Secretary, Department of Employment and Workplace Relations v Cheryl Holder
[2007] AATA 23
•16 January 2007
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2007] AATA 23
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2005/362
GENERAL ADMINISTRATIVE DIVISION ) Re SECRETARY, DEPARTMENT OF EMPLOYMENT AND WORKPLACE RELATIONS Applicant
And
CHERYL HOLDER
Respondent
DECISION
Tribunal Ms L R Tovey, Member Date16 January 2007
PlacePerth
Decision The Tribunal affirms the decision of the Social Security Appeals Tribunal dated 14 September 2005 to:
(a) set aside the decision of the Applicant of 18 April 2002, to apply a lump sum preclusion period to newstart allowance and disability support pension payments made to the Respondent for the period 14 September 1999 to 14 March 2002 and to recover an amount of $17,334.31 from her lump sum payment; and
(b) substitute a decision that no amount of the compensation payment received by the Respondent is recoverable by the Applicant.
.......(Sgd. Ms L R Tovey)...................
Member
CATCHWORDS
SOCIAL SECURITY – newstart allowance – disability support pension - lump sum compensation payment – preclusion period – special circumstances
Social Security Act 1991 (Cth), ss. 17, 1184K
Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle and Director-General of Social Security (1985) 7 ALD 670
Dranichnikov v Centrelink (2003) 75 ALD 134; [2003] FCAFC 133
Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152; [2004] AATA 615
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64
Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281
Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1
Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348
REASONS FOR DECISION
16 January 2007 Ms LR Tovey, Member 1. This is an application for review instituted by the Secretary, Department of Employment and Workplace Relations ("the Applicant") in respect of a decision of the Social Security Appeals Tribunal ("the SSAT") made on 14 September 2005. The decision related to the recovery of part of an amount of compensation received by Ms Cheryl Holder ("the Respondent").
2. The Respondent was injured in an accident which occurred in her rented home on 11 March 1999, when a banister on the top of a stairway collapsed causing her to fall down the stairs. In the fall the Respondent suffered injury to her lower back including a fracture of her coccyx and a fracture of her left foot. She also suffers from anxiety and depression as a consequence of the accident.
3. On 5 November 1999 the Respondent instituted proceedings out of the District Court of Western Australia against the owners of and occupiers of the rented property, and the real estate agents they had engaged to manage the premises, ("the Defendants") claiming damages in respect of her injuries suffered in that accident. The statement of claim filed in those proceedings included a claim in respect of the Respondent's lost earning capacity. The Statement of Claim pleaded that, prior to the accident, the Respondent was a self employed business woman trading in mobile phones with an earning capacity in the vicinity of $120,000 per annum. It also pleaded that, as a result of the accident, the Respondent was unfit to run her business.
4. The Respondent's action in the District Court was settled at a pre-trial conference held on 19 March 2002 by consent judgment for the Respondent against the Defendants in the amount of $100,000 and $22,000 costs inclusive of disbursements ("the Lump Sum Payment").
5. Following the accident, the Respondent received newstart allowance from 14 September 1999 and disability support pension from 3 July 2000. On 17 September 1999 the Applicant's delegate gave notice to the Defendants' insurer under the Social Security Act 1991 (Cth) ("the Act") that the Applicant may wish to recover part of the social security payments made to the Respondent. On 18 April 2002 the Applicant determined that, based on the Lump Sum Payment of $122,000, the Respondent would have a preclusion period starting on 11 March 1999 and ending on 14 March 2001, during which period the Respondent received $17,334.31 in social security benefits. The Applicant issued notice to the insurers requiring that amount to be repaid.
6. The Respondent sought internal review of the decision to recover this amount, but the decision was confirmed by Centrelink on 12 May 2005 and by an authorised review officer of the Applicant on 24 May 2005. However, on 14 September 2005 the SSAT set aside that decision and substituted a decision that no amount of the Lump Sum Payment was recoverable by the Applicant. It did so on the basis that no part of the Lump Sum Payment was made "in respect of lost earnings or lost capacity to earn resulting from personal injury" so as to constitute "compensation" as defined in s 17(2) of the Act.
7. The Applicant now seeks further review of that decision of the SSAT.
8. In my view, even if part of the Lump Sum Payment was made in respect of lost earnings or lost capacity to earn, it is appropriate in the special circumstances of this case to treat the whole of the Lump Sum Payment as not having been made, pursuant to ss 1184K(1) of the Act. Section 1184K(1) of the Act provides that:
"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."
9. The term "special circumstances" is not defined by the Act, and the approach of the Tribunal and the Federal Court in a large number of cases has been to regard the matters to which the Tribunal may have regard when considering whether special circumstances exist as unconfined. Although it dealt with a somewhat different provision to s 1184K of the Act, the following passage from the decision of this Tribunal in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3 is often cited in this kind of context:
"An expression such as 'special circumstances' is by its 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 on the context in which they occur. For it is context which allows one to say that the circumstances of one case are markedly different from the usual run of cases. That is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be regarded as special".
10. The decision of the Tribunal in Beadle was affirmed by the Full Court of the Federal Court on appeal: (1985) 7 ALD 670. While the Court recognised that it was not possible to lay down precise rules as to what constituted special circumstances, the expression "unusual, uncommon or exceptional" was not, as Hill J noted in Dranichnikov v Centrelink (2003) 75 ALD 134; [2003] FCAFC 133 at [65], actually affirmed by the Full Court.
11. In Secretary, Department of Family and Community Services v Allan (2001) 116 FCR 1 at [17] Heerey J said, in the context of the statutory predecessor to s 1184K of the Act:
"It is not sensible to lay down precise limits or precise rules about what may constitute special circumstances: Beadle v Director-General of Social Security 7 ALD 670 at 673; 60 ALR 225 at 228. Ill health financial circumstances and the unfairness of a strict application of the Act are some matters which may in an individual case, constitute special circumstances Kirkbright v Secretary, Department of Family and Community Services (2000) 106 FCR 281 at 284, 288; see also Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 71."
12. Similarly, in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at 545 Kiefel J said, in a passage she again adopted in Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348 at [19]:
"The phrase “special circumstances”, it has been said, although imprecise is sufficiently understood not to require judicial gloss: Beadle's case (at ALR 229; ALD 674), and for present purposes it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course 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. The enquiry I have referred to would involve considering what would be the effect, if the provision in question or the principle of liability it creates, is applied."
13. In Re Fuller and Secretary, Department of Family and Community Services (2004) 83 ALD 152; [2004] AATA 615 at [27] Downes J expressed the view that both hardship and unfairness can form the basis of exercising the discretion under s 1184K of the Act.
14. There are a number of factors which combine to lead me to the conclusion that the special circumstances of this case make it appropriate to treat the Lump Sum Payment as not having been made.
15. Firstly, even if part of the Lump Sum Payment were to be characterised as technically being made "in respect of lost earnings or lost capacity to earn", I am satisfied that no significant part of that payment is attributable to lost earnings or lost earning capacity.
16. The Respondent gave evidence, which I accept, that the accident occurred very shortly after she arrived in Perth from Singapore, where she lived. The business which she operated was previously conducted from Singapore, and her plan was to move that business to Perth. She had been advised that substantiating the claim for loss of earning capacity would be very expensive, as she would have to bring witnesses, including accountants, from Europe and Singapore. The solicitors for the Defendants had made it clear that the Defendants did not accept that there were any damages payable in respect of loss of earning capacity in the absence of proof of income. The Respondent decided to settle the claim by dropping the claim for loss of earning capacity.
17. It also appears from the report of the Respondent's clinical psychologist, Ms Susan Thorman, which was produced before me, that, at the time the Respondent accepted the Lump Sum Payment, she had not been able to realise the full implications of her reduced circumstances, due to her particular psychological vulnerability. Ms Thorman expressed the view that the Respondent "adopted a false optimism that prevented her from facing the psychological trauma of her true situation: She made the assumption that she would indeed recover and that her disability (and reduced financial circumstance) would prove to be only a temporary problem". This explains why the Respondent did not pursue the claim for lost earning capacity which she appears, on the evidence before this Tribunal, to have had against the Defendants.
18. The evidence of the Respondent is supported by the Centrelink form completed by the First and Second Defendants' solicitor, Ms Griffin, on 21 March 2002. That form (T8) indicated that past and future loss of earning capacity was claimed but not allowed as there was insufficient evidence to support the claim. Ms Griffin gave evidence before me in which she confirmed that she had completed this form two days after settlement and wrote "insufficient evidence" because the Defendants didn't get anything which supported the claim that was being made. While she did not have any detailed recollection of the matter now, she accepted that at the pre-trial conference in March 2002 she may have said that the First and Second Defendants were not going to allow the Respondent's claim for economic loss.
19. Further, the amount of the settlement is itself indicative of there being no significant component for economic loss. The Respondent had not been working since the date of the accident, a period of some 3 years at the time of settlement. If her earning capacity was $120,000 per year, then any component for economic loss would have led to a significantly greater settlement sum than $100,000 plus costs. As was noted by Mr Wong, the Respondent's solicitor in the District Court proceedings who gave evidence before me, had the matter proceeded to trial there would have been a very substantial claim for loss of earnings.
20. For the above reasons, I would regard any component of the Lump Sum Payment which can be seen to be attributable to loss of earning capacity as insignificant. However, under s 17(3) of the Act, 50% of the Lump Sum Payment would be deemed to be the "compensation part of a lump sum compensation payment". In the circumstances of this case, I would regard it as unfair to apply the deeming provisions of the Act in circumstances where no significant part of the compensation payment was in fact attributable to loss of earning capacity.
21. Secondly, I find that the Respondent understood at the time of settlement that, because no part of the settlement sum related to lost earning capacity, she would not be liable to make any repayment to the Applicant. That was the effect of the Respondent's evidence, which I accept. The Respondent's evidence was that this understanding was based on advice from her solicitor that, because the claim for lost earning capacity had been rejected, she would not be liable to make any payment to Centrelink. Mr Wong's evidence was that he had no independent recollection of the matter and relied entirely on notes and other documents presented to him for his testimony. I do not regard the documentary evidence as being inconsistent with the Respondent's evidence. I also regard the Respondent's evidence as consistent with that of Ms Griffith, to the effect that the First and Second Defendant's had made no allowance for economic loss in their offer.
22. Thirdly, I accept the Respondent's evidence as to her severely straightened financial circumstances, which may fairly be described as desperate. She does not own a car or home, and at the time of the hearing was living in accommodation where the rent consumed most of the social security benefits which are her sole source of income.
23. Fourthly, the Respondent continues to suffer from significant physical and psychological difficulties, which result both from the accident she suffered in 1999 and a motor vehicle accident in which she was involved in July 2005.
24. Finally, the Respondent's mother, who lives in Sydney, is seriously ill and much of the Respondent's funds over the past 12-18 months have gone in the Respondent travelling to and caring for her mother. That includes the amount of $17,334.31 repaid to the Respondent following the decision of the SSAT.
25. The above factors combine to lead me to the conclusion that the strict application of Part 3.14 of the Act would cause unusual hardship and unfairness to the Respondent, even if the Lump Sum Payment constituted "compensation" as defined in s. 17 of the Act. As a consequence it is, in my view, appropriate to treat the whole of the Lump Sum Payment as not having been made. It is unnecessary in the circumstances to resolve the question of whether the Lump Sum Payment is "compensation" as defined in s. 17 of the Act, as the ultimate position arrived at by the SSAT remains correct, in my view, even if that question were to be answered in favour of the Applicant.
26. For the above reasons, it is appropriate to affirm the decision of the SSAT.
I certify that the twenty six [26] preceding paragraphs are a true copy of the reasons for the decision herein of Ms LR Tovey, Member
Signed: ....................(Sgd. Ms R Riberi) .........................
Associate
Date of Hearing 15 December 2006
Date of Decision 16 January 2007Representative for the Applicant Ms R Waldron-Hartfield,
Sparke Helmore
Representative for the Respondent Mr H Christie
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