Smith; Secretary, Department of Family and Community Services - [2002] AATA 925

DECISION AND REASONS FOR DECISION [2002] AATA 925

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N2002/170

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

DECISION

Tribunal Ms N Isenberg, Member

Date15 October 2002
PlaceSydney

Decision The Tribunal sets aside the decision of the Social Security Appeals Tribunal and in substitution therefor decides there are no special circumstances so as to reduce the preclusion period from 28 November 1998 to 18 July 2003.

[SGD] Ms N Isenberg
Member
CATCHWORDS
SOCIAL SECURITY – lump sum workers' compensation payment – preclusion period – whether special circumstances exist to justify the exercise of the discretion to disregard all or part of the compensation payment being made
LEGISLATION
Social Security Act 1991 sections 17, 1165, 1184(1)
CASE LAW
Re Beadle and Director-General of Social Security (1984) 6 ALD 1
Beadle v Director-General of Social Security (1985) 7 ALD 670
Re Ivovic and Director-General of Social Services (1981) 3 ALN N95
Groth v Secretary, Department of Social Security (1995) 40 ALD 541
Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797
Re Martin and Secretary, Department of Social Security (AAT 6482, 14 November 1990)
Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147
Re Department of Social Security and Bolton (1989) 18 ALD 464
Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745
Re Krzywak and Department of Social Security (1988) 15 ALD 690
Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990).
Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211
Secretary, Department of Social Security v Hulls (1991) 22 ALD 570
Secretary, Department of Social Security v Smith (1991) 30 FCR 56
Haidar v Secretary Department of Social Security (1998) 52 ALD 255
Re Stephens and Department of Family and Community Services (2001) 32 AAR 430
Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716
Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985)
Secretary, Department of Social Security v Hales (1998) 82 FCR 154

REASONS FOR DECISION

15 October 2002 Ms N Isenberg, Member
DECISION UNDER REVIEW

The Applicant, the Secretary, Department of Family and Community Services ("the Department") decided on 10 April 1999 to impose a preclusion period of 242 weeks from 28 November 1998 to 18 July 2003 (T9). That decision was affirmed by the authorised review officer on 14 November 2001 (T19).
The Social Security Appeals Tribunal ("the SSAT"), in its decision of 15 January 2002 (T2) decided to vary the decision under review and to reduce the preclusion period so as to end on 1 July 2002.
The Applicant seeks review of the decision of the SSAT dated 15 January 2002.

BACKGROUND

On 18 April 1995 the Respondent sustained a work injury and on 10 March 1999 the Respondent received a lump sum compensation settlement of $200,000 (T4).
On 10 April 1999 Centrelink advised HIH Workers' Compensation that it had no compensation charge in relation to the Respondent's injury of 18 April 1995 (T6).
On the same day the Respondent was advised in writing that he was subject to a preclusion period from 28 November 1998 to 18 July 2003 (T9). The Tribunal notes that this letter was addressed to the Respondent at a Smithfield address.
On 4 September 2001 the Respondent lodged a claim for disability support pension and he was informed his claim would be rejected due to the preclusion period (T11 & T16).
On 18 September 2001 the Respondent provided details and receipts regarding the expenditure of the lump sum to Centrelink (T12 & T14). On the following day the Respondent requested review of the decision to impose the preclusion period (T13).
On 18 October 2001 the Respondent was advised that a reconsideration of the decision under review was unsuccessful (T15). Upon request for further review, the authorised review officer affirmed the decision under review on 14 November 2001 and the Respondent was advised in writing (T19).
On 16 November 2001 the Respondent sought review by the SSAT (T20). And on 15 January 2002 the SSAT varied the decision under review on the basis of special circumstances, so that the preclusion period would end on 1 July 2002 (T2).

ISSUE BEFORE THE TRIBUNAL

It was not disputed before the SSAT, nor was it disputed before the Tribunal that if the statutory formula were applied to the Respondent's circumstances a preclusion period from 28 November 1998 to 18 July 2003, would result.
The central issue in this matter was the application of section 1184 of the Social Security Act 1991 ("the Act") as it was at the time of the decision of 10 April 1999, (the present corresponding section of the Act is 1184K) that is, whether there are any "special circumstances" in the Respondent's case to reduce the length of the preclusion period.

APPEARANCES

A hearing was held before the Tribunal on 19 August 2002 at which Cheryl Collis, an advocate from the Advocacy and Administrative Law Team at Centrelink appeared on behalf of the Applicant and the Respondent was self-represented.

LEGISLATION

Section 1165 of the Act provides that, where a lump sum payment has been received on or after 20 March 1997, a pension, benefit or allowance (that is, a compensation affected payment) is not payable during a lump sum preclusion period. The length of the preclusion period is calculated by a formula that takes into consideration the amount of the lump sum compensation payment.
Section 17 of the Act sets out definitions of various terms used in calculating the preclusion period. Subsection 17(1) defines a ''compensation affected payment''. Subsection 17(2) defines ''compensation'' and requires that the payment, which may be a lump sum payment or a series of periodic payments, to be "made wholly or partly in respect of lost earnings or lost capacity to earn". The preclusion period is calculated by reference to what is called the ''compensation part'' of a lump sum compensation payment. Subsection 17(3) defines the ''compensation part'' as being equivalent to 50 per cent of the lump sum compensation payment.
The length of the preclusion period is calculated using the formula set out in subsections 1165(5) and (8), as follows:
"New lump sum preclusion period
1165(5)If periodic compensation payments are made in respect of the lost earnings or lost earning capacity, the new lump sum preclusion period is the period that:
(a)begins on the day after the last day of the periodic payment period; and
(b)ends after the number of weeks worked out under subsections (8) and (9).
Note: For periodic payments period see section 17.
…
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
Note 1: For compensation part of lump sum, see section 17.
Note 2: For income cut-out amount, see section 17."

In applying the statutory formula, the compensation part of the lump sum payment, $100,000, is divided by the ''income cut-out amount'', which is defined in section 17(1) of the Act and represents the amount of weekly earnings at which the single rate of pension is no longer payable. The "income cut-out amount" was inserted into the Social Security Act from 20 March 1997. When making the calculations, the divisor used is the one that applied on the day the compensation claim was settled. At the date of the Respondent's settlement the income cut-out amount was $412.70. Applying the formula therefore:
$100,000.00 divided by 412.70 = 242.3, which rounds to 242 weeks.
Therefore the preclusion period begins on 28 November 1998 and ends on 18 July 2003.
Section 1184 of the Act provides potential relief from the strict application of the compensation preclusion period, by giving the Secretary a discretion to disregard the whole or part of the compensation payment in "special circumstances". Section 1184(1) of the Act reads:
"1184 Secretary may disregard some payments
1184(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."

EVIDENCE: DOCUMENTS

The Tribunal had before it documents lodged pursuant to section 37 of the Administrative Appeals Tribunals Act 1975 ("the T-documents"), which the Tribunal took into evidence.
In addition, the following documents were tendered:

EXHIBIT       DOCUMENT DATE
TD1     T-documents    T1-T21, pp1-92
A1      Applicant's Statement of Issues    26 February 2002
A2      Applicant's Statement of Facts and Contentions          19 June 2002

SUBMISSIONS: APPLICANT

It was the Applicant's case that there are no special circumstances for all or part of the Respondent's compensation payments to be disregarded and that the discretion in section 1184 of the Act was incorrectly exercised by the SSAT.
The term ''special circumstances'' is not defined in the Act, and has been interpreted in a number of cases by the Federal Court and the Tribunal. The advocate for the Applicant referred to Re Beadle and Director-General of Social Security (1984) 6 ALD 1 (approved on appeal to the Federal Court in Beadle v Director-General of Social Security (1985) 7 ALD 670) where it was held that the term ''special circumstances'' is by its nature incapable of precise or exhaustive definition. What must be considered is whether there are special circumstances that are unusual, uncommon or exceptional which would warrant different treatment in Mr Smith's case. The Tribunal also noted that, rather than looking at each particular circumstance, the question is whether all of the relevant circumstances, when looked at as a whole, may fairly be described as unusual, uncommon, or exceptional.
The meaning of the words "special circumstances" also was considered in Re Ivovic and Director-General of Social Services (1981) 3 ALN N95 where the Tribunal said at N97:
"The reference to special circumstances 'by reason of which' a person liable 'should be released' requires, in our view, that there must exist in the circumstances of the case, a factor or factors which justify the making of an exception in whole or in part to the principle of liability which the Act otherwise establishes ... Thus whilst keeping the dominant principle of [recovery of a debt] in mind, [the decision-maker] must nevertheless 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...the decision-maker must have regard to whether...he will be achieving or frustrating ends of objects which are conformable with the scope and purpose of the Social Services Act 1947."

Groth v Secretary, Department of Social Security (1995) 40 ALD 541 affirmed the decision of the Tribunal in Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797. In Re Groth (supra) the Tribunal stated the following in relation to the compensation recovery provisions of the Act at 798:
"It seems to me that the purpose of the provisions is to ensure that a person is not paid from two sources in respect of the same period of time. What are special circumstances must be considered against that background."

Factors which have been commonly considered in making a decision as to whether special circumstances exist include financial hardship; legislative changes; incorrect legal advice; ill health; incorrect advice from Centrelink, or failure on the part of Centrelink to advise accurately of the preclusion period; the nature of existing assets; and the nature of expenditure of the lump sum payment. The question is whether all of the relevant circumstances, when looked at as a whole, may fairly be described as unusual, uncommon, or exceptional.
The advocate for the Applicant addressed each of the possible factors in this case in turn.

FAILURE OF LEGAL ADVISERS AND/OR CENTRELINK TO ADVISE OF A PRECLUSION PERIOD

Generally the failure by a person's legal advisers to advise of the existence of a preclusion period following a lump sum settlement is not a persuasive factor in establishing special circumstances.
In Re Martin and Secretary, Department of Social Security (AAT 6482, 14 November 1990) the Tribunal commented:
"Overall, this factor is not persuasive or determinative and the best view is that the matter is one, if at all, as between solicitor and client."

The Respondent told the SSAT that he had not received a letter from Centrelink dated 10 April 1999 advising him of a preclusion period. The letter was sent to his last known address – at 1 Oxford Street, Smithfield, as it was not until 5 September 2001 that he advised Centrelink that he was residing at 20 Karabar Street, Fairfield Heights.
It was the Applicant's position that, even if the Respondent had not received the letter he was aware from others of a preclusion period and the need to live off the proceeds of the settlement (T2/5 at paragraph 12).

IMPACT OF THE GST (GOODS AND SERVICES TAX)

The Federal Court in Secretary, Department of Family and Community Services v Allan (2001) 66 ALD 147 considered that the divisor used to establish the preclusion period could take account of the impact of the GST to alter the divisor applicable at the time of the compensation settlement to a date that reflected a change in circumstances. It was submitted on behalf of the Applicant that the effect of the GST in that case, however was but one of a number of circumstances which, in total, the Court regarded as special. In any event, Mr. Allan's circumstances were very different to that of the Respondent. Furthermore, the impact of the divisor affects all recipients of benefits.
It was submitted that in this case, apart from having to pay an amount of $3,000 for an operation on his right ankle there have been no unforeseen medical conditions which have arisen which are unrelated to the injury for which the Respondent was compensated.

NATURE OF EXPENDITURE OF THE LUMP SUM

According to the documentation on file the Respondent's net settlement monies of $175,003.77 were expended as follows:
Purchase of VT Holden Commodore   $38,585.00       (T14)
Less trade in on Hyundai10,000.00      (T14)  --------------     28,535.00
Purchase VX Commodore after trade in   7,594.00
Payment to girlfriend  15,000.00
Operation on right ankle   3,900.00
Ex wife (child support)   3,840.00 (T14)
Centrelink Debt (ex wife)  728.96
Centrelink debt  8,000.35
Purchase of CD's  2,000.00
Insurance  989.79
Furniture/household goods   4,040.00
Advance Rental payments:
$816 mth x 21 mths (Sept 99 - June 01)   17,136.00
$960 mth x 2 mths (Jun 01 - Aug. 01)   1,920.00
$832 mth x 15 mths (Sept 01 - Dec 02)   12,480.00
Fridge  645.00
Lounge  500.00
VCR  305.00
Dryer  307.00
Video camera  1,000.00
TV & Stereo  780.00  ---------------
Total  $ 109.701.10

It was submitted that apart from the cost of the operation on the right ankle and the payment to his girlfriend there were no unexpected expenses. The Respondent should have been aware of his debt to the Child Support Agency ("the CSA") and his responsibilities to financially contribute to his daughter's upbringing.
This leaves approximately $65,302.67 of the settlement monies unaccounted for. Furthermore, the Respondent made a number of purchases which, the Applicant submitted, were unwise and extravagant. The Applicant did not agree with the SSAT that the only items which fall into this category were the CDs and motor vehicle purchases. It was further submitted by the Applicant that the extravagant nature of some of the expenditure by the Respondent made the consideration given by the SSAT of a more generous divisor to compensate for the introduction of the GST ill-conceived.

ILL-HEALTH

The Tribunal in Re Department of Social Security and Bolton (1989) 18 ALD 464 found that ill-health alone is not enough to be a special circumstance. The Applicant cited the case of Re Secretary, Department of Social Security and VYS (1995) 40 ALD 745, in which Senior Member Dwyer stated at 757:
"It must be acknowledged that there is nothing special or unusual about recipients of DSP being in ill-health."

The Applicant submitted that the Respondent has been adequately compensated for his injuries as a result of the accident at work. Apart from the cost of the unexpected operation on his right ankle, his medical expenses have not been unforeseen or unusual. Most of the Respondent's ongoing medication costs are alleviated by a Health Care Card.

In any event, his health does not prevent him from working up to five days per week, plus his radio programs, his directorship of the radio studio, and the occasional disco.

FINANCIAL HARDSHIP

To qualify as "special circumstances" financial hardship must go beyond "straitened" circumstances and be truly exceptional Re Krzywak and Department of Social Security (1988) 15 ALD 690; Re Secretary, Department of Social Security and Winterbotham (AAT 6499, 11 December 1990). It was submitted for the Applicant that the Respondent's circumstances do not fall into this category. There is still at least $65,302.67 of the settlement monies which are unaccounted for. Furthermore, the Respondent has available assets which he can liquidate to improve his financial position.

EVIDENCE AND SUBMISSIONS: RESPONDENT

The Respondent gave sworn evidence and was cross-examined on behalf of the Applicant. Questions were also put to the Respondent by the Tribunal.
The Respondent said he was injured at work on 18 April 1995 and thereafter returned to work for only short periods.
In March 1999 his compensation case settled and he received $200,000 before any deductions such as his solicitors' fees. He ultimately received about $175,000 in the hand. He lived off that until the money started to run out and, in September 2001, he went to Centrelink to enquire about disability benefits.
He thought he was treated quite rudely there and had to tell the Centrelink officer about the application of a preclusion period. He knew about this because a friend had been in similar circumstances and had told him "Social Security" would be in touch with him about it. His solicitors had said nothing about a preclusion period and he did not enquire of them about it.

The Respondent was asked about the letter of 10 April 1999 (T9/38) wherein Centrelink purported to write to him advising him of the preclusion period. He said he never received that letter which was sent to his Smithfield address. He had moved from that address prior to that time and had kept up a mail re-direction for about five months. As he was not in contact with Centrelink because he was not on any benefits at the time, he did not advise of his change of address and had no obligation to do so. He denied that it was possible for him to have overlooked the letter.
Of the settlement monies, he agreed largely with the expenditure outlined by the SSAT (T2/7) and by the advocate for the Applicant in Exhibit A2. He said however that the SSAT had "got it wrong" and that he had not paid his rent in advance to December. He pays rent fortnightly in advance. As his lease is to expire the following month there was no way the agent would even think about accepting rent that far in advance.
He was asked about his present premises. The house is rented and consists of 2 bedrooms and a sunroom. He needs the second bedroom because his daughter comes to stay at least several nights per week. The sunroom is not really livable and, in any event, his lease does not permit sub-letting. The rent of $208 per week is "quite cheap for the area".

In relation to the car, he explained that he had bought a car which had turned out to be defective and had then been persuaded to upgrade to a newer model for an additional $7,000 or so. All up, after trade-in, his car cost him about $35,000. The car had a spoiler, tinted windows, CD player instead of standard tape-player and special rust-proofing and "scotch-guarding". It was later hail damaged and cost him several hundred dollars to repair. In recent times he has "traded down" to a less expensive car. It still costs him $50 per week in fuel. He was able to travel to the hearing by train and has no problems with taking public transport.
The Respondent said he took the opportunity after the settlement to buy "everything new" as he hadn't had new things before. For this reason he had bought the sound and video equipment and white goods. He did need a new lounge. Other household expenses have included repair to his washing machine and registration for his "other car", which is currently in his backyard and not now registrable because it is "full of rust".
He also took the opportunity to buy "a new wardrobe of clothes", but everything is now 2½ years old.
He was asked why he had paid his ex-girlfriend $15,000 and he said he did so "because she asked for it". She had helped him during "all he had been through". He had had mood swings, and there were times she had called an ambulance for him and had driven him around to doctors' appointments. They had been together for 10 years. If asked, she would not be likely to return the money, even if his financial circumstances were desperate, because they had parted on bad terms. He had made the payment to her about five months after the settlement.
He had also paid off a debt to the CSA. He had been in dispute with them but had had the debt reduced to $4,200. Presently his wages are garnisheed at the rate of $21 per month to cover his present obligations.
As to his health, he said he has six pins in his left ankle and, due to the reliance on his right side, he now has had to have pins in the right ankle as well and further intervention is anticipated. He also has serious circulatory problems with very erratic blood density which requires continual monitoring. His circulatory problems have led to vascular difficulties. His medication was costing him about $30 per month but he has had a Health Care Card since March this year and pays considerably less for his medication. He has to buy therapeutic stockings a couple of times a year and these cost about $70. His circulatory problems also meant his dental bill was higher than usual - $300.
Notwithstanding his ill-health, he is able to work casually. He is a truck driver, taking delivery of newly-imported vehicles and driving them to holding yards. He works an average of three days per week at this job, for up to eight hours per day. Occasionally he works five days per week. He is paid $15 per hour.
In addition he works at a community radio station, as he has done for many years. He is also a director of the station. Since the date of the settlement, he has spent over $2000 on CDs to play in his twice-weekly programs. He prides himself on being ahead of commercial radio in terms of new music. For this reason he spends up to $100 per week on CDs, and always has done since he commenced working on the program.
In more recent times he has registered as a business so he can "get the GST back" on the purchases. He also needs to be "registered for insurance" if he does, for example, discos at schools.
His said his present financial situation is not good – his dogs eat better than he does. Most of his money goes to pay debts. He acknowledged that he had a car, white goods, electrical equipment and CDs he could liquidate but said he would have to be "really desperate" to do so. To get rid of his CDs would be like "getting rid of his left arm".

DISCUSSION AND FINDINGS

In coming to the correct and preferable decision, the Tribunal took into account all the evidence, submissions, case law and relevant legislation.
Following settlement of a compensation claim in respect of a work accident, the Respondent received a lump sum payment which was compensation as defined in section 17 of the Act. The total sum awarded to the Respondent before any deductions was $200,000.
Pursuant to section 17(3) of the Act, the compensation part of the lump sum is 50 per cent of the lump sum, which amounts to $100,000. There was no dispute that, if the statutory formula was applied to the Respondent's circumstances, a preclusion period would result from 28 November 1998 to 18 July 2003.
It was the Applicant's position that, there are no special circumstances in the Respondent's case such that the discretion to disregard parts of the compensation payments pursuant to section 1184(1) of the Act should be exercised.
The Tribunal reviewed the decision in Kirkbright v Secretary, Department of Family and Community Services (2000) 65 ALD 211 where Mansfield J, said that section 1184, (as it then was) is designed specifically to enable the Department to ameliorate such unfairness or injustice which results upon the strict application of the Act.
The discretion to disregard the whole or part of a compensation payment can be exercised where application of the usual rules would lead to a result that is unfair or inappropriate (see Beadle v Director General of Social Security (1985) 7ALD 670 and Secretary, Department of Social Security v Hulls (1991) 22 ALD 570). The Federal Court in Secretary, Department of Social Security v Smith (1991) 30 FCR 56 held that it is appropriate for the discretion under section 1184 to be used where the arbitrary nature of the "50% rule" results in unfairness in a particular case.
Section 1184(1) is a way of alleviating the harshness of the statutory provision in appropriate cases where there are special circumstances. Special circumstances do not have to be statistically "extreme" or "unique", it is sufficient if there is something that takes the matter out of the usual ordinary case, (see Haidar v Secretary Department of Social Security (1998) 52 ALD 255 at 264, in which Hill J cited the earlier Federal Court cases of Groth v Secretary, Department of Social Security (1995) 40 ALD 541 and Secretary, Department of Social Security v Ellis (1997) 46 ALD 1).
The Tribunal considered each likely "special circumstance" in turn.

FAILURE OF LEGAL ADVISERS AND/OR CENTRELINK TO ADVISE OF PRECLUSION PERIOD

The evidence from Centrelink's records is that, on 18 March 1999 it became aware of the Respondent's settlement. On 10 April 1999 Centrelink wrote to the Respondent at his Smithfield address, the last address Centrelink had for him. The Respondent's evidence was that he did not receive that letter because he had moved to Fairfield Heights. It was unclear exactly when this move occurred but, as the Respondent's evidence was that his mail had been redirected for some five months, the move may have occurred some time in 1998.
The Tribunal accepts that Centrelink forwarded the letter to the address at which it was understood the Respondent resided. Notwithstanding that the Respondent was cross-examined at length, the Tribunal accepts that he did not receive the letter as, by the time it was sent, the Respondent had moved and his mail re-direction had expired. As the Respondent was not at that time a "customer" of Centrelink he was under no obligation to keep Centrelink informed of his whereabouts.
However, that is not the end of the issue of the Respondent's understanding about the preclusion period. The Respondent admitted that he was aware of the notion of a preclusion period because a friend had been in similar circumstances. His friend told him "Social Security would be in touch with him about it". When he heard nothing, he made no enquiries until the money was starting to run out in September 2001. In the Tribunal's view, after his friend's advice, and knowing that he was then not in regular contact with Centrelink, the Respondent chose not to make himself aware of the impact of his compensation settlement on his future entitlements.
The Respondent's evidence was that there was no discussion with his solicitor at the time of settlement in relation to any preclusion period. When his friend told him about preclusion periods, again, he made no enquiries with his solicitor about his responsibilities. As to whether the Respondent's solicitor had properly advised him at the time of settlement the Tribunal makes no finding and adopts the view in Re Martin (supra).

IMPACT OF GST

The SSAT had discussed that as there had been changes in the compensation divisor used to calculate preclusion periods, a longer preclusion period was imposed on the Respondent than that imposed on others who received compensation at a different time.

In this regard the Tribunal considered Secretary, Department of Family and Community Services v Allan (supra) where, even though a factor applied to all, or a substantial part, of the community, it was not necessarily excluded in considering if a person's circumstances were "special".

In Re Stephens and Department of Family and Community Services (2001) 32 AAR 430, the Tribunal noted the GST had increased the applicant's cost of living and this was reflected in the increased divisor from the time of the introduction of GST.

It was clear to the Tribunal from both of those decisions that there were other factors which had either not been taken into account or which served to distinguish those cases from that before this Tribunal. To that extent, the Tribunal agreed with the submission of the Applicant that the case could be distinguished.
In addition, the Tribunal noted that a significant ongoing weekly expense is the purchase of CDs for which the Respondent receives a refund of GST.

FINANCIAL HARDSHIP AND EXPENDITURE OF LUMP SUM

The evidence was that following the settlement the Respondent made some significant expenditure. He bought a car which, all up, cost him about $35,000. He made a payment of $15,000 to his former girlfriend "because she asked for it" and because she had stood by him in his illness. He paid off his debt to the CSA and had to finance an operation on his ankle. He bought new household and electrical items including a sound system, VCR and video camera. He bought himself a new wardrobe of clothes. Allowing for the error in relation to the pre-payment of his rent, this amounted to roughly $100,000. While the advocate for the Applicant pressed the Respondent for details of expenditure of the balance, and the Respondent said he had receipts for numerous items of expenditure, these did not amount to anywhere near that amount. The Respondent's evidence was that the balance had gone in living expenses and paying off debts but he did not point to major payments beyond those documented.
The Tribunal does not accept that the Respondent must account completely for the balance of the settlement monies. However, it notes that close to $70,000 additional to the items documented, is a lot of money to have been spent in 3½ years.
His present expenses are his rent of $208 per week and the Tribunal accepts that the nature of the accommodation is not unreasonable given the Respondent's frequent overnight care for his daughter. His CSA payments are $21 per month. He has a weekly CD purchases of about $100. His medication is now largely covered by his Health Care Card. He earns $15 per hour truck driving and, on his evidence, is capable of working five days per week for up to eight hours per day.
To qualify as "special circumstances", financial hardship must go beyond "straitened" circumstances and be truly exceptional. The Applicant contended that the Tribunal should decline to find special circumstances, as the Respondent has not exhausted his financial options in that he has disposable assets (Re Hajar and Secretary, Department of Social Security (1988) 16 ALD 716).
In Re Martin and Secretary, Department of Social Security (supra) Senior Member Jocelyn McGirr said at paragraph 11:

"When the hardship to be caused does not amount to severe hardship, it is not sufficient to establish "special circumstances"."

In the Tribunal's view the evidence does not support a contention that the Respondent's circumstances are special by virtue of financial hardship alone in that his current financial position does not amount to one which is "severe".

ILL HEALTH

The advocate for the Applicant did not dispute the Respondent's ill health and that he continues to suffer from the injury sustained in the accident. In addition he suffers poorly controlled circulatory problems. The advocate for the Applicant referred the Tribunal to a number of cases in which health issues were found not to constitute special circumstances.
The Tribunal in Re Secretary, Department of Social Security and Bolton (supra), found that ill health alone is not enough to constitute a special circumstance. The Applicant noted that, invariably, recipients of compensation will have health problems.
In Re Groth and Secretary, Department of Social Security (1995) 37 ALD 797 the applicant, his wife and daughter all had considerable health problems. There, the Tribunal said that:
"Mr Groth is unable to work and requires treatment. Mrs Groth has difficulties as does Shilo (their daughter). Looking at all of those health difficulties, they are not such that the operation of the [compensation] provisions becomes unjust or unreasonable".
In Re Colaiacolo and Secretary, Department of Social Security (AAT 2109, 24 April 1985), the applicant and his family had considerable health problems. In addition the applicant and his family did not own their own home and had assets worth only $3,000.
Having reviewed the authorities to which the advocate for the Applicant referred, the Tribunal found that the Respondent's ill health alone is not enough to be a special circumstance, in that recipients of compensation will be likely to have ongoing health problems.
The Tribunal therefore came to the view that none of the Respondent's circumstances amounted alone, to "special circumstances" for the purposes of exercising the discretion under section 1184 of the Act. However, in Secretary, Department of Social Security v Hales (1998) 82 FCR 154 at 162, it was stated by the Tribunal that the "concept" of special circumstances was:
"to enable a flexible response to the wide range of situations which could give rise to hardship or unfairness [in the event of a rigid application of the law]."
In the present case, the Tribunal finds that, even considering all the factors in the Respondent's circumstances in their totality, were still not "special" for the purposes of section 1184 of the Act.

DECISION

The Tribunal sets aside the decision of the Social Security Appeals Tribunal and in substitution therefor decides there are no special circumstances so as to reduce the preclusion period from 28 November 1998 to 18 July 2003.

I certify that the 88 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Member
Signed: H Sim .....................................................................................
Associate

Date of Hearing  19 August 2002
Date of Decision  15 October 2002
Advocate for the Applicant  Cheryl Collis
Representative for the Respondent       Self represented

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Citations

Smith; Secretary, Department of Family and Community Services [2002] AATA 925

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