QX2006/4; Secretary, Department of Employment and Workplace Relations

[2006] AATA 408

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2006] AATA 408

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No Q2005/137

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

Applicant

And QX2006/4

Respondent

DECISION

Tribunal Senior Member B J McCabe

Date12 May 2006

PlaceBrisbane

Decision The decision under review is set aside. I decide in substitution that the matter shall be remitted to the respondent pursuant to s 42D of the Administrative Appeals Tribunal Act 1975 so the applicant can recalculate the preclusion period after deducting $30,000 (the amount the respondent originally invested in the butchery business) from the amount of the settlement monies.

.........[Sgd) ....................................

SENIOR MEMBER

CATCHWORDS

SOCIAL SECURITY – preclusion period – disability support pension – whether special circumstances exist – circumstances of the claimant – undue influence – applicant entitled to a reduction in preclusion period

Social Security Act 1991 s 1184K

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

Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487

Groth v Secretary, Department of Social Security (1995) 40 ALD 541

Haidar v Secretary, Department of Social Security (1998) 52 ALD 255

Johnson v Buttress (1936) 56 CLR 113

Union Bank of Australia Ltd v Whitelaw [1906] VLR 711

Watkins v Combes (1922) 30 CLR 180

REASONS FOR DECISION

12 May 2006 Senior Member B J McCabe

introduction

1. Mr QX2006/4 is not entitled to receive a range of social security benefits because he is subject to a lump-sum preclusion period that runs until 25 July 2006. Lump sum preclusion periods are imposed where a welfare recipient settles a personal injuries claim and the settlement figure includes a component in respect of economic loss. The respondent received a lump sum settlement, but he is now in financial difficulty and says he needs access to welfare support. Section 1184K of the Social Security Act 1991 (the Act) says the Secretary may treat the whole or part of the compensation payment as having not been made (so the preclusion period is effectively cut short) if “it is appropriate to do so in the special circumstances of the case.” The Secretary refused to exercise the discretion in favour of the respondent, but the Social Security Appeals Tribunal (the SSAT) took a different view. The Secretary has asked this Tribunal to reconsider the SSAT’s decision.

2.      The respondent agreed not to take the money he was entitled to receive following the SSAT decision. He awaits the decision of this Tribunal.

the material before the tribunal

3. The Tribunal was provided with the documents required by s 37 of the Administrative Appeals Tribunal Act 1975. The following documents were also tendered in evidence:

·Statement of facts, issues and contentions of the applicant including various bank details (exhibit 2); and

·Letter from Mrs QX2006/4 (exhibit 3).

4.      The respondent and his wife gave evidence at the hearing. The applicant’s uncle and former guardian also gave evidence. I shall refer to him as “Uncle Jack”.

5.      The respondent represented himself. He appeared with the support of his wife. Mr McQuinlan appeared for the applicant.

the background facts

6.      Mr QX2006/4 was seriously injured in a motorbike accident at work on 2 April 1997. Both of his legs were amputated. He agreed to settle his personal injuries claim on 2 August 2001 in return for a lump sum payment of $500,000. Centrelink wrote to him at the time of settlement and advised him the preclusion period – the period during which he would not be eligible to receive a range of welfare benefits – would run from 29 July 1998 until 25 July 2006.

7.      The respondent was in receipt of disability support pension (DSP) at the time Centrelink wrote to him about the preclusion period. That pension was cancelled on 14 August 2001. He was required to refund $29,956.09 to Centrelink in respect of payments he received during the preclusion period. He also repaid $232,971.78 to Workcover out of the settlement. That amount was a refund of periodic compensation payments made in 1997-1998 in the amount of $27,442.32 and a lump sum settlement of $195,501.78.

8.      The SSAT concluded the respondent received a net total of $273,000 following the settlement. That sum takes into account money paid by Workcover. I have no reason to doubt that figure.

9.      The respondent is not an educated man. He has difficulty reading. It is unclear that he understood the implications of what he was told about the preclusion period.

10.     The respondent was orphaned at an early age. He was taken in by his Uncle Jack, who ran a large property in North Queensland. Mr QX2006/4 was raised alongside Uncle Jack’s children. When Uncle Jack gave evidence, he referred to unspecified “problems” the respondent experienced (or caused) while he was growing up. Those problems apparently included learning difficulties.

11.     Uncle Jack was an unimpressive witness. He was evasive. He volunteered a number of gratuitously nasty observations about the respondent’s character while protesting that he and his wife had provided the respondent with a high quality of care. He agreed he and his nephew were no longer speaking. He made a number of claims about the respondent’s lifestyle and spending habits that (after hearing the respondent’s evidence) I am satisfied were exaggerated or untrue. Uncle Jack obviously did not like the respondent’s wife.

12.     It was also clear from the demeanour of Mr and Mrs QX2006/4 as Uncle Jack gave evidence that they found him intimidating. I was left with a strong impression after hearing Uncle Jack and the respondent and his wife that Uncle Jack was a domineering figure. The respondent, in contrast, was a comparatively mild and simple man. It seems he was dependent on Uncle Jack and his family. Uncle Jack’s wife was the one who read the respondent’s mail, for example, and Uncle Jack dealt with the solicitor in the compensation proceedings on the respondent’s behalf. Uncle Jack was also a signatory on the respondent’s bank account. (Uncle Jack said the SSAT was wrong to suggest he had power of attorney over the respondent’s affairs.) He arranged for Mr QX2006/4 to receive an allowance each fortnight so that the fund would not be dissipated.

13.     I preferred the evidence of the respondent and his wife. Mr and Mrs QX2006/4 gave their evidence in an open and forthright way. They were prepared to make admissions (for example, the respondent agreed he was not good with his money) that suggested they were giving their evidence honestly. I am satisfied they were telling me the truth.

14.     The respondent and Uncle Jack invested in a butchery business in 2000. The respondent had a 49% share but no management role. Uncle Jack says each of them put in about $30-40,000. The respondent said he invested more money than that: he needed to pay for new refrigeration units and meet some other expenses because Uncle Jack did not have any other money. The respondent claimed Uncle Jack was misusing funds to purchase his own cattle to prop up his other business interests, although he was unable to produce any direct evidence of that occurring. Mrs QX2006/4 says Uncle Jack also purchased a number of personal items including a saddle that were unconnected with the business. Uncle Jack, for his part, claims he lost a substantial amount of his own money in the venture (it failed in 2005) and says the respondent owes him money as a result. Uncle Jack denied any wrongdoing.

15.     There was also a dispute about the respondent’s vehicle and a motorbike. Uncle Jack says the vehicle was purchased against his (Uncle Jack’s) advice. The vehicle is a Toyota tray-back 4WD which required modification so the respondent could drive it. The vehicle was bought under a financial arrangement with the dealer. Uncle Jack paid out the amount owing on the vehicle before recovering that amount from the respondent when his settlement was concluded. Uncle Jack says the respondent mistreated the vehicle. As far as Uncle Jack was concerned, the respondent only wanted the vehicle to go pig-shooting. Uncle Jack opined the purchase of the vehicle and its subsequent mistreatment was clear evidence of the respondent’s irresponsibility. Uncle Jack said the fate of the four-wheel motorbike – the respondent wrecked it shortly after it was acquired - was further evidence of the respondent’s disastrous profligacy.

16.     The respondent tells a different story about the vehicle and the bike. He says the vehicle was used almost exclusively by Uncle Jack and his family on their property for several years after it was acquired. The respondent said the modifications required to allow him to drive the vehicle were not completed until about two years after it was purchased. The respondent points out that he did not have a drivers’ licence throughout most of this period. He says the vehicle was mistreated by Uncle Jack and various members of his family. Although he has the vehicle in his possession now, it is in poor shape and requires expensive further repairs. He says the bike worked satisfactorily for three years – until it was wrecked by one of Uncle Jack’s sons.

17.     Uncle Jack estimated the vehicle cost around $70,000 in total if one takes into account the cost of modifications and repairs. I am satisfied from the evidence of the respondent and his wife that the respondent did not have the benefit of the vehicle for a period of at least two years, and that it was in poor condition (and thus worth considerably less) when it was ultimately turned over to him. It is difficult to determine what loss flowed from the wreckage of the bike.

18.     The SSAT said it could not account for approximately $104,000 of the compensation monies. It was hampered in its inquiries by the fact that Uncle Jack, the respondent’s solicitor and the respondent’s bank had not provided any information. The Tribunal has had the benefit of evidence from Uncle Jack, and Mr McQuinlan took the respondent through the bank account details. Mr McQuinlan submitted that it was possible to account for all but a relatively small amount of the compensation monies – certainly less than the $100,000 the SSAT was unable to account for.

19.     After hearing all of the evidence, I am unable to identify a shortfall of anything like the magnitude identified by the SSAT. I am satisfied the bulk of the money was spent on a number of things – the (failed) business, the vehicles, the house and household effects and other items for the benefit of the respondent. I accept there is some evidence the money invested in the butchery business may not have been managed wisely, and I accept at least some of the money invested in the business might have been used to pay personal expenses or buy personal items for Uncle Jack without the consent of the respondent. While Uncle Jack was clearly not a good custodian of the money he effectively controlled on behalf of his nephew, I am unable to be satisfied he misappropriated funds.

20.     I also accept the respondent did not have the benefit of the 4WD vehicle which remained in Uncle Jack’s possession for a substantial period of time after it was purchased. The vehicle has been damaged and requires expensive repairs.

21.     The respondent and his wife are experiencing financial hardship. Their house requires repairs – especially to the bathroom. Mrs QX2006/4 has recently been bankrupted as a result of being unable to satisfy her debts. Even so, the couple have accommodation and are able to meet their essential expenses. Mr McQuinlan performed a calculation showing expenses in respect of groceries, power, telephone and so forth of around $550 were more than covered by the household income of $760. Most of that income is derived from social security payments to Mrs QX2006/4, who receives a carer’s pension.

the law

22. I have already explained that s 1184K of the Act permits the Secretary to treat an amount paid by way of settlement as if it had not been paid – effectively shortening the preclusion period – if he or she regards it as appropriate in “the special circumstances of the case”. The courts have made it clear it is not enough to establish a person is in harsh or straitened circumstances: see Haidar v Secretary, Department of Social Security (1998) 52 ALD 255. There must be something about the claimant’s circumstances that are “unusual, uncommon or exceptional” that sets the case in question apart from other cases: see Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 per Toohey J; see also Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 per Kiefel J; Chamberlain and Secretary, Department of Family and Community Services [2002] AATA 487.

23.     There is no question the respondent and his wife are in difficult financial circumstances. But they do have assets (notably, their house) and they are making ends meet out of the welfare payments received by Mrs QX2006/4. Their situation in that sense is not noticeably different from the position of many others. The real question is whether there is anything else in the circumstances of the case that set it apart.

24.     I have already explained I am not satisfied Uncle Jack engaged in a crude process of misappropriating a large portion of the respondent’s settlement monies for his own purposes. If that had occurred, I would have little difficulty in making a finding of special circumstances. A more complicated question arises in a situation like the present where the recipient of compensation goes into business with (or makes loans of money or property to) friends or relatives and incurs a loss. Evidence of bad luck or even bad management at the hands of another will not necessarily amount to special circumstances. However the position may be different where the evidence makes it clear the investment or loan or transfer occasioning a loss of compensation monies was made by the claimant as a result of the exercise of undue influence.

25.     A court of equity may intervene where a transaction has been secured as a result of undue influence. The concept has been considered in a number of cases, but perhaps the clearest exposition is found in the decision of Hodges J in Union Bank of Australia Ltd v Whitelaw [1906] VLR 711. His Honour explained (at 720) that “influence” arises where one person gains ascendancy over another, and “undue influence” may be found where the ascendant person misuses his position of influence to benefit himself or someone else; see also Watkins v Combes (1922) 30 CLR 180 at 193-194 per Isaacs J. Transactions between people in certain types of relationships give rise to a presumption of undue influence. The party who is taken to be ascendant must rebut the presumption: Johnson v Buttress (1936) 56 CLR 113 at 135 per Dixon J. One of the recognised categories of relationship giving rise to a presumption is the relationship existing between parent and child, and between guardian and ward. The influence that accompanies this relationship does not necessarily terminate once the child reaches his or her majority: see Meagher, Heydon and Leeming, Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4 ed, Butterworths, 2002) at pp510-511 and the cases cited therein.

26.     Uncle Jack stood in the position of guardian with respect to the respondent at the time the respondent decided to make an investment in the butcher shop. It may be that a court of equity would presume the investment was made as a result of undue influence. I did not hear anything in Uncle Jack’s evidence that would have rebutted the presumption – although in fairness to him it must be said the claim was not brought specifically to his attention. In any event there is evidence that Uncle Jack was in a position of ascendancy over the respondent: the respondent was a simple man who had real difficulty reading; he relied on Uncle Jack and his wife for guidance, and Uncle Jack took a prominent role in dealing with the solicitor. I also recall the respondent and his wife blanching before Uncle Jack’s gaze as he gave evidence at the hearing. The respondent has certainly lost money as a result of his investment in the failed butcher’s shop. Uncle Jack appears to have secured that investment – an investment from which he derived a benefit – as a result of his position of influence.

27.     A finding that someone has exercised undue influence over a claimant leading to a loss of compensation monies will not automatically lead to a finding of special circumstances. One must still be satisfied that the case is “unusual, uncommon or exceptional”: Beadle. But a loss of compensation monies that results from the exercise of undue influence might set a claimant’s case apart from other cases.

28.     I think the undue influence that is apparent in this case sets it apart from other cases. The respondent’s relationship with his former guardian was unusual. The respondent was a grown man yet the evidence suggested he still exhibited an almost child-like dependence on his Uncle Jack. The investment in the butchery was ill-judged, but I accept it was effectively Uncle Jack’s decision – not that of the respondent.

29. Many recipients of compensation will receive bad advice and make unthinking investments that turn out for the worst. That is not an accurate description of what happened here. The respondent was unusually vulnerable to a domineering relative who used his ascendant position to secure investment monies for the purpose of starting a business venture in which the relative had an interest. There is no evidence the applicant would have invested in the butchery in the absence of this influence: he knew nothing of the trade and was not involved in the business in any way. From the respondent’s point of view, it was as if he had never received the money. I think that is how it should be treated for the purposes of s 1184K. Given the special circumstances of the respondent, I think the amount of the initial investment in the butchery business should be treated as if it had not been received by the respondent. The respondent and Uncle Jack indicated during the course of the evidence that they thought the amount was in the vicinity of $30-40,000. Given the uncertainty as to the exact figures, I think it is appropriate to approach the estimate with caution. I accept the figure invested was $30,000.

conclusion

30. The decision under review is set aside. I decide in substitution that the matter shall be remitted to the respondent pursuant to s 42D of the Administrative Appeals Tribunal Act 1975 so the applicant can recalculate the preclusion period after deducting $30,000 (the amount the respondent originally invested in the butchery business) from the amount of the settlement monies.

I certify that the 30 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member B J McCabe

Signed:  Associate   Adam Ryan

Date of Hearing  16 March 2006
Date of Decision  12 May 2006
The applicant was represented by Mr McQuinlan, a lay advocate.
The respondent appeared in person.