O'Driscoll; Secretary, Department of Employment and Workplace Relations

[2006] AATA 761

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 761

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2006/1

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS

Applicant

And MARGARET O'DRISCOLL

Respondent

DECISION

Tribunal Deputy President S D Hotop

Date7 September 2006

PlacePerth

Decision The Tribunal affirms the decision under review.

.......[Sgd S D Hotop].........

Deputy President

CATCHWORDS

SOCIAL SECURITY – compensation – respondent claimed newstart allowance – respondent received lump sum compensation payment – lump sum preclusion period imposed – special circumstances of respondent’s case – appropriate to treat whole of respondent’s compensation payment as not having been made – decision under review affirmed

Social Security Act 1991 (Cth) s 1169(1), s 1170 and s 1184K(1)

Re Barrington and Secretary, Department of Employment and Workplace Relations [2005] AATA 1050

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Haidar v Secretary, Department of Social Security (1998) 28 AAR 288

Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61

Re QX99C and Secretary, Department of Family and Community Services [1999] AATA 310

Re Secretary, Department of Family and Community Services and Guettler [1999] AATA 257

Secretary, Department of Social Security v Smith (1991) 30 FCR 56

REASONS FOR DECISION

7 September 2006	Deputy President S D Hotop
Introduction

1.      On 30 November 2002 Margaret O’Driscoll injured her right arm in the course of her employment as a cleaner and, being incapacitated for work by reason of that injury, she thereafter received workers’ compensation payments up until 7 August 2005.

2.      On 1 September 2005 Mrs O’Driscoll lodged with Centrelink a claim for Newstart Allowance.

3.      On 6 September 2005, however, Mrs O’Driscoll settled her workers’ compensation claim for the sum of $40,000. A Centrelink officer then notified Mrs O’Driscoll and her solicitors, by letters dated 14 September 2005, that, by reason of the lump sum compensation payment of $40,000 which was to be made to her, she would not be eligible to receive social security payments for the period from 8 August 2005 to 5 March 2006.

4.      Mrs O’Driscoll requested Centrelink to review that decision and, on 23 November 2005, an Authorised Review Officer within Centrelink decided that the earlier decision that Mrs O’Driscoll was precluded from receiving social security payments from 8 August 2005 to 5 March 2006 was correct.

5.      Mrs O’Driscoll then appealed to the Social Security Appeals Tribunal (“SSAT”) and, on 13 December 2005, the SSAT allowed her appeal and decided that, because of the special circumstances of her case, the whole of her $40,000 compensation payment should be disregarded for the purpose of determining her eligibility to receive Newstart Allowance for the whole period from the date of her claim until 5 March 2006.

6.      The Secretary to the Department of Employment and Workplace Relations (“the Secretary”) has applied to this Tribunal for a review of the decision of the SSAT.

The Issue and the Tribunal’s Determination

7.      The issue for the Tribunal’s determination is whether there are special circumstances in Mrs O’Driscoll’s case which make it appropriate, in effect, to disregard the whole, or part, of her $40,000 compensation payment for the purpose of determining her eligibility to receive Newstart Allowance for the whole, or part, of the period from the date of her claim until 5 March 2006.

8.      For the reasons which follow, the Tribunal has determined that there are special circumstances which make it appropriate, in effect, to disregard the whole of Mrs O’Driscoll’s $40,000 compensation payment for the purpose of determining her eligibility to receive Newstart Allowance for the period from the date of her claim until 5 March 2006.

The Relevant Legislation

9. Part 3.14 of the Social Security Act 1991 (Cth) (“the Act”) contains provisions regarding “compensation recovery”. Section 1169(1) provides that, in the event that a person receives a lump sum compensation payment, various forms of social security payments (including, relevantly, Newstart Allowance) are not payable to that person in the “lump sum preclusion period”. The duration of that period is calculated in accordance with s 1170 of the Act.

10. There is no dispute in the present case that s 1169(1) of the Act applies and that, subject to the operation of s 1184K(1) of the Act, the “lump sum preclusion period”, calculated in accordance with s 1170 of the Act, is the period from 8 August 2005 to 5 March 2006.

11. Section 1184K(1) of the Act, however, authorises the decision maker to “ treat the whole or part of a compensation payment as… not having been made” if the decision maker “thinks it is appropriate to do so in the special circumstances of the case”. The extent to which that discretionary power is exercised in a particular case will correspondingly affect the extent of the “lump sum preclusion period”, as calculated in accordance with s 1170 of the Act, in that case. A determination to treat the whole of a compensation payment as not having been made will result in there being no “lump sum preclusion period”, whereas a determination to treat part of a compensation payment as not having been made will result in the “lump sum preclusion period” being proportionately reduced.

The Evidence

12.     The evidence before the Tribunal comprised:

· the “T documents” (T1-T20) lodged by the Secretary in accordance with s 37 of the Administrative Appeals Tribunal Act 1975 (Cth);

·   a bundle of supplementary documents tendered by the Secretary (Exhibit A1);

·   a medical report and health summary regarding Mrs O’Driscoll prepared by Dr M Oehlers, dated 14 February 2006, tendered by Mrs O’Driscoll (Exhibit R1);

·   a letter dated 12 January 2006 from Mrs O’Driscoll to Centrelink and an enclosed list of expenses tendered by Mrs O’Driscoll (Exhibit R2); and

·   the oral evidence of Mrs O’Driscoll and Joyce McGuinness.

The evidence of Mrs O’Driscoll

13.     A statement of Mrs O’Driscoll dated 3 March 2006 was tendered in evidence (Exhibit A1, pp 23-26). The contents of that statement, which were verified by Mrs O’Driscoll in her oral evidence, may be briefly summarised as follows:

·   Mrs O’Driscoll and her husband were divorced in 1997 but in 1999 her ex-husband, who was suffering from Alzheimer’s disease, returned to live with her and she became his carer;

·   in March 2001 Mrs O’Driscoll, her ex-husband and their 3 sons (including twins) went to India to visit her mother who was ill and whose husband (Mrs O’Driscoll’s father) had recently passed away, and during that visit Mrs O’Driscoll’s ex-husband went missing and, despite her many efforts to locate him, she and their sons have not seen him since;

·   Mrs O’Driscoll’s twin sons and her ex-husband’s family blamed her for his disappearance, her sons developed behavioural problems and they began taking drugs, and she became depressed and stressed because of her family circumstances;

·   in November 2002 she suffered her abovementioned work-related injury as a result of which she became more stressed;

·   in April 2004 she had to sell the family home because she was behind in her mortgage payments, as a result of which she and her children were very upset and she became more stressed and depressed;

·   since July 2004 she has been living in rented accommodation for which she pays $150 per week in rent;

·   in October 2004 her eldest son was convicted of attempted murder and was sentenced to 2 years’ imprisonment;

·   in December 2004 her friend, Joyce McGuinness, told her that she would arrange with a solicitor to lodge an appeal against her son’s conviction, but in June 2005 the solicitor advised them that such an appeal had no chance of success;

·   in January 2005 her twin sons were imprisoned following their conviction of drug offences;

·   in September 2005 she received from her solicitor her net compensation payment of $16,750;

·   later that month Mrs McGuinness told her that she needed money for medical treatment and medication and she requested repayment of the sum of $11,000 which she had paid to the solicitor in order to fund an appeal for Mrs O’Driscoll’s son;

·   although she had been informed by Centrelink about a preclusion period, she felt that she had no choice but to repay that money to Mrs McGuinness, and she did so out of her compensation payment;

·   in October 2005 she had no money left and she sought assistance from the St Vincent de Paul Society to pay for food and some bills;

·   in December 2005 she was 2 months behind in her rent payments ($600 per month);

·   she suffers from diabetes and has been prescribed high-dose medication for that condition, as well as anti-depressant medication (although she has ceased to take the latter medication because of side effects);

·   her only family members in Australia are her 3 sons (who are in prison) – her other family members are in India, Singapore and Malaysia.

14.     In her oral evidence Mrs O’Driscoll confirmed that, of the $40,000 compensation settlement payment which she was awarded in respect of her work injury, she received only about $16,700 from her solicitors in September 2005, after payment of their costs and disbursements and other associated expenses. She also confirmed that, by the end of September 2005, she had repaid to Mrs McGuinness the $11,000 advanced by her in January 2005 to pay for her son’s appeal. She said that she felt that she had to repay that amount in full because Mrs McGuinness had told her that she badly needed the money. She said that she did not think about how she herself would be able to survive without social security payments during the preclusion period. She added that at that time she did not fully understand the implications of the preclusion period.

15.     Mrs O’Driscoll acknowledged that in January 2006 she received a refund of $4,000 from the Health Insurance Commission but that that money was spent on paying her rent back-payments ($2,100) and other unpaid bills and liabilities (itemised in Exhibit R2).

16.     As regards her present financial circumstances, Mrs O’Driscoll said that she presently receives approximately $510 per fortnight in social security payments (her sole source of income). She said that her only substantial asset is her car (a 2000 model Toyota Corolla worth about $7,000), and that she presently has no debts or liabilities.

17.     As regards her present state of health, Mrs O’Driscoll tendered in evidence a letter from her general practitioner, Dr M Oehlers, dated 14 February 2006 (Exhibit R1), listing her current medical problems and conditions as follows:

·   tendonitis

·   abnormal liver function test

·   diabetes (type 2)

·   obesity

·   paronychia

·   psoriasis

·   depression.

Dr Oehlers’ letter states:

“I have been treating this lady for a number of years and I have included a synopsis of her medical conditions. I helped guide her through a worker’s compensation case that, no doubt, had a deleterious effect on her mental health. She developed a depressive illness as a result of the pressures placed upon her to return to work when it was obvious that she was incapable of returning. This lady presently remains unfit for all work.”

The evidence of Joyce McGuinness

18.     Mrs McGuinness confirmed that she had sworn an affidavit on 18 April 2006 for the purposes of this matter. The contents of that affidavit, which was tendered in evidence (Exhibit A1, p 38), are as follows:

“1.I am a friend of Mrs Margaret O’Driscoll and have known her and her son John (sic) for many years.

2.Mrs O’Driscoll discussed with me that her son John (sic) wanted to put in an appeal against a conviction for which he was put in gaol.

3.I knew that Mrs O’Driscoll did not have the funds to pay for an appeal. I told her I would try to arrange some money to lend to her to fund the appeal.

4.I arranged for $11,000 with the help of some friends and I put in about $1000.

5.The arrangement for the repayment was that Mrs O’Driscoll would repay the money when she could.

6.The friends that lent money did not know that Mrs O’Driscoll would get a lump sum compensation payment.

7.I arranged for the Lawyer because Mrs O’Driscoll was not able to speak English well.

8.When Mrs O’Driscoll’s compensation payment came through she repaid the money to me in amounts of $5000, $3000, $2000 and $1000 each paid on different days.

9.I was grateful to receive the money back because I was ill and needed the money.

10. My friends were also grateful to receive their money back.”

19.     In her oral evidence Mrs McGuinness said that, when she arranged for the sum of $11,000 to be paid to solicitors for the purpose of funding an appeal against conviction on behalf of Mrs O’Driscoll’s son, she knew that Mrs O’Driscoll would be “getting some money” in the future although she did not know the details. She added that she knew that “some day” Mrs O’Driscoll would pay her back.

20.     Asked whether it was necessary for Mrs O’Driscoll to repay the whole amount of $11,000 at once, Mrs McGuinness said that she needed the $1,000 which she had lent to be repaid immediately in order to pay for an operation, and that when she told her friends, who had also lent some money, that Mrs O’Driscoll had received a pay-out, they said that it would be “nice” if they could get their money back. She added that one friend in particular was pressing for the repayment of her money. She said that Mrs O’Driscoll paid her the full amount of $11,000 in 4 cash instalments of $5,000, $3,000, $2,000 and $1,000 in late September 2005. She said that when she received each instalment she repaid her friends in cash.

Other evidence

21.     Included in the T documents are the following:

·   documents verifying that a total sum of $11,000 was received by a firm of solicitors from Mrs McGuinness in the matter of Jon O’Driscoll in January 2005 ($9,000) and May 2005 ($2,000) (T17, pp 69-74);

·   a letter dated 16 September 2005 from the firm of solicitors which acted for Mrs O’Driscoll in her workers’ compensation matter stating that their costs and disbursements of $18,476.25 together with other amounts totalling $4,770.33 had been deducted from the total settlement amount of $40,000, resulting in a balance payment to her of $16,753.42 (T17, pp 78-79).

22.     There is also material in evidence before the Tribunal verifying that Mrs O’Driscoll also received a refund payment of $4,000 from the Health Insurance Commission on 9 January 2006 (Exhibit A1, p 42).

Analysis and Findings

23. The “special circumstances” discretionary power conferred by s 1184K(1) of the Act and its statutory predecessors has been considered in numerous decisions of the Federal Court and of the Tribunal. The tenor of those decisions is that, before it may become appropriate to exercise that discretionary power, the circumstances of the particular case must be special, in the sense of unusual, uncommon or exceptional, such that the application of the relevant “compensation recovery” provisions in Pt 3.14 of the Act will produce a result that is, in relation to the person concerned, unjust, unfair, unreasonable or otherwise inappropriate, having regard to the purpose or object of Pt 3.14 of the Act: see, for example Re Ivovic and Director-General of Social Services (1981) 3 ALN No 61 at pp N96-N97; Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3; Secretary, Department of Social Security v Smith (1991) 30 FCR 56 at 58-63; Haidar v Secretary, Department of Social Security (1998) 28 AAR 288 at 296-297.

Are there “special circumstances”, for the purposes of s 1184K(1) of the Act, in Mrs O’Driscoll’s case?

24. Having regard to the material before it, the Tribunal finds that the following circumstances of Mrs O’Driscoll’s case are sufficiently extraordinary that they may reasonably be regarded as “special circumstances” for the purposes of s 1184K(1) of the Act:

·   in addition to her work-related right arm injury, Mrs O’Driscoll suffers from ongoing anxiety and depression which have been exacerbated by:

-the loss of her family home which was sold by reason of economic necessity in April 2004;

-her eldest son’s being convicted (unjustly, in her opinion) of attempted murder and sentenced to 2 years’ imprisonment in October 2004;

-her twin sons’ being convicted of drug offences and sentenced to imprisonment in January 2005;

-her protracted workers’ compensation case;

·   Mrs O’Driscoll also suffers from an abnormal liver, diabetes (type 2), obesity, paronychia and psoriasis;

·   Mrs O’Driscoll is, by reason of her poor physical and mental health, totally incapacitated for work (see Dr Oehlers’ letter of 14 February 2006 set out in paragraph 17 above);

· Mrs O’Driscoll received a “lump sum compensation payment”, within the meaning of ss 1169 and 1170 of the Act, in the amount of $40,000 in September 2005 but, after the deduction therefrom of legal costs and disbursements ($18,476.25) and other necessarily incurred expenses, she subsequently received a net total amount of $20,753.42;

·   the abovementioned sum of $20,753.42 actually received by Mrs O’Driscoll was quickly spent on fully repaying the abovementioned amount advanced by Mrs McGuinness ($11,000) and on paying outstanding liabilities, debts and living expenses;

·   Mrs O’Driscoll has no substantial assets, other than a 2000 model Toyota Corolla motor vehicle;

·   Mrs O’Driscoll has, since spending her compensation payment, been totally dependent on social security payments and financial support from the St Vincent de Paul Society in order to survive;

·   Mrs O’Driscoll’s only immediate family members in Australia are her 3 sons (who are in prison) and she has no other family support in Australia.

Is it appropriate, having regard to the “special circumstances” of Mrs O’Driscoll’s case, to treat the whole, or part, of her compensation payment as not having been made?

25. The Tribunal notes at the outset that legal costs and disbursements and other necessary expenses in relation to Mrs O’Driscoll’s workers’ compensation matter, which were deducted from her compensation settlement amount of $40,000 by her solicitors, accounted for nearly half of that amount, and that Mrs O’Driscoll in fact received only $20,753.42 net. In the Tribunal’s opinion, that extraordinary circumstance alone would make it appropriate to treat a substantial part of Mrs O’Driscoll’s gross compensation payment of $40,000 as not having been made, for the purposes of Pt 3.14 of the Act: see, for example, Re Secretary, Department of Family and Community Services and Guettler [1999] AATA 257; Re QX99C and Secretary, Department of Family and Community Services [1999] AATA 310; Re Barrington and Secretary, Department of Employment and Workplace Relations [2005] AATA 1050.

26.     The Tribunal, furthermore, notes Dr Oehlers’ statement that, by reason of ill health, Mrs O’Driscoll has been, and continues to be, totally incapacitated for work, and the Tribunal infers that that state of affairs is likely to continue indefinitely. The Tribunal also notes that, since September 2005 when her compensation payment was spent, Mrs O’Driscoll has been struggling to survive financially and has been able to do so only with the help of friends and the St Vincent de Paul Society.

27. The Tribunal accepts that Mrs O’Driscoll was notified by Centrelink, by letter dated 14 September 2005, of the duration and effect of the relevant “preclusion period”, and that she, nevertheless, chose to pay the sum of $11,000 to Mrs McGuinness within 1-2 weeks after receiving the net compensation payment from her solicitors, although she may not have been legally obliged to do so. The Tribunal, however, accepts Mrs O’Driscoll’s evidence that, in the circumstances – namely, that Mrs McGuinness, who had raised the sum of $11,000 and paid it to solicitors in order to fund a criminal appeal for the benefit of Mrs O’Driscoll’s eldest son, was requesting repayment because she badly needed the money for an operation – she felt that she had to repay the full amount to Mrs McGuinness, and it regards her action in so doing as understandable in those circumstances. The Tribunal also accepts Mrs O’Driscoll’s evidence that, at that time, she did not think about how she would be able to survive without social security payments during the preclusion period and that, furthermore, she did not fully understand the implications of the preclusion period. In accepting that evidence, the Tribunal notes that Mrs O’Driscoll was suffering from ongoing anxiety and depression and the Tribunal is prepared to infer therefrom that she was not in a fit mental state to give proper consideration to the effect of the preclusion period on her financial situation. In short, although Mrs O’Driscoll’s expenditure of the net compensation amount she received in September 2005 may objectively be regarded as imprudent, it was nevertheless, in the Tribunal’s opinion, understandable and not unreasonable in the circumstances, and, accordingly, the Tribunal does not regard that consideration as militating against a favourable exercise of the discretionary power conferred by s 1184K(1) of the Act in her case.

28.     Having regard to the special circumstances of Mrs O’Driscoll’s case, in particular:

·   the disproportionately large proportion of her lump sum compensation payment that was comprised by legal costs and other related necessary expenses;

·   by reason of ill health, comprising both physical and mental ailments, she has been, and continues to be, totally incapacitated for work;

·   she has no substantial assets (other than a 2000 model small car) and since September 2005 she has been, and continues to be, totally dependent on social security payments and occasional financial assistance from friends and the St Vincent de Paul Society in order to survive;

·   since January 2005 she has had no available family support in Australia (her only 3 children having been imprisoned in October 2004 and January 2005);

the Tribunal regards it as appropriate to treat the whole of Mrs O’Driscoll’s compensation payment of $40,000 as not having been made, for the purposes of Pt 3.14 of the Act.

Decision

29.     For the above reasons, the Tribunal affirms the decision under review.

I certify that the 29 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President S D Hotop

Signed:         .........[Sgd S da Motta]...............................
  Associate

Date of Hearing                   15 August 2006
Date of Decision                   7 September 2006

Representative of the Applicant       Mr P Maishman

Legal Services Branch, Centrelink

Representative of the Respondent           Ms M Beaney
  St Vincent de Paul Society