Mazurak and Secretary, Department of Family and Community Services - [2002] AATA 883

DECISION AND REASONS FOR DECISION [2002] AATA 883

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q2002/342

GENERAL ADMINISTRATIVE DIVISION       )
           Re      STAN MAZURAK
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Mr B J McCabe, Member

Date4 October 2002
PlaceBrisbane

Decision The Tribunal affirms the decision under review.

....................(Sgd)..........................
Mr B J McCabe
Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – lump sum compensation payment for workplace injury – whether special circumstances exist to warrant a reduction in the length of the preclusion period

Social Security Act 1991

Beadle v Director General of Social Security (1985) 7 ALD 670
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Haidar v Secretary, Department of Social Security (1998) 28 AAR 288
Director-General of Social Services v Hales (1982) 47 ALR 281
Re Secretary, Department of Social Security and Norman (AAT 13005, 22 June 1998)
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Szoke and Secretary, Department of Family and Community Services [2001] AATA 353

REASONS FOR DECISION

4 October 2002 Mr B J McCabe, Member

Introduction

Mr Stan Mazurak received a lump sum compensation settlement in 1998 following an injury at work. The lump sum included an amount in respect of economic loss, and the preclusion period (the period during which the applicant is ineligible to receive a range of social security payments) was calculated to end on 23 October 2005. Following a review, Centrelink reduced the length of the preclusion period. It is now scheduled to end on 27 January 2005.
The applicant was divorced from his wife and he has run out of money. He is in debt and living with friends. He says he cannot survive until the end of the preclusion period. The respondent identified one portion of the settlement – the amount of a loan made out of the settlement monies to a company that was subsequently placed in receivership – that it was prepared to disregard, but the secretary says the applicant must live with the consequences of his financial choices.
The result in this case depends on the application of the power to provide relief in the event of "special circumstances" in s 1184K of the Social Security Act 1991 ("the Act").
The Material Before the Tribunal
The Tribunal was provided with the documents required under s 37 of the Administrative Appeals Tribunal Act 1975. The "T" documents included the decision of the Social Security Appeals Tribunal ("SSAT"). The Tribunal also heard evidence from the applicant. He was unrepresented at the hearing.
The Facts
The facts in this case are clear enough. Mr Mazurak was a truck driver. He was injured in a fall at work in 1996. He hurt his back. He received workers' compensation benefits until he received a lump sum settlement of $300,000 on 23 October 1998. He has not worked (except for a brief period) since the accident.
The applicant lived in Perth at the time of the accident. He resided there with his wife and their two children. For a time he and his family lived well out of the proceeds of the settlement. They paid out the mortgage on their home ($30,000) purchased a new car ($43,000) and paid off a personal debt ($20,000) to a family member who had been providing financial support while the applicant's earnings were reduced. The applicant purchased furniture for the family home ($25,000) and took his family on a holiday overseas ($10,000) and to the Gold Coast ($10,000). They also spent $40,000 on general living expenses during this period. Mr Mazurak explained he felt comfortable with this level of expenditure as it was agreed his wife would seek work and maintain the family.
Mr and Mrs Mazurak separated in March 2000. He left for the Gold Coast although he travelled back to Perth on a number of occasions before settling on the Gold Coast permanently. The travel cost $20,000. The applicant says his wife hired an aggressive lawyer and he feared most of the property would be dissipated in legal fees. He agreed to settle on the basis that his wife would have the unencumbered house. She also retained the car and all the furniture. It was agreed the children would reside with her. Mr Mazurak departed with the contents of the bank account – which at that stage was some $170,000.
After the settlement, he paid his wife a further $15,000. It is not clear why. He also says he paid amounts to support his teenage children, especially his son. He funded his son's travel to the Gold Coast on at least one occasion (at a cost of $2,000), for example, and he gave his daughter $1,000 towards the cost of a car.
Since the separation, Mr Mazurak has purchased a new car ($43,000). He says he needs a comfortable car – because of his back condition, I gather. He estimates the car would now be worth $32,000, although he says there is no point selling it because he finds it difficult to use public transport and he must attend doctors' appointments. He also made the loan of $30,000 to a company that failed. The rest of the settlement monies have been dissipated in general living expenses.
The applicant lives with friends in rented accommodation in Southport. He pays $150 per week in rent. He says he is living off his credit card. He ran up a credit card debt of approximately $10,000. He cashed in his superannuation and received a payout of $19,764.89 on 15 March 2002. He paid off his credit card debt and lived off the balance. Between March and the date of the hearing he spent all of that money and incurred new credit card debts in the amount of around $8,000. It is unclear where the money went. He says he does not have a social life and does not play any sport. He says he lies down a lot at home.
The respondent has already agreed to disregard the amount of the loan to the company that failed. Those monies were deducted from the settlement figure for the purposes of determining the preclusion period.
Mr Mazurak said he had been on a good wage before his accident and he liked hard work. He now suffers constant pain in his lower back. A spinal fusion procedure performed after the accident has not provided any relief. He says he cannot return to paid work. He left school in the equivalent of Year 10. He is incapable of sitting or standing for long periods, and he cannot do manual labour. He said he has not considered TAFE courses and he has not received vocational or financial counselling. The applicant says he cannot survive until the preclusion period ends in January 2005.
There was no real dispute about the calculation of the preclusion period, although Mr Mazurak expressed strong views about what he perceives as being mean-spirited legislation. He did not dispute he was told of the length of the preclusion period shortly after receiving his settlement. He indicated he had doubts about how seriously the preclusion period would be enforced.
The Relevant Law
The relevant provisions of the Social Security Act 1991 proceed on the assumption that a person is not entitled to receive social security payments designed to compensate for loss of income where that person has also received a lump sum settlement which includes a component for future economic loss. The injured person is expected to live out of their settlement monies for an appropriate period during which they are not eligible to receive a variety of income support payments from the Commonwealth. This period is known as the preclusion period.
Section 1165 provides a formula for calculating the length of the preclusion period. As there was no real dispute about the calculation of the figure in this case, I will not reproduce the details of the legislation here. Suffice to say the preclusion period was determined to be 363 weeks from the date of the accident. On review, the preclusion period was reduced by 36 weeks so that it ends on 27 January 2005.
The decision-maker has the discretion to effectively reduce the length of the preclusion period where he or she is able to identify "special circumstances". I note the SSAT proceeded on the basis that the provision containing the power was s 1184, although Ms Wallis-Dunn for the respondent referred to s 1184K, the successor to s 1184. The sections are identical, so nothing turns on the discrepancy. Section 1184(1) provides:
"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."

The courts have commented on the meaning of the expression "special circumstances" in a number of cases. The Full Federal Court warned in Beadle v Director General of Social Security (1985) 7 ALD 670 at 673-4 against adding a gloss to these general words. In Secretary, Department of Social Security v Smith (1991) 30 FCR 56, the court accepted that relief for special circumstances was intended as a remedy where the application of an arbitrary rule would create injustice (at 61). But Hill J noted in Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 that it was not enough for the applicant to be dealt with harshly. His Honour explained (at 297):
"Section 1184…provides the means whereby the Secretary or, in the event ultimately of an appeal to the Administrative Appeals Tribunal, that Tribunal, could alleviate the harshness of the statutory provision in an appropriate case but only where there were special circumstances." [Emphasis added].

In other words, the section is not designed to provide relief merely because the applicant finds himself in difficulty. Most applicants in receipt of benefits are in that position: see Director-General of Social Services v Hales (1982) 47 ALR 281 at 321 per Sheppard J; see also Re Secretary, Department of Social Security and Norman (AAT 13005, 22 June 1998). The difficulty must be unusual so that the case is distinguishable from the ordinary run of cases: see Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J.
Are there Special Circumstances within the meaning of the Act in this case?
Mr Mazurak says he is broke, having expended the whole amount of his settlement. He says the money he spent after his settlement was not excessive in circumstances where he anticipated his wife would take up the burden of supporting the family. In other words, he said he had a plan for the future when he spent money on luxuries like holidays and furniture and new cars.
The respondent says the applicant was profligate. Ms Wallis-Dunn told the Tribunal the applicant was the author of his own misfortune. She referred to a number of authorities considering the position of an applicant who has "spent it all".
I am satisfied the applicant has not acted with the same degree of recklessness considered by the Tribunal in Re Szoke and Secretary, Department of Family and Community Services [2001] AATA 353. In that case the Tribunal found (at para 29) the recipient of a settlement had "deliberately spent the money without regard to the consequences of her action". The facts of this case are closer to those in Re Secretary, Department of Social Security and Norman. In Norman, the recipient of the settlement did not manage his spending wisely, nor did he take advantage of any counselling or advice that would have enabled him to make better provision for the future. But the Tribunal still declined to shorten the preclusion period. I think Mr Mazurak is in a similar position. He spent roughly half of the settlement monies unwisely. He has gone through the other half at a very rapid rate without adequate explanation.
The applicant says his divorce is a distinguishing factor. He says everything would have been okay if his wife had not left. The respondent says divorce is common enough: a large percentage of marriages fail. On that basis, it was argued, Mr Mazurak's position is no different to that of many other people whose financial position is adversely affected by a family breakdown.
Divorce and family breakdown might justify a finding of special circumstances on occasion. Although relationship failure is common enough, the consequences might be particularly devastating in some cases. But this is not one of those cases. The applicant still had over half of the settlement amount in his bank account when he parted from his wife. He had enough money to see out the preclusion period if he managed his finances carefully, particularly once he was a single man. The separation and divorce may have been costly but they did not produce a sudden and dramatic change in the applicant's fortunes.
The applicant is 38 years of age. I accept he is in pain and that he is prevented from doing manual labour. He says he is not equipped to do any work at all, but I find that hard to believe. He is pessimistic about the chances of anyone offering work to a person who has been in receipt of workers' compensation payments. He has not received vocational counselling or investigated any of the retraining options that might be available. He should do so.
Conclusion
The applicant's circumstances are difficult, but they are not special circumstances in the relevant sense. The decision of the SSAT is therefore affirmed.
I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member
Signed:         Sarah Oliver
  Associate
Date of Hearing  1 October 2002
Date of Decision  4 October 2002
The Applicant Appeared in Person
Solicitor for the Respondent    Ms H Wallis-Dunn, Departmental Advocate