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

[2018] AATA 3963

McGregor and Secretary, Department of Social Services (Social services second review) [2018] AATA 3963 (23 October 2018)

Division:GENERAL DIVISION

File Number(s):      2018/0057

Re:Colleen Elizabeth McGregor

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Bill Stefaniak AM RFD, Senior Member

Date:23 October 2018

Place:Sydney

The decision of the AAT1 dated 5 December 2017 is affirmed.

...........................[sgd].............................................
Bill Stefaniak AM RFD, Senior Member

CATCHWORDS

SOCIAL SECURITY – applicant paid lump sum in relation to worker’s compensation claim - whether lump sum preclusion period applies – whether preclusion period should be reduced – whether special circumstances exist to justify reduction of preclusion period – “special circumstances” defined -  no special circumstances found – decision affirmed.

LEGISLATION

Social Security Act 1991 (Cth) - s 1170

CASES

Beadle v Director – General of Social Security

(1985) 7 ALD 670

Secretary, Department of Family and Community Services and Rankin

(1999) AATA 498

SECONDARY MATERIALS

Guides to Social Policy Law, Social Security Guide, Version 1.248, released 28 August 2018: - parts 4.13.4.10, 4.13.2.60

REASONS FOR DECISION

Bill Stefaniak AM RFD, Senior Member

23 October 2018

BACKGROUND

1. The applicant was injured at work on 13 February 2004 and received periodic compensation payments until 5 April 2016. She received $33,000 on 3 August 2009 and $39,000 on 26 November 2013. Her claim was settled on 8 March 2016 for $450,000 which included a component for economic loss.

2. Whilst the total amount of compensation awarded was $522,000 out of the settlement sum of $450,000 in April 2016, the applicant only received $266,608.84, after deducting legal costs relating to her settlement claim, as well as a Medicare advance payment of $45,000. It was also noted that out of the $45,000 sent to Medicare the applicant would have received a substantial refund, but there was no figure indicating how much she received.

3. Her legal fees, paid out of the $450,000 were $197,896.65 (2 bills of $140,593.80 and $57,302.85 respectively). Using the 50% formula on the total gross compensation payments totalling $522,000, the respondent assessed the preclusion period applicable for the applicant whereby she could not claim any pension or allowance.

4. 50% of $522,000 is $261,000 and at the deemed weekly rate applicable in this case of $948 per week, pursuant to  the preclusion period formula at Section 1170(4) of the Act, this amounted to a period of 275 weeks running from 6 April 2016 (i.e. the day after the last periodic compensation payment) until 13 July 2021.

5. Unfortunately, the money rapidly vanished and the applicant appealed against the preclusion period and applied, unsuccessfully, for a DSP in 2017.

6. At the time of the AAT1 hearing on 5 December 2017, the applicant advised that she had about $4,000 left in her bank account and she owed $29,000 on a personal loan.

7. She told this Tribunal that her situation was desperate.

   WHERE DID THE MONEY GO?

8. The respondent submitted that the lump sum payment received by the applicant in April 2016 was equivalent to over 11 years of DSP at the present maximum rate. (see para 42 of the respondent’s Statement of Facts, Issues and Contentions)

9. This is no doubt true and the formula allows for a stated weekly amount to be nominated (in this case $948 per week) which is  twice the rate of the maximum pension payable plus some allowance for standard extras such as rent allowance, and the electricity supplement plus CPI.

10. It was certainly more than what the applicant actually was earning prior to her accident (around $500 net per week) but given that was over a decade ago it probably amounted to about the same in real terms taking inflation into account.

11. The formula and set weekly rate applicable as at the start of the exclusion period is therefore a reasonably generous amount to ensure the preclusion period is not a crippling factor provided one is fairly careful in one’s spending habits.

12. The applicant did indicate to this Tribunal and to the AAT1 that she spent some of this money on her adult children. She bought a car for her daughter Elizabeth, bought braces and bedroom suites for her grandchildren, gave $12,000 to her brother in repayment of costs relating to their father’s funeral. She gave her ex-partner $6,000 to repair his car.

13. Her daughter Elizabeth Devine also provided a statement to the Tribunal  that said her mother was a very generous, loving and caring person who used some of the money to make up to her children by providing things she was unable to provide them with as they were growing up. She was also ripped off by so-called friends who would use her for money and get her to pay for them when she went out for lunch, or to the club and the like. Being a generous person, the applicant would oblige. 

14. Unfortunately, she also gambled, including online gambling. She indicated she wanted to buy a house with the $266,000 but when she found out it was not enough she tried to make up the difference by gambling with, it seems, disastrous results.

15. Elizabeth said, “So over time, paying for bills, debts, medications, appointments, generosity and gambling, it’s safe to say that money did not last long.”

16. Adding up the list of items and loan repayments made since April 2016 until the money ran out in late 2017,  as indicated by the applicant and her daughter, this Tribunal arrives at  a figure of $86,600 (this includes one year’s cost of medication  which is an ongoing expense of $300 per month). The evidence of Elizabeth and the applicant also indicated gambling loses in excess of $100,000. The Tribunal is confident that the gambling problem was the cause of the majority of the lump sum being spent in a short period of time.

    SPECIAL CIRCUMSTANCES

17. Part 4.13.2.60 of the Guide to Social Security law states that the principle behind the preclusion period rules is that if a person has been compensated for loss of income as a result of an injury, then that person should use that money to live off rather  than  receive a taxpayer funded payment and the intent of the Parliament  was for people who receive compensation for loss of income not to also  receive income support from the Australian taxpayer in respect of the same period of time.

18. Part 4.13.4.10 of the Guide provides an overview of the Application of the Special Circumstances Provisions.

19. Special circumstances are circumstances that must have a particular quality of unusualness that permits them to be described as ‘special’.  This means in situations where the compensation provisions could lead, or have led to extreme hardship or created  an inequitable, unjust or unreasonable situation (see Beadle v Director – General of Social Security (1985) 7 ALD 670).

20. If special circumstances exist then all or part of the preclusion period can be waived.

21. Relevant factors to consider in the applicant’s case are her significant health problems which the Tribunal accepts make it unlikely she will  ever be able to work again (see letter from Dr Nguyen dated 5 March 2018), her very high legal bill ($197,896.65) and her gambling problems

22. This Tribunal finds it reasonable that the applicant appears to have paid off $27,000 worth of credit card bills. This has the effect of ensuring one does not have to pay exorbitant interest. This left a figure of $69,600 for assistance to family members including repaying a funeral loan of $12,000 which again I find to be reasonable.

23. The remaining $56,600 to help family members may be somewhat more problematic  and a prudent person would not have splurged a lot of this sum on the family.

24. It is also unclear how much was spent on friends at the club and at lunches as this was all part of the unaccounted-for expenditure which the Tribunal accepts was mainly money spent on gambling.

25. It is important to note that Dr Nguyen in his 5 March 2018 letter refers to the applicant as having a “gambling problem” and that “She is referred to Psychologist for counselling.” This letter is written after the date of the decisions I am reviewing and I note the applicant is, as at the date of the hearing in late April 2018, yet to do counselling.

26. There was no evidence before the Tribunal of any formal diagnosis or any evidence of gambling-specific treatment. A gambling addiction as a psychological/psychiatric condition can be classified as a special circumstance. There is a clear distinction between gambling by choice and as a result of a psychological compulsion (see Secretary, Department of Family and Community Services and Rankin ([1999] AATA 496).

27. Had there been evidence to that effect, this Tribunal would then be able to class the applicant’s gambling problems as an addiction. Indeed, there is nothing to stop the applicant now getting a proper diagnosis and if she does have an addiction, submitting a new application with a view to reducing the preclusion period and enabling her to qualify for an appropriate pension. In that vein, the applicant and her daughter expressed a real concern that they may be made homeless in the near future and such a dire change of circumstances  may well also qualify her to gain government assistance and a waiver of the rest of the preclusion period as such circumstances would amount to being classed as special.

28. The Tribunal, whilst not having sufficient evidence to comment in an informed way on what appeared to be a very big legal bill/series of bills did note that the applicant was unhappy with her legal assistance and the Tribunal notes  that she might wish to take this further and have a talk to the NSW Law Society and/ or Legal Aid to see if any action can be taken in relation to overly high legal fees and/ or any other issues surrounding the way her case was conducted. This in itself might, in certain circumstances, amount to a special circumstance and accordingly be relevant to a new claim.

29. In the absence of any evidence that would confirm a diagnosis of  a psychological condition in relation to her gambling problem and further evidence to flesh out any legal issues in relation to how her legal advisors handled her claim, including overcharging, this Tribunal is left with the situation of well over 50% of the net lump sum being blown on gambling it would seem by choice, however forlorn and reckless that choice was, and by around $50,000 plus being spent on discretionary items or the family plus on so-called friends taking advantage of her generosity.

30. Such spending, whilst a matter for the applicant, is not condoned by the legislature who intends that a person who gets lump sum compensation claims spend those sums wisely and prudently so the money can last  to cover the exclusion period.

31. The only way a preclusion period can be dispensed with or changed is if circumstances beyond the control of the recipient of the lump sum conspire to cause that lump sum to be expended earlier than would have been the case if those new circumstances had not intervened.

32. A gambling addiction is a case in point, as is a sudden change for the worst in a person’s medical condition, totally separate from that for which the compensation was given in the first place.

33. The applicant’s depression and gambling problems may well have been for reasons of a psychological condition rather than just a bad choice but there is simply insufficient evidence before the Tribunal to back up those claims.

34. Again there is no real evidence to give weight to the applicant’s claim that her legal bills were exorbitant, so as to assist the applicant in her quest to show special circumstances that would assist her current case.

35. Also, whilst using part of such a payment to give one’s family furniture, cars and other items they have missed out on in the past is understandable, it is exactly the sort of expenditure that is not condoned by the case law or indeed by the legislature in making  these laws.

36. The compensation is intended to tide the recipient over until such time as the exclusion period expires and the recipient of the compensation can then apply for further taxpayer assistance.  The whole idea of the preclusion period is to stop double-dipping. 

    DECISION 

37. Accordingly, the decision of the AAT1, in the view of this Tribunal, was the correct decision and will be affirmed.

38. However this Tribunal expresses concern that the applicant, apart from her considerable physical ailments, appears to have some significant mental health issues with depression and a gambling addiction that is likely to be of a psychological nature which not only need diagnosis but treatment as well.

39. An appropriate diagnosis followed by a new application for an appropriate pension/allowance/waiver of the remainder of the preclusion period may well be the way to go and both parties are urged to look at this further, as special circumstances may well then apply.

40. At this point in time however, for the reasons given above, no special circumstances exist under which all or part of the preclusion period should be waived and the decision of the AAT1 dated 5 December 2017 is affirmed.

I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of
Bill Stefaniak AM RFD,
Senior Member

.............................[sgd]...........................................

Associate

Dated: 23 October 2018

Date of hearing:	26 April 2018
Applicant:	By telephone
Solicitors for the Respondent:	Ms C Juarez, Department of Human Services