Secretary, Department of Families, Housing, Community Services and Indigenous Affairs and Waters

[2011] AATA 666

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2011] AATA 666

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2010/1978

GENERAL ADMINISTRATIVE  DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Applicant

And MARIA-JULIETTE WATERS

Respondent

DECISION

Tribunal  The Hon R J Groom AO (Deputy President)

Date 27 September 2011

Place Hobart

Decision The decision of the Social Security Appeals Tribunal made on 15 April 2010 is set aside.  The original decision of Centrelink is reinstated.

[Sgd Hon R J Groom]

Deputy President

CATCHWORDS

SOCIAL SECURITY - disability support pension - compensation preclusion period - whether special circumstances exist - application of 50% rule - inclusion of statutory refunds in lump sum - legal costs - financial circumstances - continuing ill health - special circumstances do not exist

Social Security Act 1991 – ss 17, 1184K

Barrington and Secretary, Department of Employment and Workplace Relations [2005] AATA 1050

Re Beadle and Director-General of Social Security (1984) 6 ALD 1

Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147

Broad and Secretary, Department of Family and Community Services [2003] AATA 1017

Secretary, Department of Social Security and a’Beckett (1990) FCA 332

Kemble and Secretary, Department of Family and Community Services [2003] AATA 1048

Morrison and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 1017

Secretary, Department of Family and Community Services v Chamberlain (2002) 68 ALD 357

Zarvalis and Secretary, Department of Social Security [1989] AATA 603

REASONS FOR DECISION

27 September 2011 The Hon R J Groom AO (Deputy President)      

1.      The Secretary of the Department has applied for a review of a decision of the Social Security Appeals Tribunal (“SSAT”) dated 15 April 2010.

2.      In that decision the SSAT decided that $122,608.00 of Ms Waters’ lump sum compensation payment should be treated as not having been made and that as a result the preclusion period is to be recalculated.

BACKGROUND

3.      Ms Waters suffered serious injuries in a work related accident on 4 April 2006.  She initially claimed compensation under Queensland’s WorkCover Scheme and then later commenced common law proceedings for damages.   On 21 December 2009 Ms Water settled her common law action for the sum of $600,000.00 inclusive of relevant statutory refunds plus $50,000.00 towards her legal costs.

4.      The following amounts were paid from the $650,000.00 total settlemen+t figure:

·WorkCover refund  $156,618.43

·Medicare refund  $    1,715.25

·Centrelink refund  $  25,631.51

·Legal costs  $ 88,171.00

·TOTAL  $272,136.19

5.      After the above refunds and legal costs were paid out of the total settlement figure, Ms Waters received a net payment of $377.863.30 (see Supplementary T Documents page 160).

6.      On 26 March 2010 Centrelink determined that for the purpose of calculating the preclusion period Ms Waters had received $527,818.00 as follows:

·Lump sum compensation payment          $600,000.00

·Less Periodic payments  $ 72,186.00

·BALANCE  $527,818.00

Under section 17 of the Social Security Act 1991 (“the Act”) the “compensation part” is 50% of the above figure. The amount used as a basis for calculating the preclusion period was therefore $263,909.00.

7. Centrelink calculated the applicable preclusion period to be 355 weeks being $263,909.00 divided by the cut-off income point at which no pension would be payable which at the relevant time was $742.90. (Again see section 17 of the Act). The preclusion period therefore commenced on 28 June 2008 and ends 355 weeks later on 17 April 2015.

8. After giving consideration to all relevant information the Tribunal is satisfied that $263,909.00 was the compensation part of Ms Waters’ lump sum compensation payment and that the preclusion period of 355 weeks was properly calculated in accordance with the Act.

9.      A few days after receiving the net amount of $377,863.30 from her Queensland lawyers Ms Waters proceeded to purchase a house and land at Geeveston in Tasmania for the sum of $340,000.00.  Almost all of the proceeds of the legal action were therefore invested in the purchase of the property.

10.     On 29 January 2010 Ms Waters lodged a claim for disability support pension.  The claim was rejected by Centrelink on 2 March 2010 because of the preclusion period.  The claim was reviewed by an authorised review officer and affirmed.  Ms Waters then applied to the SSAT for a review which, as indicated above, was partially successful.

THE ISSUE

11. The principal issue to be determined by the Tribunal is whether or not “special circumstances” exist within the meaning of section 1184K of the Act and if they do exist whether it is appropriate for the Tribunal to exercise the discretion provided in that section.

DO SPECIAL CIRCUMSTANCES EXIST?

12. Section 1184K of the Act provides as follows:

1184K(1)        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”

13.     Toohey J said in Re Beadle and Director-General of Social Security (1984) 6 ALD 1 at 3:

“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 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 qualify of unusualness that permits them to be described as special.”

14.     Heerey J said in Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 at 150:

“It is not sensible to lay down precise limits or precise rules as to what may constitute special circumstances: Beadle v Director-General of Social Security (1985) 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 284-7; 65 ALD 211; 32 AAR 120; see also Kertland v Secretary, Department of Family and Community Services (1999) 95 FCR 64 at 71; 57 ALD 6000 at 607.”

15.     As was said by the Tribunal in Barrington and Secretary, Department of Employment and Workplace Relations [2005] AATA 1050:

“Clearly, the decision-maker, initially the Secretary of the Department and now the Tribunal, is given a wide discretion, not limited by legislated particulars, to consider all the circumstances of a case and to decide whether they are “special” thus permitting the exercise of the discretion.   In order to properly exercise this discretion there must be special elements in the case which stand apart from the usual or the ordinary”.

16. It was contended on Ms Waters’ behalf that a number of factors present in this case establish the existence of special circumstances sufficient to enliven the discretion in section 1184K of the Act.

17.     Those factors include the following:

·Misleading information provided by Centrelink indicating that the purchase of a house would be exempt when calculating the preclusion period

·The application in this case of the 50% Rule in section 17 of the Act and the inclusion of statutory refunds in the lump sum payment have together produced a harsh and unreasonable result

·The amount of legal costs paid by Ms Waters

·Ms Waters’ financial circumstances

·The continuing ill health suffered by Ms Waters.

18.     The Tribunal will now consider each of those factors in order to determine whether they are sufficient, either individually or in combination to satisfy the Tribunal of the existence of special circumstances.

misleading information

19.     Ms Waters said in evidence that her lawyer had not explained how the preclusion period would be applied and exactly how it would impact on any social security entitlements she may have.  The documentary evidence satisfies the Tribunal that there were discussions between Centrelink and Ms Waters’ lawyer about the preclusion period and that it is reasonable to conclude that the lawyer had some understanding of the likely impact of the preclusion period.  However the evidence is that the lawyer simply advised Ms Waters to speak to Centrelink about that issue. 

20.     Ms Waters said that she was told by a Centrelink officer in a telephone discussion that “the house would be exempt”.  A person from Bayside Gate Employment phoned Centrelink on Ms Waters’ behalf and was also informed that the house was exempt.  That information was passed on to Ms Waters.  However Ms Waters also confirmed in oral evidence that a “gentleman” from Centrelink gave her advice that a house “is not classified as exempt”.

21.     The Tribunal accepts that Ms Waters had attempted to find out more from Centrelink about the likely impact of the preclusion period.  There is evidence in Centrelink records that Ms Waters told Centrelink of those earlier discussions.  (See T Document page 106).  The Tribunal suspects that the incorrect advice may have arisen because of misunderstandings or perhaps because the wrong questions were asked.  A person’s principal home is, or course, exempt from the assets test in determining an entitlement to a disability support pension.  This may have perhaps been the basis of some confusion in the advice given. 

22.     It is however quite apparent from the evidence that Ms Waters did  understand that a preclusion period would apply and would affect her entitlement to a disability support pension.  No doubt this is the reason she made several enquiries of Centrelink.  The conflicting information she received should have caused Ms Waters to seek further clarification of the true position before she proceeded to purchase the house.  She did not seek such clarification but instead proceeded to invest almost all of her funds in purchasing the Geeveston property. 

23. The Tribunal is satisfied that the provision by Centrelink of some conflicting advice about the preclusion period is not sufficient to establish the presence of special circumstances within the meaning of the term in section 1184K of the Act.

the application of the 50% rule and statutory refunds

24.     The preclusion period scheme is intended to avoid double payment by way of compensation for lost earning capacity and also payment of social security support for the same purpose.

25. The 50% Rule in section 17 of the Act is arbitrary in design. It is intended to establish by arbitrary means the income support component of a lump sum compensation payment. If there was no such arbitrary rule the figures could be manipulated to minimise the income support component in order to maximise further social security entitlements. Indeed this was the experience before the 50% Rule was introduced.

26. It seems on the face of it quite unfair to include refunded statutory payments in the lump sum compensation payment prior to applying the 50% Rule. There is however ample authority for the proposition that the inclusion of such refunded payments as part of the lump sum amount accords with the intention of the Act. (See for example Broad and Secretary, Department of Family and Community Services [2003] AATA 1017 and Secretary, Department of Social Security and a’Beckett (1990) FCA 332 per von Doussa J).

27. There is a provision in the Act for reducing the lump sum by the amount of any periodic compensation payments. (See section 17(4) of the Act) However no provision exists for reducing the lump sum figure by the amount of any medical expenses which have been paid as part of the lump sum. (See Kemble and Secretary, Department of Family and Community Services [2003] AATA 1048).

28.     The decision in Morrison and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 1017 is distinguished on the facts. In that case the hospital and medical expenses were not paid to the individual or his lawyer as part of the lump sum but were paid entirely separately to the relevant service provider.

29.     Ms Waters received $377,863.30 as a net payment to her.  The amount used as the basis for calculating the preclusion period was $263,909.00.  She therefore received $113,954.30 more than the amount taken into account in deciding how long she must wait before becoming entitled to receive social security payments.  The role of the Tribunal is not to question the fairness of the application of the legislation, including the 50% rule, in this particular case.

30. In Secretary, Department of Family and Community Services v Chamberlain (2002) 68 ALD 357 (at para 33) Kiefel J said:

“In the present case the Tribunal considered tha the application of the formulae was unfair to the applicant because she would have to pay more than she had received by way of compensation for economic loss, indeed twice as much.  That factor will, however, be present in most cases and is an aspect of the application of the formulae.  In my view it cannot, by itself, amount to a special circumstance, one out of the ordinary”.

31.     The Tribunal finds that the manner in which the 50% rule was applied in the original Centrelink decision and in the decision of the review officer of Centrelink was correct and also that the inclusion of the medical expenses in the lump sum was a commonly adopted approach and did not “stand apart from the usual or the ordinary” and therefore does not give rise to any “special circumstance”.

legal costs

32.     As mentioned the common law claim was settled for $600,000.00 plus agreed costs of $50,000.00.  Ms Waters was required to pay an additional amount of $38,171.00 for her solicitor-client costs.  The total paid was therefore $88,171.00 out of a total settlement figure of $650,000.00.

33.     Ms Waters’ contribution to her legal costs out of the $600,000.00 lump sum is approximately 6.4% of that figure.  In Barrington (above) the legal costs were some $55,000.00 for a lump sum compensation payment of $285,000.00 inclusive of costs.  In that case the legal costs were approximately 19.2% of the lump sum which the Tribunal considered to be “a significant portion”.

34.     The legal costs paid here do not appear to be out of the ordinary.  Indeed there is evidence that both the solicitor and counsel involved reduced their normal costs by approximately 30% and 17% respectively.  (See Supplementary T Documents page 161).  The Tribunal finds that the quantum of legal costs in this case does not give rise to a “special circumstance”. 

financial circumstances

35.     Again the facts here are quite different from those that were present in Barrington.  In that case Mr Barrington’s financial circumstances were found to be “something worse than straitened”. He was living in … “exceptionally difficult financial circumstances facing ongoing living costs, debts, medical expenses, car registration, other costs and future liabilities”.  He had “no income”.  Mr Barrington had purchased a house for $68,000.00 which was said to be “… near the bottom end of the market”.

36.     As mentioned Ms Waters used almost all of the net amount of settlement monies she received to purchase a comfortable house at Geeveston for $340,000.00.  She described the house in her oral evidence as “a beautiful home”.  On the evidence before the Tribunal the costs of the house and its present value suggest it is certainly not near the bottom end of the market in that particular region of Tasmania. 

37.     In relevantly recent times Ms Waters has had a small income from hairdressing.  She is now unable to do this kind of work because of the further serious injuries she received in a motor vehicle accident which occurred on the 14 November 2010. 

38.     Ms Waters has received payments by way of board of $150.00 per week from a boarder, Mr Peter Young.  Her son was also paying board of $100.00 per week when he was working.  He is not presently living with Ms Waters but she expects he will return to live with her in due course.  It is expected that Mr Young will move out of the house in September this year and then take up work in Melbourne.  Ms Waters also said “my mum helps me out sometimes”.  Ms Waters’ mother is a pensioner and lives nearby.  This was one of the reasons why Ms Waters decided to move from Queensland to live in Tasmania. 

39.     At the time of the SSAT hearing Ms Waters had $22,000.00 in the bank but now has only $1,800.00 to her name.  That amount was received when she recently sold a car she had owned. 

40.     Following the motor vehicle accident last November Ms Waters has lodged a Motor Accident Insurance Board claim.  She told the Tribunal that she was a passenger in the vehicle at the time of the accident and suffered quite serious injuries as a result.  It is possible that she may have a significant claim.  Ms Waters may eventually receive further common law damages for her injuries.  That will obviously depend on all of the circumstances of the accident and, of course, must be disregarded when considering Ms Waters’ financial circumstances.

41.     The Tribunal finds that whilst Ms Walters has some financial difficulties she is not suffering financial hardship.  She has a valuable realisable asset in the house.  Clearly she wishes to retain the house and that may well be a very sensible choice to make.  But it will be her choice.  The house is valuable and it is unencumbered.  It could be sold although there may be some delay before a sale could be effected.  It is possible that Ms Waters could take in another border when Mr Young leaves.   Her mother, although a pensioner, does assist from time to time.   

42.     The Tribunal finds that Ms Waters’ financial circumstances are not uncommon or exceptional and not the basis for a finding of  “special circumstances”.

ms waters’ continuing ill health

43.     There is no doubt that Ms Waters was seriously injured in the work-related accident on 4 April 2006.  She suffered severe thumb and hand injuries and according to her solicitor suffers “chronic neck pain, hand pain and has a significant degree of impairment and depression”.  In addition of course Ms Waters has suffered further serious injuries in the more recent accident in November 2010.

44. Ill health alone is not sufficient to establish the “special circumstances” required by section 1184K of the Act. As we are here dealing with lump sum compensation payments it is of course a common factor that a person has usually suffered an injury or illness of some kind.

45.     The injuries that Ms Waters suffered in the 2006 accident did not stop her later training to be a hairdresser and then undertaking some work as a hairdresser.  The evidence suggests that she is not now able to undertake that kind of work because of the further serious injuries suffered in the 2010 accident.    

46.     It is noted that in Zarvalis and Secretary, Department of Social Security [1989] AATA 603 the Tribunal said as follows:

“Both the physical and psychological disabilities derived directly from his accident and provide the medical grounds upon which his entitlement to invalid pension has been established.  Although no doubt distressing, they do not appear to us to be so unusual, uncommon or exceptional as to constitute special circumstances as that phrase has been interpreted”.

47. The Tribunal finds that Ms Waters’ continuing ill health does not amount to “special circumstances” within the meaning of that term in section 1184K of the Act.

48.     The above factors, nor any other factors, taken individually or in combination are sufficient to establish the presence in this application of “special circumstances”.

CONCLUSION

49. After considering all of the material before it the Tribunal finds that there are no “special circumstances” present which would allow it to exercise the discretion provided in section 1184K of the Act.

DECISION

50.     The decision of the SSAT made on 15 April 2010 is set aside.  The original decision of Centrelink is reinstated.

I certify that the 50 preceding paragraphs are a true copy of the reasons for the decision herein of The Hon R J Groom AO (Deputy President)

Signed: R Hunt  - Associate

Date/s of Hearing  4 August 2011
Date of Decision  27 September 2011
Counsel for the Applicant         Mr Brian Sparkes
Solicitor for the Applicant          Program Litigation and Review Branch
Counsel for the Respondent     Mr Henry Pill
Solicitor for the Respondent     Hobart Community Legal Service Inc