Moumin and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2011] AATA 225

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 225

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/4767

GENERAL ADMINISTRATIVE   DIVISION		)
Re		HALIT MOUMIN

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Mr Egon Fice, Senior Member

Date5 April 2011

PlaceMelbourne

Decision The Tribunal affirms the decision of the Social Security Appeals Tribunal dated 14 October 2010.

............[sgd] Egon Fice...............

Senior Member

SOCIAL SECURITY –  disability support pension – settlement lump sum – compensation preclusion period – financial hardship – special circumstances – income cut-out amount – lump sum payment – gambling

Accident Compensation Act 1985 s 134AB(25)

Social Security Act 1991 ss 17(1), 17(2), 17(3), 17(8), 1169(1), 1170(4), 1184(K)

Beadle v Director-General of Social Security (1985) 60 ALR 225

Clark v Secretary, Department of Employment and Workplace Relations (2007) 161 FCR 451

Dranichnikov v Centrelink [2003] 75 ALD 134

Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634

Secretary Department of Employment Workplace Relations v Barrington [2006] FCA 527

Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1

Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348

Guide to Social Security Law:  4.13.4.20

REASONS FOR DECISION

5 April 2011 Mr Egon Fice, Senior Member      

1.      In August 2004 Mr Halit Moumin received a work injury.  He brought a common law damages claim which was settled by his employer’s insurers on 2 March 2009.  Mr Moumin received $350,000 as the net settlement sum.  Under the settlement agreement, his employer also agreed to pay his legal costs on a party/party basis on Country Court Scale D.  On 11 March 2009 the insurer informed Centrelink of the settlement. 

2.      In a letter dated 14 March 2009 Centrelink advised Mr Moumin that payment of the settlement lump sum could impact on his eligibility to receive income support.  Centrelink explained that if he needed to apply for income support in the future, he would have a preclusion period which commenced on 27 February 2009 and ended 13 June 2013.  During that period, Mr Moumin was not able to receive income support from Centrelink.

3.      In a further letter dated 7 April 2009 Centrelink explained to Mr Moumin how his preclusion period was calculated.  In effect, the preclusion period was calculated by dividing half of the lump sum payment ($175,000) by $779.13.  Centrelink encouraged Mr Moumin to contact its office and in particular its compensation recovery team so that it could explain to him the impact of his lump sum compensation payment on any Centrelink payments he may be receiving. 

4.      

Mr Moumin contacted Centrelink on 21 April 2009 and discussed the payment with a Centrelink officer.  On 18 May 2009 Mr Moumin signed a letter of acknowledgement provided to him by Centrelink regarding his preclusion period.  Regardless, Mr Moumin lodged a claim for the disability support pension (DSP) on

9 June 2010.  Centrelink rejected his claim for the DSP because of the compensation preclusion period. 

5.      Mr Moumin sought reconsideration of that decision by a delegated compensation recovery officer because he claimed he was suffering from financial hardship, having purchased a house with the monies from his lump sum compensation settlement. 

6.      On 9 August 2010 the delegated compensation recovery officer upheld the original decision.  Mr Moumin then requested a review by an authorised review officer (ARO).  On 7 September 2010 the ARO informed Mr Moumin that in his view, the original decision was correct.  Mr Moumin then sought review of the ARO’s decision by the Social Security Appeals Tribunal (SSAT).  On 14 October 2010 the SSAT affirmed the ARO’s decision.  Mr Moumin now seeks review of the SSAT decision by this Tribunal.

7.      The issues I must address are:

(a)whether a compensation preclusion period applies to Mr Moumin’s claim for the DSP;

(b)if the answer to (a) is affirmative, the duration of the preclusion period; and

(c)whether there are special circumstances which should cause the Secretary to treat the whole or part of his compensation payment as not having been made.

DOES A COMPENSATION PRECLUSION PERIOD APPLY?

8. There was no dispute about the fact that payment of the DSP is subject to a lump sum compensation payment preclusion period (see s 17(1) of the Social Security Act 1991 (the Act)). 

9.      The term compensation is defined in s 17(2) of the Act and it means:

(2)      Subject to subsection (2B), for the purposes of this Act, compensation means: 

(a)       a payment of damages; or 

(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or 

(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or 

(d)       any other compensation or damages payment; 

(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. 

(2A)     Paragraph (2)(d) does not apply to a compensation payment if: 

(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and 

(b)       either: 

(i)the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments; or 

(ii)the agreement does so provide but the compensation payment has been calculated without reference to the provision. 

(2B)A payment under a law of the Commonwealth, a State or a Territory that provides for the payment of compensation for a criminal injury does not constitute compensation for the purposes of this Act. 

(2C)The reference in subsection (2B) to a criminal injury is a reference to a personal injury suffered, or a disease or condition contracted, as a result of the commission of an offence.

10. There can be no doubt that the payment received by Mr Moumin in settlement of his claim against his employer was a payment of damages in respect of a work related injury. That is made clear in the Deed of Release signed by Mr Moumin. The Deed of Release describes the settlement as $350,000 being a net settlement amount after the reduction required by s 134AB(25) of the Accident Compensation Act 1985. The settlement sum is said to represent both pecuniary loss and pain and suffering damages.

11.     Under the Act, the compensation part of a lump sum is defined as 50 per cent of a lump sum payment (see s 17(3) of the Act).  Therefore, $175,000 is the compensation part of the lump sum payment received by Mr Moumin.

12. Section 17(1) of the Act defines the expression compensation affected payment.  It includes the DSP. 

13.     Section 1169(1) of the Act provides that where a person receives or claims a compensation affected payment and the person receives a lump sum by way of compensation, the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period. 

14. Section 17(1) of the Act defines the expression income cut-out amount;

income cut-out amount , in relation to a person who has received a compensation payment, means the amount worked out using the formula in subsection (8), as in force at the time when the compensation was received.

15.     Using the formula set out in s 17(8) of the Act, the Secretary calculated the income cut-out amount for Mr Moumin to be $779.13 per week.  There was no dispute about the fact that this was the correct income cut-out amount at the time Mr Moumin received his settlement payment. 

16.     Using the formula set out in s 1170(4) of the Act, that is, dividing the compensation part of the lump sum by the income cut-out amount, results in an income preclusion period of 224 weeks or 1,568 days.  Therefore, I find that the lump sum preclusion period is from 27 February 2009 to 14 June 2013.

17.     Although Mr Moumin did not raise the issue of legal costs and whether they should be taken into account when calculating the preclusion period, cases dealing with the lump sum preclusion period have frequently considered this issue.  More commonly, it is raised where the legal costs form a substantial proportion of the total lump sum compensation payment. 

18.     As a matter of statutory construction, the expression lump sum payment, as it is used in the context of Division 3 of the Act dealing with receipt of compensation, is clearly a reference to the entire payment received at a particular point in time.  Where legal costs are not included in a lump sum compensation payment when first made, but are subsequently paid to the recipient by agreement or in settlement of costs, there may be an issue about including that amount in the lump sum.  That kind of question does not arise in this case. 

19.     The fact that legal costs are included in a lump sum compensation payment was accepted by the Federal Court of Australia in Secretary Department of Employment Workplace Relations v Barrington [2006] FCA 527 at [36].  As Heerey J said in that case, the amount of legal costs can be a relevant factor in assessing whether or not the Secretary should exercise his discretion regarding some payments under s 1184K of the Act.  In fact, it is likely that this aspect would become significant where an applicant is not aware of significant legal costs which will need to be met from a lump sum payment.  Mr Moumin said that he in fact only received $330,000 of the $350,000 settlement sum, because $20,000 was paid to his lawyers.  However, other than Mr Moumin’s statement, there was no evidence before me of any additional payment to Mr Moumin’s lawyers and the Deed of Release clearly provides for the payment of his lawyers on a party/party basis in addition to the $350,000 settlement sum.  For that reason, I do not propose to take into account any additional payment that Mr Moumin may have made to his solicitors.

20.     I find that the calculation of the lump sum preclusion period by the Secretary in this case was correct.  Mr Moumin’s preclusion period ends on 14 June 2013 and he is not eligible to receive the DSP prior to that date. 

SHOULD SOME OR ALL OF THE LUMP SUM COMPENSATION PAYMENT BE TREATED AS NOT HAVING BEEN MADE?

21.     Section 1184K(1) of the Act provides:

1184K Secretary may disregard some payments

(1)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.

22.     The expression special circumstances has been considered by the Federal Court on many occasions.  In essence, as Kiefel J said in Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348, those words are not so imprecise as to require judicial gloss. Her Honour then said, at 353:

In Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, I expressed the view that the words require something which distinguishes a person’s case from others, something that sets it apart from the usual or ordinary case.

23.     The view expressed by Kiefel J in Chamberlain’s case was, essentially, repeated by the Full Court of the Federal Court in Dranichnikov v Centrelink [2003] 75 ALD 134, where the Court (Hill, Kiefel and Hely JJ) referred to the Full Court decision in Beadle v Director-General of Social Security (1985) 60 ALR 225. In that case the Court said that the question of whether there are special circumstances is for the decision maker, bearing in mind the purpose for which the power was given.

24.     Lindgren J, in Clark v Secretary, Department of Employment and Workplace Relations (2007) 161 FCR 451 dealt with the expression the special circumstances of the case in the context of s 1184K of the Act.  He said that the expression: is a reference to circumstances of the case which make it unusual or out of the ordinary run (at 138). His Honour said the notion is referable to some understanding of the usual or ordinary circumstances to which the provision in question was intended to apply. 

25.     Heerey J, in Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1 at 5, also said it was not sensible to lay down precise limits or precise rules as to what may constitute special circumstances. He then said:

Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances: …

26.     The Secretary has developed a policy which deals with factors to consider when determining the special circumstance provisions.  It is set out in the Department’s Guide to Social Security Law (the Guide).  The Tribunal should take into account Departmental policy when making administrative decisions which involve the exercise of discretion.  This was clearly spelled out in Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634. In that case, Brennan J, the then President of the Tribunal, was dealing with Ministerial policy. Nevertheless, the principles which his Honour set out in that case have been applied equally to Departmental policy. As his Honour said, the establishment of a policy will assist in the consistency of decision making. He said, at 640:

There are powerful considerations in favour of a Minister adopting a guiding policy. It can serve to focus attention on the purpose which the exercise of the discretion is calculated to achieve, and thereby to assist the Minister and others to see more clearly, in each case, the desirability of exercising the power in one way or another. Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with fairness and continuity of the administrative process.

27.     Brennan J was also careful to point out that a Tribunal ought not and indeed cannot deprive itself of its freedom to give no weight to a Minister’s policy in a particular case.  However, he said, at 644:

But in general, it would be manifestly imprudent for the Tribunal to override a Ministerial policy and to adopt a general administrative policy of its own. Although the practice of giving reasons for decisions inevitably spins out threads of policy from the facts of the cases, the policy developed in this way originates in the need to ensure that justice is done in individual cases, and it is a different development from a Ministerial declaration of broad policy relating to the generality of cases. The Tribunal is no doubt able to refine a broad policy,…

And then, at 645:

When the Tribunal is reviewing the exercise of a discretionary power reposed in a Minister, and the Minister has adopted a general policy to guide him in the exercise of the power, the Tribunal will ordinarily apply that policy in reviewing the decision, unless the policy is unlawful or unless its application tends to produce an unjust decision in the circumstances of the particular case.

28.     Instruction 4.13.4.20 of the Guide sets out factors to consider when determining the special circumstance provisions in s 1184K cases.  Relevant to Mr Moumin’s situation are:

(a)straightened financial circumstances; and

(b)addictions.

29.     Mr Moumin provided written statements to Centrelink regarding the dissipation of the settlement sum.  He also gave oral evidence at the hearing.

30.     Mr and Mrs Moumin have two children, both of which are now independent.  According to Mr Moumin, they sold their home so that they could pay off their credit card debts as well as wedding expenses for their daughter.  This happened well before the compensation payment was made.  They then rented a two bedroom apartment, making monthly rental payments of $1,200.  At that time, Mr and Mrs Moumin were apparently receiving Workcover payments.  Mr Moumin said that he and his wife soon found they were unable meet their expenses and again incurred debts on their credit cards.  Mr Moumin also said that he started drinking because he was in pain due to his work injuries.  Mr Moumin claimed he was depressed although he did not seek any medical assistance for any psychological problems.  He said that he began having marital problems and moved out of the apartment, finding accommodation with friends where he remained for a little over one year.  As I understood Mr Moumin’s evidence, his wife at that time was also receiving DSP payments.  After their son, who shared the apartment with his mother, moved out, Mr Moumin arranged to move back into the apartment although he said he and his wife did not live as a married couple.  He said he was upset and depressed and was drinking heavily, spending a lot of time at the local hotel. 

31.     After being awarded the lump sum payment Mr Moumin said that he first paid off all of his debts including monies borrowed from friends, family and those which arose as a result of using his credit card.  There was no material before me which would verify repayment of any debts.  Nevertheless, Mr Moumin said they amounted to some $22,000.

32.     After receiving the lump sum payment, Mr Moumin decided to go and see his mother in Greece.  He said that his wife also had a sick aunt in Greece which she was anxious to see and so he offered to buy her a ticket.  Apparently they both went to Greece and spent some time in that country.  Mr Moumin’s bank statement discloses a number of withdrawals from his account while in Greece between June and August 2009.  He said he also paid off some $7,000 off his wife’s credit card debts.  He also said that his wife needed dental work and he paid some $8,500 for that. 

33.     Mr Moumin said that when he and his wife returned to Melbourne, because he wanted to get back together with his wife, he decided to buy a house.  He said that cost $225,000.  I had no documents in evidence which support either the purchase of the house or the amount of the payment. 

34.     

Although Mr Moumin said in a written statement that he had decided to purchase the house after returning from Greece, there is a Centrelink file note dated 21 April 2009 where it is recorded that the customer service officer explained the

50 per cent rule regarding the preclusion period to Mr Moumin and that he would not be eligible for any benefits until 13 June 2013.  The file note indicates that Mr Moumin said he understood this but he nevertheless discussed the possibility of purchasing a house or unit, despite being advised that he would be precluded from receiving benefits if he found himself without funds to meet living expenses. 

35.     Mr Moumin again contacted Centrelink on 12 May 2009 and arranged for an interview with the financial information service.  The file note of the discussion with an officer from the financial information service states Mr Moumin said that he had some $280,000 remaining at that time.  The file note records that after discussing the purchase of a house or possibly a one bedroom flat, the officer endeavoured to direct Mr Moumin’s focus towards examining other options if a property purchase was not achievable.  The officer then recorded that Mr Moumin was somewhat distressed and disappointed at the possibility that he may not be able to purchase a property and he terminated the interview, declining to take with him any of the information materials he had previously accepted in the course of the discussion.  He also declined to make a follow‑up appointment. 

36.     From this material, it is apparent to me that Mr Moumin had considered the purchase of a house or property well before going to Greece on a holiday with his wife.  Furthermore, there is nothing in the interview with the financial information services officer which would suggest that the reason for purchasing the house was so that his wife would agree to live with him again as a married couple.  The evidence simply discloses that Mr Moumin chose to ignore the advice he was given. 

37.     Mr Moumin also said that he spent about $25,000 repairing the house after it was purchased.  There was no evidence at all of any expenditure on renovations in the material before me. 

38.     There was some evidence that Mr Moumin spent monies on gambling.  His bank accounts provided by Centrelink indicate transactions at the Crown Casino and at various taverns and hotels which quite possibly have poker machines.  However, it is not possible to determine the amount Mr Moumin spent on gambling and although it has been suggested that the amount was some $30,000, Mr Moumin’s oral evidence was that it was definitely not $30,000.  Mr Moumin also said in cross-examination that he did not have a gambling problem.  Significantly, Mr Moumin’s wife was not called to give evidence.

39.     Mr Moumin also said that he had some $18,000 in superannuation and although he made an application for a hardship withdrawal, that was rejected.

40.     In my opinion, Mr Moumin’s dissipation of the lump sum payment was totally irresponsible and flew directly in the face of financial advice he had been given by Centrelink’s financial information service.  I find that s 1184K of the Act does not apply to Mr Moumin’s case.  There are no special circumstances that would so much as suggest that I should treat the whole or part of the compensation payment as not having been made.  Furthermore, it is not as though Mr Moumin will be left without means to provide for himself until the end of the preclusion period.  He is able to sell the house and find suitable rental accommodation.  Furthermore, it appears that his wife continues to receive the DSP.  It is up to Mr Moumin to live within his means.  It is not appropriate that he should now receive payment out of the public purse, having quite deliberately embarked upon what can only be described as a reckless spending spree, despite receiving advice that he should exercise caution. 

41.     In my opinion, the decision of the SSAT made on 14 October 2010 was correct.  I affirm that decision.  

I certify that the forty-one [41] preceding paragraphs are a true copy of the reasons for the decision herein of
Mr Egon Fice, Senior Member

Signed:         [sgd]

.....................................................................................

E. Montalto, Associate

Date of Hearing  21 February 2011

Date of Decision  5 April 2011
Advocate for the Applicant            Self Represented
Advocate for the Respondent       T. Noonan, Centrelink Advocacy Branch