Paule; Department of Family and Community Services
[2000] AATA 518
•27 June 2000
DECISION AND REASONS FOR DECISION [2000] AATA 518
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V1999/1384
GENERAL ADMINISTRATIVE DIVISION )
Re SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Applicant
And JOEL PAULE
Respondent
DECISION
Tribunal Miss E. A. Shanahan, Member
Date27 June 2000
PlaceMelbourne
Decision The Tribunal sets aside the decision under review. The Tribunal finds that special circumstances exist (section 1184 of the Social Security Act 1991). The respondent's compensation payments are to be disregarded in total as he has yet to, and may never, receive compensation payments for loss of earnings. There is, as of the date of hearing, no lump sum preclusion period. As a result, the Department should repay the respondent the sum of $29,406.34 termed "compensation affected payments".
........(Sgd) E. A. Shanahan..........
Member
CATCHWORDS
SOCIAL SECURITY – newstart allowance and disability support pension – effect of common law compensation payments for loss of earnings – failure to receive any compensation payments for loss of income due to incurred legal costs – state of health such to preclude input into common law litigation – appointment of litigation guardian – severity of ill health, including cerebral lupus erythematosis – special circumstances in accordance with section 1184 of the Social Security Act 1991 – special circumstances such as to negate both the preclusion period and negate payment of any refund to the department
Social Security Act 1991 ss. 17, 23, 1163, 1165, 1174, 1184
Secretary, Department of Social Security v a'Beckett (1990) 26 FCR 349
Beadle v Secretary, Department of Social Security (1985) 60 ALR 225
Re Robinson and Secretary, Department of Family and Community Services (1999) 29 AAR 274
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Re Secretary, Department of Social Security and Haining AAT 7982, 16 April 1992
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Nixon and Secretary, Department of Social Security (1998) AAT 13022, 26 June 1998
Re Judd and Secretary, Department of Social Security AAT 10353, 9 August 1995
REASONS FOR DECISION
27 June 2000 Miss E. A. Shanahan, Member
The Secretary of the Department of Family and Community Services ("Department") seeks review of the decision of the Social Security Appeals Tribunal ("SSAT") dated 22 October 1999. The SSAT set aside the decision of the primary decision-maker and recalculated the compensation preclusion period as starting from the 16 May 1993. The applicant sought that the decision of the SSAT be set aside and the primary decision reinstated. The primary decision was made on 16 January 1997. This estimated a preclusion period from 21 November 1994 to 4 June 2000 based on an average weekly earning figure of $569.20. The Department requested the respondent's solicitors direct their client to refund the amount of $11,275.81 forthwith. On 19 June 1998 the respondent was advised of a recalculation of the recoverable amount and preclusion period. The recoverable amount was stated to be $29,406.34. The preclusion period had been calculated from 21 November 1994 to 28 July 2002.
At the hearing before this Tribunal on 2 March 2000 the applicant was represented by Mr Michael Todd, an advocate of Centrelink and the respondent was represented by Mr Michael Scarfo of counsel. The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. The applicant provided details of the respondent's employment with Far Horizons Pty Ltd, trading as McDonalds Family Restaurants ("McDonalds"), between the period of 4 July 1993 to 3 November 1994 (Exhibit A1). No information was provided by the applicant nor the respondent regarding the respondent's state of health and any information the Tribunal could glean came from the Supreme Court appeal decision dated 23 January 1997 and from evidence given by the respondent at the hearing. The Tribunal finds this lack of information worrying. Given that the respondent was in receipt of a disability support pension ("DSP") medical certification of his condition prior to approval of payment of that pension should be on file. The Tribunal must assume that details contained in a Departmental file have not been made available to this Tribunal.
Following the hearing, the Tribunal received a request from the respondent's instructing solicitors, Michael D. Ruse of 155 Queen Street, Melbourne, that a full medical report be submitted to the Tribunal by the respondent's treating doctor, Dr Ian Main. A copy of this request was sent to Mr Todd and as no objection was received, the Tribunal subsequently accepted the report of Dr Main, dated 3 April 2000. A copy of this report was also sent to the applicant and no advice has been received from the applicant challenging the admission of this report, in evidence before the Tribunal.
The Tribunal requested from the applicant that the respondent's work history following the episodes of injury be sought from McDonalds Fountaingate and Endeavour Hills. This report was subsequently forwarded to the Tribunal and received on 14 March 2000.
BackgroundThe respondent, on 5 April 1992, was the victim of an armed robbery at McDonalds restaurant at Endeavour Hills. At the time he was aged 17 and was studying for his Victorian Certificate of Education in Year 12 and working at McDonalds on what is termed the "graveyard shift" i.e. late evening and early morning hours. On 16 May 1993, whilst accompanying the Manager of this McDonalds restaurant for the process of banking the night's takings and in addition being driven home by the Manager, there was a further armed hold-up. At the time of this second armed hold-up the respondent was aged 18.
Dr Main's report, dated 3 April 2000, states that in 1992 the respondent began making multiple attendances to a variety of general practitioners with symptoms of abdominal and joint pains, fever, sweats, headaches and insomnia. Dr Main is of the opinion that many of these symptoms were anxiety-related but many were far more significant and led eventually to a diagnosis of systemic lupus erythematosis ("SLE"). Dr Main also indicates that SLE is a stress-sensitive disease of auto-immune origin which can be precipitated by episodes such as those experienced by the respondent.
The respondent pursued litigation in the County Court of Victoria for loss of earnings and general damages arising from the injuries sustained on 5 April 1992 and 16 May 1993. When this matter came to hearing on 19 December 1996, the writ having been filed on 24 November 1995, the respondent as a result of his ill-health was unable to appear and was represented by a litigation guardian, his father. The hearing before a judge and jury of six, resulted in judgement for the plaintiff Mr Paule in the sum of $160,800.00 for pecuniary loss damages with interest of $4,000.00, a total of $164,800.00. General damages for pain and suffering were awarded in the sum of $75,000.00 with interest of $2,000.00. During the course of the hearing an offer of compromise had been made by the defendant and this offer was not accepted by the litigation guardian. The respondent Mr Paule therefore incurred all the parties costs dating from 10 December 1996 until the decision of 19 December 1996.
As there is no evidence to the contrary the Tribunal concludes the respondent had no input into the County Court proceedings for compensation.
Judgement by the County Court in favour of the respondent was made on 19 December 1996 and the defendant in that hearing was directed to pay the sum of $241,800.00 to the Registrar for the benefit of Mr Paule. Orders were also given regarding costs which were to be deducted from this sum by the Registrar.
The respondent's then solicitors, Clements Hutchins & Company notified the Department of Social Security (now Department of Family and Community Services) of the results of the County Court litigation on 10 January 1997 and requested a calculation of the amount repayable to the Department, if any. The respondent had been paid a newstart allowance from the period 8 December 1994 to 19 April 1996 and a disability support pension was granted on 16 May 1996. Disability support pension was terminated on 28 May 1998.
In response to the letter from Clements Hutchins & Company, the Department issued an advice that the preclusion period had been calculated to run from 21 November 1994 to 4 June 2000 and requested prompt repayment of $11,275.81 the sum that had already been paid in the form of newstart allowance.
On 23 January 1997 the State Trustees informed the Department that the respondent was appealing the County Court judgement and requested that Mr Paule's pension payment be continued until a final decision was made in relation to the matter. The appeal process was initiated by Mr Paule's litigation guardian and the funds held by the State Trustee were frozen until the appeal had been heard. A cross-appeal was also lodged by the defendant in this litigation to the Court of Appeal of the Supreme Court.
The appeal was heard on 18th and 19th May 1998 by the Court of Appeal, constituted by Winneke P., Brooking and Phillips, JJ. Judgement was delivered on 19 May 1998. Once more the respondent in this matter, Mr Paule, was represented by his litigation guardian, Wenceslao Paule. The judgement of Winneke P. provides the most detailed description of the respondent's injuries and their course until 1998. The Court noted that following the 1992 event, the respondent was diagnosed as suffering from post traumatic stress disorder. The 1993 event compounded the stress imposed by the 1992 event. The Court of Appeal also noted that during the course of 1994 the respondent developed a number of physical symptoms which led to the diagnosis of SLE in early 1995. The Court noted that a reputable body of medical opinion holds the belief that abnormal stress and stresses can play a role in the development of this disorder.
The Court of Appeal delineated a number of procedural problems which had occurred in the conduct of the litigation. These included the running in tandem of actions in respect of the two separate robberies, there being no steps taken to consolidate the two actions. Between the two events, the Accident Compensation (Workcover) Act 1992 had come into effect and put in place specified limits of compensation. In addition, the defendant, Far Horizons Pty Ltd, had in the County Court hearings denied liability for the 1993 event on the basis that it did not arise out of or in the course of employment and employment was not a significant contributing factor to the injury. It would appear that an offer of compromise between the parties relating to the 1992 event was decided in January 1996 but did not come to fruition as litigation with respect to the 1993 event was afoot.
On 18 September 1996 the appellant's (Mr Paule) counsel had sought leave of Judge Neesham in the County Court to amend the Statement of Claim. This hearing was adjourned until 30 October 1996 when Judge Jones granted leave to file and serve an amended Statement of Claim. At this Direction Hearing the respondent's (Far Horizon's) solicitors sought leave to withdraw as the respondent's legal representatives and this application was granted. The new solicitors for Far Horizons (Messrs. Garland Hawthorn Brahe) then sought and obtained leave to join the respondent's Workcover insurer HIH Winterthur Workers Compensation (Vic) Ltd ("HIH") and the respondent's public liability insurant FAI General Insurance Company Limited ("FAI").
The action for hearing commenced before Judge Wodak on 3 December 1996. The respondent sought to have the amended Statement of Claim struck out on the basis that it did not disclose any relevant cause of action and this was acceded to on 5 December 1996 by Wodak J. The effect of this ruling was that the action proceeded on the basis as originally pleaded. HIH assumed conduct of the proceedings on behalf of the respondent. FAI was no longer involved in the matter but requested its costs be paid. Following the County Court decision of 19 December 1996, HIH applied to the Trial Judge and the Order was made that the appellant, Joel Paule, by his litigation guardian, pay the respondent's costs of the third party proceedings and the costs of joining FAI. Mr Paule was also ordered to pay the respondent's costs of the amendment sought in September 1996 and subsequently struck out on 5 December 1996.
Following expert medical testimony at the County Court hearing, Wodak J. directed the jury that they should accept that the SLE had been precipitated by the 1992 event and that damages should be awarded to the appellant, Joel Paule, for such adverse consequences as the jury found attributable to the 1993 event.
The grounds of appeal before the Court of Appeal of the Supreme Court were that the primary judge had erred in ruling that Mr Paule should be precluded from contending that the 1993 event was a cause as distinct from an aggravation of his lupus condition, and secondly, that the trial judge had wrongly exercised his discretion in ordering the appellant to pay the respondent's costs relating to the third party proceedings and indemnification of the respondent with respect to FAI's costs.
The Court of Appeal dismissed the first grounds of appeal on the basis that the appellant's senior and highly experienced counsel had "sniffed the wind" and made what appeared to be a sound tactical decision. The second ground of appeal was successful, the Court of Appeal finding that the respondent had persisted in denying liability until the last moment and once liability was admitted it was clear that only the worker's compensation insurer should be involved. As a result, Mr Paule was not liable for the costs of the third party proceedings or the cost of the application before Judge Wodak on 17 August 1997. With respect to that latter application each party was ordered to pay its own costs, the Court of Appeal awarded the appellant 25% of their costs of the Supreme Court appeal.
On 22 May 1998 Clements Hutchins & Co, solicitors for Joel Paule, advised the Department of the Court of Appeal findings and decision and requested calculation of the preclusion period and the amount repayable. The Department responded in a letter to Mr Paule. This letter advised that the preclusion period started on 21 November 1994 and ends on 28 July 2002. This was calculated under the Income Test of $410.00 a week for a single person. The earlier preclusion period had been calculated on the basis of $569.20 a week, that being the average weekly earnings at that time. A repayable debt of $21,413.60 was advised. Clements Hutchins & Co had previously advised (9 June 1998) that Mr Paule's total legal costs were estimated to be approximately $150,000.00 although attempts were being made to negotiate various fees for a lesser sum.
By letter dated 28 May 1999, Clements Hutchins & Co sought the payment of unrecoverable solicitor/client costs in the sum of $62,956.51 from the Senior Master's Office of the Supreme Court. On 1 June 1999 the respondent, Mr Paule, advised the Department that it appeared likely that following the payment of legal fees and monies recoverable by the Department, he would be left with approximately $40,000.00 from his original award of $164,800.00. This $40,000.00 would be all that was available to him during the preclusion period lasting until July 2002. As the income test currently applies $410.00 per week for a single person, the sum of $40,000.00 would amount to a preclusion period of 97½ weeks.
On 22 December 1999 a delegate of the Department (Lori Mulcahy, ASO5 Comp) confirmed the preclusion period would not end until 28 July 2002. This decision also stated that the accumulation of extensive legal bills could not be contended to be unforseen or highly unusual nor were the client's present circumstances exceptional, extreme or highly unusual. This decision concluded that the client is not void of a source of income and is not verging on destitution. This decision was also advised by Vincent Loiacono in a letter dated 8 June 1999.
The respondent, Mr Paule, requested the matter be referred to an Authorised Review Officer ("ARO"). This decision was affirmed by an ARO on 7 July 1999. The SSAT, at a hearing conducted on 22 October 1999, determined that the preclusion period was effective from 16 May 1993. They directed the Department to recalculate the exclusion period based on this date. They did not find any special circumstances which might negate the exclusion period or waive the debts estimated to be owed by Mr Paule to the Department.
It would appear that the SSAT hearing was the first hearing of any kind in which the respondent, Mr Paule, gave evidence in person. Mr Paule described the episodes of 1992 and 1993 when he was the victim of a hold-up at his place of work. He advised that he was diagnosed with SLE on 13 January 1995 and was also diagnosed with post traumatic stress disorder. He confirmed the compensation settlement of $241,800.00 of which $164,800.00 was for economic loss. He also confirmed that he had been in receipt of jobsearch allowance, newstart allowance and disability support pension during the period 8 December 1994 to 28 May 1998. It would appear that he gave evidence that his prognosis from his SLE was good but that he would require immuno-suppressive drugs for life. He gave evidence that he believed that he would be able to live normally but could not live independently at the time of the hearing because of his organic disease and his continuing post traumatic stress disorder. He also advised the SSAT that he owed approximately $8,000 to Medicare and that it was his father acting as litigation guardian who had decided to appeal the County Court decision to the Supreme Court. Mr Paule stated that he was too sick at the time to make any decisions in that respect.
The Evidence Before this TribunalThe respondent, Mr Paule, gave evidence before the Tribunal. He stated he had recently obtained a job as a labourer and that this was initially a one month contract which he hoped would continue for a longer period. He described his state of health as "stable". He had found it necessary to work because he was unable to live on the payment of $270.00 a week. He continued to live with his parents as he could not afford to live independently. He had made a request to the Senior Master of the Supreme Court for funds to buy a car and also for funds to pay for a holiday but these had been rejected. Prior to the first armed robbery on 5 April 1992, Mr Paule indicated that he had been working the so-called "graveyard shifts" four or five times per week and up to 30 hours per week. He believed that his hours of work had altered after the first incident on 5 April 1992. After this incident he said he stopped work for three to four weeks and, on resuming, did less shifts and shorter hours and no longer did the "graveyard shift". He believed his working hours were further decreased after the second episode. Whilst he occasionally worked weeks of more than 20 hours after May 1993, he felt these were rare occasions.
The Tribunal asked Mr Paule whether or not he had had any success in obtaining a job or undertaking training whilst on a newstart allowance? Mr Paule indicated that he had had no success or training and had only recently started to look for work himself. He felt that his current employment was unlikely to extend beyond the end of June.
Again in answer to questions posed by the Tribunal, Mr Paule stated that he was currently taking cyclosporin and prior to that had been on high dose steroids. Whilst he had stated his health was "stable" he agreed that he was nowhere as well as he had been five to six years previously. This was because he was suffering frequent infections and had recently been in hospital for a period of six months with pneumonia. In re-examination by Mr Scarfo, counsel for the respondent, Mr Paule indicated that his present employer did not know about his state of health and if he did, he would lose his job immediately. Had he the financial backing, Mr Paule indicated that he would like to finish the marketing course he had begun before he became ill. Mr Paule had stopped his marketing course six months after he commenced it in 1993. He had, however, been able to do one subject a week for one semester in 1999. He agreed he had managed to complete his VCE in 1992.
It was obvious to the Tribunal that Mr Paule was not well. The Tribunal observed his pallor and Cushingoid features that accompany high dose steroid therapy. It was for this reason that the Tribunal subsequently allowed the request of the respondent's solicitors that further medical information be sought from Mr Paule's treating nephrologist, Dr Main.
The Relevant LegislationThe relevant legislation is contained in sections 17, 23, 1163, 1165, 1174 and 1184 of the Social Security Act 1991 (Commonwealth) ("the Act"). The term compensation is defined pursuant to section 17(2) of the Act. It reads:
"17(2) 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) that is:
(e) made wholly or partly in respect of lost earnings or lost capacity to earn; and
(f) made either within or outside Australia.
Note: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law."
Section 17(2)(a) refers to a payment of damages and section 17(2)(e) defines those damages as those made wholly or partly in respect of lost earnings or lost capacity to earn. Whilst Mr Paule has been awarded damages for loss of earnings or capacity to earn in the sum of $164,800.00, this sum has been held in trust by the State Trustee and the funds are controlled by the Supreme Court Registrar. There is no definite evidence before this Tribunal as to whether the respondent has been paid any monies from these loss of earnings damages. The respondent has estimated that he may, in the best scenario, receive $40,000.00 from this total of $164,800.00 after all costs have been paid.
Section 17 of the Act defines compensation affected payments:
"17(1) In this Act, unless the contrary intention appears:
…
compensation affected payment means:
(aa) an age pension; or
(a) a disability support pension; or
(b) a parenting payment; or
(c) a social security benefit; or
(da) * * * * *
(e) a disability support wife pension; or
(f) a carer payment; or
(fa) * * * * *
(g) a special needs disability support pension; or
(h) a special needs disability support wife pension; or(i) mature age allowance; or
(j) mature age partner allowance; or
(k) a former payment type;"Section 1163 provides that compensation may affect social security payments:
1163(1) If a person is or may be entitled to or receives compensation, payments of a compensation affected payment to the person or the person's partner might be affected under this Part.
Note: For compensation affected payment see subsection 17(1).1163(2) If the person is or may be entitled to compensation and does not take reasonable action to claim or obtain the compensation, the compensation affected payment might not be payable to the person.
1163(3) If the compensation is a lump sum compensation payment, the compensation affected payment might cease to be payable for a period (based on the amount of the lump sum) and some or all of the payments of the compensation affected payment might be repayable.
Note 1: Under section 1163A, certain lump sum payments may be treated as though they were received as periodic payments.
Note 2: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law.
1163(4) If the compensation is in the form of a series of periodic payments, the rate of the compensation affected payment might be reduced for the period for which the payments are received.
Note 1: Under section 1163A, certain lump sum payments may be treated as though they were received as periodic payments.
Note 2: Under section 1163B, a person may be treated as having received compensation that the person would have received but for the effect of a State or Territory law.1163(5) Subject to subsections (5A), (6), (7), (8), (8A), (10) and (11), payments of a compensation affected payment will only be affected under this Part if:
(a) the compensation is received on or after 1 May 1987; and
(b) either:(i) if the compensation affected payment is a rehabilitation allowance under the 1947 Act - the rehabilitation allowance is payable in place of a compensation affected payment that was claimed on or after 1 May 1987; or
(ii) in any other case - the claim for the compensation affected payment was made on or after 1 May 1987.
1163(5A) The following allowances are excluded from the operation of subsection (5):
(a) sickness allowance;
(b) partner allowance;
(c) job search allowance if, under Subdivision BAA of Division 1 of Part 2.11, the recipient of the allowance is not required to satisfy the activity test;
(d) newstart allowance if, under Subdivision BA of Division 1 of Part 2.12, the recipient of the allowance is not required to satisfy the activity test.1163(6) Despite subsection (5), payments of a compensation affected payment may be affected under this Part if it is:
(a) a sickness benefit under the 1947 Act; or
(b) a rehabilitation allowance under the 1947 Act payable in place of a sickness benefit under the 1947 Act.
Note 1: Compensation received before 1 May 1987 can affect a person's sickness benefit under the 1947 Act, or a person's rehabilitation allowance under the 1947 Act if it was paid instead of a sickness benefit - see clause 25A of Schedule 1A.
Note 2: Subsections (7), (8), (8A) and (10) further limit the effect of this Part on sole parent pension, carer payment, mature age allowance, mature age partner allowance and partner allowance.1163(7) A sole parent pension or a pension PP (single) will only be affected under this Part if:
(a) the compensation is received on or after 20 March 1992; and
(b) the claim for the pension was made on or after 20 March 1992.1163(8) The amendments of this Part relating to carer pensions made by the Social Security Legislation Amendment Act (No. 2) 1992 affect carer pensions only if:
(a) the compensation is received on or after 1 January 1993; and
(b) the claim for the pension is made on or after 1 January 1993.
1163(8A) A mature age allowance or mature age partner allowance will only be affected under this Part if:
(a) the compensation is received on or after 20 March 1994; and
(b) the claim for the allowance was made on or after 20 March 1994.
1163(9) This Part operates in certain specified circumstances to affect a person's compensation affected payment because of compensation received by the person or the person's partner. This Part is not intended to contain any implication that, in addition to those specified circumstances, there needs to be some connection between the circumstances that give rise to the person's qualification for the payment and the circumstances that give rise to the person's or the partner's compensation.
Note: See the Note to subsection 1184 (2) for more background information.1163(10) A partner allowance will only be affected under this Part if:
(a) the compensation is received on or after 20 September 1994; and
(b) the claim for the allowance is made on or after 20 September 1994.1163(11) An age pension will only be affected under this Part if:
(a) the compensation is received on or after 20 March 1997; and(b)the person's provisional commencement day for the age pension is on or after 20 March 1997."
Section 1165 of the Act provides for the method of calculation of a preclusion period consequent upon receipt of compensation:
"1165
…(5) If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:
(a)begins on the day after the last day of the periodic payment period; and
(b)ends after the number of weeks worked out under subsections (8) and (9).
Note: For periodic payments period see section 17.
(6) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the new lump sum preclusion period is the period that:
(a)begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and
(b)ends after the number of weeks worked out under subsections (8) and (9).
(7) If neither subsection (5) nor (6) applies, the new lump sum preclusion period is the period that:
(a)begins on the day on which the loss of earnings or loss of earning capacity began; and
(b)ends after the number of weeks worked out under subsections (8) and (9).
…"
Section 1165(7) was inserted by Act No. 84 of 1996 and applies to compensation lump sum payments received after 20 March 1997.
The County Court judgement awarding damages for loss of earnings to the respondent was made on 19 December 1996. The Court directed that the sum of $164,800.00 representing loss of earnings be paid to the State Trustee on behalf of Mr Joel Paule by 2 January 1997. Thus the decision awarding damages and the payment of such damages into a trust fund on behalf of Mr Paule occurred before this amendment to the Act. Any preclusion period should have been calculated using the formula in existence prior to 20 March 1997, namely, that the preclusion period is calculated by dividing the lump sum by the average weekly earnings which at that time was $569.20. On that basis a preclusion period starting on 21 November 1994 (the day the respondent ceased all employment) would expire on 4 June 2000.
Section 1184 provides that some or all of an amount of compensation maybe disregarded by the Secretary if there are special circumstances proven in the case.
"1184 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.(2) If:
(a) a person receives or claims a compensation affected payment; and
(b) the person's partner receives compensation; and(c)the set of circumstances giving rise to the compensation are not related to the set of circumstances that give rise to the person's receipt of or claim for the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not in itself constitute special circumstances for the purposes of subsection (1).
Note: Subsection (2) is in response to comments made in the decision of the Administrative Appeals Tribunal in Re Secretary, Department of Social Security and Lee (S92/155) to the effect that the Social Security Act is aimed at reducing pensions in situations where a social security recipient's entitlement is somehow connected with the fact that the recipient's partner is in receipt of compensation payments and not wages."
The SSAT considered the case law relating to the meaning of the words "special circumstances" at some length and accepted the opinion of the AAT in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 as agreed by the Federal Court in Beadle v Director-General of Social Security (1985) 60 ALR 225 at page 230 wherein it was stated that the qualifying adjective (special) looks to circumstances that are "unusual, uncommon or exceptional". The SSAT concluded in Mr Paule's case that there were no special circumstances warranting reducing or cancelling the preclusion period. The SSAT did not consider at length his state of health.
Medical Evidence
The T documents do not contain any medical reports concerning the respondent. The Court of Appeal of the Supreme Court in its decision dated 19 May 1998 referred to some of the medical evidence given at the County Court hearing. This is contained in the T documents T20, pages 35 and 36. The Court of Appeal accepted that after the 1992 armed robbery a post traumatic stress disorder was diagnosed and that Mr Paule was able to return to his work and to complete his VCE studies. They noted that in 1994 he developed physical symptoms and in early 1995 was diagnosed as suffering from SLE. They also noted that this disorder affected the joints, kidney, heart and frontal lobe of the brain in Mr Paule.
The lack of medical evidence perturbed the Tribunal, particularly after the respondent had given evidence to the Tribunal regarding his state of health and his appearance at the Tribunal indicated that he was not well. For this reason the request made by his current solicitors, Michael Ruse, Solicitors, for leave to obtain a detailed report from Mr Paule's treating doctor was granted by the Tribunal and was not challenged by Centrelink. Dr Main's report, dated 3 April 2000, was received on 5 April 2000. Dr Main identified himself as one of Mr Paule's current treating specialists, Dr Main being a nephrologist. The other current treating specialists were Dr E. Moran, rheumatologist, and Dr M. Pinto, psychiatrist. Dr Main reported that at least another eight specialists had been involved in Mr Paule's treatment as had others during frequent hospital admissions. Mr Paule's medical problems had been diagnosed as post traumatic stress disorder, SLE, lupus nephritis and cerebral lupus. Following the two armed hold-ups of 1992 and 1993 Mr Paule developed a severe form of post traumatic stress disorder with severe anxiety and depression and periods of mania. The psychiatric disorder, according to Dr Main, had led to non-compliance with medications and medical attendances. Prior to 1992 Mr Paule experienced good health. In 1992 he developed numerous symptoms including abdominal and joint pains, fever and sweats, headaches and insomnia. In Dr Main's opinion some of these were anxiety related but some were also more significant and part of the symptom complex of SLE. According to Dr Main's report the diagnosis of SLE was made in 1993. A renal biopsy demonstrated Class 4 lupus nephritis with proteinuria, haematuria and renal impairment. Following the diagnosis of SLE Mr Paule was treated for 12 months with intravenous cyclophosphamide and oral prednisolone. He initially improved but a subsequent remission led to a change of therapy and oral cyclosporin was instituted with marked improvement in renal function. In either late 1993 or early 1994 the respondent developed cerebral lupus with impairment on neuro-psychiatric testing. An MRI confirmed the diagnosis of cerebral lupus and immuno-suppressive medication was increased. Cardiac involvement has been strongly suspected since the early stages of the disease. There is also clinical evidence of bowel and liver involvement although biopsies of these organs have not been performed. Disease activity involving the skin and joints has been evident. Throughout the period of treatment with immuno-suppressive agents the respondent has suffered intermittent infections ranging from cutaneous warts to a severe chest infection requiring six months hospitalisation.
Between 1998 and 2000 the respondent's SLE has been more stable but he has had to continue on oral cyclosporin and prednisolone along with medications for depression and anxiety. Dr Main was of the opinion that given the pattern of disease it was likely there would be further flares of the lupus and that Mr Paule would remain more susceptible to infection. It was felt that it was unlikely that he would be able to maintain full employment in the early and intermediate future.
Dr Main also detailed the side-effects of immuno-suppressive drugs, these being predominantly to reduce defences against infection. He also outlined the less frequent toxic level effects which may cause hepato-, nephro- and neuro-toxicity. He noted that the short-term effects of prednisolone can include depression, anxiety, agitation and irritability and the longer term effects are hypertension, osteoporosis, skin and capillary fragility, altered fat metabolism and altered glucose metabolism. Prediction as to prognosis was guarded although Dr Main felt the prognosis would improve with the passage of time provided there was no further major organ system involvement.
Submissions of the PartiesThe Secretary has applied for review of the decision of the SSAT on the basis that the SSAT had miscalculated the preclusion period in its decision of 22 October 1999. The SSAT had determined that the preclusion period should be calculated from 16 May 1993 and not 21 November 1994, the latter date being the one when the respondent ceased all employment. Mr Todd agreed with the SSAT decision that Mr Paule was subject to a preclusion period and that there were no special circumstances which would lead to any of the compensation payment being disregarded (Transcript page 4, line 24). In support of this contention Mr Todd had tendered the wages records for the respondent from 4 July 1993 until 27 November 1994 (Exhibit A1). He also undertook to obtain the records prior to 1 July 1993. These records indicate that the respondent, between 25 March 1991 and 30 June 1991, earned the sum of $534.94; from 1 July 1991 to 30 June 1992 he earned $7,076.83; between 1 July 1992 and 30 June 1993 the earnings were $7,282.72; and from 1 July 1993 to 30 June 1994 he earned the sum of $4,849.60. The respondent last worked for Far Horizons on 20 November 1994. The hours worked on a weekly basis prior to 4 July 1993 have not been provided. The second robbery occurred in May 1993. Hours of employment as provided by Far Horizons varied between five hours per week and 21½ per week until early October 1993. Thereafter the hours rarely exceeded double figures. This is reflected in the total earnings for the period 1 July 1993 to 30 June 1994 being $4,849.60. The respondent ceased all employment on 20 November 1994. These figures tend to support the SSAT decision that the loss of earning capacity commenced following the second event of 16 May 1993.
Counsel for the respondent, Mr Scarfo, argued that any preclusion period should commence on 5 April 1992 (the first event) or alternatively, 16 May 1993 (the second event). In addition, he submitted that special circumstances exist enabling all or part of the compensation payments to be disregarded pursuant to section 1184 of the Act. He submitted that the first armed robbery resulted in a loss of earning capacity due to agoraphobia, sleeplessness and nightmares, an inability to work the "graveyard shift" and the hours previously worked and that these effects were aggravated by the second armed robbery on 16 May 1993. Mr Scarfo argued that there were special circumstances which may reduce or negate any debt owing to the Department. This included the amount of money actually received by way of a lump sum compensation, that is that the cost of litigation should be taken into account in determining any preclusion period which may apply. He argued that it would be unjust, unreasonable and inappropriate not to consider the amount of money actually received by way of lump sum compensation. The legal costs in this case were in his opinion far in excess of what may be viewed as reasonable. This he felt amounted to exceptional circumstances in accordance with the findings of Re Secretary, Department of Social Security and Haining AAT 7982, 16 April 1992. Mr Scarfo advised that as of 23 February 2000 the balance of funds retained by the Senior Master of the Supreme Court for the respondent's benefit was $96,150.16 with outstanding solicitor's claims of $62,956.51.
Mr Scarfo did not address the issue of whether or not the respondent's severe illness would equate to special circumstances. He did however point out that during the litigation process the respondent was unwell and obliged to have a litigation guardian conduct the case for him. This, Mr Scarfo described as an unusual feature.
It should be noted that there is an error of the Transcript of the proceedings on page 8 from line 3 onwards until page 10, line 23. Transcript entry attributes all statements to Mr Todd. These were in fact made by Mr Scarfo.
The issues before the Tribunal(i) The basis of this application by the Secretary is that the SSAT erred in determining the preclusion period to date from 16 May 1993. The Secretary argued the preclusion period should commence on 21 November 1994. Should this Tribunal uphold the SSAT decision, then the preclusion period would date from 16 May 1993 and based on the lump sum compensation sum of $164,800.00 calculated on an average weekly earnings of $569.20 would expire on approximately 10 November 1998. However, the respondent has not received lump sum compensation in the amount of $164,800.00 and as things stood on the date of hearing, on 2 March 2000, the likely compensation lump sum payment was at the best $40,000.00. Applying the same formula, dated from 16 May 1993, the preclusion period would run until 21 September 1994 approximately. These calculations of preclusion period are examples of what might be the situation. Any final calculation of preclusion period would be a matter for the Secretary. It would also be subject to the final conclusion of this Tribunal as to whether a preclusion period applies.
The existence of special circumstances. The SSAT decision of 22 October 1999 determined there were no special circumstances (section 1184 of the Act) existing. The issues raised before this Tribunal by counsel, those arising from the evidence in the T documents and the evidence of the respondent Mr Joel Paule have raised the possibility of special circumstances in regard to:
(a)The conduct of all Workcover and common law litigation by a litigation guardian, namely Mr Paule's father, without any input from Mr Joel Paule;
(b)The standard of advice given to the litigation guardian by the then solicitors which has been detailed in the Court of Appeals Supreme Court decision of 19 May 1998 and also relates to procedural matters conducted by Mr Paule's barristers;
(c)The fees incurred in litigation process are substantial. They may be considered unusual and uncommon given the number of preliminary hearings, amendments sought and the subsequent striking out of approved amendments in the County Court. The wisdom of appealing to the Supreme Court, Court of Appeal, is also questionable. Fees generated by these procedures have, it would appear, reduced the compensation payment for loss of earnings from $164,800.00 to approximately $40,000;
(d)The state of health and severity of underlying illness of the respondent.
Special Circumstances
Both the Federal Court and the AAT have looked at the meaning of the term "special circumstances" on numerous occasions. In Beadle (supra) the Full Federal Court held that special circumstances must be unusual, uncommon or exceptional circumstances.
The major relevant areas that have been considered as arguably supporting a finding of special circumstances have been:
existing assets;
the effect of legal advice and legal fees;
financial hardship;
the presence of ill health.
Whilst the decisions at both the AAT level and the Federal Court have varied according to individual circumstances, in the majority of decisions the existence of one of these factors alone has not been considered sufficient to find special circumstances. In addition, these cases have identified examples of conduct militating the finding of special circumstances. The majority of these have related to the provision of loans to dependants, money spent on presents, drinking and gambling, excessive spending on overseas travel, the purchases of automobiles and unwise investments.
The respondent has no existing assets. His request to the Senior Master of the Supreme Court for monies to purchase an automobile and for money to pay for an overseas trip have been refused. There would not appear to be any militating factors in this case.
In contrast, there are special circumstances arising from a combination of factors in Mr Paule's case. His Workcover and common law litigation were conducted by a litigation guardian as Mr Paule was too ill to have any input into these matters. It appears that the litigation guardian acted solely on legal advice which eventually resulted in legal fees amounting to approximately $150,000.00 (total loss of income being $164,800.00). The entire litigation process was complex and fraught with procedural problems as detailed in the Court of Appeal decision.
Dr Main has reported that the respondent suffers from a severe post traumatic stress disorder with ongoing anxiety and depression, necessitating frequent admissions to psychiatric units. In addition the respondent suffers from organic brain disease having been shown to have frontal lobe changes consistent with cerebral SLE. Medical evidence suggests that the respondent would not be capable of making decisions regarding litigation himself nor would he be in a position to pursue full-time employment or training.
Thus the weight of the evidence points to most exceptional circumstances which meet the requirement of section 1184 of the Act. These very unusual circumstances lead the Tribunal to conclude that the decision of the SSAT, dated 22 October 1999, should be set aside, that there is no lump sum preclusion period operating and as provided by section 1184(1) the whole of the compensation payment should be treated as not having been made.
I certify that the fifty (50) preceding paragraphs are a true copy of the reasons for the decision herein of
Miss E. A. Shanahan, Member
Signed: .....................................................................................
Personal AssistantDate/s of Hearing 2 March 2000
Date of Decision 27 June 2000
Solicitor for the Applicant Mr M. Todd, Centrelink
Counsel for the Respondent Mr M. Scarfo
Solicitor for the Respondent Michael D. Ruse
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