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

[2021] AATA 2246

Scott and Secretary, Department of Social Services (Social services second review) [2021] AATA 2246 (2 July 2021)

Division:GENERAL DIVISION

File Number:          2021/1650

Re:Wayne Scott

APPLICANT

AndSecretary, Department of Social Services

RESPONDENT

DECISION

Tribunal:Dr L Bygrave, Member

Date:2 July 2021

Date of written reasons:        9 July 2021

Place:Sydney

The Tribunal sets aside the decision under review and, in substitution, decides that the compensation preclusion period for the applicant is waived for the period from 1 July 2021 to 6 June 2023 pursuant to section 1184K of the Social Security Act 1991 (Cth).

..............................[sgd]................................

Dr L Bygrave, Member

CATCHWORDS

SOCIAL SECURITY – lump sum compensation preclusion period – disability support pension – whether special circumstances exist to waive the compensation preclusion period – special circumstances exist – decision set aside and substituted

LEGISLATION

Social Security Act 1991 (Cth) ss 17, 1169, 1170, 1171, 1184K

CASES

Groth v Secretary Department of Social Security [1995] FCA 1708

SECONDARY MATERIALS

Social Security Guide, version 1.283, 1 July 2021

REASONS FOR DECISION

Dr L Bygrave, Member

1. The decision of the Tribunal and the reasons for the decision were delivered orally on 2 July 2021. The following paragraphs are the written reasons for my oral decision.

   BACKGROUND

2. The applicant, Mr Wayne Scott, lodged a claim for disability support pension on 28 September 2020.

3. Services Australia, both initially and on review, rejected the claim because Mr Scott is subject to a compensation preclusion period from 26 June 2019 to 6 June 2023.

4. Mr Scott subsequently applied for review to the Social Services and Child Support Division of the Tribunal, which affirmed the decision of Services Australia.

5. On 22 March 2021, Mr Scott applied to the General Division of the Tribunal for review. The matter was heard by the Tribunal by teleconference on 2 July 2021.

   ISSUES

6. The issues for determination by the Tribunal are:

   ·whether Mr Scott is subject to a compensation preclusion period and, if so, whether the period has been correctly calculated by Services Australia;

   ·whether there are grounds to treat all or part of the compensation payment as not having been made because it is appropriate to do so in the special circumstances of the case.

   CONSIDERATION

   Issue 1: Is Mr Scott subject to a compensation preclusion period and, if so, what is the length of this period?

7. Part 3.14 of the Social Security Act 1991 (the Act) states that a person who receives a lump sum compensation payment for personal injury will be subject to a preclusion period if the settlement amount includes a component in respect of economic loss. As set out in the Social Security Guide (the Guide), the rationale for these provisions:

   …reflect the principle that if a person has been compensated for loss of income, they should use that money to live off rather than receive a taxpayer-funded payment. Lump sum compensation payments are treated on the basis that people who cannot work because of a compensable injury should NOT receive income support for the same period from both the:

   -    social security system, AND

   -    compensation systems.[1] [emphasis in original]

   [1] Social Security Guide released 1 July 2021, part 4.13.2.60.

8. Compensation is defined in section 17 of the Act: the list of compensation affected payments at subsection 17(1) includes a disability support pension; subsection 17(2) states that compensation includes any compensation or damages payment that is ‘made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury’; and subsection 17(3) describes the ‘compensation part of a lump sum compensation payment’ is 50% of the payment.

9. Section 1169 of the Act stipulates that a preclusion period applies when a person receives a lump sum compensation payment. Section 1171 of the Act states that, where a person receives two or more lump sum payments (multiple payments) in relation to the same event and at least one of the payments is made in respect of lost earnings or lost capacity to earn, the person is taken to have received one lump sum payment of an amount equal to the sum of the multiple payments.

10. The length of the compensation preclusion period is calculated in accordance with section 1170 of the Act, which identifies the start date and end date of the preclusion period.

11. Having regard to the evidence and the provisions of the Act, I find that:

    ·Mr Scott sustained a workplace injury on 12 August 2003.

    ·Mr Scott received periodic compensation payments and was paid lump sum amounts of $11,250 on 7 December 2004 and $31,250 on 7 September 2018 in relation to this injury.

    ·On 21 May 2019, Mr Scott was paid a gross lump sum settlement amount of $375,000 in relation to this injury, which ‘contained a component for economic loss’.[2]

    ·Mr Scott received total lump sum compensation payments in the amount of $417,500 in relation to this injury and the ‘compensation part’ of these payments is $208,750.

    ·Mr Scott is subject to a compensation preclusion period of 206 weeks.

    ·The start date for Mr Scott’s preclusion period is 26 June 2019, the day after his periodic payments ceased, and the last day of his preclusion period is 6 June 2023.

    [2] Exhibit T-T6, pages 36-37.

12. For these reasons, I am satisfied Mr Scott is subject to a compensation preclusion period from 26 June 2019 to 6 June 2023.

    Issue 2: Are there grounds to treat all or part of the compensation payment as not having been made because it is appropriate to do so in the special circumstances of the case?

13. Section 1184K of the Act provides that the ‘whole or part of a compensation payment’ may be treated as not having been made if ‘it is appropriate to do so in the special circumstances of the case’. The practical effect of this discretion is to reduce the length of the compensation preclusion period.

14. The term ‘special circumstances’ is not defined in the Act, however, decisions made by the Federal Court and the Tribunal provide guidance. In Groth v Secretary Department of Social Security, the Federal Court said that special circumstances distinguish a person’s case from others to ‘take it out of the usual or ordinary case’, noting it would ‘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] [1995] FCA 1708 [12].

15. The Guide also outlines factors to consider when determining special circumstances provisions, which relevantly include a person’s ill health, decision making capacity, financial circumstances and addictions. In relation to financial circumstances, the Guide notes:

    Financial circumstances need to be severe and worse than the majority of social security recipients.

    The value of all cash and realisable assets should be taken into account by comparing this with the fortnightly rate of pension.[4]

    [4] Social Security Guide released 1 July 2021, part 4.13.4.20.

16. The documentary evidence before the Tribunal shows that:

    ·Mr Scott was eligible for a lump sum compensation payment in the amount of $375,000 on 21 May 2019.

    ·Services Australia (then the Department of Human Services (Centrelink)) sent Mr Scott a letter dated 25 June 2019 that stated he has a preclusion period that starts on 26 June 2019 and ends on 6 June 2023, and during this period he is ‘not able to receive income support’.[5]

    [5] Exhibit T-T12, page 56.

17. At the hearing, Mr Scott informed the Tribunal that he received $275,000 ‘in the hand’ about late May 2019. He acknowledged he may have received the letter from Centrelink informing him about the preclusion period but ‘could not recall’.

18. Mr Scott said his compensation payment was expended on:

    ·$15,000 repaying loans for living expenses accrued prior to the payment;

    ·$40,000 as a gift to his sister to help her get out of debt and buy a car;

    ·his purchase of cars and motorbikes including a car gifted to his nephew; and

    ·his gambling, alcohol and substance addictions.

19. Mr Scott told the Tribunal that he had never previously had access to this amount of money, had no idea how to budget or deal with it, and now ‘felt sick’ thinking about his expenditure.

20. Mr Scott’s financial and personal circumstances as at the date of the Tribunal hearing were as follows:

    ·He has no income and no capacity to earn an income: he was last employed as a truck driver about ten years ago and can no longer work due to the injuries he sustained in 2003.

    ·He has $8 in his bank account, which is the amount remaining from $100 his sister provided him the day before to purchase groceries. He does not know how he will pay his next rent instalment. His sister provides him some money towards his food and rent but has no financial means to repay him the amount he gifted to her.

    ·His sole remaining asset is a motorbike, which he uses to attend medical appointments. He recently sold his car to repay money he had borrowed from his cousin.

    ·His accommodation is sharing a caravan with ‘a mate’: this is a ‘toxic situation’ because his mate is an alcoholic and has previously stolen money from him. He therefore wants to leave this accommodation.

    ·He has had five surgeries in relation to his back injury. He experiences constant back pain, although this has been alleviated through surgery.

    ·He underwent an endoscopy procedure on his upper gastrointestinal tract on 8 June 2021. A medical report stated there were ‘no immediate complications’ and Mr Scott said he requires medication and future monitoring.[6]

    ·He is continuing to engage with his general practitioner and psychologist for ongoing support with his ‘mental health’ and ‘chronic back pain’.[7]

    ·He ceased using amphetamines and alcohol in early-mid 2020. This is supported by a letter from a general practitioner dated 26 February 2021 and a letter from his sister dated 25 April 2021.[8]

    ·He has been an active participant in the Yudhilidin program at Hunter Primary Care since April 2021. This program ‘assists Indigenous people with mental health concerns’, provides ‘links to a network or specialist and mainstream supports’ and encourages participants to ‘build capacity and continue ongoing relationships with the community and services’.[9] A letter from the mental health care coordinator of the program on 10 June 2021 stated that Mr Scott had engaged well with the program and had identified areas of support including in relation to his mental health and gambling.

    [6] Exhibit A9.

    [7] Exhibit A1.

    [8] Exhibits T-T21 and A6.

    [9] Exhibit A12.

21. The evidence shows Mr Scott deprived himself of the benefit of his compensation payment through his expenditure, which included gifting money to his sister and a car to his nephew, spending on alcohol and drugs, and gambling. The nature of this expenditure means that Mr Scott now has no money. He is unable to recover the money he gifted to his sister as she is ‘not financial enough’ to pay this money back to him.[10] His only remaining asset is his motorbike, which he requires to attend medical appointments.

    [10] Exhibit A6.

22. I have considered Mr Scott’s circumstances and find that, as at the date of the Tribunal hearing, he is in a dire financial situation. He has no savings for food or rent, and is unable to earn any income due to his injury and ill health. While he owns a motorbike, I consider this is not a realisable asset as it is used for Mr Scott to attend medical appointments. I am satisfied that the financial circumstances of Mr Scott are severe and worse than the majority of social security recipients.

23. I accept that, while the intention of the statutory provisions is that Mr Scott should be using his compensation payment to live off rather than accessing social security benefits, the expenditure of his lump sum payment was likely affected by his alcohol, drug and gambling addictions and poor decision making capacity. I also note that, over the past 12 months, Mr Scott has been attempting to make positive changes in his life. He has ceased drugs and alcohol, and is currently taking steps with the assistance of the Yudhilidin program towards addressing his mental health and gambling.

24. Overall, I find Mr Scott’s current circumstances are out of the usual or ordinary case, and he has no alternative access to money to live apart from social security payments. In view of this assessment, I am satisfied special circumstances exist within the meaning of section 1184K of the Act that justify waiving the compensation preclusion period applied to Mr Scott from 1 July 2021 to 6 June 2023.

    DECISION

25. The Tribunal sets aside the decision under review and, in substitution, decides that the compensation preclusion period for Mr Scott is waived for the period from 1 July 2021 to 6 June 2023 pursuant to section 1184K of the Act.

I certify that the preceding 25 (twenty-five) paragraphs are a true copy of the reasons for the decision herein of Dr L Bygrave, Member

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Associate

Dated: 9 July 2021

Date of hearing:	2 July 2021
Applicant:	Self-represented
Solicitors for the Respondent:	M Burnham, Services Australia