Re Chamberlain and Secretary, Department of Family and Community Services
[2002] AATA 487
•21 June 2002
DECISION AND REASONS FOR DECISION [2002] AATA 487
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2002/152
GENERAL ADMINISTRATIVE DIVISION )
Re JOAN MARY CHAMBERLAIN
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr B J McCabe, Member
Date21 June 2002
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
..................(Sgd).....................
Mr B J McCabe
Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – compensation payment – application of statutory formula – compensation payment for personal injury received while in receipt of pension payments – statutory objectives in utilisation of formula - whether special circumstances exist – financial hardship
Social Security Act 1991
Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1983) 105 CLR 169
Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67
Beadle v Director-General of Social Security (1985) 60 ALR 225
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152
Re Eggleton and Secretary, Department of Social Security (1998) 50 ALD 1018
Director-General of Social Services v Hales (1982) 47 ALR 281
Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690
Secretary, Department of Social Security v Ellis (1997) 24 AAR 535
Re Griffiths and Secretary, Department of Social Security (AAT 7895, 9 April 1992)
Re Lintern and Secretary, Department of Social Security (AAT 8479, 14 January 1993)
Re Kulakov and Secretary, Department of Social Security (AAT 7238, 14 August 1991)
REASONS FOR DECISION
21 June 2002 Mr B J McCabe, Member
Introduction
The applicant, Mrs Joan Chamberlain, was injured in a car accident in January 1999. She was in receipt of the aged pension at the time as she was 60 years of age. Her claim for damages was settled out of court and she received a lump sum settlement of $35,000 (plus $4,000 for costs). Three thousand five hundred dollars ($3,500) of the settlement amount was for her loss of earnings and future loss. The respondent applied the statutory formula in s 1165 of the Social Security Act 1991 to determine the length of the preclusion period (the period during which Mrs Chamberlain would be ineligible to receive a range of Commonwealth benefits) provided for in s 17. As a result of the strict application of the formula, the respondent required the applicant to pay $7,643.36 pursuant to s 1166. That money was paid to the respondent, but the applicant says there are special circumstances that justify treating all or part of the settlement monies as not having been paid. The discretion to effectively shorten the preclusion period is contained in s 1184 (now s 1184K). In particular, the applicant said it was unfair that she be required to pay to the respondent an amount in respect of economic loss that was more than double the amount that was in fact allocated in respect of economic loss in the settlement.
Mrs Chamberlain appealed to the Tribunal in 2001. The Tribunal was satisfied that special circumstances existed within the meaning of s 1184. It decided on 9 March 2001 that $28,000 of the $35,000 settlement amount should be disregarded in calculating the lump sum preclusion period.
The respondent subsequently appealed to the Federal Court. Kiefel J allowed the appeal and remitted the matter to the Tribunal. Her Honour found the Tribunal's assessment of special circumstances was in error.
The Tribunal is required to reconsider whether special circumstances are present in Mrs Chamberlain's case that might justify the exercise of the discretion under s 1184. If the Tribunal is satisfied the discretion ought to be exercised, the applicant may be entitled to a refund from the respondent.
The Facts
The applicant did not give evidence. Her legal representative, Mr Naylor, explained the applicant was content to rely on her affidavit sworn on 6 December 2000 that was filed with the Tribunal. Mr Naylor also provided me with extensive written submissions. Affidavits sworn by Gene Patterson and a Dr Parker were also provided to the Tribunal.
The applicant was injured in a motor vehicle accident on 13 January 1999. She received a lump sum settlement in the amount of $35,000 plus $4,000 for costs on 16 December 1999. The settlement figure included an amount of $3,500 that was expressed to be in respect of economic loss. Mrs Chamberlain was qualified to provide instruction in music theory and there was a possibility that she could take pupils and earn as much as $50 per week without endangering her entitlement to a pension. She had not taken on any students prior to the accident.
Mrs Chamberlain has suffered from poor health for a long period of time. She was unable to work as a result of a knee injury that occurred approximately eight years before the motor vehicle accident in this case. She had been in receipt of a disability support pension before becoming entitled to the aged pension. In addition to the problems with her knee, she has developed a range of conditions including:
§ Arthritis;
§ Diabetes;
§ Hypotension;
§ Persistent infections;
§ Kidney trouble;
§ Tachycardia; and
§ A blood disorder.
Mr Naylor's written submissions on behalf of the applicant also said Mrs Chamberlain suffered from a bladder condition known as Interstitial Cystitis. Her many conditions cause her chronic pain, and she says she requires ongoing medical treatment.
The applicant actually received $17,612.11 of the settlement money. The balance of the money was paid to the Health Insurance Commission ($3,041.35), her solicitors ($9,035.55 for costs and outlays), Mackay Community Credit Union ($1,667.63 being interest and charges on a litigation loan), and Centrelink ($7,643.36, being the amount of the charge imposed under s 1166).
The applicant used the settlement monies she received to purchase a new Hyundai Excel motor vehicle for $17,196. Mr Naylor explained the applicant required a vehicle because she had no other means of transport.
Mrs Chamberlain is in financial difficulty. She has no savings or other investments. She must support herself from the pension. Mr Naylor informed me that she had recently married. Her new husband is also a pensioner and is not in a position to support the applicant. Indeed, Mr Naylor said the applicant's position has in one sense become more difficult as the amount of her pension has been reduced because of her changed marital status.
The Law
Section 1165 contains the formula for calculating the length of the preclusion period where a lump sum settlement has been received that includes a component for economic loss. Section 17 deems (it does not merely presume) that 50% of the settlement amount is intended to compensate for economic loss, regardless of the amount actually agreed as between the parties. There is good reason for this approach. Without a clear rule, the parties to a settlement might manipulate the amount apparently allocated in respect of economic loss to achieve a more favourable result for a plaintiff at the taxpayer's expense. The deeming provision removes the need for the Secretary to investigate in each case whether the amount attributed to economic loss by the parties is appropriate: see Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 421 per von Doussa J. A deeming provision (unlike a statutory presumption) may not be rebutted: see Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1983) 150 CLR 169 at 214 per Murphy J; see also Secretary, Department of Family and Community Services v Chamberlain [2002] FCA 67 at par 25 per Kiefel J.
The application of an arbitrary rule may occasionally result in unfairness. Such is the nature of arbitrary rules: see Secretary, Department of Social Security v Banks (1990) 23 FCR 416 at 424. The Parliament anticipated that possibility, and enacted s 1184 to provide relief where appropriate. Section 1184(1) provides:
"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 courts have been reluctant to place a gloss on the meaning of the words "special circumstances": see Beadle v Director-General of Social Security (1985) 60 ALR 225 at 228 per Bowen CJ, Fisher and Lockhart JJ. That is unsurprising, given that s 1184 is intended to provide relief in circumstances that were not anticipated at the time the Parliament devised the arbitrary rule in s 17. But while the discretion is wide-ranging, its application in each case must be carefully scrutinised. The logic behind the deeming provision would be undermined if the operation of the section could be avoided through the overuse of the discretion contained in s 1184. As Kiefel J explained in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545, it is necessary to confine the exercise of the discretion to cases where the applicant's position can be distinguished from the cases of others. Her Honour said there must be something about the applicant's case that sets it apart from the usual or ordinary case.
When the matter first came before the Tribunal, the applicant argued the operation of the 50% rule was unjust in and of itself because the applicant was required to pay the respondent nearly twice the amount in respect of economic loss that was actually provided for in the settlement. As it was clear there had been no manipulation of the settlement figures – Mrs Chamberlain was already a pensioner who was only capable of earning a token amount – the Tribunal disregarded a large portion of the settlement monies to reflect the 'true' position. The anomaly resulting from the application of the 50% rule was held to constitute special circumstances.
Keifel J rejected with this approach on appeal. Her Honour said:
"…the statutory provisions here in question were intended to operate upon factual bases which were assumed and were not intended to reflect the true position. This is so with respect to the figure of fifty per cent taken of the lump sum compensation payment; the amount of basic rate of pension used to divide it; the period during which double payment is assumed to have occurred; and perhaps even the commencement of the period when the loss of earning capacity arose, which would normally be taken to be the date when the compensable injury was occasioned to the person."
Kiefel J noted the Federal Court had previously considered the 'true' position (that is, the amount that was actually allocated in respect of economic loss) in the settlement when determining whether special circumstances existed: see Kertland v Secretary, Department of Family and Community Services(1999) 95 FCR 64 and Secretary, Department of Social Security v Smith (1991) 30 FCR 56. But her Honour said the facts in each of those cases were unusual. Her Honour explained (at par 32):
"In those cases it could be seen, objectively, there could not have been a double payment. In such a circumstance it might be concluded that the statutory assumption operated unjustly. This would not seem to me a situation which would often arise and sets these cases apart from the usual."
Her Honour concluded this case did not fall into the limited category of cases that included Kertland and Smith where it would be permissible to consider the extent of the difference between the assumed amount of economic loss and the amount actually provided for in the settlement.
The Tribunal has followed this approach in a number of other cases, including Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152 and Re Eggleton and Secretary, Department of Social Security (1998) 50 ALD 1018. In Eggleton, the Tribunal said it was appropriate instead to take a "global approach" and consider whether in all the circumstances of the case the end result of the application of the rule was "unfair, unjust or unreasonable".
The real lesson from Chamberlain and the other authorities seems to be this: once the Tribunal has satisfied itself the statutory formula was correctly applied, the Tribunal is not otherwise interested in the formula and whether or not it accurately reflects the 'true' position. The logic of the legislative scheme removes the need for that investigation. It is irrelevant that an applicant might have been treated more favourably if the rule were modified to reflect the amount actually allocated in respect of economic loss in a given case. The Tribunal must instead focus on whether special circumstances exist following the application of the rule and the imposition of the preclusion period (or the extraction of the sum under s 1166). If special circumstances do exist, the exercise of the discretion may be justified.
Do Special Circumstances Exist in this Case?
Mr Naylor conceded the applicant could not rely exclusively on the fact that the applicant had paid the respondent more than twice the amount she received in respect of economic loss in the settlement. Mr Naylor makes the concession reluctantly: in his outline of argument, he criticised the reasoning in Chamberlain. But he insists the unfavourable treatment of the applicant as a result of the application of the 50% rule could still be considered, albeit in conjunction with other factors.
The applicant claims that the state of her health and her finances constitute special circumstances. She is made even worse off as a result of having to pay twice as much money to the respondent as she would be required to pay if the preclusion period were calculated differently so as to reflect the real amount allocated in respect of economic loss in the settlement. By way of illustration, Mr Naylor explained that Mrs Chamberlain would be able to fund an expensive medicine that she requires (and which is not covered under the Pharmaceutical Benefits Scheme) if she had access to the money paid to the respondent.
The cases in relation to financial hardship hold out little hope for the applicant. She is clearly in straitened circumstances, but that is hardly unusual for a person in receipt of social security benefits: see Director-General of Social Services v Hales (1982) 47 ALR 281 at 321 per Sheppard J. It is not enough for the applicant to show that she is under financial pressure: see, for example, Re Krzywak and Secretary, Department of Social Security (1988) 15 ALD 690 at 699-700; see also Secretary, Department of Social Security v Ellis (1997) 24 AAR 535 at 539-540 per Carr J. The circumstances must make the burden unusual or extreme.
The applicant says she cannot afford to buy new clothes or presents for her grandchildren. She says she is unable to afford social activities like dancing and arts and crafts. She is also faced with expenses connected with her medical treatment. Some of these costs are not covered by Medicare or the Pharmaceutical Benefits Scheme. But the burden is not unusual or extreme. As a long-term recipient of social security benefits, it is unsurprising that she has not accumulated savings or assets, or that she has little money available for discretionary expenditure. She already suffered from a range of medical conditions before the accident that gave rise to the settlement. Sadly, her position is unlikely to be substantially worse even if the accident had not occurred.
Her position could be relieved by selling the car that she purchased out of the settlement money. I am not satisfied that the car was an extravagant purchase. Evidence of extravagance would militate against recognising special circumstances: see, for example, Re Griffiths and Secretary, Department of Social Security (AAT 7895, 9 April 1992) and Re Lintern and Secretary, Department of Social Security (AAT 8479, 14 January 1993). I accept that the purchase of a vehicle is a reasonable response to the difficulties in accessing public transport, but it is unclear whether the purchase of a car with all its associated costs is the best response to the predicament.
The cases in relation to medical conditions do not assist the applicant. While it is clear the applicant suffers from poor health, ill health of itself does not amount to a special circumstance: see Kulakov and Secretary, Department of Social Security (AAT 7238, 14 August 1991). It is unclear how the applicant's health distinguishes her case from those of other individuals who suffer from poor health.
Conclusion
The fact that the applicant is in receipt of social security assistance and will not be required to make any further payments to the respondent is relevant to the decision before the Tribunal. If the preclusion period were still in effect and the applicant was not receiving any income, the situation might be different. But that is not the case. Instead, the applicant's case has resolved into a claim for a refund of money that she says she was required to pay to the respondent as a result of an anomaly in the law. As I have already explained, the legislative framework prevents the Tribunal from inquiring into the anomaly. In those circumstances, the Tribunal affirms the decision under review.
I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member
Signed: Denise Burton
Administrative AssistantDate/s of Hearing 17 May 2002
Date of Decision 21 June 2002
Solicitor for the Applicant Mr Naylor, Macrossan and Amiet
Solicitor for the Respondent Mr McQuinlan, Departmental Advocate
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