Reid and Secretary, Department of Social Services (Social services second review)
[2016] AATA 62
•8 February 2016
Reid and Secretary, Department of Social Services (Social services second review) [2016] AATA 62 (8 February 2016)
Division
GENERAL DIVISION
File Number
2015/4023
Re
Kim Reid
APPLICANT
And
Secretary, Department of Social Services
RESPONDENT
DECISION
Tribunal Deputy President Dr P McDermott RFD
Date 8 February 2016 Place Brisbane The Tribunal affirms the decision under review.
............................[Sgd]............................................
Deputy President
CATCHWORDS
SOCIAL SECURITY – lump sum workers’ compensation payment – preclusion period – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made – financial hardship – ill health – significant equity in real property - special circumstances not made out
LEGISLATION
Social Security Act 1991 (Cth) s 1184K, 1170, 1184A, 17(1), 1169
CASES
Secretary, Department of Social Security v Hales (1998) 82 FCR 154
Re Beadle and Director-General of Social Security (1984) 6 ALD 3
Ivovic and Director-General of Social Services [1981] AATA 57
Secretary, Department of Social Security and Winterbotham [1990] AATA 808; [1990] AAT 6499
Williams and Secretary, Department of Social Services [2015] AATA 544
Krzywak and SDSS (1988) 15 ALD 690.
Re Secretary Department of Social Services VYS (1995) 40 ALD 745, 749
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Secretary, Department of Social Services and Simonelli [2015] AATA 901
REASONS FOR DECISION
8 February 2016
This review relates to the compensation preclusion period that has been applied to
Ms Kim Reid in relation to compensation she received for injuries sustained in a motor vehicle accident on 5 August 2005. In particular, the issue in this matter is whether the Applicant can be paid the Disability Support Pension (“DSP”) before the expiration of the preclusion period, namely before 23 December 2016. This requires consideration of s 1184K of the Social Security Act 1991 (Cth) (“the Act”), and in particular whether any special circumstances exist that warrant allowing all or part of the Applicant’s compensation preclusion period to be disregarded.On 5 August 2005 Kim Reid suffered a significant whiplash injury in a motor vehicle accident. In 2010 she obtained compensation for that injury assessed at a total of $693,031.16. In April 2010 the Department (incorrectly) calculated a compensation preclusion period which applied from 5 August 2005 to 24 September 2015 and wrote to the Applicant advising her of that decision.[1]
[1] Exhibit 1, T documents, page 69.
This initial calculation of the preclusion period was incorrect because it commenced the preclusion period from the date of the Applicant’s injury. In May 2010 the Department recalculated and changed the preclusion period to commence from 29 August 2009 and end on 15 September 2017. This change reflected that the commencement date was to begin the day after periodic compensation ceased, as opposed to the date of the accident and also took into account the gross amount of compensation of $693,031.16 divided by the applicable divisor of $772.10. The Department wrote to the Applicant advising her of the change and explaining the basis for the recalculation.[2] On 16 June 2010 the Applicant signed and returned a “letter of acknowledgement” confirming her awareness of the compensation preclusion period and her understanding that she would not be eligible to receive income support during the preclusion period.[3]
[2] Exhibit 1, T documents pages 71 and 153.
[3] Exhibit 1, T documents page 154.
On 3 March 2015 the Applicant lodged claims for Newstart Allowance and the DSP. On 3 March 2015 the Applicant’s Newstart Allowance claim was rejected on the basis that she was subject to a preclusion period until 16 September 2017.[4] On 9 March 2015 the Applicant’s DSP claim was rejected on the same basis.
[4] Exhibit 1, T documents page 127.
The Applicant sought a review of that decision by the SSAT. The SSAT confirmed that the compensation preclusion period had been correctly calculated, but found that there were special circumstances that warranted treating $10,000 of the Applicant’s compensation payment as not having been made. Those special circumstances related to the unanticipated cost of surgery the Applicant was required to undergo in connection with her compensable injury. This decision brought the conclusion of the compensation preclusion period forward to 23 December 2016.[5] The Applicant seeks a further review of that decision by this Tribunal.
[5] Exhibit 1, T documents pages 7.
Before considering the issue of special circumstances, it is useful to reflect briefly on the legislative context and relevant provisions.
THE LEGISLATIVE FRAMEWORK
The compensation recovery provisions in the Act operate where a person receives a compensation payment that includes some element of economic loss, which may be in the form of a lump sum or periodic payments.
Briefly, the Social Security Act 1991 (Cth) (“the Act”) sets up a scheme which provides that if a person receives a “compensation affected payment”[6] (which relevantly includes, for present purposes, DSP and Newstart Allowance), and they receive a lump sum payment by way of compensation for past or future loss of income as a result of a personal injury, the compensation affected payment is not payable to the person during what is called the “lump sum preclusion period”.[7] The length of the preclusion period is determined by the amount of compensation received and is calculated under s 1170 of the Act. In effect, the scheme is aimed at preventing “double dipping” during the period for which the recipient or Applicant has been separately compensated in respect of lost income.
[6] See s 17(1) of the Act.
[7] See s 1169 of the Act.
If any compensation affected payments are made during the preclusion period, they are recoverable under ss 1184 and 1184A of the Act.
What are “special circumstances”?
Section 1184K of the Act permits the Secretary to treat all or part of the compensation as if it had never been received by the person, and therefore allow the person to recover their entitlement to the pension or allowance. In order to exercise the discretion conferred by s 1184K the Secretary must be satisfied that there are “special circumstances” that, in all the circumstances, make it appropriate to do so. The expression “special circumstances” is not defined in the Act. It has, however, been the topic of much consideration by the Tribunal and the courts, whether in the context of s 1184K or the provisions of other legislation where the same term has been employed. While it is acknowledged that the concept of “special circumstances” is broad[8] and resistant to exhaustive or precise definition, it is frequently construed as referring to circumstances which are “unusual, uncommon or exceptional”. There must be some aspect which makes the case “markedly different from the usual run of cases”; it must have a particular quality of unusualness that permits those circumstances to be described as “special”.[9]
[8] See Secretary, Department of Social Security v Hales (1998) 82 FCR 154, 162.
[9] See Re Beadle and Director-General of Social Security (1984) 6 ALD 3.
Further, in Ivovic and Director-General of Social Services, the Tribunal made it clear that in exercising a discretion such as that conferred by s 1184K of the Act, the decision-maker:
[M]ust have regard to whether, by exercising the discretion in a particular case, he will be achieving or frustrating ends or objects which are conformable with the scope and purpose of the Social Services Act 1947.[10]
[10] [1981] AATA 57, [45].
The Tribunal’s decision in Re Secretary Department of Social Security and Winterbotham, provided a useful summary of the principle underlying the compensation provisions contained in the Act, namely that persons who receive lump sum compensation payments are expected to support themselves from their own resources for a reasonable period before seeking support from the taxpayer:
This particular piece of legislation… was aimed specifically at preventing those people receiving compensation for loss of income because of incapacity for work, from being able also to receive benefit from the public purse… Primary responsibility for the payment of such compensation lies at the feet of those responsible for the compensable injury. Once that responsibility has been met, by way of a settlement sum agreed to by both parties, it is inequitable for the recipient to seek supplementary funds from the tax-payer.[11]
CONSIDERATION
[11] [1990] AATA 808 at [19] (Deputy President Burns & Member Rogers).
Ms Reid’s Evidence
Ms Reid gave evidence at the hearing. Essentially, her claim of special circumstances was based on a combination of financial hardship and health issues, as well as a claim that she was under duress at the time of executing the acknowledgement provided to the Department referred to above. I summarise below her evidence, before considering whether the circumstances of her case are sufficiently “special” to justify the exercise of the discretion under s 1184K of the Act.
Ms Reid alleges special circumstances based on financial hardship and ill health. Ms Reid pointed to the fact that her weekly expenses currently total $1,084, and not $772 as estimated by the Court in 2009 when calculating her entitlement to compensation. She provided a spreadsheet detailing her monthly expenses to demonstrate this.[12] She stated in evidence that at that time the court endeavoured to estimate her likely living, and importantly, medical costs in the future. She says that now in 2016 those costs have proven to have been underestimated, and there is no contingency in place to allow for these, or any other, unexpected expenses. Ms Reid indicated she is also presently unable to afford to maintain her private health insurance policy and as a result has been unable to meet necessary medical costs such as optometry, dental and other remedial therapies.
[12] Exhibit B.
Ms Reid chose to use a significant portion of the compensation lump sum she received to pay off the remainder of the mortgage on her home which was approximately $70,000. She gave evidence that it made economic sense for her to do so as she had been servicing the loan for some years. She also stated that she wanted to get rid of the home loan as it was with Suncorp and she no longer wanted to associate with them after her negative dealings with them throughout her previous court proceedings.
Ms Reid decided to move out of the property and rent it out in order to generate an income for herself. On advice from a real estate agent, Ms Reid obtained a loan secured by the property in the amount of $35,000 to make repairs and renovate the property so that it may be rented out. Ms Reid moved into rental accommodation of her own and received a net income of approximately $260 per week from leasing her property. Ms Reid noted at the hearing that increased costs have decreased this amount to a net income of $232 per week.
Ms Reid advised that she was evicted from her rental premises on 6 October 2015 for her failure to pay outstanding rent and is now relying on friends and family for accommodation and other support. She pointed out the difficulties she now faces in securing a future rental property as her eviction was recorded in a central database routinely checked by lessors in the rental application process. For this reason, she states, she intends to move back into her property in early February when it becomes available, leaving her with no source of income. At the hearing, in response to my question, the Applicant informed me that she had approximately $300,000 equity in the property. When asked whether she had considered selling the property she responded that she couldn’t and wouldn’t do so because it was intended as her daughter’s inheritance.
Ms Reid made a submission with respect to the acknowledgement she signed and returned to Centrelink in June 2010 indicating she was aware of the effect of the compensation preclusion period on her entitlement to income support. Ms Reid stated that she was very unwell at that time, she cannot read well and that she was informed she had no choice but to sign the paperwork. She considers that she was under extreme duress at the time of signing the acknowledgement and perceives any reliance on the document to be unfair.
The Respondent’s contentions
The Respondent submits that Ms Reid has already had the benefit of two favourable determinations, and that there are no circumstances which warrant any further reduction in the applicable preclusion period.
The Respondent submitted that it is clear from the preclusion period provisions that when someone receives a compensation payment, it is a matter for them how they dispose of their compensation proceeds. However, there is a general expectation that some or all of the proceeds will be applied to meeting the recipient’s day to day living costs until the conclusion of the preclusion period.
The Respondent submits that the Applicant’s decision to direct a considerable portion of the compensation monies to her home mortgage was rightly a matter of choice for her. However, it was contended that if Ms Reid chose to invest a significant portion of the compensation into paying off the home, she should not be treated differently to someone who uses the funds to meet their day to day costs, and to do so would be an inequity.
The Respondent conceded that the Applicant is in straitened financial circumstances, but noted that at the time of her application she had a source of net income of $230 per week. This, the Respondent says, places her in a somewhat different position to other Applicants to the Tribunal who have nothing whatsoever. This income amount is comparable to the current rate of Newstart allowance which the Respondent submits runs at approximately $523 per fortnight. In this regard, the Respondent submits that the Applicant’s level of expenses (some $1,084 per week) is extraordinarily high when benchmarked with the sort of money received by a welfare recipient. On this basis the Respondent considers the Applicant’s financial circumstances are unable to be considered special or exceptional.
The Respondent pointed out that there is no suggestion that the Applicant did not know of the preclusion period, nor is it the case that Ms Reid has no income at all (given her $230 weekly rental income). The Respondent submits that there should have been steps taken by the Applicant to budget those funds until the end of the preclusion period, and that was not done. The Respondent therefore contends there are no special circumstances present which warrant the shortening of the applicable preclusion period.
Are Ms Reid’s circumstances “special”?
Ill Health
It is not in dispute that Ms Reid suffers from serious medical conditions. Although ill health may have a significant impact on an individual’s circumstances, it has often been remarked in the context of special circumstances claims “that the state of ill health should be more severe than that suffered by the majority of DSP recipients.”[13] Ms Reid gave evidence that she suffers from significant pain and requires assistance with most activities. There was no evidence given, medical or otherwise, that the conditions from which Ms Reid presently suffers are distinct from those for which she has been compensated. Although sympathetic to the effects of those conditions, I am unable to accept, on the grounds of ill health, that Ms Reid’s circumstances are “special”.
[13] Williams and Secretary, Department of Social Services [2015] AATA 544, [39].
Financial Hardship
In order to qualify as “special circumstances”, Ms Reid’s financial hardship must go beyond ‘straitened’ circumstances and be truly exceptional,[14] as it is generally not uncommon for welfare recipients to be impecunious and in straitened circumstances. That said, I am also conscious of the line of authorities in which it has been said that a person is not required to take a “one way ticket to poverty” before they qualify for a social security payment.[15]
[14] Krzywak and SDSS (1988) 15 ALD 690.
[15] ReSecretary Department of Social Services and VYS (1995) 40 ALD 745, 749; Williams and Secretary Department of Social Services [2015] AATA 544, [53].
In Re Hajar and Secretary, Department of Social Security Senior Member McMahon addressed specifically circumstances where an applicant asserts financial hardship, but has significant capital invested in real property in the following terms:
It is inequitable for the applicant to claim financial hardship when he owns such a valuable asset and does nothing to realise on it, particularly, when the lack of encumbrances has been brought about by diversion of some of the compensation moneys that led to the present application.[16]
[16] Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716, 720.
Although, understandably, the thought of selling the home that she built and intended to pass to her daughter might seem unpalatable to Ms Reid as a mother, it is not appropriate, or fair, that the liability for such a conscious decision fall to the public purse.[17]
[17] See Secretary, Department of Social Services and Simonelli [2015] AATA 901, [40].
In this regard I am inclined to adopt the reasoning of Deputy President Burns and Member Rogers in the matter of Secretary, Department of Social Security and Winterbotham where it was considered they were unable to accept a claim of special circumstances where the applicant had significant equity in real property that had not been realised:
Should there be any difference between one who invests his money in stocks and shares and one who invests in real estate? Neither should expect the tax-payer to support him while he holds on to assets he could well realise and use to support himself. This is not to say that the Tribunal seeks to force the respondent to sell his house; or even recommends that course of action. It is not the Tribunal's role to do that. At the same time, the Tribunal cannot ignore the view that the selling of the house is one way by which the applicant could resolve his present difficulties. It is an evident cause [sic] of action, although not by any means the only one.[18]
[18] Secretary, Department of Social Security and Winterbotham [1990] AATA 808, [25].
Execution of acknowledgement
Ms Reid made a submission to the effect that the conditions under which she signed the acknowledgement form in June 2010 amounted to duress as she felt she had no option but to sign the form. However, there was no submission made to the effect that she was not in fact aware of the preclusion period. The signing of the form in question did not detract from, or waive, any rights Ms Reid would otherwise have had she not signed and returned the acknowledgement. Rather the document merely records her knowledge of the preclusion period, which she does not dispute. As such, unfortunately, this submission does little to advance the Applicant’s case.
CONCLUSION
Whilst I sympathise with Ms Reid about the difficulties she is experiencing in meeting her week to week expenses, I am unable to accept that her financial situation goes beyond “straitened circumstances” and is truly exceptional. I consider that Ms Reid is favourably distinguished from other Applicants in similar positions in that she has a source of income, albeit modest, as well as an asset of significant value, namely the real property in which she has equity of $300,000. I accept without question that Ms Reid was perfectly entitled to have expended her settlement funds to pay down her liability and secure her accommodation. However, the present issue, Ms Reid having disposed of all of her settlement funds and now seeking support from the community, is whether the financial hardship she now experiences can truly be regarded as special or exceptional. While Ms Reid has assets of such value, she cannot in my view be so regarded.[19]
[19]Ibid, [24].
I affirm the decision under review.
I certify that the preceding 31 (thirty -one) paragraphs are a true copy of the reasons for the decision herein of Deputy President Dr P McDermott RFD ........................[Sgd]................................................
Associate
Dated 8 February 2016
Date of hearing 9 December 2016 Applicant In person Solicitors for the Respondent Department of Human Services
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