Ryan and Secretary, Department of Social Services (Social services second review)

[2022] AATA 3212

Ryan and Secretary, Department of Social Services (Social services second review) [2022] AATA 3212 (6 October 2022)

Division:GENERAL DIVISION

File Number(s):      2021/8954

Re:Terry Ryan

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

Decision

Tribunal:Senior Member A Poljak

Date:6 October 2022

Place:Sydney

The decision under review is set aside, and in substitution I find that the original CPP from 14 April 2021 to 16 May 2023 is to be reinstated.

...................................[SGD].....................................

Senior Member A Poljak

Catchwords

SOCIAL SECURITY – compensation preclusion period – whether a lump sum preclusion period applies – whether it is appropriate in the special circumstances of the case to treat whole or part of the compensation as having not been made (therefore reducing the length of the lump sum preclusion period) – relevant law and material considered – decision under review set aside and substituted.

Legislation

Social Security Act 1991 (Cth)

Cases

Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25
Beadle v Director-General of Social Security (No WAG 66 of 1984) (1985) 60 ALR 225
Hogan and Secretary, Department of Employment, Education and Workplace Relations and Anor [2011] AATA 162

REASONS FOR DECISION

Senior Member A Poljak

6 October 2022

1. On or about 8 December 2015, Mr Terry Ryan, the applicant, had a compensable event for which he received a lump sum payment of $28,360 on 20 December 2019.

2. On 9 April 2021, the applicant lodged a claim for disability support pension (DSP).

3. On 14 April 2021, the applicant obtained a lump sum compensation payment of $200,000 for the compensable event. As a result, on 30 April 2021, a compensation preclusion period (CPP) applied to the applicant from 14 April 2021 to 16 May 2023.  

4. As a result of the CPP, on 30 April 2021, the applicant’s Jobseeker payment was cancelled and on 21 May 2021, the applicant’s claim for DSP was rejected.  

5. The applicant requested a review of the decision to reject his DSP claim due to his CPP and on 6 August 2021, an Authorised Review Officer (ARO) affirmed the decision. The ARO found that the applicant’s CPP was correctly calculated and there were no special circumstances to disregard any of the compensation.

6. On 29 September 2021, the Social Services and Child Support Division of the Administrative Appeals Tribunal set aside the ARO’s decision and remitted the matter back for reconsideration in accordance with the direction that the applicant’s CPP ends on 29 September 2022. This is the decision under review in these proceedings.

   Issues

7. The issues for determination in these proceedings are:

   (a) whether a lump sum preclusion period applies to the Applicant in accordance with the Social Security Act 1991 (Cth) (the Act) due to the receipt of a lump sum of compensation; and if so

   (b) whether it is appropriate in the special circumstances of the case to treat the whole or part of a compensation as not having been made (thereby reducing the length of the lump sum preclusion period).

   Relevant Legislative Provisions

8. Section 1169 of the Act sets out the general rule regarding preclusion periods as follows:

   (1) If:

   (a) a person receives or claims a compensation affected payment; and

   (b) the person receives a lump sum compensation payment;

   the compensation affected payment is not payable to the person in relation to any day or days in the lump sum preclusion period.

   (2) In this section:

   lump sum compensation payment  does not include a lump sum payment:

   (a) to which section 1164 applies; or

   (b) that relates only to arrears of periodic compensation payments.

9. As per subsection 17(1) of the Act, it is relevant to note that DSP is a ‘compensation affected payment’. ‘Compensation’ is defined in subsection 17(2) of the Act to mean the following:

   (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.

10. Section 1170 of the Act provides the method for determining the commencement and length of a ‘lump sum preclusion period’. It relevantly provides as follows:

    (1) Subject to subsection (2), if a person receives both periodic compensation payments and a lump sum compensation payment, the lump sum preclusion period is the period that:

    (a) begins on the day following the last day of the periodic payments period or, where there is more than one periodic payments period, the day following the last day of the last periodic payments period; and

    (b) ends at the end of the number of weeks worked out under subsections (4) and (5).

    (2) If a person chooses to receive part of an entitlement to periodic compensation payments in the form of a lump sum, the lump sum preclusion period is the period that:

    (a) begins on the first day on which the person's periodic compensation payment is a reduced payment because of that choice; and

    (b) ends at the end of the number of weeks worked out under subsections (4) and (5).

    …

    (4) The number of weeks in the lump sum preclusion period in relation to a person is the number worked out using the formula:

    (5) If the number worked out under subsection (4) is not a whole number, the number is to be rounded down to the nearest whole number.

11. The method for calculating the ‘compensation part of a lump sum compensation payment’ is set out in subsection 17(3) of the Act as follows:

    (a) 50% of the payment if the following circumstances apply:

    (i) the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and

    (ii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or

    (ab) 50% of the payment if the following circumstances apply:

    (i) the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and

    (ii) the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and

    (iii) the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise; or

    (b) if those circumstances do not apply--so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn, or both.

12. Subsection 17(1) of the Act provides that, in relation to a person who has received a compensation payment, the ‘income cut-out amount’ is calculated in accordance with subsection 17(8) of the Act.

    Consideration

13. The applicant received two lump sum payments of compensation arising from the applicant’s compensable event on 8 December 2015. These include, $28,360 under section 66 of the Workers Compensation Act 1987 (NSW) on 20 December 2019; and $200,000 in relation to a settlement of the applicant’s compensation claim by way of consent judgement dated 14 April 2021.

14. The respondent has correctly set out the calculation of the applicant’s CPP as follows:

    (a)As one of the payments included a component for lost earnings or lost capacity to earn, the two payments above are taken to have been received as a single lump sum of $228,360 in accordance with section 1171 of the Act. As per subparagraph 1171(1)(d)(i) of the Act, the payment is taken to be received on the day the final payment was received.

    (b)As the final payment was made pursuant to a settlement of the applicant’s worker’s compensation claim, paragraph 17(3)(a) of the Act applies to deem 50% of the total sum as the compensation part of the lump sum. That is, $114,180.

    (c)The income cut out amount at the relevant time the final payment was received was $1041.70. Applying the formula in subsection 1170(4) of the Act yields a preclusion period of 109.61 weeks. This is rounded down to 109 weeks in accordance with subsection 1170(5) of the Act.

    (d)The applicant was in receipt of periodic compensation prior to the receipt of the lump sum payment with his weekly payments ceasing on 13 April 2021. Therefore, subsection 1170(1) of the Act applies so that the lump sum preclusion period commences on 14 April 2021 and runs for 109 weeks, ending on 16 May 2023.

    Discretion to disregard part of the compensation under section 1184K

15. Subsection 1184K(1) of the Act affords a discretion to treat the whole or part of a compensation payment as not having been made, if it is thought appropriate to do so in the special circumstances of the case.

16. The term ‘special circumstances’ is not defined in the Act. What may amount to special circumstances has been considered in several cases in the Federal Court and in the Tribunal. It has been generally accepted by this Tribunal that special circumstances are those that are unusual, uncommon, or exceptional, making the case markedly different from the usual run of cases.

17. In Beadle v Director-General of Social Security (No WAG 66 of 1984) (1985) 60 ALR 225, the Full Court did not think it possible to lay down precise limits or rules to circumscribe the discretion of the decision maker when considering whether special circumstances exist. Rather, the Court said that what constitutes special circumstances in any particular case is a matter for the Departmental head having regard to the purpose for which the power is given. However, because no precise limits or rules can be set, whether or not a particular kind of circumstance could (not should) be considered special is not merely a matter for the administrative decision maker.

18. In Angelakos v Secretary, Department of Employment and Workplace Relations [2007] FCA 25, Besanko J considered the observations in Beadle at first instance that special

    circumstances are those that are ‘unusual, uncommon or exceptional’. His Honour opined at [33] that it:

    … was not the intention of Parliament to confine the exercise of the discretion to

    an exceptional case. There is less risk of overstatement if the words ‘unusual’ or

    ‘uncommon’ are emphasised.

    19.In Hogan and Secretary, Department of Employment, Education and Workplace Relations and Anor [2011] AATA 162 at [82] it was held that in determining whether ‘special circumstances’ exist the Tribunal has ‘a broad discretion to respond to a wide variety of circumstances’.

19. In this matter the applicant contends that special circumstances exist as he had to purchase a new caravan as his previous one was damaged, written off and underinsured; he spent the majority of his compensation proceeds and is now in financial hardship; and he anticipates medical expenses for knee surgery and for hearing aids.

20. At hearing, the applicant said that he was not aware of the CPP and said his lawyers told him that he was entitled to social security. The applicant has also previously made claims that he is illiterate. Despite the applicant’s claims, the evidence set out below, confirms that both the applicant and his solicitor were notified of the CPP.

21. On 30 April 2021, the Department advised the applicant’s legal representatives of the applicant’s CPP which applied from 14 April 2021 to 16 May 2023.  On the same date, the Department also advised the applicant by way of letter that a CPP had been applied from 14 April 2021 to 16 May 2023. It was noted that during this period the applicant would not be able to receive income support.  On 3 May 2021, the applicant contacted the Agency over the phone and was advised that a CPP applied. Any difficulty the applicant had in reading or understanding the letter he received is mitigated by the fact that he called Centrelink and the file note records that the CPP was explained to him. For these reasons, I am satisfied that the applicant was aware of the CPP that applied to his social security payments and eligibility.

22. On 19 May 2021 and 26 May 2021, the applicant received $93,200 and $25,388.01 respectively in settlement monies from his legal representative into his account. By 2 December 2021, he had $19,101.34 remaining. This would mean that the Applicant spent approximately $99,436.67 in about seven months.

23. The applicant’s bank statements reveal that between May and December 2021, the applicant made PayPal payments totalling approximately $21,577.00 and between May and October 2021, he made cash withdrawals totalled approximately $54,854.00. The PayPal payments were numerous and frequent, for example, in May 2021 there were approximately 34 PayPal payments, in June 2021 there were over 30 PayPal payments and in August 2021 there were over 40 PayPal payments. At hearing the applicant explained that the PayPal payments were for online shopping and were likely for the purchase of home décor including mattresses, pots, pans, blankets, a microwave, drier, and Christmas presents etc. As for the cash withdrawals, the applicant claims that he could not recall what it was spent on but thinks some of it went towards new brakes, tyres and engine for his car.  

24. The exercise of the discretion contained in section 1184K of the Act is not warranted in circumstances relating to the applicant’s expenditure, particularly when the applicant was advised of the CPP and the need to support himself until the end of his preclusion period.

25. In a statement dated 14 March 2022, the applicant stated that he received $19,000 from the sale of his son’s car, boat, and trailer; and was holding onto this amount for his son who is currently in prison. However, in an Income and Assets form completed by the applicant on 9 April 2021, the applicant recorded that he owned a box trailer valued at $300.00, a Nissan Patrol vehicle valued at $4,000, a Mitsubishi truck valued at $5,000, a Mazda Ute valued at $1,500, and a boat valued at $1,000.  At hearing, the applicant confirmed that he still owned the items listed in the Income and Assets form. He however stated that the Nissan Patrol vehicle was valued at $10,000 and the Mazda Ute was valued at $3,000.

26. The applicant said that he needed to purchase a new caravan to live in as his previous caravan was damaged and written off. The applicant has provided evidence that he purchased a caravan for $30,000 and this transaction is reflected in his bank statements on 11 October 2021. NRMA Insurance did provide an insurance payment in the amount of $14,800 to cover the value of the applicant’s caravan. It was the applicant’s decision to purchase a new caravan for an additional $15,000 on top of the amount he received from his insurer. This decision should not be taken as special circumstances.

27. On 9 April 2021, the applicant informed the Department that he had not been self- employed since 2015. However, records show that the applicant’s business is currently trading as ‘Master Tow Transport,’ holds a current ABN and is registered to the applicant’s  current address.  At hearing, the applicant said that he that despite having a business name and ABN, he did not use them. He said his son plans to use the business and stepson had access to the business accounts. This however is not corroborated by any objective evidence. Transactions contained in the business bank account suggest the applicant has another source of income which could support his financial situation until the end of his CPP and this weighs against his financial situation being considered as special.

28. The applicant has also provided information of his current living expenses as well as costs required to purchase regular medication and future treatment in his Statement of Financial Circumstances. The applicant stated that he was paying $370 per week as rent at the caravan park when his caravan was damaged, however, the applicant’s bank statements show only two weeks of payments of $370.

29. At hearing, the applicant advised that he was currently living in his caravan on a property owned by a friend and is not paying any rent. His said his current running costs were virtually zero and only included a very small amount for electricity and water, $15 a month for internet, and mobile phone bills.

30. As for medical expenses, the applicant has provided an account from the applicant’s chemist detailing medication he had purchased from 2 January 2021 to 25 October 2021. According to the respondent’s calculations, which don’t appear to be challenged, the applicant spent a total of $1,238.98 on medication over ten months which would equate to approximately $31 per week of expenses on medication. This is not an unreasonable amount which would amount to special circumstances.

31. The applicant also previously stated that he requires future hearing aids and knee surgery which he estimated would cost a total of $70,000. At hearing the applicant confirmed that he required a knee replacement, but he was not yet on any waitlists. He also reiterated that he needed hearing aids for both ears. There is, however, no corroborating medical evidence available that this treatment is required or necessary during the applicant’s CPP. Further, the applicant may be able to pursue surgical treatment through the public health system.

32. Considering the totality of the evidence described above, I am not satisfied that the applicant’s circumstances are ‘special’ as to justify the exercise of the discretion in section 1184K of the Act to treat any of the applicant’s compensation payment as not having been made.

    Decision

33. The decision under review is to be set aside, and in substitution I find that the original CPP from 14 April 2021 to 16 May 2023 is to be reinstated.

I certify that the preceding 34 (thirty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member A Poljak

.................................[SGD].......................................

Associate

Dated: 6 October 2022

Date(s) of hearing:	10 May 2022
Applicant:	Self-Represented
Solicitor for the Respondent:	Mr T Chang, Services Australia