Lazarov and Secretary, Department of Family and Community Services

[2004] AATA 743

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 743

ADMINISTRATIVE APPEALS TRIBUNAL        

GENERAL ADMINISTRATIVE DIVISION            N2004/188      

Re: Stojan LAZAROV

Applicant

And: SECRETARY, DEPARTMENT of FAMILY and COMMUNITY SERVICES

Respondent

DECISION

Tribunal:       P.J. Lindsay, Senior Member

Date:             15 July 2004

Place:            Sydney

Decision:The decision under review is affirmed.

(sgd) P. J. Lindsay, Senior Member

©        Commonwealth of Australia          (2004)

CATCHWORDS

SOCIAL SECURITY – lump sum compensation amount – preclusion period – whether special circumstances – decision under review affirmed.

Social Security Act 1991 ss. 17, 1170(4), 1184K

Secretary, Department of Social Security v Hulls (1991) 22 ALD 570

Secretary to the Department of Family & Community Services v Allan (2001) 33 AAR 424

Re Hadchiti and Secretary, Department of Family and Community Services [1999] AATA 20

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

REASONS FOR DECISION

P.J. Lindsay, Senior Member

1.      On 2 May 2002 a claim for workers compensation by Stojan Lazarov was settled by consent for $320,000 and an additional $55,000 for costs.  Of the total amount, $187,500 was taken to have been for Mr Lazarov’s loss of earnings or loss of earning capacity. Centrelink calculated a lump sum preclusion period from 2 May 2002 to 28 May 2008. At the applicant’s request, Centrelink reviewed the imposition of the preclusion period.  An authorised review officer decided on 24 November 2003 (T19) that the preclusion period had been correctly calculated and that there were no special circumstances that would allow the preclusion period to be shortened.

2.      Mr Lazarov appealed against the imposition of the preclusion period to the Social Security Appeals Tribunal (SSAT).  On 9 December 2003 the SSAT decided that it was not appropriate to exercise the discretion to reduce the preclusion period.  He has now requested the Administrative Appeals Tribunal to review the SSAT’s decision.

3. At the hearing in Newcastle, Mr Lazarov gave evidence with assistance from an interpreter in Macedonian. The Secretary to the Department of Family and Community Services (the respondent) was represented by Mr G Lozynsky from Centrelink. The tribunal had before it the documents lodged pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 (T documents) and the exhibits tendered at the hearing.

ISSUE

4. The only issue for consideration is whether there are special circumstances under s.1184K of the Social Security Act 1991 (the Act) that would allow the whole or part of Mr Lazarov’s lump sum compensation payment to be disregarded and so reduce or eliminate the preclusion period. In relation to the discretion that allows the tribunal to shorten the preclusion period, s.1184K of the Act provides:

1184K(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.

evidence

5.      Mr Lazarov is 62.  He was injured at work on 21 July 2000 and taken to hospital. His doctor considered him unfit to return to work. His evidence was that he received payments from his employer and then from an insurance company right up to the time of settling his claim for compensation for $375,000.

6.      Centrelink wrote to him on 7 June 2002 (T6).  The letter advised that when a lump sum compensation amount is received, part of it is considered to be for lost earnings or lost earning capacity. Based on an entitlement to $375,000, Centrelink informed him that he would not be entitled to most Centrelink payments from 2 May 2002 to 28 May 2008, the preclusion period.  Centrelink wrote to the applicant’s solicitor on 13 June 2002 to inform him that a compensation payment can affect current or future entitlement to social security payments.  The solicitor was given the dates of the preclusion period (T7).  In response to enquiry from the solicitor, Centrelink advised by letter dated 26 July 2002 that the amount payable for costs is included in the compensable amount and thus the calculation of the preclusion period.

7.      Mr Lazarov requested a review of the preclusion period. He completed a questionnaire (T10) and stated that he wanted a review because neither he nor his wife was working and their only income was his wife’s disability support pension.  They are incapable of looking after each other and their medications are costly.  He listed the items he had bought with his settlement monies:

- house (including safety modifications, driveway, flooring,
fencing, painting and water system)  $ 201,500

- furniture (lounge, rugs, blinds, tables and chairs,
bedroom suite, cabinet)  $    8,703

- electrical appliances (TV, refrigerator, microwave,
washing machine, stove)  $     3,179

- gifts to daughters  $   28,000

- cars (including repairs)  $     8,000
  $  249,382

Their fortnightly expenses include: clothing ($200), food and groceries ($300), car ($160), fuel ($70), medication ($45), home and garden maintenance ($60).  Their quarterly expenses are: telephone ($250), water rates ($100) and land rates ($105). Their annual home insurance is $350. Mr Lazarov does not have ongoing medical costs that are unrelated to his accident (T10). 

8. In requesting a review by an authorised review officer, Mr Lazarov noted that he no longer had $100,000 invested and thus he had none of his settlement funds left and had no money to live on. On 24 November 2003 the authorised review officer informed the applicant that she did not consider that his financial hardship was truly exceptional. She noted that he had spent a large portion of the settlement money on a house. The authorised review officer found that the preclusion period was correct and the applicant’s circumstances not being unusual, there was no scope for the operation of s.1184K of the Social Security Act 1991 (the Act) and the decision was confirmed.

9.      Mr Lazarov wrote to the respondent in May 2004 to explain how he spent some of the settlement money:

I purchased an old house to live in, as I didn’t have enough money to buy a new house, as they are very expensive.  The house was purchased for $200,000 leaving me with $100,000.  As the house is very old, it needed some renovations as it wasn’t safe to live in for my wife and myself.  And if (sic) I brought (sic) a newly (sic) house with the fitting and requirements that I needed it would of (sic) cost me a lot more money then what I spent and that was something I didn’t have.  These included: safety ramps all around the house, safety steps, repairs to concrete paths, a safer bathroom so we wouldn’t slip and flooring as my wife has a reaction to carpet.

From this money I also had living expenses for two years including medical consultations, medication, food and house bills. 

I also brought (sic) a second hand old car as our first car blew up cause we didn’t have the money to look after it and keep it on the road.  We needed a car to help with our frequent visits to doctors.  As my wife’s condition is worsening, travelling to the doctors from one bus to another was becoming very difficult. (Exhibit A1)

10.     Dr I Rana, the GP for Mr Lazarov and his family, wrote to Home and Community Care on 30 April 2004 (exhibit A1). Dr Rana noted that Mr Lazarov suffers pain from a severe back injury, has weakness in the left leg and trouble walking. Mr Lazarov told the tribunal that he has recently been issued with a health card that has reduced the cost of his visits to the GP to $5, but not the accounts from specialists.

11.     In his evidence Mr Lazarov explained that the rented property where he and his wife had hitherto lived for eight years was not safe for them because they are unable to negotiate stairs. Mr Lazarov told the tribunal that the purchase of the new house was completed on 21 June 2002. He estimated that he spent $20-30,000 on modifications, improvements and repairs to the house. He bought new furniture and appliances to replace the old items because they were falling apart. It is apparent from receipts he provided, that the hot water system, flooring and furniture purchases were made in the period from June to September 2002 (exhibit A1)   

12.     His younger daughter, who is now in part time employment, lives with them.  Mr Lazarov said he borrowed from a credit union to buy the old car.  From the settlement money he purchased another car for $2,000 and spent approximately $6,000 fixing it up, but it is still unreliable.  He uses it to drive his daughter to work and she pays for the petrol.

13.     Mr Lazarov said he spent some of his settlement money on repaying his daughters for the help and financial support they have given him and his wife. He bought his younger daughter a computer, some clothing and furniture for her bedroom, outlaying in total approximately $8,000.  Similarly, he helped his older daughter by paying for some things she had bought.  In addition, he paid out $8,559 in stamp duty on a property that she purchased.  He thought that, after including this stamp duty, he has paid her roughly $20,000. The applicant’s evidence was confusing here because he said that the $20,000 included repayment of a loan of $18,000 he received from his son in law, for the stamp duty he had to pay on the purchase of his house.  The applicant also wanted to correct a finding made by the SSAT that he gave an additional $20,000 to another person.  He explained that this amount of approximately $20,000 covered additional expenses. 

14.     Mr Lozynsky put it to him that his spending has been reckless, at times withdrawing large sums of money on the same day or successive days.  For example, in the period 28 October 2002 to 8 November 2002, well after the time of purchase of the house and the repairs, Mr Lazarov made withdrawals of $600 and $800 at a time, and in total $7,550.  On some days he withdrew multiple amounts of $500.  Similarly, from 20 February 2003 to 3 March 2003, Mr Lazarov made a total withdrawal of $7,550, again making a withdrawal of $500 more than once on the same day. He could not explain this pattern of expenditure.

15.     Mr Lazarov said he received approximately $32,000 in May 2003, being his superannuation entitlement.  He has spent all of that money.  His current financial position is in deficit.  He still owes the credit union $4,000. He said that he could not repay the loan of $15,000 in full because it would have left him without funds.

16.     The household income includes his wife’s disability support pension.  Although his wife experiences blackouts, has pain in her legs, and she needs to be helped when she leaves the home, Mr Lazarov said she does not require full time care.  Their children do most of the domestic chores.

consideration and findings

17.     The respondent submitted that the amount of $55,000 in respect of legal costs should be treated as part of the compensation sum for the purposes of calculating the period during which a person is not entitled to certain social security payments (Secretary, Department of Social Security v Hulls (1991) 22 ALD 570). I accept that submission. It was not in dispute that the SSAT’s decision correctly found that the lump sum settlement of $375,000 was made wholly or in part in respect of lost earnings or lost capacity to earn resulting from a personal injury and thus was ‘compensation’ as defined in s.17(2) of the Act. Applying the formula in s.1170(4) of the Act, the SSAT found that the preclusion period runs from 2 May 2002 to 28 May 2008. I agree with these findings.

18.     One of the objects of Part 3.14 of the Act ’Compensation recovery’, is to preclude persons who have received compensation for some economic loss (whether lost earnings or lost capacity to earn), from being paid social security benefits in respect of the loss for a period of time. Heerey J in Secretary to the Department of Family & Community Services v Allan (2001) 33 AAR 424 explained that the provisions in Part 3.14 deal with:

… the suspension (preclusion) of social security benefits where recipients have received compensation for loss of earnings by awards under workers compensation legislation or damages at common law.  The basic policy, understandably enough, is that there should not be "double dipping".  People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source. (at 425)

I recognise that I must give effect to this policy unless there are special circumstances to the case. The expression ‘special circumstances’ has been the subject of analysis in a number of Federal Court judgments. Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 (at 545) said of ‘special circumstances’ that “ … it would require something to distinguish [an applicant’s] case from others, to take it out of the usual or ordinary 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.”

19.     Taking a global view of Mr Lazarov’s circumstances, he has no income, has a debt of $4,000 and neither he nor his wife enjoys good health.  Against that, his wife receives the disability support pension, he has a health card, owns his own home free of encumbrance and has a car. 

20.     In cross-examination the applicant was asked why he did not speak with a financial adviser when he received the compensation money. His response was that things happened all at once and he then realised that he would have to spend additional amounts in repairing and modifying the house to make it suitable for his wife’s needs. He did not deny that he had received information from Centrelink explaining the concept of a preclusion period and its implications for his entitlement to social security payments. I find that Mr Lazarov was aware of the preclusion period prior to buying his current residence. Despite that, he went ahead and bought the property for approximately $200,000 including stamp duty and fees.

21.     A difficulty with this case, one that the SSAT also found, is that Mr Lazarov has not provided a clear or consistent explanation of his expenditure. I am prepared to accept that he spent a considerable amount, at least $20,000, in repairing the property and also making it suitable by installing ramps and safety rails. I am satisfied that he spent around $12,000 on furniture and appliances for his new house, $8,000 on a car and repairs, and payments of approximately $36,000 for the benefit of his daughters. How he spent the balance of the settlement, some $44,000 and his superannuation of $32,000, has not been established.  

22.     Mr Lazarov’s is now in a difficult position financially.  However, he owns his home, which has been improved since purchase and presumably its value has increased accordingly.  His wife receives the disability support pension and they are able to call on their daughters for help whether for transport or financially. Their older daughter has given them financial assistance in the past. Mr Lazarov has no dependants and indeed his younger daughter, a 23 year old nurse, lives in the house but does not pay board though she does contribute to the cost of running his car.  It would not be unreasonable for her to make a financial contribution to the household budget. Mr Lozynsky submitted that the decision to outlay funds on the purchase of the house and its consequential impact on the applicant’s finances should not be taken to be special circumstances. It was contended that Mr Lazarov should have decided to remain in rented premises so that he could support himself and his wife throughout the preclusion period.  Mr Lozynsky referred to a tribunal decision where an applicant, prior to being injured, was committed to spending on extensions and renovations to the family home, yet the tribunal found that this did not constitute special circumstances (Re Hadchiti and Secretary, Department of Family and Community Services [1999] AATA 20). I accept the submission. The applicant could have looked into buying a property with what was left of the compensation money in May 2008.

23.     I accept that Mr Lazarov and his wife are not well.  The medical evidence, however, does not support a finding that his and his wife’s health are substantially worse than many other recipients of workers compensation or the disability support pension. Further, I note (exhibit R1) that Mr Lazarov has not been granted carer allowance or carer payment because Centrelink did not consider his wife’s condition and consequent disability were so severe as to qualify him for those benefits.  Mr Lazarov has a health card which ameliorates the costs he incurs in attending doctors and his wife has a pensioner concession card that entitles her to benefits and reductions in the cost of medical treatment. I am not satisfied, therefore, that their health or the expense of obtaining medical treatment constitutes special circumstances.

24.     I have taken into account Mr Lazarov’s personal circumstances, including his finances, his and his wife’s health, and the manner in which he spent his compensation money including the purchase of the house and its modifications. Much of the additional expenditure has not been satisfactorily explained. On the whole of the evidence presented, I am not satisfied his circumstances, though difficult, are “unusual, uncommon or exceptional” (Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3) and therefore are not special circumstances that warrant the exercise of the discretion in s.1184K of the Act.

25.     It follows that the decision under review should be affirmed.

I certify that the preceding 25 paragraphs are a true copy of the decision and reasons for decision herein of P.J. Lindsay, Senior Member:

Signed:         

............................................................................

(Associate)

Hearing  16 June 2004
Decision  15 July 2004
Applicant  In person
Respondent’s representative                     Centrelink