Lancaster; Secretary, Department of Employment and Workplace Relations and

[2007] AATA 1864

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1864

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/2323

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Applicant

And BRIDGET LANCASTER

Respondent

DECISION

Tribunal Mr B.H. Pascoe, Senior Member

Date17 October 2007

PlaceMelbourne

Decision The Tribunal varies the decision of the Social Security Appeals Tribunal under review to the extent of reducing the amount of compensation payment received by the respondent to be treated as not having been made pursuant to s 1184K of the Social Security Act 1999 from $300,000 to $255,082 and remits the matter to the applicant for calculation of the relevant preclusion period.  

(sgd) Mr B. H. Pascoe

Senior Member

CATCHWORDS – Social Security – lump sum compensation – preclusion period – whether special circumstances- amount of compensation payment to be treated as not having been made

Social Security Act 1991 s 1184K

REASONS FOR DECISION

17 October 2007 Mr B.H. Pascoe, Senior Member  

1.      This is an application by the Secretary, Department of Employment and Workplace Relations, the applicant, to review a decision of the Social Security Appeals Tribunal (SSAT) to the extent that a compensation preclusion period was reduced on the basis of disregarding $300,000 of a lump sum compensation received by the respondent, Ms B. Lancaster.

2.      At the hearing the applicant was represented by Mr A. Carson, an advocate with Centrelink.  Ms Lancaster appeared and gave evidence by telephone.

3.      Ms Lancaster suffered a work related injury on 11 September 2000.  From 18 September 2000 to 5 November 2004 she received workers compensation weekly payments.  On 25 October 2004 she settled her compensation claim for a lump sum of $400,000 inclusive of legal costs.  At the time she was advised by her legal representatives that a social security preclusion period would apply to $200,000 of the lump sum so likely precluding her from social security entitlements from 27 October 2004 to 24 August 2010.  By letter of 7 September 2006 Centrelink rejected Ms Lancaster’s claim for parenting payment upon reconsideration and by letter of 27 October 2006 gave notice that a preclusion period of 6 November 2004 to 3 September 2010 would apply.

4.      It was not in dispute that the lump sum compensation was compensation as defined by s 17(2) of the Social Security Act 1991 (the Act) and 50 percent or $200,000 was the compensation part of the lump sum under s 17(3).  The original decision relating to the preclusion period was correctly calculated under s 1170 of the Act.   The dispute relates solely to the application of s 1184K which provides:

For the purpose of this Part, the Secretary may treat the whole or part of the 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.

5.      Ms Lancaster said that she received $320,000 of the lump sum compensation settlement after deduction of $80,000 in legal costs.  At the time her husband was not working but had been employed in 2004 and was expected to obtain a job to support the family.  This did not happen, and as a drug user he was admitted to a psychiatric hospital twice in 2006.  She separated from her husband in June 2006.

6.      Ms Lancaster had given birth to a son, Alexander, on 10 February 2003.  He has been diagnosed with severe autism and requires a wheelchair outside the house.  Ms Lancaster said that the son is destructive and she has had to put child proof locks on every cupboard and external door.  He requires full time care.

7.      In a statement provided to Centrelink in August 2006 Ms Lancaster listed details of $246,024 expenditure out of the compensation lump sum.  In summary these were:

Purchase of house, costs and stamp duty	$ 192,075
Modifications to house	$   10,500
Purchase of furniture and appliances	$   12,507
Repayment of joint loan	$     7,431
Payment on credit cards and personal loan	$   22,105
Husbands’ medical costs	$       600
Taxi for one year	$       806
$ 246,024

At the time she said that she fully owned the home and a car and had $34,353 in bank accounts.  At the SSAT hearing, Ms Lancaster said that she was unable to provide details of the total expenditure but, by January 2007, she had no remaining funds.  Much was spent on living expenses with her only income being from carer allowance, family tax benefits and $3 per week child support from her husband.  Funds were also expended on legal costs resisting a claim by her husband for part of the house or $15,000 and the car.

8.      Ms Lancaster said that the problem with her son makes it impossible for her to rent premises and impossible to rent out any part of the house.  In addition her own incapacities with neck, arm, shoulder and leg nerve damage make it essential to have a modified bathroom.

9.      Section 1184K requires the Tribunal to consider whether the circumstances of the case are special.  It is generally accepted that the circumstances must be unusual, uncommon or exceptional.  While financial hardship may be relevant it is necessary to determine whether such hardship’s has arisen in unusual, uncommon or exceptional circumstances.  It is clear that the intention of the legislation is to prevent people from receiving benefits from the social security system where they have received a lump sum capital amount as compensation for incapacity.  In cases such as Re Secretary, Department of Social Security and Winterbotham (1990) AATA 6499, the Tribunal has not considered the purchase of a house property as a special circumstance where the person could support himself by selling the house in the same way as realising any other investment or supporting himself by renting out part of the house.

10.     Here I am satisfied that the circumstances of Ms Lancaster’s are special.  She has the unusual or exceptional circumstances of personal incapacity requiring accommodation with modifications, a severely autistic child with consequent unusual difficulties of neither being able to rent a house nor provide rental accommodation to others in her house and the failure of a husband to provide financial or other aid.  As said, I am satisfied that part of the compensation payment should be treated as not having been made pursuant to s 1184K of the Act.

11.     The SSAT considered it reasonable to disregard $300,000 of the $400,000 received without specifying in any detail the calculation of such amount.  In my view, the amount to be disregarded should be calculated by relating it to the special circumstances found.  Here, the provision of a house in which Ms Lancaster could live with her son is directly related to those circumstances.  As such the amount of $202,575 being the cost of the house and the modifications should be disregarded.  The cost of furniture and appliances of $12,507 should be included, also, as they do not appear excessive to enable Ms Lancaster to care for herself and son.  The question of the legal costs of $80,000 deducted from the settlement sum needs to be considered.  In normal circumstances the reduction for the reasonable legal costs from a lump sum settlement cannot be regarded as a special circumstance.  In this case, it would appear that the legal costs were high being some 20 percent of the lump sum.  Given my finding of special circumstance in general in this matter and the amount of costs, I am of the view that 50 percent of such costs should be included in the part of the compensation payment to be disregarded.  As a consequence of the foregoing, I find that the amount of $255,082 should be treated as not having been made pursuant to s 1184K.  The payment of debt, credit cards, transport, medical expenses and other unidentified living expenses cannot be regarded as special circumstances.

12.     It should be noted that the applicant submitted that the receipt by Ms Lancaster of carer payment allowance in respect of her son, Alexander, removed his special needs from being special circumstances.  It is sufficient to note that such allowances may assist in the day to day expenses associated with his disability but play no part in providing the living environment for such a special needs child.

13.     The decision under review should be varied to the extent of reducing the amount of the compensation payment to be treated as not having been made from $300,000 to $255,082 and the matter should be remitted to the applicant for recalculation of the preclusion period in accordance with this decision.

I certify that the 13 preceding paragraphs are a true copy of the reasons for the decision herein of Bruce Pascoe, Senior Member

Signed: (sgd) Lauren Spragg
  Associate

Date of Hearing  21 August 2007
Date of Decision  17 October 2007
Advocate for the Applicant          Andrew Carson
Advocate for the Respondent       Self-represented