Re Barrington and Secretary, Department of Employment and Workplace Relations
[2005] AATA 1050
•21 October 2005
|
DECISION AND REASONS FOR DECISION [2005] AATA 1050
ADMINISTRATIVE APPEALS TRIBUNAL )
) No T2005/44
| GENERAL ADMINISTRATIVE DIVISION | ) | ||
| Re | TRENT BARRINGTON | ||
Applicant
| And | SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS |
Respondent
DECISION
| Tribunal | The Hon R J Groom (Deputy President) |
Date21 October 2005
PlaceHobart
| Decision | The Tribunal varies the decision under review by directing that $60,000 of the applicant’s compensation payment be treated as not having been made. |
..............................................
Deputy President
CATCHWORDS
Social security – newstart allowance – compensation preclusion period – financial hardship - whether “special circumstances” exist – whether Tribunal should exercise its discretion to treat the whole or part of the compensation payment as not having been made.
Social Security Act 1991 – ss17(1)(2)(3), 1170, 1184K(1)
Beadle and Director-General of Social Security (1984) 6 ALD 1
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Evergreen and Secretary, Department of Social Security (1983) 16 SSR 161
Re Kulacou and Secretary, Department of Social Security (1991) 63 SSR 879
Reuben and Secretary, Department of Social Security [1997] AATA 11879
Dean and Secretary and Department of Social Security (1997) 3 SSR 16
Secretary, Department of Social Security and Lane (1993) 31 ALD 105
Department of Social Security v Banks (1990) 23 FCR 410
QX99C and Secretary, Department of Family and Community Services [1999] AATA 310
Secretary Department of Family and Community Services and Paule [2000] AATA 518
Fuller and Secretary, Department of Family and Community Services [2004] AATA 615 Secretary, Department of Social Security v Thompson (1994) 53 FCR 580
REASONS FOR DECISION
| 21 October 2005 | The Hon R J Groom (Deputy President) |
Introduction
This is an application by Trent Barrington to review a decision of the Social Security Appeals Tribunal dated 15 March 2005. That decision affirmed an earlier decision by Centrelink refusing the applicant’s claim for Newstart Allowance because of the imposition of a lump sum compensation preclusion period from 17 September 2002 to 23 April 2007.
The hearing of the application was held at Devonport on 28 September 2005. Mr John Crooks appeared for the applicant and Mr Brian Sparkes for the Department.
Oral evidence was given by the applicant. In addition the Tribunal received into evidence the T documents lodged pursuant to s37 of the Administrative Appeals Tribunal Act 1975 and certain other documents and photographs.
Background Facts
The applicant is now aged 39 years. He was injured at work in 1999 and sought compensation for that injury. He received weekly compensation until 16 September 2002. On 12 September 2002 an action for damages in the District Court of New South Wales was settled and a consent judgment entered in Mr Barrington’s favour for the sum of $285,000 inclusive of legal costs. He received a net sum of $237,500 after legal costs were deducted.
Centrelink then determined that as a consequence of the receipt of the lump sum settlement the applicant would be subject to a compensation preclusion period from 17 September 2002 until 23 April 2007. His solicitor was advised of this on 20 September 2002.
The applicant confirmed in evidence that he was aware from the outset that a compensation preclusion period would be imposed and that he would have no entitlement to social security payments during that time.
On 15 October 2004 the applicant applied for a Newstart Allowance. This application was rejected on 26 October 2004 because of the compensation preclusion period.
The applicant had lived in Wagga in New South Wales for most of his life, but after receiving his lump sum payment decided to move to Tasmania. The main reason for this was that he became aware that housing was less expensive in Tasmania and he believed that there was an opportunity to purchase a house and renovate it. His intention was then to sell the renovated house and to purchase another property to renovate.
The applicant purchased a modest house in Arthur Street, Somerset in Tasmania for $68,000 and spent $3,500 on legal fees and stamp duty. He took possession of the house at Easter time in 2003 and has since expended some $50,000 on renovations and furniture. Although a valuation has not been obtained from a qualified valuer, local estate agents have estimated that in its current partially renovated condition the property may sell for between $125,000 and $140,000. Estate agent L J Hooker has estimated the value at between $130,000 and $140,000 (see Exhibit R2 attachment D). The applicant said in evidence that Roberts Real Estate had estimated the value at between $125,000 and $135,000. The applicant said in evidence “It may take some time to sell due to the condition of the kitchen, the floorings, lot of wall linings missing …”. He further said Roberts Real estate had told him “… it might take six to twelve months to sell in its current condition …”. (Transcript p16)
Mr Barrington has made significant improvements to his house including landscaping, building retaining walls, fencing, decking, guttering, new windows and sliding doors. He has receipts for some $35,000 worth of expenditure including furniture, but believes he has probably spent a further $20,000 for which he doesn’t have receipts.
Except for the purchase of the house and the cost of renovations and furniture the only other item of major expenditure has been on cars. The applicant paid $39,000 for a “top of the range” Subaru Outback. The applicant said this vehicle had a market value at the time of $49,000 and he intended selling it at a profit to a dealership in Wagga, however that sale fell through. He kept the car for 18 months and then traded it for a $16,000 Commodore plus $10,000 in cash. He has since sold the Commodore and bought a 1987 model Subaru wagon for $3,000.
Apart from the purchase of the house and motor vehicles and associated costs the rest of the lump sum compensation has been largely expended on moving to Tasmania and the ordinary expenses of maintaining himself since September 2002. Aside from the initial purchase of an expensive car, the applicant appears to have lived modestly and acted prudently since he received the lump sum payment. He was previously a moderate drinker but stopped drinking alcohol “… three or four years ago…”. He has tried to give up smoking but remains “… just an average or light smoker.” The applicant is an infrequent gambler. He takes a ticket in “Lotto” and has a bet each year on the Melbourne Cup.
The applicant has approximately $29,000 credit in a superannuation fund with AMP. He has attempted to access those funds but was advised the relevant legislation and rules prevent access to the money.
The applicant suffered a serious left shoulder injury at work in 1999. Although there is no expert medical evidence before the Tribunal, it accepts Mr Barrington’s evidence that he continues to have serious problems with both shoulders as well as lower back pain. There is also evidence before the Tribunal of kidney problems, high iron levels in his blood and sleeping conditions. In addition a malignant melanoma was removed some time ago. The applicant continues to receive treatment from an oncologist and a skin specialist who both practice in Launceston.
Mr Barrington is a qualified motor mechanic with specialist experience with Mercedes Benz vehicles. He has also worked as a cleaner and for a period did some house painting and concreting in Wagga. In addition, the applicant worked for a period in a computer store. He partially completed a Certificate IV course in information technology at Wagga TAFE. The applicant has a particular interest in IT, especially hardware and is keen to undertake further training in that area. He said “I have very strong analytical skills which help me troubleshoot and repair computers…”.
The applicant believes his poor health, particularly his back and kidney pain and difficulty sleeping, prevents him from undertaking fulltime work. He feels that 3 days of work per week would be his limit. He has tried to find casual or part-time work of a suitable kind in the Somerset/Burnie area, but without success. He is adamant that he does not wish to work again as a motor mechanic, but would prefer a part-time position in IT. The applicant said he has been watching out for advertisements for suitable positions and has also called on businesses in the area to see if they had work available. He said he had noticed only 2 or 3 jobs in IT advertised for the Somerset/Burnie area. One position was in IT software which he said was “…way over my head…”.
The applicant has now expended his lump sum compensation payment and currently has no income, funds or liquid assets to pay for the normal expenses of living. His house and car are unencumbered, but he now has debts totalling some $4,500. This amount is owed on credit cards. He said in evidence he is paying 27½ per cent interest on a credit card loan with AGC and a lower interest rate on his Commonwealth Bank credit card. His immediate intention is to sell his car to pay most of the credit card debts, although he estimates he would still owe $1,500. The applicant said he owns a stainless steel cook top, a wall oven and range hood which together are valued at $1,600, but may realise $800 to $1,000 if he is able to sell them. His car is worth $3,000, but in a month’s time it will have to be registered which will add to his debt.
The applicant states that he had made attempts to borrow on the security of his house, but without success. He has contacted various banks, other financial institutions as well as a broker. He said “…the common reply was that it was against the law to loan money to people without an income.”.
The Legislation
It is not in dispute in this application that Newstart Allowance is a “compensation affected payment” within the meaning of s17(1) of the Social Security Act 1991 (“the Act”).
Section 17(2) of the Act provides:
”17.(2) Subject to subsection (2B), 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 and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.Under s17(3) of the Act, 50 per cent of a lump sum settlement payment is considered to be the compensation part of the payment. Section 1170 of the Act sets out the method of calculating a compensation preclusion period, which commences on the day following the last day of periodic payments (s1170(1)(a)). Section 1170(1)(b) provides that the end of the period is calculated according to a formula by which the compensation part of the lump sum payment is divided by the income cut-out amount (s1170(4) and (5)).
Section 1184K(1) of the Act provides:
”1184K(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.”
The Issues
It is not in dispute, and the Tribunal finds, that the applicant received a compensation payment of $285,000 and that as a result a preclusion period has been correctly calculated and imposed pursuant to the Act.
The issues to be determined by the Tribunal is whether or not “special circumstances” exist within the meaning of s1184K(1) of the Act, and if they do exist whether it is appropriate for the Tribunal to exercise the discretion provided and treat the whole or part of the compensation payment as not having been made.
Toohey J said in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3:
“An expression such as “special circumstances” is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular qualify of unusualness that permits them to be described as special.”
Heerey J said in Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 150:
“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances: Beadle v Director-General of Social Security (1985) 7 ALD 670 at 673; 60 ALR 225 at 228. Ill health, financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances: Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281 at 284-7; 65 ALD 211; 32 AAR 120; see also Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 71; 57 ALD 6000 at 607.”
Clearly, the decision-maker, initially the Secretary of the Department and now the Tribunal, is given a wide discretion, not limited by legislated particulars, to consider all the circumstances of a case and to decide whether they are “special” thus permitting the exercise of the discretion. In order to properly exercise this discretion there must be special elements in the case which stand apart from the usual or the ordinary.
It has been held in a large number of applications that ill health resulting in an incapacity to engage in paid employment is relevant to a finding of special circumstances.
(See: Evergreen and Secretary, Department of Social Security (1983) 16 SSR 161
Re Kulacou and Secretary, Department of Social Security (1991) 63 SSR 879
Reuben and Secretary, Department of Social Security [1997] AATA 11879
Dean and Secretary and Department of Social Security (1997) 3 SSR 16
In this application there is no expert medical evidence before the Tribunal either in the form of oral evidence or a medical report. There is some evidence of the applicant’s workplace injury, and the settlement of his claim arising from that injury, and also explanations provided by him in his oral evidence. The Tribunal found the applicant to be very open and honest in his evidence and accepts as truthful and accurate his explanations as to his ill health, including experiencing pain in both shoulders and also in his lower back and kidney area. It also accepts that he has difficulty in sleeping, that he has had a melanoma removed and that he also has a serious problem with excess iron levels in his blood. Obviously expert medical evidence would have been helpful to better explain these ailments. However, the Tribunal is satisfied that the applicant continues to suffer these health problems and that his capacity to undertake work is now significantly restricted. In this regard it is noted that Mr Sparkes for the respondent properly conceded that “he has a number of conditions and although there is no evidence before the Tribunal, we certainly accept what he said is correct.” (Transcript p35) The Tribunal is also satisfied on the evidence that there are very limited employment opportunities for the applicant in the area of Tasmania in which he currently resides.
The Tribunal is also satisfied that the applicant believed, when he received his compensation payment and made the decision to move to Tasmania, that if at any time in the future he needed income, he would be able to readily find work. When he formed that belief he had not fully understood that his general state of health and the local employment market would together significantly limit his work opportunities.
For the purposes of the relevant sections of the Act “compensation” includes legal costs (see Secretary, Department of Social Security and Lane (1993) 31 ALD 105). The 50 percent provisions in the Act is intentionally arbitrary in nature and has a sound purpose. See for example the comments by von Doussa J in Secretary, Department of Social Security v Banks (1990) 23 FCR 410 at 424:
“The wide language of subpar (i) is a recognition by Parliament that unless every component part of a lump sum payment made in settlement of a claim which has the prescribed characteristics is brought to account the mischief to which par (c) is directed will not be remedied. The scope for manipulation by inflating some heads of loss and diminishing or excluding others, without altering the total amount of the lump sum, would otherwise remain. The prescribed percentage (50 per cent) of the lump sum payment made in settlement of a claim which by s152(2)(i) is deemed to be the “compensation part of a lump sum payment by way of compensation” should be viewed as a broad attempt to balance the interests of the recipient of the payment with the competing interests of others in the community whose needs must be met as far as possible from a finite budget allocation for social security measures. The paragraph seeks to eliminate double dipping in a practical way which operates effectively in a straight forward manner.” (at 23 FCR 424)
It is nevertheless reasonable to consider the matter of the legal costs component of the lump sum settlement in deciding whether “special circumstances” exist (see for example:
QX99C and the Secretary, Department of Family and Community Services [1999] AATA 310; and Secretary Department of Family and Community Services and Paule [2000] AATA 518
See also the interesting discussion of this issue by the President of the Tribunal in Fuller and Secretary, Department of Family and Community Services [2004] AATA 615.
In this current application the gross settlement payment was $285,000 and the net amount received by the applicant from his solicitors was $237,500. He said the net amount was arrived at after deducting legal costs. This suggests that the amount of legal costs paid was $47,500. However in evidence the applicant said he actually paid $55,000 in legal fees. It may be that the applicant actually paid $47,500 for legal costs or it is possible that he was required to pay a further sum of $7,500 out of the net amount he received to bring the total to $55,000. The Tribunal is satisfied that the applicant paid at least $47,500 for legal costs associated with his claim.
The applicant explained in his evidence: “I actually didn’t even realise that there was a payment to be taken out …” and “… I didn’t believe that the price would be that high…”. (Transcript p5).
Another issue to be considered are the applicant’s financial circumstances. Mr Sparkes for the respondent contended that the applicant’s financial circumstances do not go beyond “straitened” (see Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690) because he owns an unencumbered house which he could sell. Mr Sparkes argued that the applicant could buy an even more modest house in the area and then live for the remainder of the preclusion period on the net proceeds of the sale. Details of the estimated values of houses in the Burnie area obtained from the internet were tendered in evidence on behalf of the respondent. An example highlighted at the hearing was of a house said to be worth $109,000. It was suggested that the applicant could sell his house for, say $120,000 and then purchase this other house for $109,000 and be left with $11,000, less legal and other costs, on which to live for the remainder of the preclusion period.
The Tribunal is not satisfied however that the sale of the applicant’s present house and the purchase of a cheaper property is a realistic option. The evidence suggests that his house is only partially renovated and because of that may take time to sell. After deducting legal cost, stamp duty and agent’s commission, unless the house purchased was extremely inexpensive, there would be very little money left to sustain the applicant for the remainder of the preclusion period.
In past applications the Tribunal’s approach to the sale of a house to relieve financial hardship has varied considerably. In some cases it has decided the applicant should sell the house and live off the proceeds, but in other applications there has been a reluctance to, in effect, force the sale of a house. In cases involving a modest house there seems to be a greater reluctance to suggest that a sale is appropriate. (Many helpful examples are cited at pp518 to 520 of Social Security and Family Assistance Law by Peter Sutherland 2nd Edition).
The reality is that the house owned by the applicant is relatively modest and close to the bottom end of the general market. It was purchased for only $68,000 and has appreciated in value because of an improvement in market conditions and also because of the renovations undertaken. Future renovations will see the property increase further in value. The ownership of this property provides a special opportunity for the applicant to secure his financial future avoiding total dependence on government for future housing and income. The ideal for him would be to retain his house and obtain some part-time work so that he could live a relatively secure and independent future. The alternative is to continue to sell assets until he has nothing left. Then his complete long term dependence on social welfare would be almost inevitable.
In the Tribunal’s view the applicant is in something worse than “straitened” financial circumstances. He is, in reality, living in exceptionally difficult financial circumstances facing ongoing living costs, debts, medical expenses, car registration, other costs and future liabilities. At present he has no income. When considering his financial situation it is important to consider whether the expenditure by the applicant of his compensation monies was extravagant and unwise. In the Tribunal’s view the applicant has not been extravagant, unwise or in any sense irresponsible in the way he has spent his money. This is not a case where the applicant has been involved in heavy drinking, gambling or drug use as in some other cases. He has not spent large sums on expensive holidays or generous gifts to friends and family. The applicant has actually been quite frugal and prudent in his spending with perhaps the exception of the car he purchased initially. The evidence is that car was not purchased for the purpose of ongoing use, but with the intention of an early resale at a profit. Particular circumstances did not allow that to occur.
After considering all of the evidence, the Tribunal finds as a result of a combination of factors that special circumstances exist permitting the exercise of the discretion under s1184K(1) of the Act. Those special circumstances are:
· The applicant’s state of health which has deteriorated since he received his compensation payment.
· The fact that his poor health combined with the employment market in the area where he lives have made it more difficult than expected for him to find suitable part-time work.
· That he has not been reckless and irresponsible in spending his lump sum compensation payment.
· The house he has purchased is modest and in terms of value near the bottom end of the market.
· The fact that a significant portion of his compensation payment was for legal costs. In agreeing to this settlement figure and also when informed about the preclusion period he did not fully appreciate the size and significance of the legal costs he would have to pay.
If special circumstances exists, the discretion provided in s1184K(1) of the Act allows the Tribunal, if it considers it appropriate, to treat the whole or part of a compensation payment as having not been made.
There are important reasons for the policy behind the application of a preclusion period. Bearing that in mind and also all of the special circumstances set out above, the Tribunal finds that it is appropriate to treat only part of the compensation payment as having not been made.
In Secretary, Department of Social Security v Thompson (1994) 53 FCR 580, Einfeld J said in calculating an appropriate reduction under the Act:
“…intuitive justice will often be as fair a criterion and as faithful to the legislative intention as any other approach.”
It is not necessary to precisely calculate a figure, but to consider all of the relevant facts and circumstances to try to achieve fairness and justice. The Tribunal has carefully weighed up the special circumstances set out in paragraph 39 above, and also the applicant’s precarious financial position to arrive at a figure which it considers to be an appropriate reduction.
In all the circumstances, the Tribunal considers that $60,000 of the applicant’s compensation payment should be treated as not having been made and that the preclusion period be adjusted accordingly.
The Tribunal realises that the deduction of $60,000 from the gross figure will mean that the preclusion period will be calculated on 50 per cent of the new gross amount of $225,000. Therefore the preclusion period, although reduced, will continue for some time causing ongoing financial difficulties for the applicant. The Tribunal, however, believes that this is the appropriate reduction in all of the circumstances of this application.
Decision
The Tribunal varies the decision under review by directing that $60,000 of the applicant’s compensation payment be treated as not having been made.
I certify that the 46 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon R J Groom (Deputy President)
Signed: K L Miller (Administrative Assistant)
Date/s of Hearing 28 September 2005
Date of Decision 21 October 2005
Counsel for the Applicant Mr John Crooks
Solicitor for the Applicant Launceston Community Legal Service
Counsel for the Respondent Mr Brian Sparkes
Solicitor for the Respondent Centrelink
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