Quoc Kien Ly and and Secretary, Department of Social Services
[2015] AATA 57
•2 February 2015
[2015] AATA 57
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2014/0762
Re
Quoc Kien Ly
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
File Number(s) 2014/0789 Re
Ai Que Lu
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Ms N Isenberg, Senior Member
Date 2 February 2015 Place Sydney The Tribunal affirms the decision under review.
...............................[sgd].........................................
Ms N Isenberg, Senior Member
CATCHWORDS
SOCIAL SECURITY – Compensation – preclusion period – whether special circumstances existed – financial circumstances – need for modified vehicle – large family – discretion exercised by Social Security Appeals Tribunal to disregard part of compensation payment – whether Tribunal should further exercise discretion – decision affirmed
LEGISLATION
Social Security Act 1991 ss 17, 1164, 1173, 1178, 1179, 1184, 1184K
CASES
Beadle v Director-General of Social Security (1985) 7 ALD 670
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Haidar v Secretary, Department of Social Security (1998) 52 ALD 255
Kirkbright v Secretary, Department of Employment and Workplace Relations (2000) 65 ALD 211
Re Colaiacolo and Secretary, Department of Social Security [1985] AATA 91
Re Davy v Secretary, Department of Employment & Workplace Relations [2007] AATA 1114
Re Ivovic and Director-General of Social Security (1981) 3 ALN N95
Secretary, Department of Social Security v Ellis (1997) 46 ALD 1
Secretary, Department of Social Security v Hales (1998) 82 FCR 155
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570Secretary, Department of Social Security v Smith (1991) 30 FCR 56
REASONS FOR DECISION
Ms N Isenberg, Senior Member
2 February 2015
The decision under review is the decision made by the Social Security Appeals Tribunal (“SSAT”) on 6 December 2013. The SSAT set aside the decisions made by Centrelink on 20 September 2013 to raise a compensation charge in the combined amount of $62,642.25 ($37,292.35 for Mr Ly and $25,349.90 for Mrs Lu). In substitution, the SSAT decided that due to special circumstances, so much of the compensation be disregarded so as to reduce the combined charge to $50,000.
BACKGROUND
Mr Ly and Mrs Lu are married with 6 children. In 2001 and 2007 Mr Ly sustained workplace injuries.
On 10 March 2010, Allianz Australia Worker’s Compensation (NSW) Limited (“Allianz”) faxed Centrelink a notice advising that Mr Ly’s claim for worker’s compensation settled on 24 February 2010 for $27,900 and that weekly benefits were not payable at that time.
Mr Ly then applied for and received the following social security benefits:
(a)Newstart Allowance (‘NSA’) from 19 March 2010 to 16 September 2010; and
(b)Disability Support Pension (‘DSP’) from 17 September 2010 to 31 December 2012.
Mrs Lu was paid carer benefits in respect of her husband while he was paid NSA and DSP.
On 16 May 2013, Allianz informed Centrelink that it had been ordered to pay Mr Ly wages for the period 26 February 2010 to 31 December 2012 at a gross weekly rate of $678.35 per week. Allianz enquired whether Centrelink had a charge in relation to this. Centrelink calculated and raised a charge of $37,292.35 for Mr Ly and $25,349.90 for Mrs Lu. Centrelink sent a compensation recovery notice to Allianz and informed Mr Ly and Mrs Lu’s solicitors about the charge.
Both Mr Ly and Mrs Lu sought internal review of the decision by a Centrelink Authorised Review Officer (“ARO”). The decision was affirmed.
Mr Ly and Mrs Lu then applied for review by the SSAT. On 6 December 2013, the SSAT set aside Centrelink’s decision and substituted a decision that, due to special circumstances, so much of the compensation be disregarded as to result in a combined charge of $50,000. The lump sum balance between that amount and the original charge was to be refunded to Mr Ly and Mrs Lu.
Mr Ly and Mrs Lu seek review by this Tribunal.
ISSUES
Mr Ly and Mrs Lu did not challenge that there was an overpayment of their benefits, but sought relief as to the repayment of the ensuing debt.
Consequently, the issue for the Tribunal is whether there are there any special circumstances that would make it appropriate to treat any part of the compensation payment awarded to Mr Ly as not having been made pursuant to s 1184K of the Social Security Act 1991 (“the Act”), so as to reduce Mr Ly and Mrs Lu’s compensation charges.
LEGISLATION
Part 3.14 of the Act operates to reduce a person’s payment when that person or their partner receives a compensation payment. Sections 1164 and 1173 of the Act provide a formula for certain lump sums to be treated as though they were received as periodic compensation payments. Where a lump sum entitlement includes a component of economic loss, section 17(3) of the Act states that 50% of the lump sum is deemed to be the compensation part of the lump sum. This amount is then used to calculate a period of time when a person will not be eligible to receive Centrelink payments, with some exceptions. This is called the “preclusion period”. If, during the preclusion period, the person receives Centrelink payments such as NSA or DSP and carer payments, then ss 1178 and 1179 of the Act create a statutory charge over the settlement funds to the extent of the payments made. Under s 1184, the insurer is obliged to pay the amount of the charge to Centrelink in priority to payments to the person entitled to the benefit of the settlement.
CONSIDERATION
There is no dispute that Mr Ly received compensation in respect of work-related injuries. He received periodic compensation for each of his workplace injuries from the insurer, Allianz, in the amount of $678.35 per week for the period 26 February 2010 to 31 December 2012. Consequently, the entitlement to NSA and DSP is subject to the provisions of Part 3.14 of the Act.
The Certificate of Determination from the Workers Compensation Commission, dated 3 May 2013, sets out the terms of Mr Ly’s compensation payment. It requires, in part, that the “[employer’s insurer] to pay the applicant $678.35 per week from 26 February 2010 to 31 December 2012”.
Mr Ly was not receiving any social security payments at the time of his injuries. Therefore, s 1173(1) and (2) apply to reduce the compensation affected payment on a dollar-for-dollar basis.
Mr Ly’s NSA and DSP were therefore appropriately reduced by the amount of his periodic compensation during the period 26 February 2010 to 31 December 2012.
Section 1174 provides the effect of periodic compensation payments on the rate of a partner’s compensation affected payment, such that any excess amount from Mr Ly’s periodic compensation payments is treated as Mrs Lu’s ordinary income. Centrelink’s debt calculations were correctly calculated on the basis that Mrs Lu’s charge amounts were ordinary income.
Centrelink calculated Mr Ly’s entitlement and applied a dollar for dollar direct deduction pursuant to s 1173(2) of the Act. The debt calculations show that Mr Ly’s payments reduced to nil as a result of the periodic compensation payments. Mr Ly received $37,292.35 in social security payments during the period 26 February 2010 to 31 December 2012 when in fact his entitlements were nil. This amount was recoverable pursuant to s 1184 of the Act.
The charge of $25,349.90 on Mrs Lu was the effect of excess income from Mr Ly’s periodic compensation payments, which was assessed as ordinary income pursuant to s 1174 of the Act. Centrelink debt calculations show that Mrs Lu’s entitlements were calculated based on ordinary income. Mrs Lu received $40,294.14 when she was only entitled to $14,944.24 during the period 26 February 2010 to 31 December 2012. Therefore, the charge of $25,349.90 is recoverable pursuant to s 1184 of the Act.
As Mr Ly received $37,292.35 in social security benefits and Mrs Lu received $25,349.90, a total of $62,642.25 is recoverable pursuant to s 1184 of the Act.
Do special circumstances exist making it appropriate to disregard any, or all, of the compensation payment in relation to Mr Ly’s and Mrs Lu’s social security payments?
Section 1184K of the Act provides potential relief from the strict application of the formula by providing the Secretary discretion to disregard whole or part of the compensation payment in “special circumstances” where the strict application would otherwise lead to an unfair or inappropriate result: see Kirkbright v Secretary Department of Employment and Workplace Relations (2000) 65 ALD 211; Beadle v Director-General of Social Security (1985) 7 ALD 670 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570). The Federal Court in Secretary, Department of Social Security v Smith (1991) 30 FCR 56 held that it is appropriate for the discretion under section 1184K to be used where the arbitrary nature of the “50% rule” results in unfairness in a particular case.
Section 1184K is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. Special circumstances do not have to be statistically “extreme” or “unique”, it is sufficient if there is something that takes the matter out of the usual ordinary case: see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, where Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1.
The bulk of the applicants’ evidence about their circumstances was provided by Mr Ly.
Mr Ly said that before his injuries his job had paid about $1000 per week in take home pay. He said that his solicitor had advised him that the maximum workers compensation he could receive was about $600 per week, irrespective of what he had previously been earning.
At the time of her husband’s injuries Mrs Lu was not working, presumably because they had very young children. She has not worked since coming to Australia.
Mr Ly was asked about what his family had lived on from the time of his workplace injuries until he started receiving NSA in March 2010. His evidence was somewhat unclear. It appeared he was attempting to negotiate with his employer, which resulted in him obtaining about $300 per week, but only until December 2007. He said he withdrew some of his disability insurance from his superannuation account – about $2000 per month. He said there was a gap before he started receiving Centrelink benefits. He unsuccessfully applied in the first instance for DSP, so went onto NSA. He received Sickness Allowance for a period, before qualifying for DSP.
Mr Ly gave evidence that he and Mrs Lu defaulted on the mortgage of their house and it was sold, although he could not remember for how much. Apparently it did not cover the debts because he said they received ‘nothing’ form the proceeds of sale. Mr Ly said he sought financial advice from Lifeline. They recommended bankruptcy to alleviate debt pressure. He adopted that course and his 3 year bankruptcy was ultimately discharged in late 2011. Mr Ly stated that since that time they have accumulated further debts which he estimated currently at in excess of $100,000, which he said he had borrowed from close friends with no written agreements. He was somewhat evasive in identifying to whom the debts were owed and how much each person was owed. He keeps no records of these amounts because, he said, he ‘doesn’t want to remember’. He is not being pressed to repay the debts.
After another of their properties was sold by the bank, the family moved to several rented premises, including at Killara. Finding accommodation was made more difficult by having to locate premises for a family of 8, with the 6 children ranging in age from 7 to 18. Similarly, finding public housing – for which they are now eligible – for a large family is problematic. Somewhat surprisingly, Mr Ly claimed that their present accommodation in Lindfield, at $650 per week, is cheaper than Beverly Hills where they had lived for a time. He was referred to some material he had provided to the Tribunal which indicated that larger homes with better facilities were available at, for example, Hornsby, for nearly $100 per week less. Mr Ly was unclear about which properties he had enquired about.
As to how they had spent the ‘refund’ following the SSAT decision, the applicants said that they paid bills and made purchases for the children, including school fees, clothes and met costs associated with attending friends’ parties. The bulk, Mr Ly said, was spent on food over time. He was referred to his bank statements which tended to suggest withdrawals of large amounts of money, but he said this was to avoid bank fees on smaller transactions. The statements also showed expenditure at department stores, which he said related to the purchase of computers and a vacuum cleaner.
In relation to their current finances he said that with his DSP, Mrs Lu’s carer payment and their Family Tax Benefit, they receive about $2400 per fortnight. Utilities are deducted from his DSP. After payment of rent they have about $1180 to live on, including running their 2 cars – a 1997 Jackaroo, purchased in 1998, and a 2008 Tarago. The Tarago had been purchased in 2010 for about $35,000, on the road. He said he needed a car to accommodate his motorised scooter and it can be modified so he can ride straight onto it, but he is unable to afford the modification. He is able to access the car normally, but it is painful to do so. As to why they had retained the Jackaroo he said that the Tarago is unable to manage the slope at their home; he said his wife is unable to manage the slope with the grocery shopping.
There are assorted medical expenses. In respect of his health Mr Ly said that he is in pain and is unable to walk. He purchased the mobility scooter in 2011. He has sleeping medication, pain medication and medication for his stomach (which is upset as a result of the painkillers). Mrs Lu said she has unexplained dizziness and blackouts and some eyesight problems. Neither sees themselves as able to work in the future.
As to the children’s health the applicants said that some of the younger children eat little and this is unexplained. There was some suggestion of possible anorexia and asthma, but there was no medical evidence to that effect. They said one daughter recently fainted and another recently had a nosebleed.
Mr Ly said the children are all of school age and attend public schools. One daughter would like to learn piano but they are unable to afford it.
Mr Ly gave evidence that he and his family travelled to Vietnam in 2012 for 2 weeks, visiting family. He claimed that he obtained discounted flight tickets because of his long service benefits with Qantas, and he provided a letter from Mark Stokes (Industrial Relations Manager at Qantas) addressed to Mr Ly dated 26 November 2012. The letter however does not demonstrate that Mr Ly was eligible to receive discounted tickets for his entire family; instead, it implies that Mr Ly is eligible for "one 10 year Long Service Trip". The respondent submitted that Mr Ly and Mrs Lu's financial circumstances in 2012 could not have been exceptionally difficult if they were able to fund the cost of a two week holiday for the balance of the family.
The SSAT found that Mr Ly and the family finances have been destroyed as a consequence of the loss of the family home, bankruptcy, and debts to family and friends totalling $100,000. It also found that although Mr Ly and Mrs Lu are living frugally, their fortnightly budget is in deficit. The SSAT accepted that Mr Ly and Mrs Lu are dependent on social security benefits to raise their family of six children aged between six and eighteen years; that Mrs Lu does not work in order to be Mr Ly’s carer, for which she receives carer benefits; that the family is residing in inadequate housing and unable to provide study space for their daughter, who was, at the time the SSAT heard the matter, studying for her final year of school; that Mr Ly’s disabilities have generated an unmet need for a modified car for mobility; and that Mr and Mrs Ly’s family would qualify for assistance from the Housing Department if it weren’t for an outstanding debt that is currently being repaid. Based on the factors described above, the SSAT decided that “special circumstances” exist so as to treat some of the compensation payments made to Mr Ly as not having been made. The SSAT ultimately decided it was appropriate to treat a part of the compensation payment, being $12,642.25, as not having been made.
In deciding how much of the compensation payment made to Mr Ly should be disregarded, the SSAT considered that, had the compensation payment made to Mr Ly for the period 26 February 2010 to 31 December 2012 been made at the same time he was awarded the lump sum payment of $27,900 on 10 March 2010, the effect on Mr Ly would not have been as harsh as it was having both compensation payments for the same injury settled differently. The Respondent was asked about its position if all of Mr Ly’s workers compensation payments had been made at the same time. The Respondent conceded that, had that occurred, his preclusion period would have been calculated at 72 weeks, instead of 149.
Although the Respondent considered the SSAT’s decision to be generous, it accepted a reduction in the compensation charge by $12,642.25 due to “special circumstances” on the basis of an unjust and unfair application of the statutory calculation. It argued, however, that special circumstances do not exist due to Mr Ly and Mrs Lu’s financial position; Mrs Lu’s inability to supplement the household income due to her caring responsibilities; the size of their family and their dependence on social security payments to raise a family; the size and inadequacy of their family home; the unmet needs for a modified vehicle, and the inability to benefit from Housing Department benefits due to an unpaid debt.
In Re Colaiacolo and Secretary, Department of Social Security [1985] AATA 91, the Tribunal stated that the factor of financial hardship alone is not sufficient to amount to special circumstances unless it is “exceptional” and not merely “straitened”. Even if the financial circumstances were “exceptional” the Tribunal noted that this would not ordinarily constitute a special circumstance.
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, it was held that mere financial impecuniousness on the part of a social security recipient is not sufficient to attract a finding that special circumstances exist. To qualify as “special circumstances”, financial hardship must go beyond “straitened” circumstances and be truly exceptional.
The respondent did not dispute that Mrs Lu has reduced work capacity due to her caring responsibilities. I agree that this is a common situation amongst recipients of a carer benefit. It is not a circumstance that is sufficiently unusual as to put Mr Ly and Mrs Lu’s case outside the ordinary run of cases.
Similarly, it is not unusual for recipients of Centrelink benefits to come from large families, dependent solely on Social Security benefits. While their residence may be less than ideal I do not accept that it is inadequate. Further, the evidence, provided by the applicant, was that cheaper, better homes were readily available and that rental savings could therefore be achieved.
The Respondent accepted that, in accordance with the letter from John Henry (occupational therapist) dated 23 November 2012 and the Medical Assessment form for Housing NSW dated 15 October 2010, Mr Ly may require specific housing requirements to accommodate his medical conditions. However, the recommendations for Mr Ly's housing in the Medical Assessment, are not unusual or uncommon for people in receipt of the DSP or age pension. For example, Dr Cheng recommends that the housing provided has "ground floor and level access (wheelchair)" and that Mr Ly needs to live in an area with access to "G.P. + SPECIALISTS". The additional documents do not demonstrate that Mr Ly and Mrs Lu's housing situation is outside the ordinary run of cases which often involve large families, housing which could be described as inadequate and dependence on social security payments.
Mr Ly and Mrs Lu now have the benefit of qualifying for government housing.
At the conclusion of the hearing, I asked Mr Ly to provide documentary evidence in support of his assertion that his doctors had recommended that he purchase a mobility scooter in 2011. Mr Ly provided a letter from Dr Cheng dated 4 March 2011 in support of his assertion that it was necessary to purchase a "folding electrical mobility scooter" because of chronic severe pain in his right ankle. The mobility scooter recommended by Dr Cheng (and purchased by Mr Ly) is foldable. I consider Mr Ly's purchase of this scooter for $2,265.00 is unlikely to be a substantial purchase that led to exceptional, straitened financial circumstances where the worker's compensation settlement paid Mr Ly $27,900.
Mr Ly and Mrs Lu provided a large number of documents which also dealt with broader contentions. There was no suggestion in Dr Cheng’s letter or any of the other voluminous documents provided by the applicants that Mr Ly requires a modified vehicle, as he claimed.
CONCLUSION
Each matter is different and must be decided on its facts. In the present matter, I agree that the family’s circumstances are unfortunate but the family has had the benefit of over $60,000 to which Mr Ly and Mrs Lu were not entitled.
Taxpayers are entitled to expect that in the ordinary course money paid to Centrelink beneficiaries to which they are not entitled will be recovered: see Secretary, Department of Social Security v Hales (1998) 82 FCR 155 and ReDavy v Secretary, Department of Employment & Workplace Relations [2007] AATA 1114, at [80].
I consider that Mr Ly and Mrs Lu’s circumstances do not warrant the exercise of the Tribunal’s discretion any further than what was decided upon by the SSAT, and that to disregard any more of the compensation payment under s 1184K of the Act would allow “double dipping”, contrary to the intention of the legislation: Re Ivovic and Director-General of Social Security (1981) 3 ALN N95.
DECISION
The Administrative Appeals Tribunal affirms the decision under review.
I certify that the preceding 49 (forty – nine) paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member ..............................[sgd]..........................................
Associate
Dated 2 February 2015
Date(s) of hearing 25 November 2014 Date final submissions received 18 December 2014 Solicitors for the Respondent Grace Thangasamy, Department of Human Services
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