstly pay off his mortgage and then find himself new employment.
The Applicant, between 10 July 2000 and November 2000, spent $55000 paying off his mortgage and $8000 paying off debts that he accrued with friends whilst waiting for his compensation payment. The Applicant spent a further $2000 on living expenses. Up to November 2000 he was earning around $150 per week working as a GST pricing checker for the ACCC.
Between November 2000 and August 2001 the Applicant lived on the money from the part-time work and from financial handouts from friends. It was these personal debts that the Applicant was particularly keen to settle upon receipt of his compensation payment.
The Applicant proceeded to inform the Tribunal that he was about to undergo a total knee reconstruction and that he could not find employment. He further stated that he only went to Centrelink because he was in genuine need of financial assistance. It was very much a last resort for him as a means of seeking help. The Applicant was at pains to explain that he had not squandered his compensation payment but had used the money responsibly in paying off his mortgage and repaying his accrued debts. He did not feel that he should be punished for having used his compensation payment in the way that he did. He requested that the Respondent, and the Tribunal, show compassion and not enforce the preclusion period due to his financial hardship.
The Applicant gave further details in regard to his financial position whilst he was waiting for his workers' compensation. He had sold his car and household items such as his video recorder in order to defray living expenses. In addition the Applicant pays, and has paid for 10 years, $50 per week in maintenance to his former wife for the care of his 20 year old daughter as well as contributing half the costs of her education.
The house, fully paid off, was sold in February 2001. As a result of the sale the Applicant currently has assets of over $80000. He also does a little non-permanent part-time work. Currently the Applicant is studying information technology at TAFE where he attends classes three days per week. He should finish the course in November 2001.
Upon questioning from the Mr Lozynsky the Applicant offered the following information in relation to this matter:
He was aware of the preclusion period, having been given advice of this by his solicitor, but he was unaware of exactly what this meant. He signed the settlement documents (T3) in order to be finished with the legal proceedings. The Applicant assumed that he would find employment and that he would have no further dealings with Centrelink.
He did not seek the advice of a financial adviser upon receipt of the lump sum payment. This was because the Applicant knew how he intended to spend the money.
The Applicant's friends who had lent him money were not asking for the money to be returned but the Applicant was eager to repay the loans, out of pride and because his friends would be more likely to assist if he made the repayments at the earliest opportunity.
The Applicant has no outstanding debts.
The Applicant experiences headaches and takes medication for them. He also takes anti-inflammatory medication for his knee.
He plays golf but cannot afford to renew his membership at his golf club.
He has not been to St Vincent de Paul or other charitable organisations to ask for assistance with bills. The Applicant was not aware of such a service.
Submissions – the Applicant
Mr Krstic made brief but impassioned submissions to the Tribunal. He stated his belief that Centrelink should be more compassionate in their consideration of what constitutes special circumstances and that the law should be changed in this regard. Further it was his opinion that Centrelink should be able to make discretionary decisions about special circumstances in individual cases and that the law should be more flexible in regard to what makes circumstances "special."
The Applicant further stated that the way he spent his lump sum payment was responsible and proper and that he should not be punished for such spending. He was at pains to point out that the money had not been spent on a holiday or a car or any other luxury item.
Finally the Applicant made a criticism of Centrelink and its staff. He stated that after having lodged his disability support pension claim it was left up to the Applicant to phone Centrelink and find out about its progress after a period of some weeks. When he did make contact with Centrelink he was informed that his application had not yet been reviewed. The Applicant felt that the service provided was totally inadequate.
It should be noted that both Mr Lozynsky and the Tribunal made the Applicant aware of particular avenues that could be followed in lodging complaints about the service provided by Centrelink.
Submissions – the RespondentMr Lozynsky made brief oral submissions that supplemented his more detailed submissions in his statement of facts and contentions (Exhibit R1). He stated that the Applicant's situation was not unusual, uncommon or exceptional and noted that because the Applicant sold his house he is currently in a much healthier situation that many other social security payment recipients.
It was further submitted that the Applicant had been advised of the preclusion period and that the intention of the legislation, to prevent recipients from receiving both compensation and social security payments, should be honoured. The Applicant's financial circumstances had no quality that would allow the exercise of the discretion of s 1184(1) of the Act to waive all or part of the preclusion period.
Findings on material questions of fact with reference to the evidence and other materials in support of the findingsThe Applicant received a lump sum compensation payment of $65000 on 10 July 2000. This is undisputed.
There is no issue as to the existence of a preclusion period pursuant to s 1165(1A) of the Act. The preclusion covered the period 11 July 2000 to 27 August 2001. The Applicant stated at the hearing that he understood how such a period is calculated and that he has no argument with the preclusion period itself. The issue in this matter is whether there are any special circumstances that warrant part or all of the preclusion period being disregarded.
The test used to ascertain whether special circumstances exist was laid down by the Tribunal in ReBeadle and Director-General of Social Security (1984) 6 ALD 1 at 3 where the Tribunal said:
"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 on 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. That 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."
This passage was endorsed by the full Federal Court in Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228.
In relation to the question of financial hardship a relevant authority is Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985) where the Tribunal was of the opinion that financial hardship must be "exceptional" rather than merely "straitened." The Tribunal finds no evidence that the circumstances of the Applicant were exceptional in this sense. He had received a lump sum payment of $65000 which could have been used to cover his living expenses for a considerable period. Although the manner in which the Applicant spent the money can be seen to be responsible, his resulting financial circumstances, although straitened, were not unusual, uncommon or exceptional.
Conclusion
The Applicant, although having experienced straitened financial circumstances during the preclusion period of 11 July 2000 to 27 August 2001, did not experience a financial situation that constituted "special circumstances" as defined in s 1184(1) of the Act. The exercise of the discretion in this section of the Act is not warranted in this case.
The Tribunal notes the Applicant's concerns regarding the interpretation of the legislation and what can constitute "special circumstances." The Applicant was of the opinion that the legislation should be altered or that the interpretation be more flexible or more discretionary.
Finally the Tribunal notes the Applicant's concerns about the general standard of service provided by Centrelink. The Tribunal would encourage him to register a complaint through the proper channels, as explained to him at the hearing, if he continues to receive what he feels is a poor standard of client service.
DecisionThe Tribunal affirms the decision under review.
I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of Mr M J Sassella, Senior Member.
Signed: .....................................................................................
AssociateDate of Hearing 10 October 2001
Date of Decision 26 October 2001
Self-represented ApplicantRepresentative for the Respondent Mr G Lozynsky
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