Smith and Department of Family and Community Services - [2001] AATA 541

DECISION AND REASONS FOR DECISION [2001] AATA 541

ADMINISTRATIVE APPEALS TRIBUNAL )

) No V2001/384

GENERAL ADMINISTRATIVE DIVISION       )
           Re      SHANE SMITH
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Mr J. Handley, Senior Member

Date8 June 2001
PlaceMelbourne

Decision      The decision under review is affirmed.
  .………..Mr J. Handley..........
  Senior Member
CATCHWORDS
Social Security – Preclusion period – purchase of real estate – funds from compensation settlement expended – applicant formerly alcohol and drug dependent – whether special circumstances.
Re Beadle and Director General of Social Security 1984 6 ALD 1
Secretary, Department of Social Security v Banks 1990 20 ALD 19

REASONS FOR DECISION

8 June 2001 Mr J. Handley, Senior Member

The applicant applied to review a decision of the Social Security Appeals Tribunal ("SSAT") made on 26 February 2001. The SSAT then decided to affirm a decision previously made by Centrelink to impose a compensation preclusion period from 25 July 1998 until 7 May 2004.
This application was lodged on 9 April 2001. Having regard to the extreme financial circumstances of Mr Smith, who appeared without representation, the hearing was convened on 29 May. The respondent was represented by Mr Todd. Documents were lodged by the respondent pursuant to s.37 of the Administrative Appeals Tribunal Act 1975 and were taken into account. The applicant also lodged a number of documents, which will be referred to in this decision.
For the purposes of this decision, I am satisfied (i) that the monies received by Mr Smith were a "compensation payment" within the meaning of s.17(2) of the Social Security Act 1991 ("the Act"), (ii) that the claim for Disability Support Pension ("DSP") made by Mr Smith is a "compensation affected payment" within the meaning of s.1165(1A), (iii) that a lump sum preclusion period is to be imposed pursuant to s.1165 and (iv) the calculation made by the Department with respect to the period of the preclusion has been calculated (correctly) pursuant to s.1165(8).
The only issue in dispute is whether the whole or part of the compensation payment should be treated as not having been made, or not liable to be made, because it is appropriate in the special circumstances of the case (s.1184(1)).
The applicant was formerly employed by the City of Hume and suffered a severe back injury in the course of his employment in April 1996. He thereafter became totally incapacitated and received payments under the Victorian WorkCover scheme. Weekly payments were made until 25 July 1998 when a settlement was then achieved in the lump sum of $250,000. That sum was received on 9 October 1998 (subject to legal costs) and on 20 November 1998 the applicant was formerly notified by Centrelink of the preclusion period of 25 July 1998 until 7 May 2004. Mr Smith said at the hearing that he was advised by his solicitors prior to the resolution of his WorkCover claim that a preclusion period would be imposed.
On 20 November 2000, Mr Smith formerly claimed Disability Support Pension, but the application was rejected by reason of the existence of the preclusion period. An appeal was lodged with the Social Security Appeals Tribunal and on 26 February 2001 it decided to affirm the decision made by Centrelink to reject the claim for Disability Support Pension by reason of the existence of a preclusion period.
The Facts
Mr Smith is presently 43 years of age and lives alone. He was formerly a member of a defacto relationship but this has ended. He has never been married and does not have children.
Prior to the injury at work he described himself as a social drinker only and would drink beer with friends on weekends. After incapacity commenced he said he was consuming 6 cans of beer per day and was also consuming large quantities of prescribed painkillers, relaxants, anti-depressants and sleeping tablets. After he received his lump sum compensation payment, he increased his beer consumption to an average of 12 cans per day and was also smoking large quantities of marijuana.
Mr Smith described the profound affect upon him and his lifestyle by the work accident.
He said that he was a member of a relationship where he had few debts and enjoyed his work. He described himself as fit and healthy, yet the work injury has totally incapacitated him. He has subsequently ended his defacto relationship and entered into a period of what he described as 'recklessness'. He said there were many occasions where he was "off (his) face". He said there were occasions where he did not know whether he was "coming or going" and had spent all of the settlement funds within 6 to 12 months of receipt.
Mr Smith purchased a run-down former Housing Commission Home in Broadmeadows in the sum of $91,000 and eventually spent between $40,000 & $45,000 on renovations. He purchased a number of contents and electrical appliances in the vicinity of approximately $15,000, and also purchased a second hand motor car. Some monies were given to his mother as a gift, and to his brothers and sisters. He also travelled to Darwin for a holiday. The balance of funds which he estimates to be in the vicinity of $50,000 to $60,000 have been spent on alcohol and marijuana.
Mr Smith acknowledged that he became addicted to alcohol and marijuana, but was not prepared to admit to it or speak about it to either the Centrelink office at Broadmeadows or to the Social Security Appeals Tribunal. Subsequent to the SSAT hearing, he volunteered to enter into a withdrawal and detoxification program at Moreland Hall, being a rehabilitation unit operated by the Uniting Church in Coburg.
Mr Smith has recently advertised the sale of his motor car, in an attempt to extinguish an outstanding visa card debt for which recovery proceedings are presently threatened. He has sold jewellery at "Cash Converters". He has exhausted the limit of his visa card, and he has no monies invested.
Mr Smith has also been diagnosed with Hepatitis C and regularly attends a clinic at St. Vincent's Hospital. He understands that he has liver damage and probably has a reduced life expectancy but is hopeful, having not consumed alcohol now for four weeks, that his liver function will improve.
Mr Smith said that gas, electricity and water is still connected to his house, but said that he is in imminent danger of disconnection because of outstanding accounts. He has not paid rates, which are presently owing and has a number of other debts. He presently has assets being his house which he estimates to have a value of between $150,000-$160,000 and contents of $15,000. He estimates the value of his 1987 Toyota Station Wagon at between $6,000-$7,000. He does not have money invested and has also spent a superannuation lump sum he received from the City of Hume in the sum of $32,000. He has received food vouchers and groceries in recent months from the Salvation Army in the value of between $40 and $60 per fortnight, and has also sought assistance from local charities. He has been told that it is unlikely that he will continue to qualify indefinitely for assistance. Other welfare organisations have also on occasions paid accounts and charges that have been levied against him and his home.
In cross-examination Mr Smith said that he would not be prepared to move and live with his mother in St. Albans and rent his home as a means of earning an income. He said that he is an independent person by nature and could not cope with giving up his independence or living with his mother, whom he said is presently 62 years of age. He also dismissed a suggestion that he rent a room in his home to achieve income. He said he has previously lived in shared accommodation and in his experience "it doesn't work". He said the Broadmeadows district where he lives has the cheapest accommodation in Melbourne and it is not an option for him to sell the home and move elsewhere to purchase a home at a cheaper cost. He said he has always lived in inner suburban Melbourne and it was also not an option for him to move to rural Victoria where he may obtain accommodation at a lesser cost than in Melbourne. He also said he preferred to live close to other members of his family who live in the district surrounding Broadmeadows.
Having regard to his financial circumstances and his illness from both back injury and Hepatitis C, Mr Smith said that his future would be improved if he were granted a pension. He said his objective was to "try and be happy" and to have his self-respect. He said he has felt better since he has ceased alcohol and marijuana, and is confident that he will not again consume alcohol. He acknowledges that he has "lost (his) working life" and a considerable sum of money into the future because he is unable to earn wages. He said he would wish to "start afresh", "put the past behind me" and "enjoy what's left".
Documents Filed
Mr Smith lodged a number of documents from Moreland Hall. One of the documents detailed his participation in a rehabilitation program between 16 May and 22 May which assisted him withdrawing from both alcohol and cannabis and offered financial and unemployment counselling.
In a letter dated 23 May 2001, Heather Carmichael from Moreland Hall, confirmed that Mr Smith had attended the Community Residential Withdrawal Unit, for withdrawal from alcohol and cannabis between 16 and 22 May. She recorded that he had been drinking alcohol and smoking cannabis "consistently for the past five years". She also recorded "Mr Smith has found it increasingly difficult to cope with every day living skills and management due to his dependency problems and reported a depressed mental state". In a letter signed by the applicant's Federal Member of Parliament, dated 25 May, the applicant is recorded as having "had little experience in handling such large amounts of money. While a good deal of this money, responsibly (sic) such as buying a house in Jacana, much of this money unfortunately went to supporting his substance abuse habits".
The letter concludes "It would be highly unfair and irresponsible to leave Mr Smith adrift in the community with no means of support and no help from the government. Mr Smith has few other options in life, especially as he is largely unskilled, having left school in form 3. It would be a shame to let somebody who spent years working for our community to be left desolate and relying on support from welfare groups such as the Salvation Army".
In a letter dated 24 May 2001 from the Family Support Services division of the Salvation Army, Ms Joy Pentland-Hall reported that Mr Smith had been attending the agency since February 2001 "due to his not being entitled to any assistance from Centrelink until 2004". She concluded "The Salvation Army will try to provide support in the form of food vouchers and food in kind, but our resources are limited and therefore restrictions on the number of visits per year have to be adhered to".
The applicant's treating General Practitioner Doctor Papagelis reported on 24 May 2001, that he is unlikely to ever return to "productive, effective employment and that discussions with the applicant's treating orthopaedic surgeon (Mr Turner) suggested that "Shane's work days are up".
In a letter from Mr Trewhella, a Financial Counsellor with Dianella Community Health Inc., in Glenroy, it was reported (having been assisting Mr Smith for six months)-
'I believe that providing Shane with some income at this sensitive time when he is beginning the long road to recovery from 3 years of personal and moral stagnation may be a sound investment from the point of view of taxpayers. It will cost far more to the community if Shane is hospitalised due to his problems and continues to be a drain on the financial stocks of the local welfare agencies. If Shane has to sell his house then this will have a negative effect on his personal status and ensure when he does go back onto Centrelink benefits that more will have to be paid out to support him. He would even have to go into public housing if he was forced to sell his property, putting a further drain on the public purse. Shane's story is one of poor decision-making exacerbated by what he saw as a disappointing and abrupt end to his previously useful working life."

Conclusion & Reasons For Decision

In cases of this type, where the circumstances of a claimant are to be considered and enquiry made as to whether they are "special" the decision of Re Beadle and Director General of Social Security 1984 6 ALD 1 at page 3 remain significant and compelling. The court then decided-
"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. That is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be prescribed as "special".
Many cases are heard by this Tribunal involving appeals against the imposition of a preclusion period where persons who have received lump sum awards of compensation and find themselves in straightened or impecunious circumstances within a relatively short period of time after receipt of funds. A dispassionate observer might conclude that an applicant in those circumstances is responsible for their own misfortune, and the public purse should not be brought to account, yet the court in Beadle recognised that there are many persons in similar situations and concluded at page 4-
"The question is whether, when the relevant circumstances of the applicant are looked at in their entirety, they may fairly be described as unusual, uncommon or exceptional so as to warrant payment of the allowance earlier than the date from which it would ordinarily be paid".
Section 1184 is drafted in broad terms to permit the Secretary – if he thinks it is "appropriate" to treat the whole or part of the compensation payment as either not having been made, or not liable to be made, if there are special circumstances of the case. This section compels enquiry into the circumstances of each person to determine whether those circumstances are special. Comparison with other persons in similar circumstances may be of assistance to determine whether the circumstances are special, yet each person has circumstances, which are unique. Those circumstances might not necessarily be "unusual" or "uncommon" but they may be "exceptional".
However, the imposition of s.17 and s.1165, is apparently a recognition by the Federal Parliament that if persons do receive a compensation lump sum, that those persons should be precluded from receipt of public monies for a period of time. As His Honour von Doussa J said in Secretary, Department of Social Security v Banks 1990 20 ALD 19, there is an attempt by the legislation to balance the competing interests of members of the public who are dependent on a limited public purse with persons who have received a compensation lump sum.
In balancing the considerations required by s.1184, I have reached the conclusion, not without anguish, that the preclusion period must prevail.
I acknowledge that the applicant expended his monies during a period of time when he was probably under the influence of prescribed medication, alcohol and cannabis. I am satisfied on his evidence that his ability to rationally make decisions was affected by these substances. I am also satisfied that he was probably depressed and overwhelmed by having his compensation rights ended and having realised that the opportunity to earn income in the future had been eliminated.
I also acknowledge that it is unlikely on the evidence that Mr Smith will ever return to employment and that he will lose considerable income by not being able to return to the workforce. There was an absence of evidence as to whether Mr Smith is capable of being retrained or rehabilitated back into the workforce.
I acknowledge also that the home purchased was relatively modest and was intended to provide a secure and long-term domicile. I also acknowledge that Mr Smith has a preference to be independent and believes that independence can be achieved by owning his own property and living alone.
I am concerned by this decision that the good progress he has recently made in his drug and alcohol counselling may be upset or reversed, because one of the issues specifically raised by Mr Smith at the hearing, was to qualify for a pension whereby he would have a regular income and would therefore have a more stable independent existence.
On the other hand however, Mr Smith – in terms of assets – is in a more secure position than he was prior to the settlement of his compensation claim to the extent that he now owns real estate and the contents. That is to say on one view he has benefited by the compensation monies in that he has been able to secure real estate, which is presently unencumbered and by reason of his renovations has increased in value since purchase.
Whilst nothing can be done now to recover the monies expended over the last two or three years on alcohol and marijuana, Mr Smith does have the opportunity to earn an income by reason of him owning real estate, either by taking in a border, or moving out and living elsewhere (and therefore renting the property) or by selling it and investing the monies. Alternatively he may choose to sell the property and purchase another property elsewhere at a cheaper cost.
All of these options were discussed with Mr Smith at the hearing and he rejected them. However Mr Smith was aware prior to the receipt of settlement funds that there would be a preclusion period. Because he has the opportunity to earn income, having regard to the sale or rent of his home, I am not satisfied, despite his recent circumstances, that on balance, those circumstances may be regarded as being "special".
In the circumstances of this application I am satisfied that the decision under review should be affirmed.
I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J. Handley, Senior Member
Signed:         .C. Irons..................................................
  Secretary
Date/s of Hearing  29 May 2001
Date of Decision  8 June 2001
Counsel for the Applicant        unrepresented
Solicitor for the Applicant
Counsel for the Respondent    Mr M. Todd, Departmental Representative
Solicitor for the Respondent