MPVL and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
[2009] AATA 822
•26 October 2009
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2009] AATA 822
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2009/2063
GENERAL ADMINISTRATIVE DIVISION ) Re MPVL Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Senior Member R W Dunne Date26 October 2009
PlaceAdelaide
Decision The decision under review is affirmed.
..............................................
R W DUNNE
(Senior Member)
CATCHWORDS
SOCIAL SECURITY – pensions, benefits and allowances – injury in the course of employment – compensation – preclusion period as a result of lump sum compensation payment – all compensation monies expended – whether special circumstances exist to warrant treating all or part of the lump sum compensation as not having been made – special circumstances found not to exist – decision under review affirmed
Social Security Act 1991 ss 17(1), (2) and (3), 1160(1), 1169(1), 1170(3), (4) and (5), 1184K(1)
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Haidar v Secretary, Department of Social Security (1998) 157 ALR 359
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Riddell v Secretary, Department of Social Security (1993) 42 FCR 443
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25REASONS FOR DECISION
26 October 2009 Senior Member R W Dunne introduction
1. The applicant, MPVL, was injured in the course of his employment and received weekly compensation. In anticipation of receiving a lump sum compensation payment, he sought from the respondent (“Centrelink”) an estimate of the charge and preclusion period in respect of the payment. He settled his claim for compensation, received a lump sum payment and was advised by Centrelink of a decision to impose a preclusion period commencing on 20 April 2008 and ending on 24 July 2010. At MPVL’s request, the decision was reviewed and affirmed by the original decision-maker, an Authorised Review Officer and the Social Security Appeals Tribunal (“SSAT”). MPVL has applied to this Tribunal for review of the decision of the SSAT.
2. At the hearing, MPVL represented himself (with the assistance of Ms D) and Centrelink was represented by Ms Julie Okmasich (from Centrelink Legal Services and Procurement Branch). The Tribunal received into evidence the T documents (Exhibit R1) lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, together with the following documents:
·medical report from Dr Sam Nitchingham dated 6 July 2009 (Exhibit R2); and
·further medical report from Dr Sam Nitchingham dated 6 July 2009 (Exhibit R3).
issues for the tribunal
3. The issues before the Tribunal are:
(a) Whether the applicant is subject to a compensation preclusion period as a result of the lump sum compensation payment received by him and, if so, for what period?
(b) If the applicant is subject to a compensation preclusion period, are there “special circumstances” that make it appropriate to disregard all or part of the lump sum compensation payment, pursuant to s 1184K of the Social Security Act 1991 (“Act”)?
legislative scheme
4. Part 3.14 of the Act provides for the effect of compensation recovery on certain Social Security benefits. Section 1160(1) of the Act provides for the general effect of that Part of the Act. It provides as follows:
“1160 General effect of Part
(1)This Part operates in certain specified circumstances to do one or more of the following:
(a) reduce a person’s compensation affected payment;
(b) render a person’s compensation affected payment not payable;
(c)require the repayment of some or all of a person’s compensation affected payment;
because of the receipt of compensation by the person or the person’s partner.
…”
5. Section 1169(1) of the Act provides, in effect, that a compensation affected payment is not payable during a lump sum preclusion period. It provides as follows:
“1169 Compensation affected payment not payable during lump sum preclusion period
(1) If:
(a)a person receives or claims a compensation affected payment; and
(b) the person receives a lump sum compensation payment;
the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.
…”
6. Section 17(1) of the Act defines the expression “compensation affected payment”, and a Disability Support Pension (“DSP”) is included in that definition.
7. Section 17(2) of the Act defines “compensation”. This includes a payment of damages “that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”.
8. Section 1170(3) of the Act provides relevantly that the lump sum preclusion period is the period that begins on the day on which the loss of earnings or loss of earning capacity began, and ends at the end of the number of weeks worked out pursuant to the statutory formula referred to in sub-sections 1170(4) and (5). That formula refers to the “compensation part of lump sum” and the sub-sections read:
“1170 Lump sum preclusion period
…
(4)The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:
(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. Section 17(3) of the Act provides an artificial statutory formula for determining the “compensation part of a lump sum compensation payment”. The compensation part of the lump sum is 50 percent of the settlement amount. Section 17(3) provides relevantly as follows:
“Compensation part of a lump sum
(3)Subject to subsection (4), for the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a) 50% of the payment if the following circumstances apply:
(i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or
…”
10. The above provisions must, however, be read subject to s 1184K of the Act. That section authorises the Secretary (and this Tribunal, standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment in certain circumstances, referred to as “special circumstances”. Section 1184K(1) provides as follows:
“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.
…”
background and evidence
11. MPVL has been in receipt of Carer Allowance, in respect of Ms D, since 9 September 2005. He was injured in the course of his employment and claimed compensation in respect of his injuries. He received weekly compensation payments of $816.72 up to 19 April 2008. On 11 April 2008, he settled his compensation claim for a total of $180,000.00, comprised of the following components:
Compensation for non-economic loss $34,008.44
Redemption of income maintenance payments $119,391.56
Redemption of medical expenses $500.00
Legal costs and disbursements $26,000.00
Employment discharge $100.00
Total $180,000.00
After his solicitor’s costs of $39,278.27, MPVL received a cheque for $122,721.73 which, when added to the anticipated payment from the Health Insurance Commission of $18,000.00, resulted in total settlement funds of $140,721.73. By letter dated 24 April 2008, Centrelink advised MPVL of a decision to impose a preclusion period, based on the settlement amount, commencing on 20 April 2008 and ending on 24 July 2010. On 9 January 2009, he claimed DSP and that claim was rejected due to the preclusion period.
12. The preclusion period was calculated in accordance with the formula prescribed in s 1170(4) of the Act. The formula divided the total amount received by two, resulting in an amount of $90,000.00, which was the deemed economic loss component. This amount was divided by $756.75, being the income cut-out amount at the date of settlement, to produce a figure of 118 weeks (rounded down). The end date of the lump sum preclusion period, after 118 weeks from 20 April 2008, was 24 July 2010. There was no dispute by MPVL as to the determination of the preclusion period.
evidence of applicant
13. It was MPVL’s evidence that, prior to his work injury in September 2005, he was employed by the Advertiser Newspaper and as a bar person at Globe Derby on Saturday nights. After his work injury, he received full WorkCover payments for the first 12 months, but the payments were then reduced to 80 percent. He had applied for DSP in January 2009 in order to survive and because of his back injury and his depression. He received a fortnightly Carer Allowance of $100 for looking after Ms D. She received a fortnightly Age Pension of $456. This amount of Pension was apparently paid to her on the basis that she and MPVL were treated by Centrelink as a married couple. When he received the lump sum compensation payment, MPVL said he had to pay bills that were outstanding. He was six months behind in his home loan repayments and in his car payments. He also arranged and paid for a lot of repairs to be undertaken by tradespersons around his home, which he could no longer do himself because of his injury. The repairs were as a result of past deterioration which his weekly compensation payments would not cover.
14. MPVL said he had also received an amount of $40,000.00 as a superannuation fund payout. He said he owned his home at Lewiston jointly with Ms D. After questioning by the Tribunal, it appeared that the home was owned by MPVL and Ms D jointly as tenants-in-common. His outstanding home loan repayments amounted to $10,000 and his monthly repayments were $1,800.00. He had also borrowed $10,000 from his sister, which he had to repay. Prior to September 2005, he acquired two motor vehicles for about $55,000 and he was still paying them off. He estimated that the vehicles would now both be worth no more than $25,000 in total. He said the repairs to the jointly owned home were approximately $60,000-$70,000, which were in addition to about $70,000 spent on home loan arrears, repaying several credit cards and a number of other debts. The credit card and other debts were necessary to “make ends meet” until he received the lump sum payment. There were also car servicing costs of $200 for each vehicle and new tyres costing a total of $2,000.00 for the vehicles. MPVL said he had met with a financial planner in his solicitor’s office, but his advice was not helpful at all. He confirmed that amounts totalling approximately $140,000.00 were paid on repairs to the home, home loan repayments and several credit card and other debts.
15. In cross-examination, MPVL acknowledged he was aware of the preclusion period and that he had received a letter from Centrelink dated 24 April 2008 (Exhibit R1, T3 at page 140) setting out details of the period. When questioned about his assets, he said they comprised his interest in the jointly owned home, his motor vehicles and his trailers. His outstanding debts were the home loan, which was currently about $280,000, and approximately $45,000 still owing on his motor vehicles. He had nothing left of his lump sum compensation payment and only about $30,000 of his superannuation payout. Out of this latter sum, about $2,000 was spent monthly on home loan and motor vehicle repayments. When questioned by Ms Okmasich about the payments totalling approximately $70,000 for housing loan repayments, credit card and other debts, MPVL could only account for approximately $45,231. He said he did not have receipts for the balance. He also did not have receipts for the monies spent on repairs to his home. He estimated that he would make about $100,000 from the sale of the home, after repayment of the housing loan. This amount, together with the remainder of his superannuation payout, would enable him to purchase land freehold with a house on it or with the capacity to take caravan accommodation.
evidence of dr nitchingham
16. By telephone, Dr Nitchingham was referred to his medical report for MPVL dated 6 July 2009 (Exhibit R2). In it, he said:
“Gregory, age 53 years, has been a patient of mine for the past five years. He SUFFERS FROM CHRONIC DEPRESSION AND CHRONIC BACK PROBLEMS AND IS UNFIT TO WORK PERMANENTLY. Gregory is deemed to be a suicide risk and as such I will only give him a single script of the anti-depressant and pain relief that he is on with no repeats.”
17. Although he initially referred to the wrong patient file, Dr Nitchingham then corrected himself. He said that MPVL was still on anti-depressants and was taking arthritis tablets. One problem he had had with him was his suicide attempt and he said MPVL had seen a psychiatrist in February 2008. However, his current conditions were a chronic back problem and depression and he saw MPVL once a month for pain killers. When questioned by Ms Okmasich, he said MPVL had not seen a psychiatrist since his report of 6 July 2009.
consideration
Is the applicant subject to a compensation preclusion period and, if so, for what period?
18. Section 17(2) of the Act states that “compensation” means various types of payment, including any compensation or damages payment. When a lump sum payment is made to a claimant, the compensation part of the lump sum compensation payment is calculated pursuant to s 17(3) of the Act as 50 percent of the settlement amount. The duration of the compensation preclusion period is determined in accordance with s 1170 of the Act. Section 1170(4) states that the number of weeks in a lump sum preclusion period is calculated on the basis of the formula:
Compensation part of lump sum
Income cut-out amount
In MPVL’s case, the compensation part of the lump sum was 50 percent of the settlement amount, namely $90,000. The income cut-out amount was $756.75 and the number of weeks in the lump sum preclusion period was 118 weeks (rounded down). The start day of the preclusion period was 20 April 2008 and the end day, 118 weeks later, was 24 July 2010. The Tribunal is satisfied that the compensation preclusion period was correctly determined.
If the applicant is subject to a compensation preclusion period, are there any “special circumstances” that make it appropriate to disregard all or part of the lump sum compensation payment?
19. During the course of the hearing, Ms D questioned whether the legislation dealing with the determination of the compensation preclusion period took into account costs of living at a particular time, and that different individuals had different circumstances and different living costs. The Tribunal explained that different circumstances were taken into account through the operation of s 1170 and s 1184K of the Act. As was said by Kiefel J in Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 (at paragraph 23):
“23. It may generally be accepted that the statutory provisions here in question were intended to operate upon factual bases which were assumed and were not intended to reflect the true position. This is so with respect to the figure of fifty per cent taken of the lump sum compensation payment; the amount of basic rate of pension used to divide it; the period during which double payment is assumed to have occurred; and perhaps even the commencement of the period when the loss of earning capacity arose, which would normally be taken to be the date when the compensable injury was occasioned to the person.”
20. Earlier, in Haidar v Secretary, Department of Social Security (1998) 157 ALR 359, Hill J said (at page 367):
“Without putting too fine a point upon it, the purpose of the basic thrust of the legislation was to avoid a claimant being entitled both to social security benefits and benefits in the nature of income through lump sum payments.
However, the legislature was conscious of the possible harshness of a rule structured in an arbitrary way. Section 1184 [now s 1184K], therefore, provided 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. The question of what constitutes special circumstances has been the subject of a number of decisions of this Court. It suffices here to say no more than that something is required which would take the matter out of the usual ordinary case: Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J, Secretary Department of Social Security v Ellis (1997) 46 ALD 1 at 5 per Carr J.”
21. Thus, the decision-maker (and upon review, the Tribunal) is entitled to treat a compensation payment, or part of it, as if it had not been made, which is to say in a manner different from that required by the formula in s 17(3) of the Act. As was said further by Kiefel J in Chamberlain, this is undertaken only if the requisite opinions are formed, namely that “special circumstances” exist and it is considered appropriate to treat the lump sum compensation payment such that there will either be no period when double payment is assumed to have been made, or there will be a shorter period.
22. The question then is what can be taken into account as “special circumstances”. The concept of what constitutes “special circumstances” has been discussed in many cases in the Federal Court and in this Tribunal. In Re Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal was dealing with an application under a different section of the Act which also, however, involved a consideration of whether special circumstances existed. Toohey J said (at page 3):
“An expression such as ‘special circumstances’ is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.”
23. In the same case on appeal ((1985) [1984] AATA 176; 7 ALD 670), a Full Federal Court (Bowen CJ, Fisher and Lockhart JJ) said, at page 675, that it was “in broad agreement with the approach of the Tribunal”, and reiterated the need to avoid limiting the scope of what might constitute special circumstances when it explained, at page 674:
“We do not think it is possible to lay down precise limits or precise rules. The matter is one for the Director-General bearing in mind the purpose for which the power is given. The phrase ‘special circumstances’, although lacking precision, is sufficiently understood in our view not to require judicial gloss.”
24. In a later case, Groth v Secretary, Department of Social Security [1995] FCA 1708; (1995) 40 ALD 541, Kiefel J, after referring to the Federal Court’s decision in Beadle, observed at page 545 that special circumstances:
“... would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary case ... It would of course 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.”
25. The flexibility of the concept of special circumstances was referred to in Riddell v Secretary, Department of Social Security [1993] FCA 261; (1993) 42 FCR 443, where a Full Court of the Federal Court (Neaves, Burchett and O’Loughlin JJ) said, at page 450:
“Each particular case must be considered on its merits. It is the essential nature of the provision to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the Act, to make a decision one way or the other.”
26. In a similar vein Heerey J, in Secretary, Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 66 ALD 147, said at paragraph [17]:
“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances ... 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.” (References omitted).
27. The purpose of the “special circumstances” provision was explained (in the context of a similar section, namely s 1237AAD of the Act) by French J (as he then was) in Secretary, Department of Social Security v Hales (1998) 82 FCR 154, when he said, at page 162:
“The evident purpose of s 1237AAD is to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness in the event of a rigid application of a requirement for recovery of debt.”
His Honour also said, at page 162:
“The concept of special circumstances is broad. A constellation of factors, including financial circumstances, may fall within it.”
28. Ms D contended that, before MPVL received the lump sum payment, his weekly compensation was reduced to 80 percent. As she said, “[t]hings fall behind, bills fall behind, the house starts falling down, things need repairing around the place”. Once MPVL received the lump sum payment, he had to attend to the outstanding bills, housing loan repayments, credit card and other debts and repairs. As a consequence, the whole of his lump sum payment had been dispersed and only $30,000 of his superannuation payment now remains. He acknowledged the whole of the payment had been dispersed, but he said it was on “things” that needed doing or bills that needed to be paid.
29. It was also MPVL’s evidence that he suffered from a chronic back injury and depression. Although Dr Nitchingham had an initial problem with his evidence in relation to MPVL’s conditions, he confirmed that he suffered from chronic depression and a chronic back injury and that his medication comprised anti-depressants and arthritis tablets. Although he made mention in his report of suicide risk, Dr Nitchingham said nothing about this in his oral evidence. He made brief mention of psychiatric treatment in February 2008, but since his report of 6 July 2009, no psychiatric treatment had occurred.
30. In questioning by Ms Okmasich, MPVL said he had obtained financial advice upon receipt of the lump sum payment, but the advice was largely useless. He acknowledged that, prior to the receipt of the lump sum payment, he had received written advice from Centrelink (Exhibit R1, T3 at page 140) providing details of the compensation preclusion period. He knew he would not be eligible to receive Centrelink payments during the preclusion period. Notwithstanding this advice, MPVL effectively disposed of a lump sum compensation payment of approximately $140,000 in a period of less than 12 months.
31. It is clear that MPVL is in strained financial circumstances. Financial hardship alone, however, does not constitute special circumstances. Although financial hardship may contribute to a finding of special circumstances, it is not a prerequisite to such a finding. In order for financial hardship to be a “special circumstance” under the Act, the financial circumstances must be more than “straitened” and, as was said by Besanko J in Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, must be “unusual” or “uncommon”. In the Tribunal’s view, the fact that MPVL found it necessary to disperse the whole of the lump sum payment on “things” that needed doing, does not amount to “special circumstances”. His financial situation does not set him apart from the usual type of situation where a compensation recipient is struggling to make ends meet. His financial situation falls short of unusual or uncommon, so as to set him apart from other income support claimants who have received lump sum payments. Ms D argued that there was a compelling need for the applicant to make the payments out of the lump sum compensation. The Tribunal recognises that such a need may have existed. However, that is not the issue – it is the fact that MPVL, having disposed of his settlement monies, now seeks support from the community.
32. Ms D contended that the applicant’s chronic back injury and depression amounted to special circumstances. She also sought support from Dr Nitchingham’s evidence of psychiatric treatment. However, the Tribunal was not impressed by Dr Nitchingham’s evidence and, although there is a chronic back injury and depression, coupled with MPVL’s financial circumstances, these factors are not, in the present case, sufficient to amount to special circumstances. It is, therefore, not appropriate to exercise the discretion in s 1184K to treat the whole or part of the lump sum compensation payment MPVL received as not having been made, so as to reduce the compensation preclusion period.
decision
33. The decision under review is affirmed.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne
Signed: ............J Coulthard.........................................
AssociateDate of Hearing 31 August 2009
Date of Decision 26 October 2009
Advocate for the Applicant Self-representedAdvocate for the Respondent Ms J Okmasich
Centrelink Legal Services & Procurement Branch
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