Marchant and Secretary, Department of Social Services (Social services second review)

[2021] AATA 3568

Marchant and Secretary, Department of Social Services (Social services second review) [2021] AATA 3568 (7 October 2021)

Division:GENERAL DIVISION

File Number(s):      2021/2426

Re:Anthony Marchant

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Dr L Bygrave, Member

Date:7 October 2021

Place:Sydney

The decision under review is affirmed.

............................[SGD]....................................

Dr L Bygrave, Member

CATCHWORDS

SOCIAL SECURITY – age pension – lump sum compensation settlement – preclusion period – whether compensation preclusion period was correctly calculated – whether special circumstances exist – substantial and regular expenditure – gambling – decision under review affirmed

LEGISLATION

Social Security Act 1991 (Cth) pt 3.14, ss 17, 1170, 1184K

CASES

Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541

SECONDARY MATERIALS

Social Security Guide, Department of Social Services, Version 1.286 released on 27 September 2021

REASONS FOR DECISION

Dr L Bygrave, Member

7 October 2021

INTRODUCTION

1. The applicant, Mr Anthony Marchant, lodged a claim for age pension on 13 July 2020. Services Australia[1] rejected Mr Marchant’s claim, both initially and on review, because he is subject to a compensation preclusion period from 2 February 1997 to 9 June 2046.

   [1] On 26 May 2019, the Prime Minister announced the establishment of Services Australia and, on 1 February 2020, it became an executive agency in the Social Services portfolio.

2. Mr Marchant subsequently sought review at the Social Services and Child Support Division (SSCSD) of the Administrative Appeals Tribunal (the Tribunal) and, on 18 March 2021, the SSCSD affirmed the decision of Services Australia.

3. On 20 April 2021, Mr Marchant applied to the General Division of the Tribunal for review.

4. The matter was heard in Sydney by videoconference on 28 September 2021. Mr Marchant did not attend the hearing; however, he was represented his daughter, Ms Jodie Powell, who also gave oral evidence to the Tribunal.

   ISSUES

5. The issues for determination by the Tribunal are:

   ·whether Mr Marchant is subject to a compensation preclusion period and, if so, whether the period has been correctly calculated by Services Australia; and

   ·whether there are grounds to treat all or part of the compensation payment as not having been made because it is appropriate to do so in the special circumstances of the case.

   CONSIDERATION

   Issue 1: Is Mr Marchant subject to a compensation preclusion period and, if so, what is the length of this period?

6. Part 3.14 of the Social Security Act 1991 (Cth) (the Act) stipulates that a person who receives a lump sum compensation payment for personal injury will be subject to a preclusion period if the settlement amount includes a component in respect of economic loss. The rationale for these provisions is set out in the Social Security Guide (the Guide) as follows:

   The compensation provisions… [in] Part 3.14 [of the Act] reflect the principle that if a person has been compensated for loss of income, they should use that money to live off rather than receive a taxpayer-funded payment. Lump sum compensation payments are treated on the basis that people who cannot work because of a compensable injury should NOT receive income support for the same period from both the:

   -    social security system, AND

   -    compensation systems.[2] [emphasis in original]

   [2] Social Security Guide released 27 September 2021, part 4.13.2.60.

7. Compensation is defined in section 17 of the Act: the list of compensation affected payments at subsection 17(1) relevantly includes an age pension. Subsection 17(2) of the Act states that compensation includes any compensation or damages payment that is ‘made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury’, and subsection 17(3) provides the ‘compensation part of a lump sum compensation payment’ is 50% of the payment.

8. The length of the compensation preclusion period is calculated in accordance with section 1170 of the Act, which identifies the start date and end date of the preclusion period. The total preclusion period is derived according to subsections 1170(4) and (5), which provide:

   (4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:

   compensation part of lump sum
   ___________________________

   income cut-out amount
   
   

   (5)  If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.

9. The undisputed evidence before the Tribunal is that Mr Marchant sustained an injury on 1 May 1995 and made a claim for compensation on the basis that he was ‘disabled due to depression’.[3] He received income protection payments in the period from 2 June 1995 to 1 February 1997 and, on 25 August 2000, he settled his claim and received a lump sum compensation payment of $2,800,000.

   [3] Exhibit T-T10, page 77.

10. In accordance with the provisions in Part 3.14 of the Act, I am satisfied that the economic loss component of Mr Marchant’s lump sum compensation payment was $1,400,000. A record of the ‘compensation management summary’ shows the income cut-out amount was $543.63 and, pursuant to section 1170 of the Act, Mr Marchant’s compensation preclusion period commenced on 2 February 1997, the date after his periodic payments ceased, and ends on 9 June 2046.[4]

    [4] Exhibit T-T21, pages 265-266.

11. On 19 October 2000, Centrelink sent Mr Marchant a letter that stated:

    When a person receives a lump sum payment of compensation, part of the payment is considered to be for lost earnings or lost capacity to earn. This amount is then used to calculate a period of time when a person will not be eligible to receive social security payments… This period of time is called the preclusion period.

    I have been advised that you are entitled to a lump sum compensation payment of $2,800,000.00. In case you need to apply for social security payments in the future, I have calculated that the preclusion period start date is 2 February 1997 and the end date is 9 June 2046…[5]

    [5] Exhibit ST-ST1, page 278.

12. Based on the evidence, I am satisfied that Mr Marchant:

    ·is subject to a compensation preclusion period from 2 February 1997 to 9 June 2046; and

    ·was notified in writing that he would not be eligible to receive social security payments during this preclusion period.

    Issue 2: Are there grounds to treat all or part of the compensation payment as not having been made because it is appropriate to do so in the special circumstances of the case?

13. Section 1184K of the Act provides that the ‘whole or part of a compensation payment’ may be treated as not having been made if ‘it is appropriate to do so in the special circumstances of the case’. The practical effect of this discretion is to reduce the length of the compensation preclusion period.

14. Although the term ‘special circumstances’ is not defined in the Act, decisions made by the Federal Court and the Tribunal provide guidance. For example, the Federal Court in Groth v Secretary Department of Social Security set out that special circumstances distinguish a person’s case from others to ‘take it out of the usual or ordinary case’, noting it would ‘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’.[6]

    [6] [1995] FCA 1708 [12].

15. Factors to consider when determining special circumstances provisions are also listed in the Guide and, relevant to this matter, include a person’s ill health, emotional state, financial circumstances, addictions and changed circumstances. The Guide outlines the following principles apply in relation to these factors:

    ·Ill health: state of ill health should be more severe than the majority of disability support pension recipients.

    ·Emotional state: whether stress or some other personal circumstance has influenced the person’s emotional state to the point that it has become a significant factor in their behaviour.

    ·Financial circumstances: whether the person deliberately deprived themselves of their means of support or recklessly or inappropriately spent their lump sum. Financial circumstances need to be severe and worse than the majority of social security recipients.

    ·Addictions: whether there is evidence that the person’s behaviour was the result of an addiction or mental health condition outside their control. If the case involves gambling, whether the person controls their gambling. Whether the person has sought any help regarding their addiction.

    ·Changed circumstances: whether the person’s circumstances altered ‘significantly’ since the preclusion period started due to circumstances outside their control.[7]

    [7] Social Security Guide released 27 September 2021, part 4.13.4.20.

16. As Mr Marchant did not appear at the hearing, there is no information before the Tribunal about the payment amount that he received after he settled his compensation claim on 25 August 2000 and his legal and other costs were deducted.

17. The oral evidence of Ms Powell was that Mr Marchant was a successful financial advisor prior to his injury and he continued to manage his finances after receiving his compensation payment. Ms Powell confirmed to the Tribunal that Mr Marchant and his wife continued to live a ‘comfortable’ lifestyle and – as at 20 September 2013 – they owned an apartment, two cars and held $632,000 in their superannuation funds.

18. Ms Powell said the circumstances of her family changed after her 17-year-old son died in a motor vehicle accident in 2013; she and her siblings believe that Mr Marchant subsequently suffered depression that led to a gambling addiction. In 2018, Mr Marchant’s children became aware that Mr Marchant had spent all his and his wife’s savings and was accruing credit cards debt. His children paid off Mr Marchant’s credit cards (adding about $130,000 to their own mortgages and loans), put their parent’s apartment on the market, and assumed their parent’s expenses in relation to their mortgage, bills, living expenses and levies. Unbeknownst to his wife and children, Mr Marchant accessed additional credit cards and accrued further gambling debts that totalled about $50,000.

19. Mr Marchant continues to hold a joint bank account with his wife. Mr Marchant’s wife is in receipt of the age pension at the partnered rate and bank statements from this joint account in March and April 2020 show substantial and regular expenditure at Coles and Liquorland.[8] Ms Powell told the Tribunal she believes her father was purchasing some grocery items and then withdrawing cash for gambling. However, she contended her father no longer gambles.

    [8] See Exhibit T-T14, pages 129-135.

20. At the hearing, Ms Powell said that her parents put their apartment on the market in 2018 for $1,100,00 to $1,200,000 with the aim to pay their debts and reduce their levies for repairs following storm damage to the building in 2015. Unfortunately, however, Mr and Mrs Marchant had difficulty selling the apartment due to adverse publicity regarding the building damage. Ms Powell provided property valuations that showed her parents’ apartment was independently valued at $600,000 on 29 August 2019 and $650,000 on 6 November 2020, and she told the Tribunal the apartment next door sold in 2020 for $640,000. Mr Marchant’s son-in-law was eventually able to obtain a loan and purchased the apartment for $600,000 in April 2021. Disbursements from the sale of the apartment show funds from the sale paid the outstanding mortgage on the apartment, legal fees and debts to Mr Marchant’s children.

21. Ms Powell told the Tribunal that her parents continue to live in the apartment rent-free but this is not financially sustainable for her and her siblings in the long-term. Ms Powell and her siblings pay their parent’s private health insurance, medical bills, Foxtel subscription, some clothing/travel expenses, and Ms Powell pays Mr Marchant’s ‘buy-in’ for social poker.

22. In relation to other circumstances, Ms Powell said that her parents have health concerns. Her father had a stroke in 2018 and has now been diagnosed with diabetes, and her mother has had treatment for cancer, kidney stones and a heart condition. I accept this evidence although note there is no medical evidence before the Tribunal.

23. I am satisfied that Mr Marchant current circumstances show he has deprived himself of the benefit of his compensation payment. Mr Marchant currently owns no assets, and he is financially reliant on his wife’s age pension and assistance from his three children.

24. In considering the factors listed in the Guide and summarised in paragraph 15 above, I find:

    ·There is no medical evidence to show the current state of Mr Marchant’s health is severe or worse than the majority of disability support pension recipients.

    ·While Ms Powell’s emotional evidence to the Tribunal shows the death of her son in 2013 has been traumatic for Mr Marchant and their family, there is no expert or objective evidence that these circumstances led to Mr Marchant being diagnosed with depression or prompted Mr Marchant to gamble. In the absence of any objective evidence, I cannot make a finding about whether or the extent to which these personal circumstances have affected Mr Marchant’s emotional state.

    ·Mr Marchant is in difficult financial circumstances; he has no savings and no realisable assets apart from his car and household items. The expenditure of over $600,000 between 2013 and 2017 suggests Mr Marchant inappropriately spent part of his compensation payment, although I note there is no detailed information from Mr Marchant regarding how he has expended this money. Nonetheless, I am not satisfied that Mr Marchant’s current financial circumstances are worse than the majority of social security recipients. This is because he resides rent-free in stable accommodation, continues to have access to his wife’s age pension paid at the partnered rate payment and receives financial assistance from his children to pay for items including private health insurance, Foxtel and social poker.

    ·The evidence of Mr Marchant’s children is that his expenditure post-2013 was the result of a gambling addiction. While I understand that Ms Powell now has power of attorney/enduring guardian for Mr Marchant, there is no evidence before the Tribunal that Mr Marchant has either acknowledged he has a gambling addiction or has sought treatment for gambling or has accessed financial counselling. It appears that he continued gambling (accruing further debts of $50,000) even after his children assumed his debts and control of his finances.

    ·It is clear from the evidence that Mr Marchant’s circumstances have changed since his preclusion period commenced in 1997. Although the length of his preclusion period is significant, I note that this is due to the amount of his settlement payment that he received in 2000. Mr Marchant was advised by Centrelink in 2000 that he would not be eligible for social security payments until 2046; nonetheless, he continued to enjoy a ‘comfortable lifestyle’ and gambled substantial sums of money. I accept that, to some extent, Mr Marchant’s circumstances have been affected by the unexpected death of his grandson in 2013 and the reduced value of his apartment due to building damage, and both of these events were outside of his control.

25. Weighing all of these factors and the current situation of Mr Marchant, I do not find that his circumstances are ‘out of the usual or ordinary case’. He has accommodation and access to his wife’s age pension. While Mr Marchant may have irresponsibly expended his compensation payment on gambling, there is no objective evidence before the Tribunal that he has accessed treatment for addiction or demonstrated a change in behaviour.

26. For these reasons, I am not satisfied that special circumstances exist within the meaning of section 1184K of the Act that justify waiving the compensation preclusion period applied to Mr Marchant from 2 February 1997 to 9 June 2046.

    DECISION

27. The decision under review is affirmed.

I certify that the preceding 27 (twenty - seven) paragraphs are a true copy of the reasons for the decision herein of Dr L Bygrave, Member

..................................[SGD]..................................

Associate

Dated:  7 October 2021

Date(s) of hearing:	28 September 2021
Advocate for the Applicant:	Ms Jodie Powell
Solicitors for the Respondent:	Ms Lauren Boyd, Hunt & Hunt Lawyers