Soasan Karnib and Secretary, Dept. of Families, Housing, Community Services and Indigenous Affairs
[2012] AATA 764
•2 November 2012
[2012] AATA 764
Division GENERAL ADMINISTRATIVE DIVISION File Number(s)
2012/1656
Re
Soasan Karnib
APPLICANT
And
Secretary, Dept. of Families, Housing, Community Services and Indigenous Affairs
RESPONDENT
DECISION
Tribunal Senior Member A K Britton
Date 2 November 2012 Place Sydney The decision under review is affirmed.
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Senior Member A K Britton
CATCHWORDS
SOCIAL SECURITY – Disability support pension – Compensation preclusion period – Lump sum preclusion period – Whether special circumstances exist – Legal costs – Ongoing expenses – Gambling – Debts – Medical expenses – If so, whether discretion should be exercised to treat compensation payment as not being made – Decision affirmed
LEGISLATION
Social Security Act 1991 (Cth) ss 1169; 1184K(1)
CASES
Beadle v Director-General of Social Security [1984] AATA 176; (1985) 7 ALD 670
Boscolo v Secretary, Department of Social Security [1999] FCA 106; (1999) 90 FCR 531
Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 2 ALD 60
Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441; (2010) 185 FCR 52
Groth v Secretary, Department of Social Security [1995] FCA 1708 ;(1995) 40 ALD 541
Secretary Department of Employment and Workplace Relations v Barrington [2006] FCA 527
Secretary Department of Social Security v Hodgson [1992] FCA 338; (1992) 37 FCR 32
Secretary to Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 116 FCR 1SECONDARY MATERIALS
The Guide to Social Security Law, Version 1.190 - Released 20 September 2012
REASONS FOR DECISION
Senior Member A K Britton
Following an injury at work in 2007, Ms Soasan Karnib received lump-sum compensation totalling about $410,000 (gross). By the operation of the Social Security Act 1991 (Cth) (the Act) this payment creates a “lump sum preclusion period” and as a result, Ms Karnib is not entitled to receive the disability support pension (DSP) or any other “compensation-affected payment” throughout the “preclusion period”, 1 August 2011 to 19 June 2016 (s 1169 of Act).
The preclusion period may be reduced if the respondent Secretary, or the Tribunal acting as substitute decision-maker, thinks it appropriate to do so in the “special circumstances” of the case (s 1184K(1) of the Act). Ms Karnib seeks review of the decision made by a Centrelink Authorised Review Officer, and affirmed by the Social Security Appeals Tribunal, not to exercise that discretionary power in her case.
There is no issue that the preclusion period has been correctly calculated. The issues I must decide are whether "special circumstances" exist within the meaning of s 1184K(1) of the Act, and if so, whether it is appropriate to exercise the discretionary power to treat the whole or part of the compensation payment as not having been made.
Compensation received
Following the work injury Ms Karnib received lump sum compensation paid in two instalments:
June 2010 $58,250
August 2011 $352,000 (inclusive of $78,000 costs)
After deduction of legal fees Ms Karnib received a total of $332,250.
In addition, Ms Karnib received weekly compensation in the sum of $150 per week between June 2009 and July 2011.
Ms Karnib’s current financial situation
At the date of hearing, 22 October 2012 there were 190 weeks remaining in the preclusion period. At that time Ms Karnib had $190,000 in a term deposit and no other savings or assets. In February 2012 she reported to the Social Security Appeals Tribunal that the term deposit held $240,000.
Ms Karnib currently receives $293 per fortnight made up of $278 in family tax assistance and $15 in child support. She understands that within the next month the child support will be increased to $138 per fortnight ($300 per month). At that point she will receive a total of $416 per fortnight.
Ms Karnib and her son, who is nearly four years of age, reside in Government assisted housing. He attends pre-school and the fees for his attendance are $620 per month.
In these proceedings Ms Karnib estimated that her usual weekly expenditure was around $1060 per week which included: gym membership ($25), donation to a charity ($100), medication ($50), purchase of cigarettes ($150) and replacement cost of broken items ($50).
Medical expenses work
Ms Karnib is currently undergoing major dental work. Her treating dentist estimates that the cost of that work is about $45,000. Ms Karnib understands that the total cost will be slightly less. Ms Karnib has already paid a significant proportion of those expenses.
Ms Karnib suffers from multiple health problems. She estimates that she spends at least $50 per week on medication. She anticipates that in the near future she will commence seeing a psychologist on a weekly basis at a cost of about $100 per visit.
ARE THERE “SPECIAL CIRCUMSTANCES” THAT MAKE IT APPROPRIATE TO REDUCE THE PRECLUSION PERIOD?
Section 1184K of the Act gives the Tribunal the power to reduce the preclusion period:
Secretary may disregard some payments
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 appropriate to do so in the special circumstances of the case.
Ms Karnib says that special circumstances apply to her for these reasons:
A large part of the compensation payment was or will be expended on legal costs and disbursements and dental fees
She is a sole parent with significant ongoing expenses and will find it difficult to make the remaining compensation payment last until June 2016
In May 2010 following the removal of her son from her care she found herself homeless and her mental state deteriorated and she turned to recreational drugs and gambling. She claimed that in that period she squandered the first lump sum compensation payment of just under $60,000
She has spent over $28,000 to repay debts incurred throughout that period.
The term “special circumstances” is found in a number of provisions of the Act. Its meaning has been the subject of exhaustive consideration by the Administrative Appeals Tribunal and the Federal Court. The Federal Court has consistently declined to adopt a prescriptive formula: see for example Beadle v Director-General of Social Security [1984] AATA 176; (1985) 7 ALD 670 at 673; and French J in Boscolo v Secretary, Department of Social Security [1999] FCA 106; (1999) 90 FCR 531 at 535. Nonetheless, the Court has emphasised that the term denotes a requirement that there be “something which distinguishes [the claimant’s] case from others, to take it out of the usual or ordinary case”: per Kiefel J in Groth v Secretary, Department of Social Security (1995) 40 ALD 541 at [545]. This however is not to be interpreted as a requirement that the claimant’s circumstances be “extremely unusual, uncommon or exceptional”: per Hill J in Secretary Department of Social Security v Hodgson [1992] FCA 338; (1992) 37 FCR 32 at [42]. There is no requirement that the circumstances be unique to the individual — circumstances might be special although they apply to more than one person or to a class of persons, provided they are not of universal application: per Katzmann J in Fischer v Secretary, Department of Families, Housing, Community Services & Indigenous Affairs [2010] FCA 441; (2010) 185 FCR 52 at [65].
The Guide to Social Security Law (the Guide) provides direction to decision-makers on the application of the “special circumstances” discretion. The Tribunal is not bound to apply the policy expressed in the Guide, but may do so and, indeed, will usually do so unless there are cogent reasons in a particular case for not doing so (see Drake v Minister for Immigration and Ethnic Affairs [1979] AATA 179; (1979) 2 ALD 60).
The Guide states (at 4.13.4.10):
When special circumstances should generally NOT be applied
Each case must be examined on its own merits by the delegate but as a general rule, special circumstances would NOT usually be applied where:
the person has sufficient liquid assets to support themselves, and their family if applicable, for the duration of the preclusion period…
Section 1184K requires two separate but interrelated issues to be addressed — whether “special circumstances” exist in Ms Karnib’s case and, if so, whether the discretion to treat some or all of her compensation payments as not having been made, should be exercised.
I accept Ms Karnib’s claim supported by NSW Department of Community Services and the Jannawi Family Centre that following the removal of her son in May 2010 she was extremely distressed. I also accept that because of mental health problems Ms Karnib then went on an uncharacteristic spending binge and spent the large part of the first compensation payment on a combination of recreational drugs, gambling and short-term accommodation within a very short period. As recognised by the Department and the Jannawi Centre since the return of her son in September 2010, Ms Karnib has made significant changes in her life, no longer gambles or uses recreational drugs, manages her finances responsibly and provides a stable and loving home for her son.
Even if accepted that this spending binge constituted “special circumstances” I am not persuaded that the discretion to treat some or all of the compensation paid to Ms Karnib as not having been paid, should be exercised. This is because as the evidence discussed below makes plain, Ms Karnib has ample funds to support herself and her son for the balance of the preclusion period notwithstanding that she effectively threw away $60,000.
In my opinion the legal costs incurred by Ms Karnib — $73,000, or 17 per cent of the total lump sum compensation payment — could not be said to constitute special circumstances. While there may be circumstances where the payment of legal fees representing that proportion of a settlement sum could be said to constitute special circumstances (see for example Secretary Department of Employment and Workplace Relations v Barrington [2006] FCA 527) of itself, it would not generally give rise to special circumstances.
Excluding interest, the money held in the term deposit gives Ms Karnib a weekly income of about $1000 (190,000 ÷ 190 weeks) if it is fully expended during the preclusion period. That figure increases to $1208 if family tax benefit and child support payments are added. In addition Ms Karnib is likely to receive about $20,000 in interest from the term deposit during the life of the preclusion period. (Based on the assumption that she draws down $52,000 each year for the balance of the preclusion period and the current interest rate paid of 4.5 per cent remain unchanged — Year 1: $8550, Year 2: $6210, Year 3: $3870, Year 4: $1530). The significant debts Ms Karnib claims she incurred during and after the spending binge have now largely been repaid.
Consistent with the authorities, the power to treat some or all of a compensation payment as not having been made must be exercised sparingly. To do otherwise could undermine the “basic policy” underlying those provisions of the Act aimed at suspending social security benefits where recipients have received compensation for loss of earnings. As Heerey J commented in Secretary to Department of Family and Community Services v Allan [2001] FCA 1160; (2001) 116 FCR 1 at [1], these provisions were designed so that “people should not receive social security payments for loss of earnings where they have received compensation for that same loss of earnings from another source”, in short, to prevent “double dipping”.
I accept that Ms Karnib suffers from multiple health problems and has on-going health costs and other significant expenses. Nonetheless she has the capacity to meet those expenses. She is in a relatively sound financial position: she resides in government supported housing, will receive about $416 per fortnight for the balance of the preclusion period and has liquid assets of about $190,000. Her position is much better than that of a Disability Support Pension recipient who receives $356 per week (current rate for single person). I appreciate that Ms Karnib considers it unfair that she must turn to her compensation payment to support herself and her son throughout the preclusion period. My task is not to decide on the fairness or otherwise of those provisions of the Act designed to prevent “double dipping” but to decide whether special circumstances exist. I am not satisfied Ms Karnib’s circumstances taken as whole could be described as “special” and therefore the power to reduce the preclusion period cannot be exercised. I must therefore affirm the decision under review.
I certify that the preceding 24 (twenty four) paragraphs are a true copy of the reasons for the decision herein of Senior Member A K Britton.
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Associate to Senior Member A K Britton
Dated 2 November 2012
Date(s) of hearing 22 October 2012 Applicant In person Solicitors for the Respondent Pankaj Sharma, Program Litigation and Review Branch, DHS Legal Division
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