LUCAS and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2010] AATA 914
•17 November 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 914
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2010/2534
GENERAL ADMINISTRATIVE DIVISION ) Re ALEXANDER LUCAS Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Dr P McDermott, RFD, Senior Member Date17 November 2010
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
.................[Sgd].............................
Senior Member
CATCHWORDS
SOCIAL SECURITY – Disability support pension – Application of compensation lump sum preclusion period – Imposition of preclusion period appropriate – No special circumstances exist that would justify disregarding the application of the preclusion period – Decision under review affirmed.
Social Security Act 1991 (Cth) ss 17, 1170, 1171, 1169, 1184, 1184A, 1184K
Workers’ Compensation and Rehabilitation Act 2003 (Qld)
Department of Social Security v Banks (1990) 23 FCR 416
Department of Social Security v Cunneen (1997) 78 FCR 576
Department of Social Security v Hulls (1991) 22 ALD 570
Department of Social Security v Smith (1991) 30 FCR 56
Najdovska and Secretary, Department of Social Security (1998) 54 ALD 184
Re Beadle and Director-General of Social Security (1984) 6 ALD 1.
Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Re Secretary, Department of Education, Employment and Workplace Relations and Morrison (2008) 105 ALD 635
Re Department of Social Security and Winterbotham [1990] AATA 808
REASONS FOR DECISION
17 November 2010 Dr P McDermott, RFD, Senior Member INTRODUCTION
1. Centrelink have made a decision to cancel the payment of disability support pension (“DSP”) to Mr Alexander Lucas (the applicant) and impose a compensation lump sum preclusion period. I have to determine whether it was appropriate to impose such a preclusion period, and, if so, whether there are any special circumstances which allow all or part of that preclusion period to be disregarded.
BACKGROUND
2. On or about 29 July 2008, the applicant was injured in the course of his employment. From 30 July 2008 up to and including 14 August 2009, he received periodic compensation payments from WorkCover Queensland. The applicant served notices of claim under the Workers’ Compensation and Rehabilitation Act 2003 (Qld) (“the Queensland Act”).
3. On 17 August 2009, the applicant was granted DSP. Centrelink have assessed the applicant as being medically and residentially qualified for the payment of DSP.[1]
[1] Exhibit A, T17/ 73.
4. On 20 August 2009, a letter was sent to the applicant advising him that if he received any weekly or lump sum compensation payments, some or all of his Centrelink payments may have to be repaid. He was also advised that any compensation that he receives may prevent him from receiving Centrelink payments in the future.
5. On 30 November 2009, WorkCover Queensland reported that the applicant had received a total of $52,782.23 in weekly payments. A copy of that report was received by Centrelink on 4 December 2009.
6. On 4 December 2009, a letter was sent to the applicant's solicitors that provided an estimate of a charge debt and preclusion period on an estimated settlement amount of $226,027.26. On that date, a letter was sent to the applicant to advise him of the effect of compensation payments on his Centrelink payment including any future entitlement.
7. On 12 February 2010, Centrelink was advised by WorkCover Queensland that the claim of the applicant was settled for an amount of $228,079.21 gross. A copy of the deed of Release and Discharge (“the deed”) was provided which was signed by the applicant on 8 February 2010.
PRIOR DECISIONS
8. On 9 March 2010, a letter was sent to the applicant to advise him that a decision had been made to cancel his DSP. On that date, a letter was sent to the applicant to advise him that a preclusion period applied from 15 August 2009 to 18 November 2011 and that a charge debt in the amount of $5,650.43 was to be recovered.
9. On 7 April 2010, a “Letter of Acknowledgement” was sent to the applicant for him to sign. In that letter, the applicant was advised to sign the letter if he understood the following:
· Centrelink can make relevant enquiries to ensure that he received the correct entitlement.
· His lump sum compensation payment of $228,079.21 affected his entitlement to income support and that a preclusion period applies commencing on 15 August 2009 and finishing on 18 November 2011.
· That he will not be eligible to receive income support payments during his preclusion period.
10. On 15 April 2010, Centrelink received that 'Letter of Acknowledgement' which was signed by the applicant on 13 April 2010.
11. On 15 April 2010, the applicant requested a review of the decision which was then referred to an authorised review officer (“ARO”). On 16 April 2010, the applicant discussed his case with the ARO. A file note of the conversation is as follows:
rang and spoke to with customer (8:00am). Customer advised that he is appealing the cancellation of his DSP as he is [sic] financial hardship, or at least he will be. Customer said that he received approximately $82K in the hand from the settlement of his claim and he has approximately $25K left. Customer said this will not last until November 2011. Customer said that he has paid off all his debts with the settlement money. Customer gave the following details of the major repayments he has made:
GE Money:
$10,905 (repay loan used for fixing and maintenance on truck)
AVCO:
$3,165 (repay loan for furniture)
HSBC:
$3,542 (repay loan for maintenance on truck)
Personal friend:
$6,000 (repay loan for general living expenses)
Citibank:
$4,700 (as above)
GE Credit Line:
$5,000 (as above)
NAB (Wife’s name)
$9,000 (as above)
ANZ Home loan
$18,500 (12 mths mortgage repayments)
12. On 27 April 2010, the ARO affirmed the decision.
13. On 4 May 2010, the applicant sought a review of the decision by the Social Security Appeals Tribunal (“SSAT”). On 17 May 2010, the SSAT affirmed the decision. The applicant advised the SSAT that at that time he had $21,000 in the bank.
14. On 22 June 2010, the applicant lodged an application for review of the decision by this Tribunal.
ISSUES
15. I have to determine whether a compensation lump sum preclusion period applies in respect of the applicant’s entitlement to DSP; and, if so, whether there are special circumstances that allow all or part of the applicant's compensation lump sum payment to be disregarded.
LEGISLATION
16. The relevant legislation that I have to administer is contained in the Social Security Act 1991 (Cth) (“the Act”).
CONSIDERATION
17. In Re Fuller and Secretary, Department of Family and Community Services,[2] the President of this Tribunal outlined what matters have to be considered in a case such as this in order to calculate the preclusion period. At [6] Downes J posed the following questions:
i.Has the applicant received or claimed a compensation-affected payment (s1168(1)(a))?
ii.Has the applicant received a lump sum compensation payment (s 1169(1)(b))?
iii.Alternatively to (ii), is the applicant deemed to have received one lump sum compensation payment (s 1171(1))?
iv.If yes to (i) and either (ii) or (iii), what is the compensation part of the lump sum compensation payment (s 17(3))?
v.What preclusion period is derived from applying the sum representing the lump sum compensation payment to the formula prescribed in s 1170?
[2] (2004) 83 ALD 152 at 155 [6].
18. In these reasons I will outline my consideration of these matters.
19. The threshold issue to consider is whether the applicant has received or claimed a compensation-affected payment. This is certainly the case as s 17(1) of the Act defines a 'compensation affected payment' to include DSP.
20. The next issue to consider is whether the applicant is deemed to have received one lump sum payment under s 1171(1) of the Act. This subsection provides as follows:
If:
(a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments); and
(b) at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act and the Administration Act:
(c)the person is taken to have received one lump sum compensation payment (the single payment) of an amount equal to the sum of the multiple payments;
(d) the single payment is taken to have been received by the person:
(i)on the day on which he or she received the last of the multiple payments; or
(ii)if the multiple payments were all received on the same day, on that day.
21. The deed that was signed by the applicant acknowledged that WorkCover Queensland provided statutory benefits to him of $78,079.21 (clause 3(a)).[3] Some $25,986.98 is left from that sum after the deduction, under s 17(4) of the Act, of periodic compensation payments of $52,092.33. That sum of $25,986.98 is also “compensation” as defined in s 17(2)(b) of the Act which applies to payments under a scheme of insurance or compensation under the Queensland Act. This sum of $25,986.98 is deemed to be part of the lump sum compensation payment that to the applicant is taken to have received it because of the operation of s 1171(1) of the Act.
[3] Exhibit A, T9/30.
22. The expression “lump sum” is not defined in the Act. However, there are decisions of the Federal Court of Australia on the meaning of “lump sum”: see Department of Social Security v Banks[4]; Department of Social Security v Hulls[5] and Department of Social Security v Cunneen[6]. Those decisions give a purposive construction to prevent double dipping. In Department of Social Security v Banks[7] Von Doussa J remarked:
The expression, “lump sum payment … made … in settlement of a claim” in s 152(2)(c)(i) of the Social Security Act was apt to describe the total amount payable as the monetary consideration passing from the party on whose behalf the payment was to be made to the recipient in exchange for a release from a claim for compensation.
[4] (1990) 23 FCR 416.
[5] (1991) 22 ALD 570.
[6] (1997) 78 FCR 576.
[7] (1990) 23 FCR 416 at 423.
Although that decision relates to a statutory predecessor to the provisions which I have to administer, the present legislation is not distinguishable in any sense.
23. It should be mentioned that s 17(2) of the Act provides that “compensation” is “a payment … in settlement of a claim for damages … that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”. I am satisfied, having regard to the deed signed by the applicant, that the deed covers a claim for lost earnings or lost capacity. This is because the deed provides for the release and discharge of the employer from any liability arising out of the claims. Such a liability would include a claim in respect of lost earnings or lost capacity to earn. In these circumstances, by virtue of s 17(2) of the Act, the whole of the payment is deemed to be “compensation”.
24. This application certainly differs from the application that was determined in Re Secretary, Department of Education, Employment and Workplace Relations and Morrison[8] where the payments in question did not relate to the settlement sum.
[8] (2008) 105 ALD 635.
25. Third, it is necessary to calculate the “lump sum compensation payment” which is referred to as “the single payment” in s 1171(1) of the Act. As I understand the case of the applicant, he has taken issue with the calculation of the “lump sum compensation payment”. In particular, the applicant has pointed to the settlement sum under the deed of settlement as $150,000 and not $228,079.21 as the lump sum compensation payment calculated by Centrelink and the SSAT. However, what is material in such a case in applying s 1171 of the Act is not what settlement sum is mentioned in a deed, but the actual payments that have been made to the applicant.
26. It is important to mention that on 12 February 2010, WorkCover Queensland advised Centrelink as follows: “This claim for injury/ies has now settled for $228,079.21 gross”.[9] The deed signed by the applicant provided that the sum of $150,000 was to be paid to the applicant (clause 1); and WorkCover acknowledged that it was not entitled to a refund of statutory benefits totalling $78,079.21 (clause 3(a)).[10]
[9] Exhibit A, T9/29.
[10] Exhibit A, T9/30.
27. The amount of $78,079.21 that is referred to in clause 3(a) of the deed includes the sum of $52,092.33 which is the amount of periodic compensation payments that were paid prior to the applicant receiving any social security payments.
28. In calculating the “lump sum compensation payment” (as 17(3) of the Act is expressed to be subject to s 17(4) of the Act), the periodic compensation payments of $52,092.33 are to be deducted from the $228,079.21 gross settlement amount. On my calculations, I find that the “lump sum compensation payment” is $175,986.98.
29. The next matter to determine is the “compensation part of a lump sum payment”. This is assessed as 50 per cent of that “lump sum compensation payment” which is deemed, under s 17(3) of the Act, to be the economic loss component which is referred to as the “compensation part of a lump sum payment”. I find that this “compensation part of a lump sum payment” therefore amounts to $87,993.49. Ms Forsyth has helpfully provided a document which outlines how this sum is calculated.[11]
[11] Exhibit H.
30. It is the “compensation part of a lump sum payment” which is used under s 1170 of the Act to calculate the lump sum preclusion period.[12] It should also be mentioned that s 1169 of the Act provides that if a person receives a compensation affected payment and they receive a lump sum payment, then the compensation affected payment is not payable to the person in relation to any days in the lump sum preclusion period.
[12] Exhibit A, T3/18-19.
31. The next matter for determination is the calculation of the “lump sum preclusion period”. This is provided for by s 1170(4) of the Act which provides that the number of weeks of a lump sum preclusion period is calculated by using the following formula:
Compensation part of lump sum
Income cut-out amount
32. I have already determined that the compensation part of the lump sum payment is $87,993.49. This sum is divided by the “income cut-out amount” of $742.90, as being the amount determined after application of the formula in s 17(8), which was in force at the time when the compensation was received.[13] This gives a “lump sum preclusion period” of 118 weeks.
[13] Exhibit A, T12/54.
33. In my view, the preclusion period in this case has been correctly calculated. Under s 1170(1), this preclusion period is taken to begin on the day following the last day of the periodic payments period. As the applicant received periodic compensation payment until 14 August 2009, the preclusion period therefore commences on 15 August 2009 and ends on 18 November 2011.
COMPENSATION CHARGE
34. From 17 August 2009 until 25 February 2010, the applicant received DSP. I have already mentioned that DSP is a “compensation affected payment” under s 17(1) of the Act. Under s 1169(1) of the Act, a person is not entitled to receive a ”compensation affected payment” on any day or days in the lump sum preclusion period. The amount of DSP paid to the applicant during the preclusion period is a recoverable amount by virtue of ss 1184 and 1184A of the Act. Centrelink has correctly calculated the amount of the compensation charge in this case - that is $5,650.43, which represents the amount of DSP paid to the applicant from 17 August 2009 until 25 February 2010. This sum was, in my view, properly recovered from the settlement sum.
SPECIAL CIRCUMSTANCES
35. I next have to consider whether the preclusion period can be reduced due to special circumstances. Where there are “special circumstances” in a particular case, s 1184K(1) allows the Secretary to treat part or all of the compensation monies as having not been made, thereby reducing the length of the preclusion period.
36. I have formed the view that the circumstances of the applicant are not such as to invoke the exercise of the discretion to treat the whole or part of the settlement as not having been paid. There is no unfairness or unintended consequence arising from the application of the compensation provisions in this case, and the discretion available under s 1184K of the Act ought not to be exercised. The discretion to treat all or part of the compensation monies as having not been received under s 1184K should be considered in the context of the scope and purpose of the compensation provisions of the Act, and ought not be exercised in a manner calculated to frustrate legislative intention[14].
[14] Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 at [45].
37. While the Act does not define “special circumstances”, it has been generally accepted as being circumstances which are "unusual, uncommon or exceptional" which make the case "markedly different from the usual run of cases".[15]
[15] Re Beadle and Director-General of Social Security (1984) 6 ALD 1.
38. There is a legislative intention in that those who receive a lump sum compensation payment for lost earnings or lost capacity to earn are expected to support themselves from their own available resources for a period before seeking support from the taxpayer. In Re Department of Social Security and Winterbotham [1990] AATA 808, this Tribunal observed:
This particular piece of legislation ... was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse ... Primary responsibility for the payment of such [sic] compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the tax-payer.
39. In Department of Social Security v Smith[16] von Doussa J remarked that the scheme is intended to operate to provide “a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.”
[16] (1991) 30 FCR 56 at 61.
40. The applicant has submitted that he has significant health problems. This has been accepted by Centrelink who have assessed him as being medically qualified for DSP. I also accept that the applicant is truthful in his evidence in stating that those injuries prevent him from earning money.
41. However, I decline to find that the applicant’s injuries for which he received compensation are of themselves a special circumstance which would cause me to exercise the discretion under s 1184K. In Najdovska and Secretary, Department of Social Security,[17] the Tribunal found that Mrs Najdovska's ill health could not be considered to be a special circumstance when it remarked:
... Mrs Najdovska does have health problems which are the reason for her receipt of disability support pension and for her husband's receipt of carer's pension. There is no evidence which would allow me to find that her health problems are special or unusual in the context of people receiving disability support pensions whose spouses also receive carer's pensions…
[17] (1998) 54 ALD 184.
42. The applicant also raises the issue of financial hardship. In considering this issue it becomes necessary to consider the nature of the expenditure of the lump sum. The applicant has been responsible in retiring some debts. I accept the evidence of the applicant that some of the debts related to expenditure in relation to a truck that he used in his employment. He has made repayments on his house mortgage until early 2011.
43. However, one matter of concern is that there is evidence before me that from 26 March 2010 until 13 September 2010 the applicant has made ATM withdrawals which total $7,400: these withdrawals are mainly from sporting clubs, a casino and a TAB agency.[18] This evidence has been compiled from accounts provided by the applicant to Centrelink. During the hearing, I mentioned that on some days there were multiple withdrawals of cash. The applicant stated that he gambled the funds that were withdrawn at the casino. I am reluctant to exercise the discretion under s 1184K of the Act in the face of evidence that there has been considerable withdrawal of funds at sporting clubs.
[18] Exhibit F.
44. In deciding not to exercise the discretion under s 1184K of the Act I am mindful that the applicant is still in possession of some funds and that his wife is in receipt of a regular pension payment. He also receives some funds for boarding.
AGE PENSION
45. As a matter of completeness, I should deal with the contention raised by the applicant that he should now be entitled to receive the age pension. While this is a matter that was not the subject of the decision under review, I should mention that s 17(1)(aa) of the Act defines a “compensation affected payment” to mean “an age pension”.[19] The payment of compensation to the applicant therefore affects his entitlement to receive the age pension.
[19] Exhibit A, T3/131.
ASSISTANCE TO APPLICANT
46. The applicant and his wife have responsibility for raising two grandchildren. I recommend that Centrelink offer to provide the applicant with assistance from a social worker to advise of what support may be available.
DECISION
47. This Tribunal affirms the decision under review.
I certify that the 47 preceding paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott, RFD, Senior Member
Signed: .........................[Sgd]....................................................
Kate Slack, Research AssociateDate/s of Hearing 13 October 2010
Date of final submissions 5 November 2010
Date of Decision 17 November 2010
Applicant was self represented
Solicitor for the Respondent Ms Forsyth, departmental advocate
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