Re Secretary, Department of Family and Community Services and Peak

[2003] AATA 1212

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2003] AATA 1212

ADMINISTRATIVE APPEALS TRIBUNAL       )          No.     N2003/427
  )

GENERAL ADMINISTRATIVE DIVISION          )

Re:SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And:       Robert Peak

Respondent

DECISION

Tribunal       M.A. Griffin, Member

Date              3 December 2003

Place            Sydney

DecisionThe decision under review is set aside and the Tribunal remits the matter to the Applicant with the direction that the decision of the Authorised Review Officer dated 5 December 2002 is the correct decision.

(Sgd)   M.A. Griffin
  ………………………………

Member

SOCIAL SECURITY - Whether the preclusion period should be set aside or reduced ––whether special circumstances exist – very high legal costs - substantial gambling - decision set aside

Legislation

Social Security Act 1991 – section 1184K

Case Law

Dranichnikov v Centrelink [2003] FCAFC 133, 19 June 2003

Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152

Re Secretary, Department of Social Security and Thompson (1993) AAT 8997, 17 September 1993

Re Magallanes and Secretary, Department of Social Security (1995) AAT 10044, 3 March 1995

REASONS FOR DECISION

3 December 2003  M.A. Griffin, Member

1.This is an application by the Secretary, Department of Family and Community Services (“the Applicant”) for review of a decision of the Social Security Appeals Tribunal (“SSAT”) dated 14 February 2003.  The SSAT set aside a decision of an Authorised Review Officer (“ARO”) of Centrelink and sent the matter back to the Chief Executive Officer of Centrelink for reconsideration with directions that:

(i)in the special circumstances of the case, the whole of the compensation payment is to be treated as not having been made; and

(ii)the amount recovered from the compensation payment be refunded to Mr Peak. 

2.At the hearing of this matter on 8 October 2003, the Applicant was represented by Ms Cheryl Collis, a Centrelink advocate. The Respondent was represented by Ms Dianne Agnanos, a solicitor from the Welfare Rights Centre. The Tribunal had before it the documents lodged pursuant to section 37 of the Administrative Appeals tribunal Act 1975, as well as exhibits marked A1 and A2 for the Applicant and R1 - R3 for the Respondent.

BACKGROUND

3.Mr Peak was injured in a fall in his backyard on 23 May 2000. He made a claim for compensation against his landlord. The claim was settled on 24 July 2002 in the amount of $115,000.00. After payment of legal and medical costs, other disbursements and a payment to Centrelink of $15,649.79, Mr Peak was left with $35,096.66. He later received a refund of $10,000.00 from the Health Insurance Commission (“HIC”).

4.Centrelink calculated that Mr Peak was precluded from receiving compensation affected payments from the date of injury to 1 April 2002 based on a statutory formula applied to the compensation part of any lump sum payment. Mr Peak had received $15,649.79 in Newstart Allowance payments during that period of time and Centrelink determined that this amount was recoverable.

5.Mr Peak sought review of that decision. On 5 December 2002, an ARO decided to vary the decision. The first Centrelink decision calculated the compensation part as fifty per cent of the total settlement, namely half of $115,000.00, being $57,500.00. The ARO decided the actual amount received by Mr Peak, that is $45,096.66 should be regarded as the compensation part of the settlement and Mr Peak was refunded $3,486.26 after recalculation of the preclusion period.

6.On 6 January 2003, Mr Peak applied to the Social Security Appeals Tribunal (“SSAT”) for review of that decision. The SSAT found, inter alia, that Mr Peak had sustained very high legal costs in his compensation claim, that he had substantial and long standing debts which he had no capacity to pay, that he has physical disabilities which impair his ability to work and decided that in the special circumstances of this case, it was appropriate to treat the whole of the compensation payment as not having been made.

ISSUE

7.The parties agreed at the outset that the issue is:

whether there are special circumstances that make it appropriate to disregard some or all of the compensation payment made to the respondent pursuant to section 1184K of the Social Security Act1991 (“the Act”).

EVIDENCE

8.Mr Peak is twenty-seven years old. He lives in rented accommodation with his partner, Heather Channon. They have two dependant children living with them who are under five years of age. Mr Peak receives a Disability Support Pension (“DSP”). Ms Channon receives Parenting Payment (partnered) and a Family Tax Benefit. Neither of them is in paid employment.

9.Mr Peak told the Tribunal he has generally been unemployed since the age of sixteen. He said he has generally been exempted from the requirement to actively seek work due to his chronic dizziness and fainting spells.  He said these disabilities resulted from an assault on him some years before and from being struck by lightning as a child. He said he has very limited reading and writing ability. He said he has difficulty concentrating and dealing with and completing forms and documents. He said his father is a bricklayer and he has worked for him occasionally but on a very limited basis.

10.Mr Peak said he was misled by the solicitor who acted for him in his compensation claim. He said the solicitor told him during the settlement negotiations that he would receive $45,000.00 plus the $10,000.00 HIC refund and that he would get the $15,000.00 back from Centrelink because there would be no economic loss component of the settlement to give rise to a preclusion period.  Mr Peak said the solicitor told him his costs would be $11,500.00. The actual bill for the solicitor was $32,453.80. Mr Peak complained about his solicitor and his costs to the Office of the Legal Services Commissioner. The Commissioner advised Mr Peak that he could have the costs assessed and directed him to the Supreme Court Costs Assessment Section. The Commissioner dismissed the complaint about the solicitor. Mr Peak did not apply to have the costs assessed. He said he could not afford to do so.

11.The law firm acting for the defendant in Mr Peak’s compensation claim advised Centrelink in writing that the settlement included a component for economic loss (see T11).

12.Mr Peak’s initial written evidence was that he expended his settlement proceeds as follows:

Car (Holden Astra)

$26,000.00 (including extras)

General living expenses    

(including a trip to Adelaide

to see Ms Channon’s family)

$12,000.00

AGC (debt)

$2,000.00

Lounge/furniture

$5,000.00

13.A similar accounting was given by Mr Peak to the SSAT. However, during the course of the Tribunal hearing, Mr Peak revealed that he had gambled an amount of at least five to seven thousand dollars of the compensation payment. Mr Peak also advised the Tribunal of a further recent expenditure of $3,100.00 by way of payment of a debt to a family friend for repair of his motor vehicle, which Mr Peak had damaged. Mr Peak said this debt had recently been paid out of the $5,000.00 refund made by Centrelink on 6 June 2003 pursuant to a stay order of the Administrative Appeals Tribunal. Mr Peak produced a letter of demand from the family friend for this debt dated 19 June 2003.

14.Mr Peak said the gambling was confined to a limited period of time in late 2002, was not a continuing problem and had been a misguided attempt to make more money.

15.Ms Channon said Mr Peak had told her on the day of the compensation settlement that he would receive close to sixty thousand dollars. She said she did not see the settlement papers. Ms Channon was asked in cross-examination why, with Mr Peak’s cognitive difficulties, she did not look at the settlement paperwork. She said she was a trusting person. She was adamant that she confirmed with the solicitor that Mr Peak would receive $45,000.00 in hand and close to $60,000.00 with the other refunds.

16.Ms Channon said Mr Peak had expended around $8,000.00 on gambling through poker machines.

17.Ms Channon has a medical condition, which involves heart palpitations and breathlessness. A letter from her doctor describes a diagnosis of cardiac arrhythmia. She has been hospitalised because of this in recent times. She said it is caused by stress and shock. She takes iron tablets and is seeing a cardiologist. She worked for a month or so earlier this year at night in a supermarket. She said she stopped working because it was hard on the family, she was not getting enough sleep and it made her grumpy.

18.Ms Channon said she deals with the family finances. She said they have substantial debts. She said they owe the State Debt Recovery Office some $1,600.00 for traffic fines incurred by Mr Peak. Ms Channon was asked about the expenditure of the December 2002 Centrelink refund of approximately $3,500.00. She said there had been other debts not previously mentioned and that she had bought more clothes for the family. She said the $5,000.00 stay order refund was spent on more clothes, blankets, the debt to the family friend and on tyres and a service for the car. She said someone at Centrelink had told her she would be getting back all of the money.

19.Ms Channon said the family subsist from week to week on the social security payments they receive and have little money left at the end of the fortnight. Ms Channon disagreed with the suggestion that her claimed family expenditures for everyday living were excessive.. She conceded that the budgeted amount for electricity costs was high and did not know why the figure of $70.00 per fortnight was claimed.  She said the family income is $1,048.80 per fortnight with expenditure for the same period of $1,340.00. She said the family has debts of $3,115.00.

20.Ms Channon said the $100.00 per fortnight expenditure for telephones was related to pre-paid mobile telephone cards for Mr Peak’s mobile telephone, as their home telephone is limited to receiving calls because of debt to the telephone company. Ms Channon said the budgeted sums of $15.00 for the hairdresser and $10.00 for presents for the children per fortnight was not excessive.  An amount of $40.00 per fortnight is budgeted for medication, said to include anti-inflammatory cream for Mr Peak, iron tablets for Ms Channon and Panadol.

CONSIDERATION OF THE ISSUES

21.The relevant section of the Social Security Act 1991 is section 1184K which 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.”

22.Ms Collis submitted that the ARO had already taken account of the special circumstances when he reduced the figure for the basis of the calculation of the compensation component from the total settlement figure to the amount actually received after costs and disbursements. She said that questions concerning costs and economic loss arise frequently in settlement negotiations and that value judgments must be made. She said that Mr Peak could have obtained a costs assessment and his decision not to do so was unreasonable. Ms Collis said the family had received some eight and half thousand dollars in refunds from Centrelink but was still in debt. She said economies were available in the family budget. She said debts are not uncommon for low-income families. She said Mr Peak had embarked on a gambling spree and that where there was such a lifestyle aberration, the Tribunal should not exercise the discretion to waive the debt. Ms Collis said the discretion should only be exercised in cases where there are unplanned contingencies which arise. Ms Collis said the discretion should be reserved for use in the very needy cases and that this family is not destitute and can through better budgeting, improve its financial position.

23.Ms Agnanos submitted that the Tribunal should not focus on any one particular factor but look instead at the total picture. She said Mr Peak’s physical disabilities are not related to his compensation payment.  She said the family budget figures are not actual expenditure but demonstrate what the family would like to be able to afford. She said their outgoings regularly exceed their income. Ms Agnanos submitted it would be unfair to expect Mr Peak to sell the car and downgrade to a less expensive model. She said he cannot use public transport because of his medical condition and he requires the car to attend the doctor and for family needs. Ms Agnanos said the gambling was a short-lived desperate attempt to increase the family finances. Ms Agnanos referred to the low proportion of the settlement figure actually received by Mr Peak and the expectation created by the solicitor’s advice to Mr Peak of a higher amount for him. Ms Agnanos said the matter was now out of time for a costs assessment. Ms Agnanos submitted this was an appropriate matter in which to exercise the discretion to regard the payment as not having been made.

CONCLUSION

24.In reaching its decision, the Tribunal takes into account the written material, the oral evidence and the submissions made at the hearing.

25.The issue is whether or not there are special circumstances in this case, which make it appropriate to regard the whole or part of the compensation payment as not having been made. In Dranichnikov v Centrelink [2003] FCAFC 133 (19 June 2003) at paragraph 65, Hill J in considering the term “special circumstances” said:

“65. … The origin of the test apparently adopted by the Secretary appears to be the decision of the first instance Judge in Beadle v Directory-General of Social Security (1985) 60 ALR 225. That was a decision under previous legislation, the history of which is referred to by French J in Secretary of Department of Social Security v Hales (1998) 82 FCR 154. The Full Court in Beadle comprising Bowen CJ, Fisher and Lockhart JJ, however, was of the view that it was not possible to lay down precise rules as to what constituted special circumstances under the then s 102(1)(a) of the Social Security Act 1947 (Cth). Their Honours point out that the question whether there were special circumstances was one for the decision maker (in that case the Director-General) bearing in mind the purpose for which the power was given. The reference to the first instance decision from which the words “unusual, uncommon or exceptional” come was not actually affirmed by the Full Court.

66. To some extent the question whether there were special circumstances must depend on how it came about that the error occurred.  Again that is not a matter to which the decision maker apparently averted.  Other cases which have considered analogous words such as ‘special reasons’ has tended to conclude, albeit in different contexts, that what is required will be circumstances which distinguish the case in consideration from the usual case.  There will be a requirement that the circumstances are such that takes the case out of the ordinary: Jess v Scott (1986) 12 FCR 187 and the cases in various contexts in the decision which Lockhart, Shepherd and Burchett JJ discuss.

67. It is possible to read the decision statement as suggesting that the present case was one incapable of falling within the words ‘special circumstances’..  If that is what was held, it would involve legal error.  However, the real problem with the exercise of discretion under s 101 as with the mandatory provisions of s 97, is that the decision maker appears not to have considered at all what the circumstances were which gave rise to the overpayment.  Whether those circumstances were or were not special will obviously be a matter for the decision maker when the factual circumstances have been ascertained.”

26.The Tribunal is not satisfied that Mr Peak was misled by his solicitor as to the settlement monies he would receive or the costs he would have to pay.  Mr Peak has on his own evidence, confirmed by Ms Channon, significant cognitive difficulties. He finds it difficult to concentrate and to read and deal with documents. These disabilities were obvious during the hearing. Ms Channon was not present for the discussions about costs or settlement with the solicitor. I am not satisfied that her evidence of what the solicitor told her about the amount to be received is reliable. The Legal Services Commissioner investigated Mr Peak’s complaint about his solicitor and dismissed the complaint. Mr Peak did not seek an assessment of the costs. The Tribunal does not have any evidence upon which to make its own assessment of the costs. There is evidence that the settlement monies included an economic loss component. The legislation requires the application of the preclusion provisions in these circumstances.

27. It is submitted that the proportion of the settlement figure related to economic loss was minimal and that amounts to special circumstances. In Re Fowles and Secretary, Department of Social Security (1995) 38 ALD 152 at 162, Bulley J said :

“(58) In the final analysis the only matter relied on by the applicant  through her solicitor is the fact as alleged, that Ms Fowles received a significantly lower component for economic loss in the lump sum settlement than that calculated by the department…These sorts of problems are to my mind not unusual in the run of cases in the personal injuries field. Those sorts of issues arise day in, day out, and commonly form the reason why at the end of the day matters are settled, because those sorts of risks are takan on board and a value judgment is made…Further if one acceded to Mr Jeffery’s argument on special circumstances as set out in the initial part of Cl 58 of these reasons, one would in a back door fashion be giving credence to the sort of approach the amending legislation sought to prevent. That approach of seeking to dissect the lump sum into components by disguising it under the phrase ‘special circumstances” pursuant to s1184 should not be countenanced in the circumstances’”.

28.The section 1184 under consideration in Fowles supra has the same effect as the present section 1184K. The Tribunal is satisfied that it is not appropriate to enter into a consideration of the economic loss component of the settlement monies for the purposes of section 1184K.

29. An ARO considered the facts of this matter and was satisfied the circumstances were such as to warrant the exercise of the discretion and reduced the preclusion penalty. The SSAT found there were special circumstances such as to make it appropriate to disregard the entire compensation payment.  This Tribunal was apprised of some evidence not available to the SSAT. This is the fact of Mr Peak’s loss of around seven thousand dollars through gambling on poker machines. Previous decisions of the Tribunal have looked at the issue of gambling in relation to the consideration of special circumstances: see Re Secretary, Department of Social Security and Thompson (1993); Re Secretary, Department of Social Security and Rodgers (1992); Re Magallanes and Secretary, Department of Social Security (1995). In this instance, it is clear that Mr Peak’s gambling was not the consequence of any psychological imbalance or compulsion or any intellectual deficit. There was nothing compulsive in his gambling.

30. The family has debts; they are substantial but not out of the ordinary for low-Income families. The family do not appear to have used the compensation monies to retire any large component of their debts. The evidence of how the money has been expended aside from the purchase of the motor vehicle was not clear.  The Tribunal was not satisfied the evidence of expenditure including the June 2003 debt to the family friend was reliable.

31. There is evidence which the Tribunal accepts of various medical conditions adversely affecting the family, however, these are not of such an order as to make them unusual or out of the ordinary.

32.On the evidence presented, the Tribunal finds that there are no personal or financial or other matters raised by the Respondent that could constitute special circumstances, nor is there anything in the circumstances which gave rise to the amount of the compensation that constitutes special circumstances.  Therefore, the Tribunal finds that it is not appropriate to treat the whole or part of the compensation payment as not having been made.

DECISION

33.The decision under review is set aside and the Tribunal remits the matter to the Applicant with the direction that the decision of the Authorised Review Officer dated 5 December 2002 is the correct decision.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for the decision of:

M.A. Griffin, Member

Signed:……………(K. Wong)………….……………………….

Associate

Date of hearing:  8 October 2003

Date of decision:  3 December 2003

Advocate for the Applicant:      Ms C Collis, Secretary, Department of Family and Community Services

Solicitor for the Respondent:     Ms Agnanos, Welfare Rights Centre