Re PGVK and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
[2008] AATA 381
•12 May 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 381
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2008/0161
GENERAL ADMINISTRATIVE DIVISION ) Re PGVK Applicant
And
SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS
Respondent
DECISION
Tribunal Mr RG Kenny, Member Date12 May 2008
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
..................[Sgd]..........................
Member
CATCHWORDS
SOCIAL SECURITY – Pensions, Benefits and Allowances – disability support pension – settlement of compensation claim – lump-sum compensation payment includes costs component – costs component included in calculation of preclusion period – special circumstances established – part of settlement treated as not having been received – preclusion period shortened – decision under review affirmed.
Social Security Administration Act ss 17, 1169, 1170, 1184K
Secretary, Department of Social Security v Smith (1991) 23 ALD 277
Secretary, Department of Family and Community Services v Allan (2001) 6 ALD 147; [2001] FCA 1160
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745.
Re Hajar and Department of Social Security (1988) 16 ALD 716.
Director-General of Social Services v Hales (1983) 47 ALR 281
Re QX05/10 and Secretary, Department of Employment and Workplace Relations [2006] AATA 178.
Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152.Department of Social Security v Hulls (1991) 22 ALD 570
REASONS FOR DECISION
12 May 2008 Mr RG Kenny, Member BACKGROUNG
1. On 31 August 2007, a consent judgement was made in the Supreme Court of New South Wales in favour of the applicant in the sum of $500,000 plus costs agreed in the sum of $245,000. This was in relation to the applicant’s claim for damages relating to head injuries he received in an accident which occurred whilst he was serving a term of imprisonment at the Mannus Correctional Centre at Wagga Wagga in 1999. From the time of the injury, he received newstart allowance and then disability support pension, forms of income support payable under the Social Security Act 1991 (the Act), in the total amount of $116,190.69. That sum was repaid to Centrelink from the compensation lump-sum.
2. On 11 September 2007, Centrelink determined that the applicant’s compensation payment precluded him from receiving disability support pension from 17 March 1999 until 23 December 2008. That decision was affirmed by an authorised review officer on 9 October 2007. On 5 December 2007, the Social Security Appeals Tribunal (the SSAT) determined that, in the special circumstances of the applicant’s case, so much of the compensation sum paid to him should be treated as not having been made so as to allow the preclusion period to end on the date of its decision. Accordingly, the applicant has received disability support pension since 5 December 2007. The applicant now seeks review of that decision by the Administrative Appeals Tribunal (the Tribunal).
Issues and Legislation
3. Where a person receives certain compensation monies and has received income support payments under the Act, provision is made for recovery of those payments and for the imposition of a period during which further such payments are precluded. The applicant does not dispute the decision to recover the income support payments made to him before the court’s consent judgment. Further, the applicant does not dispute the initial application of the relevant provisions of the Act concerning the imposition of and the duration of the preclusion period imposed upon him. These provisions are set out in ss 17, 1169 and 1170 of the Act. The issue raised by the applicant relates to the operation of s 1184K of the Act which makes provision for disregarding part or all of a lump-sum payment which has the effect off shortening the applicable preclusion period. It reads:
“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.”
4. The applicant was represented in these proceedings by his mother. Whilst accepting that s 1184K (1) of the Act was given effect by the SSAT, she submitted that all of the compensation monies received or some greater proportion than recognized by the SSAT should be disregarded. For the respondent, Mr McQuinlan submitted that there were no special circumstances to justify the exercise of the discretion under s 1184K (1) of the Act. Nevertheless, he conceded that, if special circumstances were found, these would not justify a more favourable decision than that reached by the SSAT.
Evidence
The applicant’s mother
5. The applicant’s mother provided the following evidence and submissions.
6. She has been appointed as the legal guardian of the applicant and assumes responsibility for the management of his affairs. None of the settlement monies have yet been received by the applicant and, as a result, he has been placed in difficult financial circumstances. In expectation of receiving those monies, she purchased, in October 2007, a residential unit on his behalf which she financed from her own resources. It cost $358,000. Because of the delay in the receipt of the settlement monies and the amount of them, she has concerns about her capacity to retain the property. Accordingly, the applicant does not reside in those premises which have been rented to a relative at a rate below that which is commercially applicable. The applicant currently resides in another of her properties near to where she lives and requires assistance with aspects of his daily living. Although the applicant is now in receipt of disability support pension, that was not the case after Centrelink’s decision until the SSAT decision. Prior to this, he was without income support and the benefits available to him through use of a health care card. As a result, he experienced severe financial hardship. In the result, she has also been required to provide him with financial assistance. She understands that the settlement monies will not be sufficient for her to be fully reimbursed for her outlays and accepts that any shortfall will constitute a loan by her to the applicant.
7. The applicant’s mother describes him as suffering from disabilities in addition to those directly related to the head injury he received in 1999. These include a shoulder and back problem, epilepsy and depression. Because of the effect of all of these conditions, the applicant would never be in a position where he could maintain financial independence. She described this as being of particular significance because of the high achievement potential he demonstrated in his early years.
8. The applicant’s mother described a level of pressure on herself and the applicant from his solicitors at the time when the settlement was agreed to. Whilst she had been aware that Centrelink would impose a preclusion period for the receipt of social security benefits, she was not aware that the calculations would be based upon a lump-sum which included the award of costs. This increased the amount from $500,000 to $745,000 and significantly increased the preclusion period. In this, she believed that the solicitors acted negligently in failing to provide appropriate advice to Centrelink about the level of the proposed settlement amount. While she was aware that information had been provided to the solicitors by Centrelink concerning the likely length of the preclusion period, she considered that this information should have been provided directly to her by Centrelink. She also considered that the costs in this matter were disproportionately high in comparison to the damages awarded and that the level of those costs should be taken into account in calculating the length of the preclusion period.
9. The applicant’s mother submitted that the special circumstances in this matter comprised the general unfairness of the small amount of the settlement, the disproportionate level of costs required to be paid and the unfairness of taking costs into account, the negligence of the solicitors, the failure by Centrelink to properly inform her of the basis for the calculation of the preclusion period, the impact on the applicant of conditions unrelated to that for which he was compensated and a difficult financial situation in which the applicant is now placed.
Other evidence
10. Centrelink provided estimates to the applicant’s solicitor on 21 May 2007 and 4 July 2007, respectively, of what the repayment amount and the corresponding preclusion period was likely to be. Records of these were in evidence. The first, based upon a settlement estimate provided by the solicitor of “$900,000”, was $110, 490.63 and 17 March 1999 to 18 January 2011. The second, based upon the solicitor’s settlement estimate of “$500,000 plus costs”, was $84,403.94 and 17 March 1999 to 14 October 2005. As noted above, the judgment amount including costs was $745,000.
11. Also in evidence were medical and psychological reports prepared in the period from 1999 until 2007 in respect of various treatments and procedures which the applicant has undergone during that time. One of these was a treating doctor’s report prepared in 1999. It referred to the applicant’s traumatic brain injury and nominated a period of 6 to 12 months during which he would be unfit for employment. A further report, dated 30 March 2007, was from a consultant neurologist. It refers to the applicant’s current situation and describes constant right lower back pain, deafness in the left ear as a result of childhood meningitis, a marked non-organic weakness of the right leg and permanent impairment of the nervous system because of the injury in 1999 manifesting in a degree a behavioural disturbance and memory impairment. The presence of epilepsy was queried but the report concluded that it was doubtful whether the applicant would ever return to the workforce in any capacity, that he was not fit to manage his financial affairs and that he was otherwise capable of independent living.
12. Prior to the settlement, the applicant’s mother filed an affidavit in the Court. A copy was in evidence and it included the following:
“I understand that from the settlement moneys a refund of approximately $5,610 is to be deducted to repay the Victims Compensation Board, $879.40 to Health Insurance Commission, $84,394 or other such amount as advises (sic) by Centrelink and the sum of $94,000 to the solicitor for the plaintiff in payment of the balance of his costs and disbursements.”
Consideration
13. The purpose of the provisions relating to the imposition of preclusion periods following the receipt of compensation payments has been the subject of judicial comment. The provisions have been described as operating as a:
“…..fair balance of 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[1]”
[1] Secretary, Department of Social Security v Smith (1991) 23 ALD 277 at 281-282 (Von Doussa J)
14. Similarly, they been described as a safeguard against “double dipping” in that:
“People should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source[2]”.
[2] Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 148 (Heerey J)
15. Those considerations must be kept in mind when determining whether or not special circumstances arise in a given case. The issue of special circumstances is provided for in various parts of the Act. In the context of other aspects of the Act, it was observed that what is required is:
“……something to distinguish... [the]… case from others, to take it out of the usual or ordinary case. ……. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary[3]”.
[3] Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 (Kiefel J).
16. That observation is equally applicable to s 1184K of the Act. Accordingly, there must be something about the applicant’s situation which makes it “unusual” or “uncommon” such that it distinguishes it from the ordinary or usual case.[4]
[4] Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25 at [33] (Besanko J).
17. The estimates of the prospective refunds and preclusion period made by Centrelink in May and June 2007 were based on proposed lump-sum settlement amounts provided by the applicant’s solicitor. The relevant documents indicate that that data was utilized in the application of the appropriate formula under the Act. The estimates were sent to the applicant’s solicitor and, as the legal representative of the applicant, the carriage of the matter was in the solicitor’s hands. I am satisfied that this was the appropriate approach by Centrelink, that there was no obligation to provide that information directly to the applicant and that no consequential unfairness to the applicant arose from this.
18. The applicant’s mother has alleged negligence on the part of the solicitor in providing its estimates of the quantum of the proposed lump-sum settlement amount. There may well have been an underestimate of the proposed lump-sum amount by the solicitor but there might also have been a degree of inappropriate processing by Centrelink of the information provided by the solicitor. Reference has been made above to the Centrelink estimate of the repayment amount and corresponding preclusion period provided to the applicant’s solicitor on 30 June 2007. The document containing that advice appears to contain an internal inconsistency. It includes a “Note” that the estimate will be calculated on the information provided and requires that it be fully completed. That information is provided under the following heading: “Proposed gross lump-sum amount (including legal costs, medical expenses in any payment for non-economic loss)”. The response under the heading is “$500,000 + costs”. “Legal costs being assessed”. Despite that, the proposed lump-sum amount was taken to be “$500,000” for the purposes of the calculation. This revealed an estimated repayment amount of $84,403.94 and a preclusion period from 17 March 1999 to 14 October 2005. As noted above, the judgment amount including costs was $745,000. This meant that the repayment was higher and the preclusion period longer that the Centrelink estimate. However, the document makes it clear that it is an estimate. Nevertheless, the letter accompanying that document was in evidence[5] . It refers to the estimated settlement amount of $500,000 but also advises that the ultimate settlement amount may very from the figure which was nominated.
[5] T10; Folio 44.
19. There have been cases where negligence of a legal adviser in failing to properly advise a person in the applicant’s position have given rise to an exercise of discretion under s 1184K of the Act and, in that context, the applicant’s mother referred to the Tribunal decision in Re Secretary, Department of Social Security and VYS[6]. Generally, however, this will not be the case on the basis that this is a matter between the applicant and the solicitor[7]. In this matter, the applicant’s mother, from the affidavit filed by the applicant’s mother in court prior to settlement, had an awareness that the settlement sum would be impacted upon by repayments to Centrelink but there may well have been contribution to the imperfect information provided to her such as to enliven the discretion under s 1184K to the Act.
[6] (1995) 40 ALD 745.
[7] See Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716.
20. The applicant’s mother referred to the presence of conditions other than that for which the applicant was compensated and submitted that these had a significant impact upon him. She noted that the treating doctor’s report in 1999 implicated his head injury as being of a degree which would prevent him from working for some 12 months. She contrasted that with the more recent reports which indicated that he was unemployed ball and invited the Tribunal to infer that this implicated the other conditions from which he suffers. The 1999 report was prepared for the purposes of an application for the disability support pension and prospects of employment within that relatively short-time frame were pertinent to such an application. In any event, it also described his condition as being “long-term: likely to persist for at least two years” and, of course, that has been the outcome for the applicant. The breadth of the discretion in s 1184K of the Act is such as to accommodate the submission of the applicant’s mother. However, on the basis of the report, noted above, from the neurologist, I am satisfied that the major impact upon the applicant comes from the results of his head injury. That is precisely the condition for which the compensation was paid and is a direct consequence of that injury. It is not an unusual or uncommon consequence that the compensated condition would lead to the outcomes described in that report.
21. It was submitted that financial hardship is a relevant consideration in this matter. Of particular significance, in the applicant’s case, is the delay which has attended the payment of the settlement monies. Further, he was deprived of income support payments and the benefit of his health card for several months. Nevertheless, financial hardship will not generally constitute special circumstances unless it goes beyond straitened circumstances and is truly exceptional[8]. The applicant is currently in receipt of disability support pension and, when payment is received, will have the advantage of having ownership of his own residential property. In that sense, the applicant’s circumstances would compare favourably with many recipients of Social Security benefits and I am satisfied that his situation is not so uncommon or exceptional as to constitute a special circumstance.
[8] Director-General of Social Services v Hales (1983) 47 ALR 281 at 321 (Sheppard J)
22. The size of the settlement amount, the applicant’s mother submitted, was such as to constitute a special circumstance in this case. I do not accept that submission. The amount was agreed to by her after a course of negotiations involving the applicant’s solicitor. She referred to feeling pressure to reach agreement but that is not an unusual or uncommon situation in the circumstances which prevail when parties are attempting to compromise a legal claim. I am satisfied that this is not a matter which falls within s 1184K of the Act.
23. For the contention that the preclusion period should be calculated without regard being had to the costs component of the compensation settlement amount, the applicant’s mother relied upon Re QX05/10 and Secretary, Department of Employment and Workplace Relations[9] and Re Fuller and Secretary, Department of Family and Community Services[10].
[9] [2006] AATA 178.
[10] (2004) 83 ALD 152.
24. As I understand it, the decision in Re QX05/10 is not based on the exclusion of legal costs from the calculation of the preclusion period but, rather, on the particular circumstances in that case which the Tribunal found were special such as to justify the shortening of the preclusion period to end on the date of its decision in the same manner as the SSAT did in the applicant’s case. Inclusion of the costs component in the calculation is in accordance with the definition of compensation in s 17(2) of the Act. This includes a payment in settlement of a claim for damages or a claim that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. I am satisfied that this applies to the lump-sum relevant in this case. That is consistent with the decision in Fuller[11] which I am also satisfied does not stand as authority for the contention raised on behalf of the applicant. The applicant’s mother relied upon a component of that case where the Tribunal made recommendations to Centrelink concerning certain aspects of its policy in dealing with the cost components of settlement lump-sums. This related to two situations: first, where the settlement sum included an agreed costs component; and secondly, where it did not do so because costs were to be subsequently assessed. The Tribunal in Fuller noted that, in the former but not the latter situation, costs were included in applying the formula in the calculation of the preclusion period. The Tribunal remitted its matter with a recommendation that Centrelink reconsider its practice concerning the different manner in which it treated those situations. As I understand it, Centrelink has not amended its practice in that regard.
[11] (2004) 83 ALD 152 at 161-162; Secretary, Department of Social Securityv Hulls (1991) 22 ALD 570.
25. The SSAT found special circumstances in this matter to ground the application of s 1184K of the Act. I agree with that conclusion. In particular, the nature of the advice given to the applicant concerning the extent to which the settlement amount would be impacted by Centrelink action, the relatively high costs component of the settlement amount and the delay involved in making those monies available to the applicant constitute special circumstances as that term has been explained above. This requires that some part of the settlement sum be disregarded and I am satisfied that the approach applied by the SSAT should be adopted. Accordingly, so much of the compensation sum should be treated as not having been made so as to allow the preclusion period to end on the date of the SSAT decision
Decision
26. The Tribunal affirms the decision under review.
I certify that the 26 preceding paragraphs are a true copy of the reasons for the decision herein of Mr RG Kenny, Member
Signed: .....................[Sgd]...........................................................
Research AssociateDate/s of Hearing 26 February 2008
Date of Decision 12 May 2008
For the Applicant Applicant represented by his mother.
For the Respondent Mr R McQuinlan, departmental advocate.
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