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

Milovanovic and Secretary, Department of Social Services (Social services second review) [2020] AATA 4166 (16 October 2020)
Division:GENERAL DIVISION
File Numbers: 2019/0116, 2019/0115
Re:Mr Mico Milovanovic
Mrs Dijana Milovanovic
APPLICANTS

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:The Hon. Matthew Groom, Senior Member
Date:16 October 2020
Place:Melbourne

The Tribunal sets aside the decisions under review and remits the matters to the Department to reassess the applicants’ entitlement to DSP and Carers Payment for the relevant period with the direction that $29,099 of the Allianz Compensation Amount be treated as not having been made or not liable to be made.
...[sgd].....................................................................
The Hon. Matthew Groom, Senior Member
Catchwords
SOCIAL SECURITY – compensation recovery provisions – applicants in receipt of compensation affected payments – applicants received compensation payment for arrears of compensation – Centrelink recovered substantial amount from compensation payment – special circumstances – financial situation – health – applicants incurred significant legal costs relative to compensation payment – portion of compensation payment that was used for legal costs not considered to be part of the amount received by the applicants – decisions set aside and remitted
Legislation
Social Security Act 1991 (Cth)
Cases
Beadle and Director-General of Social Security, Re (1984) 6 ALD 1
Ivovic, Re (1981) 2 ALN 95
Ryde v Secretary, Department of Family and Community Services [2005] FCA 866
Secondary Materials
Social Security Guide, September 2020
REASONS FOR DECISION
The Hon. Matthew Groom, Senior Member
16 October 2020
INTRODUCTION

The applications before the Tribunal involve a review of a decision of the Social Services and Child Support Division (AAT1) made on 7 December 2018 to affirm decisions made by an authorised review officer (ARO) of the Department of Human Services (Department) to recover compensation charges of $52,822.40 in respect of Mr Milovanovic and $37,264.93 in respect of Mrs Milovanovic. The applications were considered by the Tribunal concurrently.
BACKGROUND FACTS
Mr and Mrs Milovanovic (the applicants) are married and live together with their four children aged 23, 20, 18 and 17. Mrs Milovanovic is Mr Milovanovic’s full time carer and is also his appointed Guardian and Administrator.
In September 1995 Mr Milovanovic was involved in a workplace injury which resulted in damage to his hand and the amputation of the tip of his right finger. Following the injury Mr Milovanovic underwent an operation and subsequently undertook a graduated returned to work. Following a partial recovery, Mr Milovanovic suffered significant complications due to a recurrent infection. He had a number of further operations in an attempt to address the issue. He ceased work in around 2001.
Based on the medical evidence included in the materials, the Tribunal is satisfied that as a consequence of his hand injury Mr Milovanovic developed a number of debilitating conditions including chronic pain syndrome, severe depression and anxiety and a mood disorder which resulted in the applicant demonstrating aggressive behaviour including sudden outbursts and generally having difficulty in regulating his emotions. Mr Milovanovic was taking both pain medication and also antidepressants in the management of these conditions.
The evidence demonstrates that Mr Milovanovic suffered some balance issues as a consequence of his prescribed antidepressants, particularly after the dosage was increased. In January 2008 he had a fall which resulted in a serious head injury. He lost consciousness and suffered bleeding. He was placed in ICU and intubated for approximately 17 days and underwent further treatment for the injury. He again suffered subsequent infections that required antibiotics.
It is clear from the evidence that as a consequence of his head injury there were further complications to the applicant’s health. Following the head injury Mr Milovanovic experienced severe headaches, anosmia, tinnitus, impaired taste and hearing difficulties.
Mr Milovanovic was subsequently diagnosed with acquired brain injury and has suffered impaired processing speed, verbal and memory function, a compromise of his frontal executive functions including word finding difficulties, impaired reading and spelling.
There was also evidence that Mr Milovanovic’s head injury further exacerbated his previous conditions of depression, anxiety and mood disorder. As a result, episodes of aggression, emotional outbursts and difficulty in regulating his emotions increased.
Mr Milovanovic has also been variously diagnosed with, or demonstrated symptoms of, a number of other conditions including atrial fribullation, post-traumatic stress disorder, post-traumatic epilepsy, hypertension and panic disorder.
Mr Milovanovic has an ongoing requirement for psychiatric/psychological treatment as well as the maintenance of a complex medication regime in the management of his conditions, including various medications for pain management, antidepressants and anti-coagulation medication.
Mr Milovanovic has also more recently been diagnosed with seizures and multiple sclerosis (MS) and is being treated with prednisolone for these conditions. The Tribunal is satisfied that Mr Milovanovic’s MS diagnosis is likely to reduce his life expectancy to some degree.
Mr Milovanovic was awarded workers compensation through WorkSafe Victoria (Allianz) and received periodic payments up until June 2014 when the periodic payments were ceased. Mr Milovanovic commenced legal action against Allianz for the recovery of the periodic payments and, after a three and a half year legal dispute, was successful in having the cessation decision overturned. As a consequence, on 26 July 2017 Mr Milovanovic became entitled to a lump sum amount totalling $139,116.80 in lieu of the unpaid periodic payments (Allianz Compensation Amount) in respect of the period from 30 June 2014 to 3 August 2017 (relevant period) and his ongoing periodic payments were also recommenced.
Following the cessation of his periodic payments in 2014, Mr Milovanovic had successfully applied for a Disability Support Pension (DSP). He commenced receiving DSP in June 2014. Mrs Milovanovic was also in receipt of carers payment (Carers Payment) at that time.
Centrelink then determined that, as a consequence of Mr Milovanovic becoming entitled to the Allianz Compensation Amount, during the course of the relevant period Mr Milovanovic had been overpaid DSP of $52,822.40 and also Mrs Milovanovic had been overpaid Carers Payment of $37,264.93 due to the flow on adjustment of income.
Centrelink then made the decision to seek recovery of a compensation recovery charge of $90,087.33 (being the amounts it calculated had been overpaid to both Mr and Mrs Milovanovic) (Compensation Recovery Charge) direct from Allianz prior to the Allianz Compensation Amount being paid to Mr Milovanovic. Mr Milovanovic received the balance of the Allianz Compensation Amount, although he then had to pay certain costs associated with the legal action.
As a consequence of the compensation payment there were also further adjustments to the applicants’ tax returns for the relevant period requiring a repayment of tax and also Mrs Milovanovic’s entitlement to Family Tax Benefit (FBT) which also required repayment in the amount of $8,450. In the course of the hearing Mrs Milovanovic sought to have the Tribunal review the repayment of both the adjusted tax liability and her FBT repayments. However, those were not matters that were before either the ARO or the AAT1 for determination and are therefore also not reviewable by this Tribunal.
The applicants sought a review of Centrelink’s decisions and on 4 May 2018 the ARO affirmed the decisions.
The applicants sought a further review with the AAT1 and on 17 December 2018 the AAT1 again affirmed the decisions.
The applicants then sought a review of the AAT1 decision which is the matter before this Tribunal.
A hearing in this matter was held on 21 January 2020. The applicants were self-represented although Mrs Milovanovic advocated on behalf of both herself and her husband. The respondent was represented by Mr Tim de Uray, Deputy General Counsel with the Litigation and Information Release Branch of the Department.
Following the hearing the Tribunal issued a direction allowing the applicants to lodge further evidence and submissions in support of their applications as well as for the respondent to make further submissions in reply. On 17 February 2020 the applicants lodged further evidence and submissions with the Tribunal in accordance with the direction. On 5 March 2020 the respondent lodged its further submissions in reply.
RELEVANT LAW
The relevant legislation is the Social Security Act 1991 (Act). The Tribunal has also had regard to the Guide to Social Security in considering this matter.
The Act, and more specifically Part 3.14, includes provisions that allow for the recovery of certain social security benefits where a recipient is also in receipt of compensation payments. The policy intent behind the provisions is to avoid so called “double dipping” whereby a person is in receipt of compensation payments while at the same time being in receipt of social security payments that have been granted without regard to compensation.
Section 17(1) of the Act provides that compensation affected social security payments include DSP and Carers Payment.
Under section 1169 of the Act, where a person receives compensation as a lump sum compensation payment they are precluded from receiving affected social security payments during a preclusion period. However, where the compensation is payable as a lump sum but in fact represents an arrears payment of periodic compensation payments then the compensation is not treated as being a lump sum compensation payment, but rather is treated as being periodic payments.
Under section 1173 of the Act, where the payment is received as a periodic payment (or is treated as being periodic payments) the person’s daily rate of the person’s affected social security payment is reduced by the amount of the person’s daily rate of periodic compensation payment. Under section 1174 of the Act, where there is an excess in the compensation periodic payment over a person’s entitlement to an affected social security payment, and that person is a member of a couple, the excess amount is treated as income of the person’s partner which may in turn reduce the partner’s affected social security entitlement.
Section 1184A provides a formula for determining the recoverable amount in circumstances where compensation payments have been received and a person and their partner is in receipt of affected social security payments.
Section 1184 authorises the Secretary to give a written notice to an insurer seeking recovery of the recoverable amount.
Section 1184K provides the Secretary with the discretion to 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.
ISSUES
The issues before Tribunal are:
(a)whether the recovery of the Compensation Recovery Charge from Allianz was undertaken by Centrelink in accordance with the Act; and
(b)whether there are any special circumstances that would justify some or all of the Allianz Compensation Amount being treated as having not been made or not liable to be made.
CONTENTIONS AND CONSIDERATION
At the hearing Mrs Milovanovic, advocating on behalf of both applicants, confirmed that:
(a)Mr Milovanovic had become entitled to the Allianz Compensation Amount; and
(b)Mr Milovanovic had received DSP and Mrs Milovanovic had received Carers Payment during the relevant period.
The applicants’ submissions have not identified any objective basis for challenging Centrelink’s calculation of the Compensation Recovery Charge nor do they provide any objective basis for challenging Centrelink’s application of the relevant provisions of the Act in seeking to recover that amount from Allianz. The applicants do, of course, continue to claim that the Compensation Recovery Charge should not have been recovered by Centrelink and that they should have received the Allianz Compensation Amount in full.
The applicants maintain an objection to the policy intent of the Act arguing that it was wrong for the Compensation Recovery Charge to have been recovered because it is “their money”. They also put forward various arguments that they claim justify the exercise of the special circumstances discretion to treat the Allianz Compensation Amount as having not been made or liable to be made and that on that basis the Compensation Recovery Charge should be repaid to them.
The Tribunal accepts that the Allianz Compensation Amount was liable to be paid to Mr Milovanovic and that the payment was in respect of periodic payments in arrears and is therefore not to be treated as a lump sum compensation payment for the purpose of Part 3.14 of the Act. The Tribunal is also satisfied that Mr and Mrs Milovanovic were in receipt of DSP and Carers Payment during the relevant period as contended by the respondent. In addition, having considered all of the material before it, including the specific submissions made by the respondent in the course of the hearing, the Tribunal is satisfied that the calculation of the Compensation Recovery Charge was correct and that the steps taken by Centrelink to recover that amount were undertaken in accordance with the Act.
Therefore, the residual question for the Tribunal is whether there are special circumstances which justify the exercise of the discretion set out in section 1184K of the Act to treat some or all of the Allianz Compensation Amount as having not been made or liable to be made.
“Special circumstances” is not defined in the Act but there is considerable case law on the meaning of the term and it is generally accepted as referring to “unusual, uncommon or exceptional” circumstances or circumstances that stand out from the “usual run of cases”.[1] In this context, the Tribunal has been mindful of the need not to overstate the concept of “exceptional’ in applying the test. As stated by Branson J in Ryde v Secretary, Department of Family and Community Services [2005] FCA 866 at [26]:
The statutory requirement for ‘special circumstances’ discloses an intention to proscribe waiver in ordinary cases. The hardship or unfairness … must be understood to be hardship or unfairness sufficient to justify departure from the general rule in the particular case.
[1] See the observations of Toohey J in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3.
The Tribunal accepts the submission by the respondent that in giving consideration to the exercise of the discretion, regard should be had to the scope and purpose of the compensation recovery provisions of the Act so that the discretion not be exercised in a manner that frustrates the legislative intent.[2] As described above, the Tribunal understands that intent to be the avoidance of ‘double dipping”, that is, receiving compensation benefits that have not been factored into social security benefits that are being received at the same time.
[2] Re Ivovic (1981) 2 ALN 95.
The applicants raised a number of considerations which they claim have resulted in unfairness or hardship which is unusual, uncommon or exceptional justifying the exercise of the special circumstances discretion including:
(a)Mr Milovanovic’s poor health and poor future health prospects;
(b)The applicants’ changed circumstances due to more recent micro seizures and Mr Milovanovic’s MS diagnosis which have shortened his life expectancy and increased his medical needs necessary to maintain a reasonable quality of life;
(c)The family’s difficult financial circumstances and the difficulty they are likely to face in meeting Mr Milovanovic’s health needs necessary to ensure a reasonable quality of life;
(d)The challenging circumstances the family is facing more broadly including the ongoing stress and pressure associated with circumstances following Mr Milovanovic’s injury and also health challenges being faced by other members of the family;
(e)The stress and pressure the applicants faced in fighting for three and a half years to secure the Allianz Compensation Amount and the significant flow on costs they have incurred in the process.
Health
As described earlier in these reasons, the Tribunal accepts that Mr Milovanovic suffered significant injuries to his hand and head which have resulted in a number of consequential health conditions. The Tribunal accepts that Mr Milovanovic suffers:
(a)chronic pain syndrome, severe depression and anxiety and a mood disorder which resulted in him having difficulty in regulating his behaviour;
(b)severe headaches, anosmia, tinnitus, impaired taste and hearing difficulties;
(c)acquired brain injury resulting in impaired processing speed, verbal and memory function, a compromise of his frontal executive functions including word finding difficulties, impaired reading and spelling; and
(d)atrial fribullation, post-traumatic stress disorder, post-traumatic epilepsy, hypertension and panic disorder.
In addition, the Tribunal accepts that Mr Milovanovic has more recently been diagnosed with seizures and MS.
The applicants’ submissions have also included reference to the difficult broader circumstances of the family that have caused great pressure and stress for them and continue to do so. In particular, they have referenced the health challenges being faced by other members of the family. Mrs Milovanovic noted that all of her children had witnessed her husband’s head injury and that it had been very traumatic for them and that they have also recently lost their grandmother.
There was evidence that the applicants’ eldest daughter, M, suffers from a number of serious health issues including post-traumatic stress disorder, depression and anxiety, in addition to chronic heart issues and gastrointestinal issues. M has an ongoing need for counselling, has suffered an injury to her rib and eye and has also recently failed a subject at University. According to the applicants’ submissions this was due to stress associated with her health conditions as well as issues associated with a number of outstanding criminal charges and her interactions with police.
There was evidence that the applicants’ second daughter, N was also suffering from anxiety, depression and sleep issues. Again, Mrs Milovanovic claims that N’s health conditions were in part a consequence of witnessing her father’s head injury as well as the family’s broader health issues and interactions with police.
While the Tribunal accepts that Mr Milovanovic’s health condition is serious and complex and that his future health prospects are poor, many people receiving social security benefits also suffer very serious health conditions with poor prospects. Without wishing to diminish in any way the serious nature of Mr Milovanovic’s health issues, when considered in the context of other social security recipients the Tribunal is not satisfied that Mr Milovanovic’s personal health circumstances are, of themselves, so unusual, uncommon or exceptional so as to justify the exercise of the special circumstances discretion. Nor does the Tribunal consider that the family’s broader health concerns or the stress and pressure they have experienced or are likely to experience in the future justify the exercise of the discretion, for the same reasons.
Financial circumstances
There was considerable evidence before the Tribunal in relation to the financial circumstances of the applicants and their family. As noted in the respondent’s further submissions, at the hearing Mrs Milovanovic confirmed the following:
(a)The applicants live in the family home together with their 4 children although 2 of their children make some contribution to household expenses. The eldest daughter is receiving DSP and the eldest son is an apprentice;
(b)The applicants own the family home with an insured value of approximately $570,000 outright with no mortgage;
(c)The applicants own 2 cars;
(d)Mr Milovanovic continues to receive his periodic workers compensation of approximately $800 net per week;
(e)Mrs Milovanovic has a Health Care Card and continues to receive fortnightly payments of:
(i)Carer Allowance of $129.80;
(ii)Carer Payment of $197.75; and
(iii)Family Tax Benefit of $484.
(f)Total out of pocket medical costs come to about $40 per week after taking into account Medicare and Workcover rebates.

In addition, the applicants’ submissions detail a number of outstanding debts totalling approximately $15,000 as well as anticipated future expenses for the children, household repairs, a new car and veterinary expenses. The submissions also note a concern regarding the anticipated funeral expenses for Mr Milovanovic as well as anticipated future additional medical expenses in the management of Mr Milovanovic’s health concerns and dental needs. The applicants note that while some of these expenses may be covered through Workcover, there can often be significant time delays and also disputes over whether or not the costs are eligible to be reimbursed.
The Tribunal acknowledges that the applicants have significant debts and expenses with a limited available income and that it is reasonable in that context to describe their financial circumstances as being difficult. Again, however, when considered relative to the position of other social security recipients, the Tribunal is not satisfied that their financial circumstances constitute severe financial hardship. Nor is the Tribunal satisfied that the applicants’ financial circumstances alone are sufficiently unusual, uncommon or exceptional to justify the exercise of the special circumstances discretion.
The Tribunal accepts the respondent’s contention that this is especially the case given that the applicants own their family home mortgage free. Many social security recipients would not be in that position. In addition, the Tribunal also accepts the respondent’s contention that many of the expenses identified by the applicants in their submissions were day to day expenses that most people would need to meet or otherwise highly discretionary for example, fixing the driveway or replacing solar panels.
The applicants’ submissions also included references to potential future claims against Allianz, the applicants’ previous lawyers as well as others associated with their Allianz action and in relation to unresolved criminal matters and a potential misconduct claim against police. The applicants claim that these further actions are likely to impose further stress and financial costs on the family. The Tribunal is not in a position to make an assessment of the merits of any such actions, the likelihood of them being pursued or the potential costs involved. For these reasons, the Tribunal is satisfied that it would not be appropriate to exercise the discretion in respect of these circumstances.
Costs associated incurred in recovering the compensation amount
The applicants claim that to apply the effect of Part 3.14 to the full amount of the Allianz Compensation Amount on a dollar for dollar basis is unjust and unfair having regard to the significant costs the applicants have incurred in pursuing their legal claim against Allianz and the consequential costs they suffered in the form of tax liabilities and FBT repayment flowing from their adjusted income.
The applicants’ submissions included details in relation to the costs the applicants incurred in connection with their action against Allianz as follows:
(a)Appearance fees for solicitors - $1,779;
(b)Legal fees and disbursements - $22,520;
(c)Litigation guardian - $1,800;
(d)Medical report - $3,000.
(together the Legal Costs)
Based on the evidence before it, the Tribunal is satisfied that the Legal Costs were in fact incurred and were done so in connection with the applicants’ litigation against Allianz for the purpose of securing the Allianz Compensation Amount. It is also satisfied that there is merit in the applicants’ argument that Centrelink’s recovery of the Compensation Recovery Charge, without regard to the significant costs they incurred in securing the Allianz Compensation Amount, led to a result that was unfair and unjust. This is particularly so given the substantial amount of the Legal Costs incurred relative to the residual payment the applicants actually received. It was of course further impacted by the further costs the applicants incurred as a result of the other adjustments to their tax liabilities and FBT entitlements.
While the Tribunal does not accept that it is appropriate in all of the circumstances to treat some or all of the Allianz Compensation Amount as not having been made or not liable to be made due to the adjustment to the applicants’ tax position or the requirement to make FBT reimbursements as a consequence of their adjusted income, it is satisfied that it is an appropriate exercise of the discretion in section 1184K of the Act to do so in respect of the Legal Costs that were incurred. It makes this finding because of the significant amount of the Legal Costs relative the residual amount of compensation the applicants actually received and the fact that they were incurred for the purpose of securing the compensation and also taking into account the broader circumstances of the case considered collectively.
The Tribunal is satisfied that when considered collectively the applicants’ circumstances are sufficiently uncommon or unusual to justify the exercise of the discretion in this way. The Tribunal is also satisfied that this finding is consistent with the legislative intent of Part 3.14 in that the applicants cannot be said to be double dipping in respect of cost they incurred in seeking recovery of the compensation amount.
In the course of the hearing the applicants claimed that the recovery of the Compensation Recovery Charge was wrong and unfair because of the application of the “50% rule”. The Tribunal has understood this to be a refence to the rule in section 17(3) of the Act which is a provision which sets out how to determine the compensation part of a lump sum compensation payment. That rule does not apply in the circumstances of the applicants because the Allianz Compensation Amount is not treated as a lump sum payment for the reasons set out earlier. This is made clear by section 17(4A) of the Act which expressly provides that a payment of arrears of periodic compensation payments is not a lump sum compensation payment. Notwithstanding this the Tribunal has been mindful of the significant costs the applicants have incurred in securing the Allianz Compensation Amount as set out above.
CONCLUSION
For the reasons set out above, the Tribunal is satisfied that it is appropriate to exercise the discretion set out in section 1184K of the Act to treat $29,099 of the Allianz Compensation Amount as not having been made or not liable to be made.
DECISION
The Tribunal sets aside the decisions under review and remits the matters to the Department to reassess the applicants’ entitlement to DSP and Carers Payment for the relevant period with the direction that $29,099 of the Allianz Compensation Amount be treated as not having been made or not liable to be made.

I certify that the preceding 57 (fifty seven) paragraphs are a true copy of the reasons for the decision herein of The Hon. Matthew Groom, Senior Member

[sgd]...............................................................
Associate
Dated: 16 October 2020

Date of hearing: 21 January 2020

Applicants: In person

Advocate for the Respondent: Mr Tim de Uray

Solicitors for the Respondent: Services Australia

[2020] AATA 4166

16 October 2020

Key Legal Topics

Areas of Law

Administrative Law

Statutory Interpretation

Legal Concepts

Judicial Review

Statutory Construction

Remedies

Procedural Fairness

Jurisdiction

Standing

Date of hearing:	21 January 2020
Applicants:	In person
Advocate for the Respondent:	Mr Tim de Uray
Solicitors for the Respondent:	Services Australia