Spencer; Secretary, Department of Family and Community Services

[2004] AATA 248

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 248

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No N2003/295

GENERAL ADMINISTRATIVE DIVISION		)
Re		SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

Applicant

And JUDITH ANNE SPENCER

Respondent

DECISION

Tribunal Michael Sassella, Senior Member

Date11 March 2004

PlaceSydney

Decision The decision under review is affirmed.

[sgd] M J Sassella

Senior Member

CATCHWORDS

SOCIAL SECURITY – Disability Support Pension – preclusion period due to payment of lump sum compensation – all compensation monies exhausted – special circumstances exist - applicant suffering from psychological disability – no source of funds apart from Social Security – no capital assets - part of compensation monies treated as having not been made

Social Security Act 1991 ss 17(1), 17(2), 17(2)(e), (f), 1169(1), 1170, 1184K

Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793

Re Department of Family and Community Services and Rankin [1999] AATA 496

Re Thomas and Secretary, Department of Family and Community Services [2003] AATA 842

Secretary, Department of Social Security v Thompson (1994) 53 FCR 580

REASONS FOR DECISION

11 March 2004 Michael Sassella, Senior Member           

RESULT

The tribunal agrees with the SSAT that the preclusion period is to end as of 14 January 2003.  DSP is therefore payable from 15 January 2003.

BACKGROUND

1.      Judith Anne Spencer (“the respondent”), born 31 January 1958, was in receipt of Parenting Payment Single (“PPS”) from Centrelink, the agency that administers payments under the Social Security Act 1991 (“the Act”)[1] on behalf of the Secretary, Department of Family and Community Services (“the applicant”, “the Secretary”) on 8 July 1999. On that date a common law damages claim she had brought following a motor vehicle accident in 1989 was settled out of court. She received $840,000 compensation. On 5 August 1999 a Centrelink officer wrote to Ms Spencer to inform her that, in accordance with the Act, she would be precluded from receiving social security income support payments (such as PPS) from 27 July 1999 to 16 November 2015. She had also been paid $209.59 which had been received after 27 July 1999 and which was to be repaid.

[1] October 2001 Ms Spencer had exhausted her compensation moneys and approached Centrelink to see if she could recommence receiving social security.  Centrelink decided that it could not pay her.  She sought a review and a Centrelink authorised review officer (“ARO”) reviewed the earlier decision but refused to change it.  She then appealed to the Social Security Appeals Tribunal (“SSAT”) which decided on 14 January 2003 to set aside the decision.  The SSAT effectively relieved Ms Spencer of the remaining preclusion period.  Thus the preclusion period ended on 14 January 2003 instead of on 16 November 2015.  The Secretary did not accept this decision and appealed to the Administrative Appeals Tribunal (“the tribunal”).

ISSUES

3.      The issues in a case such as this involving a compensation preclusion period are:

(a)Is the social security payment a compensation affected payment?

(b)If the answer to (a) is yes, has the respondent received compensation?

(c)If the answer to (b) is yes, has a preclusion period been properly imposed?

(d)If the answer to (c) is yes, should the discretion in s 1184K be exercised to treat the whole or part of the compensation payment as not having been made?

FINDINGS ON MATERIAL QUESTIONS OF FACT WITH REFERENCE TO THE EVIDENCE AND OTHER MATERIAL IN SUPPORT OF THOSE FINDINGS

(A)Is the social security payment a compensation affected payment?

4. The answer is yes. Section 17(1) of the Act defines a compensation affected payment to include a parenting payment.

(B)If the answer to (a) is yes, has the respondent received compensation?

5. The answer is yes. Section 17(1) defines compensation by reference to the definition in s 17(2) of the Act. Section 17(2) in turn defines compensation in paragraph (c) as “a payment (with or without admission of liability) in settlement of a claim for damages …”. As noted above in [1], Ms Spencer was the beneficiary of such a payment.

6. Section 17(2)(e) of the Act requires that the payment must be made wholly or partly in respect of lost earnings or lost capacity to earn. I find that the payment here covered such matters. Although none of the documents before the tribunal explicitly state this, Ms Spencer was represented by Ms J Finlay from the Welfare Rights Centre (NSW) who is an excellent legal representative. I am confident that, if there was any chance that the settlement amount included no element for lost earnings or earning capacity, Ms Finlay would have put this to the tribunal.

7. Section 17(2)(f) of the Act is satisfied in that the payment was made within Australia.

(C)If the answer to (b) is yes, has a preclusion period been properly imposed?

8. The answer is yes. The preclusion period calculated under s 1170 of the Act was advised to Ms Spencer by Centrelink on 5 August 1999. It has not been challenged by Ms Spencer and there is nothing before the tribunal to suggest that the calculation was excessive. Moreover, the ARO explained the calculation process in a letter to Ms Spencer dated 25 June 2002 and, if anything, the calculation was generous to Ms Spencer. Centrelink took the gross compensation amount to be $711,121.77, a lower amount than the actual figure of $840,000.

9. Section 1169(1) of the Act provides for the imposition of the compensation preclusion period.

(D)If the answer to (c) is yes, should the discretion in s 1184K be exercised to treat the whole or part of the compensation payment as not having been made?

10.     The answer is yes.  My explanation for this will appear below.  The SSAT exercised this discretion on the basis of Ms Spencer’s drug addiction and her health problems.  In addition they noted these other special circumstances:

·     She had exhausted her compensation money by October 2001.

·     She has a minimal capacity for work.

·     She has limited opportunities for obtaining support from alternative sources.

·     Her brother provided accommodation for Ms Spencer but this was placing pressure on his family and could not continue for the duration of the preclusion period.

11.     At the tribunal hearing Mr G Lozynsky, the Secretary’s advocate, explained the Secretary’s case as based on the proposition that, while Ms Spencer’s circumstances are special, the preclusion period had been shortened to too great an extent by the SSAT.  He argued that an acceptable reduction might be six years, to a date in 2009, not to 2003, a 12-year reduction. 

12.     I consider that the SSAT and the Secretary have wisely decided that special circumstances do exist in this matter and I applaud the Secretary for the realism and compassion embodied in that concession.  The sole remaining issue is how long Ms Spencer should be precluded from receiving further social security payments.  The SSAT recognised that the leading case on exercise of the discretion to reduce the length of the preclusion period is Secretary, Department of Social Security v Thompson (1994) 53 FCR 580, 586 where Einfeld J in the Federal Court decided to reduce the preclusion period such that it ended on 13 March 1995 instead of 14 January 1999. It had commenced in 1989. The factors the tribunal had taken into account were:

·     Mr Thompson had lost some of the compensation money in a failed business investment.

·     Mr Thompson's background, psychological state and poor management skills.

13.     The tribunal deducted the value of the failed investment from the amount of compensation - this automatically reduced the preclusion period.  It also decided to reduce the period by one year because of the background and other personal status problems.

14.     The Secretary, Department of Social Security appealed that decision to the Federal Court on the basis that the tribunal had erred in deciding to reduce the preclusion period by one year whereas the legislation directed attention to the identification of a dollar figure, part of the compensation award, with the reduced preclusion then following from application of the statutory formula.

15.     Einfeld J dismissed the appeal.  As regards reduction of the preclusion period His Honour permitted a direct reduction without the need to nominate a sum of money to generate the reduction period.  He said, in relation to exercise of the discretion, that the width of the discretion extends to all the circumstances of the case, including circumstances not specifically related to a particular portion of the compensation payment.  It can be appropriate for a decision-maker to consider such general factors as the person's mental health and social condition and to conclude that the period should be shortened.  He described this as intuitive justice being the criterion for reduction of the period.

16.     I now turn to consider the matters relating to Ms Spencer that may justify reducing the preclusion period.

·     Ms Spencer has not worked since the motor vehicle accident in 1989.  Prior to that she was a technical librarian at Hawker De Havilland.

·     Ms Spencer received only $375,000 of the $840,000 as cash in hand.

·     With the compensation money Ms Spencer bought a new car valued at $38,700.  That car was sold after two years and replaced by a car worth $11,000

·     She and her son lived what she described as "the high life".  She spent up on jewellery, cigarettes, alcohol, groceries, rent and "helping people out".

·     She bought toys for her son and gifts generally "beyond estimation".

·     She lent money, she estimates $50,000, to people who did not repay her, despite letters of demand she sent to them.

·     Ms Spencer became addicted to Pethidine, which was originally prescribed, and spent $100,000, she estimates, on securing illegal supplies of the drug.  It was prescribed by Dr Salmon for 18 months to two years.  She had not taken this drug before that time.  She later bought the drug illegally thinking she needed it to cope with pain.  Drs Hedge and G D Champion also approved Pethidine for Ms Spencer because of her pain.  Ms Spencer said she withdrew $60,000 on one occasion and $40,000 on the second occasion from a St George bank account, although the bank statements before the tribunal do not reflect this.  She currently has a weekly Pethidine dose.  At another point in her evidence Ms Spencer said she told her family of the Pethidine only after she ceased using it.  The tribunal takes this to mean after she ceased using it illegally.

·     Ms Spencer went to expensive restaurants and took holidays.  She said she could spend up to $1000 in one night at a restaurant, paying cash.  She stayed at a five-star resort in Fiji and had a holiday in Queensland.  She has no documentary evidence relating to these trips.

·     Ms Spencer spent money on clothes.  She said she spent money on luxuries, never having had so much ready cash before.

·     Ms Spencer took to gambling - on poker machines and on horses.  She had not gambled before the accident.  She has now stopped gambling.

·     She bought a house in Queensland which she rented out and later sold.

·     In 2000 Ms Spencer had surgery, a cholecystectomy.  She spent 20 days in hospital and a week at home convalescing.  She had to return to hospital with septicaemia and peritonitis because the surgeon had accidentally cut the bile duct.  She borrowed money when she left hospital.

·     After leaving hospital Ms Spencer lived awhile with friends and then with her brother and his family.  She is now in a Department of Housing flat.

·     Ms Spencer lost custody of John, her son, born in 1991.  He is with her ex-husband. She was unable to support her son financially.  She now has access which commenced with the favourable decision of the SSAT.

·     Ms Spencer cannot work.  She cannot do cleaning.  She has lost arm, leg and neck function and suffers bad headaches.  Later in these reasons I will refer to a report detailing neuropsychiatric problems.

·     Ms Spencer considers that without social security money she would lose access to her son and would lose her home.  She would be destitute, she said.  She has to pay some $38 a fortnight child support for her son.

·     At the time of the hearing Ms Spencer's medications were free because of the number of prescriptions she had had filled.

17.     At the date of the hearing Ms Spencer was in receipt of Disability Support Pension (“DSP”) at $308 a fortnight.  She said she was managing her finances well.  She pays $110 a week rent and has no current debts, although she owes her brother, Philip Saville, $8,000.

18.     Mr Saville gave evidence.  Ms Spencer had lived with his family for about a year.  She had been destitute and her child was removed from her.  The year had imposed strains on the family.  Mr Saville was trying to run a business and his daughter had just given birth.  He had been concerned about Ms Spencer's health problems but could not communicate with her.  He tried to get help for her.  He is still in contact with her.  She was in a much better state at the time of the hearing, having her pension and her flat.  She had established some stability in life and was trying to make the best of it.  He said that if Ms Spencer lost her pension he could do nothing to assist her.  Because of his family and other commitments he has no room at his house and no other capacity to assist.

19.     Mr Saville was cross-examined by Mr Lozynsky who ascertained that the motor vehicle accident had "sent [Ms Spencer] straight down hill".  Mr Saville said his wife had offered to assist Ms Spencer to invest the compensation.  However, Ms Spencer was on Pethidine at the time and wanted funds to buy the drugs.   Mr Saville tried to intervene regarding the Pethidine.  He threatened her supplier and sought help for her from a psychologist, but to no avail.  Ms Spencer was on pain relief tablets at the time of the hearing and had no ongoing Pethidine addiction.  She had gone off drugs when the compensation ran out.  She has no ongoing gambling problem.  Ms Spencer has other brothers in addition to Mr Saville.  None of these brothers, however, could take her in when she was homeless, either because they had sick children in the house or because of marital problems.

20.     Mr Lozynsky accepted that Ms Spencer's financial hardship without her pension is severe.  However, he said, it was caused by Ms Spencer herself, by her reckless spending.  She had no excuse based on ignorance.  He said that the tribunal should not reward reckless spending.  He estimated that, if Ms Spencer has DSP as of January 2003, she would receive $140,000 over the period of compensation preclusion.

21.     Mr Lozynsky noted the lack of corroborate evidence regarding Ms Spencer's gambling and drug addiction.  He noted that the various medical reports - from Dr Dinnen (26 August 2003), Dr Vial (20 October 2003), Dr Salmon (25 September 2001), Dr Hunter (7 November 2003) -- do not suggest that her expenditure on drugs and gambling was out of control.

22.     Mr Lozynsky commented also on the lack of the paper trail showing her expenditures on gifts, loans, etc.

23.     Mr Lozynsky referred the tribunal to Re Davis and Secretary, Department of Family and Community Services (1999) 56 ALD 793. Senior Member Lewis refused in that case to exercise the discretion in what is now s 1184K of the Act. At page 795 the learned Senior Member points out that the case law requires that the whole of the person's circumstances are to be taken into account in considering whether there are special circumstances. She noted that Mr Davis was experiencing extreme financial hardship and was precluded from social security for six more years. He did, however, own his own house. He spent money on smoking, drinking and gambling in a "grossly irresponsible" way. Senior Member Lewis refused to shorten the preclusion period saying that "[i]f the preclusion period is shortened or waived because of the reckless spending then that would be an invitation to others in similar circumstances to do likewise and then become dependent on the public purse. One could anticipate the public outcry, and reasonably so."

24.     Likewise, in Re Department of Family and Community Services and Rankin [1999] AATA 496 the tribunal declined to exercise the discretion in a case where the person used compensation for gambling and extravagant spending on luxuries. He also acquired a house.

25.     Ms Finlay, on the other hand, referred me to Re Thomas and Secretary, Department of Family and Community Services [2003] AATA 842. Mr Thomas was paid $282,000 compensation in March 1999. His preclusion period expired on 13 April 2005. He exhausted the money too soon, largely by giving it away to friends. He bought a house in Mackay for more than $146,000. He paid off $50,000 in debts. He paid out the debts of another family in the expectation of becoming a silent partner in their spray-painting business. The house in Mackay was supposed to accommodate both Mr Thomas's family and the spray-painting family. The arrangement came to nothing but the other family took the money. By the time of the tribunal hearing the Mackay house and other various assets had been sold and Mr Thomas was living on less valuable land which he had intended to use for self-sufficiency. That plan also failed as the land was totally unproductive. At the tribunal Mr Thomas had no money in the bank and no other assets. He was without other means of supporting himself and was seeking DSP.

26.     Member McCabe (as he then was) decided to reduce the preclusion period by one year.  The learned Member saw the problem as Mr Thomas failing to manage his finances properly.  A significant amount of the lost money was unaccounted for.  Member McCabe identified that Mr Thomas had been reckless and was in a mess of his own making.  However, the learned Member said that that was "not the end of the matter.  Even the foolish and the profligate must be protected in appropriate circumstances through the exercise of the discretion..." (paragraph 16).

27.     I thank the advocates for these authorities.  I thank Ms Finlay also for the helpful report from psychiatrist Dr A Dinnen.  Dated 26 August 2003 this report indicates that Ms Spencer has a "major neuropsychiatric impairment.  She displays poor memory and poor judgement.  She has limited capacity to manage her day to day life."  He considered her condition to be due to chronic brain damage which causes her to be unfit to manage her own affairs.  Ms Spencer's situation is in fact quite different from that of individuals in the Davis [23] and Rankin [24] cases.  She has no house of her own.  The individuals in those cases did not suffer from neuropsychiatric impairment.

28.     Ms Spencer's psychological disability also seems to me more serious than any of the problems that assailed Mr Thomas in [25] above.  I consider that Ms Spencer requires relief from the preclusion period to the extent noted below.

29.     I make the following express findings:

(a)While the respondent's evidence was not entirely satisfactory she was trying her best to assist the tribunal and to answer questions truthfully.  Any problems were attributable to her disability.

(b)Although there is no clear paper trail explaining the destination of much of the compensation money, the respondent has not retained any of that money.  As Ms Finlay submitted, Ms Spencer tended to use cash in her dealings and such spending as that on drugs, gambling and loans to friends would seldom be recorded.  I add that Ms Spencer clearly was not disposed at the time to manage her affairs carefully or systematically.

(c)There is no medical evidence before the tribunal to contradict Dr Dinnen's evidence in [27] above.  Indeed, the other evidence, such as Dr Vial's, supports Dr Dinnen, or highlights Ms Spencer's serious physical disabilities.

(d)Ms Spencer has no source of funds other than from social security.  She has some assistance from the Salvation Army every few weeks but this is supplementary to more basic income support she requires.

(e)Ms Spencer is unfit for work according to Dr Dinnen and her treating doctor, Dr Vial.  This seems to me a valid assessment.

(f)Ms Spencer has no capital assets such as a house.

(g)Ms Spencer's ability to continue and develop a relationship with her son, now aged 13, requires her to have continued access to accommodation for which she can pay for only if in receipt of social security funds.

30.     In view of all these findings, and referring to Thompson [12], I find that Ms Spencer's "mental health and social condition" compel me to agree with the SSAT’s “intuitive judgment” that the preclusion period here is to be shortened to end on 14 January 2003.

CONCLUSION

31.     The applicant accepts that Ms Spencer's situation involves special circumstances justifying treating part of the compensation payment as not having been made.  The applicant considers that the preclusion period should end in 2009.  The tribunal has, however, decided to affirm the SSAT's decision and treat sufficient of the compensation as not having been made as will cause the preclusion period to cease on 14 January 2003.

DECISION

32.     The decision under review is affirmed.

I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Michael Sassella, Senior Member

Signed:         .....................................................................................
  Associate

Date of hearing  20 November 2003
Date of decision  11 March 2004
Counsel for the applicant          Ms J Finlay
Solicitor for the applicant          Welfare Rights Centre (NSW)
Advocate for the respondent     Mr G Lozynsky
Solicitor for the respondent      Centrelink Service Recovery