Sams v Secretary, Department of Social Services - [2016] AATA 654

Sams and Secretary, Department of Social Services (Social services second review) [2016] AATA 654 (30 August 2016)

Division

GENERAL DIVISION

File Numbers

2016/0080

Re

Julie Sams

APPLICANT

And

Secretary, Department of Social Services

RESPONDENT

DECISION

Tribunal
Deputy President J W Constance

Date 30 August 2016

Place Sydney
The decision under review, being the decision of the Social Services & Child Support Division of the Administrative Appeals Tribunal made 9 December 2015, is affirmed.
...........[sgd].............................................................
J W Constance
Deputy President
Catchwords
SOCIAL SECURITY - lump sum compensation preclusion period - disability support pension - lump sum compensation payments and periodic compensation payments - length of the preclusion period - whether special circumstances exist to reduce the preclusion period - decision affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1171, 1184K(1)
CASES
Alvers and SDSS [1992] AATA 333
Re Beadle and Director-General of Social Security [1984] AATA 176
Groth v Secretary, Department of Social Services [1995] FCA 1708
Re Martin and SDSS [1990] AATA 768
REASONS FOR DECISION
Deputy President J W Constance
30 August 2016
INTRODUCTION

In January 2009 the Applicant was injured in a workplace accident. The applicant received two gross lump sum workers compensation payments totalling $282,537.50 in respect of this injury.
On 21 January 2014 Mrs Sams was informed that her Disability Support Pension was cancelled due to the compensation settlement and that she was subject to a preclusion period beginning 19 January 2014 and ending 14 January 2017. On 2 December 2014 an Authorised Review Officer of Centrelink affirmed the decision to cancel Mrs Sams Disability Support Pension but recalculated the preclusion period as beginning 14 February 2014 and ending 9 February 2017. Mrs Sams requested a review of that decision.
On 9 December 2015 the Social Services & Child Support Division of the Administrative Appeals Tribunal set aside the decision and remitted the matter to Centrelink for a recalculation of the preclusion period in accordance with a direction that $20,000 of the compensation received by Mrs Sams is to be disregarded due to special circumstances. The recalculation resulted in a reduction of the preclusion period, such that it ends on 24 November 2016.
Mrs Sams has applied to the General Division of this Tribunal for a review of the decision made by the Social Services & Child Support Division.
The parties agreed that the review should be conducted “on the papers” and for this reason there has been no hearing and no oral evidence has been given. I have marked the documents filed by the Secretary in accordance with section 37 of the Administrative Appeals Tribunal Act 1975 (Cth) as Exhibit R1.
For the reasons which follow the decision under review will be affirmed.
BACKGROUND
Mrs Sams received two lump sum payments for compensation of her workplace injury. The first sum of $62,537.50, comprised of approximately $38,000 for permanent impairment and $25,000 for pain and suffering, was received in October 2011.[1] The second sum of $220,000 was as a result of a final settlement issued by the District Court of NSW on 4 December 2013.[2]
[1] Exhibit R1 p.88.
[2] Exhibit R1 p.31.
By letter of 21 January 2014 Centrelink advised Mrs Sams of the preclusion period that had been applied and further wrote:
During this period you are not able to receive income support from Centrelink.
…
You need to call Centrelink’s Compensation Recovery Team… about your preclusion period. They will clearly explain to you the impact of your lump sum compensation payment.
There is no record of Mrs Sams calling Centrelink to obtain the advice as requested.
The final lump sum compensation payment was paid to Mrs Sams on 14 February 2014. In the period between settlement and 13 February 2014 Mrs Sams received weekly compensation payments from the insurance company.[3]
[3] Exhibit R1 p 83, 88.
At the hearing before the Social Services & Child Support Division Mrs Sams gave the following evidence about how this money was spent.
(a)Mrs Sams used the first lump sum payment to purchase a new car worth $39,000 and to repay a debt of $12,000 owed on another car.
(b)Of the $220,000 lump sum payment Mrs Sams reported that she received $79,000 after legal costs and a $22,000 payment to Medicare. She later received $20,000 back from Medicare. A letter of costs and disbursements from her lawyer was not produced to Medicare or in the Tribunal proceedings.
(c)She spent money seeing doctors and paying for braces for her back and in her shoe. After her bottom teeth broke she paid to have them fixed. She also has ongoing medication expenses.
(d)Mrs Sams produced a number of invoices. These included invoices for six mobile phones totalling $509. Mrs Sams husband gave evidence that Mrs Sams has on several occasions become angry and thrown her phone to the ground, breaking it; hence the number of replacement phones purchased. She produced invoices for a fridge for $1,448, a microwave for $188, a lawnmower for $439.98, a water cleaner for $199, two hedge trimmers for Mr Sams and their son totalling $335, car service and repairs totalling $3,697, car registration and insurance of $680, car insurance payments of $64.59 and $76.25 per month, her driver’s licence and disability parking permit for $125, three pairs of prescription glasses and court fines of $1,159 related to driving offences.
(e)Mrs Sams lent $6,000 to a friend for the purchase of a new car as she had written her car off. This money was never repaid to Mrs Sams.
(f)Mrs Sams helped her daughter financially when she was released from jail. This was because when her daughter was incarcerated she was unable to afford the storage costs of her belongings and therefore lost all of her possessions. Mrs Sams funded her moving costs and purchased furniture, a second hand washer and dryer and other household items for her. Mrs Sams was unsure of exactly how much money was spent on these items.
(g)Mrs Sams and her husband were living in community housing at below market rent. Their rent had increased due to the compensation payments but had since reduced again.
(h)Mrs Sams did not think that the money would run out before the end of the preclusion period.
In her application for review to this Division of the Tribunal Mrs Sams wrote:
I only live on my husband pension of $653.00 a fortnight out of that there is $120 a fortnight Direct Debit then our rent $390.00 a fortnight then their [sic] $20.00 a fortnight waterbill $30.00 for funral [sic] fund leaves $220 a fortnight to live on to buy food Bills meat power etc
The Centrelink customer record provides that on 3 September 2015 Mrs Sams advised that:
…she received $79,000 in compensation settlement monies in the hand and that these monies were disbursed on rent, gifts, car maintenance costs associated with a flood, and everyday living expenses.[4]
[4] Exhibit R1 p.65.
The records further show that in March 2015 Mrs Sams provided information to Centrelink showing that at 12 January 2015 she had a bank balance with the Greater Building Society of $19,003.
The Secretary’s Statement of Facts and Contentions sets out the following about the Applicant’s present financial situation. The Applicant and her husband live in a private rental property paying $794 per fortnight in rent for which her husband receives $122.80 per fortnight in rent assistance from Centrelink. Mr Sams receives a total of $905.00 per fortnight in disability support pension payment and carer allowance.
ISSUES
There are two issues for determination in this application:
(i)whether the Applicant is subject to a compensation preclusion period and if so what is the preclusion period; and
(j)whether any “special circumstances” exist that would allow the whole or part of the compensation payments to be treated as not having been made, thereby reducing the preclusion period.
LEGISLATION
The relevant legislation is the Social Security Act 1991 (Cth).
Section 1169 of the Act provides that where a person claims a compensation affected payment and they receive a lump sum compensation payment, the compensation payment is not payable to the person in relation to any days in the lump sum preclusion period.
A disability support pension is a “compensation affected payment”.[5]
[5] Social Security Act 1991 (Cth) s 17(1).
Length of the preclusion period
Section 1170(4) of the Act provides that the length of the lump sum preclusion period is calculated using the following formula:
compensation part of lump sum
____________________________
income cut-out amount
“Compensation part of lump sum” is defined in section 17(3), as follows:
(3) … the compensation part of a lump sum compensation payment is:
(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.
Section 1171 deals with situations where multiple lump sum payments have been received. It provides:
(1) If:
(a)a person receives 2 or more lump sum payments in relation to the same event that gave rise to an entitlement of the person to compensation (the multiple payments ); and
(b)at least one of the multiple payments is made wholly or partly in respect of lost earnings or lost capacity to earn;
the following paragraphs have effect for the purposes of this Act and the Administration Act:
(c)the person is taken to have received one lump sum compensation payment (the single payment ) of an amount equal to the sum of the multiple payments;
(d)the single payment is taken to have been received by the person:
(i) on the day on which he or she received the last of the multiple payments; or
(ii) if the multiple payments were all received on the same day, on that day.
The “income cut-out amount” refers to the maximum amount of weekly earnings that a person can earn before a pension, at the single person rate, is no longer payable to that person.[6]
[6] Social Security Act 1991 (Cth) s 17(8).
Section 1184K(1) provides that the Secretary may treat some or all of compensation payments as not having been made if satisfied that it is appropriate to do so in the “special circumstances of the case”.
When the preclusion period begins
Section 1170(1) of the Act provides in part:
(1) … 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).
…
CONSIDERATION
Issue 1: whether the Applicant is subject to a compensation preclusion period and if so what is the preclusion period
Length of the preclusion period
Mrs Sams received two lump sum payments totalling $282,537.50. As both of the these payments were received in respect of the same workplace incident and the later payment was in respect of lost income, s1171(1) of the Act applies such that the payments are taken to be one “lump sum compensation payment”.
In accordance with section 17(3) of the Act the “compensation part” of the lump sum payment is 50% of the lump sum compensation payment. Here that equates to $141,268.75.
To calculate the preclusion period the “compensation part” of the lump sum payment is divided by the “income cut-out amount”.[7] The relevant income cut-out amount at the time that Mrs Sams received the settlement was $905.10. When $141,268.75 is divided by $905.10 the result is 156 (rounded down[8]). As such, the relevant lump sum compensation preclusion period is 156 weeks.
When the preclusion period began
[7] Social Security Act 1991 (Cth) s 1170(4).
[8] Social Security Act 1991 (Cth) s 1170(5).
As Mrs Sams received both a lump sum compensation payment and periodic compensation payments, the preclusion period is taken to begin on the day following the last day of the periodic payments.[9] As Mrs Sams periodic payments from the insurance company ceased on 13 February 2014 the preclusion period started on 14 February 2014.
[9] Social Security Act 1991 (Cth) s 1170(1).
As such, the preclusion period is from 14 February 2014 until 9 February 2017.
Issue 2: whether there any special circumstances
Under section 1184K(1) of the Act, the whole or part of a compensation lump sum payment may be treated as not having been made if it is considered appropriate in the “special circumstances” of the case.
The term “special circumstances” has been considered in a number of decisions in this Tribunal. In Re Beadle and Director-General of Social Security[10] it was said:
An expression such as "special circumstances" is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend upon the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.
[10] [1984] AATA 176.
In Groth v Secretary, Department of Social Services[11] Kiefel J, referring to the case of Beadle, stated that what is required to establish special circumstances is something which distinguishes a person’s case from others “to take it out of the usual or ordinary case”.[12]
[11] [1995] FCA 1708
[12] At para. [12].
Financial hardship alone will not constitute special circumstances unless they go beyond “straitened” circumstances. In Re Martin and SDSS[13] it was said that:
When the hardship to be caused does not amount to severe hardship, it is not sufficient to establish “special circumstances”.
[13] [1990] AATA 768 at para. [11].
The Social Services & Child Support Division of this Tribunal found that special circumstances in Mrs Sams case did exist which justified a decision that $20,000 should be disregarded from the lump sum compensation payment. Those circumstances were that Mrs Sams had dispensed with money for the following four reasons.
·Mrs Sams lent $6,000 to her friend to purchase a car and was never repaid;
·The costs associated with Mrs Sams medical conditions not associated with the compensable back injury, namely having her teeth repaired;
·The money that she spent helping her daughter re-establish herself after being released from jail; and
·The fact that a large proportion of the compensation lump sum was paid to Mrs Sams in October 2011 in the form of permanent impairment and pain and suffering compensation and Mrs Sams dispensed with this money on advice from Centrelink that this would not affect her entitlements.
The Division below found it was proper to disregard $20,000 from the lump sum payment resulting in a reduction of the preclusion period so that it ends on 24 November 2016. Noting that this finding is not contested by the Secretary, I find that disregarding $20,000 of the compensation payment due to special circumstances is appropriate.
As I have found that the special circumstances discretion is enlivened I now have to consider whether these or any other special circumstances exist that would warrant a further reduction in the lump sum preclusion period.
Looking at the totality of Mrs Sams circumstances I accept that she is suffering from financial hardship as both her and her husband are living off the income of one pension. However, I must also consider that the purpose of the preclusion period is to prevent individuals from ‘double dipping’, in the sense that they should not simultaneously benefit from compensation for lost earnings and social welfare payments.
In Alvers and SDSS[14] it was noted that the Tribunal has “tended to take a hard line where someone has, through extravagance or thoughtlessness, brought about their own dilemma.”[15] By letter of 21 January 2014 and 27 February 2014 Centrelink advised the Applicant that she should call them in order to discuss the effect that the preclusion period would have on her Centrelink payments. Mrs Sams did not follow this advice.
[14] [1992] AATA 333.
[15] At [49].
Although, I do not suggest that Mrs Sams dwindled the money on extravagant purchases, I am satisfied that had she been more careful in managing her finances then Mrs Sams’ present financial hardship could have been prevented.
I have considered Mrs Sams’ claim that of the second lump sum compensation payment she was awarded she paid $117,000 in legal fees and $2,000 to Medicare. I consider that the 50% rule in section 17(3) of the Act sufficiently accounts for this loss of payment. Mrs Sams received $62,537.50 in the initial lump sum payment and then according to her evidence received $99,000[16] in the second payment. This amounts to $161,537.50. The amount used for the purposes of calculating the preclusion period (minus the $20,000 for special circumstances) is $131,268.75. Therefore, Mrs Sams received more compensation than was used to calculate her preclusion period and I am satisfied that the amount of legal costs paid does not amount to any special circumstances in her case.
[16] That is $79,000 and the $20,000 that she later got back from Medicare.
In Mrs Sams’ case I cannot be satisfied that any more of the compensation payment should be excluded. Apart from the small amount of documentary evidence produced at the Social Services & Child Support Division hearing there is no other evidence of where the funds have gone.
I also do not find any circumstances, apart from those already taken into account by the $20,000 reduction, have a particular quality of unusualness. Accordingly, the preclusion period should remain unchanged.
CONCLUSION
The decision under review, being the decision of the Social Services & Child Support Division of the Administrative Appeals Tribunal made 9 December 2015, will be affirmed.

I certify that the preceding 44 (forty -four) paragraphs are a true copy of the reasons for the decision herein of Deputy President J W Constance.
............[sgd]............................................................
Associate
Dated 30 August 2016

Applicant Self-represented

Solicitors for the Respondent Department of Human Services

Division	GENERAL DIVISION
File Numbers	2016/0080
Re	Julie Sams
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

Tribunal	Deputy President J W Constance
Date	30 August 2016
Place	Sydney

Applicant	Self-represented
Solicitors for the Respondent	Department of Human Services