Kummer and Secretary, Department of Social Services (Social services second review) - [2023] AATA 33

Kummer and Secretary, Department of Social Services (Social services second review) [2023] AATA 33 (20 January 2023)
Division:GENERAL DIVISION
File Number: 2022/1834
Re:Michelle Kummer
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

Decision
Tribunal:Mrs J C Kelly, Senior Member
Date:20 January 2023
Place:Sydney

The decision made by AAT1 dated 15 February 2022 is affirmed.
..................................[sgd]......................................
Mrs J C Kelly, Senior Member
Catchwords
SOCIAL SECURITY – whether the Applicant was subject to a preclusion period as a consequence of settling legal proceedings – whether the decision to recover a compensation charge was correct – whether there are special circumstances that make it appropriate to treat some or all of the lump sum compensation payment as not having been made – whether the compensation charge can be written-off or waived – reviewable decision affirmed
Legislation
Social Security Act 1991 (Cth)
Cases
Ahmic and Secretary, Department of Employment and Workplace Relations [2007] AATA 74
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) FCA 25
Beadle v Director-General of Social Security (1985) 60 ALR 225
Director-General of Social Services v Hales (1983) 47 ALR 281
Dranichnikov v Centrelink [2003] FCAFC 133
Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339
Groth v Secretary, Department of Social Security [1995] FCA 1708
Hadchiti and Department of Family and Community Services (1999) AATA 20
Mosarevski and Secretary, Department of Social Security [1996] AATA 510
Nehme and Secretary, Department of Family and Community Services [2002] AATA 1225
Re Beadle v Director-General of Social Security (1985) 6 ALD 1
Rice and Secretary, Department of Employment and Workplace Relations [2006] AATA 757
Secretary, Department of Education, Employment and Workplace Relations and Morrison [2008] AATA 1017
Secretary, Department of Social Security and Winterbotham [1990] AATA 808
Secondary Materials
Department of Social Services, ‘Social Security Guide’ Guides to Social Policy Law
REASONS FOR DECISION
Mrs J C Kelly, Senior Member
20 January 2023
Introduction

On 21 September 2021, Ms Kummer, the Applicant, was receiving Jobseeker Allowance when she settled legal proceedings for a work injury she suffered in 2014 (the settlement). On 6 October 2021 Services Australia – Centrelink (the Agency) decided that she was precluded from receiving Jobseeker and Coronavirus payments for a period from 9 February 2020 to 17 April 2021 (the compensation preclusion period), and to impose a compensation charge of $27,967.17 which was to be deducted from the settlement sum and paid to the Agency, representing Jobseeker Payment and Coronavirus Supplement Payment (the benefits) she had received during the preclusion period, from 23 March 2020 (when she began receiving the benefits) to 17 April 2021.
The relevant legislation is the Social Security Act 1991 (Cth). The Guide to Social Security Law (the Guide) is the relevant policy document.
The Applicant unsuccessfully sought an internal review of the decision made on 6 October 2021 and then a review by the Social Services & Child Support Division of the Tribunal (AAT1). I am reviewing the decision made by AAT1 which affirmed the decision of the Authorised Review Officer to affirm the 6 October 2021 decision.
I have to decide:
(i)Whether the Applicant was precluded from receiving Jobseeker and compensation affected payments as a result of the settlement;
(ii)Whether the decision to recover a compensation charge was correct;
(iii)If so, whether there are special circumstances that make it appropriate to treat some or all of the lump sum compensation payment as not having been made;
(iv)Whether the compensation charge may be written-off or waived.
Facts
The Applicant suffered an injury to her left knee on 6 July 2013 for which she received $450,000 in settlement on 28 April 2017. She said that she ‘walked away’ with $205,000.
On 8 December 2014, the Applicant suffered the work injury, (the injury) including to her left ankle, that resulted in the settlement.
On 26 November 2019, she received a lump sum payment of $22,000 in respect of the injury (the first payment). The evidence did not show where that deposit was made.
The Applicant received weekly periodic WorkCover (compensation) payments in respect of the injury up to and including 8 February 2020. In 2019 and 2020 the amount varied around $1,100 per week.
She was employed by RE/MAX Property Specialists briefly from 25 February 2020.
On 1 April 2020 the Applicant submitted an online claim for Jobseeker Payment which was granted with effect from 23 March 2020.
In April 2020 and July 2020, the Applicant’s superannuation fund deposited two amounts of $10,000 into her bank account on the basis of hardship. A deposit of unknown origin for almost $6,000 was also made into her account in July 2020.
The Applicant worked for a real estate agency briefly in about October 2020. The termination letter dated 23 October 2020 stated that the termination was because the company was ineligible for the second stage of Job Keeper package. During the hearing, the Applicant said that her termination was for a different reason.
On 17 December 2020, the Applicant received a deposit of $19,800 from GIO for whole person impairment caused by the injury.
In March 2021, the superannuation fund made a further deposit of $7,804. Her account had been in debit since the end of January 2021 and returned to debit on 25 March 2021 when an online gambling transaction occurred. The statements reflect her brother’s regular deposits to pay her rent and other deposits of different amounts from him fairly regularly. The account remained in debit until 18 October 2021.
The agreement to settle the legal proceedings for $110,000 was made at a settlement conference/mediation on 24 June 2021. The Deed of Release was executed by the insurer on 21 September 2021. It included an acknowledgement by ‘the worker’ that she had been informed that she may be liable to pay an amount pursuant to five pieces of legislation including the Act and the insurer was entitled to deduct such sum from the settlement sum and repay the statutory entities and/or the Commonwealth. Another clause was titled ’Centrelink’ and stated that the insurer is to deduct from the settlement sum and pay Centrelink any monies owing under a notice pursuant to the Act.
On 6 October 2021, the Agency determined that the compensation period applied and the Applicant was notified that GIO Workers Compensation (NSW) Ltd had been requested to repay $27,967.17 to the Agency before paying the rest of the compensation payment. That payment was made. The notice to the insurer was issued pursuant to section 1184 of the Act, which enables the Secretary to recover the amount from the insurer.
On 18 October 2021, $31,754.98 was paid into the Applicant’s bank account in respect of the settlement. (the second payment)
On 10 November 2021, a further $11,000 was deposited in respect of the settlement (the third payment). In total, the Applicant received into her bank account a total of $64,754.98 in respect of the injury between November 2019 and November 2021.
The Applicant’s social security payments were cancelled in April 2022 for failure to report, which I infer was a consequence of her getting a job at the beginning of April 2022, which she still had at the time of the hearing. Her annual salary was approximately $70,000. She was on probation and was working very long hours.
Was the Applicant precluded from receiving compensation affected payments as a result of the settlement?
Section 17 of the Act sets out relevant definitions in respect of compensation recovery. I am satisfied that the Applicant has received a lump sum compensation payment of $132,000 in respect of the injury that contained an economic loss component and the compensation part is 50%.
Sections 1169 and 1170 of the Act set out how to calculate and apply a preclusion period to compensation affected payments, as in this case. Multiple lump sum payments in respect of the same event may be added together (section 1171 of the Act).
In this case, the preclusion period begins the day after the last day of periodic payments, that is 9 February 2020. Considering the division formula in section 1170(4) of the Act, the compensation part of the lump sum is $66,000 (50% of $132,000) (the dividend) and the income cut-out amount at the time was $1,057.50 (the divisor). The result is a preclusion period of 62 weeks, after rounding down. It began on 9 February 2020 and ended on 17 April 2021.
Was the decision to recover a compensation charge correct?
The Applicant was not entitled to receive Jobseeker and Coronavirus Supplement payments during the preclusion period because they were compensation affected payments.
The payments were debts owed to the Commonwealth and were recoverable by the Secretary (section 1184F of the Act).
The total debt was correctly calculated as $27,967.17 pursuant to sections 1178 and 1179 of the Act and was recovered in October 2021. That being so, the Applicant has no current debt in respect of the compensation charge.
Are there special circumstances that make it appropriate to treat some or all of the lump sum compensation payment as not having been made?
The relevant provision is section 1184K of the Act. There is no dispute that the Applicant may receive a refund of the whole or part of the compensation payment if the Tribunal decided to apply this provision.
The purpose of the compensation recovery provisions of the Act is to ensure that people who receive compensation for loss of income do not also receive income support from the Australian government (the Australian taxpayer) in respect of the same period of time.[1] They are designed to ensure that income support is provided by those with the primary responsibility to provide it, statutory compensation schemes and insurers.[2]
[1] Secretary, Department of Education, Employment and Workplace Relations and Morrison [2008] AATA 1017, [24]; Groom and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2008] AATA 339, [39].
[2] Rice and Secretary, Department of Employment and Workplace Relations [2006] AATA 757, [19]; Secretary, Department of Social Security and Winterbotham [1990] AATA 808, [19].
Section 1184K of the Act confers a discretion on the decision-maker. The term ‘special circumstances’ is not defined. It has been discussed in numerous cases in the Tribunal and the Federal Court. There can be no ‘precise limits or precise rules’ to determine whether there are ‘special circumstances’; ‘the matter is one for the [decision-maker] bearing in mind the purpose for which the power is given’[3] and the context in which they occur.[4]
[3] Beadle v Director-General of Social Security (1985) 60 ALR 225, [228].
[4] Re Beadle v Director-General of Social Security (1985) 6 ALD 1, [3].
The circumstances have been variously described: they must be ‘unusual’ or ‘uncommon’, ‘out of the ordinary’.[5]
[5] Groth v Secretary, Department of Social Security [1995] FCA 1708; Angelakos v Secretary, Department of Employment and Workplace Relations (2007) FCA 25; Dranichnikov v Centrelink [2003] FCAFC 133.
The special circumstances the Applicant claims may be categorised as follows.
·Financial hardship, which included a lower than expected settlement she was bullied into accepting, and Centrelink’s deduction of $27,967.17 from her settlement which she said both she was unaware of and had been told that she would not have to repay it. She paid high rent, had a personal loan and ‘maxed’ out her credit cards. She paid for utilities, food, fuel, car, and courses to remain in real estate. She can longer afford to see her physiotherapist, psychologist or psychiatrist and surgeon.
·Ill-health, including physical and mental health conditions. She was competing for jobs against people who were not disabled.
·The coronavirus pandemic which caused a very high rate of unemployment, making it more difficult to get a job, and impacted on her mental health adversely because of the increased isolation.
The Applicant was very disappointed with the amount of the settlement and felt that she was pressured or bullied into settlement and had been ill-served by her legal representatives. The deduction for the social security benefits she had received added to her disappointment.
The Applicant was billed for fees for three different firms of solicitors who had acted for her. She complained to the Legal Services Commissioner in respect of the firm who had first acted for her. She maintained that she was unsuccessful, however, I infer that the $11,000 deposited into her account in November 2021 was in respect of that matter. In the letter dated 18 October 2021 from her then solicitors confirming details of the settlement payment received and the monies repayable and deducted, the sum of $12,577.85 was recorded as being held in trust in respect of fees owed to that firm.
The $11,000 was not taken into account by the Respondent when determining the preclusion period. I do not consider it further for that purpose.
There is no legislative basis for excluding legal costs from a lump sum compensation payment for the purposes of section 17(3) of the Act.[6]
[6] Nehme and Secretary, Department of Family and Community Services [2002] AATA 1225.
If the Applicant had a complaint against another lawyer who had acted for her, the appropriate course would have been to complain to the Legal Services Commissioner or take legal action if appropriate.[7] This is not the appropriate forum for determining whether legal advice was negligent or otherwise in breach of a legal representative’s duty. I agree with the comments made in Mosarevski and Secretary, Department of Social Security [1996] AATA 510 at paragraph 31:
Similarly I am not satisfied that the Australian community should undertake the financial responsibility of supporting the applicants when they might properly recover damages from their solicitor as a result of the negligent legal advice thereby reinstating some financial security.
[7] Ahmic and Secretary, Department of Employment and Workplace Relations [2007] AATA 74.
While the Applicant may believe that she was not aware that an amount may be deducted from her settlement in respect of social security benefits she had received, the contemporaneous evidence shows that she was on notice of that possibility. She signed a deed ‘made on the 24^th day of June 2021’ between the parties which included acknowledgments that she may be liable to pay the ‘Past Benefit’ under various pieces of legislation, including the Act and that the insurer was ‘at liberty to deduct’ such amounts from the settlement sum and ‘repay amounts to statutory entities and/or the Commonwealth’.
On 17 September 2021, the Applicant signed an Authority to Settle addressed to her solicitors. It stated that she would receive ‘net’ the sum of $47,722.00. It set out an amount of $23,000 ‘(estimated)’ repayable to Centrelink.
The financial records available to the Tribunal show that the Applicant was in debt throughout 2019 to the date of the hearing. It is not possible to determine the precise extent of the debt because some of the records, for example for various credit cards and loans, show balances at a particular date or are undated.
It is not clear how the Applicant spent the various amounts she received in respect of the injury, $22,000 in 2019, $19,800 in 2020 and then approximately $43,000 in 2021, or the lump sum payments from her superannuation fund in the order of $28,000, and other deposits of uncertain origin. During the same period, she received regular periodic compensation payments until 8 February 2020 and thereafter benefits. It is relevant that she had received $205,000 in 2017 for her 2013 injury which had apparently been spent by 2019.
The Applicant makes frequent and regular payments to Afterpay services, which she explained was to buy clothes and makeup for work. The transactions have occurred over a long period of time and I am not persuaded that they have all been for that purpose, given the Applicant’s brief periods of employment at the beginning and end of 2020 and that she began her current job in April 2022.
The Applicant said that she repaid a loan from her brother of $10,000 and helped her parents. She said that her father has terminal cancer and she will have to pay for his funeral.
The bank records do show, and she acknowledged, that she has developed a gambling addiction which she said she had not mentioned to her doctors because she cannot afford to see them and for which she has not apparently sought other assistance.
Her addiction involves online betting in amounts varying from $30 to about $600. Some days there was more than one transaction. She also bets at clubs. For example, over a couple of days in December 2019 she gambled $4,000. In June 2020 she spent $3,900 over two days and in August 2020, almost $4,000 in one day. In February 2022 she spent about $4,000 over two days and in April 2022, $3,700. This addiction predated the COVID-19 pandemic.
The Applicant said that she had been living on reduced income for five years while she received WorkCover payments and that she had been used to receiving bonuses. She also said that she does not know how anyone survives on Jobseeker.
The Respondent pointed to her having received a settlement for the 2013 injury in 2017 from which the Applicant said that she received about $200,000, and which she had spent, to demonstrate that her spending had not been prudent.
The Applicant said that she spent some of that settlement to live in Bali for three months to overcome an opiate addiction, which she did successfully. She then lived in Thailand for a month. She said that she also paid off her credit cards.
By 2019 the Applicant was in debt.
The Applicant’s only income from 2014 to April 2022, apart from two short periods of employment in 2020, was from WorkCover payments and then Jobseeker. During that period she was waiting on and then received settlements for the 2013 and 2014 injuries.
It seems that the Applicant did not reduce her expenditure to conform to her reduced income and did not make prudent decisions about spending the settlements she received, given her financial position and ongoing health conditions, which I address below.[8] Her financial situation has been exacerbated by a gambling addiction.
[8] Hadchiti and Department of Family and Community Services (1999) AATA 20.
She has been earning a regular income since April 2022. She indicated that it would only cover her rent, credit cards, loan, phone, utilities and living expenses.
The Applicant’s principal bank provided information at the Respondent’s request on 22 July 2022. The letter showed a credit balance of $3,648.11 in an account and a debit balance of $17,882.49 for a credit card. It stated that a personal loan had been closed on 9 June 2021. However, the same bank wrote to the Applicant on 4 January 2022 about a personal loan of $27,259.97 advising her of a new payment arrangement of $85 weekly. In total, the Applicant was in debt to the bank in the order of $45,000.
The records in evidence show a number of different credit cards over 2019 to the present. The Applicant provided balances of one (Amex) card, the most recent being in debit $16,625.64 on 22 March 2022.
The Applicant provided a statement from her superannuation fund dated 30 June 2021 which showed a balance of almost $60,000, after the $20,000 had been withdrawn but did not include the later withdrawal.
Based on the most recent information provided, the Applicant’s total debt is approximately $62,000 and she has a superannuation balance in the order of $50,000.

Justice Sheppard observed in Director-General of Social Services v Hales (1983) 47 ALR 281:
The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common: they will be impecunious and in straitened circumstances.
With respect to the Applicant, I would not describe her circumstances as either ‘impecunious’ or ‘straitened’. She has demonstrated determination and persistence, and despite what she describes as her physical and psychological disabilities, she is working, earning a modest income. She is in a much better financial position than a person who is relying on income support.
I do not consider that the Applicant is in severe financial hardship.
Her financial circumstances are not special circumstances.
The Applicant provided a number of medical certificates and reports that set out the symptoms she suffers, her medications, and likely future surgery. Her health providers include a psychologist, psychiatrist, physiotherapist, and surgeon.
The injury has had a devastating effect on her physically and psychologically, even before the COVID-19 pandemic occurred. Her ambitions, personal and professional, have been dealt a major blow. She had a psychological condition before the injury but her mental health has been detrimentally affected by it.
Unfortunately, that is the effect of an injury on many people. The settlement the Applicant received was intended to compensate her for the effects of the injury, including incapacity and loss of earnings.
The Applicant’s efforts to rejoin the workforce have coincided with the pandemic. Her last compensation periodic payment was 8 February 2020. She got a job then, briefly, and then again briefly, later in 2020. Since April 2022 she has been employed.
The pandemic caused many people to lose their jobs and apply for income support and compete for fewer jobs. Lockdowns affected most of the population and adversely impacted many.
The Applicant’s physical and psychological conditions and the pandemic, individually or considered together, were not special circumstances.
I am not satisfied that the Applicant’s circumstances are special to warrant the exercise of the discretion under section 1184K of the Act.
Can the debt be written-off or waived?
As the debt has already been recovered in full, none of the paragraphs of section 1236(1A) of the Act apply to allow the debt to be written off.
The evidence does not suggest that there has been any administrative error made by the Commonwealth in respect of the calculation of the preclusion period or the compensation charge or its recovery. Section 1237A of the Act does not apply to permit waiver of all or part of the compensation charge.
Section 1237AAD of the Act enables the Secretary to waive all or part of the debt where there are special circumstances ‘other than financial hardship alone’ that make it desirable and it is more appropriate to waive than write off the debt or part of the debt.
The term ‘special circumstances’ has a meaning analogous to that in section 1184K of the Act. I do not consider that the Applicant’s circumstances as described earlier in this decision, are special circumstances pursuant to section 1237AAD of the Act.
Decision
For the above reasons, the decision made by AAT1 dated 15 February 2022 is affirmed.

I certify that the preceding 70 (seventy) paragraphs are a true copy of the reasons for the decision herein of Mrs J C Kelly, Senior Member

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Associate
Dated: 20 January 2023

Date of hearing: 17 August 2022

Applicant: In person

Solicitors for the Respondent: Mr G Lozynsky, Services Australia

Date of hearing:	17 August 2022
Applicant:	In person
Solicitors for the Respondent:	Mr G Lozynsky, Services Australia