Simmons and Secretary, Department of Social Services (Social services second review) - [2022] AATA 167

Simmons and Secretary, Department of Social Services (Social services second review) [2022] AATA 167 (7 February 2022)
Division:GENERAL DIVISION
File Number: 2020/8117
Re:Luke Simmons
APPLICANT

AndSecretary, Department of Social Services
RESPONDENT

DECISION
Tribunal:Member B Cullen
Date:07/02/2022
Place:Brisbane

The Tribunal affirms the decision under review.
............[SGD]............................................................
Member B Cullen
Catchwords
SOCIAL SECURITY – disability support pension – DSP – periodic compensation payments – whether the Applicant’s income protection insurance payments fall within the definition of “compensation” contained in s.17(2)(d) of the Social Security Act 1991 – whether “special circumstances” exist, pursuant to s.1184K of the Act, which would justify treating all or part of the Applicant’s income protection insurance payments as not having been made
Legislation
Social Security Act 1991
Social Security (Administration) Act 1999
Cases
Alirezai and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 64
Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9
Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281
Davis and Secretary, Department of Family and Community Services [1999] AATA 84
Re Drury and Secretary, Department of Social Services [2019] AATA 5246
Gartside and Secretary, Department of Social Services [2017] AATA 45
Gerard Haughey and Secretary, Department of Social Security [1994] AATA 226
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Secretary, Department of Employment and Workplace Relations v Homewood (2006) 91 ALD 103
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114
ReDrake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634
Vernon and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 513
Secondary Materials
Social Security Guide, Department of Social Services, version 1.290
REASONS FOR DECISION
Member B Cullen
07/02/2022
BACKGROUND

This is a review of a decision of the Social Services and Child Support Division of the Administrative Appeals Tribunal (AAT1) to affirm Services Australia’s decision to reject the Applicant’s claim for the Disability Support Pension (DSP).
The Applicant is a 41-year-old man, who developed incomplete quadriplegia, following a swimming accident when he was 23-years-old. The accident has had a very significant impact of the Applicant’s life – he uses a wheelchair and has had to navigate related accommodation, transport, employment, financial, and social issues.
The Applicant was granted the DSP from 10 January 2004; however, the DSP was cancelled shortly after being granted, from 7 February 2004, after the Applicant began to receive income protection insurance payments from AMP Life Limited (AMP) (T6 at 42; T15 at 69).[1]
[1] Unless otherwise stated, all references are to the Section 37 “T Documents”, marked as Exhibit 1 at the hearing of this matter.
On 31 July 2020, the Applicant lodged a further claim for the DSP (T7 at 43 - 44), which was rejected on the basis that the Applicant’s income, from his monthly income protection insurance payments, exceeded the allowable limit (T10 at 56). An Authorised Review Officer affirmed the decision, on 25 September 2020, on the same basis (T12 at 59 - 62).
The AAT1 affirmed the decision under review on 4 November 2020 (T2 at 5). The Applicant then applied, on 2 December 2020, for review by this Tribunal.
The Tribunal held a hearing on 7 September 2021, which both parties attended by telephone. The Applicant gave evidence, and both parties made submissions.
The Applicant’s position
The Applicant has set his concerns out in a letter, explaining that:
“I believe the fact that I can’t get a part pension is unfair. As a young adult I thought I was doing the right thing taking out income protection insurance in case I ever had an accident. At the time I never imagined I would end up a quadriplegic and in a wheelchair for the rest of my life.” (T14 at 67)
The Applicant goes on to explain that if he was eligible for a part pension, he would also qualify for rental assistance. This, in turn, would facilitate his ability to live in his hometown, rather than Mackay, as well as qualifying for cheaper vehicle registration. It is only recently, following the introduction of the National Disability Insurance Scheme, and his eligibility for some assistance, that the Applicant has qualified for a Health Care Card (T14 at 67).
As at 23 October 2020, the Applicant reports that:
“The cut off point for disability support pension is $53,731.60 per year my income from my income protection and assets totals $40,997.00 which is $12,734.60 under the cut off point for disability support pension.” (T14 at 67)
Putting it plainly, the Applicant’s position is that, by virtue of planning ahead and obtaining an income protection policy, he is now worse off financially, than if he had done nothing and was then eligible for the DSP.
ISSUES FOR DETERMINATION
The Tribunal must determine:
·whether the Applicant’s monthly AMP income protection insurance payments fall within the definition of “compensation” contained in s.17(2)(d) of the Social Security Act 1991 (Cth) (the Act); and
·whether “special circumstances” exist, pursuant to s.1184K of the Act, which would justify treating all or part of the Applicant’s income protection insurance payments as not having been made.
Were this Tribunal to make a decision that the Applicant’s AMP income protection insurance payments were not compensation, or find that special circumstances exist, it would impact the rate of DSP that the Applicant might be eligible to receive.
LEGISLATIVE BACKGROUND
The legislation relevant to this matter is contained in the Social Security Act 1991 (Cth).
Section 1173 of the Act sets out the effect of periodic compensation payments on the rate of DSP:
(1) If:
(a)a person receives periodic compensation payments; and
(b)the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and
(c)the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;
the rate of the person's compensation affected payment in relation to that day or those days is reduced in accordance with subsection (2).
(2) The person's daily rate of compensation affected payment is reduced by the amount of the person's daily rate of periodic compensation.
(3) The reference in subsection (2) to a daily rate of periodic compensation is a reference to the amount worked out by dividing the total amount of the periodic compensation payments referred to in paragraph (1)(a) by the number of days in the periodic payments period.
(4) If:
(a)a person receives periodic compensation payments; and
(b)the person was not, at the time of the event that gave rise to the entitlement of the person to the compensation, qualified for, and receiving, a compensation affected payment; and
(c)the person receives or claims a compensation affected payment in relation to a day or days in the periodic payments period;
the periodic compensation payments are to be treated as ordinary income of the person for the purposes of this Act.
Subsection 17(1) of the Act defines “compensation affected payment” to include DSP.
Subsection 17(2) of the Act defines “compensation” as follows:
Subject to subsection (2B), for the purposes of this Act, compensation means:
(a)a payment of damages; or
(b)a payment under a scheme of insurance or compensation under a Commonwealth, State or Territory law, including a payment under a contract entered into under such a scheme; or
(c)a payment (with or without admission of liability) in settlement of a claim for damages or a claim under such an insurance scheme; or
(d)any other compensation or damages payment;
(whether the payment is in the form of a lump sum or in the form of a series of periodic payments and whether it is made within or outside Australia) that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.
Subsection 17(2A) of the Act provides:
Paragraph (2)(d) does not apply to a compensation payment if:
(a)the recipient has made contributions (for example, by way of insurance premiums) towards the payment; and
(b)either:
(i) the agreement under which the contributions are made does not provide for the amounts that would otherwise be payable under the agreement being reduced or not payable because the recipient is eligible for or receives payments under this Act that are compensation affected payments; or
(ii) the agreement does so provide but the compensation payment has been calculated without reference to the provision.
Subsection 17(5) of the Act provides:
A person receives compensation whether he or she receives it directly or whether another person receives it, on behalf of, or at the direction of the first person.
Does the Applicant receive “periodic compensation payments”?
The Respondent asserts that the Applicant’s monthly income protection insurance payments from AMP fall within the definition of “compensation” in s.17(2)(d) of the Act, because they are:
1.    a compensation or damages payment;
2.    in the form of a series of periodic payments;
3.    that is made wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury.[2]
[2] Respondent’s Statement of Facts and Contentions, paragraph 18, marked as Exhibit 2 at the hearing of this matter.
The Applicant asserts that the Tribunal should apply s.17(2A) of the Act and find that he does not receive periodic compensation payments. In support of his argument, the Applicant tendered a letter (undated) that he had received from AMP just prior to the hearing, titled “AMP Claims Centrelink Offset Review”.[3]
[3] AMP Claims Centrelink Offset Review, marked as Exhibit 3 at the hearing of this matter.
The effect of s.17(2A) of the Act is that a payment under s.17(2)(d) of the Act is not “compensation” if the payment recipient made contributions toward the payment and there is no offset clause in the insurance policy. The Respondent submits that s.17(2A) does not apply because there is an offset clause in the Applicant’s AMP income protection insurance policy.
In support of this assertion, the Respondent references both the AMP Claims Centrelink Offset Review letter, filed by the Applicant (Exhibit 3), as well as a letter from AMP to Centrelink (now Services Australia), dated 25 March 2004 (T6 at 42), which states:
“In order for us to apply the offset clause in our policy, would you please provide us with the start date and exact details of his benefit.”
The AMP Claims Centrelink Offset Review confirms, in the Tribunal’s view, that there is an offset clause in the Applicant’s AMP policy, reading:
“Upon review, the Specialist Policy team defined wording regarding offsets as follows:
[Under the What We Actually Pay section]
“We will actually pay an amount that (when added to any other regular income amounts you receive because you are unable to work) is not more than 75% of what you earned when you were able to work”
Our Policy Review team defined that the offset is dependent on the nature of the pension you will receive. If the pension is paid solely because you cannot work, then we will be required to reduce your benefit accordingly. If the pension does not relate to your condition then we would not offset it.
Centrelink may still take into account your Income Protection Benefits and offset this on their end, however you will be required to notify AMP Claims.”
(Bold in original)
The Applicant agrees that he receives payments of $3,260.66 in income protection insurance payments per month, pursuant to the AMP policy.[4]
[4] Hearing Transcript, P-9 at [35].
The plain language of the AMP documents before the Tribunal reveals that the payments are made “wholly or partly in respect of lost earnings or lost capacity to earn resulting from personal injury”, and they are, therefore, a “periodic compensation payment”, as defined by s.17(2)(d) of the Act.
Given the clear existence of an offset clause in the Applicant’s AMP policy, it is not open to the Tribunal to apply s.17(2A) of the Act and find that the AMP income protection insurance payments are not compensation.
For these reasons, the Tribunal finds that the Applicant’s AMP income protection insurance payments are “periodic compensation payments” for the purposes of s.17(2)(d) of the Act.
Are there “special circumstances” justifying application of s.1184K of the Act?
The Applicant contends that there are “special circumstances” which would justify treating all or part of the AMP compensation payments as not having been made. The Respondent asserts that there are no special circumstances, relying upon guidance from case law and the Social Security Guide (the Guide).[5]
[5] Department of Social Services, version 1.290.
The Tribunal is not bound to apply the Guide, but it may, and it should, apply relevant policy in exercising its discretion, unless it is unlawful or “tends to produce an unjust decision in the circumstances of the particular case.”[6]
[6] ReDrake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 645.
Section 1184K of the Act enables the Tribunal to exercise discretion to disregard the whole or part of a compensation payment in special circumstances, where the strict application of the Act would otherwise lead to an unfair or inappropriate result.
Section 1184K of the Act provides:
Secretary may disregard some payments
(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.
(2) If:
(a)a person or a person's partner receives or claims a compensation affected payment; and
(b)the person receives compensation; and
(c)the set of circumstances that gave rise to the claim for compensation is not related to the set of circumstances that gave rise to the person's or the person's partner's receipt of, or claim for, the compensation affected payment;
the fact that those 2 sets of circumstances are unrelated does not alone constitute special circumstances for the purposes of subsection (1).
If the Tribunal finds that special circumstances exist for the purpose of s.1184K of the Act, French J (as he was then), in Secretary, Department of Employment and Workplace Relations v Homewood (2006) 91 ALD 103 at [34] , outlined what the Tribunal is expected to do:
“1. Identify the circumstances of the case which it found to be ‘special’ and the reasons for which it arrived at that finding.
2.Explain why, in the special circumstances so found, it thought it appropriate to treat the whole or part of the compensation payment as not having been made.
3. Explain why it selected the particular quantum (ie the whole or part) of the compensation payment as not having been made.”
What does “special circumstances” mean?
The Act does not define what constitutes “special circumstances”.
However, the Guide, at 4.13.4.10 does provide guidance about when special circumstances should not be found:
“Intent of compensation recovery provisions
The compensation recovery provisions of social security law are designed to ensure that people who receive compensation for a loss of income do not also receive income support from the Australian Government in respect of the same period of time.
Note: The special circumstances provisions should not be used to override this basic legislative intention.”
(Bold in original)
The Respondent flags that the phrase “special circumstances” has been extensively considered in case law, citing the following frequently cited cases for the Tribunal’s consideration:[7]
·In Re Beadle and Director-General of Social Security (1984) 6 ALD 1, the Tribunal stated 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 the 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 quality of unusualness that permits them to be described as special.”
·In Groth v Secretary, Department of Social Security (1995) 40 ALD 541, the Federal Court stated at 545:
“The phrase ‘special circumstances’, it has been said, although imprecise is sufficiently understood not to require judicial gloss ... it is sufficient to observe that it would require something to distinguish Mr Groth's case from others, to take it out of the usual or ordinary case. That was, I consider, the only enquiry to be undertaken in this case. It would of course follow that if one were to conclude that something unfair, unintended or unjust had occurred that there must be some feature out of the ordinary...”
·In Angelakos v Secretary, Department of Employment and Workplace Relations (2007) 100 ALD 9, the Federal Court stated at 18:
“There is less risk of overstatement if the words ‘unusual’ or ‘uncommon’ are emphasised. Those words indicate, correctly in my view, the fact that there must be something that distinguishes the case from the ordinary or usual case. It may not be easy to postulate the ordinary or usual case other than in quite general terms and, in doing so, close attention must be given to the particular statutory context.”
[7] Respondent’s Statement of Facts and Contentions, paragraph 26, marked as Exhibit 2 at the hearing of this matter.
Relevant to the Tribunal’s considerations about what might amount to special circumstances, the Guide, at 4.13.4.10, provides the following:
What are special circumstances?
The discretionary nature of the special circumstances provisions makes it impossible to give a precise list of factors that should be taken into account when considering whether the provisions should be applied.
...
There is usually not one factor which makes a situation unusual, unforeseen or exceptional, but a combination of factors applying to each individual.
(Bold in original)
What is the Applicant’s argument in relation to special circumstances?
The Applicant explained to the AAT1 (T2 at 6 - 7), as well as to this Tribunal, that he considers it unfair that the annual amount of income he receives from his AMP income protection insurance policy is treated as a periodic compensation payment, as this results in the AMP income protection insurance payments being deducted “dollar-for-dollar” from the rate of potential DSP by virtue of the operation of s.1173 of the Act. The impact of a dollar-per-dollar deduction in the Applicant’s case results in the maximum daily rate of DSP being nil, as the AMP income protection insurance payments exceed the maximum rate of DSP payable.
The Applicant did raise concerns, both before this Tribunal and the AAT1, that the cumulative total of his AMP income protection insurance payments is less than the ordinary income limit that applies to DSP, and he contends that this is a further basis on which it is unfair that he cannot receive partial DSP. At the time of the AAT1 decision, the Applicant received $38,856 annually from AMP, and the ordinary income limit applicable to DSP was $53,731.60. The Tribunal points out that the amount of $53,731.60 is a reference to ordinary income, rather than to periodic compensation payments, and is, therefore, not relevant to the Tribunal’s legal considerations.

Having found that the AMP income protection insurance payments are periodic compensation payments for purposes of s.17(2)(d) of the Act, it is clear that the operation of s.1173 of the Act is to deduct the value of the AMP income protection insurance payments from any DSP payable on a dollar-for-dollar basis. This is central to the Respondent’s argument about why this Tribunal cannot find that there are “special circumstances” in the Applicant’s case – the Respondent asserts that the operation of s.1173 of the Act cannot, by itself, constitute special circumstances.
The Tribunal has had regard to case law, which has consistently determined that the application of s.1173 of the Act, resulting in a dollar-for-dollar deduction of periodic compensation payments when calculating DSP, is not a special circumstance.[8]
[8] Re Drury and Secretary, Department of Social Services [2019] AATA 5246 at [31]; Alirezai and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2012] AATA 64 at [23]; ReVernon and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 513 at [25]; and Gerard Haughey and Secretary, Department of Social Security [1994] AATA 226 at [37].
Consistent with previous decisions determining the same point, this Tribunal finds that the dollar-per-dollar deduction of the Applicant’s AMP periodic compensation payments is the result of the application of the Act itself. On this basis, the Applicant’s argument that this is unfair must fail, as the clear intent of the Act is to operate in this way.
The Tribunal has carefully considered the Applicant’s challenging life circumstances. The Applicant has summarised his concerns in a global fashion, explaining that his mobility challenges and inability to work have resulted in him having a very tight budget. He would have been able to improve his life if he were eligible for a partial DSP, and would, therefore, also be eligible for rent assistance, in particular.
The Applicant has sustained a very serious injury resulting in incomplete quadriplegia and the need to use a wheelchair, but there is otherwise no evidence before the Tribunal that points to broader ill health, unusual medical expenses, or financial circumstances that are markedly more severe than those experienced by other DSP recipients.
In relation to the Applicant’s ongoing medical needs as a basis to find special circumstances, this Tribunal, consistent with well-established caselaw, concludes that the Applicant’s medical condition does not, of itself, constitute special circumstances. The Applicant continues to receive compensation for his injury, albeit at a level that he understandably wishes was higher. The Applicant is now receiving some assistance from the National Disability Insurance Scheme.
In relation to the financial impact of the Applicant’s disability as a basis to find special circumstances, the comments of Deputy President Sosso in Gartside and Secretary, Department of Social Services [2017] AATA 45 at [57] are instructive:
“I do not understand the many Federal Court and Tribunal decisions on ‘special circumstances’ to require the Tribunal to find that special circumstances exist simply because the Applicant is in straitened financial circumstances. My understanding of the law is that it is open for the Tribunal to find special circumstances in such a circumstance, but a Tribunal Member is not obliged to do so. In exercising the discretion vested in the Tribunal, a Member is required to consider all of the matters the evidence admitted produces and straitened financial circumstances is one factor, albeit a very important one, but not the sole one. As Sheppard J said in Director General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281 at 321:
‘The legislation provides for the payment of a variety of benefits to different classes of people who will usually have one thing in common; they will be impecunious and in straitened circumstances. Very often their stories will be quite tragic.’
Other factors which may outweigh straitened financial circumstances include consideration of the general administration of the social security system (Re Davy and Secretary, Department of Employment and Workplace Relations [2007] AATA 1114) and whether an Applicant’s disposition of their compensation payment has been reckless – e.g. Davis and Secretary, Department of Family and Community Services [1999] AATA 84.”
On the basis of the evidence before the Tribunal, the Tribunal concludes that, although challenging, the Applicant’s life circumstances, including his ongoing medical needs and limited financial means, are not more severe than the challenges faced by others in receipt of social security payments.
The Tribunal finds that no special circumstances exist in the Applicant’s case. Consequently, there is no basis upon which the Tribunal can justify the exercise of the discretion under s.1184(K) of the Act.
DECISION
The Tribunal affirms the decision of the AAT1 dated 4 November 2020.

I certify that the preceding 48 (forty-eight) paragraphs are a true copy of the reasons for the decision herein of Member B Cullen

..............[SGD]..........................................................
Associate
Dated: 7 February 2022

Date of hearing: 7 September 2021

Applicant:

Solicitor for the Respondent:

By Phone

Mr Andrew Summers
Services Australia