Smith and Department of Family and Community Services
[2002] AATA 616
•26 July 2002
DECISION AND REASONS FOR DECISION [2002] AATA 616
ADMINISTRATIVE APPEALS TRIBUNAL )
) No Q2001/527
GENERAL ADMINISTRATIVE DIVISION )
Re PETER SMITH
Applicant
And SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
Respondent
DECISION
Tribunal Mr O Rinaudo, Member
Date26 July 2002
PlaceBrisbane
Decision The Tribunal affirms the decision under review.
...................(Sgd).........................
O Rinaudo
Member
CATCHWORDS
SOCIAL SECURITY – preclusion period – lump sum compensation payment - whether preclusion period correctly calculated – whether special circumstances exist to warrant treating part or all of the compensation monies as having not been made
Social Security Act 1991
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 60 AL4 225
Males v Secretary, Department of Family and Community Services (1999) 57 ALD 793
Re Secretary, Department of Social Security and Hickman (1996) 43 ALD 75
Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464
REASONS FOR DECISION
26 July 2002 Mr O Rinaudo, Member
This is an appeal against a decision of the Social Security Appeals Tribunal dated 31 May 2001 affirming a decision by Centrelink on 12 October 2000 to impose an income support preclusion period on the receipt by Mr Smith of social security payments until 18 August 2007.
The applicant was injured at work on 10 January 1995 in which he "sustained a significantly depressed fracture of the right lateral tibial plateau when he fell into a manhole on that day" (report of Dr Thompson, 18 October 2001).
Mr Smith received a lump sum compensation payment of $370,888 by Arbitrator's Award on 11 November 1998 (see T13, Folio 43). This amount was calculated under various Heads of Damage, which are set out at T13, Folio 44. The relevant Heads of Damage for the purposes of this appeal are that past wage loss was assessed at $127,858.00; interest on past wage loss was calculated at $10,424.00 and future wage loss was calculated at $143,504.00; making a total of $281,786.00 paid to Mr Smith by way of damages for lost income. An amount of $95,621.30 was paid to Mr Smith by way of periodic workers' compensation payments. This amount was refunded to his workers' compensation insurer.
The economic loss figure used by Centrelink to calculate the preclusion period in this case then was $186,164.70 (T21, Folio 73). Based on the formula set out in the Social Security Act 1991 ("the Act"), in particular, s 1165(8), the preclusion period was calculated at 451 weeks commencing on 27 September 1998 and concluding on 18 August 2007. Mr Smith is precluded, therefore, from receiving various income support payments until 18 August 2007.
ExhibitsThe following exhibits were tendered at the hearing.
Exhibit 1 "T" Documents
Exhibit 2 Letter and attachments (forming a bundle) dated 17.1.02
Exhibit 3 Letter and attachments (forming a bundle) dated 12.9.01
Exhibit 4 Letter and attachments (forming a bundle) dated 20.12.01
Evidence at the Hearing
Mr Smith gave oral evidence at the hearing and was cross-examined.
Mr Smith told the Tribunal that when he was given the award he was not told that a preclusion period would apply. He said that he had no way of planning for the future given that he was not aware that he would be precluded from receiving Centrelink payments. He further stated that he would not have taken the award had he been aware that he would be precluded from receiving Centrelink payments until 2007.
It is clear from his evidence that Mr Smith sustained a serious injury to his leg as a result of which he required a number of operations. Complications have arisen as a result of these operations and it now appears that Mr Smith has Hepatitis C. He is taking medication for this, including Interferon Alfa and Ribavirin. The history of his employment, including the effects of the Hepatitis C, is accurately set out in the decision of the Social Security Appeals Tribunal. The medical reports provided to the Tribunal, including Dr Thompson's report dated 18 October 2001 and the report of LJ Stevenson, Occupational Therapist of 21 November 2001 both set out in some detail the medical conditions from which Mr Smith suffers. It is not necessary for present purposes to set out in any greater detail those medical conditions.
Mr Smith received $209,000 clear (T24, Folio 81) which he spent on various things, including the purchase of a home, motor car, shares, repairs, furniture and travel.
I accept the findings of the Social Security Appeals Tribunal with respect to this expenditure that they were not extravagant or frivolous but that some of the expenditures could be described as imprudent and that Mr Smith had an unreasonably optimistic expectation about his future prospects of employment.
Mr Smith claims that all or part of the preclusion period should be waived due to financial hardship and special circumstances which include his diabetes, Hepatitis C, an elbow complaint, problems with his left knee arising from damage to right knee, recent surgery for tear in one eye, hypertension and high cholesterol, stress and depression which is undiagnosed but which is causing him to grind his teeth at night, and gallstones.
Mr Smith believes that he has reduced prospects for work as a result of his injuries.
Mr Smith is also concerned that the economic loss part of the settlement forms an unusually high proportion of the total settlement resulting in a longer preclusion period for him.
Mr Smith also made comment that he may at some stage be required to accommodate his aging father and care for him, although this was not the case at the time of the hearing.
Discussion of the EvidenceMr Smith's main argument before the Tribunal was that he had not been informed that a preclusion period would apply. Centrelink have provided the Tribunal with a copy of a letter from Mr Smith's Solicitors, Taylor and Scott, Lawyers of Sydney dated 17 August 1998 which, on the second page, states as follows:
"We should also point out that if your matter does settle, you will be precluded from receiving social security benefits for a period of time. The length of the preclusionary period will depend upon the amount of the settlement figure, the higher the amount of the settlement figure the longer the preclusionary period will be and vice versa. For example, if the settlement sum is $500,000.00 gross, you will be precluded from receiving social security benefits until up to approximately the year 2010; if the settlement sum is $400,000.00 gross, the preclusionary period will be up to about the year 2008 and so on."
It should be noted that this letter is dated 17 August 1998. The Arbitrary Award in the claimant's action was given on 11 November 1998.
Mr Smith says that he received this letter but did not understand it. On 24 August 1998, Mr Smith was required to sign an "Authority to Negotiate Settlement" which he did. This document stated that:
"If my matter should be settled, I also understand the following:
1. I will be precluded from receiving social security benefits for a period of time. …"Again, Mr Smith says that he remembers signing this document but did not understand it.
The Tribunal is satisfied that Mr Smith was advised of the prospect of a preclusion period well before the arbitration award was made. Accordingly, the Tribunal cannot see any reason for reduction of the preclusion period on this basis.
Application of the LawFor the purposes of calculating the preclusion period, s 17(3) of the Act sets out what is to be deemed the compensation part of a lump sum payment received by an applicant. That section states as follows:
"(3)For the purposes of this Act, the compensation part of a lump sum compensation payment is:
(a)50% of the payment if the following circumstances apply:
(i)the payment is made (either with or without admission of liability) in settlement of a claim that is, in whole or in part, related to a disease, injury or condition; and
(ii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(ab) 50% of the payment if the following circumstances apply:
(i)the payment represents that part of a person's entitlement to periodic compensation payments that the person has chosen to receive in the form of a lump sum; and
(ii)the entitlement to periodic compensation payments arose from the settlement (either with or without admission of liability) of a claim that is, in whole or in part, related to a disease, injury or condition; and
(iii)the claim was settled, either by consent judgment being entered in respect of the settlement or otherwise, on or after 9 February 1988; or
(b)if those circumstances do not apply – so much of the payment as is, in the Secretary's opinion, in respect of lost earnings or lost capacity to earn."
As Mr Smith received his compensation payment as the result of an arbitration award rather than by consent, s 17(3)(b) of the Act applies. The Tribunal is satisfied that the amount in respect of lost earnings or lost capacity to earn is as set out by the Authorised Review Officer (T21, Folio 73), namely, $186,164.70. This figure was reached after the officer had regard to the Heads of Damage specified in the award (as discussed in par 3 above). The Tribunal is satisfied that it was open for the officer to calculate the amount of lost earnings / capacity to earn in this manner.
Pursuant to s 1165(5) of the Act, where periodic payments have been made, the lump sum preclusion period begins on the day after the last day of the periodic payment period. The length of that preclusion period is determined in accordance with the formula in ss 1165(8) and (9) of the Act which read:
"1165(8) If a compensation lump sum is received on or after 20 March 1997, the number of weeks in the preclusion period is the number worked out under the following formula:
Compensation part of lump sum
Income cut-out amount
1165(9) If the number worked out under subsection (4) or (8) is not a whole number, the number is to be rounded down to the nearest whole number."
In this case, the income cut-out amount is $412.70 and, when the formula above is applied, the preclusion period is calculated at 451 weeks. The applicant was in receipt of periodic payments until 26 December 1998. Therefore, the preclusion period would commence on 27 December 1998.
The Tribunal is satisfied that Centrelink has properly calculated the preclusion period.
Special CircumstancesHaving established that the preclusion period has been properly calculated, it is necessary to consider whether the whole or part of the compensation payment may be treated as not having been made or not liable to be made in accordance with s 1184(1) of the Act. That section states as follows:
"(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."
The meaning of the phrase "special circumstances" has been considered on many occasions. The leading case of Re Beadle and Director-General of Social Security (1984) 6 ALD 1 has set out with some particularity what constitutes "special circumstances". There it was stated that to be "special" the circumstances that the applicant finds himself in must be sufficiently "unusual, uncommon or exceptional". In Beadle v Director-General of Social Security(1985) 60 ALR 225, the Full Federal Court observed (at 228) that the phrase "special circumstances" would usually include events that rendered the operation of the statute in a particular case "unfair or inappropriate".
In Males v Secretary, Department of Family and Community Services (1999) 57 ALD 793, the Tribunal commented that the decision of Beadle continues to be the most useful starting point in considering the concept of "special circumstances" noting:
"that the Full Federal Court acknowledged that circumstances need not be unique to be 'special' but 'they must have a particular quality of unusualness that permits them to be described as special'. The court also said that the word 'special' in its context 'looks to circumstances which are unusual, uncommon or exceptional' and whether those circumstances exist will be dependent upon the context where a determination needs to be made as to whether the circumstances are different from 'the usual run of cases'."
In this case, the applicant claims that he is suffering financial hardship. He also claims that his declining health and the fact that the economic loss part of his compensation payment was unusually high, amount to special circumstances that would warrant part or all of the compensation monies being treated as having not been received.
In relation to the financial position of the applicant, the evidence is, and the Tribunal accepts, that the applicant has not made extravagant or frivolous purchases. He has purchased a motor vehicle and a house, and made some investments. However, he also made some imprudent purchases, for example, he has made substantial loans to family members, took a nephew on a holiday, and expended money on a boat.
Cases have arisen in which special circumstances have been found where a person, who has acquired an asset with compensation funds, is not required, either actually or notionally, to sell an asset in order to alleviate financial difficulty: see Re Secretary, Department of Social Security and Hickman (1996) 43 ALD 75 where the asset was the family home. In other cases, where it would not be unreasonable to require the sale of the asset, special circumstances have not been found: see Re Secretary, Department of Social Security and Bolton (1989) 18 ALD 464.
In this case, the Tribunal is satisfied that it would not be unreasonable for the applicant to sell his motor vehicle, his boat or his house in order to relieve his financial hardship. The applicant has sufficient assets on hand which could be readily converted into additional cash. There would seem to be no hindrance to this being done, if necessary, thereby establishing a cash resource which could be utilised for living expenses.
In relation to the applicant's health situation, although the applicant has suffered additional health problems since receiving his compensation payment, the Tribunal is not satisfied that the applicant's circumstances are sufficiently "unusual, uncommon or exceptional" so as to warrant exercising the discretion in s 1184 of the Act. The Tribunal notes that it is common for people who have received a lump sum compensation payment to experience difficulties with their health.
Finally, the applicant claims that the unusually high economic loss part of his compensation monies, which has resulted in a longer than usual preclusion period, would amount to special circumstances in light of the particularly harsh application of the statutory provisions in his situation. However, the Tribunal is satisfied that Mr Smith was advised of the prospect of a preclusion period well before the arbitration award was made; and that he had been given an indication of the likely length of any such preclusion period. The Tribunal cannot see any reason for reduction of the preclusion period on this basis.
The Tribunal finds that the circumstances described by Mr Smith in this case are not so unusual, uncommon or exceptional so as to constitute "special circumstances" as set out in the authorities.
DecisionAccordingly, for the reasons stated, the decision under review is affirmed and the appeal is dismissed.
I certify that the 34 preceding paragraphs are a true copy of the reasons for the decision herein of Mr O Rinaudo, Member
Signed: Sarah Oliver
AssociateDate of Hearing 5 March 2002
Date of Decision 26 July 2002The Applicant Appeared in Person
Solicitor for the Respondent Mr R McQuinlan, Departmental Advocate
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