NEIL TAYLOR and SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

[2013] AATA 161

[2013] AATA 161

Division	GENERAL ADMINISTRATIVE DIVISION
File Number	2013/0835
Re	NEIL TAYLOR
APPLICANT
And	SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
RESPONDENT

DECISION

Tribunal	Dr P McDermott, RFD, Senior Member
Date	22 March 2013
Place	Brisbane

The Tribunal affirms the decision under review.

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Dr P McDermott, RFD, Senior Member

CATCHWORDS

SOCIAL SECURITY – Pensions, benefits and allowances – Disability support pension – Compensation settlement – Compensation charge – Compensation preclusion period – No special circumstances – Decision under review affirmed   

LEGISLATION

Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1184, 1184A, 1184K

CASES

Colaiacolo and Secretary, Department of Social Security [1985] AATA 91

Dranichnikov and Centrelink (2003) 75 ALD 134
Najdovska and Secretary, Department of Social Security (1998) 54 ALD 184
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95; [1981] AATA 57
Re Secretary, Department of Social Security and Winterbotham [1990] AATA 808
Secretary, Department of Family & Community Services v Allan (2001) 66 ALD 147
Secretary, Department of Social Security v Smith (1991) 30 FCR 56

REASONS FOR DECISION

Dr P McDermott, RFD, Senior Member

INTRODUCTION

1. I have to consider whether Centrelink was correct in making a decision that disability support pension (DSP) is not payable to Mr Taylor, the applicant, because he is subject to a lump sum preclusion period from 26 April 2011 to 7 October 2013. I have to decide whether there are any special circumstances which would allow all or some of a lump-sum compensation payment made to Mr Taylor for a workplace injury to be disregarded. 

   BACKGROUND

2. In June 2010 the applicant was injured at work. The applicant was paid weekly payments of compensation from WorkCover Queensland; those payments ceased on 25 April 2011. From 28 April 2011 the applicant was granted DSP. On 15 June 2012, the applicant settled his compensation claim for $175,000 plus $25,000 costs and $14,372.24 in foregone medical costs.[1] Centrelink also recovered $29,365.54 from the insurer as the amount of social security benefit paid to the applicant from the period of 28 April 2011 to 15 August 2012, this amount being subject to a compensation charge.

   [1] Therefore, for the purposes of the Act the “compensation” payment is $214,372.40.

   PRIOR DECISIONS

3. On 20 August 2012, Centrelink wrote to the applicant’s solicitors to advise them that a lump sum compensation preclusion period had been calculated as running from 26 April 2011 to 7 October 2013. Centrelink also cancelled the payment of disability support pension to the applicant. The applicant has sought reviews of the amount of the compensation charge as well as the length of the preclusion period. On 3 January 2013, an authorised review officer affirmed the decision made on 20 August 2012 to impose the preclusion period as well as to recover the amount of the compensation charge. On 30 January 2013, the Social Security Appeals Tribunal affirmed the decision. On 26 February 2013, the applicant made an application for review of the decision with this Tribunal. 

   COMPENSATION PRECLUSION PERIOD

4. Subsection 1169(1) of the Social Security Act 1991 (Cth) (“the Act”) provides that “compensation affected payments” are not payable during a lump sum preclusion period. Under sub 17(1) of the Act, DSP is a compensation affected payment and therefore DSP cannot be paid during any lump sum preclusion period. Subsection 17(2) of the Act defines “compensation”, and includes a payment for damages, or a payment in settlement of a claim for damages, that is made (either wholly or partly) in respect of lost earnings or lost earning capacity. The settlement that the applicant received included a component for part and future economic loss. As the settlement is “compensation” for the purposes of the Act, then the payment of DSP is subject to a preclusion period.

5. The duration of the preclusion period is determined by a number of provisions in the Act. The “compensation part” of a lump sum which is made in settlement of an injury related claim is, by the operation of sub 17(3) of the Act, deemed to be 50% of the compensation payment.[2] Therefore the “compensation part” of Mr Taylor’s lump sum is $107,186.12. The duration of the preclusion period is calculated by dividing the “compensation part” by a fixed amount, being the income cut-out amount which, at the relevant date, was $831.50.[3]

   [2] See footnote 1 above where the compensation payment was determined to be $214,372.40.

   [3] See subs 1170(4) and (5) of the Act and Exhibit 1, T-document 17, p. 66.

6. I am satisfied that the duration of the compensation preclusion period has been correctly calculated by dividing the compensation amount ($107,186.12) by the income cut-out amount ($831.50), giving a period of 128 weeks. The last day that the applicant received periodic payments of compensation was 25 April 2011 and sub 1170(1)(a) of the Act provides that his preclusion period starts “the day following the last day of the periodic payments period”. Accordingly, the compensation preclusion period starts on 26 April 2011 and runs for 128 weeks, ceasing on 7 October 2013.

   COMPENSATION CHARGE

7. Under sub 1169(1) of the Act, a person is not entitled to receive a “compensation affected payment” on any day or days in the lump sum preclusion period. I have previously mentioned that DSP is a “compensation affected payment”. During the period 28 April 2011 to 15 August 2012, the applicant received DSP in an amount of $29,365.54.[4] The amount of DSP which has been paid to the applicant during the preclusion period is recoverable under ss 1184 and 1184A of the Act.

   [4] See Exhibit 1, T-document 29, p. 188.

   ISSUES FOR RESOLUTION

8. The applicant has made no challenge to the calculation of the compensation preclusion period or the calculation of the compensation charge. On 4 December 2012 and 17 December 2012, the applicant was advised of how the length of the preclusion period as well as the amount of compensation charge was calculated. I am satisfied that they have been correctly calculated. As the applicant has made no challenge to the calculation of the compensation preclusion period or the calculation of the compensation charge, it remains for me to consider whether there are any special circumstances that make it appropriate to treat some, or all, of the compensation payment as not having been made.

   SPECIAL CIRCUMSTANCES

9. Where there are “special circumstances” in a particular case, sub 1184K(1) of the Act allows the Secretary to treat part or all of the compensation monies as having not been made, thereby reducing the length of the preclusion period. This Tribunal can exercise the powers vested in the Secretary to reduce the length of the preclusion period.

10. I have formed the view that the circumstances of the applicant are not such as to cause me to exercise the discretion to treat the whole or part of the settlement as not having been made. I do not consider that there is unfairness or unintended consequence arising from the application of the compensation provisions in this case and so the discretion available to me under s 1184K of the Act ought not to be exercised.

11. While the Act does not define “special circumstances”, it has been generally accepted by this Tribunal as being circumstances which are “unusual, uncommon or exceptional”, making the case “markedly different from the usual run of cases”.[5] The Full Federal Court of Australia in Dranichnikov and Centrelink,[6] remarked, at [66]: “There will be a requirement that the circumstances are such that takes the case out of the ordinary”.[7] In Secretary, Department of Family & Community Services v Allan,[8] Heerey J remarked, at [17]: “It is not sensible to lay down precise limits as to what may constitute special circumstances”.

    [5] Re Beadle and Director–General of Social Security (1984) 6 ALD 1 at [3].

    [6] (2003) 75 ALD 134.

    [7] Per Hill J with Kiefel and Hely JJ agreeing.

    [8] (2001) 66 ALD 147.

12. The discretion in s 1184K to treat all or part of the compensation monies as having not been received should be considered in the context of the scope and purpose of the compensation provisions of the Act and ought not be exercised in a manner calculated to frustrate legislative intention.[9] This intention is that those who receive a lump sum compensation payment for lost earnings or lost capacity to earn are expected to support themselves from their own available resources for a period before seeking support from the taxpayer. In Re Secretary, Department of Social Security and Winterbotham,[10] this Tribunal observed at [19]:

    This particular piece of legislation ... was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse ... Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the tax-payer.

    [9] Re Ivovic and Director-General of Social Services (1981) 3 ALN N95; [2001] AATA 57 at [45].

    [10] [1990] AATA 808.

13. In Secretary, Department of Social Security v Smith,[11] von Doussa J remarked, at 61,  that the scheme is intended to operate to provide:

    a fair balance of the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures.

    [11] (1991) 30 FCR 56.

14. I appreciate that the applicant requires an artificial hip. In August 2012 he had been told that he was on a waiting list as a priority patient; he has still received no indication of when to expect an operation. However, I do not consider that the applicant’s injuries for which he received compensation are itself a special circumstance which would cause me to exercise the discretion under s 1184K. In Najdovska and Secretary, Department of Social Security,[12] the Tribunal found that Mrs Najdovska's ill health could not be considered to be a special circumstance when it remarked:

    Mrs Najdovska does have health problems which are the reason for her receipt of disability support pension and for her husband's receipt of carer's pension. There is no evidence which would allow me to find that her health problems are special or unusual in the context of people receiving disability support pensions whose spouses also receive carer's pensions.

    [12] (1998) 54 ALD 184.

15. The applicant also raises the issue of financial hardship. This Tribunal has found that financial hardship alone cannot qualify as special circumstances. In Colaiacolo and Secretary, Department of Social Security,[13] the Tribunal stated, at [20]:

    It is surely correct, on the basis of the evidence, that the applicant and those members of his family still dependent on the combined incomes are by no means well off financially. However, I cannot escape the conclusion that straitened as the financial circumstances are, they are not exceptional. Even if they were, the Tribunal has previously ruled that the financial position of an applicant would not ordinarily constitute a "special circumstance (See Re Beadle and Director-General of Social Security (1984) 6 ALD 1) … 

    [13] [1985] AATA 91.

16. In considering the issue of financial hardship it becomes necessary to consider the nature of expenditure of the settlement funds. The applicant contends that in four months he expended the sum of $108,000. It is not possible on the evidence before me to see how the funds from the compensation payment have been dispersed. The applicant informed the Social Security Appeals Tribunal that he repaid debts of $60,000 as well as spending $44,000 for two vehicles. However, in giving telephone evidence at this Tribunal, the applicant stated that he had repaid debts of $35,000 as well as purchasing the two vehicles. The applicant states that he has no money in the bank but has not provided any documentary evidence to show how the settlement funds have been applied. I would be reluctant to exercise the discretion under s 1184K of the Act in circumstances where there is no documentary evidence of how the settlement funds have been applied.

17. In deciding not to exercise the discretion under s 1184K of the Act I am mindful that the applicant still has assets, namely two vehicles. The applicant asserts that the vehicles have dropped in value.

18. As the applicant lives by himself, I would recommend that Centrelink urgently arrange for a social worker to provide assistance to him.

    DECISION

19. I affirm the decision under review.

I certify that the preceding 19 (nineteen) paragraphs are a true copy of the reasons for the decision herein of Dr P McDermott, RFD, Senior Member.

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Associate

Dated:   22 March 2013

Date of hearing	20 March 2013
Applicant	In person
Solicitor for the Respondent	Mr Joe Guthrie