Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Agaton Balaj

[2012] AATA 342

[2012] AATA 342 

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2011/3893
Re	Secretary, Department of Families, Housing, Community Services and Indigenous Affairs
APPLICANT
And	Agaton Balaj
RESPONDENT

DECISION

Tribunal	Senior Member K Bean
Date	6 June 2012
Place	Adelaide

The decision under review is varied such that, pursuant to s 1184K of the Social Security Act 1991, so much of Mr Balaj's compensation payment is to be treated as not having been made as will result in his compensation preclusion period ending on 5 September 2012.

....................[Sgd]....................................................

Senior Member K Bean

CATCHWORDS

SOCIAL SECURITY - Disability Support Pension - Receipt of redemption and lump sum for non-economic loss - Compensation preclusion period - Whether s 1164 applies - Whether "special circumstances" justifying treating some of compensation as if it had not been paid - Some of expenditure excessive - Special circumstances present but only such as to justify 12 month reduction of preclusion period - Decision under review varied.

LEGISLATION

Social Security Act 1991 (Cth), ss 17, 1164, 1170, 1171, 1184K

CASES

Savage v Department of Education and Employment (2007) FMCA 32

Re Secretary, Department of Social Security and VYS [1995] AATA 371
Beadle and Director-General of Social Security (1989) 6 ALD 1

REASONS FOR DECISION

Senior Member K Bean

6 June 2012

INTRODUCTION

1. The respondent, Mr Balaj, is currently 37 years old.  He was born in Kosovo, but came to Australia in 1997 and is now married with three children.  Up until November 2005, he had been working and enjoyed his job.  However, in November 2005 he suffered a serious back injury and has been unable to return to work after that injury.  Prior to this he suffered a previous back injury which also affected his legs, in 2004.

2. Following his injury on 21 November 2005, Mr Balaj was in receipt of weekly payments of income maintenance until 24 June 2010.  In addition, in March 2009, he received a lump sum payment by way of compensation for non-economic loss in the amount of $39,089.58.[1]

   [1] T5/40.

3. However in June 2010, Mr Balaj decided to accept what is known as a “redemption” of his entitlement to weekly payments and as a result of that agreement, he was paid a lump sum of $220,000, of which $500 related to medical expenses.[2]  This redemption was expressed to be in respect of the following injuries:

   ·bruising to the left lower leg - 24/3/2004;

   ·L4/5 disc degeneration - 20/7/2004; and

   ·muscular back strain and low back injury/sequelae depression - 21/11/2005.

   [2] T5/34.

4. As the redemption was in effect an advance payment of the income maintenance Mr Balaj would otherwise have been entitled to receive by way of weekly payments over a number of years, it could have been expected that this would have lasted for some time.  However by February 2011, some eight months after receiving the redemption payment, Mr Balaj had only a relatively small proportion of his redemption settlement left, in the order of approximately $16,000. 

5. Mr Balaj accordingly lodged a claim for Disability Support Pension (DSP) on 4 February 2011.  However, he was advised in response to this claim that by reason of his receipt of a compensation lump sum including a component for economic loss, he was subject to a compensation preclusion period during which he was not entitled to receive social security payments.  The preclusion period was determined to last for 167 weeks, until 5 September 2013.

6. Mr Balaj sought review of that decision and the Social Security Appeals Tribunal (SSAT) subsequently varied the preclusion period to 83 weeks such that it ended on 27 January 2012. However the Secretary has in turn sought review of that decision, giving rise to these proceedings.

   LEGISLATION AND ISSUES

7. The Social Security Act 1991 (Cth) (the Act) contains a number of provisions directed toward recovery of amounts which have been paid by way of social security payments where the recipient of those payments subsequently receives a lump sum by way of compensation, including an amount attributable to economic loss. It also contains provisions designed to preclude those who have received compensation for economic loss from receiving social security payments during the period for which they have received compensation. The principle underlying these provisions is that where a person receives compensation for lost earnings or lost capacity to earn, they should rely on that compensation rather than seek, or be permitted to retain, income support by way of social security payments.

8. Accordingly, in general terms the legislation provides that where a person has received compensation for economic loss, they should exhaust that compensation before being entitled to income support by way of social security payments.  Similarly, where a person receives compensation for economic loss and social security payments in respect of the same period, they should repay the amount they have received in social security payments once they have received their compensation lump sum.

9. In order to achieve this objective, and prevent settlements from being manipulated so as to minimise the amount repayable to Centrelink, the Act relevantly provides that where a person has received a compensation lump sum by way of a settlement which relates partly to lost earnings or lost capacity to earn, half of that amount is treated as compensation for economic loss and described as the “compensation part of a lump sum payment”[3].  A formula is then applied to that amount so as to determine the number of weeks that the recipient could reasonably be expected to support themselves from that component of the lump sum.  The number of weeks arrived at becomes the “preclusion period” during which the compensation recipient is not entitled to receive most social security payments.  Further if they have already received a specified form of social security payment or “compensation affected payment”[4] (which includes DSP) during that period, they are required to repay to Centrelink the amount of the social security payments they have received during the preclusion period.

   [3] s 17(3).

   [4] s 17(1).

10. The preclusion period is calculated by reference to s 1170 of the Act. Pursuant to that section, the compensation part of the lump sum (i.e. half of the total lump sum received) is divided by the “income cut out amount” to give a number of whole weeks.  The “income cut out amount” is defined in s 17(1) to be:

    “The amount worked out using the formula in sub-section (8), as in force at the time when the compensation was received.”

    That formula is based partly upon the maximum pension rate payable at the time the compensation was received. 

Section 1171 also requires that, where more than one lump sum is received in respect of a particular injury and one of the lump sums relates to lost earnings or lost capacity to earn, both lump sums must be taken into account. It provides as follows:

“1171 Deemed lump sum payment arising from separate payments

(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.

(2)A payment is not a lump sum payment for the purposes of paragraph (1)(a) if it relates exclusively to arrears of periodic compensation.”

1. Also relevant in this matter is s 1164, which provides as follows:

   “1164 Certain lump sums to be treated as though they were received as periodic compensation payments

   If:

   (a)a person was entitled to periodic compensation payments under a law of a State or Territory; and

   (b)the person's entitlement to the periodic payments was converted under the law of the State or Territory into an entitlement to a lump sum; and

   (c)the lump sum was calculated by reference to a period;

   this Part applies to the person as if:

   (d)        the person had not received:

   (i)    the lump sum; or

   (ii)if the lump sum was to be paid in instalments--any of the instalments; and

   (e)the person had received in each fortnight during the period a periodic compensation payment equal to:

Lump sum amount

Number of fortnights in the period

where:

lump sum amount is the amount of the lump sum referred to in paragraph (b);

number of fortnights in the period is the number of whole fortnights in the period referred to in paragraph (c).”

1. These provisions must, however, be read subject to s 1184K of the Act. That section authorises the Secretary (and this Tribunal, standing in the shoes of the Secretary) to disregard the whole or part of a compensation payment in certain circumstances. Section 1184K(1) provides as follows:

   “1184K  Secretary may disregard some payments

   (1)   For the purposes of this Part, the Secretary may treat the whole or part of the 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.

   …”

   ISSUES

2. Having regard to the facts and the applicable legislative regime therefore, the issues for my determination are as follows:

   (a)what is the compensation preclusion period which applies to Mr Balaj?; and

   (b)are there “special circumstances” within the meaning of s 1184K of the Act such that all or part of the compensation paid to Mr Balaj should be treated as not having been paid?

   I propose to address each of these issues in turn below.

   WHAT IS THE PRECLUSION PERIOD THAT APPLIES TO MR BALAJ?

3. In the Statement of Facts, Issues and Contentions lodged on behalf of the Secretary, it was contended that the total lump sum compensation received by Mr Balaj was $259,089.58, comprised of the amount received by way of economic loss, of $39,089.58, plus the redemption sum of $220,000. The Secretary contended that both of these amounts should be taken into account, pursuant to s 1171 of the Act, and that when both of those amounts were taken into account the correct preclusion period was 167 weeks, as originally determined by Centrelink.

4. However, at the hearing, the Secretary took a somewhat different position, arguing that, in respect of the redemption lump sum, s 1164 of the Act applied.

5. In relation to that submission, I note that for s 1164 of the Act to apply to a redemption settlement, the redemption amount must have been calculated “by reference to a period”.  However there is no reference in any of the relevant documentation to Mr Balaj’s redemption lump sum having been calculated by reference to a period.  Further, having regard to Mr Balaj’s young age and the relatively modest amount of the redemption payment, I do not consider it possible to infer that the redemption lump sum was calculated by reference to the usual retirement age.  As I am not satisfied that Mr Balaj’s redemption was calculated “by reference to a period”, I have concluded that s 1164 does not apply to his circumstances.

6. It follows therefore that the preclusion period applicable to Mr Balaj must be calculated by reference to the relevant provisions, most notably s 17(3), ss 1170 and 1171. In light of those provisions, I am satisfied that both of the lump sum amounts received by Mr Balaj must be taken into account in determining the preclusion period which is applicable to him.

7. I also note that in Savage v Department of Education and Employment (2007) FMCA 32, Federal Magistrate Wilson decided that where a settlement relates to more than one injury:

   “Centrelink is required to calculate separately the amount of refund and the preclusion for each event giving rise to a claim for compensation”[5].

   [5] At [41].

8. That approach has not been taken in this matter, although it is clear that the redemption agreement referred to three separate injuries, as specified above, and the earlier non-economic loss payment also appears to have related to all three injuries.  This raises the question of whether Mr Balaj’s redemption payment should be apportioned between the various injuries so as to enable separate preclusion periods to be calculated.

9. In considering that question, it is necessary to have regard to the terms of s 1170 of the Act, which governs calculation of preclusion periods, and its application to the particular circumstances of this matter.

10. On the material before me, it appears that following his injury on 24 March 2004, Mr Balaj received compensation for the days of 25 March and 26 March 2004.[6]  Similarly, following his injury on 20 July 2004, he received compensation for the days of 20 July 2004 to 31 August 2004.[7] Further as the redemption agreement also related to those injuries, it would appear to follow that Mr Balaj’s ongoing weekly compensation payments after 21 November 2005 also related to the two earlier injuries. As Mr Balaj continued to receive weekly or periodic compensation payments in respect of both of the 2004 injuries until he accepted the redemption payment, it follows from the terms of s 1170 that the preclusion period as it relates to those injuries commences on the day after he last received period compensation payments, being 25 June 2010, as does the compensation preclusion period relating to the injury of 21 November 2005.

    [6] T4/23.

    [7] T4/23.

11. In other words, because Mr Balaj continued to receive weekly compensation payments relating to all three injuries, the date of the commencement of the compensation preclusion period is the same in respect of all three injuries.  In these circumstances, even if an attempt were made to apportion the redemption payment between the three injuries, the outcome would be no different.  The end result would be the same because, even if the redemption amount was broken into separate components relating to each of those injuries, ultimately those amounts would still need to be combined with the non-economic loss payment made to Mr Balaj in March 2009 and half of the total amount paid in respect of each injury would still need to be taken into account in calculating his preclusion period.  Mathematically, the end result would be same as the result arrived at by simply adding the redemption payment and the non-economic loss payment together and treating half of that total amount as the “compensation part” of the compensation lump sum amount.

12. For these reasons, although neither the ARO nor the SSAT attempted to calculate the preclusion period by reference to the three separate injuries, the result they arrived at would have been no different had they done so.  Under either approach, the preclusion period commences on 25 June 2010 and must be calculated by reference to an amount of $129,544.79, which, when divided by the relevant income cut-out amount of $772.10, gives the result of 167 weeks. 

13. I am accordingly satisfied that the preclusion period applicable to Mr Balaj is 167 weeks, from 25 June 2010 to 5 September 2013.  It therefore also follows that, subject to the existence of “special circumstances”, Mr Balaj’s claim for DSP lodged on 4 February 2011 was correctly rejected.

    ARE THERE “SPECIAL CIRCUMSTANCES” SUCH THAT PART OF MR BALAJ’S LUMP SUM COMPENSATION PAYMENT SHOULD BE TREATED AS NOT HAVING BEEN MADE?

14. A number of matters were put forward on behalf of Mr Balaj as constituting “special circumstances” either individually or in combination.  In broad terms, the circumstances put forward can be grouped as follows:

    (a)inadequate advice or information and lack of knowledge as to how long the preclusion period would be;

    (b)the fact that Mr Balaj had been “under-compensated” and pressure had been put on him to accept the redemption rather than continuing to receive weekly payments;

    (c)the fact that the rapid expenditure of the lump sum Mr Balaj received was excusable in all the circumstances, including Mr Balaj’s state of mind at the time; and

    (d)Mr Balaj’s health and other current circumstances.

15. I propose to address each of these matters in turn.

    The advice and information given to Mr Balaj about the preclusion period

16. At the time he entered into the redemption agreement, Mr Balaj was represented by a solicitor, Mr Tim Clarke.  In his oral evidence at the hearing, Mr Balaj said that before he signed the redemption agreement, Mr Clarke had told him there would be a preclusion period but notwithstanding this advice Mr Balaj said he had “no idea” how this worked.  When it was put to him that Mr Clarke had advised him as to a specific preclusion period which would apply if he proceeded with the settlement, Mr Balaj disputed this and said that he did not remember receiving that advice.  He also said that after he had received an earlier offer of $165,000, prior to the offer he ultimately accepted, he and his wife went to Centrelink to ask what the preclusion period would be.  He said Centrelink could not tell them what the relevant period would be.  Under cross-examination, Mr Balaj confirmed that he understood in general terms what a preclusion period was, that is that it was a period of time during which he would not be able to receive Centrelink payments.

17. Mrs Balaj confirmed in her evidence that she was with Mr Balaj at all of the meetings he had with his lawyers relating to the redemption agreement.  She also stated that there was mention made of a preclusion period when Mr Balaj met with Mr Clarke to discuss the proposed redemption.  She also confirmed that she understood at this time that the reference to a “preclusion period” meant a period of time during which Mr Balaj would not be able to receive payments from Centrelink.  She said she or Mr Balaj had asked Mr Clarke or the other lawyers acting for them how long the preclusion period would be, but “they didn’t know”.  Consequently, she said she and Mr Balaj had “no idea” how long the preclusion period would be.

18. Mrs Balaj also confirmed that after receiving an offer from Allianz, prior to the one they ultimately accepted, she and Mr Balaj had attended the Marion office of Centrelink to ask what the preclusion period would be.  However they had been told by Centrelink that Centrelink could not advise them how long the preclusion period would be.  Mrs Balaj also referred to a subsequent telephone conversation she had with Centrelink, when she was told that the preclusion period could not be calculated until she or Mr Balaj put in a claim.[8]  She said the person she spoke to did not offer to send out a form to her or refer her to anyone else within Centrelink.  She said they simply kept advising her to put in a claim.  She said she could not recall how many times she telephoned Centrelink about the preclusion period issue, although she was certain she had rung more than once.

    [8] This is corroborated by a note in Centrelink’s records dated 21 June 2010 – T14/133.

19. Under cross-examination, Mrs Balaj confirmed that when she and Mr Balaj attended the Centrelink office at Marion, they were inquiring as to the preclusion period in the context of an offer of $165,000.  When it was put to Mrs Balaj that Mr Clarke had advised her and Mr Balaj as to a specific preclusion period, i.e. a particular number of weeks, she said she did not remember him doing this.

20. Mr Clarke also attended the hearing and gave oral evidence.  His evidence was significantly different from that of Mr and Mrs Balaj.

1. Mr Clarke confirmed in the course of his evidence that he had written to the SSAT setting out what had occurred and the advice he had given to Mr and Mrs Balaj in the context of the redemption payment, and he also confirmed that the contents of that letter were accurate.  In that letter, he advised that prior to the redemption documentation being signed, the matter had been listed in the Workers’ Compensation Tribunal and on 19 May 2012, a redemption conference took place in the Workers’ Compensation Tribunal.  At that conference, Mr Balaj was offered the sum of $165,000.  Mr Clarke went on to state in his letter:

   “At that conference a Centrelink preclusion period was discussed and it was indicated that the Centrelink preclusion period is determined by dividing the offer made to resolve the matter by two, and dividing that sum by $770 which equals the number of weeks that Mr Balaj would be precluded from obtaining Centrelink benefits.  $770 there being an estimate of the appropriate weekly earnings divisor.

   It was also noted at that time that Mr Balaj was to talk to Centrelink in relation to the implications of his redemption from a Centrelink perspective.”[9]

   [9] T3/18.

2. Mr Clarke went on to indicate in his letter that after further negotiations the matter resolved on 2 June 2010 on the basis of a redemption amount of $220,000.  Mr Clarke also stated in his letter that his notes for 2 June 2010 indicated that on that day Mr Balaj and his wife had told Mr Clarke they had been to Centrelink and were “aware of a preclusion period”[10].  Mr Clarke went on to state in his letter:

   “Subsequently Mr and Mrs Balaj attended my office on 10 June 2010 and I have provided him advice in accordance with Annexure A Professional Advice.  Although I don’t have a separate note in relation to that meeting, I recall discussing the preclusion period and the basis upon which it is worked out with Mr and Mrs Balaj.  I recall doing a calculation dividing $110,000 by $770 and indicating that I believed the preclusion period would be in the order 142 weeks.  At that meeting Mr and Mrs Balaj indicated they had discussed the preclusion period with Centrelink.”[11]

   [10] T3/18.

   [11] T3/18.

3. Mr Clarke also produced at the hearing a file note of the redemption conference on 19 May 2010.  He said he was not present on that occasion, but Mr Balaj has been represented by counsel together with a para-legal from Mr Clarke’s office.  The file note reflected an offer having been made of $165,000 and some discussion of a counter offer of $220,000.  In the top right-hand corner of the file note the following notation appears:

   “Centrelink preclusion

   Offer ÷ 2 ÷ 770 = No of weeks.”

   In his evidence, Mr Clarke said this showed that the preclusion period had been discussed with Mr and Mrs Balaj at the redemption conference, as well as with him subsequently.

4. Mr Clarke conceded in his evidence that he did not have any specific recollection of the calculations that he carried out when he met with the Balajs, and to that extent his letter to the SSAT was a “reconstruction” based in part upon the redemption conference file note.  He also conceded that his advice to the Balajs was incorrect, insofar as his calculation of the preclusion period did not take account of the earlier lump sum payment for non-economic loss.

5. It is difficult to reconcile Mr Clarke’s evidence with that of Mr and Mrs Balaj.  Whilst Mr and Mrs Balaj both acknowledged that they were aware there would be a preclusion period resulting from the redemption payment, they both asserted they were unaware what this period would be and neither recalled being advised as to the length of the preclusion period.  However, Mr Clarke has given evidence that he recalls advising Mr and Mrs Balaj of a preclusion period, albeit one which was slightly shorter than the period ultimately imposed by Centrelink.  Further, there is some contemporaneous material which supports Mr Clarke’s version of events, namely the file note of the redemption conference, which records the formula to be applied to any settlement offer so as to give the preclusion period.

6. Ultimately, I have come to the conclusion that I prefer Mr Clarke’s evidence on this issue.  His evidence is corroborated to some extent by the contemporaneous documentation and I consider that he has a better recollection of the advice which was given than Mr or Mrs Balaj.  I am therefore satisfied on balance that Mr and Mrs Balaj were given advice as to the length of the preclusion period, both in the context of the earlier offer of $165,000 made at the redemption conference and by Mr Clarke in the context of the actual redemption settlement amount, on 10 June 2010.  I accept that they may not recall being given advice as to the length of the preclusion period, but I am satisfied that such advice was given.

7. I also accept that Mrs Balaj approached Centrelink on at least two occasions in relation to the redemption settlement and sought assistance as to the implications of this, and the length of the preclusion period.  On the first occasion, her inquiry was made in the context of an earlier settlement offer of $165,000.  However, it appears that her later query, on 21 June 2010, related to the actual redemption amount. 

8. On neither of these occasions was Mrs Balaj given an estimate of the preclusion period and nor was she provided with a “compensation estimate of charge/preclusion” form to be completed and returned,[12] or referred to the compensation recovery team.  If any of those things had been done, it is likely that Mrs Balaj would have received advice from Centrelink as to the correct preclusion period.  However, as I have indicated above, I am satisfied in any event that Mr and Mrs Balaj were verbally advised of the likelihood of a preclusion period being imposed in the order of 142 weeks, which was approximately six months less than the preclusion period which was ultimately imposed.

   [12] Exhibit 9.

9. Clearly, it would have been preferable if Mr and Mrs Balaj had been advised by their lawyers as to the correct preclusion period, and if they had been given that advice in writing.  It would also have been preferable if, when they approached Centrelink, they had either been given an estimate form to complete, or directed to the compensation recovery team.  However, in circumstances where I am satisfied they were verbally advised, not just that there would be a preclusion period but as to approximately how long that preclusion would be, I do not consider any deficiency in the advice or information provided to Mr Balaj to be capable of amounting to or contributing to the existence of “special circumstances” within the meaning of s 1184K.

   The circumstances in which Mr Balaj took the redemption and the amount of the redemption

10. There is consistent evidence before me to the effect that there was some pressure on Mr Balaj to enter the redemption agreement, as he was advised that if he did not seek a redemption within a relatively short timeframe, he may not be able to do so in the future.  Mr Clarke confirmed in his evidence that was his understanding and his advice to Mr Balaj.  Mr and Mrs Balaj also each gave evidence that this advice was a significant factor in Mr Balaj agreeing to enter into the redemption agreement, and I accept that aspect of their evidence.

11. I also accept that the evidence before me is to the effect that, at the time he entered the redemption agreement, Mr Balaj had no expectation of returning to work and that remains the case currently.  Nevertheless, the amount of the redemption is equivalent to only approximately five years of weekly compensation payments, at the rate that Mr Balaj was receiving weekly compensation prior to the redemption. [13]

    [13] T5/35.

12. I accordingly also accept that the evidence before me is consistent with the proposition that Mr Balaj was “under compensated” for the economic loss he has suffered as a result of his compensable injuries.  Indeed, on the material before me, it appears that he would have been better off in a financial sense if he had simply continued to receive weekly payments of compensation, rather than having his entitlements redeemed.

13. I consider that the fact Mr Balaj felt under pressure to take a redemption, and the fact that he has been under compensated for his injuries, are matters which are appropriately taken into account in determining whether “special circumstances” are present and that these matters are capable of contributing to a conclusion that there are “special circumstances”.

    The spending of the redemption monies and the circumstances surrounding this

14. Mr Balaj said that with the redemption lump sum he had paid approximately $20,000 off his credit card, and also paid for some work to be done on his existing car, which needed a new gearbox.  This cost $4,000 or so.  He also purchased a new car and had some work done around the house. 

15. Mr Balaj also said that he and his wife decided to take a trip to Kosovo to see his family, although he mentioned that they had decided to do this even before receiving the redemption and had booked their tickets.  He said that friends had lent them money to buy the tickets for the trip. 

16. He confirmed that the trip to Kosovo had cost approximately $80,000 altogether including money spent on doing things for his parents, including having work done on their house.  He said he and his family spent nearly three months in Kosovo.  However unfortunately his health had been very poor when he was in Kosovo and he did not really enjoy the trip.  He said if he had known the length of the preclusion period, he would still have gone to Kosovo but would not have taken his family.  

17. Apart from the money spent on the Kosovo trip and the other expenditures referred to above, Mr Balaj said the balance of his redemption had been spent on his mortgage and household bills.  When Mr Balaj was asked about how he was expecting to support himself and his family after he returned from Kosovo, his evidence was to the effect that he had not given this a great deal of thought, as he was depressed and in a state of despair about his life, feeling that his life “was gone”.

18. Mrs Balaj confirmed in her evidence that the Kosovo trip had cost $80,000 altogether.  As to whether the family would have taken this trip if Mr Balaj had not received the redemption, she said she thought they would have and referred to the fact that before they received the redemption monies they had borrowed money to buy their tickets.  She said that they had $120,000 of the redemption monies left when they returned from Kosovo.  However, this had since been spent on payment of their mortgage and other living expenses. 

19. In her evidence, Mrs Balaj also confirmed that she understood before the family went to Kosovo that there would be a preclusion period flowing from the redemption lump sum, although she maintained that she did not know precisely how long this would be.  As to how she and her husband were expecting to support themselves and their family following their return from Kosovo, Mrs Balaj was not able to provide a satisfactory answer, other than indicating that they had not been intending to simply rely on social security.

20. On the evidence before me, it therefore appears Mr and Mrs Balaj did not have any real plan for how they were going to pay their mortgage and support themselves and their children in the years following their return from Kosovo, notwithstanding that they concede that they were aware that Mr Balaj’s redemption payment gave rise to a preclusion period. 

21. In her submissions on behalf of Mr Balaj, Ms Riley conceded that the spending of $80,000 or 36 per cent of the redemption on the Kosovo trip was extremely reckless, given that at the time Mr and Mrs Balaj decided to undertake this trip, they had no other means of support apart from the redemption lump sum.  She submitted that Mr and Mrs Balaj would not have undertaken this trip or at least would not have expended the amount of money they did if they had known the length of the preclusion period.  However, I am unable to entirely accept that submission in view of my conclusion that Mr and Mrs Balaj were advised of a preclusion period only slightly shorter than the length of the actual preclusion period.

22. I do accept that Mr Balaj’s health has been extremely poor since he took the redemption payment and in fact prior to that time.  In particular, I accept that Mr Balaj’s mental health has been poor throughout that period and that he has been depressed and at times suicidal.  I also accept at the time he decided to take the trip to Kosovo, he was in a state of hopelessness as to the future and that because of his poor health and somewhat desperate emotional state, he gave less thought to how he would support his family following their return from Kosovo than he would otherwise have done.

23. Whilst I accept that all of these matters played a role in the amount of money spent however, it is highly significant in my view that Mr and Mrs Balaj both asserted that the Kosovo trip would still have taken place, even if Mr Balaj had not received the redemption, and they each referred to the fact that tickets had been booked for the whole family before Mr Balaj entered into their redemption agreement.  The evidence accordingly is to the effect that Mr and Mrs Balaj saw this trip as a necessity and that they were determined to undertake the trip, regardless of Mr Balaj’s receipt of the redemption lump sum. 

24. To a large extent therefore, this expenditure was not an impulsive or ill-considered act prompted by receipt of the redemption, but the result of a considered and deliberate decision by the Balajs to prioritise the need to see and assist Mr Balaj’s family.  Having said that, I accept that Mr and Mrs Balaj spent more money on this trip than they would have if Mr Balaj had not received the redemption lump sum, and I consider that at least some of this additional expenditure was probably influenced by Mr Balaj’s despairing and hopeless frame of mind, which led him to be more reckless than he would otherwise have been.  However, as I have indicated above, I consider the expenditure of the money spent by the Balajs in Kosovo was largely attributable to a decision to prioritise the need to see and help Mr Balaj’s family, over and above the need to support their own family in the longer term.    

25. Therefore whilst the amount of money spent may have been influenced to some extent by Mr Balaj’s poor state of mental health, I consider it was largely attributable to a conscious decision by them to prioritise the needs of Mr Balaj’s family in Kosovo above their own financial future.  Further, as I have indicated above, the Balajs made the decision to spend the funds in this way, notwithstanding that I consider they were advised not only that there would be a preclusion period but as to the approximate length of that preclusion period.

26. Having regard to all of these matters, whilst Mr Balaj’s state of mental health had some bearing on the amount of money he spent on the Kosovo trip, I consider the contribution made by this to have been relatively minor compared with the other matters I have referred to above.  I have accordingly concluded that Mr Balaj’s decision to spend $80,000 on the trip to Kosovo and the circumstances surrounding this, are not sufficiently unusual or sufficiently exculpatory so as to amount to or contribute to “special circumstances” in the relevant sense.  For completeness, I have also concluded that none of the other expenditures referred to above give rise to or contribute to the existence of “special circumstances”.

    Mr Balaj’s health and other current circumstances

27. As I have alluded to above, the evidence is to the effect that Mr Balaj’s health continues to be extremely poor.  In addition to his chronic back pain, I accept that he suffers from severe depression[14] and I also accept that he suffers from sclerosis of the liver and at the time of the hearing in this matter, was due to undergo screening as part of the Flinders Liver Failure Program[15].  In addition, the evidence before me suggests that he has high blood pressure and stomach problems.

    [14] Exhibit 11.

    [15] Exhibit 7.

28. As to the family’s current financial situation, the evidence is that at the time of the hearing in this matter, Mr and Mrs Balaj had under $1,000 in their bank accounts and were in a relatively dire financial situation.  They own a Toyota Camry vehicle which they bought new with the redemption, and a Holden Barina bought very cheaply second hand.  Mrs Balaj gave evidence that they have considered selling their home, however on the advice they had received, this was not a realistic option for them since if they paid out their current loan, they would not be able to get another one.  In relation to their mortgage, Mrs Balaj said this was currently $170,000 and she had recently been able to renegotiate a short term reduction in payments, to $500 per month for three months.  This was approximately half the usual rate of repayments.  She said that the capital value of their home was between $260,000 and $290,000.  In relation to their vehicles, Mrs Balaj said if they sold the Holden Barina they would get very little for this and the family needed at least one car.  If they sold the Toyota Camry and bought a cheaper car, she said they would be likely to incur more expenses in relation to maintenance of that vehicle. 

29. Mrs Balaj also said that she and Mr Balaj currently owe between $15,000 and $16,000 on their credit cards.  She also gave evidence that she was not in a position to seek work as the couple have three children with the eldest being 13.  She said that in light of Mr Balaj’s health problems and mental state, she did not feel she could leave all three children with him.  In particular she felt that she could not leave the eight or four year old with Mr Balaj. 

30. The evidence before me was to the effect that currently, Mrs Balaj receives approximately $1,300 per fortnight by way of family tax benefit and carers pension.  In addition, Mr Balaj is receiving approximately $569 per fortnight by way of DSP (consequent upon the SSAT reducing the preclusion period).

31. Having regard to this evidence, I accept that Mr and Mrs Balaj are in an extremely difficult financial position, and if the original preclusion period was to be reinstated, this could have the result that they would be forced to sell their home.  This would be likely to have extremely negative implications both for them and their three children.  It is not entirely clear to me on the evidence that, even if the preclusion period remained as determined by the SSAT, Mr and Mrs Balaj will necessarily be able to avoid the need to sell their home.  However, I accept that if the preclusion period were to be lengthened, it is more likely that they would find themselves in that situation or that Mrs Balaj would be forced to look for work, notwithstanding the age of her children and Mr Balaj’s serious health difficulties. 

32. I therefore consider that Mr Balaj’s current circumstances, including the family’s relatively dire financial predicament, are capable of contributing to a conclusion that his circumstances are “special” in the relevant sense.

    Overall assessment

    Contentions

33. In her submissions as to what conclusions the Tribunal should reach on the evidence, Ms Welfare, who appeared for the Secretary, pointed out that Mr and Mrs Balaj had spent approximately $900 per day on their Kosovo trip and she submitted that this was clearly excessive in all the circumstances.  She submitted that clearly the redemption lump sum was intended to replace the weekly payments Mr Balaj had been receiving and to provide income support to him by way of compensation for his inability to earn a wage.  She submitted that it had been spent recklessly and inappropriately, having regard to that context.  She also submitted that there were alternatives available to Mr and Mrs Balaj to attempt to ameliorate their financial situation, including attempting to renegotiate their mortgage or selling one of their cars.  In addition, Ms Welfare pointed out that the “50 % rule” had operated favourably to Mr Balaj, given that effectively the whole of the redemption lump sum amount related to economic loss.  She contended that this also militated against the existence of “special circumstances”.

1. On behalf of Mr Balaj, Ms Riley submitted that in relation to the expenditure on the Kosovo trip, the Tribunal should take into account the fact that at the time this occurred Mr Balaj was not thinking of the future as he saw no future for himself.  She also submitted that if the Balaj’s were forced to sell their home this would effectively be a “one way ticket to poverty” and not something which should be countenanced by the Tribunal.

   Consideration

2. One of the difficulties for Mr Balaj’s case is that, as submitted by Ms Welfare, many of the circumstances confronting him are not unusual amongst welfare recipients.  It is not unusual for those who have received a compensation payout for an injury and are reliant on social security to be in poor health and difficult financial circumstances.  Indeed, in some respects Mr and Mrs Balaj are in a better situation than many welfare recipients as they currently own their own home, albeit that it has a significant mortgage, and they also own two vehicles.  In addition, while she currently has care of three children, including a four year old, Mrs Balaj appears to be in reasonable health and has capacity to work.  As a family therefore, they will have the capacity to improve their financial situation in the future. 

3. In addition, as I have indicated above, I am not satisfied that all of the more specific matters put forward on behalf of Mr Balaj are capable of contributing to a conclusion that his circumstances are “special”.  In particular, I am not satisfied that he was not given substantially correct advice about the preclusion period and nor am I satisfied that his expenditure of $80,000 on a trip to Kosovo can be excused or explained as being attributable to his poor mental health and inability to see a future at that time.  I consider that expenditure to have been a large part attributable to a deliberate and considered decision he and Mrs Balaj made, which involved considerable risk to their own financial future.  I also consider that they made that decision having been advised of a preclusion period of 142 weeks and with full knowledge and understanding that once the balance of Mr Balaj’s redemption payment had been spent, they would have no other means of supporting themselves apart from Mrs Balaj seeking work, or resort to the social security system.  I also accept Ms Welfare’s submission that Mr Balaj has benefited from the application of the 50% rule, insofar as more than 50% of the lump sum compensation he received was attributable to economic loss.

4. On the other hand however, I do consider some aspects of the Balaj’s situation to be relatively unusual and especially unfortunate.  In particular, I accept that Mr Balaj felt under some pressure to enter into a redemption agreement which, assuming he is unable to return to work, has the result that he has been significantly under compensated for his serious work injuries.  I also accept that it is unrealistic at the present time for Mrs Balaj to return to work, given that her youngest child is four years old and she is needed at home to care for her children and for Mr Balaj, who is not capable himself of caring for their three children whilst she goes out to work.  In addition, there is a very real risk that if the preclusion period was to be increased from that determined by the SSAT, Mr and Mrs Balaj would be forced to sell their home, with severely adverse consequences both for them and their three children.  I accept that, as they would be very unlikely to be in a position to purchase another home, they would be forced to rent and that this could fairly be described as a “one way ticket to poverty”.[16]

   [16]  Re Secretary, Department of Social Security and VYS [1995] AATA 371.

5. The question remains however as to whether the circumstances I have identified immediately above are sufficiently unusual and involve sufficient hardship such as to amount to “special circumstances” justifying reduction of the preclusion period.  I consider that to be a relatively finely balanced question and I note in this regard that a number of the factual bases for the SSAT’s conclusion that there were “special circumstances” have not been borne out on the evidence before me.[17]

   [17] T2/15-16.

6. In the event, I have concluded that the circumstances referred to above are sufficiently unusual and involve sufficient hardship[18] such that they do constitute “special circumstances” which justify shortening of the preclusion period, but not to the extent to which the preclusion period was reduced by the SSAT.  I note that the original preclusion period ended on 5 September 2013, however the SSAT reduced this such that it ended 27 January 2012.  In my view, the circumstances referred to above justify treating so much of Mr Balaj’s redemption lump sum as not having been paid such that his preclusion period will end on 5 September 2012, 12 months earlier than the original preclusion period. 

   [18] See Beadle and Director-General of Social Security (1989) 6 ALD 1.

   DECISION

7. The decision under review is varied such that, pursuant to s 1184K of the Social Security Act 1991, so much of Mr Balaj’s compensation payment is to be treated as not having been made as will result in his compensation preclusion period ending on 5 September 2012.

I certify that the preceding 72 (seventy-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member K Bean.

...................[Sgd].....................................................

Administrative Assistant

Dated 6 June 2012

Date(s) of hearing	29 March and 11 April 2012
Advocate for the Applicant	Ms M Welfare
Solicitors for the Applicant	Program Litigation and Review
Advocate for the Respondent	Mrs M Riley
Solicitors for the Respondent	Welfare Rights Centre (SA) Inc