Secretary, Department of Social Services and Brian Muir
[2013] AATA 831
•22 November 2013
[2013]AATA 831
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2013/1332
Re
Secretary, Department of Social Services
APPLICANT
And
Brian Muir
RESPONDENT
DECISION
Tribunal Mr John Handley, Senior Member
Date 22 November 2013 Place Melbourne The Tribunal sets aside the decision of the Social Security Appeals Tribunal dated 21 February 2013 and in substitution reinstates the decision of the Authorised Review Officer made on 15 January 2013 to impose a preclusion period from 27 July 2012 to 18 July 2021.
(sgd) John Handley
Senior Member
SOCIAL SECURITY – respondent suffered extensive injuries in a motor car accident – lump sum compensation paid – house purchased before period of preclusion determined – contention that advice given by Centrelink officers of likely duration – Social Security Appeals Tribunal found amount equivalent to cost of house be treated as not having been paid – whether circumstances of Respondent were special – decision set aside.
LEGISLATION
Social Security Act 1991 ss 17, 1170, 1171, 1184K
Transport Accident Act 1986 (Vic)s 93(17)
CASES
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348
Re Beadle and Director General of Social Security (1984) 6 ALD 1
REASONS FOR DECISION
Mr John Handley, Senior Member
Mr Muir, the respondent in this review, suffered horrific injuries in a motor car accident on 18 April 2009, which, coincidently, was his birthday.
On the day of the accident, the respondent, who was a passenger, was teaching his nephew to drive. His nephew lost control of the car and hit a power pole. The car caught fire and the respondent was trapped. He was admitted to hospital, was not expected to survive and spent 12 months as an inpatient. He continues to have rehabilitation, will need skin grafting into the future and is likely to require right hip surgery and/or replacement. It is doubtful he will ever work again. He is 38 years of age.
The respondent has received payments from the Transport Accident Commission of Victoria (TAC). Payments were initially made on a fortnightly basis and calculated by regard to his pre-accident salary. He also received 4 lump-sum payments, described by the TAC as impairment lump sums (T8, p. 37) in the total sum of $178,560. On 26 July 2012 he settled proceedings with the TAC, during a mediation conference, by a payment to him of damages in the (additional) sum of $600,000 for pecuniary loss and pain and suffering (T9, p. 45-47).
The TAC also agreed to pay the respondent’s legal costs and disbursements. His solicitors claimed costs and disbursements in the sum of approximately $166,000. The respondent understood that $120,000 was recovered. He paid his solicitors the difference between those sums ($46,000), I assume, on a solicitor/client basis (T3, p. 10).
On 22 October 2012 the respondent claimed disability support pension (DSP). On 13 December 2012 an officer of the applicant decided to impose a compensation preclusion period (PP) and his claim was refused because of the monies he received from the TAC (T10, p. 48). An authorised review officer (ARO) affirmed that decision on 15 January 2013 (T13, p. 55-57) but varied the commencing and concluding dates. The ARO decided that the respondent was precluded from obtaining any social security entitlements between 30 July 2012 and 18 July 2021, approximately 9 years. The variation did not affect the duration of the PP as the primary decision determined. The respondent challenged that decision by an application to the Social Security Appeals Tribunal (SSAT).
On 21 February 2013, a Member of the SSAT decided that expenditure of $480,000 from the proceeds of the TAC payments by the respondent, on the purchase of a house, was a special circumstance. Accordingly, the SSAT decided that the sum of $480,000 should be treated as not having been paid and the period of preclusion should be recalculated. That resulted in the PP aggregating 179 weeks and the respondent would become entitled to DSP in early 2015.
The applicant has sought review of the SSAT’s decision and asserted that the sum of $480,000, being the vast majority of the entire lump sum, was expended within 7 months of receipt, in those circumstances which could be described as reckless (T1, p.1).
The respondent contended that he was advised by Centrelink officers that the PP would be about 3 years in duration. On the basis of that advice, he decided to purchase a house, in the belief that he could cope, financially, for 3 years, until 2015, without DSP.
The advice given to the respondent was a significant issue in this review. The applicant called 4 of its customer service officers (CSOs) from the Corio office to give evidence. A number of memorandums completed by them and found within the T-documents were examined during the hearing. Irrespective of the findings made in relation to that issue, the principal issue in this application was whether the circumstances of the respondent are special.
THE LEGISLATION
The respondent and his partner, Jodi Muir, were confused about the basis for calculation of the PP and it was the subject of some discussion during the hearing.
Section 1171 of the Social Security Act 1991 (the Act) provides where a person receives two or more lump-sum payments arising out of the same event which gives an entitlement to payment of compensation, and at least one of those payments was made wholly or partly in respect of lost earnings or lost capacity to earn, all of the lump-sum payments will be aggregated and that sum shall be regarded as one lump-sum compensation payment.
Compensation is defined in s 17(2)(d) of the Act, as a payment that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury. I am satisfied the lump sum payment of $600,000, being one of the payments, incorporates a payment for either, or both, lost earnings or lost capacity to earn (s 93(17) of the Transport Accident Act1986 (Vic)). The Deed of Release signed in settlement of the TAC application, provides that the payment was in respect of damages for pain and suffering and pecuniary (monetary) loss (T9, p. 47 at [9]). Accordingly, the aggregated payment, being in part for lost earnings or lost capacity to earn, is a compensation payment.
Calculation of a period of preclusion is undertaken by first identifying the compensation part of a lump-sum compensation payment (being a payment made in settlement of a claim for an injury), calculating 50 per cent of it (s 17(3)) and then dividing that sum by the income cut out amount (sometimes known as the divisor) (s 17(8) and s 1170(4) of the Act).At 1 July 2012 the divisor was $831.50 per week (T22, p. 93).
Accordingly, 50 per cent of the aggregate of the lump-sum compensation payments received by the respondent, $778,560 ($178,560+ $600,000) is $389,280. When divided by $831.50 the PP is 468 weeks commencing from the date the respondent received the last of the compensation payments (s 1171(1)(d) of the Act), being 29 July 2012 (T8, p. 42)
Section 1184K(1) of the Act permits the whole or part of a compensation payment to be treated as either not having been made or not liable to be made if it is appropriate to do so in the special circumstances of the case.
The SSAT Member found that the respondent’s circumstances were special and part of a compensation payment, $480,000, should be treated as not having been made. That sum was subtracted from $778,560, the resultant sum was halved (50 per cent), it was divided by $831.50 and the PP was reduced.
EVIDENCE
The respondent and his partner both gave evidence in this review. He was not legally represented. They have 2 daughters, presently aged 9 and 11 years. Prior to the motor car accident, they had separated and were living apart. The children lived with Ms Muir. After the respondent was discharged from hospital, he lived in the home occupied by Ms Muir. She cared for him. He later purchased a house from the funds received in the settlement with the TAC. The respondent, Ms Muir and their daughters live together in that house. Centrelink regards the respondent and Ms Muir as separated under one roof.
The Centrelink Officers
Wendy Duque
Ms Duque has been employed with Centrelink and its predecessor for 23 years as a CSO. In a statement lodged prior to the commencement of the hearing (Exhibit A1), she recorded that she met with the respondent and Ms Muir on 22 October 2012 at the Corio office when he lodged his application for DSP. She identified the respondent during the hearing as the person she assisted.
Ms Duque said in evidence that she did not discuss the duration of a PP with the respondent or Ms Muir. She denied the allegation she understood would be put by the respondent that she had advised him the PP would be of 3 years duration. She said it would be up to the compensation section to determine what length of period and she was not in a position to make an estimate (Transcript, p. 10). She said she referred the DSP claim form and other documents delivered by the Respondent on 22 October 2012 to the compensation section of Centrelink.
In response to questions from Ms Muir, Ms Duque reaffirmed that her responsibility only was to receive applications for a benefit. Having identified that the Respondent was claiming DSP, she arranged to forward his application forms to the compensation division. She said he did not ask about a PP. She was adamant that she did not advise Ms Muir or the respondent on 22 October 2012, being the only occasion that she had contact with them, that he would be precluded from benefits for about 3 years. She said there was no discussion about it (Transcript, p. 9) and it was incorrect that she told Ms Muir at the interview on 22 October 2012, that the respondent would be precluded for 3 years (Transcript, p. 19).
Ms Duque agreed she was the author of 2 memorandums (32 of 39 and 33 of 39 found at T17, p. 85 – 86). The memorandums confirm that she did meet with the respondent on 22 October 2012 at the Corio office. She received a claim for DSP, which would appear to have been satisfactorily completed because she recorded that all relevant questions have been answered and the respondent provided proof of his identity. It would also appear that there was discussion about when the respondent might learn whether he qualified for DSP because she recorded that she estimated that the claim would be processed by 10 December 2012. She also recorded that she had advised the respondent to make further enquiry if we have not been in touch by that date. In her evidence, Ms Duque said that was the only advice that she gave (Transcript, p. 10).
Patrick Crowe
Mr Crowe has worked with Centrelink as a CSO for about 8 years. In a statement lodged prior to the hearing (Exhibit A2), he recorded he was working in that role in November 2012. By reference to a memorandum reproduced in the T-documents (29 of 39 found at T17, p. 83 – 84), it would appear that Mr Crowe met with the respondent on 13 November 2012. He acknowledged in evidence the memorandum had been completed by him. In it, he noted that he advised the respondent that a compensation clearance had not been received from the compensation branch. In the absence of that advice, Mr Crowe recorded that eligibility for DSP and whether a PP would be imposed could not be advised.
Additionally, he recorded that he had no recollection of the respondent or his partner but he conceded that he may have told them that advice from the compensation branch might not be received for another 3 weeks (which he also confirmed in his evidence). He recorded that he would not have given advice on the likely duration of a PP because he had no knowledge of how to calculate it.
In evidence Mr Crowe said that abbreviations recorded in the memorandum (SUOR and docs) indicate that there was discussion with the respondent and Ms Muir about them being separated under the one roof. He said there was also discussion about some documents they provided in relation to that arrangement. The memorandum suggested to him that there was discussion about referring the respondent to a social worker.
Ms Muir suggested to Mr Crowe that she had told him of advice previously received from another Centrelink officer of roughly how long it would be (the duration of the PP) and he virtually said the same thing. When she was asked to clarify her discussion, Ms Muir conceded that Mr Crowe had said that he was unsure (Transcript, p. 26).
The following passage of the evidence is found at page 27 of the Transcript:
SENIOR MEMBER: You mean he did not say that it was going to be three years?
MS MUIR: Well, he goes, "I'm not sure exactly but it may be". And I think he only said that from what we had sort of been talking to the previous person.
SENIOR MEMBER: That's from Ms Duque?
WITNESS: I was just going to – can I just say I think if you go back to my statement I think I said that in the statement, 30 May.
MS HEFFERNAN: It's really what you can and can't recall?---Yes.
So if you don't recall, I mean, based on what Ms Muir just said, do you recall any of that being said to you?---No, but it sounds like something I would say.
Sounds like something – sorry?---I would say.
You would say?---Yes.
Okay. But you don't recall saying it?---No.
Michelle Tither
Ms Tither has worked with Centrelink as a CSO for approximately 7 years. She lodged a statement prior to the hearing (Exhibit A3) and confirmed that she was the author, in part, of a memorandum dated 20 December 2012 identified as J4U (T17, p. 77 – 78). That memorandum is described as an annotation to a memorandum completed by a customer contact officer in Toowoomba on 18 December 2012 who recorded that the respondent (customer) contacted that officer on that date by telephone to complain about incorrect information that he had received. The memorandum records that the respondent had said that he had attended the Corio office on various occasions and had been advised that the PP would be for a maximum of 3 years. The memorandum records he has now been informed that his preclusion period will end in 2021. The respondent requested a callback to discuss the matter.
In evidence Mr Tither said she recalled an interview with the respondent and Ms Muir on 20 December 2012 at the Corio office. She said she could recall the respondent had told her that he had purchased a house. She was aware by reference to his computer file that a decision had been made notifying him of a PP which would expire in July 2021. She said that he had told her that 2 other CSOs had previously advised him that the PP would be for 3 years. She recalled that the respondent and Ms Muir were upset and shocked. They became angry and distressed. They told her that on the basis of the advice that had previously been given about the duration of a PP, it was decided to purchase a house with the settlement proceeds (Transcript, p. 31). She also said that they had specifically identified Ms Duque and Mr Crowe as the persons to whom they had previously spoken.
Having received that advice Ms Tither indicated that she would notify her team leader, Ms Rebacek of the conversation. She did not indicate to the respondent and Ms Muir that she had accepted that incorrect advice had been given. She said that she assumed they had been, or had believed, that they had been given advice of a PP of 3 years (Transcript, p. 32).
In a part of the memorandum, Ms Tither said the comment she felt for the customer who had been given incorrect information was made by Ms Rebecek who was the co‑author of the memorandum (T17, p. 78).The word incorrect was a reference to a belief held by the respondent that he was incorrectly advised about the compensation waiting period (Exhibit A3 at [3]). It was also a reference to the financial consequences potentially faced by the respondent, having been given incorrect information.
Ms Tither recorded that she understood that the consequences of incorrect information given by officers could be significant. She therefore, asked her team leader to circulate an e-mail to officers at Corio regarding the issues that emerged from the conversation she had with the respondent and Ms Muir (Exhibit A5 at [2-5]).
Nada Rebacek
Ms Rebacek did not give evidence in this review but lodged a statement prior to the hearing received (Exhibit A5). She recorded that she completed part of the memorandum identified as J4U which was also partially completed by Ms Tither.
In her statement Ms Rebacek recorded that she had been the manager at the Corio office since July 2011 and had been engaged by Centrelink and its predecessors since 1992. She recorded that she had spoken with Ms Tither and had learnt of the conversation she had with the respondent and Ms Muir on 20 December 2012. The memorandum records that she also spoke with Ms Duque and Mr Crowe who said that they separately had discussions with the respondent and Ms Muir but had not ever give them any indication of the length of the PP. She also recorded that she had spoken with Ms Tither who was the one who had advised him of the correct waiting period as per the compensation clearance advice and had also given him a copy of that advice being the rejection letter dated 13 December 2012 (T10, p. 48 and T17, p. 77-78).
Ms Rebacek recorded that when a person claims the DSP and notifies that they had received a compensation payment, a CSO seeks a compensation clearance from the compensation team. That team determines the impact of compensation on eligibility for payment, including the duration, if any, of a PP. She recorded that a CSO is not in a position to advise a customer about potential payment eligibility until the ‘compensation clearance’ is issued (Exhibit, A5 at [6]).
Having regard to the discussions that she had with Ms Duque, Mr Crowe and Ms Tither, Ms Rebacek arranged to send an e-mail to all the CSOs to remind them that it is necessary to await the compensation clearance before they advise customers about any compensation preclusion period (Exhibit A5 at [7]).
Troy Craig
Mr Craig has been employed by Centrelink and its predecessors since November 1992. He is currently a service centre manager in the Market Square office in Geelong. He was a team leader in 2012 at the Corio office and worked with Ms Rebacek and Ms Tither.
In a statement lodged by him prior to the hearing (Exhibit A4), Mr Craig recorded that he was aware of the statement of Ms Rebacek and he adopted paragraphs 3 to 6 of it.
In evidence he said CSOs initially receive applications for DSP and if there is a compensation element they have no responsibility or authority to give advice concerning entitlements or the duration of a PP. He said Because of the complex nature of the compensation system and the preclusion periods… it's a specialised team that make those assessments (Transcript, p. 39). He said staff in the Corio office had been instructed not to give any advice about a PP until information concerning it had been given by the compensation officers. He said the staff do not have the expertise or the knowledge about the calculation or application of a PP and wouldn't be able to answer that question if they were asked (Transcript, p. 39).
Mr Craig said he was aware that Ms Rebecek had been dealing with the complaint lodged by the respondent and Ms Muir. He had been informed that Ms Tither had spoken to him about it but he had no memory of it. He said he was surprised that an allegation had been made that a CSO had given advice about the duration of a PP. He was aware that Ms Rebacek had sent an e-mail to CSOs reminding them to wait for advice from compensation officers before advising customers. He regarded that initiative as a preventative measure (Transcript, p. 40).
Jodi Muir
Ms Muir said that the first visit to Corio office on 22 October 2012 was to deliver the DSP claim forms. She and the respondent met with Ms Duque and asked her about the likely duration of a PP. She said they were told that it would be about 3 years from the date of the accident. On the basis of that advice, Ms Muir said she discussed with the respondent that he would have no problem in purchasing a house and he could settle down (Transcript, p. 43).
Ms Muir said they heard nothing from Centrelink for a few weeks and decided to return to the Corio office, which they did, on 13 November 2012 where they met with Mr Crowe. She said that he then advised that the claim for DSP was being processed and also advised, when asked, that the likely duration of the PP would be roughly 3 years from the date of the accident. She thought the processing of the DSP application was a slow process and decided to return to the Corio office on 20 December 2012, where they met with Ms Tither. The respondent had settled the purchase of his house earlier that day (Transcript, p. 43).
During the discussion with Ms Tither, they were advised that a letter dated 13 December 2012 had recorded that a decision had been made to impose a PP of 9 years, from the date of the compensation settlement. Ms Muir said that we basically nearly fell off the seat. We just couldn't believe it. And she even had a look of shock on her face too when she was reading it (Transcript, p. 44). (At this stage I should express my confusion of the evidence of Ms Muir, corroborated by Ms Tither, of being shocked on learning of the PP being imposed, on 20 December 2012. The memorandum of the call centre operator of 18 December 2012 suggests the respondent or Ms Muir knew of the PP on that date. This issue was not examined in evidence and I will not make any finding about it).
Ms Muir said that an appeal was lodged with the SSAT:
… because Brian was given misleading information of understanding the period of time, and the people at Centre link, knowing that they are not actually – they don't specialise in those sorts of areas to be helping out people that have no idea what is going on, it's just – it was wrong (Transcript, p. 44).
In cross-examination Ms Muir was adamant that both Ms Duque and Mr Crowe had told them that the PP would be about 3 years from the date of the accident (Transcript, p. 48). She denied the suggestion put to her that they had either misheard or misunderstood the advice of Mr Crowe – that the DSP claim would take about 3 weeks for processing – and believed that he had said that the PP would be about 3 years.
Ms Muir said she could not recall whether the respondent paid a deposit for the purchase of the house before or after the claim that DSP was made. She recalled that his solicitors had advised that he should obtain financial advice in relation to his settlement funds. She said that she sought financial advice on his behalf and was advised to:
… wait until you speak to Centrelink. Process the paperwork and go from there, because sometimes it can be two years, sometimes it can be five years. You just don't know (Transcript, p. 49).
She said on the basis of that advice, she suggested that the respondent submit the paperwork (the DSP claim forms) to Centrelink because:
…that way once you know how long it's going to be then you can work out how long it is before you can buy something or do something with the money that you have or have to live off that money (Transcript, p. 49).
Brian Muir
The respondent said that in the first interview at Corio with Ms Duque, he recalled her asking him for a doctor's certificate to verify that he was unable to work. He recalled telling Mr Crowe during the next interview that he was considering buying a house. He asked Mr Crowe whether he should go ahead and buy it or do I ditch it? He said Mr Crowe replied you’re going to be fine. He said the respondent told him that it will take a few weeks to come through, like, to verify it is all confirmed, about six weeks to come through. You will get back pay for that six weeks. On that basis, the respondent said he decided to purchase the house (Transcript, p. 54).
The respondent said he signed a contract to purchase a house after the interview with Mr Crowe. He said he had asked Mr Crowe Do I go for it and do it or do I just, you know, don't do it? He goes, “Go for it”. So I took his advice for it and went for it (Transcript, p. 55).
On the next visit to the Corio office in December 2012, the respondent said he recalled Ms Tither notifying him that a PP had been imposed for 9 years. He said he had told her that he had purchased a home and asked her how, in the circumstances, he would be expected to live without a pension. She informed him that he could lodge a complaint about the advice he said he had previously been given.
The respondent said that he was not aware that Ms Muir had obtained financial advice. He said he recalled being advised by his solicitors when the TAC proceedings were settled that he should obtain advice from a registered financial planner. His solicitors said, don't go and buy a house or do anything stupid, to get advice from a financial adviser (Transcript, p. 56).
In cross-examination the respondent said that Ms Duque said it would be about 3 years. He said because the accident was in 2009. I thought, “This is all right because it will have been only three years…” At the interview with Mr Crowe, the respondent said he was told about three years (Transcript, p. 68).
Did Centrelink officers give advice about the duration of the preclusion period?
Ms Duque and Mr Crowe were both engaged by Centrelink as CSOs. The respondent and Ms Muir met with them, respectively, on 22 October 2012 and 13 November 2012.
Ms Duque recorded in her statement (Exhibit A1) and said in evidence that she did not have any discussion with the respondent or Ms Muir about the duration of a PP.
Mr Crowe recorded in his statement (Exhibit A2) that he understood it would be contended that he gave advice of a PP having a likely duration of three years. In evidence he said he did not give that advice.
Mr Crowe said that he met with the respondent and Ms Muir when they returned to the Corio office with forms that recorded details of the compensation payments that had been received. He had no recollection of meeting with them but conceded that he may have told them that advice concerning the duration of PP, which would be given by officers in the compensation branch, might not be received for about three weeks.
Mr Crowe relied on his statement which recorded that he may have told him that it may take another 3 weeks for a decision to be made about his eligibility for DSP. Ms Muir contended during his cross-examination that he had said that the PP would be about 3 years in duration. She later conceded that he was unsure about the duration and said words to the effect I'm not sure exactly but it maybe (Transcript, p. 26 – 27).
In their evidence Ms Muir and the respondent said that Ms Duque and Mr Crowe had advised them that the PP would be three years in duration and would commence from the date of the accident. There was no evidence during examination of Ms Duque and Mr Crowe of the date of commencement of the PP.
Having read the statement of both officers and the transcript, I am satisfied and find as a fact that advice was not given concerning the duration of a PP nor about the date of its commencement.
I am satisfied that the calculation of the PP can only be completed by officers in the compensation branch of Centrelink. Those persons are not located in the Corio office. The duration of the PP can only be determined when advice has been received about the quantum of compensation the respondent received.
Ms Duque could not have given advice about the duration of a PP because the respondent did not give her the requisite forms disclosing the amount of compensation that had been received.
The appointment with Mr Crowe was principally to deliver forms disclosing the quantum of compensation and I am satisfied that he told the respondent and Ms Muir that the entitlement to DSP and a decision about the duration of the PP would be decided by other Centrelink officers.
The evidence of a PP commencing at the date of the accident, alleged to have been given by both Ms Duque and Mr Crowe emerged during the evidence of Ms Muir and the respondent during the hearing.
The respondent said in evidence that he had a discussion with Mr Crowe about the PP because he intended to buy a house. It would appear from that discussion that when he was advised, as he alleged, that the PP would be about 3 years and would commence from the date of the accident, he understood that he could confidently purchase a house and would be entitled to fortnightly DSP payments (Transcript, p. 68).
I am not satisfied that the memorandums found within the T‑documents and completed by Ms Tither and Ms Rebacek imply fault or negligence on the part of Ms Duque or Mr Crowe.
I am satisfied that having been alerted by Ms Tither to the possibility of the respondent lodging a complaint about the advice that he alleged he had been given, Ms Rebacek, as the Corio manager, interviewed Ms Duque and Mr Crowe. I am satisfied also that her telephone discussion with the respondent was appropriate in order to reach a balanced conclusion in anticipation of a complaint being made. I am also satisfied that her memorandum subsequently sent to officers within the Corio branch reminding them of the need to be cautious about giving advice, was to ensure that misinformation was not passed onto Centrelink customers who could subsequently act to their detriment.
It was also appropriate for Ms Rebacek to advise the respondent that he could pursue a complaint and it would seem from her memorandum that she had in mind that he could seek compensation under the CDDA scheme. That does not amount in my view to an admission that there was an entitlement to compensation for defective advice. Rather the respondent could pursue that course if he could establish that defective or negligent advice had been given which caused him to act to his detriment.
On the probabilities, I am not satisfied that Miss Duque and Mr Crowe, independently of each other, gave the respondent and Ms Muir advice that a PP would have a duration of three years commencing from the date of the accident.It is more likely that Mr Crowe informed the respondent that processing of the entitlement to DSP might take about three weeks after he submitted all the forms to appropriate officers.
I am satisfied that Ms Duque and Mr Crowe gave their evidence honestly. I am also satisfied that their responsibilities, as CSOs, were confined to receiving documents and, in the context of a claim being made for DSP and the potential of a PP being imposed, forwarding those documents to appropriate officers elsewhere who are authorised to make decisions concerning qualification for DSP and the duration, if any of a PP.
I think the respondent and Ms Muir were anxious to learn whether there would be a PP imposed and its duration. I think they were also anxious to learn whether they could purchase a house from the settlement monies and whether DSP would thereafter, be paid. If DSP was payable, the respondent could confidently expend a great proportion of the settlement funds on the purchase of a home. I do not find that they were dishonest. Rather their anxiety and impatience in waiting for advice on the outcome of the DSP claim, caused them to interpret Mr Crowe’s advice in November 2012 that an outcome to the application might not be expected for another three weeks as advice that a PP would be of three years duration. Having misinterpreted the advice from Mr Crowe, the respondent paid a deposit on the house he eventually purchased, on 30 November 2012, about 2 ½ weeks after the interview with Mr Crowe.
There were inconsistencies in the evidence of the respondent and Ms Muir about the commencement of the PP. The respondent at paragraph 8 earlier referred to the PP expiring in 2015, 3 years after the DSP claim was lodged. However, at paragraphs 41, 44 and 63, the evidence was of the PP commencing at the date of the accident – 2009 – and expiring in 3 years – 2012. On that basis there was an expectation of DSP being paid soon after the claim was made. This points to misunderstanding and/or confusion.
I am satisfied that the respondent and Ms Muir were not given incorrect advice. I am not satisfied they were given advice at all about the duration of a PP or its commencement date.
The respondent's circumstances
The respondent and Ms Muir gave evidence concurrently about his circumstances before and after the motor car accident.
Before the motor car accident, the respondent was in full-time employment as a labourer with Geelong Leather. Ms Muir was in part-time employment. They had previously been in a de facto relationship but had separated and lived independently from each other in rented accommodation.
After the respondent was discharged from hospital, he gave up his rented accommodation and moved into the house occupied by Ms Muir and their daughters. Prior to the accident, the respondent paid Ms Muir $200 per week for maintenance of herself and their daughters. Whilst he was an inpatient in hospital, his financial affairs were managed by his sister who withdrew $150 per week from his account and paid it to Ms Muir.
After the house was purchased (by the respondent, alone) with the proceeds from the settlement, the vendors continued to reside in it under a tenancy agreement until approximately June 2013. They paid rent to the respondent of $380 per week. The respondent then moved into the house and lived alone for approximately one month. Ms Muir and their daughters moved in later and they have all lived together in the house subsequently. Centrelink regards the respondent and Ms Muir as separated.
Ms Muir is in part-time employment of between 15 and 18 hours per week. She also receives parenting payment from Centrelink. She was receiving carers payment or allowance after the respondent was discharged from hospital and whilst he was living in her home but she became frustrated with completion of documents required by Centrelink and did not pursue those entitlements.
Subsequent to the respondent and Ms Muir resuming cohabitation, she has paid him $100 per week as rent. They have agreed to share all costs associated with the home. He is available to and assists his daughters on days when Ms Muir is working. Both girls are in primary school. The eldest daughter will commence secondary school next year.
Ms Muir drove the respondent to look at a number of houses before he made his decision to purchase. The house he selected was regarded as a cheap house in the district despite it having four bedrooms and a study. The respondent said he chose the house because he could afford it. It was also near the school that his daughters attend and was a short distance from local shops, a supermarket and his bank which he could access on his motorised scooter.
The respondent said he decided to purchase the house because he was sick of renting. He said he wanted to own a home and regarded payment of rent as wasted money. He had previously been paying rent when living alone at $420 per week. He said if [he] had [his] time again he would not have purchased a house but would have continued to pay rent until the expiration of the PP. He said unless the PP is reduced, he may have to sell the house and apply the funds received to make future rent payments. He said he would not rent his house and pay rent elsewhere because he would not be prepared to trust tenants. He dismissed the suggestion put to him in cross-examination that he could rent one of the rooms in the house he now owns (and have an income). He said he would not have a stranger in the house.
The respondent spent approximately $15,000 purchasing new furniture for the house. He said the furniture from the house he previously rented was on its last legs.
The respondent's solicitors wrote to him on 7 August 2012 (T3, p. 10 – 11) enclosing a cheque for part of the settlement sum. They recommended that he obtain financial advice in the following terms:
… I strongly recommend that you obtain independent financial advice from a registered financial planner regarding investment/use of your settlement money. A list of recommended financial advisers is enclosed.
Ms Muir said that she did consult a financial adviser on behalf of the respondent. She said that person suggested that they should speak with Centrelink before doing anything. She said she was told by the adviser that a PP could be a few years.
The respondent said that he did not consult a financial adviser. He said he did not know that Ms Muir had obtained financial advice. He could not recall the recommendation to obtain advice as contained in the letter from his solicitors but did recall that he was given that advice by the solicitors on the day of settlement. He said he did not recall being given any advice by his solicitors or any other person that he may be precluded from receiving a pension from Centrelink because of the settlement monies that he would receive.
The respondent said that the balance of his bank account at the time of the hearing was about $400. He said his only income is $100 per week that is paid to him by Ms Muir.
A considerable amount of the settlement funds received by the respondent, together with the monies previously received from TAC are unaccounted. Ms Muir said that she was unaware of the expenditure by the respondent of some of his settlement monies. She said they do not have joint accounts and she has never had access to his bank account.
CONCLUSION AND REASONS FOR DECISION
Prior to the settlement with the TAC in the sum of $600,000, the respondent received 4 other payments aggregating $178,560 (T8, p. 37). Accordingly, the respondent received a total of $778,560 from the TAC arising out of his motor car accident in April 2009.
The table below points to a considerable sum of unaccounted money which the respondent is unable to explain. For the purposes of the table, in the absence of evidence, I have made a number of assumptions and have used approximate numbers.
·In addition to the monies received from the TAC, the respondent has also received rental income from the purchased property, at $380 per week ($9,880), between January 2013 and June 2013 (26 weeks) at which time he moved into it.
·The 4 payments made by the TAC referred to at T8 p. 37, in the total sum of $178,560, are described as impairment lump sum. I do not understand that description. There appears to be little doubt that those 4 payments were made in addition to the $600,000 and the respondent was not required to bring them into account by the settlement of $600,000. The respondent therefore, received $778,560 in lump-sum payments.
·The applicant lodged a bundle of documents which contained statements from the conveyancing agent used by the respondent when he purchased the house (Exhibit A6). It records a total expenditure of $471,725.75 incorporating the deposit, stamp duty, registration fees and conveyancing costs (with an adjusted amount in favour of the respondent as the purchaser). The statement records that a deposit of $45,000 was paid. A photocopy of a receipt for payment of the deposit, lodged by the respondent after the hearing, records that he paid the sum of $44,000.
·It would appear that the respondent did pay solicitor/client costs. A letter received from his solicitors (after the hearing) records an account of $166,000 (inclusive of disbursements and GST). The letter suggests that sum was sought from the TAC on a party/party basis. In anticipation that not all of that sum would be recovered, the solicitors forwarded the respondent a cheque for $434,000 being the net difference between $600,000 and the account for costs and disbursements of $166,000. The respondent was advised that when the issue of costs and disbursements had been resolved, he would receive a cheque estimated to be in the sum of $120,000. The respondent said that he had a recollection of receiving a cheque for $120,000. Accordingly, I will find that the respondent paid his solicitors the sum of $46,000 as solicitor/client costs.
·One of the documents within Exhibit A6 is a statement on behalf of the respondent recording his expenses over the past 3 years. The expenses are described as rent at $110 per week and child support and everyday living, each at $200 per week. The document is undated but appears to have been completed in April 2013. The respondent was an inpatient after his accident in April 2009 for about 12 months. The period between April 2010 and April 2013 is 3 years. The sum of $110 per week was paid by the respondent to Ms Muir as rent after he commenced to live in her house when he was discharged from hospital. The other weekly amounts were paid by him as the parent of his 2 daughters and on account of his own personal costs. For the purposes of this exercise, I will find the weekly amounts claimed were in fact expended. At the hearing of this review, on 19 August 2013, a total of 172 weeks had elapsed from April 2010.
·Prior to the motor car accident, the respondent was paying Ms Muir $200 per week in child-support. Whilst he was an inpatient, the respondent's sister had access to his bank account and paid Ms Muir $150 per week for child support. Although it was unexplained during the hearing, a schedule of payments made between 2009 and 2012, suggest the respondent was receiving weekly income. The schedules are attached to the documents received from the TAC (T8, p. 39-42). I will assume that those payments were made in lieu of income from the employer. I will also assume that those monies were the source of payments made by the respondent’s sister from his account to Ms Muir. I will not take the amount paid to Ms Muir at $150 per week into account in the calculations below because they were less than the amount actually received from the TAC. Equally, I will not take account of the difference between the amount received from the TAC and the amount paid as child support, and treat it as a net gain, in the absence of evidence of any other expenses or costs the respondent might reasonably be found to have incurred.
$
$
INCOME
TAC
778,560
Rental Income
9,880
EXPENDITURE
House Purchase
471,725
Furniture
15,000
Solicitor/Client Costs
46,000
Child Support
34,400
Weekly Living Expenses
34,400
Rent
18,920
788,440
620,045
Nett Difference
168,395
It would be unfair to make an adverse finding against the respondent because he has been unable to explain the net difference of $168,395. It was clear to me at the hearing that he did have a very poor memory and was frequently confused. It is likely that monies were expended by him associated with the house purchase and other costs. I cannot find an amount that would represent those costs and expenses. But I am left, on the evidence (or rather, in the absence of it), with a considerable sum being unaccounted. I am satisfied that an amount greater than $100,000, but less than $168,395 is unaccounted.
Section 1184K of the Act permits treating the whole or part of a compensation payment as not having been made if it is appropriate to do so, in the special circumstances of an application.
The expression special circumstances is not defined in the Act. However, it has been considered by the Federal Court and the Tribunal.
In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, Kiefel J decided at 545 that the expression special circumstances:
… would require something to distinguish Mr Groth’s case from others, to take it out of the usual or ordinary 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.
In Secretary, Department of Family and Community Services v Chamberlain (2002) 116 FCR 348 Kiefel J again addressed this issue and whilst generally adopting her previous conclusions in Groth, she considered whether special circumstances existed when a strict application of the legislation resulted in unfairness or inappropriateness [at 20 – 33]. Her Honour, in setting aside the decision of the Tribunal, concluded that injustice cannot, by itself, amount to a special circumstance, one out of the ordinary (at [33]).
In Re Beadle and Director General of Social Security (1984) 6 ALD 1 at 3, the Tribunal stated that the expression special circumstances is incapable of precise definition. The Tribunal decided that circumstances that are unusual, uncommon or exceptional are consistent with the word special. Circumstances need not be unique but they must have a particular quality of unusualness that permits them to be described as special.
Legal costs
The respondent’s solicitors claimed costs and disbursements from the TAC in the sum of $166,000. The disbursements totalled $33,327.91 comprising the costs of medical reports and fees paid to counsel. The professional costs of the respondent’s solicitors were $117,581.18. The GST at 10 per cent upon the disbursements and the professional fees was approximately $15,000. The solicitors recovered $120,000 from the TAC. The respondent incurred solicitor/client costs of $46,000.
Costs incurred by persons who engage lawyers in litigation, subject to them being excessive, cannot be regarded as a special circumstance. In this case, the respondent paid $46,000 in solicitor/client costs which cannot be viewed as excessive when compared to the $600,000 he received from the TAC in settlement of his claim. However, it is not that sum, alone, in my view to which enquiry should be directed. His solicitors claimed $166,000 but were able to recover $120,000 only. The sum of $46,000 in these circumstances takes on a different characteristic.
The respondent is entitled to seek an itemised account from his lawyers and then determine whether he is satisfied with the amount charged. If he is not, he could also bring this issue to the attention of the Legal Services Commissioner for advice and or intervention. If it is determined that the costs were excessive, he may be entitled to a refund, if only in part.
These rights should be exhausted by him. I am not prepared to find that the sum of $46,000 is a special circumstance.
The respondent’s injuries
The respondent suffered extensive injuries in the motor vehicle accident. It is unlikely that he will work again. It follows that he will not earn income into the future. He is 38 years of age. However, his future rights, including pecuniary loss, would have been considered by his representatives in the settlement negotiations. His solicitors and his barrister, who is a Senior Counsel, are well-known and well regarded in personal injury litigation.
The monies paid to the respondent in settlement of his TAC claim would have been an amount assessed by his legal representatives as appropriate for his injuries and his pecuniary loss. The absence of his ability to earn in the future could not in the circumstances be regarded as a special circumstance for the purposes of reducing the period of preclusion. The settlement was also achieved on the respondent’s instructions and consent.
The respondent's rights for future medical and like treatment are unaffected by the settlement and are preserved by the Transport Accident Act1986 (Vic). The respondent will incur future treatment and it is likely that he will have surgery. Those costs will be paid by the TAC. The injuries could not therefore be regarded as a special circumstance.
Carer allowance or payment
Ms Muir was receiving carer allowance or payment until relatively recently. It provided some income. Confronted with a considerable volume of paperwork she abandoned the rights she apparently had for receipt of that payment or allowance.
The financial position of the respondent and Ms Muir could be ameliorated by making a fresh claim for either carer allowance or payment. The absence of receipt of those monies, where a claim was not made or pursued, could not be regarded as a special circumstance.
Financial advice
The respondent was given advice by his lawyers that he should seek financial advice. He personally did not seek advice. Ms Muir did and was advised that monies should not be expended until Centrelink had processed the application for DSP. The respondent said he was unaware that she had obtained that advice. The respondent said he recalled having a discussion with his solicitors at or about the time that his proceedings were settled and was advised that he should obtain financial advice. Specifically, he said he was told don't go and buy a house or do anything stupid (Transcript, p.56). His solicitors also recommended that he obtain advice in their letter to him following settlement of his TAC application.
I suspect the oral advice of his solicitors was expressed in more eloquent terms. However, he did not obtain advice and he did buy a house contrary to the oral advice he had been given.
Policy considerations
In broad terms, persons who have received a compensation lump sum, whether it be from an employers’ workers compensation scheme or a no fault motor accidents scheme, will not have an entitlement also to payments from the public purse. The imposition of a PP is an example of the expectation inherent by the Act that persons who have received a lump sum will be financially independent for a period of time calculated by the formula at s 1170 of the Act.
Additionally, under s 1184 of the Act, decision-makers may only treat the whole or part of a compensation payment as not having been made if it is appropriate to do so in the special circumstances of a person's application.
Purchase of the house
Ordinarily, a person who expends a substantial proportion of settlement funds on real estate, unless more is known, is unlikely to have a PP reduced. Those persons are likely to attract comment, as made by an officer of the applicant in this review, that the expenditure was reckless.
A feature of administrative review is the opportunity for the Tribunal to receive evidence and have discussion with both parties, whilst each is present, and obtain more information about the circumstances of a claimant and the attitude of Centrelink, to those circumstances. That is a process infinitely preferable to a determination upon documents held in the applicant’s file.
If the decision of the SSAT is set aside and the decision of the ARO to impose a PP, which will not expire until July 2021, is restored, the consequences for the respondent and therefore, Ms Muir and their daughters could be very severe.
I am satisfied on the evidence heard in this review that despite a considerable amount of money being unaccounted, the respondent virtually has no monies. He must be regarded now as being in financial hardship. Ms Muir works three days per week and receives parenting payment. She has no other income. They have two dependent daughters. It is inconceivable that they could afford to continue to reside in the house he purchased, until 2021 unless the PP is reduced. The annualised costs of municipal rates, electricity, gas and water charges, insurances, motor car registration and running costs, combined, would leave little, if any monies, to meet the costs of food, clothing, education and medical expenses.
The house apparently has four bedrooms and a study. The applicant submitted that it was bigger than needed, a room could be rented and therefore, the respondent could receive some income. He was reluctant to have a stranger in the house. I do not think that sentiment is unreasonable, especially when consideration would need to be given to providing a border with bathroom and kitchen facilities over which there was no evidence in this review. Despite the respondent’s concerns, I cannot ignore that having a border would provide a source of income.
The applicant also submitted that the respondent could a) sell the house and acquire another, at less cost; b) rent the house and use that income to fund rental payments elsewhere or c) sell the house and the proceeds used to fund rental of another property.
Adopting two of those propositions would involve monetary loss being agent’s commission on sale. One of those proposals would require payment of stamp duty on purchase. It would also involve moving from accommodation that is suitable for the respondent’s needs and which has provided a place for reunion with his daughters who, no doubt, by having to move, again, are likely to suffer instability and upset.
Subject to a price achieved on a sale (the house was purchased 10 months ago at $450,000), it is likely that sum could fund the purchase of another house with some monies remaining. Whether those monies could sustain the respondent during the PP is unknown.
If the property is sold and the proceeds used to meet future rental costs, the monies achieved on sale, if properly invested, with the benefit of sound financial and taxation advice, could fund rental costs for many years. Whilst rental costs will most likely diminish the lump sum, if competently invested is likely to ameliorate that loss by the interest paid on the sum invested.
Renting a house of equivalent size in the likely range of between $400 and $500 per week ($20,000 – $25,000 per annum) over the next 8 years will leave the respondent with a considerable sum remaining invested. When the PP ends he will become eligible for payment of DSP. It is unlikely that he will then have sufficient monies to purchase another house but he did not own a house before he settled his TAC claim. Acquiring a capital asset – the house – from the settlement monies resulting in a diminution of those funds is not a special circumstance.
Disposition of settlement monies resulting in an expectation of the public purse paying a person a pension is contrary to the policy behind the PP regime. The expression double dipping is often used to explain the legislative prohibition of receiving a lump sum (which includes a component for future income loss) and then being paid a pension.
There is nothing special about the circumstances of purchase of the house. If it were of a special construction to accommodate his needs and to improve his mobility, his circumstances might be different, especially if no allowance was made for his accommodation needs in his settlement lump sum. From the evidence heard in this review, the TAC, as part of its continuing legal obligations to the respondent, has agreed to meet the cost of modifications to the house. That obligation would exist in another house the respondent may purchase.
I do not regard the expenditure of settlement monies, by the respondent, on the purchase of his house as reckless. I think he was probably confused or he misunderstood or misheard the advice that was given to him by Mr Crowe which, as I have found above, was confined only to the period of time before he would learn the outcome of his DSP application.
It is unfortunate that the respondent did not learn of the financial advice given to Ms Muir. It is also unfortunate that he failed to act on the advice of his solicitors when his claim was settled.
I have concluded that the circumstances of the respondent are not special, in the context of the Social Security legislation. It follows, pursuant to s 1184K of the Act that it would not be appropriate to treat part of his compensation payment as not having been made. I have been unable to determine that his application can be distinguished from others because it would not be unfair or unjust (refer Groth) to deny him payment of a pension in respect of his incapacity when he has separately received compensation for it from the TAC.
DECISION
The decision of the SSAT dated 21 February 2013 is set aside and in substitution for it, the decision of the ARO made on 15 January 2013 imposing a PP which will expire on 18 July 2021 shall be reinstated.
I certify that the preceding 122 (one hundred and twenty-two) paragraphs are a true copy of the reasons for the decision herein of
Mr John Handley, Senior Member
(sgd) Olympia Sarrinikolaou
Associate
Dated 22 November 2013
Date(s) of hearing 19 August 2013 Date final submissions received 2 September 2013 Advocate for the Applicant Ms P. Heffernan Solicitors for the Applicant Centrelink Legal Services Branch Respondent In person
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