Slamkov and Secretary, Department of Social Services (Social services second review)

[2015] AATA 558

Slamkov and Secretary, Department of Social Services (Social services second review) [2015] AATA 558 (31 July 2015)

Division	General Division
File Number(s)	2014/5616
Re	Slavko Slamkov
APPLICANT
And	Secretary, Department of Social Services
RESPONDENT

DECISION

Tribunal	Senior Member J F Toohey
Date	31 July 2015
Place	Sydney

The Tribunal affirms the decision under review.

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Senior Member J F Toohey

CATCHWORDS – social security – age pension – lump sum compensation payments – preclusion period – legal costs – whether special circumstances – decision under review affirmed

Legislation

Social Security Act 1991 ss 17(1)(aa), 17(2), 17(3), 17(8), 1169(1), 1170, 1171, 1184

Cases

Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Groth and Secretary Department of Social Security (1995) FCA 1708
Secretary, Department of Social Security v Hulls (1990-1991) 20 ALD 570
Secretary, Department of Social Security and Haining [1992] AATA 130
QX99C and Department of Family and Community Services [1999] AATA 310
Krzywak and Secretary Department of Social Services (1988) 15 ALD 690)

Re Ivovic and Director General of Social Security (1981) 3 ALN 95

REASONS FOR DECISION

Senior Member J F Toohey

Background

1. Mr Slavko Slamkov was injured at work in June 2010.  In July 2012, he received a lump sum compensation payment of $40,000 for permanent impairment and pain and suffering, from which $1800 was deducted for medical expenses.  In September 2013, his claim for incapacity was settled for $75,000 inclusive of costs, from which legal costs and disbursements of $50,000 were deducted.

2. On 14 April 2014, Mr Slamkov applied for an age pension.  Centrelink determined that, because of the lump sum compensation payments, a preclusion period applied during which Mr Slamkov could not be paid the pension.  Centrelink calculated the preclusion period to run from 16 October 2013, being the day after Mr Slamkov’s periodic payments for incapacity ceased, to 6 January 2015. 

3. In September 2014, the Social Security Appeals Tribunal (SSAT) affirmed the decision that a preclusion period applied and there were no special circumstances by reason of which it should be reduced.

4. Mr Slamkov disputes Centrelink’s decision.  He says he received only $25,000 of the second lump sum compensation payment, the remainder having been expended on legal costs about which he says he knew nothing.

5. Mr Slamkov attended a hearing of the Tribunal on 21 July 2015.  He was assisted by a Macedonian interpreter.

   When does a preclusion period apply?

   6.If a person receives a lump sum payment, part of which is compensation for lost earnings or earning capacity, the payment is compensation within the meaning of s 17(2) of the Social Security Act 1991 (the SS Act). In such case, a lump sum preclusion period applies during which a compensation affected payment is not payable to the person: s 1169(1). 

   7.The age pension is a compensation affected payment: s 17(1)(aa).  It follows that, once Mr Slamkov received the lump sum compensation payments, a preclusion period applied during which he would not be able to receive the age pension.  (He turned 65 during the preclusion period and has been receiving the pension with effect from 7 January 2015).

   How is a preclusion period calculated?

   8.As it applies to Mr Slamkov, s 17(3) of the SS Act provides that the compensation part his lump sum compensation payment is 50 per cent of the payment.

   9.If a person receives two lump sum compensation payments, part of at least one of which is for lost earnings or earning capacity, the two are treated as one for the purposes of calculating the preclusion period: s 1171. As Mr Slamkov received a total payment of $115,000, the compensation part of his payment was $57,500.

   10.A preclusion period is calculated according to a formula in sub-sections 1170(4) and (5) in the SS Act. The compensation part of the lump sum is divided by the income cut out amount, which is a weekly amount calculated according to a formula in s 17(8).  The amount varies from time to time; the income cut out amount at the time of Centrelink’s decision concerning Mr Slamkov was $886.40.

   11.Applying the formula in s 1170, Centrelink calculated that Mr Slamkov was subject to a preclusion period that commenced on 16 October 2013, when he received the last of his periodic payments, and ended 64 weeks later on 6 January 2015: s 1170(1)(a). 

   12.As I understand it, Mr Slamkov does not dispute the actual calculation of the preclusion period, and I am satisfied that Centrelink calculated it correctly.

   The settlement agreement

   13.The Tribunal may treat the whole or part of a compensation payment as not having been made if it thinks it appropriate to do so in the special circumstances of the case: s 1184K of the SS Act.

   14.Mr Slamkov says there are special circumstances in his case.  He says he was not aware, when his claim for incapacity was settled in September 2013, that it was settled for $75,000.  He says his barrister and solicitor told him his claim was hopeless and advised him to accept the offer of $25,000 made by the insurer or risk losing his house if he proceeded to a hearing.  He says he had no idea, until he received correspondence from Centrelink advising that a preclusion period would apply, that the full amount of the settlement was $75,000 of which $50,000 went to legal costs. 

   15.Documents provided to the Tribunal by Centrelink show that, on 10 October 2013, Centrelink wrote to the compensation insurer advising that Centrelink had no costs to be recovered from the settlement monies and the insurer could pay all compensation monies for which it was liable to Mr Slamkov. 

   16.On 16 October 2013, Centrelink wrote to Mr Slamkov’s solicitors, Thomas Booler and Co, advising it had been notified of the settlement in the amount of $75,000 and that a preclusion period would apply from 16 October 2013 to 6 January 2015.   On the same day, Centrelink sent a letter to Mr Slamkov in similar terms.

   17.Mr Slamkov says that, on receiving Centrelink’s letter, he immediately contacted his solicitors and went to see them to question the amount of their legal costs, saying this was the first he was aware of the amount.

   18.A copy of a letter dated 12 November 2013 to Mr Slamkov from his solicitors advises that, on 18 September 2013, he “accepted an offer of full and final settlement of your claim for work injury damages in the sum of $75,000 clear of workers compensation payments made, medicare, and all legal costs”.  The summary of the settlement shows:

   Settlement amount  $75,000
   Less our Costs and Disbursements   ($50,000)
   Remaining funds  $25,000

   19.Disbursements amounting to $12,093.40 are itemised in the letter.  “Professional costs” totalling $37,906.60 are not itemised other than being the balance of $50,000 after deduction of the amount for disbursements.

   20.Given that neither compensation claim involved a hearing, the costs relative to the total settlement amounts appear high, but it is not possible for the Tribunal to know, without further information, whether they were reasonable in the circumstances.  What is clear is that they were the balance of $50,000 deducted for Costs and Disbursements.

   21.The letter continues:

   We enclose our cheque for $25,000 together with two copies of this letter.  Would you kindly sign both copies acknowledging receipt of our cheque and details of Costs and Disbursements. 

   22.The letter includes a section which states that Mr Slamkov acknowledges receipt of $25,000 “due to me in settlement monies to settle my claim with respect of my work injury damages” and acknowledges that “with the assistance of an accredited interpreter [he had] read and understood the itemised account for Costs and Disbursements and agree that they are fair and reasonable”.

   23.The letter also includes an unsigned section in which “an accredited interpreter” stated that he or she had “read the contents of the above letter to the above named client in the Turkish language” and interpreted the advice in it.  Mr Slamkov is Macedonian and does not speak Turkish.

   24.The letter of 12 November 2013 appears to be a response to Mr Slamkov’s visit to his solicitor after he received Centrelink’s letter.  It is not clear when he actually received the cheque for the settlement monies from his solicitors. 

   25.At the hearing, Mr Slamkov said he had a handwritten note of the settlement agreement which his barrister had prepared at the time of the settlement and which showed that he received only $25,000.  He sent a copy to the Tribunal after the hearing.  The three-page document was signed by Mr Slamkov and acknowledges that he was accompanied by his wife and a Macedonian interpreter.  It includes the paragraph:

   I have been offered a full and final settlement of my claim for work injury damages in the sum of $25,000 clear of all workers compensation payments made, medicare, tax and all legal costs.

   Are there any special circumstances by reason of which the preclusion period should be reduced or waived?

   26.The meaning of special circumstances has been considered on many occasions in decisions that are well-known.  The exercise of the discretion requires circumstances that, while not necessarily unique, are “unusual, uncommon, or exceptional” and have “a particular quality of unusualness that permits them to be described as special”: Re Beadle and Director-General of Social Security (1984) 6 ALD 1; see also Groth and Secretary Department of Social Security (1995) FCA 1708.

6. The particular facts of a case might make the amount of legal costs a special circumstance: Secretary, Department of Social Security v Hulls (1990-1991) 20 ALD 570 at 578-579. For example, if “a very very large portion of the only lump sum involved went or was to go in the payment of legal costs”, special circumstances might be found: Secretary, Department of Social Security and Haining [1992] AATA 130 at paragraph 41 (although they were not found in that case). In QX99C and Department of Family and Community Services [1999] AATA 310 (12 May 1999), the Tribunal found special circumstances where legal costs turned out to be substantially greater than had been allocated at the time of settlement.

7. It appears, from the document that he signed at the time of settlement, that Mr Slamkov was not made aware of the full amount of the settlement of $75,000 and that twice the amount he received went on costs.  I accept that it came as a surprise, if not a shock, to learn later the full settlement amount and the amount of the legal costs.  However, I am not satisfied that the amount of the costs was so high as to amount to special circumstances or that the circumstances in which he agreed to the settlement were special.  If Mr Slamkov was not made aware of the costs, or if his informed instructions were not obtained, that is a matter for him to take up with the Office of the Legal Services Commissioner.

   29.Nor am I satisfied that Mr Slamkov is suffering serious financial hardship by reason of the preclusion period.  In a number of cases the Tribunal has said that financial hardship must go beyond "straitened" and be truly exceptional (see, for example, Krzywak and Secretary, Department of Social Services (1988) 15 ALD 690).  That said, decision-makers must be “prepared to respond to the special circumstances of any particular case by reason of which strict enforcement of the liability created by the section would be unjust, unreasonable or otherwise inappropriate”: Re Ivovic and Director General of Social Security (1981) 3 ALN 95.

8. Mr Slamkov cannot be said to be in financial hardship.  He owns his own home and has approximately $60,000 in savings.  That amount was considerably larger when the preclusion period started but he had to use savings for living expenses during the preclusion period.  He was made aware of the preclusion period as soon as it commenced.  He has no debts of any size.  He has ongoing medical expenses on account of a number of serious health issues but there is nothing to suggest that his health is seriously at risk because he cannot afford treatment.  Since 6 January 2015 he has been receiving a full age pension.

9. I am not satisfied that the application of the full preclusion period was unjust, unreasonable or otherwise inappropriate such that the preclusion period should be reduced.

   Conclusion

10. I affirm the decision under review.

33.     I certify that the preceding 32 (thirty-two) paragraphs are a true copy of the reasons for the decision herein of Senior Member J F Toohey. 

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Associate

Dated 31 July 2015

Date(s) of hearing		21 July 2015
Representative for the Applicant		Self-represented
Representative for the Respondent	Mr George Lozynsky, Government Lawyer